Good morning, and welcome to Fluor's Fourth Quarter and Full Year 2024 Results Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management’s presentation. 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 seven 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, operator, and welcome to the Fluor's 2024 fourth quarter earnings call. David Constable, Fluor's Chairman and Chief Executive Officer; Joe Brennan, Fluor's Chief Financial Officer; Jim Breuer, our Chief Operating Officer; and John Regan, our current Chief Accounting Officer and soon to be CFO are here 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 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 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, 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. I'll now turn the call over to David Constable, Fluor's Chairman and Chief Executive Officer. David?

Thank you, Jason. Good morning, everyone, and thank you for joining us today. Please turn to Slide 3. I would like to start by discussing the CEO transition announcement issued earlier this morning. It has been just over four years since we launched our building a better future strategy and set our long-term financial targets. In 2024, we achieved the goals under this strategy with strong cash flow and a robust capital structure, supporting a backlog that is not only majority reimbursable, but one that reflects our portfolio approach to our end markets. Importantly, we have met and, in most cases, exceeded our strategic targets, bringing the fix and build portion of our strategy to a close. Consistent with our long-term succession plans and with the full support of Fluor's Board, it is now the right time for me to transition into the role of Executive Chairman and pass this Chief Executive Officer role on to Jim Brewer. Starting on May 1, in my new role, I will be supporting Jim as he builds upon his relationships with clients and engage more fully with our stakeholders. In Jim's new role, he will be focused on developing the storylines for the next chapter of our strategy, which is thematically be focused on grow and execute. This will include revised growth targets and a laser focus on project delivery. We look forward to sharing our view of the markets over the next four years at our upcoming strategy update event on April 2 at one of our major ATLS sites. On a personal note, back in 1982, when I first started at Fluor as an engineer in our Calgary office, I had no idea of the incredible experiences and opportunities that awaited me and my family over the next five decades. I'm…

Thank you, David, and good morning, everyone. Let me start by saying that I'm very excited to assume the role of CEO in May and would like to thank the Board for entrusting me with his responsibility and honor. Over my 31 years at Fluor, I have learned to appreciate and share the values that define this great company. I've seen first-hand the amazing work that we do around the world to support our clients and the many communities where we work. Through David's leadership during these last four plus years, our company is healthier financially and poised to meet the demand driven growth we see around the world. As Fluor embarks on the next chapter of our strategy, I look forward to working closely with our employees, partners and other stakeholders to continue to serve our clients through excellence in project delivery. Now moving to the results of the quarter and full year. Please turn to Slide 6. Beginning with Urban Solutions. The segment reported a profit for the quarter of $81 million versus $147 million a year ago. New awards for the quarter totaled $1.4 billion, and ending backlog for the full year grew by 20% to $17.7 billion, up from $14.8 billion a year ago. Please turn to Slide 7. In ATLS, we received an incremental award of $243 million for our ongoing efforts at Lilly's LP1 project in Lebanon, Indiana. This project has grown from 200 to 1,000 personnel in 2024 and continues to progress with the installation of the facility's central utilities building along with steel and concrete placement at the peptides, small molecule and tank farm areas of the facility. The workforce is expected to increase in size in the first half of 2025. On the semiconductor front, based upon our project performance, a…

Thanks, Jim, and good morning, everyone. This morning, I'd like to discuss an overview of our financial performance and provide an update on the progress we have made in strengthening our capital structure. Please turn to Slide 13. For the full year, Fluor reported revenue of $16.3 billion and a net income of $2.1 billion or $12.30 per diluted share. Results for the year reflect the favorable impact of the NuScale deconsolidation and subsequent fair value accounting. During the quarter, we recognized a $116 million provision related to a jury verdict against a Flour joint venture on an infrastructure project completed over 12 years ago. The client sued over alleged incorrect designs performed by a subcontractor. We believe that the jury verdict does not accurately reflect the evidence that trial and we are evaluating all options that may eliminate most, if not all of the provision taken. The provision does not reflect any offsetting recoveries that we believe are owed to the joint venture. Our 2024 Form 10-K filed today contains additional discussion on this matter. Segment profit for the year was $635 million and adjusted EBITDA was $530 million. On an adjusted basis, our 2024 results were $2.32 per diluted share. Corporate G&A expenses for the year were $203 million compared to $232 million a year ago. The improvement over 2023 can be attributed to an ongoing focus on overhead optimization and a reduction in performance-based compensation. For the full year, we reported net interest income of $150 million, as our cash management team invested Fluor's cash and high quality interest-bearing assets, which more than covered the $46 million in low cost fixed rate interest expense on our outstanding debt. Please turn to Slide 14. Cash and cash equivalents combined with marketable securities were $3 billion, representing a 14%…

Thanks, Joe. What Fluor accomplished with the first chapter of our strategy has restored investor confidence and established the foundation for the next chapter. I'm excited to support the business as we pivot to the grow and execute phase. Back in December, I had the opportunity to speak with the analyst community, and I look forward to meeting our investors in the days ahead. Please turn to Slide 16. Looking to 2025, our EBITDA guidance is $575 million to $675 million. which lends itself to an operating cash flow range of $450 million to $500 million. Our estimated cash flow reflects the underlying operational performance and working capital needs under a largely reimbursable profile. We expect our full year EPS to range between $2.25 to $2.75 per diluted share. We currently don't see any material items that need normalizing from our GAAP earnings other than FX and NuScale, which is now mark-to-market to their screen price across our 126 million shares. These expectations are based on our ability to successfully execute our strategic priorities as well as capturing the demand for our services across the end markets we serve. To provide a bit more granularity on the outlook for '25, our assumptions include a new awards book-to-burn ratio well above 1, revenue growth of approximately 15%. Net interest income of approximately $80 million, G&A expense of around $180 million and despite a potentially wide range of outcomes, we also see an effective tax rate of approximately 30% to 35%. Our expectations for 2025 segment margins are approximately 4% to 5% in urban, 3.5% to 4.5% in energy and 5% to 6% in mission. For 2025, we expect the normal shaping of quarterly cash flow. For EBITDA, we expect an acceleration in the second half of the year as we ramp up execution activities, particularly on our urban solutions portfolio. As a housekeeping matter, we'll file an S-3 later today solely to refresh our ability to capitalize on expedited financing opportunities in the future. Lastly, once NuScale files their 10-K, we will file an amended 10-K to incorporate their financial information into ours as required under the securities laws. Operator, with that, we're now ready for our first question.

Thank you. The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Good morning, gentlemen.

Good morning, Mike.

Good morning, Mike.

Good morning.

Congrats, Jim and well done David. First, maybe for David or Jim, as you've put together your outlook for 2025 and some of the cross currents that you highlighted in your prepared remarks, on the book-to-bill that could be well above 1, maybe a little bit more thought on timing and the areas. Certainly, highlighted Energy Solutions reloading. But in the urban side, which has really been a big driver in the last couple of years, maybe some -- a little bit more visibility on how that will be booked. And the margins that you're seeing on some of these opportunities in the Urban Solutions area relative to the mixture business?

Yeah. Good morning, Mike. Maybe I'll start and ask Jim to comment as well. As you look at the backlog at the end of the year, in '24, obviously, we've seen Urban Solutions kick up dramatically as we had laid out and planned for in our strategy to drive growth across the portfolio. So you see that backlog sitting at $17.7 billion. Our Energy Solutions coming down as we expected as well and Mission Solutions holding firm, so we expect that to continue. We do see a book-to-bill significantly above 1 in 2025, just to emphasize that. And the margins we guided, we're comfortable and certainly comfortable with. So where it's coming from, specifically, Jim, some comments on that, please?

Sure. Thanks, David, and thanks, Mike for the words there and looking forward to working with you on the -- your colleagues going forward. Yeah. So the book-to-bill is significantly above 1. A lot of good opportunities in ATLS. If you look at pharma, and the market that we've been very successful on in previous years, it's going to continue to be a good growth market for us. If you look at what we call the Advanced Technologies projects that include semiconductors and data centers. Data centers is a market we're focusing on very strongly, and we've already had some recent success on that, in addition to building on our experience that we had in Europe and Asia. Mining has a significant slate of opportunities, some of them in front-end work, some of them converting to EPCM. And then, of course, in government, we have a very strong position in -- with DOE, and we expect some of those significant awards to come from that client. So it's urban and its mission primarily with a lot of front-end work and energy preparing for subsequent years.

Yeah. Just to -- Mike, just a kind of big picture support what Jim has just mentioned, we've got about -- in the next 12 months, we've got prospects just in the larger EPC, PCM project arena, not the front-end work, but just the full EPC awards prospects of about $46.5 billion with again, urban being about almost $24 billion of that and then evenly split between energy solutions and mission for the other $22 billion. So that kind of supports where we're heading with our bookings in the coming year.

And Mike, just to add, you asked a little bit about timing. I think it's encouraging to see some of the announcements through the mining group this early in the year and also through kind of the data center activity that we're kind of -- we've got some inroads at the beginning of the cycle, so it should help then support the burn curves as we move through the year.

Maybe how -- when you look at the -- maybe upcoming data center cycle relative to say, your, let's say, life science or semi cycle and like, where are we in maybe early inning or what innings we're in, and the magnitude and scope of what you will be providing and what those numbers would look like when you convert those kind of prospects to the bookings.

Mike, we missed the -- sorry, what was the specific area. We missed the beginning of that.

No. I'm sorry, I apologize. On the data center side, maybe compared to like your life science or semiconductor electronics space. And what inning we are in and -- when you convert those prospects, what type of size of projects and what scope that you'd be providing as you move through this looks like a long cycle of build-out on the AI front.

Yeah. Thanks, Mike. I'll start that. This is Jim. We're in early phases. Just if you look at the projections by just the big five data center hyperscalers here in the United States. They're talking about several hundred billion dollars’ worth of announced investments. And I think given that the size of these projects is growing, they lend themselves to Fluor's project delivery expertise and model. Now we're going to remain diligent and methodical and taking on this work. But building on our track record of recent data center projects, like, I said, in Europe and Asia, we believe we're well positioned for this big wave of data centers that is projected for the United States. And as I said in the prepared remarks, we signed a major -- we signed a master agreement with a major data center company. We're kicking off the initial stages of the first project under this agreement. This project is a colocation data center, which is on the smaller scale, call it, between $0.5 billion and $1 billion in scale. But this agreement allows you to build and work on data centers of all sizes, including hyperscalers that now you're talking about multiple billions of dollars. Now those jobs take a little more time to mature and develop. But the neat thing about this agreement is that it allows us to build a longer-term relationship with this client on multiple projects and therefore take advantage of the benefits of replication of efficiencies lessons learn on previous projects. So I think we're in the -- to answer specifically your question, we're on the early stages of the cycle. We're going to approach the market methodically and with a proper project and pursue discipline. But we do believe that data centers will be a significant engine for our growth in this next chapter of the strategy.

Yeah. And just adding to that, Mike, right, as Jim said, a significant contributor to our grow and execute phase not only for the -- in the facilities, data center facilities themselves, but also where Flour can add value on the power demand side of the equation, right? Our expertise in power generation, both thermal and nuclear is going to play a key role in supporting our clients' needs, and we're already currently ramping up our capabilities further on the power side. The numbers are just astronomical for power demand for data centers. We’ve got 26,000 megawatts installed in the U.S. right now. That’s going to go to – they say 92,000 is required by the end of the decade. And then the numbers are even larger globally, but the U.S. is about 40% of the market so a big focus here on data centers combined with power generation, which is obviously in our wheelhouse.

Excellent. Thanks, gentlemen.

Thanks, Mike.

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

Good. Thank you so much for taking my question. If I can ask one on NuScale. I believe that there was a due date to execute a true sheet to the strategic buyers. So I'm just wondering if that is still the case. Is there a change in your thinking on the timing of the monetization?

Good morning, Sangita. Thanks for the question. As Jim mentioned in his prepared remarks, we're in detailed negotiations right now with our strategic investor to reach an agreement on a long-term monetization and revenue stream to Flour, while at the same time moving NuScale closer to monetization commercialization. And we continue to believe that our current path is the best way to bring value to Fluor shareholders to the strategic investor and also to NuScale’s. And for that the business strategy will be successful, we need all three parties to win. So the time line to monetization has been slower than desired. However, as you can imagine, anything in the nuclear space that is in start-up pre-commercialization mode does take patients and we want to get this right for decades to come. Not just for the next few years, right? So the overarching objectives are three-fold here. First, to ensure the successful commercialization of the NuScale technology with our strategic investor. And then second, to drive maximum value for Fluor shareholders from monetization; and third, ensure Fluor's project execution services are considered for NuScale installations on a global basis wherever we can add value to an opportunity. So on a related note, as you -- I think you may know, Fluor is executing front-end design work for RoPower’s SMR, project in Romania, and that is utilizing NuScale’s still industry-leading technology. And Jim also talked about conventional work in nuclear power, which you've probably seen in the news recently, we've just kicked off with our joint venture partners on some front-end design scope conventional nuclear power, which is -- our scope on that program is being executed on a reimbursable basis. So work continues, and we're positive about NuScale’s monetization. In fact, all will be personally in a meeting later this week to continue the discussion. So we'll give you more information as it becomes available.

Great. I appreciate that. And I know you guys mentioned in your prepared remarks regarding the new administration of the EU, but there's also been a lot of confusing news regarding spending freezes. So maybe you can give us an update on where you stand with your federal government contracts, whether it's FEMA or NNSA or the Department of Defense and if you're seeing any movement there?

Yeah. I'll also ask Jim to comment here. From what we can see, because we primarily -- in the mission solutions space and based on our -- where we play in Department of Defense and Department of Energy to our key clients plus FEMA at this point, which is still firmly in place. So when you're talking about national security, and energy and nuclear cleanup plus nuclear support of -- in the nuclear deterrent space, all that work that we're doing in Mission Solutions really is top priority, and we've got indications that most of the work that we're focused on will continue because of that type of work that we do for the for the country. Jim, anything else you right.

No. You're right, David. I think we believe that the project work we do and the support work we do for the government is tied to their very critical missions on these respective missions. So we expect the work to continue out. There has been a lot of news coming out of Washington, Sangita, but it seems like a lot of it's been updated and refreshed soon thereafter. So I think when it's all said and done, these programs are going to continue because they are mission critical, and we feel good about continuity to them. And we feel good about our future opportunities and mission also with these two big departments with FEMA and other civil agencies that we're pursuing work for.

Appreciate that. Thank you so much.

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

Hi. Good morning, and congrats, Jim, David and Joe. I guess my first question, just on LNGC, JGC announced cost increases, I think, last week in conjunction with their earnings, and you mentioned some stuff in your prepared remarks. So can you just give us more color there? Were there any cost increase that you guys incurred in the quarter associated with that project? And your margins for ES next year are 3.5% to 4.5%. So at the low end, the margins are lower than what you're expecting this year at the low end of the range, so does that reflect LNGC? And then just my second question on the guide for the year. I think you mentioned that it would be more back-end loaded. If you could just help us how we think about first half versus second half, just so the Street calibrates estimates correctly. Thank you.

Good morning, Jamie. Thanks for the questions.

Good morning.

And hi, I'll ask -- Jim has been spearheading all of our discussions at LNGC, and I'll ask him to comment on that. And then Joe could comment on the ES margins, and Regan can talk about the back-end load and how we see the ramp-up for the year.

Yeah. Thanks, David. Hello, Jamie. So as everyone knows, LNG Canada is obviously an important project for us, and we're working closely with our JV partner and our client in this final stretch. The commissioning efforts, as I said are progressing well and are very advanced. And as I indicated, Train 1 is in advanced stages of commissioning and preparation for cool down. Now despite the fact that we have had to expend additional resources on the insulation work, we are still on track to meet the client's objective of first cargo middle of this year. The project continues to perform, Jamie, tracking to management expectations. And we expect it to be a very successful project when it's all said and done. We continue our conversations with the client on the final commercial resolution. We've had some good fruitful discussions in recent weeks and days. And again, we're confident this is going to be a successful project at the end of the day, tracking to our expectations.

So Joe, do you want to comment on how that weaves into margin guide for Energy Solutions?

Yeah. Jamie, thanks for the question. Yeah. If we look at kind of the burn-off of some major programs flowing into kind of a reload situation for Energy Solutions around FEED work. What you're seeing is kind of the pivot of a lot of those resources as we move over to the demand driven growth side of the model. So you'll see a little bit of a drag in the beginning of the year, and I think you'll see better strength in that margin performance as we get to the end of the year. But really, this is kind of the pivot as we shift over to the Urban Solutions side of the model in terms of where we see the demand driven growth and the types of teams that we need in order to support that and open the aperture to that opportunity within our backlog growth. So that's really where it's at right now. It's kind of the trail off of the projects that we're executing and as we pivot into pivot some of those resources over to the Urban Solutions side of the business.

And I think a little bit of a testimony to the portfolio approach that as you're coming off these big projects in ES, you really see a ramp in the urban side in the back half of the year. So I'm not going to give you too much color on the shaping, but I'll say, we'll see a really high exit velocity from an EBITDA as we get into the second half of the year.

Thank you.

Thanks, Jamie.

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

Yeah. Great and thanks for taking my questions. Maybe, Joe, one for you. Just kind of looking at the cash flow guidance here, $450 million, $500 million, that's at or maybe slightly above the net income guidance, which is a pretty good outcome. I think particularly concerned here, you've got, I guess, $237 million of burn associated with these legacy projects, yet a pretty good OCF number. So I guess my question is -- got a couple of parts to it, which is, what are the offsets that are leading to maybe -- considering you've got this burn for legacy, what's the offset on the positive side? Are there more JV cash distributions that are kind of propping up the OCF guidance that you give here? Are you expecting, like, in 2024, you came into the year expecting to burn a lot more on the legacy projects than you actually did because during the year, you got some relief on those projects. I'm thinking about Gordie. I'm thinking about LAX. Some of those things, I think, helps offset some of the cash burn. So are you looking for some of these offsets in '25 to deliver this number or can you just talk maybe about some of the moving parts inside of that? Thanks.

No. I think you laid it out kind of pretty correctly. As we're looking at the bar that we set relative to the funding of the legacy projects at the beginning of the year, we had a similar number in 2024, and we drove that number down. This is what the planning basis has laid out for us. So the $450 million to $500 million cash flow guide that we're providing absorbs that $200 million into that discussion. And we will fight, obviously, as we did in 2024 to bring that number to the lowest possible common denominator. And I would suggest there's maybe 20% to 30% of that guide that is wrapped up into some of the additional dividends that we're repatriating in, not so much from Mexico, but principally probably from our operations up in Canada at this point. But yeah, there's a piece of it. It's probably a smaller piece, 20% to 30%. I would suggest the $450 million to $500 million probably represents -- is a better representation of what the ongoing business is going to present and generate over the course of the planning period coming up.

Yeah. Okay. Appreciate that. And then, I guess, maybe, David, one for you. You talked about the potential to attach power generation, including thermal to the data center and being a more holistic solution. I think obviously, that makes a lot of sense and stands to reason. Just as it relates to the thermal side, I mean, this is a business, obviously, you guys have had a long history. You mentioned that, but from investors' point of view, this was a business that was kind of shut down because of the fixed price nature of the business. I would imagine that the experts that you had in the company might not any longer be with the company. How do you position the business rebuilding a team -- presumably, you'd only do it on a reimbursable basis. How do you credibly rebuild that team to deliver that solution? And can you just -- as part of the answer to that question, can you just talk about how advanced any discussions on the power generation side are for you on the thermal side? Thank you.

Thanks, Andy. Good morning. Thanks for the question. Yeah, it's exciting. The utilities tell me it's exciting and electric times in the power generation world right now. Everyone out there is scraping and scratching for where they can get power generated, including coal to gas fired SMRs and thermal power. I had the opportunity to run our power business back in the mid-2000s, had a great run there with thermal power build-out and some clean coal facilities as well. So definitely, we do know how to execute. That was all fixed price back then, but you're right. We want to move into this space strategically and follow our risk process -- risk management processes as we look to build out power generation to support the broad power demands going forward. So we're rebuilding the capabilities. When you see our traditional -- I think of our traditional clients, the likes of Chevron and ExxonMobil, just announcing this quarter, both of them that they're developing power solutions for U.S. data centers. And we've got our traditional clients looking at that, so which helps us, obviously, with our relationships and how to get involved with those projects. But we do need to look at a deal shaping and either reimbursable or hybrid models where the risk is put in the right places on these generators. So I'll ask Jim to comment a little more because he's close to it having -- as Chief Operating Officer, working closely with Energy Solutions and what they're doing to get ready.

Thanks, David. Yeah, Andy. You brought on some interesting points in your question, stuff that we are discussing internally to make sure we are approaching this the right way. Let me just first say, we've not forgotten the lessons of the past. And when we pursue power work, we're going to be very deliberate in our approach to the market. I think there are great opportunities out there driven by data centers, but in general, just driven by greater demand for power for a variety of reasons. Today, we are currently involved selectively in several power projects, both nuclear and natural gas. We've entered these projects early at the front end, working closely with our clients, looking for the best technical solutions. And during the front end, we're shaping the EPC, EPCM faces to a commercial profile that makes sense for everyone. So we are doing that today, both like I said, nuclear and thermal And we're going to follow the same process for future opportunities. As David said, we're in discussions with several utilities about their project needs. And we believe we have a lot to add there in terms of our execution and project management capabilities. And let me add our expertise in supply chain. So much of the success of a project today is driven by supply chain, not just the main equipment, but all the other ancillary equipment and making sure all that gets delivered on time, both for engineering and for the construction. So I think there's a lot that Fluor can add value in this market without having to go to a competitive lump-sum bidding process, late conversions, partially reimbursable hybrids. There's a lot of models we can implement, and the clients today are more amenable to follow these more innovative, creative models, given that they know there's limited capacity out there and that project delivery certainty is what they need.

Yeah. There's a lot of -- the existing power EPC service providers are stretched right now in their execution capabilities. So that brings opportunity for Fluor. As Jim said, we need to be very, very careful and have patience, right? One of the bigger issues in this space is that the turbine OEMs are sold out till 2028. So that's another challenge that we've got on our projects to make sure we can get the supply chain right and the timing right, but we're going to be very, very careful and measured in this space.

Thank you.

Thanks, Andy.

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

Thanks. Good morning and congratulations to all with the new roles. Just wanted to follow up on the NuScale discussion. I'm just curious, David, I mean, has anything changed in terms of the negotiations? I mean are you actually making progress? I know investors are kind of sitting a little bit anxiously hoping you're able to lock in some of the value in the marketplace. So I understand it's probably hard to discuss negotiations that are ongoing, but I'm just wondering if there's any other comfort you can offer investors that you are actually making tangible progress towards some monetization.

Yeah. Good morning, Steve. As you said, we're in the -- since we're in negotiations, not a lot I can say other than we're -- these are detailed discussions and -- which, as I said, I'll be participating in later in the week. So as I said, it takes patience in the nuclear space, and we're at the very front end -- we're in the first inning on SMRs and commercialization of the NuScale technology. But the demand and the interest in that type of business model going forward is really off the charts. As soon as some power purchase agreements get signed up, I really think the floodgates are going to open up wide. So I'm very positive on the opportunity for Fluor and for our strategic investor and for NuScale supporting with their technology. And like I said, we're in detailed discussions and hope to have some news for you soon.

Okay. That's helpful. And then just a follow-up on Jamie's question about the Energy Solutions margins. I guess I'm still a little unclear why the first half at least is a little bit low, given that it sounds like the mix should be much higher in terms of engineering services, which should be higher margins. Is it -- was the point that basically, there's just an under absorption of the project management resources and staffing that you have and that offsets the higher engineering mix? And then, I guess, more broadly, David, I think during a lot of your tenure, the message has really been about a focus on putting higher margins into backlog. And I'm wondering is that -- under Jim and John, is that going to be sort of still the ongoing message here or has anything kind of changed in that regard?

Do you want to talk?

Yeah. I'll talk a little bit about ES. Maybe what I'm trying to describe is the pivot as we came off the back end of some of these bigger programs, we have a significant amount of infrastructure that was in place to support those big programs. And as they start to trail off and we pivot to demand driven growth, there is a little bit of friction in that process as we get the right people in place in order to open the aperture into what we see as a fairly robust opportunity slate within Urban Solutions. So it's just a bit of the friction that's going to occur in the beginning of the year through the first quarter into a portion of the second quarter. But as that starts to shift, you'll start to see better leverages coming through Energy Solutions, and you'll start to see better backlog growth into Urban Solutions. And that will help normalize your margin profile across the spectrum of the segments that we have.

Right. And then on higher margins and the focus on higher margins and a healthier backlog going forward and also moving to a primarily reimbursable backlog as part of that. Our strategic priorities, which we'll talk about in April with you, have not changed. We've got a little more focus on project delivery because we're growing, and we have to make sure we cover all our bases and execute with excellence as we grow and not get stretched. So the strategic priorities are pretty well the same that you'll hear about. And when we talk about fair and balanced contract terms and getting paid properly for the value we provide, that is still firmly in place going forward. And again, that's what you'll be hearing more about here in April. So I guess I should turn it to Jim and Regan because you asked them the question as well. Jim?

No. That's right, David. There's going to be a focus on the proper returns on a risk-adjusted basis. The fact that the portfolio is majority reimbursable helps with that. Yes, there is a pivot in Energy Solutions, and that's a market I know well because I ran that business for several years. And we're reloading with a lot of significant work, including the power discussion we had a minute ago, but there's other opportunities, LNG and decarbonization in downstream and chemicals. So we expect that market, probably in the '26 time frame, to start picking up. In the meantime, urban is going to be our primary engine of growth. So yes, there is a lot of focus on margin, but there's also a lot of focus on risk and making sure the margins we are getting are proper for the risk profile. So the priority is going to be the same in a methodical and a rigorous manner. John, anything you'd like to add?

I'd just echo that. It will continue to be a focus. I think the phenomenon of the absorption issue that you raised is real. I think as Jim pointed out, that will normalize as we get closer to 2026. And we'll see some of the leverage to the margins in ES as we get into that latter half of the year. So your question was intuitive and a bit leading, but I think you've heard us all echo the continued focus on the margins coming into the backlog.

Sure. Thank you very much.

Thanks.

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

Hey, thanks. Good morning and congrats as well to everyone. I just had a question on the financial guidance inputs and specifically just around the interest income expectation of $80 million in 2025. I think you realized $150 million in 2024. Just can you bridge the difference there? Are there any other cash outflows you need to be aware of? Understand you're going to have some share repurchases in there, but just wanted to understand that.

Yeah. Good morning. Thanks for the question, Brent. So as you think about it, your intuition is again spot on. You are seeing a little bit of the impact of the share repo, which kicked off and will remain in progress in earnest across all of '25. The biggest thing that maybe you're not thinking about is the cash that we've held at a couple of our significant joint ventures, notably in Canada and in Mexico. And so we had significant repatriation of those dollars back into Fluor Corp. and out of the JV. And so you wouldn't have necessarily seen that cash, but it has now come back into the corporate portfolio. And so we were kind of generating interest on cash you couldn't see because of the nature of the JV accounting. So the biggest difference there in addition to a little bit lower interest rates across the balance of the year. But the biggest thing is really the JV cash that has now been redeployed back to the JV partners.

And we're returning shareholder -- and we're buying back shares, too, right? So...

Understood. Yeah. And I guess just a follow-up and all the conversation around the stronger book-to-burn, I think well understood, Urban Solutions is going to continue to be a nice driver here. I guess I'm more curious on the timing in Energy Solutions as we advance through 2025. Are you cautiously optimistic or optimistic we might see an inflection in this kind of downward trend in backlog that's developed more recently? I'm just trying to get a sense of when you think some of these opportunities start to accelerate there.

Yeah, Brent. This is Jim. Yeah. 2025 is the reloading year. So -- and look, we don't always control the timing of awards. We can get ready for the projects. We develop the teams, the proposals, the execution plans. Sometimes these front-end efforts drag on because of clients. It's interesting. The clients in the energy market have been a little more careful and prudent in launching their FIDs than the clients we see in other markets that are more time to market and are willing to jump the gun earlier. So when you ask when will the inflection point turn upward, it depends a little bit on these FIDs. I would say '26 is a higher chance, for sure, than '25, but perhaps even the second half of '26. So we're doing everything we can to set up the projects for success, doing quality front-end work, helping the clients maneuver the challenges of the supply chain, helping them maneuver the challenges of potential tariffs and other issues. So there's a lot of good work that happens on the front end to set these projects for success. The exact timing of them, it's up to the clients. And specifically to your question, I'm probably looking at a '26 time frame.

Very good. Thank you.

Thanks, Brent.

Due to time constraints, this concludes our Q&A session. I will now turn the call back to David Constable, Chief Executive Officer for closing remarks.

Thank you, operator, and many thanks to everyone for participating on our call today. As we close out the 2024 financial year, really pleased with our cash generation trajectory and our ability to return capital to shareholders. In addition, we have significant near-term prospects that will support further revenue growth and broad-based industry diversification for the company. So we appreciate your interest in Fluor Corporation, and thanks again for your time today.

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