Andrew Whittman

Andrew Wittman from Baird asked about the various components impacting cash flows, specifically JV cash distributions, legacy project burn, and tax payments. He also questioned the Q4 corporate costs, including potential incentive comp reversals, and the drivers behind the higher 6% Mission Solutions margin guidance.

Answer

CFO John Regan detailed cash flow impacts, noting Fluor will be a more regular taxpayer in 2026, expects reduced JV distributions from LNG Canada, and a slight uplift from Savannah River. He attributed Q4 corporate cost fluctuations to stock-based compensation reversals due to corporate performance and share price, and confirmed modest, non-material restructuring costs for 2026. The higher 6% Mission Solutions margin guidance is driven by the performance on Savannah River, which receives equity method treatment.

Andrew Wittman inquired about the moving pieces impacting cash flows, specifically JV cash distributions and other minor items. He also asked about the components of corporate G&A expense in Q4, including environmental liabilities, FX, and incentive compensation reversals, and whether more restructuring is anticipated in 2026. Finally, he sought clarification on the drivers behind the perked-up 6% Mission Solutions margin guidance.

Answer

CFO John Regan explained that cash flow will be impacted by higher tax outflows in 2026 as Fluor becomes a more regular taxpayer. JV distributions are expected to see a slight uplift from Savannah River but a reduction of approximately $60 million from LNG Canada as it winds down. For G&A, Q4 saw a reversal of stock-based compensation due to corporate performance and share price decrease, with 2026 guidance assuming closer to targets. He expects modest, non-material restructuring in 2026, unlike the $40 million in 2025. The higher Mission Solutions margin is primarily due to the performance on Savannah River, which receives equity method treatment, allowing profit recognition without corresponding revenue.

Andrew Whitman asked about the implicit FX rates in Ecolab's 2026 guidance and sought clarification on whether expected volume improvements in the water segment are driven by easier comparisons or actual underlying market improvements.

Answer

CFO Scott Kirkland stated that FX is expected to be neutral for 2026, with a slight favorability in the first half. He noted that below operating income items are not expected to provide a net benefit due to a higher tax rate and lower other income. Chairman and CEO Christophe Beck added that new business for the entire company, including challenged water segments like basic and paper, has increased in absolute terms, but demand in those specific industries remains lower year-over-year.

Andrew Whittman inquired about the specific components that bridge ABM's $250 million normalized free cash flow for 2026 to the actual expected free cash flow, identifying any unusual or one-time items. He also asked for details on the WGNSTAR acquisition's payout structure, including whether it involves cash or contingent considerations, and sought clarification on the segment operating profit for fiscal 2025 to contextualize the new metric's guidance. Finally, he asked about the remaining scope and phasing of the restructuring program and where its benefits are expected to accrue in fiscal 2026 and beyond.

Answer

David Orr, EVP and CFO, ABM Industries, detailed that the $250 million normalized free cash flow for 2026 includes approximately $20 million in transformation costs, $10 million in integration acquisition costs, $5 million in restructuring costs, and a $30 million payout for the RavenVolt contingent consideration, resulting in an actual free cash flow of around $185 million. He stated that the WGNSTAR deal is expected to close early in fiscal Q2 2026 with cash funding at that time, and management structures are in place to motivate the team. Orr confirmed that the segment operating profit for fiscal 2025 was 7.9%. He added that about 20% of the $35 million restructuring benefits were realized in Q4 2025, with the remainder expected in 2026, and that the program is largely complete, with ongoing efforts in areas like real estate and AI-enabled savings.

Andrew Whitman sought clarification on the $250 million normalized free cash flow outlook for fiscal 2026, asking for a breakdown of unusual or one-time items. He also inquired about the WGNSTAR acquisition's payout structure, specifically if it involves cash or contingent considerations. Additionally, he asked about the remaining scope and phasing of the restructuring program for fiscal 2026 and where the benefits are expected to accrue, including into 2027. Finally, he asked for the segment operating profit for fiscal 2025.

Answer

David Orr, Executive Vice President and CFO, detailed the free cash flow bridge for 2026, noting that from the $250 million normalized figure, approximately $20 million in transformation costs, $10 million in integration/acquisition costs, $5 million in restructuring costs, and $30 million for the Ravenvolt contingent consideration payout would be deducted, resulting in an actual free cash flow of around $185 million. He stated that the WGNSTAR deal is anticipated to close early in Q2 2026 and will be funded at that time, with management structures in place to motivate the team. Mr. Orr confirmed that the segment operating profit for fiscal 2025 was 7.9%. He also explained that about 20% of the $35 million restructuring benefits were realized in Q4 2025, with the balance expected in 2026, and that the program is largely complete, with future savings from real estate, subcontract optimization, and AI being incremental.