Fluor Corp (FLR) Q1 2024 Earnings Call Transcript Highlights: Robust Revenue and Strategic ...

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Sat, May 4, 2024, 1:02 AM 4 min read

Revenue: $3.7 billion for Q1 2024.
Consolidated Segment Profit: $118 million for Q1 2024.
Adjusted EBITDA: $88 million for Q1 2024.
Adjusted EPS: $0.47 for Q1 2024.
New Awards: $7 billion in Q1 2024.
Ending Backlog: $32.7 billion, 80% reimbursable.
Operating Cash Flow: Outflow of $111 million for Q1 2024.
Cash and Marketable Securities: $2.3 billion, excluding amounts held by NuScale.

Warning! GuruFocus has detected 6 Warning Sign with FLR.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Fluor Corp (NYSE:FLR) reported strong revenue of $3.7 billion for the first quarter.
Consolidated new awards for the quarter were robust at $7 billion, led by key awards in the Advanced Technologies & Life Sciences business line.
The company's total backlog increased to $32.7 billion, with 80% being reimbursable, indicating a healthy pipeline and future revenue stability.
Fluor Corp (NYSE:FLR) highlighted significant progress in strategic markets such as life sciences, semiconductors, and data centers, with substantial new awards and ongoing projects.
The company is actively engaging in energy transition projects and has a strong presence in mission-critical sectors, contributing to a diverse and resilient business model.

Negative Points

Fluor Corp (NYSE:FLR) faced challenges with a construction-only subcontract in Mexico, recognizing $29 million in cost growth due to delays and labor issues.
The Energy Solutions segment reported a decrease in segment profit to $68 million from $88 million a year ago, reflecting challenges in project execution.
Operating cash flow for the quarter was an outflow of $111 million, although it was an improvement from the previous year, it still indicates pressure on liquidity.
The company noted ongoing negotiations and challenges with labor market instability in certain geographic locations, impacting project timelines and costs.
Despite a strong backlog, the company must navigate ongoing geopolitical risks and market volatility which could impact client CapEx plans and project execution.

Q & A Highlights

Q: Joe, it looks like you increased your free cash flow guide. What were the drivers behind that? And given the stronger cash flow generation, how are you thinking about capital allocation in the back half of the year? A: Joseph L. Brennan - Fluor Corporation - Executive VP & CFO: The increase in cash flow guidance is due to better clarity on margins as we move to an 80% reimbursable model and early onboarding activities in Urban Solutions. Regarding capital allocation, our strategy remains focused on returning shareholder capital, which will be communicated later in the year.

Q: You mentioned that the JV is working on a commercial resolution in Mexico. What's the degree of risk of further charges there on that project? A: David Edward Constable - Fluor Corporation - Executive Chairman & CEO: The project in question is a small, challenging subcontract in a volatile location. We've been negotiating cost increases and schedule extensions, and are currently addressing these challenges with the client. The risk of further charges exists, but we are focused on revenue recovery.

Q: Can you elaborate on the status of Mission Solutions joint ventures and their impact on margin guidance? A: Joseph L. Brennan - Fluor Corporation - Executive VP & CFO: There is about $2 billion worth of revenue from joint ventures not reflected in the backlog, significantly impacting the margin guidance. Projects like Pantex could further enhance this effect, and we are working on better communicating these impacts.

Q: How do you see the cadence of bookings across the segments, and do you expect a linear ramp-up across all segments? A: David Edward Constable - Fluor Corporation - Executive Chairman & CEO: We expect the 80% reimbursable rate to remain or increase by year-end, with a higher margin profile continuing. Bookings are anticipated across all segments, supported by strong prospects in data centers, chips, pharma, and energy transition markets.

Q: What are your thoughts on demand by region and how do you think about geopolitical risk? A: David Edward Constable - Fluor Corporation - Executive Chairman & CEO: Our major clients tend to look through short-term economic and geopolitical challenges, maintaining or increasing their CapEx plans. We see strong markets continuing and expect to grow our backlog further.

Q: What can you tell us about the operating cash flow guidance for the year, especially considering the seasonality? A: Joseph L. Brennan - Fluor Corporation - Executive VP & CFO: The significant ramp in operating cash flow is expected towards the end of the year, with some variability in Q2 and Q3. This is partly due to dividends we plan to repatriate in mid-2024.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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