Fluor Corporation (NYSE:FLR) Q3 2023 Earnings Call Transcript

Joe Brennan: Andy, thanks for the question. What’s happened is, we had anticipated the work that needed to be done in order to get to the position where we could recognize those cost recoveries with our client to occur in quarter four. It got pulled forward into quarter three. So you’re seeing a little bit of the distortion of that $150 million run rate over the Q3-Q4 period that we had laid out in the last call. So some of that is being recognized earlier. But I think we’re still feeling comfortable in that $140 million to $160 million range going into quarter four as well.

Andrew J. Wittmann: Okay, that’s helpful. And then I just wanted to drill in on your commentary. You’ve previously been a little reluctant to talk about cash flow in 2024. I think that made a lot of sense. Is it just that we’re closer to 2024 now that gives you confidence to say that there could be significant free cash flow next year? Or is there something in the business that you’re seeing more confidently today in terms of the business’s performance that gave you the confidence to make that general comment?

David Constable: Yeah, Andy, I appreciate the question. I think this is the result of a lot of hard work in clearing out the legacy challenges. You can see some of those settlements flowing through the books today. We’re getting significantly more comfortable where we are in that position. We continue to add very high quality backlog at very good rates, as experienced in Q3 relative to $5 billion in new award and then coming out next quarter. So it’s really a combination of all those things. The other thing that’s underpinning our comfort levels around kind of highlighting cash generation moving not only into Q4 of this year but into 2024 as we’re starting to see some of the repatriation of the dividends that we have been communicating to the market over the last two, three quarters. And in Q4 you’ll start to see the ramp up of the return of the liquidity to Fluor.

Andrew J. Wittmann: Great. Thanks a lot, guys.

Operator: Your next question comes from the line of Brent Thielman from D.A. Davidson. Your line is live.

Brent Thielman: Hey, thank you. Congrats on a great quarter. Just looking at the slide deck, the expectations for energy segment margins for 4Q, that 4% to 4.5% percent would be below what you’ve seen year to date. I understand there were some outstanding benefits here in the third quarter. I’m just wondering if there’s some specific influences in the fourth quarter in that business group we should consider just sort of trying to be prudent given that the moving pieces of the business.

Joe Brennan: No, we are — for the full year, we’re at 6.5%. And this is more just a reset after the culmination of getting to the recognition of the cost recoveries in Mexico. It’s just a bit of a settling of that, a bit of the lumpiness that’s flowing through, but 6.5%, and we look forward to giving you the guide for 2024, but we do not see 4% to 4.5% being the run rate moving forward for energy solutions at this point.

Brent Thielman: Okay. Appreciate that. And I guess just taking a step back, I mean, look, you’re still facing some cost growth on some legacy projects that’s more than offset by kind of positive items in the business, core execution, recovery. Is some of these legacies activities moving to sort of late stages here, you’re ramping up more profitable in new work. I just want to get a sense, are you more confident that the sort of typical kind of quarter-to-quarter risk associated with these legacy projects is diminishing? Company is in a better position now to sort of more than offset that, even if we do see some more cost growth ahead?