Fluor Aktie

Good morning, and welcome to Fluor's First Quarter 2026 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A replay of today's conference call will be available at approximately 10:30 a.m. Eastern Time, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for 7 days through a registration link, also accessible on Fluor's website at investor.fluor.com.

At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Vice President, Investor Relations. Please go ahead, Mr. Landkamer.

Thanks, Krista. Good morning, and welcome to Fluor's 2026 First Quarter Earnings Call. Jim Breuer, Fluor's Chief Executive Officer; and John Regan, Fluor's Chief Financial Officer, are with us today.

Fluor issued its first quarter earnings release earlier this morning, and a slide presentation is posted on our website that we will reference while making prepared remarks. Before getting started, I would like to refer you to our safe harbor note regarding forward-looking statements, which is summarized on Slide 2.

During today's presentation, we'll be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that our actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in our 2025 Form 10-K and our Form 10-Q, which was filed earlier today.

During this call, we will discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.Fluor.com.

With that, I'll now turn the call over to Jim Breuer, Fluor's Chief Executive Officer. Jim?

Thank you, Jason. Good morning, everyone. Thank you for joining us on our first quarter 2026 earnings call. Before I discuss the quarter, I want to highlight the strong trajectory we are seeing in our prospect pipeline and our capacity to grow the business.

Turning to Slide 3. At Fluor, we're driven by the pursuit and capture of large and complex EPC projects. We apply our core competencies to project management and EPC execution to deliver world-class facilities globally. What differentiates us is not simply the scale of the projects we pursue, but the discipline with which we pursue them and the depth of our technical expertise and project delivery track record.

We're focused on building a quality backlog where rigor in planning and execution translate into successful outcomes. Our preferred model for project execution is to get in early in the planning phase and stay until the end of the execution phase. This is how we add the most value. And therefore, it is very encouraging to see the many front-end awards that we have announced in recent months. These early wins are a key stepping stone to accelerate growth in the latter part of this year and into 2027.

During the front-end phase, we work with our clients to plan the project and establish a solid foundation for the scope, cost and schedule of the execution phase, which kicks off after the final investment decision by the customer. The early engagement is where we shape the commercial model and ensure projects are set up for success before significant capital is deployed.

Some of these early awards that we announced recently include the Centrus Nuclear Fuels Enrichment project, the small modular reactor project for Dow with X-energy, the America First Refinery, the Donlin Gold project, the Terra Wolf Data Center and our announcement yesterday for Anglo American's Woodsmith fertilizer project. With these recent awards and the study work that we already have in-house, we're executing front-end work representing over $60 billion of revenue on potential backlog if clients choose to move forward on these projects with Fluor.

Furthermore, we're tracking additional prospects, representing another $40 billion in potential over the next 3 years. Our prospect pipeline has increased by 50% in the past 12 months. This expansion reflects growing demand across the critical minerals, life sciences, LNG, nuclear, refining and power markets. In mining, for example, copper opportunities in South America and other parts of the world underscore the long-cycle investment required to support urbanization and electrification.

In Energy Solutions, LNG demand and gas fuel power generation are aligned with current energy priorities. Growing demand for power is driven by investments in data centers, advanced manufacturing and broader economic development. This is why we're optimistic about the future and confident in our ability to grow the company. But growth alone is not the objective. We are prioritizing backlog quality that aligns with our strategic priorities and with our strengths.

Now let's turn to our review of results in Q1, beginning on Slide 4. John will go into greater financial detail, but I'd like to cover a few key items. Consolidated new awards for the quarter were $2.7 billion and 98% reimbursable. As we said in February, larger new award bookings will be weighted towards the second half of this year. Importantly, margins on new awards in Q1 were 200 basis points higher than the margin represented in our current backlog, reinforcing our project selectivity.

Our backlog improved slightly from year-end to $25.7 billion and reflects an additional $1.1 billion in positive project adjustments on current work. Ending backlog was 82% reimbursable.

Now let's turn to our review of the business segments, starting on Slide 6. Urban Solutions reported a $6 million segment profit in the quarter. Results reflect a $37 million impact for a mining project in the Americas that experienced declining productivity in the field. While I'm disappointed in this result, we've taken steps to strengthen our execution team. This project is significantly advanced in the construction phase.

New awards for the quarter were $2.1 billion compared to $5.3 billion a year ago when we received a multibillion-dollar award for a life sciences project. Awards for this quarter include a metals project in the Middle East, incremental work for a pharmaceutical facility and an infrastructure expansion on a mining facility in Chile. Ending backlog for Urban now at $19 billion represents 74% of Fluor's total backlog. We expect this percentage will rebalance as growth in Energy and Mission Solutions starts to drive greater diversification in backlog.

Moving to Slide 7. Life sciences and advanced manufacturing remain in the capital spending up cycle. Demand is being supported by onshoring initiatives and continued investment to expand capacity in select critical sectors, and we're well positioned to support clients as they move projects from planning into execution. For the balance of this year, we see some sizable prospects, including pharma work in a rare earth magnet facility.

Turning to our data center efforts. We signed a limited notice to proceed with TeraWulf. Under this agreement, we are delivering master planning and preconstruction services for a large-scale data center campus in Kentucky with access to 480 megawatts of grid-connected power. We're currently working with the client towards a full notice to proceed. Generally speaking, we continue to see hyperscalers signaling a multiyear surge in demand for data center and power infrastructure.

Contract and commercial terms of the data center market remain challenging, especially regarding risk allocation. We're staying disciplined and selective, and we're working to shape deals on a contract-by-contract basis to ensure opportunities meet our return expectations. Turning to Slide 8. In Mining and Metals, as I mentioned in the quarter, we received a reimbursable EPCM contract for a new aluminum recycling facility in the Middle East. Our work on this project and in the region continues to move forward.

Now with regards to the Reko Diq project, we recently received notice from our clients that they are reducing the pace of development on the project as a result of their geopolitical and security concerns. We continue to perform engineering and procurement from our offices outside the region. For the second quarter, we received a feasibility study award for Anglo American's large fertilizer project in the U.K. Later this year, we're tracking several copper-related opportunities in South America.

The infrastructure business line continues to focus on achieving substantial completion on a number of projects this year. On the Gordie Howe Bridge, on the LAX People Mover and on the LBJ project, we have made good progress and expect to complete them over the next several months. And on I-35 Phase 2, that project remains on track to achieve substantial completion in Q1 of 2027. As it relates to the non-legacy infrastructure portfolio, later this year, we also expect to complete work on the Oak Hill Parkway project in Austin and the red and purple line modernization in Chicago.

Moving to Energy Solutions on Slide 9. Segment profit was $74 million compared to $47 million a year ago. Results increased primarily due to the recognition of favorable closeout items on 3 projects. New awards for the quarter totaled $213 million and included the FEED award for the America First refinery in Brownsville, Texas. This will be the first grassroots refinery to be constructed in the United States in more than 50 years.

When complete, the facility will process 60 million barrels per year of domestic crude and will contribute to the modernization of U.S. refining infrastructure. We also entered into a contract with X-energy for the small modular reactor project at Dow's plant in Seadrift, Texas. Our initial award is for front-end engineering and execution planning. Fluor is excited to partner with Dow and X-energy, and we look forward to advancing this strategic project.

This is the second SMR technology we're adding to our resume in addition to our project in Romania using NuScale technology. Moving to Slide 10. I am pleased to see a very positive response from clients in the power market. There's a clear need for our EPC capabilities in domestic gas fuel projects and our engagements with several clients are encouraging and are progressing well.

We hope to make further announcements in this market in coming quarters. Similarly, we're excited about the growing momentum in nuclear and the recognition from governments and the private sector that nuclear power has a prominent role in supporting long-term solutions. In addition to X-energy and NuScale, we're currently engaged with 2 additional technology partners in the nuclear power space to position for project work in the future. Prospects in the next few quarters in Energy Solutions include LNG Canada Phase 2, a gas compression project, a gas field power plant in the Northwest and a chemical facility in Canada.

Turning to Slide 11. Mission Solutions reported a segment loss of $71 million for the first quarter compared to a profit of $5 million a year ago. Results reflect an outcome of a court ruling related to a lawsuit that was filed back in 2013 for LOGCAP activities in Afghanistan. Fluor prevailed on 3 of the 4 claims involved in the matter.

The final jury award for the fourth claim was $15 million, but increased to $96 million when included treble damages and legal fees. We expect to appeal. Excluding this legal decision, results were consistent with our expectations for the quarter. New awards in the quarter were $332 million and ending backlog was $2.5 billion.

Awards in the quarter included a significant FEED award for the Centrus uranium enrichment plant expansion. We also received a $100 million task order to provide services at Shaw Air Force Base in support of ongoing operations in the Middle East. This task order is in addition to our existing work at an air base in Kuwait, where we're providing support services for the Air Force.

At Savannah River, we're currently executing both the maintenance and operations scope and the Plutonium Pit production project. NNSA took ownership of the site in late 2024 and is in the process of recompeting both the MNO and Plutonium Pit scopes of work under a single contract. We are well positioned for this work and expect to submit a bid later this year.

Prospects for the remainder of 2026 include a 2-year extension on current intelligence work, additional awards on Centrus, including EPC work, an extension on our efforts at Savannah River and several opportunities that will grow our civil market. Before I turn the call over to John, I want to provide Fluor's business perspective on the Middle East and on Venezuela on Slide 12.

Starting with the Middle East. Our first priority is always the safety and well-being of our employees and their families. Everyone is safe, and we're closely monitoring events. Our thoughts are with everyone affected by the conflict, and we hope there's a quick and lasting conclusion to it. With our workforce safe, our activities in the Middle East have continued without interruption.

Despite the conflict, we continue to serve our projects in the region and mitigate supply chain constraints. We remain committed to the Middle East and are leveraging our extensive experience in the region and in reconstruction of damaged facilities. Currently, we're in conversations on damage assessments and stand ready to respond to client needs. This early work could translate into larger scopes once the situation stabilizes and clients are ready to proceed.

Speaking more broadly, the Middle East is not only a critical source of oil and gas, but also petrochemicals, metals, industrial gases and fertilizers, all markets where we have an extensive track record and a strong market position. Therefore, we're monitoring the longer-term implications of the conflict, including new opportunities, not just in the region, but globally as clients will look to diversify energy and commodity sourcing.

Turning to Venezuela. Similar to the Middle East, Fluor has a long history of project delivery in this country. In fact, Fluor has executed projects in Venezuela that totaled 2 million barrels of daily crude processing capacity, which represents a significant portion of the country's output at its past peak. We're in active discussions with clients and local partners, positioning for work as investment plans firm up. We will have more clarity on the timing of these opportunities in the coming months.

I'll now turn the call over to John for a financial update.

Thanks, Jim, and good morning, everyone. Today, I'll go over Q1 results, refreshed guidance and outline our capital plans for the balance of the year, beginning on Slide 14. Jim covered consolidated revenue and new awards, so I'll start with consolidated segment profit for Q1, which was $8 million.

This quarter, our GAAP figures reflect several discrete items that merit additional mention, including: one, a legal outcome related to our LOGCAP work in Afghanistan last decade, which triggered a $96 million impact. two, a $37 million charge for effects of cost growth on the mining project, which Jim already covered; three, $124 million gain on the sale of our fab yard in China; and four, a $16 million gain from FX arising out of a strengthening U.S. dollar. Adjusted EBITDA for Q1 was $60 million compared to $155 million a year ago. Adjusted EPS was $0.14 compared to $0.73 in 2025.

To arrive at adjusted results, we reversed the effects of the Fab yard sale, the FX gain and the LOGCAP ruling, all to present a clear view of underlying performance across the business. About 1/3 of the LOGCAP charge reflects working capital growth we experienced since completing the work in 2016. The tables accompanying our earnings release provide the complete reconciliation to GAAP. G&A for the quarter was $61 million, up from $36 million a year ago. This increase primarily reflects stock compensation accruals tied to share price.

Please remember, in '26, our stock appreciated about $7 per share during Q1, whereas in the corresponding period in 2025, our share price decreased by about $14. This effect and other associated deferred comp items created a $20 million impact between the quarters. Net interest income in Q1 was $15 million compared to $19 million in Q4 and $17 million a year ago, remaining relatively stable sequentially and year-over-year.

Moving to Slide 15. We ended Q1 with $3.2 billion of cash and equivalents, an increase of $1 billion from year-end, which was in line with the pro forma effect that we published in February. This growth was largely driven by proceeds from the sale of 71 million shares of NuScale during Q1. After quarter end, we completed the sale of the remaining 40 million shares, generating an additional $473 million of proceeds.

In April, we paid $400 million for state and federal taxes associated with the conversion of NuScale shares in 2025. That conversion established a basis of around $28 per share, and we monetized the 111 million shares at around $16 per share, thus generating a tax loss we can deduct in the future. As you will recall, our investment was originally contributed at a $10 per share value at the time of their de-SPAC in 2022.

More on the NuScale returns in a moment. Operating cash flow for the quarter was $110 million compared to an outflow of $286 million a year ago. This $400 million year-over-year improvement reflects lower working capital on several projects as well as distributions from large JVs in Energy and Mission. This is the most substantial Q1 operating cash flow generation since 2017.

On the lost project front, we didn't see any overall growth in the expected funding. However, the allocation across '26 has accelerated a bit. In Q1, we provided $87 million in funding. Before consideration of any recovery, we still expect to wrap up the funding with an additional $200 million before the end of '26, and that funding could be substantially complete as early as the end of Q3.

As a reminder, due to our JV ownership structure on the underlying projects, most of this funding is reflected as an investing activity rather than an operating cash flow. Backlog for the legacy projects dropped to $169 million compared to $255 million at year-end, reflecting our continued execution and progress towards completion. Moving to Slide 16. Earlier this decade, we made a deliberate decision to shift away from CapEx-intensive operations and to streamline our balance sheet. We began this transition with the sales of our AMECO business and Stork.

We have now completed the sale of our fab yard in China for over $120 million. In addition, our NuScale sell-down program generated over $2.4 billion since September '25 and over $2 billion after tax. By any measure, this NuScale sell-down delivered exceptional value, generating a MOIC of around 4.5x and an internal rate of return of 15% since our initial investment in 2011. With these actions, we have completed our journey to being asset-light.

In Q1, we continued to deliver on our commitment to return significant value to our shareholders. We bought back 11 million shares, deploying over $0.5 billion. For all of '26, we anticipate spending about $1.4 billion on share repurchases, consistent with our capital return framework. Today, we operate with both a simplified balance sheet and ample liquidity to support our current scale.

Combined with a robust share repurchase program, this positions us to increasingly focus on actions to drive growth. We are actively investing in our capabilities and our people to build additional expertise and depth. We are also reviewing carefully targeted, reasonably sized M&A opportunities and sharpening our focus on transactions that could inorganically enhance our efforts in target markets and bring about long-term value creation.

Moving to Slide 17. In developing our guidance, we, like many of our industrial peers, acknowledge that the situation in the Middle East looms as a potential disruptor to our trajectory. This could mean, among other things, supply chain delays and reconfiguring, higher inflation and interest rates and capital spending implications by our clients in the event there is no resolution by the end of the second quarter.

So assuming we see a resolution within that window, we are narrowing our full year 2026 adjusted EBITDA guidance to $525 million to $560 million. This had previously been a range of $525 million to $585 million. Our modest adjustment to the higher end reflects the discrete items in mining previously discussed, but also importantly, reflects the rest of the business continuing to deliver at or above expectations.

Based on our expected tempo of share repurchases, we anticipate adjusted EPS to be between $2.60 and $2.80 per share. Our expectations for operating cash flow remain at $300 million, excluding the tax bill on NuScale that I mentioned earlier. We expect an appeal on the LOGCAP matter with any payment dependent until its outcome, which likely extends beyond 2026.

Our key assumptions and expectations for the full year are outlined on the slide, including a new awards book-to-burn ratio above 1, which continues to be weighted toward the back half as we continue to make progress that Jim discussed earlier. Corporate G&A expenses of $175 million to $185 million. This figure normalizes to around $40 million per quarter in Q2 through Q4 as we get past the share price impacts that I mentioned and the typical Q1 effect on grants to retirement-eligible employees. This also excludes the up to $15 million we could occur across the balance of the year on a potential replacement of our ERP.

It also includes an assumed tax rate of 26% to 28% and a revenue split of approximately 65% urban, 20% energy and 15% mission, which is largely unchanged from our February guide. And assuming these splits, our expectations for full year reported segment margins are 2.5% to 3.5% in Urban, reflecting the mining charge, 5% to 6% in Energy Solutions and 6% in Mission Solutions.

If we get into Q3 and the impacts of the Middle East persist, we'll update the guidance at that time. Before we turn to Q&A, I want to reinforce the following from our overall commentary. One is that we had a single in-flight project with a charge of substance, and that project is approaching 80% complete in the field. Two is that although new awards may seem light compared to our full year target, these early awards continuing into April reflect a strong endorsement of our strategy by the clients in our end markets.

Our task at hand is to continue to convert the opportunity set in the market into front-end awards and to work with our clients to convert the front-end awards into full EPC releases. Despite what we hope are temporary headwinds in the Middle East, our focus remains squarely on delivering predictable results and meaningful shareholder returns.

And with that, Krista, let's open the line for questions.

Your first question comes from Jamie Cook with Truist Securities.

I guess my first question is for you, John. Just understanding the puts and takes of the guidance, but for you to get to the new midpoint of your range, it does assume that adjusted EBITDA has to like double from current levels. And I think that's tough to do even adding back making the adjustments for the charges and the $37 million in Urban Solutions.

So can you talk -- in particular, with the Middle East being a headwind now. So can you just talk to me about the drivers behind the significant ramp in EPS in the remaining 3 quarters? I guess that's my first question.

And then my second question, Jim, is more to you just on the award front. One, when you talk about the Middle East opportunity over the longer term, is that included in like the energy infrastructure rebuild? Is that included in the -- you mentioned your prospects are up 50%. I'm just wondering if the Middle East opportunities are in there and where they would be in oil and gas.

And then the other question, just on Power Gen. Can you talk about the opportunities on gas-fired, but more so the opportunities of sort of working with some of the legacy customers Fluor's had historically where you've been very strong?

Maybe I'll start with the first question on the ramp-up in EBITDA. So probably the 2 biggest normalization items in the quarter, as you state, are the mining charge and also what appears to be about $20 million worth of higher run rate in Q1 on the G&A front. So those are significant bridging items. The rest of it is principally coming -- we're seeing outperformance in all aspects of the business, probably led by the Energy Solutions group.

And so we'll wrap up warranty period and the last of the performance tests at LNGC. So that ought to give us a little bit of a tailwind there. We're expecting a little higher performance in Mexico in Q2 from where we were in Q1. And then probably the biggest thing is going to be the pull-through of some of the early awards and the work that we're conducting on them. So some robust services awards in Q1 that Jim delineated. And so we'll see those added to the portfolio and become being EBITDA generating.

Yes. And on the second part, Jamie, yes, we do continue to feel very good about the pipeline. Pre-Middle East conflict, we have seen that significant growth in our pipeline. If you look at the 26 opportunities that are in the short term, energy and urban mission, all 3 have really exciting prospects out there in LNG, in power within urban -- sorry, within energy and urban, mining, rare earth magnets, the data center opportunity we're cultivating that we announced, life sciences work in Mission, Savannah River, additional work, the growth in the Centrus accounts and that project as it continues to expand its scope and national security.

All of this stuff pre opportunity driven by the conflict, Jamie. So if there are any significant opportunities in late '26 or '27 as a result of the conflict, it would be additive to what we already had. One way that I see the impact of the Middle East is, I think it's going to increase the chances of some of our current key front-end work to materialize into full awards. If you look at the fertilizer project in the U.K., I think its chances of going forward have increased. If you look at the LNG project in Canada, I think its chances of going forward have increased as a result of the conflict.

And then looking into '27, we, as a team, have spent a lot of effort in recent quarters, not just cultivating the awards for the year, but also the pipeline for next year. There are some great opportunities in mining associated with copper and some of the other commodities, iron ore, et cetera, and that those markets continue to be very strong. The price of copper is very high these days, and that should stimulate investment.

Power, to your question on our prior clients, those conversations are going well. There's one client, the confidential client for which we already had a limited notice to proceed for a combined cycle. But there are 2 other projects for that same client that are in the pipeline that we have an opportunity to negotiate with the client. There's a second client that we're bidding a project on in the Northwest that we feel good about.

There's a third client that we're preparing a bid for. And in this particular case, it's a similar model where we would go into a front-end effort if we win the proposal, work with the client on an execution plan and then the estimate. And once that effort is mature enough, then we will convert to a lump sum. And there are other clients that are approaching us, and we're talking to them about opportunities.

And so we're balancing all these opportunities out there with our discipline, making sure we have the right ingredients for a successful project, the right team, the right contract, the right price, et cetera. And that the supply chain is able to support those projects, which is becoming an increasingly important element. There's chemicals work that we believe is going to start picking up again late this year and next year.

The chemicals market has been in a slow mode recently. But with the conflict that sector has been stimulated, so to speak, and prices have improved. So there's opportunity there. And there's some other markets. So I think that the short-term volatility is concerning, and we hope for a quick resolution. But I think past that in the midterm, whether it's specific project work as a result of the conflict or the Gulf countries pushing for investments to stimulate their economies or global work associated with diversifying from the Middle East, I think we're well positioned for all that -- all those opportunities.

Your next question comes from the line of Michael Dudas with Vertical Research.

First question, Jim, you mentioned about the -- I think 200 bps improvement in new business into the backlog. Maybe can you characterize that relative to what you've been putting into the backlog the last several quarters? Is that because of mix of, say, front-end work versus EPC? And how do you see that as you convert feed into awards into backlog, how that may improve or change as we go through the next several quarters?

Yes, Mike, the 200 basis points is a result of 2 things. One, some of it is services work, you're right. Some of it is just better bidding conditions and better commercials. Because we are being very selective in which projects we intend to convert to EPC, we look very carefully at the risk/reward formula, if you will, Mike, on those projects. On the large reimbursable mining project, there's a certain expectation.

On an LNG project, there's a different expectation. On the power job, there's going to be a different expectation. So my thinking is the numbers are going to improve along the quarters as the backlog grows as a combination of the selectivity and market conditions, but also as a function, just Mike, of greater volume. So I do expect the margins to continue to improve and be reflected in the actual performance of the business.

I appreciate that. My follow-up is when you think about -- or maybe you can share a little bit more of your discussions with some of the hyperscalers and the market seems to be warming up to what you want to do, but still not quite there yet from a term condition standpoint. And maybe offshoot on some other industrial technology, semiconductors has been quite a factor into the news and some other large commercial spending and how that may flow into Urban Solutions opportunities in the next several quarters.

Yes, Mike, as we have said before, we are interested in doing data center work in the U.S. We have been successful overseas, and we continue to look at opportunities overseas. But the big prize is domestically. But the reality is also that there are a lot of regional and commercial type contractors that are well positioned for that market.

And what we're seeing is many of the commercial and contractual terms in our view and in our estimation, our risk analysis are a little bit challenging from a risk allocation perspective. And so what we're saying is we will continue to pursue work in the advanced technologies arena that data centers and semiconductors. But we're going to be selective, and we are going to maintain our discipline in looking at the commercial model for these projects.

Now we are -- in the advanced technologies and advanced manufacturing world, we are looking at beyond data centers and -- or more than just data centers and semiconductors. If you look at the magnet facility that we're pursuing in the U.S., that's a massive project, and we're well positioned for that. It just -- it suits well our expertise and the strength of our EPC value chain. So we're going to continue to look at these opportunities. The team is working hard on it, but always maintaining our discipline around commercials.

Now frankly, the way we're seeing it, the way the market is evolving, Mike, the rates for dominance in AI in the United States and the various markets that are being pulled by that, the one that is perhaps most attractive to us is the power market. It just fits better our expertise, our strong engineering, our strong global supply chain. And so we believe that the greatest opportunity for growth, profitable growth associated with the buildup around data centers and AI is actually in the Power sector.

Your next question comes from the line of Steven Fisher with UBS.

Just wanted to follow up on the mining project. If you could give a little bit more detail there. I think you said 80% through construction, but just maybe a little more color on the timing of completion. What productivity assumptions that you have made for the rest of the project? Kind of what's going wrong there?

And mining, we typically think of those as being cost reimbursable projects. Just curious kind of what was different about this online fixed price in the first place and how comfortable we are about not having further charges on that? And then second question is, I know you mentioned expectations for kind of -- or hoping that things improve in the Middle East by the second quarter. Have you started running some scenarios that if things don't improve by then? Where are some of the bigger variables that could flow through the financials for the rest of the year?

Thank you, Steve. Let me start with the first question around the mining project. Obviously, that disappointing setback. I know the team overseeing the work is also disappointed with this charge and is working very hard to advance the project and finish it expeditiously. A little background on the project. Engineering and procurement are essentially complete.

Construction is well advanced. It's nearing 80%. What happened, Steve, was in recent months, the site experienced declining productivity in the field as the craft ramped up and we progressed into latter stages of the work. So we did a detailed analysis of work to go, quantities, productivities, et cetera, and concluded that we needed to increase the cost estimate of the project. it was a prudent thing to do given where those productivity numbers were pointing.

But I'll say while the team and the business leadership continues to work with the client on what it will take to finish the project. We're looking at a completion around the end of the year. That's the target. But let me say a couple of things. You mentioned the mining and metals business. It is overwhelmingly reimbursable. This is the one large lump sum project there. It only represents about 5% of the backlog that we have today on mining and metals projects. And the rest of the mining and metals portfolio projects, the other 95% is performing very well, delivering above hassle target. So it's a very attractive market for us, very successful market.

I believe we have captured the cost adequately. We made a detailed assessment, working with our partners there, made the necessary adjustments also in the -- not just in the estimate and the team to strengthen that oversight and that execution. And we're going to watch it very closely over the next several months. Let me say one more thing on the project.

This project, although the unfortunate charge that we saw this quarter, there's another project of similar nature and characteristics that was executed by the mining business some years ago, very similar project, and that project was very successful. So I think this is clearly an isolated item, and we're working very hard to resolve it.

Your next question comes from the line of Sangita Jain with KeyBanc Capital Markets.

First, can I ask about the total magnitude of the closeout? If you can give us how we should apportion them between the 3 favorable closeouts, that would be very helpful.

Yes. So the big 3 projects, the 3 projects that we closed out were a project in China, a project in Kazakhstan and of course, the project in Canada. And the tailwinds for those were really a function of the timing, particularly in Canada on some of the closeout items, probably created a little bit of a tailwind to the guide, but certainly in line with our expectations for the full year. And I think the same can be said for the other 2 projects as well.

Got it. And then just kind of going back to the guidance and Steve's question and Jamie's question. I appreciate you thinking through the pull forward on the early awards. Can you help us more on which of those recent LNTPs of fees that you're budgeting a conversion to FNTP FID, for example, the TeraWulf project or the Centrus project?

Let me answer that. So we always look at things probabilistically. So we assign go get to the conversion. And it's always a little bit of a challenge because you have to kind of guesstimate the exact timing of when the client is going to make a decision. So we don't really focus too much on individual projects.

We we do an analysis of the portfolio, you have Centrus, you have TeraWulf, you have the potential of an LNGC award, you have some power work. You have a potential of a conversion on the gas compression project, potential for a copper project in South America moving on to the next phase.

So it's -- the contributions from multiple projects. That's why we feel good about the guidance that we gave to the question that was raised earlier. Another data point that I'd like to look at is how much of the expected PGM gross margin in the year is already in backlog, and that's above 75%, well above 75%. So that is -- that's a little higher than historical averages. So I think there's good -- barring some really unexpected change in the kind of geopolitical and world economy stage, we feel pretty good about where we stand with the guidance.

Your next question comes from the line of Andy Wittmann with Baird.

Yes. So I guess, John, we noticed that you had about a $1.1 million scope adjustment that contributed to backlog, but not into the awards this quarter. You've had these -- a few of these actually in the past several quarters.

And when it's happened in the past, when you get like customer furnished material scope increases, it can change the percentage of completion accounting associated with those jobs that can either force you to book more revenue or debook some revenue depending on which way the CFM goes in or out. So I was wondering what the impact was to your profits in the quarter from that and if that has any effect on this year's guidance by pulling or pushing profits in or out of this year?

Andy, you are correct. The sawtooth effect that you're referring to, we did see a little bit of a negative sawtooth impact in the quarter. It was probably less than a $10 million impact that we will recapture across the balance of '26. So it would also be a bridging item in getting from Q1 run rate to the full year guide. But it is -- it wasn't so substantial and worthy of mention, but about a $10 million-ish impact in the quarter.

Okay. Well, that's still helpful because when I look at the quarter, you've got the $60 million EBITDA that you reported, $37 million charge add back, you're about $20 million heavy on SG&A this quarter versus the rest of the year. So you're about the EBITDA at $120 million there. I'm wondering if there's anything else -- and then to get to the number for the year, you need to be close to $155 million, $160 million on the quarterly EBITDA. So I'm wondering if there's anything else in the first quarter that is unusually low.

Maybe it's seasonally, I thought that the mission profits were a little bit lower than we expected, maybe even the core urban was a little bit less than we expected. Was there a seasonal effect or something, maybe a smaller charge that we should be considering in terms of the 1Q base that we're building off to get to that EBITDA run rate? I just want to understand if there's something beyond just the ramp that you pointed to in the second half with some of the contracts you've already won.

No. So look, I think there's a whole lot of kind of single-digit million dollar impacts that when you compare Q1 across the balance of the year, you could probably take into consideration. We probably had about $4 million or $5 million worth of, I'll say, receivable allowances that we recognize on a certain project.

We are certainly anticipating some better scores in the Mission Solutions arena on one of their large projects based on early intel there. So there are -- there's a lot of little things like that, that drive it up $2 million or $3 million, $4 million, and I could probably delineate another 3 or 4 things that occurred during the quarter. I would consider those just normal quarterly ebbs and flows, but do appreciate that in order to bridge from a relatively light Q1 to the numbers you're talking about, they do help when multiplied by 2 or 3 times.

Your next question comes from the line of Andrew Kaplowitz with Citigroup.

Jim, with the understanding that the geopolitical noise out there is still quite high, I just want to clarify that you still think '26 new awards could be significantly higher than '25. And then you mentioned LNGC Phase 2 probability to move forward has increased. Do you think that probability for 2026 FID is high on that project?

And maybe just give us a little more perspective on the sizing of the project. Obviously, we know you built the infrastructure up there. You built Trains 1 and 2. But I would assume this is still many billions of dollars to floor if it does move forward.

Thank you, Andy. Yes, we still feel very confident that 2026 awards are going to be higher than '25. And that is on the back of the quality of our prospects that we have in front of us, many of which we're working on right now.

I was doing the math the other day, it's about 85% of our expected new award revenue we're already working on. And as far as Phase 2, Andy, I think the project is looking -- it's a client's decision ultimately, but the project is looking very good. It's a complex project with many stakeholders. You've got the JDP partners that own the project. You have national government, provincial government, First Nations, various stakeholders.

I know the client has been working very, very hard to put all the pieces of the puzzle together. We're one important piece, and our conversations are going well, and we continue to support the client with information needed for their final investment decision.

Ultimately, it's their decision. I think it's going to happen in 2026, but it's not up to us. But we're doing everything we can from our side to make the client's decision a positive one. It will be a multibillion-dollar award for us, somewhere between $5 billion and $10 billion. So you can look at that, but it's going to be a single-digit multibillion-dollar award.

Very helpful. And then just referring to...

Regarding timing, We think it's going to be '26. But again, subject to clients' decision. Yes.

Very helpful. And then referring to your comments on Middle East reconstruction and/or Venezuela, maybe give us a little more color regarding your conversations. It's probably early to have too much clarity on the Middle East. But in Venezuela, you talked about having more information in the next few months, which I thought was intriguing.

So is that the time frame we're talking about where you actually could see real work in Venezuela maybe as you go into next year? And could you get assurances on that work, so it's relatively low risk?

All great questions that we're looking at very carefully, Andy. We have a lot of experience in Venezuela. We have a lot of employees today that have worked in Venezuela projects. So we are well poised to do work there. We follow our clients. That's our model. So we're watching very carefully what our clients are saying publicly and privately.

And the general consensus is that there still needs to be more clarity in the -- making sure the business environment there is stable and predictable for large investments. And you heard that said by several very high-profile CEOs that could be invested in Venezuela. I think there is a lot of interest from our clients to go into Venezuela, both American companies and a few European companies. We're talking to them.

We have sent people delegations to Venezuela to talk to these clients, to talk to local partners. A lot of the work we've done in the past was with local partners. Those companies are still there. And so we're doing -- we're getting ready for it. I can't tell you what the exact timing is going to be because it just depends on when will our clients get comfortable in going there. But the opportunity set is huge.

As everyone knows, the resources in Venezuela are enormous. And by the way, it's not just oil and gas. The infrastructure has to be rebuilt, including a lot of power generation. So there's a lot of opportunity there. I'm also aware that the U.S. government is in conversations with Venezuela about mining resources. There's also tremendous mining opportunities in Venezuela. So that also bodes well for our expertise. So we're watching it closely, Andy.

I think because the types of projects that we get involved on are usually large investments, I would expect that our clients would want that level of certainty. So we'll know more about it in the next few months. I just don't know exactly how fast it's going to go.

Yes. We're staying close to them on their journey to assess what could be the opportunity set there.

And that concludes our question-and-answer session. I will now turn the conference back over to Jim Breuer for closing comments.

Thank you, operator, and thank you for joining today's call. I am very pleased with the momentum we're seeing across our end markets and the strength of our opportunity pipeline. I'm confident that our strategy will deliver growth and meaningful value for our shareholders. Have a good day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to Fluor's Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A replay of today's conference call will be available at approximately 10:30 a.m. Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for 7 days through a registration link, also accessible on Fluor's website at investor.fluor.com.

At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Vice President, Investor Relations. Please go ahead, Mr. Landkamer.

Thank you, Sarah, and welcome to Fluor's 2025 Fourth Quarter Earnings Call. Jim Breuer, Fluor's Chief Executive Officer; and John Regan, Fluor's Chief Financial Officer, are with us today. Fluor issued its fourth quarter earnings release earlier this morning and a slide presentation is posted on our website that we will reference while making prepared remarks. .

Before getting started, I would like to refer you to our safe harbor note regarding forward-looking statements, which are summarized on Slide 2. During today's presentation, we will be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially.

You can find a discussion of our risk factors, which could potentially contribute to differences in our 2025 Form 10-K, which was filed earlier today. During this call, we will discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com.

When discussing revenue and related margin, we are introducing disclosure for adjusted net revenue and adjusted net margin, which we determined by reducing GAAP revenue to exclude ad cost revenue, which we define in the 10-K. I'll now turn the call over to Jim Breuer, Fluor's Chief Executive Officer. Jim?

Thank you, Jason, and good morning, everyone. Thank you for joining today. I want to start by sharing my perspective on 2025. And what's ahead of us in '26, why we're excited about our strategy and the business conditions supporting our growth. Please turn to Slide 3. When I think about our current state, it's helpful to reflect on the progression of our strategic journey over the past few years.

We executed our fix and build chapter early in the decade where we prioritize actions critical to our long-term success. These included creating a robust capital structure, reestablishing disciplined pursuit principles and diversifying our mix of revenue.

Last year, this management team launched the next chapter of our strategy, grow and execute with a focus on growth, project delivery and returning value to shareholders. Since then, we deployed $754 million in share repurchases in 2025, plus an additional $335 million to date in 2026. We achieved a monetization solution for our investment in NuScale with $2 billion received since September of 2025 and more to come in the next few months.

We completed the sale of Stork and signed an agreement for the sale of the CFHI yard. We maintain our discipline around contract terms, ensuring that we get paid for the value we provide and we have much to be proud of in our 3 business segments. In Energy Solutions, in 2025, we completed several major projects successfully, including LNG Canada Phase I, TCO in Kazakhstan and BASF in China.

In urban, we expanded in key markets, including a major award related to the largest pharmaceutical project in the world. A rare earth project in the United States, copper and iron ore projects across multiple continents and a semiconductor tool install.

And admission, we saw a significant extension for nuclear remediation work and continue to make inroads in the intelligence space. Please turn to Slide 4. As we stand in early 2026, we're seeing improved confidence across our client base. This confidence is a result of high levels of new front-end work as well as detailed negotiations on projects that we see converting to backlog in the next several quarters, weighted towards the second half of 2026.

The uncertainty and hesitation that we saw last year is abating. Furthermore, after last year's disruption, the Fluor team has been very active in finding new opportunities in our target markets. and progressing the ones already in-house. We're actively pursuing and shaping prospects across LNG, mining and metals, advanced technologies and nuclear fuels.

We also saw an increase in prospects in both gas-fired and nuclear power projects. Based on our conversations with clients and their current expectation of FID timing, we anticipate that new awards for 2026 will be significantly higher than in 2025 with a book-to-burn ratio in excess of 1.

On Slide 5, we have listed the major opportunities we're tracking for 2026, showing the diversity of our end markets. I'll provide more detail in my commentary on each segment. Now let's turn to our review of our results for 2025, beginning on Slide 6.

John will cover the majority of the financials, but I'd like to cover a few highlights. Consolidated new awards for the year were $12 billion and 87% reimbursable. New awards last year were affected by clients' concerns around geopolitical and trade uncertainty. And in the case of SR PPF, the client's evolving approach for tendering the CM scope.

In addition to these awards, we recognized close to $1 billion in positive backlog adjustments as part of normal growth in our project activities.

Our backlog ended at $25.5 billion and 81% reimbursable. I'm encouraged by the earnings potential of our current backlog, we saw an improvement in new award margin and in total backlog margin. These improvements are supportive of the operating margin range that we discussed last year at our Investor Day.

Having these projects in hand, we're now focused on delivering at or better than as sold. Moving to our business segments. Please turn to Slide 8. Urban Solutions reported a profit of $205 million for 2025 compared to $304 million a year ago. Segment profit reflects $108 million in cost growth on 3 infrastructure projects, offset by $54 million of positive developments on other infrastructure projects including a favorable negotiation on the project completed in 2019.

Specific to our 4 infrastructure projects in the loss position, we're still on track to hand over 3 projects in 2026 and 1 in early 2017, and we continue to aggressively pursue recoveries and change orders from clients and subcontractors. New awards in urban for the year were $8.7 billion and included the previously mentioned pharmaceutical project, 2 significant mining projects and 2 highway projects.

This is the third year in a row of new awards in the $9 billion range in urban, validating the benefits of our diversification. Ending backlog for Urban Solutions is $18.7 billion. Please turn to Slide 9. We see opportunity to grow in 2026 with large copper, aluminum and green steel projects in mining and metals.

Rare earth material production facilities in manufacturing and life science facilities for 2 new clients. In Advanced Technologies, we brought in additional industry experience leadership to support our offering in both semiconductors and data centers. As a result of our increased efforts in these markets, we are in advanced discussions with a client for a major data center in the U.S.

We're pursuing project management work on a data center project in Europe and are well positioned for semiconductor work in the U.S. Moving to Energy Solutions. Please turn to Slide 10. For full year '25, Energy Solutions reported a segment loss of $414 million compared to a profit of $256 million in 2024. These results reflect the Santos ruling, the completion of several large projects and a temporary slowdown in execution in Mexico.

Excluding the Santos effect, the segment performed extremely well, exceeding our internal expectations for the year. New awards and Energy Solutions totaled $1.4 billion in 2025. Awards for the year were primarily related to higher margin engineering services that will enable larger EPC awards in the next 2 years.

Ending backlog was $4.6 billion. As a final point, we recently celebrated the mechanical completion of our work in BASF's largest investment to date in China. Our scope was delivered with more than 75 million work hours without a lost time injury. In Fluor provided full engineering, procurement and construction management services across multiple facilities.

This proudful achievement is another example of our ability to deliver successful projects no matter the size and complexity. Please move to Slide 11. Prospects for 2026 include our entrance back into the gas-fired power market. We currently have an LNTP with a confidential U.S. utility for a large-scale project with the potential to add 2 additional facilities for the same client.

These projects will start on a reimbursable basis and then convert to a negotiated fixed price once the execution plan and estimate are completed in late '26 or early '27. We're very excited about these opportunities because they reflect our ability to jointly develop a contract and execution plan with the client, driving a win-win outcome under fair and balanced terms.

In the nuclear power market, we're pleased with our progress to advance current projects and to diversify our portfolio of opportunities. On the [ Cernavoda ] project, we continue to advance the front-end planning with the client and our JV partners and expect to finalize all deliverables and EPC estimate by the end of '26.

This project could result in a multibillion-dollar award next year. On the Row Power SMR project, we're actively coordinating with the client, the U.S. and Romanian governments and with NuScale to obtain the next stage of funding to progress that project beyond the recently completed feed.

We're also pursuing additional opportunities in conventional nuclear and SMR projects in partnership with several technology providers. So as you can see, we continue to expand and diversify our nuclear power portfolio, which we believe will provide significant growth potential in the mid- to long term.

In LNG, we continue to support the LNG Canada client as they work towards a decision on Phase 2. We're looking forward to replicating the success of Phase 1 in this next phase. Our LNG team also recently started a feed package for a portion of a U.S. LNG facility.

Turning to Mission Solutions. Please go to Slide 12. This segment reported a profit of $94 million for the year compared to $153 million a year ago. Results for the year reflect $60 million in the aggregate for the recognition of reserves on the DoD project and a previously disclosed ruling on a project completed in 2019.

New awards totaled $1.8 billion, similar to 2024. Awards included the start of a 6-year contract to extend our presence at the Portsmouth site. Backlog was $2.2 billion compared to $2.7 billion for 2014. As previously explained, these numbers exclude the work performed under the equity investment method. For 2026, we see opportunities in the civil agency market, including FEMA and the National Cancer Institute, pursuits in our national security business, additional LOCAP work and support services for the intelligence community.

Mission is very well positioned for nuclear fuels work, combining our EPC expertise with our extensive nuclear experience with the government. We expect this market to expand as the U.S. drives investment to increase domestic production. In this sense, we are extremely excited with last week's announcement of the Centrus award for the EPC of a major expansion of its Ohio uranium and Richmond plant.

We're proud of our long-standing partnership with Centrus and our contribution to rebuilding the U.S. nuclear fuel supply chain. We recognized an early engineering award in Q1 and expect meaningful EPC awards in the second half of '26 and into '27. We continue to have a full team deployed on the SR PPF project, which is part of our scope at Savannah River.

While we had previously anticipated a full release in 2026, we are awaiting additional information from the U.S. government as to timing of next steps. Before I hand the call over to John, I wanted to briefly discuss artificial intelligence which is a topic of great interest in our industry.

Please turn to Slide 13. When it comes to AI, Fluor was an early adopter. We began our AI journey in 2018 by developing a predictive analytics platform built on data from more than 200 of our largest EPC projects. This foundational work allows us to benchmark schedule, planning and cost performance using proven historical outcomes.

So projects are planned with greater accuracy and discipline from the start. At Fluor, we view AI as a strategic advantage that strengthens our fully integrated EPC model. AI will enhance our ability to plan, design, procure and build improving decision timeliness and quality, accelerating execution and sharpening our competitive edge.

As of today, we have deployed AI across the project life cycle from predicted analytics on capital projects to intelligent pricing insights across the supply chain. These applications are already embedded in how we plan projects and engage with suppliers across key markets. We have also implemented AI applications across individual functional roles, including HR, finance, legal and procurement.

Building on these capabilities and looking ahead, we are evolving our project delivery platform into what we call the project of the future. While still in the early stages, this next evolution of our platform is intended to deliver shorter schedules and greater cost competitiveness for our clients. We look forward to sharing more details in the future.

With that, John will give us the financial update. John?

Thanks, Jim. Good morning, everyone. Today, I'd like to complete the picture of '25 results and share our view on the year ahead, including some thoughts on capital returns. Please turn to Slide 15. There are some key things to consider within our full year GAAP results, including: one, the $643 million charge related to Santos, which we booked as a reduction to revenue. .

Now in Q4, we saw a modest callback of $10 million as we further tightened the earlier estimates coming out of the judgment, and we saw more contribution from our insurance carriers. Two, we recorded $210 million in equity method earnings, driven mainly by our investment in NuScale and the Q1 NTTA impact.

The accounting for new scale in Q4 is very nuanced. So we'll comment more on that in a moment. Three, we recognized $108 million in cost growth across 3 infrastructure projects, including a $30 million effect during Q4. And finally, we had $43 million in restructuring costs to better optimize our operating platform for the current execution window.

We recognized $16 million of this in Q4 and with all year-to-date amounts included in our SG&A. Coming back to equity method and NuScale, because we had not completed the forward sale program until last week, we kept all 111 million shares on our balance sheet through year-end.

The $2.2 billion loss in the quarter represents the $22 decrease in NuScale carried across all 111 million shares, but offset by the $200 million we recognized for the derivative asset associated with the forward sale which amounted to roughly $3 per share for the 71 million shares within the program.

As I said, nuance. All in, our carrying value for the 71 million shares in the program completed last week was $1.2 billion, and we received $1.35 billion so the difference becomes a realized gain in Q1. Please turn to Slide 16. For 2025, our 10-K reported a consolidated segment loss of $109 million. which was significantly impacted by Santos. Adjusted EBITDA for 2025 was $504 million compared to $530 million a year ago.

Our adjusted EPS of $2.19 compares to $2.32 in 2024. G&A for the year was $196 million down from $203 million reported a year ago. This reflects a decrease in stock-based comp expense but was offset by the restructuring costs of $43 million. Net interest income in 2025 was lower at $67 million compared to $150 million a year ago.

As a result of both lower interest rates and the level of cash balances at our more significant JVs. Moving to Slide 17. We ended 2025 with $2.2 billion in cash and marketable securities, compared to $3 billion a year ago. Remember, we had several outsized items impacting year-over-year cash, including share repurchases, the NuScale monetization in September and October, plus the Santos payment in Q4.

To provide more clarity, we've included an adjusted balance sheet on Slide 24 and to illustrate the impact of share repurchases and new scale monetization that we've already completed this year. It shows a $1 billion augmentation of our cash balance and positions us to execute the capital allocation that we headlined in today's earnings release and to do so with a supreme confidence.

We ended '25 with operating cash flow of a negative $387 million, largely due to the $642 million paid to Santos. Absent that, cash flow remained robust. As a reminder, our payment to Santos in Q4 enabled us to move ahead with our appeal, which is currently slated to be heard in mid-'26.

While we are hopeful for a more positive outcome via the appeal, we don't see any material downside to pursuing it. As it stands, we don't expect any meaningful updates regarding the appeal and any insurance recoveries until the second half of the year.

On the lost project front, we funded $238 million for all of with $80 million reported as operating cash flow and the remainder in investing. By virtue of the further widening in Q4, we now expect that 2026 will see approximately $220 million in funding, including $90 million within OCF. Backlog for legacy projects now stands at $250 million compared to $700 million last year.

Please turn to Slide 18. We're very proud of 2025 on several meaningful fronts. We had over $750 million in share repurchases in the calendar year resulting in an 11% decrease in float. We converted all of our new scale holdings and embarked on a comprehensive plan to monetize them.

Excluding the 40 million shares that we still hold, the already accomplished monetization means that we have a MOIC of over 3.5x and an IRR of over 13% since our initial investment in 2011. The final chapter of the monetization will only turbocharge these results. We finalized the agreement to sell our ownership in the Chinese fabrication yard for over $120 million which upon closing, will enable us to further reinvest in our business.

We had $37 million in debt retirements, which generated $1 million in gains because of how we attack them. We don't see a need to refinance any of our outstanding indebtedness in '26. But if these types of small-scale opportunities continue to present themselves, we'll be poised to act.

And lastly, we completed the divestiture of store. Looking ahead for 2016, we expect to spend approximately $1.4 billion for share repurchases across all 4 quarters. which includes $400 million for the first 2 months of the year. We also expect to conclude our new scale monetization efforts during Q2.

By virtue of the NuScale proceeds and our operating results will continue to put a priority on investing in our capabilities and our people with a focus on building additional expertise and depth reviewing tuck-in M&A opportunities that directly advance objectives within our target markets and continuing meaningful share repurchases beyond 2026 and based on free cash flow performance.

Moving to Slide 19 and the outlook. For 2026, we are establishing our initial adjusted EBITDA guidance in the range of $525 million to $585 million. When we think about adjusted EPS in 2026, the significance of the share repurchases will play a big role in reducing outstanding shares.

Assuming we create -- we complete the entire program at $45 per share, which was Friday's close, we expect adjusted EPS to be in a range of $2.60 to $3 on an invested basis. 2026 operating results are weighted a bit more heavily towards the second half of the year. Our expectations for operating cash flow are approximately $300 million. But that figure excludes the over $400 million for the tax bill on last year's NuScale conversion, which comes due in Q2. It does, however, reflect the lost project funding I discussed earlier.

Our key assumptions and expectations for 2026 are shown on the slide, including the new awards book to burn above one based on the continued optimism that you heard in Jim's commentary, Corporate G&A expenses of approximately $175 million to $185 million. Now this range excludes up to $10 million we could incur for early work on a potential replacement of our ERP.

An income tax rate of approximately 26% to 28%. And while revenue is increasingly difficult to predict, in part due to the impact of varying levels of ad cost revenue, we expect our split to be approximately 20% in Energy Solutions, approximately 65% in urban and approximately 15% in mission. Assuming these splits, our expectations for reported segment margins are approximately 3% to 4% for urban solutions, approximately 4% to 5% for Energy Solutions and approximately 6% for mission.

As an alternative view to margins and using the definitions outlined in our 10-K filed earlier today, I wanted to highlight Slide 25. I where we have presented our view on consolidated adjusted net margin, including the growth we saw in 2025.

In the spirit of transparency, we expect to elevate our disclosure in this area for 2026. And with that, operator, we're now ready for the first question.

[Operator Instructions] Your first question comes from Steven Fisher with UBS.

Rats on all the progress in 2025. Just to focus a little bit on the initial guidance. It seems like it was a little bit better than what you were thinking back in November, December when we're talking about sort of a flat to maybe modestly higher. Just curious kind of what changed. It sounds like maybe you're hearing a little bit of confidence from your customers.

Just if you could talk a little bit about that? And then what specifically still has to happen to hit those targets? Are you acquiring some of these bookings in the second half to make a meaningful contribution.

Steve, this is Jim. Let me start and then I'll ask John to supplement we feel good, Steve, where we are. We feel good about the diversity of prospects we have in front of us and the likelihood of converting we are saying that a lot of the awards are going to come in the second half of the year.

So the contribution for this year's income statement is going to be modest, I would say. So a lot of our confidence is also what's in backlog. And so it's a combination. But where we sit today in February, John, I would say in the 70% plus or minus, is already in backlog, maybe a little bit higher. The rest would have to come from what we call book and burn Steve.

But we feel, given the quality of prospects and giving the I would say the maturity of these opportunities, we feel pretty good about it. John?

Yes. I think you're spot on, Steve. In respect of what's coming from backlog for the EBITDA guide, Jim's right, it's probably in that 2/3 to 3/4 range. And the rest of it is kind of a comfortable book to burn for us based on kind of historical trends. So no major concerns there. .

And then look, I think the slightly uplift to guide is based on some of the confidence that Jim referenced and in part due to some better execution. We spent so much time talking about our problem projects. We forget that so much of the portfolio continues to execute at greater than as sold.

And so as we're seeing uplift to margins in some of those backlog projects the drop-through into the income statement and 26 is meaningful.

The next question comes from Jamie Cook with Truist Securities.

And lots of accomplishments in 2025. Jim, I guess just my first question, it seems like the opportunity on power, as you said going forward relative to where we were last year, seems to have improved quite a bit. So is there any way you can help me understand, given the prospects you're seeing today, like what percent of your business could be power, let's say, in the next years like on a backlog basis.

And just are you seeing any improvement in terms and conditions with utilities, given they've historically been a difficult customer to work with before. Understanding the contract will be hybrid, cost plus then goes into fixed price, but just any commentary on the terms and conditions or competitive environment that makes you comfortable going in this market.

Jamie. Let me answer first the second part of the question. The power market in the U.S. has evolved significantly in the last few years, driven by the huge demand for power. That translates into demand for reliable EPC services. And we have that. We have the experience to do these complex projects. And so in our conversations with the primarily utilities, they recognize that and the conversation is very different now.

Like I explained, it's starting reimbursable, working together on the execution plan and the estimate and then converting to lump sum. And even that lump sum is going to have better conditions than what we saw 8, 9, 10 years ago. This is what we're calling smart lump sum where the risk allocation is properly balanced between both sides.

I feel good about the power market. I think I can see ourselves executing at least 2 or 3 large projects simultaneously. We don't want to -- I mean, we like our diversification in Fluor. So we want to grow in urban. We want to grow in mission.

We want to grow in energy. The 2 large growth engines in energy are LNG and power. And in the shorter term, it's going to be gas-fired power. Again, a several small projects at the same time is what I would like to shoot for by '27. With this one confidential client that I mentioned, we're starting on 1 project, but the agreement is for an additional 2 sites. So we can -- you can see us managing that relationship as a program with different sites and the efficiencies and the economies of scale that -- so yes, multiple projects by next year, Jamie, I don't have in my mind what percentage of the backlog, but it's going to be certainly one of our growth engines. Yes.

Probably a little less focus on the nuclear side in terms of backlog growth over the next 2 years. But again, that's a market that we continue to stay close to and to hone our CV so that if the renaissance does, in fact, materialize in a meaningful capital way, we'll be hanging around the hoop for that.

The next question comes from Sangita Jain with KeyBanc Capital Markets.

First, can I start with the feed on the U.S. LNG plant. I think in the past, you've referenced hesitancy on taking express risk on U.S. LNG projects? So if this project does turn into EPC, will it be fixed price? Or are you thinking cost reversal?

This is a feed for a scope that is not a train, this is an ancillary scope, it's still significant in size, but it's not in the magnitude that you're thinking a train or 2 trains would be -- we're working on the feed. And again, this will be another example where the eventual EPC contract will be negotiated in a way that risk is properly allocated.

There probably will be some elements of it, lump sum, but again, it would be what we call smart lump-sum to make sure we're not taking blanket risks. But it's not by any means of the scale of, say, on LNG Canada. It's much smaller than that.

Got it. And then on the Urban Solutions margin outlook of 3% to 4% for 2026. I think in the past, you've referenced a higher margin range. So just kind of some color on whether it's a function of the projects that are burning this year? Or if there's a recalibration on your part on your Urban Solutions margin trends going forward?

Nothing kind of in the macro there that is causing that. As we had in the prepared remarks, we do have the legacy projects that are scheduled for handover, so it's pushing the finality of those out the door with maybe a little bit longer of a horizon than we had expected in earlier years. So it's really just the drag of those things. here in the final stages.

Your next question comes from Andy Wittmann with Baird.

Okay. I guess I'm going to ask one on cash flows, and then I'm going to ask one, I think, on corporate costs. So guys, just on cash flow, it looks like you've kind of articulated some of the moving pieces. John, thank you for that. You talked about the legacy burn. You talked about the cash tax payment here coming early in the second quarter for the new scale.

One thing you didn't talk about was some of the JV cash and this has been a number that a couple of years ago was very large, and it's beginning small, but maybe if there's other moving pieces on the cash flows that we should maybe understand even if they're a little bit more minor, but particularly JV, maybe you could talk about that, please?

Yes. So you're spot on. So taxes are a big driver of cash flow, and it's that nuance of I pay in the succeeding year, the tax bill for the earlier year. So having consumed a fair bit of those tax attributes that we've talked about, we're going to be a little more regular way taxpayer beginning in 2026.

So we will see some cash outflow there. On the JV distribution front, not much in the way of expected changes coming out of Mexico. We are expecting a slight uplift in almost nuisance percentage, but roughly comparable to slightly up coming out of Savannah River. And then in LNG Canada, we are expecting that to come backwards.

We're expecting probably $60-ish million less in distributions coming out of Canada as that project is winding down. and we make the final distributions accordingly. But given the lower effort that we've had in recent quarters, not surprising that the distributions themselves are coming down as that project nears completion.

Okay. And then, I guess, maybe it's a little bit of a moot point because you gave guidance on your G&A expense. And I'm just trying to understand the moving pieces in the fourth quarter as well.

You had an environmental liability in there. you had your normal FX number in there that are both notable items. It feels like there was a reversal on incentive comp because otherwise, your corporate G&A number if I adjust for those 2 items, it seems kind of too low.

So maybe just thought I'd have you talked about that one. And do you expect that there will be more restructuring in 2026? At all that we should be contemplating?

Yes. So a lot in there. So the core cost guide, you are correct, there was some reversal of the stock-based compensation. That was related to, in part, overall corporate performance vis-a-vis our internal targets. That will also was a factor from the decrease in share price during quarter 4.

And so we have several of our equity awards that received a liability treatment. So those are constant mark-to-market. So we did see some impact there. And I think our expectation for the 2026 guide is that we're at something closer to the targets for 2026 and which is why you do see a little inflection there.

You called out the restructurings that we're in there with respect to 2026, I would say our restructurings in 2025 were more largely geographic. There was a little bit of a tail on some of the Stork stuff, but we looked at where we were operating in the offices we needed, and we took some restructurings around those.

I think as we get into 2026, we may still have some modest tail of those things, but I wouldn't expect them to be anywhere close to the $40-ish million we spent in '25. So again, bit of a nuisance, but there will be some, but I don't expect them to be material.

Got it. Sorry, if I could just sneak one more in here. Just the Mission Solutions margin guidance seems to have perked up here at 6%. Obviously, there's lots of factors that can go into this one as well. But I was wondering if there's anything discrete that we should be thinking about as to driving that margin higher than what we've seen maybe over the years?

Yes. Essentially, it's the performance on Savannah River, which receives that equity method treatment. And so you're picking up some of the profit without corresponding revenue.

Your next question comes from Michael Dudas with Vertical Research Partners.

Jim, in your prepared remarks on Urban Solutions, you highlighted a couple of newer pharmaceutical clients. You called out data center semi. So is the market demand for those services picking up to the point where it's coming into your ballpark on securing those types of terms and conditions that will lead to booking growth this year. .

And on just on the pharma, how much is Lilly? They've mentioned that new plant in Pennsylvania all is that -- are they still -- you're still able to add to their cause given all the work that you've done?

Thanks, Michael, for the question. Let me go in pieces here. Yes, we continue to be very excited about the urban markets and ATLS semiconductors that is in our flywheel those large complex projects. We're talking to clients about those projects, they're multibillion dollar complex facilities. So that is something we're pursuing very actively. Data centers, we've had, as you know, many comments in this forum around the data center market and Fluor's role in it.

We continue to be very interested in data centers. We are pursuing data center work. We have very good opportunities, one in the U.S. for a large project, one in Europe or project management services that were in advanced negotiations.

We will remain selective in that market. A lot of the data center work in the U.S. is better suited for regional contractors or commercial construction-type contractors. But we think there's still good opportunities to pursue there, and we intend to grow in that market.

And similarly, in pharma and life sciences, right now, we're executing a massive project for Lilly in Indiana. It's actually 2 projects in 1, and we are fully committed to making sure that project is successful. We're also chasing some other smaller facilities, still sizable projects, but not in the same scale.

And as the Indiana job gets further ahead and there's line of sight on the completion then I'm sure we're going to continue to do more work in that area.

And my follow-up is you've made terrific progress on your financial discipline and certainly, the contract terms is very good to hear. Utilities are being more accommodative in your longer-term goals that you've set out you set out in your term here, how do you feel about the growth aspect, the adjusted EBITDA growth over the next few years, the new business opportunities, is the demand in the market increased confidence leads you to more added confidence of achieving those goals as we move forward? .

Mike, I feel very good about them. I feel very good because I'm confident that we're -- we have the right capabilities aimed at the right markets. The uncertainty and the disruption we saw last year in Q2, Q3 has gone a lot better. I think our clients are getting used to the trade policy flux and I think it's perhaps a new normal.

And so they're looking past it and making plans for their CapEx programs. We have great end markets, and we talked about power, we talked about copper in the past, the copper demand, I think there's going to be an increase in copper demand, 30%, 35% in the next 5 to 10 years. Someone needs to build those facilities.

We're the world leader in copper projects in the U.S., the manufacturing boom on life sciences, data center semiconductors and other types of facilities. Our work in government fairly diversified across multiple agencies. So I feel very good.

I think we -- in our projections, Mike, we are still targeting the 2028 objectives that we laid out a year ago. Yes, there's a 4 quarter slide, if you will, due to 2025 events, but we feel very good about our 2028 objectives.

[Operator Instructions] Your next question comes from Andrew Kaplowitz with Citi.

This is Natalia on behalf of Andy Kaplowitz. Maybe first question that I'll ask, your backlog ended over $25 billion. Can you provide more color on the conversion rates by segment for 2026? And how much of that backlog do you expect to convert to revenue in the next 12 months would be helpful.

Well, I think it's -- in terms of how much of the backlog will convert to revenue that's in that 50% to 60% range. And despite maybe an apparent wide gap there largely hinges on execution and client furnish materials and other things that could have significant impacts within that range. .

So I don't attempt to evade the question, but it's a high percentage of that backlog will drop.

Got it. That's helpful. And then just curious, right, with the significant NuScale proceeds expected, how are you weighing share repurchases against your capital allocation framework?

Or in other words, just curious about maybe an updated color on your tracking order? And just as a follow-up to that, you mentioned strategic investments in M&A. I'm just curious if there's any specific gap in your current portfolio that you'd like to fulfill with M&A?

Yes. I'll take that one. So I don't think we have a material shift in the way we were thinking about it and what we presented last April. And so back then, we said at the early part of the capital returns we're going to be weighted towards share repurchases.

And I think we delivered on that in '25, and I think we've got a lofty goal in '26 with respect to the $1.4 billion. I think as we get later into the planning cycle, then we will have increasing EBITDA and free cash flow, and we will look to redirect those back to shareholders. And so there is probably some diminishing returns of the long haul of share repo.

And so we'll look at other ways to deliver value for shareholders. And so my packing order is kind of reinvesting in our own business as I said in the prepared remarks, building additional expertise and depth inside our human capital structure and then reviewing the tuck-in opportunities and so the tuck-in opportunities shouldn't be viewed as expanding into brave new markets, but again, adding depth to the markets that we have placed a priority on.

And we've chosen the word tuck-in carefully so as not to convey an inappropriately large size of an acquisition. So we do see opportunities on smaller scale acquisitions in several of our businesses. So that's how we're thinking about it.

Okay. That's helpful way to think. And maybe one last question on my end. Just taking a step back, are you advanced from a fixed and build approach to grown executive strategy so I'm just curious, can you talk about which end markets you feel you regain competitive advantages and which markets you're still seeing maybe more competition and pricing pressures?

Let me start with that, Natalia. We try to pick only markets where we think we have an advantage. And so if you look at LNG in Canada. If you look at copper, if you look at nuclear fuels, if you look at DOE work, if you look at other large projects and other technologies, but projects that really demand floor scale set of complex project execution from front end all the way to construction.

That's what we're targeting for. We had -- as you know, Matla, we've had a lot of discussions on data centers. That is a fairly new market to us, and we're a little bit behind catching up there. I'll admit to that.

But again, we're maintaining that discipline where we're only going to go after projects where we think we have a high chance of success. So what am I most excited about and where do I think our strongest opportunities are in these projects that we're we've been cultivating in these markets that I just mentioned because I think we really provide a competitive advantage there and clients are willing to pay for that value.

This concludes the question-and-answer session. I'll turn the call to CEO, Jim Breuer, for closing remarks.

Thank you, operator, and many thanks to all of you for participating today. As we enter 2026, we're excited about the future, given our capabilities, the macro environment for EPC services and our competitive positioning. We appreciate your interest in Fluor and thank you for your time

This concludes today's conference call. Thank you for joining. You may now disconnect.

Good morning, and welcome to Fluor's Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A replay of today's conference call will be available at approximately 10:30 A.M Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for 7 days through a registration link, also accessible on Fluor's website at investor.fluor.com.

At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Vice President, Investor Relations. Please go ahead, Mr. Landkamer.

Thanks, Ian. Good morning, everyone, and welcome to Fluor's 2025 Third Quarter Earnings Call. Jim Breuer Fluor's Chief Executive Officer; and John Regan, Fluor's Chief Financial Officer, are both with us today. Fluor issued its third quarter earnings release earlier this morning and a slide presentation is posted on our website that we will reference while making prepared remarks.

Before getting started, I would like to refer you to our safe harbor note regarding forward-looking statements, which are summarized on Slide 2. During today's presentation, we will be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in our 2024 Form 10-K and our Form 10-Q, which was filed earlier today.

During the call, we will discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com.

With that, I'll now turn the call over to Jim Breuer, Fluor's CEO. Jim?

Thank you, Jason, and good morning, everyone. Thank you for joining us today. To start, I'd like to comment on our very successful long-term investment in NuScale. I'm pleased to say that we've reached a major milestone with this investment. Since we pivoted earlier this year away from a strategic investor to a market-focused solution.

Working with NuScale's management and Board, we announced yesterday the conversion of our remaining investment into Class A shares. We will begin monetizing these shares in an orderly way starting next week and expect to complete this process in the second quarter of 2026.

This accomplishment is a result of negotiations with NuScale over the past several quarters. Our monetization plan ensures we can have line of sight to deliver the significant value of this investment to Fluor shareholders, while also considering NuScale's own capital raising needs.

John will provide details about Fluor's capital allocation plans in the moment. Furthermore, this milestone accelerates our broader strategic journey where we have moved successfully to an asset-light model with a majority reimbursable backlog, creating a strong foundation to fuel long-term growth.

Now let's turn to our operating review. Beginning on Slide 4. Revenue for the third quarter was $3.4 billion, which includes a $653 million revenue reversal in Energy Solutions related to the Santos litigation. Consolidated new awards for the third quarter were $3.3 billion, a 99% reimbursable. In addition to these awards, we recognized nearly $800 million in positive backlog adjustments, which keeps our total backlog around $28 billion of which 82% is reimbursable.

Moving to our business segments. Please turn to Slide 6. We Urban Solutions reported profit of $61 million in the third quarter. Results in this segment reflect a ramp-up of recently awarded projects in ATLS and in Mining and Metals. New awards for the quarter totaled $1.8 billion, a significant increase from $828 million in the same period last year.

Awards for the quarter included incremental bookings for 2 projects, a copper mining project in Canada in a Life sciences project in the United States. We were also awarded a front-end engineering and design services contract for MP Materials as they built a new rare earth magnet manufacturing facility in Texas.

These awards reflect our exposure to growth markets and highlight our leadership in professional and technical solutions supported by our global engineering and construction expertise. Ending backlog now at $20.5 billion represents 73% of Fluor's total backlog. Now please turn to Slide 7. In infrastructure, we continue to make solid progress on the 4 remaining loss projects.

At Gordy Hal, we anticipate completing all construction required to open for traffic in Q4 or early next year. On the LAX People Mover, construction activities will be largely complete and positioned for operation in early 2016. The 635 LBJ project will reach substantial completion in Q2 of 2026. And on the I-35 E Phase 2 project, most of the major construction activities will be nearing completion in late '26.

On many of these projects, we continue to pursue cost recoveries and change orders from clients and subcontractors. While we ultimately expect to be successful in these recoveries, in many cases, these efforts materialize on an extended time line. One proof point for this is a favorable negotiation result in the third quarter on an infrastructure project that we completed in 2019.

Please turn to Slide 8. For the next few quarters, we remain very excited about the opportunities in the urban solution space. In Mining and Metals, we continue to engage clients developing copper, rare earth and critical minerals as well as aluminum and green steel.

In Life Sciences, we anticipate a Q4 award for a pharmaceutical facility with the new clients. In data centers, we're looking to translate our success in India and in Europe to North America. While many clients are asking for terms and conditions that don't align with our pursuit principles, we are confident in the value that we provide for the more complex programs, including hyperscalers.

Moving to Energy Solutions. Please turn to Slide 9. For the quarter, Energy Solutions reported a segment loss of $533 million compared to a profit of $50 million a year ago. Results reflect a $653 million court ruling that we had previously announced in August. This was on the long completed reimbursable Santos project in Australia. John will provide further details in his comments.

New awards and energy for the quarter totaled $222 million, mostly in services. If you'll recall last quarter, we rebaseline our full year expectations for our joint venture in Mexico and slowed down our execution activities pending payment from a client. I am pleased to report that the client has made significant payments during the quarter and again in October.

This enabled us to begin a controlled ramp-up of our execution activities. Turning to Slide 10. Last week at LNG Canada, we achieved RFSU on Train 2, and all systems have been handed over to the client. Our team is now focused on the remaining punch list items. This marks our final progress update. I want to congratulate the entire team and all workers for their dedication and hard work.

This project will be remembered as one of the largest and most complex projects in Fluor's history and its success is a testament to our global capabilities, even in remote or difficult locations. Our work with the client continues as we update the fee package and estimate for a potential Phase II expansion.

Please turn to Slide 11. Trade and policy uncertainty, oversupply of chemicals and defunding of energy transition have caused delays in our clients' FIDs and have impacted 2025 new awards. We're staying close to our clients by performing front-end work and remain encouraged by their commitment to traditional oil and gas. Most new awards in 2026 will be weighted towards the second half of the year.

Now with regards to growth opportunities, we're accelerating our efforts in the power market, given the increased need for power generation. Currently, we're active on the Row Power and [indiscernible] projects in Romania. We're also executing a gas-fueled power plant in Indonesia and pursuing a number of opportunities in the U.S. and internationally particularly where we have an operational footprint.

We're also tracking short-term midsized opportunities in chemicals and in upstream. Moving on to Slide 12. Mission Solutions reported a segment profit of $34 million for the third quarter compared to $45 million a year ago. During the quarter, Mission Solutions continued to deliver solid performance across its portfolio of projects. However, third quarter results reflect allowances for certain questions and disputed costs on a defense support project.

This was mostly offset by additional revenue recognized in connection with a favorable judgment on a long completed weapons project. New awards totaled $1.3 billion, compared to $274 million a year ago. This includes a $1.1 billion 6-year contract for the DOE, which extends our presence on the Portsmouth project in Ohio.

We also received a final extension for work at the strategic petroleum reserve, and we're also awarded a position under a contract for the Defense Threat Reduction Agency. This award provides the opportunity to compete for task orders with a combined value of up to $3.5 billion over 10 years. On our project at [ Tenon ] Island, the stop work order has lifted, and we are ramping up operations.

As we look ahead to the fourth quarter and the first part of 2026, prospects include work on the strategic range services contract for the Air Force additional work to support the intelligence community and work for the National Cancer Institute. We also anticipate hearing on a small but strategic ACAS-related award with our partner in Australia. On the nuclear enrichment front, Fluor is well positioned on 4 prospects.

We anticipate that over the next 2 quarters, DOE will announce grant awards to allow our clients to effectively move forward. The above opportunities and Fluor's current portfolio of projects could shift based on any further impacts related to the government shutdown.

Before I turn the call over to John, I want to provide an update on the business environment and how that aligns with our 4-year strategic plan. Please turn to Slide 13. During our strategic update in April, we set clear targets for the management team to achieve throughout the grow and execute phase of our strategy.

So far, in 2025, we have strengthened financial discipline, making significant progress in maintaining a robust capital structure while returning substantial capital to shareholders. This has been supported by our core business performance and will be enhanced by the monetization of NuScale.

We have continued to pursue fair and balanced contract terms with a majority of reimbursable backlog. And when we take on fixed-price projects, we do so in areas where we have a distinct competitive advantage and without overburdening our backlog mix. and we have remained focused on project delivery, consistently executing at or above the as sold gross margin.

Now while we're pleased with our strategic progress, External factors resulted in award delays, which means that our backlog remains level at $28 billion. These delays have put pressure on our EBITDA growth rate -- we still anticipate approaching $90 billion in new awards over the 4-year planning cycle ended in 2028. But most of these awards will be concentrated in 2026 to 2028.

With EBIT from these contracts coming in, in 2027 to 2029. Based on our current discussions with clients, these deferrals and cancellations are causing a roughly 4 quarter shift in EBIT delivery. To mitigate this, we've accelerated our plans to lean into markets where we can capture opportunities on a short to medium term.

This includes deploying additional teams into mining and metals, power Advanced Technologies and LNG. As a leading EPC firm, we are one of a few with high demand capabilities that include project execution leadership complex engineering acumen, robust supply chain and construction expertise. We can deliver projects that support global GDP growth and are confident in our ability to win work that meets our pursuit criteria.

We see tremendous potential in our end markets. And with an asset-light model, and a flexible workforce, we intend to take advantage of our ability to pivot our key execution resources across the organization into areas where we have a clear and distinct advantage.

With that, let me now turn the call over to John for the financial update. John?

Thanks, Jim, and good morning, everyone. Today, I'll be going over third quarter results and sharing our view on financial guidance for the full year, plus the details on our ongoing capital allocation plan.

Please turn to Slide 15. Our GAAP results notably reflect 4 items: one, fund the $653 million charge related to Santos, which because it's custom customer-related was recorded as a reduction to revenue in establishing the liability; two, a $400 million mark-to-market loss related to our investment in NuScale.

But with the related tax benefit of $230 million, more on the tax effects later; three, a net charge of $13 million for additional infrastructure items; and four, anomalous tax outcomes wherein the Santos charge was not tax benefited, but the new scale conversion yielded $125 million release of valuation allowances with no corresponding book income.

For Q3, our 10-Q reflects a consolidated segment loss of $439 million, impacted by many of those same enumerated items. When you remove the effects of the charge for Santos, results for the quarter trended well above our expectations. Adjusted EBITDA for Q3 was $161 million compared to $124 million a year ago.

Our adjusted EPS of $0.68 compared to $0.51 in 2024. Adjusted results exclude the mark-to-market effect of our investment in NuScale, the charge for the Santos legal ruling, customary FX impacts and notably for this quarter, the favorable judgments and settlements on 2 long completed projects. G&A for the quarter was $43 million, up from $37 million reported a year ago.

Results actually reflected a reduction of G&A year-over-year when you set aside $12 million in restructuring costs included in the 25 figures. Some of that is the result of our share price reducing from 52 to 41% during the quarter and the related impact on stock-based comp. Net interest income in Q3 was slightly lower than last quarter at $13 million and compares to $37 million a year ago.

This reduction results from less cash on hand at a large JV project nearing handover and to a lesser extent, by lower prevailing interest rates. Moving to Slide 16. As Jim mentioned, we've seen marked improvement from last quarter in Mexico, where we scaled down execution activities for much of Q2 in the face of liquidity constraints related to unpaid AR.

Since then, we've seen significant cash receipts, including JV level collections of $800 million in Q3 plus $300 million more in October. On a consolidated basis, we ended the quarter with $2.8 billion of cash and marketable securities up $0.5 billion from June 30. This included over $400 million in net proceeds from new scale shares sold during the quarter. Not reflected in our Q3 numbers, or an additional $190 million in new scale proceeds from October.

This initial 15 million share conversion and sale created no meaningful tax liability, cash tax liability due to the tax attributes we've talked about over the last several quarters. After this conversion, we have consumed most but not all of the attributes that we began the quarter with.

That means the upcoming conversion will have the same but not complete tax shielding. As guided, operating cash flow for the quarter was strong at $286 million. This was driven by reduced working capital on several large projects as well as distributions from a large energy solutions joint venture because our JV in Mexico is recognized under the equity method, the robust collections there have not yet impacted our balance sheet cash or our operating cash flow results.

For the fourth quarter, we expect to send payment to Santos to enable the appeal process as is customary in Australia. The estimated payment will include several items which we can only currently estimate, including contributions from our insurance providers, interest on the ruling and legal fees. We continue to make progress with our carriers regarding their financial support for both the appeal payment and for the legal costs associated with the appeal.

We'll update the markets once we finalize this and remit the funds. As an update on our legacy projects in Q3, we provided $73 million in funding. Half of which came through operating cash flow and with the remainder reflected as an investing activity.

For the fourth quarter, we expect legacy funding to be in the $70 million range, 20% coming from operating cash flow. And for 2026, we anticipate around $140 million, with 50% of that coming from operating cash flow. I'd also like to point out that projects in a loss position represented $642 million of our total backlog, down $200 million from last quarter, reflecting our continued march to completion for these projects.

Please turn to Slide 17. On the capital allocation front, we bought back 1.4 million shares in Q3, spending $70 million to do so. Since last December, we've cut our outstandings by over 11 million shares. We modified the pace of the repo in Q3 when we believe the judgment on the Santos case could occur imminently, and in our desire to preserve capital for that potential event.

Last quarter, we lowered our full share repurchase plan in consideration of our concerns around operating cash flow. Since then, cash flow generation has improved, and we've monetized the initial conversion of [indiscernible] we now see a path to target an additional $800 million in repurchases through the end of February.

That would put us on pace for total share repurchases of $1.3 billion over the 15-month period beginning December 2024. We see this $800 million as a great addition to our existing repurchase program and expect to announce additional capital allocation programs next year with the clarity of the proceeds from the upcoming conversion.

Moreover, this deployment should be a clear signal of the confidence we have in our strategy and the operating ability we have to execute against it. Regarding our NuScale investment, I want to reiterate that our conversion happens in November and funds from the sale of these shares are partially tax shielded monetization should begin next week. Moving to Slide 18 and the outlook.

Based on the results from this quarter, we are increasing our '25 adjusted EBITDA guidance to $510 million to $540 million and our adjusted EPS guidance to $2.10 and to $2.25. Our guidance, like many of our competitors doesn't assume that the government shutdown ends relatively soon. Our expectations for operating cash flow increased and we now expect $250 million to $300 million generated for the full year, excluding the anticipated payment of Santos.

Key assumptions and expectations for CAL '25 are shown on the slide but include a new awards outlook of $13 billion and revenue roughly flat with 2024 when excluding the Santos effect. Our expectations for segment margins in Cal or approximately 2.5% for Urban Solutions, approximately 6% for Energy Solutions when excluding the Santos effect and approximately 4.5% for Mission Solutions.

With respect to income taxes, in Q4, we hope to find a better outcome on deductibility for the Santos ruling. Moreover, we note that our income tax rate for the balance of 2025 will hinge significantly on the taxes arising from the conversion of our new scale shares later this week. We generally expect to fully utilize the remaining tax attributes to shield some of that step up.

We, of course, would have tax effects for the gain or loss on sale that could arise after conversion. While we are not prepared to give detailed guidance for 2026, I do want to echo Jim's comments that the ongoing market conditions have had a meaningful impact on our ability to capture new awards and earnings in the short to medium term. Early indications would suggest EBITDA generation will be marginally better than our guide for full year 2025.

In February, we'll provide more perspective for full year 2026 after we finalize the operating plan. And with that, Ian, we're now ready to field our first question.

[Operator Instructions] Our first question comes from the line of Jamie Cook with Truist Securities.

Congratulations on NuScale. I know it's been a long time coming. Anyway, I guess just my first comment, John, you talked about 2026 and 2026 in EBITDA being marginally better than 2025. Just try -- that even could be aggressive just given what you're saying about bookings in ES being more back-end loaded in 2026. So can you just help me understand what the puts and takes are? Is it just less noise related to the problem projects? Is it Mexico, like stuff that was deferred into 2025 goes into 2026.

Just trying to understand your thoughts there, and it sounds like flat to up modestly at best. And then my second question, understanding you don't want to get too granular, but the margins in ES, excluding Santos was pretty good. Just trying to understand there's I know there's 2 factors that drove the margin outperformance if we exclude Santos.

How would we think about a normalized margin in that -- in the quarter, just so we can think about that going forward? And last, on Santos, just how you're planning to fund it? Does any of the funding come from NuScale?

Yes. So 1 question 7 parts, Jamie, with respect to guidance, -- so with respect to 2026 guidance, yes, it's part of overall the portfolio nature of our business. So we do see significant contributions coming in growth in Urban Solutions, I'd say, particularly in the metals and mining space. Energy Solutions does catch a tailwind based on the resumption of work in Mexico.

So that will normalize in 2026 to kind of 2024 levels for us. So that's what we're thinking. And as I may have suggested in the prepared remarks, based on our guide for 2026 and where consensus is -- I'm sorry, based on our guide for '25 and where consensus is for '26, probably trending somewhere in the middle. And it's continued progression in the business and unburdened by what we expect will be completion of some of those legacy projects.

On ES operating margin, the significant impact there, very clearly, we are reaching the end of the line on LNGC with handover on Train 2 having occurred earlier this month. So very naturally, the risk mitigation process that comes with handover would suggest that there are some reductions in reserves giving them a bit of a tailwind there.

But moreover, it is on the strength of what's happening in Mexico and where that resumption of work is taking us. So in terms of normalized margin, we'll have to coalesce around that figure and potentially get back to you. In terms of the Santos payment, you should be thinking -- we've been planning for this for a long time.

And in fact, the step down of our share repo intensity that came out of Q2 was in large part to preserve capital from our core business to fund that liability. And so it's my expectation that the $600 million-ish payment that we're expecting will come from cash on balance sheet generated from our core operations, not just in '25, but through the last several years.

And so as a consequence, it is generally my intent to deploy everything that we generated from the early new scale, the first conversion of NuScale as part of the $800 million program that I described over the next 3 months or so. And then from the second conversion, we'll feed into the March and beyond share repurchase program. So not using new scale and the benefits they're in for Santos, but to honor our commitment to deploy those proceeds for the benefit of our shareholders.

Wow, John, I'm impressed you got all those in answer all my questions. I'll get back in the queue.

Our next question comes from the line of Sangita Jain with KeyBanc.

So first off, can you talk a little bit more about the opportunity set for next year I know, Jim, you said you're going to maybe accelerate momentum in some of the power gen opportunities. So can you talk about the data center ecosystem, whether it's gas-fired power or just data centers where you are in the process of standing up your power gen practice? And what kind of opportunities you're looking for, the sizes of opportunities?

Thanks, Sangita. And good morning, everyone. And again. Yes. So let me spend a little bit of time talking about the short-term opportunities. Of course, many of these projects were already working on the front end, so we have good line of sight event.

It's a little hard for us to determine the exact timing of the full release. But the good news is we are inside of many of these opportunities in urban let me start with urban. There's a lot of momentum around mining and metals, particularly copper. So there's some good opportunities there in the coming quarters. There's also aluminum projects in the Middle East.

There's a pharma project here in the United States, in addition to just a general wave of opportunities in all our other businesses. And let me get back to data centers in a minute. But in energy, there is a good, healthy pipeline of midsized projects I mentioned specialty chemicals and the chlorine space.

I mentioned a midstream project in upstream midstream in the United States. There is some services work in Europe around a large integrated petrochemical refining complex. There are some services work in Canada. And of course, in Mission, we are looking at various opportunities for the government, such as the O&M opportunity in multiple bases for the Air Force.

As far as Power is concerned, in addition to the current work that I mentioned in Romania and in Indonesia, we have accelerated our efforts in our conversations with U.S.-based clients for gas-fired opportunities. We are talking to several of the major utilities in the U.S. around their needs to engage reliable contractors early on to help work with them in shaping and developing these projects. So we're not looking Sangita at competitive bidding. We got 3 to 4 bidders and lowest price wins.

We're looking at strategic relationships where clients are trying to secure key resources, get involved early and then jointly get to an EPC contract that is -- that fits better our preferred pursue criteria. But on the flip side, it takes a little longer [indiscernible] so that's the year for gas in the U.S. And as far as nuclear, we're active both internationally and domestically, again, talking to the various technology providers, early conversations, how do we how do we position and jointly to get these projects off the ground?

Obviously, scope definition, risk allocation are important component. And so we're excited about those opportunities -- we're being diligent and shaping them and making sure that the commercial side of it fits our criteria, and we think we're going to have some very good progress next year and maturing these projects and turning them into real opportunities.

As far as data centers, as I said in my prepared remarks, we've been very successful in Asia and in Europe. What we're seeing in the U.S. for the smaller projects -- the terms and cities and the conversions are not always ideal for what we're looking for but we're still very well positioned for the bigger, more complex projects that the campuses, the big hyperscalers. We continue to talk to multiple clients about those opportunities.

We have not yet announced any, but we continue to work on those diligently. So we hope to see some good news there in the coming quarters.

Very comprehensive. I appreciate that. And then just 1 more following up on the same theme. On the White House memo on Trump's visit to Japan. They cited a couple of EPCs who would be working on the Westinghouse buildout I'm just curious if you think that list is final or if it's a work in progress and if you have -- even have an interest in being part of the mix.

I know it's a long lead time, but I just kind of wanted to hear your thoughts.

Yes. No, great question, Sangita. We are in conversations with multiple technology providers, including the one you mentioned, about collaborating on projects. There are a lot of opportunities out there, some in the U.S., some overseas. There are very few companies in the world that can really tackle these projects. We are one of them -- and so yes, we're excited about those opportunities.

You're right, they will take time, but you got to get there early. And we're talking to all the big players about being a part of that market.

Our next question comes from the line of Andy Kaplowitz with Citigroup.

Jim or John, maybe just on NuScale again. What does it mean when you talk about a green up some of your economic rights. I know there's been negotiation around Fluor doing back-end new scale work, but maybe talk about sort of where you are in the new agreement here on that.

I'll start maybe with the nonfinancial side of it, and I'll let John talk about the more technical financial stuff. So on the rights to do work, we have modified the rights to [indiscernible] to do work, but we still have those in the fence that -- we have the opportunity to bid on the projects that they have with their strategic partner, and we have the same rights for projects that are not involving that strategic partner.

But more importantly, what we've analyzed Andy is if you think about -- a step back and think about it, we're the only EPC contractor that has real project experience on [indiscernible] we did the first of the project that ended up not going forward for economic reasons, but we have that experience. Now we're working in the Romania project at some active projects that we're doing the feed and the estimate and the execution plan.

And so we feel we're very well positioned to do NuScale work in the future. We have the expertise for large complex projects. But we're also very clear to say we're going to do work following our pursuit criteria and where we have a competitive advantage. So there's still a favorite position there. And we were very excited about the market.

We look forward to working with NuScale and their clients and our [indiscernible] clients for the future. I think we -- there can be some good opportunities there for us. As far as the technical side of things, John, maybe you can explain that?

Yes. I mean, I think to Jim's point, I think we remain commercially in a favorite nation status because of the work we've done for them. And we expect that as they continue to deploy their technology with their strategic partner or otherwise, that we'll be in the role with X and on speed Dow for them to deliver EPC services.

But the overarching message in the bargain was the cores that we heard from our shareholders about getting something done and providing clarity as to value. And so in the new negotiation, there are gives and gets. And for us, we feel like we get around speedy transaction with lots of clarity and then the ability for our shareholders to measure our progress against that in very short order was extremely valuable to us.

And so that was the crown jewel as it were of the bargain. And I don't want anything on the commercial arrangement side to diminish the shine that comes from that crown jewel.

Very helpful, guys. And then, Jim, I just want to follow up on your commentary on data center gas power plants. Just -- I know you said you hope to book a data center. But as you know, I mean, we're getting much larger in these projects. And Fluor historically been very good at megaprojects.

I mean you're talking about a gig data center, there's a couple of trillion dollars of potential spend out there. So I mean, do you expect to book 1 in '26 or '27, can you get it at the terms that you want? I know you said you hope to, but should we expect 1 over the next 12 to 24 months or more, given your historical prowess in doing this stuff?

Well, look, Andy, we're confident in our capabilities. We're confident that we can sell a compelling story to clients -- we're talking to multiple clients about the more complex projects, many of them Tier 1 companies. But we're going to make sure we follow our pursuit criteria and our commercial discipline.

I cannot guarantee that we're going to win one, but tell you that our team is very focused and we have some very clear expectations and plans to get there. So I'm hopeful and I'm confident that we can break into the markdown to complex projects. But we'll see what the next quarter in -- yes. We think we've got the credentials. We think we're sitting in the right space. We've got the right relationships. It's just do the commercial terms come to us in a way that is sufficiently appetizing.

John, just a quick follow-up. You mentioned on the infrastructure projects that they were offset by a refinement of expected claims against your subcontractors, do you pick that up in short order? Is that just a change in accounting? Like how does that work to offset incremental cost?

Yes. So to be clear, on the infrastructure projects, what we had was a negotiated outcome for a long completed project that gave us some favorable results in the P&L. And that was offset by some changes in our views on variable consideration. And so you shouldn't think of it as cost growth or schedule extension or anything like that, just some things that we thought were we were entitled to under the contract through June 30 began to dissipate for us in Q3.

We'll continue to negotiate to get a better outcome there, but we're dealing in some of the vagaries of contracts. So it is not really cost growth. So I don't want to leave you with that impression. That was the impact during the quarter. But on an aggregate basis, those are around $12 million or $13 million for the good guy that came coupled with the reduction in the expected consideration.

Our next question comes from the line of Steven Fisher with UBS.

Congrats not only on the new scale, but also pretty much closing out the chapter on the first phase of LNG Canada, a very long long process, but good to see that. Can you just maybe remind us on the $90 billion of potential awards, what's the competitive set overall look like on those?

How much of that is sole sourced and really how to think about the potential win rate there because even though it's over a few years, it is still obviously quite substantial relative to your existing backlog.

Thanks, Steve. Let me start that. This is Jim. It's spread across the 3 businesses, Steve, with perhaps more focus on urban in the first half of the remaining period, if you will, and then shifting to beyond the second half. So if you look at urban, I would say, the biggest contributor not the only one, but perhaps a more significant one would be in mining and metals and our position in copper [indiscernible] extremely strong, and we're already working on the front end of a lot of those opportunities North America, South America, Australia.

And so our whole source, I would sell -- the way I would characterize it is we're already on the project of questions, will they get FID or not. On the other urban markets around life sciences, advanced technologies, data centers, et cetera. We have a leading position in science some others will have to be not necessarily competitively bid, but negotiate and again, we feel pretty good about our position there.

We already talked about data centers and our situation there. We're also looking at semiconductors. And again, to the extent that these are large projects and many of them will be large projects, we have a competitive advantage there. So I think we're well positioned there. And then on Energy Solutions, LNG Phase I, you know where we are there.

That job is obviously not guaranteed because we're going through a process with a client, but it's a negotiated position -- on the power side, we are refocusing on power. We we're rebuilding those relationships. But like I said earlier, we're not looking at these competitive bidding processes, but we're looking at more relationship-driven engagements where clients are realizing -- the market has really changed.

It used to be a lot more competitive price-driven market 5, 10 years ago. Now it's more about secured resources and having good execution plans, and that's where we come in. So -- it's a combination of -- we're already on the project. We need to go to the next phase with.

Yes. We have to convince our clients that we are the right solution and we think we have a very compelling story for many of these markets. And then on the mission side, of course, we've been talking about SR PPF for some time. But also, we have a very strong position with DOE and some of the other agencies. So again, we think we are well positioned to win that work. So we feel good about the convertibility of the $90 billion and we were very focused on doing that going forward.

Yes. I might just chime in with a little bit on the nuclear front and then a little bit in the growing relationship with the Department of War. We expect better in terms of national security also being rather critical elements to getting to the $90 million

Great. That's very helpful. And then just on NuScale, I'm not sure how much you can say on this, but I'm just curious if there are multiple options for how you plan to execute this monetization? Is it just going to be sort of in the kind of the chunky sales like we've seen you do to date just more of them and more frequently?

Or are there other options that you're considering for how to get this done by the end of the second quarter?

Yes. So I think in the first conversion, we did a very transparent market-based approach, daily kind of for form requirements. And it was 15 million shares, but it did allow for a little gamesmanship in the marketplace there. So it's my expectation that when we get to conversion and get into the market next week that it will be under a structured program, you should probably expect to see a 144 filing out there.

But we expect a program that will be executed across the balance of the year and into the new year, and you won't see quite the Form 4 10, but we're working with our financial advisers on a program that we think will get us the overall best NPV and allow us to add the most turbocharging to that repo program.

Our next question comes from the line of Andy Wittman with Baird.

I just wanted to clarify a couple of things that I think you touched on. Maybe the first one is for John. John, I think maybe I misheard this, but on the Mexican joint venture, talked a lot about how the cash is coming in, you're restarting the work, and that's great.

Did I hear you say that the cash that came in, in the quarter, I think it was $800 million during the quarter than $300 after the quarter. Did you say the $800 million was not on the balance sheet? Or did that -- if -- is that correct, how is that not on the balance sheet if you've collected it?

Yes, I did explicitly say that. So again, I caveat it because it's a equity method JV. And so when the JV collects it, it sits on their balance sheet, but I am consolidating them into a single line item on my balance sheet called investments. So their entire balance sheet is collapsed into that single line item.

And when that JV or any JV that is equity method makes a distribution to its partners -- that is when it comes into the frame for purposes of recognition as cash and cash flow in my statements.

Okay. That makes total sense. I thought when you say we collected it, I thought you meant floor we not JV or we so that makes sense.

I hope I said JV level collections.

You probably did. These are complicated things. I hear you now. Okay. just the other one here, just the $800 million backlog adjustment. We've had a couple of these in the last few quarters. Was that another kind of a change on the -- on how you're recognizing customer furnished materials, or was this actual incremental scope with profit dollar, real profit dollars attached?

Yes. it was across a couple of projects. And it did subsume both some CFM growth as well as some overall growth and I would say it was kind of single-digit million -- I'm sorry, deferral of income in the current quarter. So stuff that we had expected to recognize in quarter 3 drifting into the remaining term of those handful of projects.

Got it. And then just finally on Santos here and kind of the cash associated with that understand $650-ish million. I guess that number is -- I just want to confirm, that's net of insurance does go to hear you say that you still think there's potentially more insurance that could go against that. Is that right?

Yes. So we'll do a full accounting retailing of this next week, Andy. But essentially the insurance proceeds that we recognized in the quarter were those committed proceeds where we had signatures saying from the carriers that we are going to fund this. we continue to chop wood in terms of the rest of the carriers in the program.

And once we -- so we are expecting the payment in quarter 4. So we're very busy in the negotiations with the carriers. And that's why I said in my prepared remarks, when we actually remit the payment, we will have crystallized the interest component, the legal fee component and the insurance contribution component.

But you should expect the insurance to only get better from what we recognized in the quarter as we hope to bring more carriers into the agreed upon path forward.

Got it. Okay. Yes. It looks like there was 15 of the 20 carriers have signed up an agreed and it sounds like you got to get those other 5 on board to collect that portion? Is that the right way to think about it? And are all carriers, the same size inside of this we would...

Gosh. No, no. Our program is very complicated, obviously, has many different layers. It is absolutely a like untangling of bolused to get to it. So it's very complicated. But in broad strokes, yes, there are several carriers, many of them play at different layers in the tower -- but anyway, I expect we'll have some form of announcement in the next 30 days around the ultimate cash.

And as I said, the contribution that came from the tower.

Our next question comes from the line of Michael Dudas with Vertical Research.

Jim, you've been very helpful with the color on opportunities and new bidding in the pipeline over the next several years. But maybe you could step back from when you discuss your 4-year plan in April with us, and obviously, there's been quite a bit of changes in the last several months.

But how does the -- like that fee opportunities like the amount of FEED work that you're looking into when you put together your 4-year plan how does that look today? How much of the change to bid? Has it gotten better? Is there still this expectation of clients want to do work and they want to invest.

Obviously, we've had some delays in certain end markets, but there's still that sensitivity. And then just a follow-up, can we assume that the 5-year -- the plan of 10% to 15% EBITDA through 2028, that's pushed out, so that would be likely 2029? Is there any changes or amplitudes on that?

I don't want to get too far ahead, just directionally how we think about the outlook given with some of the changes we've seen in the last couple of quarters.

Yes. Thanks, Michael. So let me respond to 2 questions. The fee -- the quality of the feed pipeline is still very good across urban and energy. For example, the awards in Q3 for energy, Granted, the absolute number was fairly low. Most of that was in services. So the pipeline still is getting fed -- similarly in urban, I'll repeat myself, but in mining and metals and life sciences and some of the other markets, aluminum, copper, et cetera, very healthy pipeline of FEED work.

So the tone hasn't changed. I would say, energy transition that has more permanently or at least for the foreseeable future, slow down because of just a change in with cans in Europe around the funding of energy transition, but tube and the impact of the tax legislation, tax legislation. So on the flip side, traditional oil and gas is picking up steam. So we're seeing some increased activity there.

We're looking at the Middle East there, closely or potentially do a lot of front-end PMC services type work there. So we still feel good about the fee pipeline, Michael. As far as growth rates, the growth rates that we mentioned at the beginning of the year, as I said in my remarks, we're probably looking at a 4 quarter shift in EBITDA generation which would take us to the lower range of that growth rate.

But I think we still expect to see significant growth between 2025 and 2028. But I think it'd be a good way to look at it to say that 2028 ultimate goal a shift to 2029. Now I would like to just append that with some of the tailwinds that could amplify those numbers coming in the form of settlement of sort of trade policy on a global basis. Certainly, the trend in interest rates generally should be encouraging of more capital investments.

And so that's certainly the land of the day, but there are some things that could lead to an even better outcome there.

Duly noted, John and Jim, that makes the perfect sense.

Our next question comes from the line of Brent Thielman with D.A. Davidson.

Great. Just, I guess, a clarification on that. The $800 million in additional share repurchases through February, that's completely exclusive of the monetization of the remaining new scale stake?

Yes, the conversion of, I'll say, today, has no bearing on the $80 million that we're going to repo. Now obviously, it feeds into the confidence that there's near-term augmentation to our liquidity, that will come from the monetization of the 111, but directly, no, none of the proceeds from the program we're about to embark on feed into the $800 million.

Got it. And then just from the perspective of the award cycle over the next kind of 12 to 18 months, maybe if I look at Urban Solutions, it seems like that's where you've got most momentum, pretty healthy pipeline. Are you -- I guess, with what you see coming forward within your sort of visibility can you sustain a book-to-bill over 1x in that segment with all the things in front of you there.

Let me start, Brent. We're still working through our operating plan for 2026. So we don't yet have full visibility. But I'll tell you that -- for the next few quarters will be more weighted on the urban side. Starting on the second half of 2026 and 2027, we're expecting more awards in the Energy Solutions side. So it's initially weighted on urban back in the '26 and into '27 and greater contribution from energy.

And a steady stream from mission across the quarters. caveat it only by SR PDPS and when that award comes and how chunky or not that award [indiscernible]

There are no further questions at this time. I would like to hand things back over to Jim Breuer for closing remarks.

Thank you, operator, and many thanks to all of you for participating in our call today. As the year draws to a close, I'm encouraged to see that our strategic priorities are project delivery and financial discipline continue to guide us through today's economic landscape.

I'm also pleased to see that with our announced agreements, we can deliver significant value in the short term to our shareholders. We appreciate your interest in Fluor, and thank you again for your time.

Good morning, and welcome to Fluor's Second Quarter 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A replay of today's conference call will be available at approximately 10:30 a.m. Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for 7 days through a registration link, also accessible on Fluor's website at investor.fluor.com.

At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Vice President, Investor Relations. Please go ahead, Mr. Landkamer.

Thank you, Tiffany. Welcome to Fluor's 2025 Second Quarter Earnings Call. Jim Breuer, Fluor's Chief Executive Officer; and John Regan, Fluor's Chief Financial Officer, are with us today. Fluor issued its second quarter earnings release earlier this morning and a slide presentation is posted on our website that we will reference while making prepared remarks. Before getting started, I would like to refer to our safe harbor note regarding forward-looking statements, which are summarized on Slide 2.

During today's presentation, we will be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in our 2024 Form 10-K and our Form 10-Q, which was filed earlier today. During this call, we will discuss certain non-GAAP financial measures Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com.

With that, I'll now turn the call over to Jim Breuer, Fluor's Chief Executive Officer. Jim?

Thank you, Jason, and good morning, everyone. Thank you for joining today. Please turn to Slide 3. To start, I wanted to provide an update on our ownership of NuScale Class B shares. In the next few weeks, NuScale will convert 15 million shares into Class A securities. We see this as a positive step in returning value to our shareholders. As NuScale's largest shareholder and the only firm with NuScale EPC expertise, we continue to be excited about our investments and the opportunities to deploy NuScale technology in the power market. John will provide additional details in his remarks.

Now let's turn to our operating review, beginning on Slide 4. Revenue for the second quarter was $4 billion. Consolidated new awards for the second quarter were $1.8 billion and 72% reimbursable. In addition to these awards, we recognized $1.7 billion in positive backlog adjustments for scope changes on existing reimbursable work. For the first half of 2025, new awards were $7.6 billion with a book-to-burn PGM above 1. Total backlog remains around $28 billion, of which 80% is reimbursable.

Moving to our business segments. Please turn to Slide 6. Urban Solutions reported profit of $29 million in the second quarter. Results in this segment reflect a $54 million net impact of cost growth and expected recoveries on 3 infrastructure projects. I'll provide details on these charges in a moment. We also had lower take-up in the quarter on a couple of mining and metals projects as time lines were extended and we saw a slower-than-expected ramp-up in revenue on a large life sciences projects.

New awards for the quarter were $856 million compared to $2.4 billion a year ago. This includes the full release for the Reko Diq copper and gold mining project in Pakistan and an incremental award for a life sciences project in the U.S. As a note, the Reko Diq Award is a services-only contract and therefore, it excludes the typical CFM associated with similar large mining projects. Ending backlog in urban now at $20.6 billion represents 73% of Fluor's total backlog.

Now please turn to Slide 7. During the quarter, we substantially completed the EPCM scope on 2 innovative colocation data centers in India for an important but confidential clients. Prospects for the ATLS business in the second half of 2025 include a pharmaceutical facility and additional data center work under our MSA with a major technology provider. We remain excited about the opportunities in the semiconductor and data center markets over the longer term.

Near term, in semiconductors, our clients' investment intentions have not yet translated into meaningful new awards. In the data center market, clients are refining our capital spending plans to solve for short-term demand in addition to addressing power and water needs for the ever-increasing scale of projects. Having said that, we continue to deepen our relationships with data center clients as they express a need for our capabilities, large-scale project acumen and modularization expertise.

In Mining and Metals, while the fundamentals for capital spending by our clients remain very strong. The immediate enthusiasm for major capital deployment is currently tempered by the potential impact of global trade uncertainty. During the quarter, we built upon our relationships with our traditional clients including Anglo American, Barrick, BHP, Freeport-McMoran, Ma'aden and Rio Tinto. We also maintain our strong focus on execution and are leveraging our global capabilities from our traditional energy solutions offices to deliver high-quality results on ongoing projects.

For the next few quarters, our opportunities include additional scope on the Reko Diq project, copper work in Canada, green steel production in Europe and aluminum recycling in the Middle East. We're also very excited about opportunities in the United States, where we're already providing support and working on early engineering. These include several significant copper developments and a rare earth project in Wyoming.

During the quarter, there were a number of announcements about the investment and development of mining projects in the U.S. including rare earth and critical minerals such as an opportunity for MP materials. We're also seeing interest in steel production. We have strong relationships with many of these companies and believe that this market will be a source of opportunity in the next few quarters.

Moving to Slide 8. As I mentioned, infrastructure experienced cost growth on 3 projects during the quarter. On Gordie Howe, cost increase in the second quarter as we experienced rework and additional efforts required to hand over both ports of entry. This project is now 97% complete and we expect substantial completion this fall. The 635 LBJ project experienced cost increases in construction materials as well as labor productivity impacts. This project is 78% complete with an expected substantial completion date in Q2 of 2026.

Finally, on I-35 Phase II the project experienced increased costs due to a subcontractor default, third-party utility delays and mitigation costs related to these delays. This project is 58% complete and targeting substantial complete in Q4 of 2026. To address the issues across these projects, we have increased operations oversight and strengthening the execution teams. We're also taking action against certain subcontractors, including designers, for recovery of costs caused by their poor performance.

Other projects in the infrastructure portfolio continue to perform to management expectations. For example, we are pleased to report that the Chicago Transit Authority Red Purple Line project opened up 4 stations and celebrated its first rider on July 19. And the Oakhill Parkway project in Austin successfully completed a traffic switch to newly constructed roadways and bridges.

Moving to Energy Solutions. Please turn to Slide 9. Segment profit was $15 million compared to $75 million a year ago. Results reflect reduced contributions due to projects nearing completion, and the recognition of an unexpected $31 million arbitration ruling for a fabrication project completed by our Mexico joint venture in 2021. This impact is not reflected in our adjusted results. New awards for the quarter totaled $549 million. Prospects for the next few quarters are expected to be modest as the reload we discussed for 2025 is taking longer than expected. This is due to a number of factors, including reduced CapEx budgets, trade uncertainty and soft battery and chemicals markets.

We continue to engage in multiple power opportunities for the medium term. that are aligned with our proven pursuit principles of fair and balanced risk allocation. This includes the improved market and policy environment surrounding nuclear power investments. as well as selective opportunities in the gas-fired power generation market.

Turning to Slide 10. We are extremely proud of the multiple accomplishments on LNG Canada in recent months. We achieved RFS on Train 1 in the quarter and the clients shipped the first cargo of LNG meeting their announced time line. This milestone marks a significant achievement for the LNG Canada organization. and for our joint venture responsible for EPC execution. I congratulate the project team and the thousands of workers who help build this facility. Most importantly, this is a watershed moment for Canada, who is now becoming a significant player in the increasingly important LNG market.

Our team is now focused on achieving RFSU on Train 2. And in line with our previous comments regarding timing of resolution, I am pleased to report that our joint venture has recently reached a settlement agreement covering our COVID claims and other matters. And finally, this morning, we announced an award to our joint venture to update the feed package for a proposed Phase 2 expansion. If built, this expansion would potentially double the size of the facility. We look forward to supporting LNG Canada as they work towards a final investment decision.

Moving on to Slide 11. Mission Solutions reported a segment profit of $35 million for the second quarter compared to $41 million a year ago. Profits slightly declined due to a temporary stop work order for an existing project on Tinian Island. We look forward to the restart of the work in the near future. New awards of $363 million included short-term extensions at 2 DOE sites and additional funding for hurricane relief efforts.

Ending backlog for the quarter was $2 billion. As a reminder, this excludes work reported under the equity method. For the balance of the year, we have the Portsmouth recompete and key prospects for projects that are supporting Halo nuclear fuel efforts. We now expect the full release of work at the Savannah River Plutonium project in the first half of 2026. The while we continue to work at full speed to progress engineering, long lead procurement and early side work.

Before I turn the call over to John, I want to provide an update on our view of the overall business environment. Please turn to Slide 12. In our last call, I mentioned that some clients were forging ahead with their time-to-market prospects, while others were exercising caution as their businesses are more sensitive to economic factors. Over the past couple of months, we've seen more clients continue to take a wait-and-see approach due to a variety of reasons, including ongoing trade policy discussions and developments, cost escalation and interest rates. In a few cases, we've seen project cancellations or extended deferrals.

So what does that mean for Fluor? It means that we are at a point in the cycle of short-term hesitation on our way to longer-term opportunity. We believe that the hesitation to release full EPC investments will subside once there is certainty and trade agreements and on their impact on client end markets, project costs, and importantly, the rebalancing of the supply chain. Furthermore, and specifically in the U.S. once the effects of the recently enacted pro-growth policies materialize, we expect clients to accelerate domestic investments in many of our end markets. such as manufacturing, semiconductors, data centers, power, mining, metals and national security.

With that, let me turn the call over to John for the financial update. John?

Thanks, Jim, and good morning, everyone. Today, I'll cover our results for the second quarter and go over the revised guidance for the balance of the year. Please turn to Slide 14 and the financial highlights. Jim already referenced revenue and new awards in the quarter. But as you can see, our consolidated segment profit for Q2 was $78 million.

Our GAAP results notably reflect a $3.2 billion pretax mark-to-market gain for NuScale with a related tax impact of $757 million. It also includes a $31 million unfavorable arbitration ruling related to our JV in Mexico for a job completed long ago. It includes a $13 million deferral of PGM associated with the $1.7 billion in backlog adjustments that Jim described. And from a cash flow perspective, the cash payment for settlement of the NTTA matter that we accrued in Q4, which amounted to $33 million.

With respect to the $13 million deferral of PJM, I'd remind you, in Q1, we saw an acceleration of PGM associated with some de-scopes. The $13 million this quarter represents the inverse of that, but is unrelated to the same projects impacting Q1. Adjusted EBITDA for Q2 was $96 million compared to $165 million a year ago. Our adjusted EPS was $0.43 compared to $0.85 in '24. The reconciliation to GAAP figures can be found in our earnings release but adjusted EBITDA includes the infrastructure charges but not the Energy Solutions arbitration matter.

G&A for the quarter was $52 million, similar to the $50 million reported a year ago. However, results for this quarter reflect lower performance-based compensation, offset by the recognition of some severance costs and a slight increase in our reserve for legacy legal claims. The restructuring activities principally related to reductions in head count in several non-U.S. energy solutions offices. Although we accrued the expected costs in Q2, the funding of the underlying obligations will occur across the back half of '25.

We continue to actively review our overhead footprint in light of our needs and scale of operations. This year, for example, we've rightsized our efforts in global sustainability compliance and reporting as a result of the CSRD deferral. On another note, weakness in the dollar contributed to an FX impact of $41 million in the quarter. This was uncharacteristically large but irrespective of its size was also excluded from our adjusted results. Net interest income in Q2 is unchanged from the last quarter at $17 million, but compared to $38 million a year ago. This reduction results from lower cash balances for projects nearing completion particularly at LNGC.

Our share repurchases also impact the year-over-year decrease as did the slowdown at our JV in Mexico. As a reminder, at the JV in Mexico, we have some unique credit protection features, including an ability to ramp down execution activities and to novate subcontractor obligations in the event of nonpayment. With delays in payment, we unfortunately had to invoke some of those rights this quarter, which impacted the quarter from both PGM and interest income and does trickle into the additional effects in the back half of 2025 that are embedded within the revised guidance.

Moving to Slide 15. At June 30, we had $2.3 billion of cash and marketable securities compared to $2.5 billion at March 31. Operating cash flow for the quarter fell short of our expectations with an outflow of $21 million compared to cash generation of $282 million a year ago. This shortfall versus expectation was a result of a number of factors. One, increases in working capital on several large projects for a variety of factors, funding of some of the cost growth in the infrastructure space. and the timing of AR collections and Mission Solutions and at our JV in Mexico.

As a reminder, the '24 cash flow number reflected the resumption of dividends from LNG and significant mobilization receipts for 2 then early-stage projects. As an update on our legacy projects in Q2, we provided $44 million of funding. Our original expectation of funding about $200 million on legacy projects for all of '25 holds true, although we now anticipate some more funding in '26 based on the revised project estimates. Also, some of the claims associated with the recovery for these jobs will likely extend into '26, which has a bearing on our OCF for this year.

On the capital allocation front, we bought 4 million shares in the second quarter, spending $153 million. In light of our revised operating cash flow guidance, we are expecting to slow the repurchase cadence in the second half of '25. Based on current projections, we expect total repurchases to be between $450 million to $500 million versus the $600 million for all of '25 communicated after quarter 1.

At our Investor Day, we implied roughly $1 billion of stock repurchases across the planning cycle. Even at this reduced tempo, we still outpaced the straight-line effect of that target, and we are not revising that figure. As a reminder, all of these repurchase expectations come on the back of our base operations not through any SMR monetization more on that in the outlook. That said, there are a number of important milestones in the next 90 days. which will address the contingency wedge of my cash forecast wheel from Investor Day, which itself subsumes several items such as litigation, taxes feeds and other matters.

The final outcome of these matters over the next quarter will influence where we land within that repurchase range. Coming back to LNGC, the JV remains focused on the completion of Train 2 and the remaining open punch list items. With future releases of dividends, to the JV partners tied to the completion of Train 2 and the normal progression of the warranty period. The COVID settlement agreement largely mirrors the expectations we had embedded in earlier forecasts but it does provide more insight into when the JV will be able to collect for such items and make future dividends to its partners.

For several quarters, we've described our efforts to monetize our ownership of NuScale. Within the strategic sale pursuit, most of the discussion is centered around how to convey the P shares without converting them into the registered securities. With NuScale stock performance in the last few months, we see it is increasingly difficult for the strategic buying community to consummate a transaction at fair value. Accordingly, we are more embracing a stock market-facing solution, which can be better accomplished with the conversion into A shares.

As Jim mentioned, we expect to complete a 15 million share conversion of NuScale shares this month. We further expect to unveil our monetization plan over the next quarter, but I don't want to be too specific on how or when at this juncture. In the meantime, the conversion will go a long way to utilizing the tax credits that I've mentioned before. In any event, we still expect to use NuScale to contribute to our capital return objectives across the planning cycle.

Moving to the outlook on Slide 16. We are revising our 25% adjusted EBITDA guidance to $475 million to $525 million and our adjusted EPS guidance to $1.95 to $2.15. As you think about this revised guidance, the big factor is causing the decrease are the hesitancy prevailing in the market and the related impact to book and burn, plus the decrease associated with Infra and the slowdown in Mexico, roughly with similarly equivalent weighting.

Our expectations for operating cash flow now range from $200 million to $250 million for the full year or $500 million to $550 million for the second half of the year. This reflects the lower guidance range for EBITDA and the timing of expected claims recovery for the infrastructure projects but excludes the effects, if any, on legal settlements.

Key assumptions and expectations for 2025 include: a new awards outlook of $13 billion to $15 billion as we now expect the release for SR PPF, our largest prospect for '25 will extend into the first half of 2026. New awards are also expected to be impacted by the economic observations that Jim made earlier. We see revenue growth of approximately 5% to 10% compared against '24, alongside the other guidance listed on the slide. Our expectations for Cal 25 segment margins are unchanged, except for urban, where we now expect a range of approximately 2.5% to 3.5%, largely reflective of Q2 results.

And with that, Tiffany, we're now ready for our first question.

[Operator Instructions] Your first question comes from the line of Andy Kaplowitz with Citi.

Jim, so I know you've talked about delays in project decisions. Maybe just talk about -- if I look at the bookings environment these days, you've seen a little bit of stabilization in the tariff environment. Have you seen any sort of stabilization in customer conversations?

I know John just talked about the $13 million to $15 million in new awards for this year. should we be thinking that you really don't turn back to backlog growth in the first half of '26? Is that the sort of goal at this point? And where is that going to come from besides the plutonium project?

Yes. Thank you, Andy, for the question. So yes, we -- you hit it several points here, so let me try to hit them in order. As far as the trade policy topic, it is having a significant impact on client sentiment and their willingness to make long-term decisions, investment decisions. We have seen some clarity, as you say, there were some announcements around Japan, EU. I personally would like to see more progress in the conversations with China, with Canada, with Mexico, those -- just those 3 countries are very relevant to our world. And I think we're still seeing a developing story around tariffs and all you need to do is read the headlines for the last few days.

So I think what our clients are looking for is a little more stability and certainty around where that's going to go in terms of several things. One, costs, project costs, but almost equally important, how is that supply chain going to rebalance. We're having these conversations with our active clients and our bids right now as the tariff matrix, if you will, on 1 axis countries on a different axis to the commodities. As that matrix continues to evolve how do we shift and pivot and mitigate those risks on projects. And that is an ongoing story. So that has not fully sorted itself out. We hope that it does in the near future. Our clients need that stability. These are big decisions, big investments.

Now as far as the opportunities for the near term, we feel very strong that we're pursuing work in the right markets. If you look at what we presented in April in our Investor Day, we said we would be focusing on mining, and there's a big push for mining work both in the U.S. and internationally. We said we would focus on advanced manufacturing data centers and life sciences. And there's a lot of activity there. We talked about power. We talked about selective LNG. You saw the announcement on Phase 2. So Phase 2, the feed that we announced, that's going to take some time, but it can be a really, really good opportunity for next year.

In mission, national security, DOE work -- of course, SR PPF is the largest opportunity, but it's not the only opportunity we're pursuing there. And even though there's softness in some of the ES markets, namely, say, chemicals, which is we're very strong in chemicals, we're still pursuing a couple of interesting chemicals opportunities. So I think I think, Andy, the portfolio is similar. I think we're seeing things slowing down a little bit. There's some hesitation today, but the opportunities will come from those markets that I just mentioned to.

Helpful. And then, John, I know you don't want to talk too much about the NuScale conversion, but obviously, it's a it's a topic du jour these days. So maybe just the mechanics of the $15 million, do you take a tax gain when that class be converted to A? And can you offset that? And then if you just step back, I think you talked about sort of resolving it over the next quarter. So obviously, we've talked about this for a very long time. Do we think that you get more of a resolution here over the next quarter or so, as you said, we'll get more of an update than we got today?

Yes without question, Andy, several things in there. On the tax and then the credit utilization, absolutely, as I said in the prepared remarks, we do have a tax gain associated with the step up. And so you can -- it will all come to fruition when we make the conversion. So you should generally think about the tax gain being roughly equivalent to whatever their screen price is on that day multiplied by the 15 shares -- 15 million shares. But we will be able to shield substantially all of that through the tax credit profile that we have. So not much in the way of cash leakage associated with the conversion.

And then the monetization itself becomes one of not trying to top the market but trying to do it in a way that captures a lot of the value without taking a steep discount associated with it. And again, we've got a long time to get that done. And I know there's a lot of anxiousness in the market for that to happen yesterday, but we're going to continue to be measured about it.

Your next question comes from the line of Jamie Cook with Truist Securities.

Sorry, another follow-up question on NuScale, just to make sure I understand. Beyond this 15 million shares, I mean, I think that was -- it's a good start, but people probably expected more shares, just given where NuScale stock. Is this the path going forward? And is the -- has the conversations with the strategic buyer? Is that debt? I'm just trying to think your's was just the way forward or there other alternatives besides this to continue to reduce your percentage of ownership in NuScale?

And then my second question, Jim, obviously, we want to be sensitive on LNGC, and it's -- I guess, a positive you made an agreement on the COVID claims. But any more color you can add there on how positive, what it implies for cash flow. And then sorry, last, what's the $1.7 billion in positive backlog adjustments?

Maybe I'll start, Jamie, and then I'll pass it on to John. So on LNGC, yes, we're very pleased with the settlement of the COVID claim. As I think, John, you mentioned, there's no significant change to management expectations as a result of that change order?

Correct.

And so anyway, go ahead on the new scale question.

Yes. So on the NuScale front. So Jamie, I think the $15 million has a lot of applicability One, it does go a long way to consuming the tax credits, as we just talked about to, it does demonstrate the path to the BA conversion. And importantly, we're expecting a monetization of those figures to more than cover our initial investment in NuScale. And so it suggests that the remaining 111-ish million shares or so are all upside opportunity from that initial investment.

Now admittedly, it doesn't cover cost of capital over that period of time that we've invested in the but we do recoup that initial investment through this transaction. And then I think as I said in my prepared remarks, we do see it increasingly difficult for the strategic buying community to transact at this relative screen price for the -- I'll say, the 111 million shares. So it's a big number for someone to swallow. So if we can get this monetized through the normal stock market mechanisms, then that might be -- might [ harbing ] the way we're going to do this moving forward.

Okay. That's helpful. Sorry, and on the $1.7 billion backlog adjustment, any color you can add there?

Yes, I missed that, Jamie. So yes, those were adjustments to ongoing work on reimbursable work. A lot of it is CFM. If you recall, last quarter, we had the reverse effect on different projects are not the same projects. But it's an unusually high CFM and backlog adjustment number. That's why we felt it was important to disclose it. And I think John had resulted in a deferral of PJM to the tune of about $13 million in the quarter.

Yes, that's correct. And so that's just going through the normal POC speculation. So it's not abandoned profit. It's profit that will scoop up later in the year or across the execution profile of those projects.

It was -- it's all reimbursable work. It was mostly urban, I think was a little bit of -- yes.

It was all urban.

[Operator Instructions] Your next question comes from the line of Andy Wittman with Baird.

I just want to build on the last one because I think for many people, these accounting things about delayed profit and CFM customer furnished materials, and gross profit margins. These are complicated topics. So last quarter, and I think you said it was a chemical project, you descoped it that allowed you to recognize profit. This quarter, different projects, it sounds like you didn't have the CFM and now you do have the CFM. So that increases your backlog and then the profit recognition is the opposite of that year. you're delaying it now and you'll get it in the future. I just wanted to kind of say it another way for everyone's benefit because these are complicated topics. John, do I have that pretty close to right or not?

Yes, I think it was you that was proven on this in Q1, and yes, you've got it nailed.

Okay. All right. So then I guess my other question. We don't want to go in that tier.

Andy, while you're thinking about it. So in its simplest terms, the project has equivalent profitability before and after the additional scope, similar, a little bit more, but generally speaking, similar. But it's just saying that as those furnished materials haven't yet landed when they land, that's when I'll take up the profit. So what we saw was the percent of complete from an accounting perspective, go slightly backwards as a consequence of the additional scope. So I don't know if that's helpful or not, but...

Yes, makes sense. And because it's large, the urban revenue burn because now you're recognizing the customer furnished materials, through that segment, your revenue burn, all else equal would go up. Now there's other moving pieces, but that's what people otherwise should expect. Right?

Fair. Yes.

Okay. So I guess my next question is kind of related to this. But in mining, you said that the copper mine here is services only. It's a little bit unusual, I guess, historically, you've booked EPCM on that, which would have come with customer furnished materials here. you're just getting services here. So the implication there is that this should be higher margin work. I don't know if you could give some subjective commentary on how we, as the investment community should think about what these margins are. I think historically, when you've had the it's been like kind of 3%, maybe 4% margin stuff because there's a lot of pass-through. But here, you don't have that. So what's the profit profile that we should think of on a project like this line.

So Andy, that's -- I think your assessment is correct. In this particular case, given the nature of the scope of work, we did not take CFM the magnitude of effort from us, it's similar to a traditional project, so you can assume that the magnitude of services and therefore, the magnitude of margin is very similar to a project that would otherwise have attracted CFM. And I think your estimation of the margin percentage is correct as this has been a fully CFM project.

Maybe put differently, the services margin is akin to what it would be on the services margin on a different mining project.

Okay. And then just final question for me on LNGC Phase 2. Obviously, the feed here puts you in a good position. The execution on Phase I, frankly, puts you in probably a pretty good position here for Phase 2. Obviously, going back many years now that Phase 1 was done on a largely fixed price basis through COVID and through all this, you guys have negotiated yourself to a pretty good position through all these things. So congratulations on that. But now I think investors are going to turn their attention to what the risk profile could be and should be or might be for Phase 2.

And I understand that, that contract has not been inked. And I know that just given that, that is a negotiation that has to evolve here still. But what can you tell investors about how you're thinking about that as you sit here today, what you're willing to do, recognizing the general success you had on Phase 1 and how that might be applicable to how investors should be thinking about Phase 2?

Thank you, Andy. That's a very relevant question. I appreciate that. So absolutely. We are well positioned with our partner for Phase 2. I think our performance on Phase 1 has proven that we can deliver on a large complex project with the right execution, contractual and commercial model. I will tell you that Phase 2 will be -- will have largely lump sum elements to it, but you're right.

We're having those discussions with the client right now. So I don't want to get too far ahead of myself. Part of the FEED update is a negotiation of the contracts but the advantage here though, Andy, is there are so many positive learnings from Phase 1. If you look at what has transpired on Phase 1, we have a proven project delivery model, the self-perform part, the part that we relied on third-party contractors and vendors. We have established working relationships with the local unions, the First Nations, extremely important in this case, the local government community we're going to use, to a large extent, the same subcontractors and vendors that were used in Phase 1.

By the way, on Phase 2, for those who are interested in engineering, 80% 80% of the design is replicated. So we have that design. We're tweaking it in the FEED update, but 80% is replicated. And we have extensive experience in self-performed construction in Canada. So all these ingredients -- and let me add another ingredient, we have a very collaborative, good relationship with the clients. we put all these ingredients, we are confident that at the end of the planning period if the project gets funded and move forward, that we're going to come up with a contract that reflects those learnings has the proper allocation of responsibilities between the JV and the clients. And we're going to end up with a better contract and a better execution plan in Phase 1 in the way that we're going to be confident that Phase 2 is going to be a very successful project.

Your next question comes from Michael Dudas with Vertical Research.

Jim, maybe you could share some further thoughts on the infrastructure projects. Obviously, [indiscernible] creep into the process here. Where do we stand? I know you talked about it a lot completion, but some of the issues behind that and other projects that maybe we hadn't seen it [indiscernible], guess, that wasn't mentioned, but is this -- how [ ring-sensed ] business as we kind of move through the planning trade over the next 6 to 12 months?

Yes, we're I would say that we're disappointed with the results in the quarter on these 3 projects, as I said in my remarks, the impacts were caused for a variety of reasons, specifically limited to the 3 projects, whether it's design errors by third parties or material escalation or labor challenges. We are addressing very aggressively these issues and have taken actions both on the execution front and on the recovery from third parties. And yes, it is true that unfortunately, we are still experiencing some pain from projects that were bid many years ago with different pursuit principles and cover targets.

But having said that, we are committed to finishing them as safely and as expeditiously as possible. Michael, we've learned valuable lessons that have shaped and will continue to shape our strategies going forward. And specifically for these 3 projects, as I quoted in my remarks, one of them is essentially almost done, one of them is well advanced. The other one is about 58%. So you got 97%, 78% and 58%. And we're going to be tracking them very closely to make sure we keep them within the current forecast.

Yes. Mike, I just might add too that the current results reflect the probable recoveries and the possible recoveries are substantially larger than we embedded into the project forecast. And so just as we did earlier this decade across Gordie and across LAX, where things haven't been or we're going to fight real hard to reach an accretable outcome on those things as well. So the story here is not done from an upside perspective. And just as we've done before, we'll continue to ply away at that.

I appreciate that. Jim, as you assess the second half of the year, maybe into 2026, can you share like how relative to a normalized level on project performance and executing against the margin how that's been saved to these 3 projects in the Mexican project. And that maybe success relative to the deferrals from some clients, do you expect that could lead a bit more into 2026 as some of these issues have to sort through.

Michael, so the project performance outside of the 3 infrastructure projects and the slowdown in Mexico is going very well. We had -- as I think we alluded to earlier, there's some reimbursable work that is just burning a little bit slower than initially anticipated, but that's just a pace issue. It's not a performance issue. And we had the -- so due to the additional backlog adjustments. But I would say that by and large, the rest of the portfolio is doing very well, in some cases, exceeding initial expectations.

And as far as the outlook for this rest of the year and next year, I just -- Michael, I think it just depends on whether the economic environment settles down. I think some of the prospects we're pursuing have a high certainty of going forward regardless. But in other cases, clients really need that certainty. And I think if you look at some of the commodities that may be affected by tariffs, whether it's steel or copper, even rebar that's tied to the steel market, piping, electrical equipment that comes from overseas. These are pretty significant inputs to projects and clients are looking for certainty on cost and on origin of supply.

And so I think we do need to see the market settle down a little bit and have some further clarity to be able to properly predict when exactly those projects are going to start taking off.

Your next question comes from the line of Judah Aronovitz with UBS.

Just wanted to ask about the long-term target, the 10% to 15% EBITDA CAGR. With the reduction in guidance for '25, I guess how are you thinking about that target, now implies a pretty big acceleration. So is it fair to say that we're trending towards the lower end? And if not, what gives you confidence in reacceleration.

Thanks, Judah, for the question. So we feel pretty good about our strategy, Judah. If you go back to what we presented in April at Investor Day, those same markets are poised to do a lot of growth to experience a lot of growth in the coming years in the planning cycle. Yes, we're seeing a greater extent of hesitation today than we would have predicted 2 or 3 months ago. We're hopeful that, that hesitation is short term. and that the clarity will take place, and therefore, the decisions for investments will accelerate as the economy here is doing well.

In general, the world economy is progressing in a positive manner. You see the build recently enacted here that has some very targeted and strong policy endorsements around certain industries where we feel strongly we can play a big role Europe, it's starting to show some level of increased economic activity.

In Mexico, Judah, Mexico had elections late last year. it's very normal that in the initial cycle of the Mexican presidential 6-year term, the initial cycle is a little slow and then the country starts picking up. And we -- as you know, we have a presence in Mexico. We've been very successful there in the past. So if you add up all these ingredients, I think we feel pretty good about the strategy and the long-term objectives of the 4-year planning cycle. We just need some short-term clarity so that this distraction and this uncertainty at least gets reduced, I don't know if it's going to be eliminated completely, but at least significantly reduce so that we can see some decisions going forward.

Yes, I definitely think that the one big beautiful bill should create some tailwinds domestically, and it's in all the markets that we're playing with, playing in and Jim covered them in his prepared remarks. You just basically go down the line where we operate. So I think from a strategy perspective and across the planning cycle, I don't see a need to pivot at this point. And I think as the trade policy settles, as our customers are better able to assess their end markets, I think we're going to have a lot more clarity in the coming quarters.

Okay. And are you already having conversations kind of around the bill? And yes, I mean, how are customers thinking about prospects maybe across copper, domestic mining, manufacturing, pharma, life sciences. Are you hearing that from customers already?

Judah, it's -- we are hearing it's a little early. I mean the bill was just passed a few weeks ago. These things take time. But even before the build, we were already talking to these customers. So I don't want to give you the impression that just after the bill, we started to talk to new customers. I mean if you look at Earth in the U.S., we have relationships with clients that are working in that space. If you look at copper in the U.S., we have a long-standing relationship and have a lot of project work under our belt, a very successful project for domestically and internationally, with the largest copper producer in the U.S.

We -- obviously, you know we're doing a very large life sciences projects, so we have a strong resume there. And so yes, our existing clients will benefit from the bill and those incentives and favorable conditions. I just think it's not about flipping the switch and it happens overnight. I think it takes a little bit of time.

And it's helpful to the industries that specifically get called out in the bill but more generally, things like more ability to deduct interest, R&D expenditure deductions and modus depreciation are kind of agnostic as to industries but they all feed into feeding the machine from a capital investment perspective. And so we think that's going to be in that positive in the quarters to come.

Okay. Fair enough. And then just a clarification question on the LNG, the change order, it sounds like maybe it won't impact margin, but what about the cash flow? I don't know if I heard that right.

Yes. No, that's exactly what I was intimating in the prepared remarks. So the JV structure there creates a little additional nuance. So the JV itself needs to collect the money attendant to the amendment and then subsequently make dividends. So as pertains to Fluor, the operating cash flow will come to us when the dividends are made. So the JV collecting it is an important first step and they should have additional clarity by virtue of the amendments.

That concludes our question-and-answer session. I will now turn the call back over to Jim Brewer for closing remarks.

Thank you, operator, and many thanks to all of you for participating in our call today. We appreciate your interest in Fluor, and thank you again for your time.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.