Good morning and welcome to Fluor's Third Quarter 2022 Earnings 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 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 conference over to Jason Landkamer, Head of Investor Relations. Please go ahead, Mr. Landkamer.

Thank you, Julie. Welcome to Fluor's 2022 third quarter earnings call. David Constable, Fluor's Chairman and Chief Executive Officer; and Joe Brennan, Fluor's Chief Financial Officer are 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’d 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 the discussion of our risk factors, which could potentially contribute to such differences, in our 2021 Form 10-K and in 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. I’ll now turn the call over to David Constable, Fluor’s Chairman and Chief Executive Officer. David?

Thank you, Jason. Good morning, everyone. Thank you for joining us today. Please turn to Slide 4. Before we get started on operational results, I want to share insights from Fluor's Supply Chain Summit in Greenville, South Carolina on September 14. This high-energy event brought together senior leadership from Fluor, our clients, suppliers, and contractors across the globe. Ongoing industry trends, new business ideas, and solutions to current supply chain challenges were discussed. And this event gave everyone an opportunity to meet and interact with Fluor clients and senior Fluor business line and supply chain leadership. Fluor committed the proceeds from the event to non-profit organizations, including the Carolinas Virginia Minority Supplier Development Council, the Houston Minority Supplier Development Council, the Greenville Chamber, and Fluor Cares. The Councils and Chamber will use the donation funds to impart training and certification to minority-owned businesses, helping them get ready for relationships with larger corporations. Please turn to Slide 5. I want to start by addressing the legacy infrastructure charges incurred in the quarter. Clearly, the impact of these projects weighed heavily on our otherwise excellent results in the quarter. The $107 million in charges includes: $64 million for additional rework and scheduled delays on the I-635 LBJ East Freeway project, $22 million for cost growth and delay mitigation costs on the Gordie Howe project, and $21 million for subcontractor cost escalation and productivity estimates on the LAX Automated People Mover project. Over the past 21 months, Fluor's leadership team has taken action to improve the progress and execution of our legacy projects. Specifically in infrastructure, we have completed 6 of the 9 challenge projects in this timeframe. We continue to strengthen the leadership on the three remaining legacy infrastructure projects in support of our joint ventures. In the last 3 months, we have shifted resources from across our organization, including claims management, project estimators, procurement, and field execution personnel. This is not only to support our specific efforts, but also reinforce the performance of our joint venture partners. Finally, we are actively engaged in formalizing our entitlement positions on these three legacy projects to seek relief for cost growth and scheduled delays. This has taken some time to perfect due to the complex nature of the projects in question. We expect to validate these substantial positions in the next few months. Please turn to Slide 6. Building upon the positive momentum from the previous quarters, one-to-one book-to-burn for new awards, Q3 new awards were $9.7 billion with a 2.7 book-to-burn ratio. Q3 was the second-largest new awards quarter in Fluor's history. Importantly, these new contracts are accelerating Fluor's strategic priority of fair and balanced terms with reimbursable work, representing 91% of total awards for the quarter. A majority of our backlog is now reimbursable. New award margins continued our year-long trend of being above our internal plan. And we have a robust prospect pipeline that demonstrates the value that Fluor can provide to our clients. We are currently working on or recently completed FEED and study packages that represent an estimated $131 billion in high-quality new award prospects. We are also tracking FEED and feasibility prospects in the next 18 months that represent more than $163 billion in capital expenditures. Of that amount, 40% is related to energy transition. Moving now to our business segments, please turn to Slide 8. Urban Solutions reported a segment loss of $54 million for the third quarter. Results for the quarter reflect infrastructure cost growth on the legacy projects we just discussed. New awards for this segment approached a one-to-one book-to-burn ratio at $929 million of reimbursable work in mining and ATLS. This quarter, we made the decision to retain Stork's North American operations. Starting next year, this new business line, Plant and Facility Services will be in our Urban Solutions segment. As some of you may recall, this represents the original Fluor operations and maintenance baseload business that supported North American clients before the acquisition of Stork. The new plant facility service business line will promote our strategic priority of driving growth across the portfolio. This will extend our relationship-driven business model beyond the initial EPC prior to execution contracts with existing clients, while also contributing new awards and growth opportunities. Joe will address the remaining Stork operations portfolio in his comments a little later. Now turning to Slide 9. In mining, we continue to make progress on converting our near-term prospect pipeline. In Q3, we received an incremental award for one of our key projects in South America. We are currently working on a limited notice to proceed for multiple clients, and we have $5 billion of near-term prospects to support demand for copper, gold, lithium, and metals for several clients that should be converted to full awards in the upcoming quarters. Now, please turn to Slide 10. Our Advanced Technologies & Life Sciences business continues to expand. In Advanced Technologies, we have several projects and prospects across the battery and data center markets. Semiconductor opportunities continue to develop with many clients. Specific to Intel, we continue to receive incremental awards and are supporting their efforts to reprioritize investment plans. In Life Sciences, we were selected by a leading biologics company for a multi-hundred million-dollar reimbursable contract to perform procurement and construction management for a large-scale biologics drug substance manufacturing facility located in Scandinavia. This project and over $3 billion in prospects in Europe and the U.S. next year also supports our strategic priority of driving growth across the entire company portfolio. During the quarter, we received work from a new client that provides cutting-edge robotics and automation technology for some of the largest retailers and wholesalers in North America. Our initial contract is for the installation of racks and automation equipment into five mega-distribution centers. As these locations are completed, we see the potential to significantly expand this relationship across the United States. Please turn to Slide 11. Since we already reviewed the challenges this quarter, I want to elaborate on our expectations for Urban Solutions, and specifically the infrastructure business line. Two years ago, as part of our go-forward strategy, we narrowed the focus of our infrastructure business to State Departments of Transportation moving away from large signature projects and focusing on regional road and bridge work. After we narrowed our focus, we further refined the strategy by adjusting our selectivity criteria. Simply put, this means saying no to projects, no to clients, or no to joint venture arrangements that did not provide an equitable balance of risk. And I can confirm that this selectivity strategy is working well. As an example, over the past 18 months, we've declined to bid on approximately $28 billion in infrastructure work, where we could not see a path to mitigate risk and still deliver an appropriate return. For projects we may pursue, we expect fair and balanced contract terms. This includes additional contingencies, the ability to procure equipment and materials early, and contracts where the client has some degree of responsibility for quantities and labor cost risk. In addition, we did not pursue EPC lump sum contracts where we are a minority partner. Moving on to Slide 13. Mission Solutions reported segment profit of $29 million for the third quarter consistent with our expectations. The photo on this slide is from our Ascension Island Project for the Department of Defense, U.S. Space Force, and the U.K. Royal Air Force. Fluor began restoring the auxiliary airfield to its full capacity in 2020. The eastern side of the runway is now complete, marking the halfway point of the project. New awards for the quarter include a $4.5 billion 4-year extension with the U.S. Department of Energy for the Fluor-led Savannah River Nuclear Solutions LLC, management and operations contract near Aiken, South Carolina. Work performed at the Savannah River site includes environmental management and the cleanup of legacy materials, facilities, and waste remaining from the Cold War. The site also supports the U.S. government's non-proliferation efforts by processing and storing nuclear materials. Additionally, Mission Solutions has received a 1-year extension from the U.S. Army to continue supporting work with the U.S. Africa Command. Currently, we work at 14 sites in 8 countries across the African continent. The outlook for Mission Solutions is increasingly optimistic with upcoming renewals, recompetes, and new work. Moving to Energy Solutions, please turn to Slide 15. Segment profit of $59 million reflects an embedded derivative loss of $5 million, a $4 million impairment related to the conclusion of a project in Russia, and declines in execution activity for projects nearing completion. This is offset by increased activity on recently awarded projects. New awards for the quarter included two reimbursable contracts, totaling more than $2 billion for BASF, ethylene oxide, and ethylene glycol and infrastructure off sites and utility packages in China. Fluor was also awarded a $600 million award for a refinery upgrade in Mexico with our joint venture partner ICA. This award is part of the reactivation of a residual upgrading project that was suspended in 2019. This is a fixed-price contract that aligns with our strategy because it was awarded on a sole source basis with a long-term client where we have a strong relationship. Another major award recently announced is a reimbursable contract for front-end engineering, detailed design, and engineering and procurement services for Imperial. This project will use our renowned expertise to develop a world-class renewable diesel complex at the client's Strathcona refinery, near Edmonton, Alberta, Canada. The facility is expected to be the largest renewable diesel facility in Canada and will produce approximately 20,000 barrels of renewable product per day from locally sourced feedstocks. Turning to Slide 16. At the LNG Canada project, this month, we celebrated our 4-year milestone from receipt of the project's full notice to proceed. Our joint venture scope is approaching 75% complete. At the end of the quarter, 137 modules were shipped with 124 on site. All 250 modules are expected to be delivered by the middle of 2023. We continue to work with the client to resolve our COVID-related impacts across the primary job site and fabrication yards. Fluor is well-positioned to support the increase in demand for LNG. During the third quarter, we announced a full notice to proceed on the New Fortress Energy, FAST LNG 2 project as a follow-up to the LNG 1 project from Q1. We also see an opportunity for additional reimbursable awards with this client early next year. Not only do we have prospects in the pipeline for LNG work, but we also have prospects to support our chemical clients. This includes a significant reimbursable prospect for a major chemical facility in North America. Moving to energy transition on Slide 17. We are seeing ET activity across all of our business lines, including a project for a major automotive client that involves subject matter experts from energy solutions and mining and metals. In addition to this automotive award, Carbon Capture Incorporated, a U.S. climate tech company recently selected Fluor to provide engineering and project integration services for Project Bison in Wyoming. This will be the first atmospheric carbon removal facility to use Class VI wells for permanent CO2 storage, and it will be the first scalable direct air capture mega project in the United States. Moving to Slide 19 and NuScale. In September, NuScale and KGHM signed a task order to initiate deployment of the first small modular reactor in Poland. Under this task order, NuScale is working with KGHM to identify and assess potential project sites and develop project planning milestones and cost estimates. It is anticipated that Fluor will engage in these activities early next year. On October 20, the Nuclear Regulatory Commission's Advisory Committee on Reactor Safeguards issued a letter agreeing on NuScale's methodology for determining their small modular reactor emergency planning zones. The approved methodology will permit a smaller planning zone thereby opening up a wider range of potential sites for NuScale plant locations, including, for example, coal-fired plants scheduled for decommissioning. Finally, the U.S. Trade and Development Agency awarded a grant to Romania's RoPower Nuclear, a subsidiary of the National Nuclear Energy producer, Nuclearelectrica for a FEED study to develop NuScale's first SMR plants in Romania. Joe will talk more about this in the financial update, but I'll just mention as a reminder that Fluor remains the largest investor in NuScale with 57% ownership. We are still considering the appropriate time and approach to begin monetizing our investment in NuScale. With that, let me turn the call over to Joe for the financial update. Joe?

Thanks, David, and good morning, everyone. I will review our results for the third quarter, provide an update on our divestitures and capital structure plans, and go over the key financial outlook assumptions that support our 2022 guidance. Please turn to Slide 21. For the third quarter of 2022, revenue of $3.6 billion increased from the ramp-up of execution activities on refinery projects in Mexico, a recently awarded reimbursable LNG project, and the chemicals project David mentioned. Segment profit decreased to $31 million from $116 million a year ago. The decline stems from the $107 million in legacy infrastructure project charges previously discussed. Adjusted EBITDA for the third quarter was $26 million, and our diluted adjusted EPS for the quarter was $0.07. Results reflect a $16 million foreign exchange impact across a number of projects in Energy and Urban Solutions. Corporate G&A expense for the quarter was $30 million, down from $45 million last quarter. This improvement included $12 million of incentives reversals associated with the project charges taken in the quarter. Net interest income in the quarter was $14 million, compared to a $1 million expense last quarter. The increase in income is a result of the positive impact of rising rates on our global cash balances. As we anticipated new award revenue for the quarter was $9.7 billion. This improved our backlog to $25.4 billion, which also improved our reimbursable backlog to 58%. Our cash and marketable securities balances for the quarter was $2.6 billion, with 23% of this amount domestically available. Total cash includes $348 million held by NuScale. Please turn to Slide 22. Our operating cash flow for the quarter improved to $118 million as working capital levels remain stable. For the year, we expect our cash balance to be roughly flat when normalized for the impacts of the NuScale leaseback consolidation. Regarding the monetization of Stork and AMECO, we continue to make progress. We have reached an agreement to divest Stork operations in Australia and New Zealand, and this transaction is expected to close at the end of November. Although this transaction is not material, it is an important next step in our journey to refocus the business. As David mentioned, rather than selling the Stork North American operations, we have decided to retain the operations as part of Urban Solutions. This will be reflected in our financial results starting in the first quarter of 2023. With respect to Stork European operations, our conversations with the preferred bidder have progressed, and we will provide more details in the near-term. Please turn to Slide 23. With the positive developments at NuScale, we continue to be asked about our ownership strategy. As we said on our last call, and during our Strategy Day in 2021, our long-term intention is to own approximately 20% to 25% of NuScale. The De-SPAC related lock-up period ended at the end of October. We are currently evaluating our options and will move forward as market conditions allow. At the end of the quarter, we had $1.1 billion in outstanding debt, including $145 million maturing in March of 2023. Our debt to capital ratio is 36.5%. We intend to retire our 2023 notes using available cash. With respect to our capital structure, we remain committed to our plans to reduce outstanding debt to a more appropriate level and use existing liquidity. The proceeds from NuScale and the monetization of our non-core units will address the needs of our business. Looking forward at options to distribute cash to shareholders, either by share buyback or dividend, we must be diligent in addressing these known uses of cash. We look forward to discussing future capital structure options at the appropriate time. Please turn to Slide 24. For the fourth quarter, we are setting an adjusted earnings per share guidance range of $0.50 to $0.60. We anticipate adjusted EBITDA in the fourth quarter to be in the range of $125 million to $150 million. This range is driven by strong performance in Energy Solutions, improved performance from Urban Solutions, and supported by over $15 billion in new awards year-to-date booked at higher new award margins than our internal expectations. Our assumptions for the fourth quarter include revenue of more than $4 billion, adjusted G&A expense of approximately $40 million and an effective tax rate of approximately 34%. This may vary somewhat depending on the countries in which revenue is generated. Our expectations for segment margins in the fourth quarter are: approximately 4.5% in Energy Solutions, approximately 4% in Urban Solutions, and approximately 3% in Mission Solutions. Finally, as it relates to our 2024 adjusted EPS and EBITDA guidance, we are currently in the process of finalizing our 2023 operating plan and our long-term strategic plan. We look forward to providing an update on our year-end call in February. Operator, we are now ready for our first question.

Thank you. Your first question comes from Mike Dudas from Vertical Research. And we ask you to limit yourself to one question and one follow-up. Please go ahead.

Thank you. Good Friday morning, everyone.

Hey, Mike.

Good morning, Mike.

First question, David, maybe you could share a little bit more detail your thoughts on three areas of prospective award potential over the next several quarters. One, progress on semiconductors in the United States and your international exposure with Intel? Secondly, the timing and pace of some of the mining notes to proceed that we may see. And third, from an energy standpoint, there’s a lot of momentum, obviously get some big projects in China, but in the U.S. that large chemical project, is that a near-term, medium-term type opportunity? Are there any ones behind that, that could hit in 2023?

Thanks, Mike, and good morning again. Regarding semiconductors, we have established a strong relationship with Intel. As you may have heard, they initially outlined $27 billion for capital expenditures this year, which was adjusted down to $21 billion for 2022, but they're planning to increase it back to over $28 billion in 2023. They are reassessing their plans to ensure that they continue to allocate work to us appropriately both in the U.S. and internationally. With this level of capital spending, we anticipate continued work coming our way, although the larger projects may extend into 2023 and 2024. Samsung has experienced a slight slowdown but expects their capital expenditures to remain unchanged for 2022 and to rise from $38 billion to $39 billion in 2023. They anticipate a rise in demand during the second half of 2023, particularly in high-performance computing and automotive sectors. It appears to be a temporary pause before demand picks up again later in 2023, affecting both U.S. and international markets. In mining, we're starting to see an uptick in activity. We have been discussing mining in our strategic planning sessions and see it currently in a favorable position, with new work coming in and limited notices to proceed. I previously mentioned $5 billion in limited notices to proceed, which we expect to convert in the next quarter, particularly in the first half of 2023 and possibly into the third quarter. We anticipate substantial full notices to proceed in mining within the next nine months. Regarding energy, the chemical project I mentioned is based in North America and is an exciting energy transition project aimed at achieving a low carbon footprint for the client. We see potential for more projects like this as chemicals are one of our targeted business lines with significant growth expected. That should cover everything.

Yes.

Okay. Yes, thanks, Mike. Thank you.

Yes, excellent. Can I quickly follow up on NuScale? Are there any indications or thoughts regarding the monetization of such a large stake and whether private investors, private equity, or other parties might be interested in taking a position in that transaction? Thank you.

Yes. Thanks, Mike. Yes, just a great spot for us to be in right now with different optionality that we're looking at. And I'll ask Joe to comment.

Yes, Mike, good morning. We have kicked off kind of a parallel path here relative to looking at strategic and looking at maybe some public activity. We do see a significant amount of value in terms of bringing in a strategic. In many cases, those strategics have a vested interest, not only in the technology but in some cases looking to apply that technology. So they become very critical and important partners as we look at the valuations of NuScale moving forward. But at the same time, we are also looking at some public opportunity for a transaction. What I will say is that we're going to do it in a very measured way, such that we maintain not only the integrity and the valuations that are in NuScale but also the required liquidity that Fluor will need as we move out into '23 and into '24.

Thanks, gentlemen.

Thanks, Mike.

Thank you, Mike.

Yes. Great, thanks. Good morning. I just thought we'd check in on the three infrastructure projects here. Maybe, David or Joe, you could give us the updated POC and completion dates on those three projects to get us going?

Maybe I'll take the detailed question on that. And then we can talk a little bit higher level relative to how we're addressing the challenge as we move forward. With the caveat to, Andy, when you think about this, what we've had in our prepared remarks relative to the development of claims and other things that are really right in front of us as we get into Q4. But in terms of LBJ, we are 50% complete as of Q3, Gordie is 41% complete and LAX is 73% complete. And so with that, maybe, David, if you wanted to ...?

Yes, Andy, good morning. So just following on those percent complete, it looks like right now we're forecasting LBJ 635 completing in the second quarter of '25. Gordie completing in the second half of 2025 and LAX further along, as Joe said, 73% completion at the end of the second quarter of 2024.

Andy, if I could just add and kind of reinforce where we are relative to the development of claims and other entitlements as we move forward based on understanding cost and the cost impacts within these projects, we are recording those when they are made available and known to project teams, and it takes time to develop your claim positions and potential variable consideration around that. That is all starting to come to a head as we get into Q4 and into Q1 of next year. So I would expect, as we move out, you'll start to hear a little bit of the flip side of what has been a difficult story to not only present but to hear, but I think you'll begin to understand some of our positions as Fluor in terms of how we support our overall EACs going forward.

I want to clarify that you've mentioned in the 10-Q that discussions are ongoing in the fourth quarter. Are you indicating, Joe, that you've set aside reserves for some of these items and are working to recover them? Or is the 215 million in unapproved change orders noted in your 10-Q part of this discussion? I would like to understand how the outcomes of these discussions could impact your income statement.

Yes. Let me suggest that in terms of what we've recorded in cost and then potential recovery of variable consideration is a smaller component of the overall claims that we will be putting on the table. And those claims are significantly larger than our current positions, not only as it relates to variable consideration, but we have recorded 100% of the cost associated with that. So what you're seeing in our Q3 presentation today is really what we consider to be the downside pending all of these additional claims and discussions that will occur. And I will suggest to you it's not across just LAX and it's not across Gordie, it's across a significant portion of the infra portfolio.

All right. That's helpful context. Thanks, guys.

Thanks, Andy.

Good morning, everyone.

Good morning.

Good morning.

David, obviously, you reported a really strong quarter of bookings. You gave us good color, I think, regarding individual end markets with a lot of possible potential bookings coming up. Given some of the concerns you mentioned from some of your customers, can you continue your recent bookings momentum? And ultimately, do you see backlog continuing to rise from here, call it, in the near to medium-term?

Good morning, Andy, and thank you for your question. We've discussed this a bit previously. We are experiencing some recessionary pressures and inflation in the market. Despite expecting a mild recession in the U.S. and potentially more significant challenges in Europe, global recession forecasts for GDP are around 2.7% to 2.9%. How China navigates its recovery from the zero COVID policy might provide a boost to the global economy. That said, from our perspective in conversations with clients and examining their capital expenditure plans, many are showing positive trends. For example, from a sample of our key clients across three business segments, capital expenditure plans are projected to rise from $175 billion in 2022 to $195 billion in 2023, with around $30 billion of that focused on energy transition. These decisions are made for the long term and aren't significantly affected by a temporary economic slowdown. Our Head of Strategy noted that in a recent survey of 136 CEOs, 98% expect a recession in the next 12 to 18 months, but 86% are planning to maintain or increase their capital spending. The capital is available and will flow. We need to be precise in our estimations, and fortunately, the supply chain forecast indicates a general softening of prices, which will support our estimates and return rates for clients. We believe we are at a turning point for backlog, and we anticipate our book-to-burn ratios will remain at or above one. However, we do face some challenges regarding new awards and backlog across our business lines. Joe?

No, maybe I would just add that the pipeline that we were communicating over the previous quarters was pushed to the right slightly. But as we start to see this inflection point and our new award ramp, what I would suggest to you is that pipeline that we were looking at that's driving to some of the release of this capital into some of the project activity that we've been able to put into backlog has not fundamentally changed as we look forward. That those opportunities still exist. It will be a little bit chunky because some of these opportunities are multibillion. And others are more strategic, but the pipeline itself has not fundamentally changed in terms of what we are looking at and how we are viewing our business moving forward.

I think the really good news is that our new strategy has us focused on reimbursable work, which has not slowed us down or limited our opportunities. In fact, we are seeing improving margins, as we've discussed over the last several quarters. We've been mentioning improved margins since the fourth quarter of 2021. So yes, we are quite optimistic about the markets ahead of us.

Very helpful, everyone. I have a related question regarding earnings. You mentioned a revenue increase to over $4 billion in Q4. You are aware of the '24 targets that you’ve set. I believe you mentioned an EBITDA target around 900, which would necessitate significant growth next year. Without going into too much detail about '23, how confident are you about achieving that growth? Will it be back-end loaded to reach '24, or can we expect a steady increase throughout '23, especially with the higher revenue in Q4?

No. It's something we are looking at right now, like I said, in our strategic plans, and we are doing our operating plan for '23 here. Second week of December, Joe, any kind of additional comments on guidance and how we are going to be handling that?

I think my general guidance is that we had signaled to the market that we were probably closer to maybe two quarters earlier into these types of backlog improvements. So that two quarter impact in terms of how it flows into the overall burn for the P&L will have a little bit of an impact on where we are in '24. We haven't finalized all those numbers, but we are not seeing a drastic departure at this point. It does support what we've laid out back at the beginning of 2021. I think the delay is going to be what we are working our way through in discussion right now. But certainly not the quantum of new awards to support a robust growth trajectory into the outward years.

Helpful guys. Thank you.

Thank you.

Hi, good morning. My first question is about understanding the factors behind the sequential revenue increase from Q3 to Q4, specifically the over $4 billion, and what is expected for the operating margin in Urban Solutions since that market has faced margin challenges. What do we need to achieve the anticipated 4.5% margin? Additionally, Joe, regarding the fourth quarter, you're indicating an EBITDA run rate of $125 million to $150 million. Should we consider that a solid quarterly base as we move into 2023, provided there are no execution issues? I'm trying to frame 2023 with that earnings base, especially given the recent success in bookings. Thank you.

Thank you, Jamie. The revenue growth we are experiencing can be attributed to the fact that, as we have indicated in previous quarters, the projects we are adding to our backlog as new awards were primarily secured through an Invitation to Bid, a significant portion of them had already been in progress. With these projects now in our backlog, we expect them to generate higher revenue more quickly due to their level of completion. This is likely the reason for the increase in Q3, and we anticipate continued growth. Regarding your second question, Jamie...

The margins in Urban Solutions, just given what we've seen the challenges so far this year?

Yes. I think what will happen is that those projects in the backlog, which we've made progress on, will start generating higher revenue at a quicker rate. That's likely why you're seeing an uptick in Q3, and we expect that growth to continue. And regarding your second question…

Yes, go ahead. I was just like the fourth quarter margin on Urban Solutions confidence level there.

We are very confident in the 4% that we've laid out relative to Q4.

But what's driving it?

What's driving it? Well, clearly, we are not having the challenged projects that we are having. If we strip out the challenged projects, I can get back to a normalized run rate that is in that 4% range just based on the backlog that's flowing through the segment.

Okay. And then my last question was for 2023, can I say your fourth quarter EBITDA is expected to be between $125 million and $150 million? Is that a reasonable quarterly estimate to consider as we approach 2023?

I believe, Jamie, that is a good launching point to think about a very simplified linear run rate moving forward as we go through the operating plan over the next couple of weeks and are able to provide you significantly additional color in the Q4 earnings call. But I don't see the $125 million being the bottom of our run rate moving forward. I see it as more of a launching point and starting point as we begin to put in. You got to remember too, Jamie, we just put in $15 billion nominally a good, high-quality backlog, and that is going to start flowing through the books.

Thanks, Jamie.

Thanks. Good morning. I just wanted to follow-up on the Urban Solutions margins and performance and really ask about the expectations that you want to set for the segment. Obviously, you just talked about Q4 in some detail, but more curious about the next couple of years as you go through the completion process on those projects. I mean, should we assume that there's just going to be some noise on more charges going forward.

Steven, yes, I will take that question. We believe, as of today, we've captured with the facts and circumstances as we know them in the forecast. Obviously, it's difficult to say that we guarantee there will not be additional challenges on projects that have a couple of years of execution to complete. But as of today, we believe we are starting to make enough progress to where we are getting more comfortable with Gordie and with LAX. I think we've ring-fenced LBJ.

Yes, Steven, I will just add to help us along here. Joe talked earlier about the percent complete when you're in the 50% to 75% complete range like we are, 45% to 75%, say, right now, since we are in Q4. That we're almost bought out completely on these products over 90% bought out from an equipment and a supply standpoint. So also very helpful that that's behind us.

I would like to add that we are facing several challenges. We have allocated significant resources across the company and made many changes in project management and construction management. We are continually reallocating resources in areas such as estimating, procurement, and prime contract administration, which are critical for all these jobs. We are fully committed to delivering these projects. They face substantial challenges and would not have passed our pursuit criteria and backlog at this time. However, we are dedicated to bringing these projects to completion.

Great. And then I guess just a follow-up, similar sort of question specifically related to LNG Canada. How is the ongoing inflation in the marketplace affecting that project in particular? I know obviously, you have some discussions going on, on that one as well. But I think that's more related to COVID impacts, but maybe the inflation gets baked under that umbrella. How should we think about inflation on that project?

Yes, I think procurement is complete and everything is acquired. We are essentially moving into fabrication and construction mode now, so that's behind us. As you mentioned, our focus is currently on addressing COVID-related and scheduling discussions.

Any additional inflation exposure primarily relates to labor, but we have protections in place through project labor agreements. Generally, we have been able to contain potential labor cost increases. As David mentioned, most of those risks have been mitigated. The remaining risk mainly affects our material and equipment accounts, and since we have secured all necessary equipment, either on-site or in our fabrication yards in China, we believe we have significantly reduced our exposure to price increases as we move towards project completion.

Yes. It was mostly about the labor, but you have addressed that. So thank you very much.

Thanks, Steven.

Hi, guys. Thanks for taking my questions. Joe, when you're talking about being diligent around known uses of cash, obviously, the 2023 notes that you'll pay down is defined. But what else are you talking about there? And in particular, I'm curious beyond the $100 million of cost to fund loss projects you highlighted for the fourth quarter, what's that number going to be for 2023?

In 2023, we are looking, Sean, at a number that hasn't been affected by the variable consideration in the claims and how we view those. If I look at it on trade up without considering the variable consideration and our discussion around claims, it's probably a little higher number than we would expect it to be at this point in the $200 million to $250 million range in 2023. But again, we have not layered in all of these discussions as we start submitting claims and looking at potential.

Thanks for that, Joe. Along the same lines, a significant turning point for our story is marking this considerable improvement in our operating cash flow generation. Is it still true that we expect this to be a 2023 event?

Yes, I believe you will begin to see slightly improved cash flow as we move forward. We are experiencing some headwinds with the 2023 projects, and while there will be challenged projects, there are also other sources of cash we can tap into as we advance on key initiatives that could generate returns in the form of dividends. I don’t want to go into too many specifics, but there are cash sources that will enable us to start bringing some funds back into Fluor's as we address certain risks.

Okay. Thanks a lot. I will turn it over.

Hey, great. Thank you. On Urban Solutions, when you think about where the award opportunities are coming from and then also sort of this deliberate transition in the segment portfolio over the next few years, how do you think about what the end market exposure could look like sort of between call it, mining and metals, advanced technologies and then the traditional sort of infrastructure projects? I guess I'm just wondering, is the infrastructure stuff ultimately become a much smaller piece of that pie.

Yes, good morning, Brent. As I have mentioned previously, we have completed our strategic planning process that extends through 2026. The market conditions for Mining and Metals are currently very favorable, and ATLS also has numerous opportunities both domestically and internationally. These two areas will serve as strong growth drivers for the company moving forward, and we have a clear view of prospects extending well into the future, particularly in mining. To address your specific question, we anticipate that infrastructure will constitute about 10% of the Urban Solutions portfolio during this planning period through 2026 and beyond. In terms of our business segments, we expect mining to represent approximately 65%, ATLS around 20%, and other segments, including our agency staffing company and the developing plant facility services business, to make up the remaining 5%. So the breakdown would be 65% mining, 20% ATLS, 10% infrastructure, and 5% other. That seems accurate.

That's really helpful. I appreciate that. Regarding Mission Solutions and the strong awards, how much of that was related to Savannah River this quarter compared to other activities in the segment? Also, do you have any updates on Pantex? I understand there may be discussions about splitting that up, but is there any potential timeline for re-engaging with that?

So yes, $4.5 billion of the new award totals for mission comes from the Savannah project. Regarding Pantex and Y-12, we have separated those two contracts. Pantex will be available around the middle to the end of 2023 through a bidding process, and we will navigate that process. We have conducted significant internal work to adjust our pursuit criteria and strategy for how we will approach the Pantex opportunity and how we will go after Y-12. Y-12 will be further along in the strategic planning cycle, around the mid to end of 2025, before we have a clearer perspective. However, we will pursue both opportunities separately. The approach and strategy we will use to pursue them will differ slightly.

Okay. I appreciate it. And any other sort of meaningful opportunities along the way in that segment beyond those two?

Yes. We have many recompetes happening in the nuclear and civil sectors, including with both the Department of Energy and the Department of Defense. We expect this positive trend to continue, and we will also incorporate the larger Pantex and Y-12 opportunities in the 2024 and 2025 timeframe.

Okay, great. Thank you.

Thanks, Brent.

This is all the time that we have for today's questions. I will turn the call back over to David for closing remarks.

Thank you, operator, and thanks to everyone for participating in the call today. And just to conclude, we are very pleased with the pace and timing of new awards in today's economic environment. Fluor is a great company with exceptional people, and we are well-positioned to meet the ever-growing needs of our clients. And finally, be assured that these two legacy project challenges the company is working through this quarter are in no way a reflection on the overall health in a very positive direction that Fluor Corporation is heading in. So we appreciate your interest in the company today, and thank you again for your time.

This concludes today's conference call. You may now disconnect.