Q2 2024 Earnings: Iron Mountain, AES Corporation, Fluor Corporation, and Enbridge Report Strong Results

Iron Mountain Incorporated (IRM) Q2 2024 Earnings Call Transcript

Iron Mountain Incorporated (NYSE:IRM) Q2 2024 Earnings Conference Call August 1, 2024 8:30 AM ET Company Participants Gillian Tiltman - SVP and Head, IR William Meaney - President and CEO Barry Hytinen - EVP and CFO Conference Call Participants George Tong - Goldman Sachs Kevin McVeigh - UBS Nate Crossett - BNP Alexander Hess - JPMorgan Eric Luebchow - Wells Fargo Shlomo Rosenbaum - Stifel Brendan Lynch - Barclays Jon Atkin - RBC Operator Good morning and welcome to the Iron Mountain Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Gillian Tiltman, Senior Vice President and Head of Investor Relations. Please go ahead. Gillian Tiltman Thank you, Rocco. Good morning and welcome to our Second Quarter 2024 Earnings Conference Call. On today's call, we will refer to materials available on our Investor Relations website. We are joined here today by Bill Meaney, President and Chief Executive Officer, and Barry Hytinen, Executive Vice President and Chief Financial Officer. After prepared remarks, we'll open up the lines for Q&A. Today's earnings materials contain forward-looking statements including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor Language on Slide 2, and our quarterly report on Form 10-Q for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures in our supplemental financial information. So with that, I'll turn the call over to Bill. William Meaney Thank you, Gillian, and thank you all for taking the time to join us today for our discussion of our second quarter results. As you saw in this morning's announcement, this quarter delivered another record financial performance and exceeded our expectations. Reflecting on these results, I am incredibly proud of how our team consistently executes at a high level, putting our customers at the center of everything we do. With our proven growth strategy, we are entering the back half of the year with strong momentum. We continue to see firsthand the power of Project Matterhorn from our commercial teams, who are successfully leveraging our full suite of products and solutions to help position Iron Mountain as an ideal partner to our customers. This customer centricity continues to power our results forward for both customers and our shareholders. Building on our track record of value creation for our shareholders and our strong positive outlook, our Board of Directors has authorized an increase of our quarterly dividend by 10% to $0.715 in-line with our AFFO per share growth. I'll now turn to key developments during the quarter and how we executed on our growth strategy, which is aligned to our business segments. As a reminder, our strategic priorities are the following. Driving continued revenue growth in our physical storage records management business, providing digitally enabled solutions for our 240,000 customers, which allows them to get true competitive advantage out of their physical and digital information, delivering differentiated data center offerings and offering top-tier growth through our global scale and customer trust, and advancing our asset lifecycle management services which provide security, maximum efficiency, and an environmentally sound lifecycle management approach for our customers' IT assets. To give you some examples of how we have recently applied our services on behalf of our customers, let's begin with our records management business. The first win I wish to highlight shows how our scalable solutions can solve for complex regulatory requirements and address changing customer needs. A European-based pharmaceutical company came to us in need of a global record retention schedule, as the company was struggling to manage costs and meet regulatory requirements. As part of our expanding partnership, we are providing a fully managed suite of solutions, including policy center [upkeep] (ph), advisory services, and a dedicated help desk for queries in a scalable and flexible way that can seamlessly adapt over time as their needs evolve. Continuing with wins in our records management business, I am particularly excited to discuss a couple of digital wins. The first example to highlight is a major contract signed with a large financial institution. The foundation of this win was based upon multiple decades of a trusted relationship with the bank's understanding of our truly differentiated approach to digitally managing and automating workflow. As a result, they selected Iron Mountain to serve as its partner for a long-term transformation of its management of digital and physical documents. On the bank's behalf, Iron Mountain is transforming how it captures both digital and physical documents and their associated metadata across all lines of business, including non-banking internal documents like finance and HR. Our unique offering revolutionizes document processing services for both physical and digital documents. We have achieved this by employing our proprietary leading edge, AI powered intelligent document processing built into our InSight platform. Continuing with our digital business in Australia we have secured a large deal with one of the country's biggest banks to provide our Digital Mailroom solution, which brings together our operational scale and digital capabilities. Iron Mountain has been a trusted records management partner for over 20 years, and we built on that relationship to develop a comprehensive service offering that will see us manage their physical Mailroom sites across Australia and scan around 32 million images a year, as we process mortgage documents, checks, vouchers, and other banking documents. Our proven implementation methodology reassured the customer that we could execute a seamless transition of services and the innovative technology we are deploying will help them to realize significant efficiencies in the years ahead. Moving to our data center business, through the first half of the year, we leased 97 megawatts, which includes 66 megawatts this quarter. Due to our strong pipeline, we feel confident we will exceed our original projection and now expect to lease 130 megawatts for the year. The speed of leasing in the first half of the year is thanks to the momentum that our team has built in our leasing pipeline. We are an attractive partner to customers looking for infrastructure, which can support their very dense IT workloads and associated with their AI enabled services. Here are some examples of wins during the quarter from our US and UK markets. At our Western Pennsylvania location, we welcomed a new hyperscale customer with a seven-year contract. Since signing the contract, the customer is already in discussions about potential expansion to some of our other campuses. A good example of our continued and growing partnerships with some of the largest hyperscalers, our recent wins this quarter with a single customer in both the US and UK markets. This customer has placed a 10-year contract for us with us for almost 25 megawatts of capacity at our London data center campus and a 15-year contract for 36 megawatts at our data center campus in Phoenix, Arizona. Also at our Phoenix campus, we have won a 10-year co-location contract with one of Japan's largest banks. We will be providing 800 kilowatts of capacity to support the complete transformation of this customer's North American IT platform. Turning to our asset lifecycle management business, we continue to see established Iron Mountain customers seek new solutions from our ever-expanding portfolio. A perfect example of this is how we expanded a relationship with an insurance company that has been an Iron Mountain customer since the late 1950s. Having secured a small ALM project with them last year, our customers confidence in our capabilities and our delivery record has led them to make us their sole ALM provider. Finally, I'd like to share a last example of a customer that has added our ALM services to the Iron Mountain Solutions from which they already benefit. This global cloud-based software company has asked us to manage an ALM program to securely destroy, remarket or recycle data center assets at more than 30 locations in North America, EMEA, Latin America, and the Asian Pacific regions. Demonstrating we can provide a full service global ALM offering is no small task, but our skilled and dedicated teams successfully met the challenge. We are now a proud ALM partner for this customer, alongside the records management and digital solutions that we already provide. To conclude, we have thoughtfully and strategically curated a mountain range of best-in-class solutions and an effective operating model under Project Matterhorn. This quarter's successes are a brief testament to the value our strategy is already delivering and a window into the future we are building at Iron Mountain. As we continue to expand our footprint of storage and services and deliver tailored, innovative solutions for each of our customers, I could not be more grateful for the hard work of our Mountaineers. Our strategy and execution is showing the way in delivering consistently strong revenue growth in the resulting financial model that delivers top tier growth in both our AFFO and our dividend. We have an energized team of experienced, proven operators who are committed to excellence, and that gives us great confidence in our future. With that, I'll turn the call over to Barry. Barry Hytinen Thanks, Bill, and thank you all for joining us to discuss our results. I'll begin by providing an overview of our second quarter results, and then go into more detail on each of our business segments before turning to our outlook for the third quarter, the full year. In the second quarter, our team achieved strong performance across all of our key financial metrics. We achieved record revenue of $1.534 billion, up 13% on a recorded basis driven by 11% storage growth and 17% service growth. We delivered 10% organic revenue growth. Revenue was ahead of the expectations we shared on our last call by more than $30 million. Total storage revenue was $920 million up $89 million year-on-year. Storage growth was driven by revenue management and continued strong commencements in our data center business. Total service revenue was $615 million up $87 million from last year, driven by strength in our asset lifecycle management and global RIM businesses. Adjusted EBITDA was $544 million a new record, up 14% year-on-year, driven by strong growth in global RIM, as well as data center and asset lifecycle management. Adjusted EBITDA margin was 35.5% up 50 basis points year-on-year, which reflects improved margins across our business. AFFO was $321 million or $1.08 on a per share basis, up $34 million and $0.10 respectively from the second quarter of last year. This represents growth of 12% for AFFO and 10% for AFFO per share. This is ahead of the guidance we provided for the second quarter, driven by higher adjusted EBITDA, as well as lower than expected cash taxes, which is included in our guidance for the third quarter. The strength of the US dollar continued to be a headwind in the quarter. On a constant currency basis, revenue was up 14% and AFFO was up 13%. Now turning to segment performance. I'll start with our global RIM business, which achieved revenue of $1.25 billion, an increase of $91 million year-on-year with strong organic revenue growth of 7.9%. Revenue management and positive volume trends drove organic storage rental growth of 7.7%. Our team delivered organic service revenue up 8.3%. Global RIM adjusted EBITDA was $549 million, an increase of $50 million year-on-year. Global RIM adjusted EBITDA margin was up 40 basis points sequentially and 90 basis points from last year driven by storage growth and continued productivity across our operations. Turning to Global Data Center, the team delivered revenue of $153 million, an increase of $35 million year-on-year. From a total revenue perspective, we achieved 24% organic growth. Organic Storage Rental revenue growth was particularly strong at 27% driven by commencements and improved pricing. GAAP mark-to-market in the second quarter was 12.3% and was benefited by a single relatively large renewal. We continue to expect mark-to-market to be up mid-to-high single digit in the second half. Data center adjusted EBITDA was $66 million representing 23% growth. Turning to new and expansion leasing, we signed 66 megawatts in the quarter, bringing total bookings for the first half to 97 megawatts. As Bill mentioned, with our strong leasing and favorable outlook, we are increasing our full-year projection to 130 megawatts. The data center market continues to develop rapidly, and with our strong and expanding hyperscale relationships, our pipeline continues to grow. I am pleased to report that we have increased our land bank by 57 megawatts. With those additions, our total data center capacity can now be built out to 918 megawatts over time with 347 megawatts held for development. Turning to Asset Lifecycle Management. Total ALM revenue in the quarter was $90 million, an increase of 111% year-on-year and 30% on an organic basis driven by both improved volume and pricing. ALM continues to be a key beneficiary of cross-selling with over 95% of our bookings this quarter happening as a result of that initiative. The team at Regency Technologies continues to deliver results ahead of our plan with revenue of $35 million in the quarter. We have seen our combination with Regency result in expanded client relationships and improved profitability. Turning to capital allocation, we remain focused on a disciplined approach to fund our growth initiatives and drive meaningful shareholder returns, while maintaining a strong balance sheet. Capital expenditures in the second quarter were $399 million with $360 million of growth and $37 million of recurring. Turning to the balance sheet. With strong EBITDA performance, we ended the quarter with net lease adjusted leverage of 5.0 times, which is the lowest level we have achieved since prior to the company's REIT conversion in 2014. Turning to our dividend. On a trailing four-quarter basis, our payout ratio is now 60%. Consistent with our target payout range and reflecting our positive outlook, we have increased our dividend 10%. Now turning to our projections. For the full year, we now expect to deliver results towards the high end of our guidance range on all metrics. For the third quarter, we expect revenue of approximately $1.55 billion, adjusted EBITDA of approximately $560 million, AFFO of approximately $325 million, and AFFO per share of approximately $1.10. In conclusion, our team delivered record results in the first half. We continue to perform ahead of our long-term growth objectives, and our outlook is strong. I'd like to take this opportunity to thank all of our Mountaineers for their continued efforts to deliver on behalf of our customers. And with that operator, would you please open the line for Q&A? Question-and-Answer Session Operator Absolutely. We will now begin the question-and-answer session. [Operator Instructions] And today's first question comes from George Tong with Goldman Sachs. Please go ahead. George Tong All right, thanks. Good morning. Your ALM business saw 30% organic revenue growth in the quarter. Can you discuss how much of the growth came from volumes versus pricing and what assumptions for component prices you're baking into your guidance. William Meaney Thanks, George, and good morning. Let me handle the first part, and then I'll let Barry talk a little bit more about the pricing trends that we're seeing. So first, we're really pleased with the growth, in the organic growth that you highlighted in our ALM business this quarter. And you think about that, about two-thirds of that is driven by just pure volume. And the other third is the price improvement that we've seen from the record lows that were 12 months, 18 months ago. So we're really pleased with the progress. But I'd say most of the growth is from volume. Barry Hytinen And, George, from a standpoint of what we're seeing in our view for pricing going forward is, as you'd know pricing continues to be expected to trend higher. We've been somewhat conservative with respect to our outlook for pricing because we've seen some variation between the spreads between new gear and secondary gear, particularly so on memory. It's widened some, but frankly, it's narrowed those spreads on other gear like drives. So, you know, look it's a very positive outlook for our ALM business because the team continues to win a lot of business. The cross-selling activity we have is immense. And we are expecting, if you work through the guidance we just gave for the third quarter and implied for the fourth, you should be expecting our ALM business to be comping organically in the 40s in the back half, if not higher. So we're feeling really good and I guess I should just call out, since you asked about ALM, our Regency business is doing phenomenal. The team there continues to execute very, very well. We are seeing very strong productivity as a result of leveraging Regency's capabilities and their utilization is going up, thanks to historic Iron Mountain business that's being processed by regency. So thank you, George. Operator Thank you. And our next question today comes from Kevin McVeigh, UBS. Please go ahead. Kevin McVeigh Great. Congratulations on the record results. Yes. I don't know if it is for Barry or -- can you reconcile kind of the two quarters of beat relative to the reaffirmed guidance and just the optimism that it seems like it is scaling on the ALM side. Just puts and takes around that. Barry Hytinen Yes. Kevin. Good morning. We continue to feel very good, as we just noted about our guidance, and as you know, we beat in the first quarter, and we beat again here in the second quarter, actually a wider beat than the first. And our thought process is that things continue to trend very much in the right direction. That's why we pointed to the higher end of our guidance range for the year. I will note FX continues to be a headwind, so you will see the stronger dollar be an impact to our reported results in the third quarter probably of the order of the same magnitude as the second quarter, if not a little bit more. But what you are seeing is, improving trends as compared to our initial outlook this year across the business. Global RIM continues to perform really well in the organic storage rental revenue growth accelerated in the quarter, as we expected it to and as we forecasted last quarter, and we continue to expect that to be in the 7% to 8% range in the back half. And then in terms of data center, as we talked about before, that's a business that has a tremendous amount of visibility in the near-term. And as we talked about the outlook for the long term, there is very robust in light of the leasing activity we've had. And I just mentioned ALM with George. So I appreciate the question. Operator Thank you. And our next question today comes from Nate Crossett of BNP. Please go ahead. Nate Crossett Hi, good morning. Just wondering what you are expecting in terms of overall RIM volumes for 3Q in the balance of the year? And then can you -- I guess, you already talked about your expectations for pricing growth. So should we assume that the organic revenue growth is 7% to 8% in the back half? Barry Hytinen Hi, Nate, it's Barry. Consistent with our outlook for the last many quarters, we continue to expect our physical volume to be flattish to slightly up. And it continued that trend obviously, in the second quarter, and we have a favorable outlook for it again to be in that vicinity in the third and in the fourth quarter. So we expect our volumes to be continuing to rise. I'll just note we have never stored more physical volumes than we are storing today. And so that is, I think, a testament to the team's diligence, as it relates to serving our customers. And frankly, the value we are driving for customers, as they continue to trust us with their important assets. In terms of organic growth in RIM on the storage side, you've got it right. So the volume would be a relatively small component of the growth and then the rest would be driven principally by revenue management. And I'll note that our services business in Global RIM continues to be benefited both on the traditional side, but also and going forward likely to be ramping some on the digital side, because the team in our Digital Solutions Group just delivered the best bookings quarter we've ever had in digital. So that is a really nice performance by our commercial and digital teams. Thanks, Nate. Operator And our next question comes from Andrew Steinerman with JPMorgan. Please go ahead. Alexander Hess This is Alex Hess on for Andrew Steinerman. I hope you are all well today. A quick question on data center CapEx. And then maybe a quick follow-up. On data center CapEx, do the assumptions that you guys made at Investor Day -- your investor event in 2022 still hold. Obviously, we're seeing notable pickup in the guided CapEx numbers from the hyperscalers. And then maybe a structural question. Has the pool of hyperscalers, are those still say, the same firms for you guys as three years or four years ago? Or is there opportunity for some of these infrastructure software and AI start-ups to also be hyperscalers in your book as well? Thank you. William Meaney Good morning. I'll start with your second question and then Barry will follow up on the CapEx relative to our Investor Day. So I think what you see for us, hyperscalers are always kind of not just the largest cloud providers, but the largest SaaS providers as well. So people who need very, very large deployments in terms of megawatts of data center capacity. And usually, these are global firms. So I'm not saying that we won't see some of those firms -- some of the more newer firms that you are highlighting come into that fold, but I'd say, that the barriers to entry for these really very large hyperscalers just given the cost of leasing and building data centers. It is a fairly consolidated in tight group. I'm not saying that there couldn't be people that break into it, but I think for the moment, it's a pretty stable group, slightly increasing as some of the SaaS players get bigger in their own right. Barry Hytinen Alex, it is Barry. I'd say, a couple of thoughts about your question on the CapEx use. We are continuing to see our data center business and actually the whole business run ahead of the expectations we shared at that Investor Day. As we talked about last quarter, for the first couple of years, we were well ahead. And if you look at what we are doing here this year, we are actually accelerating that level of beat. So we are generating more revenue, more EBITDA and more cash generation. And certainly, we continue to lease more and faster than we were indicating at the time of the Investor Day. So over time, I think it's possible that we may see a continued ramp in capital for data center. But I'll just note, we are constructing to leases with some of the best quality tenants you could imagine in the hyperscalers. And I mean a couple of statistics, we are 96% leased in our operating portfolio and in our under development construction portfolio which is about 10% bigger than what we are operating, maybe even 15% bigger than we're operating, we're 96% leased on that as well on a pre-lease basis. So I will just underscore that when we are putting capital to work to build out our data center platform, it is because we have already signed contracts with clients, and we're very pleased with the level of returns that we have been generating on those deals. Operator Thank you. And our next question from comes from Eric Luebchow with Wells Fargo. Please go ahead. Eric Luebchow Thanks. Appreciate it. Just a follow-up on the data center conversation. I mean just based on all the opportunity you've had, the outperformance on leasing year-to-date. Maybe you could just talk about funding sources going forward. And given the fact that your stock has been so strong this year, your equity cost of capital is significantly lower than it has been in years past. Does this issuing equity enter the conversation going forward, as you look at funding the data center business? Thank you. William Meaney Thanks, Eric. Let me start and then Barry may want to chime in as well. So first, we feel really good about, as you are highlighting, the growth and momentum that we are building in the data center business. And just in the colo, but more and more in the hyperscale and the majority is coming from hyperscale. But as Barry said, it is -- well over 90% like around 96% is all pre-leased and it is a fully funded plan as we highlighted in Investor Day. So we don't see any -- we feel really good in terms of the way that we are able to fund the growth. And so we are happy in terms of the trajectory that we have without going out and raising equity. I think we have a plan that works. Barry Hytinen Eric, I'd just add that if you look going forward, likely rates are probably coming down over time. So that makes it that much easier for us. And the business is so cash generative from the core. And as you see, the [covering] (ph) business continues to deliver outstanding results. So I think from a standpoint of your point about the equity has risen a bit, that is true. But I think that's more a function of where it was. And if you look at us on a multiple versus the growth we're putting up I think that bolsters the point Bill was just making as it relates to equity. Thank you. Operator Thank you. And our next question today comes from Shlomo Rosenbaum with Stifel. Please go ahead. Shlomo Rosenbaum Hi, thank you very much. I just wanted to touch on two items, if I may. One, just on ALM, are you seeing the hyperscalers starting to really open up the inventory of gear that they had and really starting to sell it? Or are you still starting -- seeing the hesitation in case prices rise more. What I'm trying to understand is, are they starting to actually dump the stuff that they've been holding on to? And then just second, just if you can comment, Barry, on the storage gross margin had increased by 20 basis points sequentially, but the moving parts are very interesting, where you had like all other storage costs up like $10 million, but you had a rent to actually go down $2 million sequentially. Maybe you could talk about what the movements over there, how did rent go down? And what are those other storage costs that are going up? William Meaney Good morning. Shlomo. So I will take the question on the ALM and then Barry can talk to you a little bit about the takes in terms of storage costs. So on the ALM side, is the hyperscale is the reticence that you might have seen last year that I think we commented from the hyperscalers was less to do with the pricing on the components. It was more the availability of new kit that they had to actually refresh their data centers. And I think you've seen all the reporting from some of the largest hyperscalers in the last couple of weeks that you are all ramping up their refresh of their data centers to bring in the most capable GPUs, so that they are AI ready, and they can build up some of their AI Services. So we do see an uptick, to your point in the volume that we're getting from the hyperscalers, but it's driven more because they are refreshing their data centers to be more AI enabled and they're able to get the latest GPUs from the supplier, so they are able to accelerate some of that. So we do see a building volume from the hyperscalers right now in terms of decommissioning, which leads to more ALM volume in our business. Barry Hytinen Shlomo, it is Barry. A couple of thoughts about the storage rental gross margin. First of all, we were really pleased with that at 70% and that being because really, if you look at our global RIM business, it was up very nicely year-on-year. Of course part of that revenue management, part of that is the continued productivity that our operations teams are driving. And so the reason it was slightly down year-on-year is related to, as I talked about hour, as well as data center. As we've talked about sometimes before, data center is a lower gross margin, but it is, of course accretive to our EBITDA margin. And so as data center continues to ramp at a very fast rate, it has a little bit of a level of mix. But obviously, it is very incremental. And on a sequential basis, you would expect on that all other storage costs, there to be some power inflation as commencements begin to ramp and folks start to drop out, if you know that -- that's a direct pass-through. So it can actually also affect rate. So to have the storage gross margin up sequentially in light of that headwind is we thought very favorable about that. On the storage rent expense it was down some sequentially, and that's thanks to our team's continued productivity around warehouse efficiencies. We have -- as you would have seen over the last few quarters, reduced some of our warehouses and thereby gotten to a better expense position. And the only other thing I'll mention is taking it up a level. Our gross margin in the quarter for the whole company was almost just under 56%. Now that's slightly down from last year. But two things to think about. One, we are absorbing the mix issues, including the power that I mentioned in that number. And two, we've added Regency Technologies, which is, again, a mixed headwind on gross margin, but by the way Regency performed extraordinarily well on EBITDA in the quarter. And so we feel really good about where the gross margin is trending and it's been ahead of our expectations. Operator Thank you. And our next question today comes from Brendan Lynch with Barclays. Please go ahead. Brendan Lynch Hi, thanks for taking my questions. It came up a little bit already. But on the pricing front, your organic constant currency growth was 7.7% for storage rentals, up quarter-to-quarter, but down relative to the 2023 pace. I think you guys have one suggested mid-single digit pricing growth which is possible over the next couple of years. But you've been at high single digits for a few years now. Is it transition to mid-single digits occurring now? And how should we think about you guys pushing price as inflation wanes? Barry Hytinen Brendan, we were very pleased with the 7.7%. And I think at that level, you can see the amount of EBITDA the business generates since it is a highly productive portion of our company. And as it relates to trending, we have indicated we feel like mid-to-upper single is the right kind of level over the longer term. And so I'd say, it trending in this vicinity is -- would be very positive to the business model going forward. William Meaney Yes. And the only thing I would add is that it isn't so much inflation-based anymore. It's really about the value that we are adding to our customers. So if you look at our traditional records management business, is we've over the last few years have added a portfolio of services such as Smart Sort, Smart Reveal, and I highlighted on the call some of the governance and compliance consulting and systems that we are able to install around their hard records management. And so we are really driving more value for our customers and the customers see value in that. So I think you can continue to expect that our pricing will remain some 300 basis points to 400 basis points ahead of what you would think is normal inflation, but it is really driven by the value that our customers see from our services. Barry Hytinen Brendan, the only other thing I'll add is that at the start of the year, we had suggested Global RIM might be in the vicinity of 6%, total growth for the year. And so year-to-date, we are running 7.5% on that business. So we continue to see outperformance in Global RIM. Some of that is driven off of revenue management, also incremental service uptake of the sort that Bill just mentioned. Operator Thank you. [Operator Instructions] And your next question comes from Jonathan Atkin with RBC. Please go ahead. Jon Atkin Thanks. A couple of questions. Can you talk a little bit about ALM and to what extent Regency is sort of fully occupied? Or do you have the opportunity within that set of assets to see more productivity. And then secondly, on data centers, if there is anything to call out in terms of lead times around construction and delivery and the conversion of book-to-bill. Thank you. William Meaney Good morning Jon. Let me start with the data center piece and then Barry can talk about Regency and more broadly, the ALM business and operating leverage. So on the data center side, is you are right to highlight the lead times for a lot of the build components, including the concrete panels or the actual physical construction of the shelf. The good news is that we've been able to manage that and keep the lead times similar to historical norms and what our customers are expecting because as we're building scale in our data center business, we're standardizing across a lot of those components in market, right? So across some of the like Europe versus the United States, you can't standardize as much. But within Europe, you can standardize a lot. Within the United States, you can standardize a lot. India, you can standardize a lot, et cetera. So we are doing that. And what that allows us to do is as we get scale is to be much more flexible in terms of having the right equipment for the right customer in the right location. So we feel pretty good in terms of our ability to manage the supply chain and keep our timing intact? Barry Hytinen Jon, this is Barry. As it relates to Regency and the opportunity to continue to utilize and optimize further, it's definitely there. There is a lot of opportunity. We have considerable capacity to expand the business, both in terms of what is already in place, as well as the opportunity to expand the footprint at relatively low CapEx, I might add. So it's a very positive situation to be having Regency get further utilized which I expected to over time. And I'll say, we have a very highly capable team at Regency that there is no doubt, can manage a much larger business and drive a tremendous amount of value for our shareholders. Operator Thank you. And our next question is from Shlomo Rosenbaum with Stifel. Please go ahead. Shlomo Rosenbaum Hi. Thanks for squeeze me in for one more. This is a little bit more of a technical one also. It looks like the real estate depreciation went up sequentially by like $14 million. Was there a major site that team on Board during the quarter? Barry Hytinen Shlomo, you should expect the depreciation, of course to continue to ramp with all of the CapEx we've been doing on data center as well as some of our incremental new warehouses that we put in as well as some of the digital innovation that we've been driving internally for some time now. So that is the primary driver, and it is in those that order. Operator Thank you. And ladies and gentlemen, this concludes our question-and-answer session and the Iron Mountain second quarter 2024 earnings conference call. We thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Iron Mountain (IRM) Q2 2024 Earnings Call Transcript

Good morning, and welcome to the Iron Mountain second quarter 2024 earnings conference call. [Operator instructions] Please note today's event is being recorded. I would now like to turn the conference over to Gillian Tiltman, senior vice president and head of investor relations. Please go ahead. Gillian Tiltman -- Senior Vice President, Investor Relations Thank you, Rocco. Good morning, and welcome to our second quarter 2024 earnings conference call. On today's call, we will refer to materials available on our investor relations website. We are joined here today by Bill Meaney, president and chief executive officer; and Barry Hytinen, executive vice president and chief financial officer. After prepared remarks, we'll open up the lines for Q&A. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the safe harbor language on Slide 2 and in our quarterly report on Form 10-Q for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures in our supplemental financial information. So with that, I'll turn the call over to Bill. William Leo Meaney -- President and Chief Executive Officer Thank you, Gillian, and thank you all for taking the time to join us today for discussion of our second quarter results. As you saw in this morning's announcement, this quarter delivered another record financial performance and exceeded our expectations. Reflecting on these results, I am incredibly proud of how our team consistently executes at a high level, putting our customers at the center of everything we do. With our proven growth strategy, we are entering the back half of the year with strong momentum. We continue to see firsthand the power of Project Matterhorn from our commercial teams who are successfully leveraging our full suite of products and solutions to help position Iron Mountain has an ideal partner to our customers. This customer centricity continues to power our results forward for both customers and our shareholders. Building on our track record of value creation for our shareholders and our strong positive outlook, our board of directors has authorized an increase of our quarterly dividend by 10% to $0.715, in line with our AFFO per share growth. I'll now turn to key developments during the quarter and how we executed on our growth strategy, which is aligned to our business segments. As a reminder, our strategic priorities are the following: driving continued revenue growth in our physical storage records management business, providing digitally enabled solutions for our 240,000 customers, which allows them to get true competitive advantage out of their physical and digital information; delivering differentiated data center offerings and offering top-tier growth through our global scale and customer trust; and advancing our asset life cycle management services, which provides security, maximum efficiency and an environmentally sound life cycle management approach for our customers' IT assets. To give you some examples of how we have recently applied our services on behalf of our customers, let's begin with our records management business. The first win I wish to highlight shows how our scalable solutions can solve for complex regulatory requirements and address changing customer needs. A European-based pharmaceutical company came to us in need of a global record retention schedule as the company was struggling to manage costs and meet regulatory requirements. As part of our expanding partnership, we are providing a fully managed suite of solutions, including policy center upkeep, advisory services and a dedicated help desk for queries in a scalable and flexible way that can seamlessly adapt over time as their needs evolve. Continuing with wins in our records management business, I am particularly excited to discuss a couple of digital wins. The first example to highlight is a major contract signed with a large financial institution. The foundation of this win was based upon multiple decades of a trusted relationship with the bank's understanding of our truly differentiated approach to digitally managing and automating workflow. As a result, they selected Iron Mountain to serve as its partner for a long-term transformation of its management of digital and physical documents. On the bank's behalf, Iron Mountain is transforming how it captures both digital and physical documents and their associated metadata across all lines of business, including nonbanking internal documents like finance and HR. Our unique offering revolutionizes document processing services for both physical and digital documents. We have achieved this by employing our proprietary leading-edge AI-powered intelligent document processing built into our InSight platform. Continuing with our digital business in Australia, we have secured a large deal with one of the country's biggest banks to provide our digital mailroom solution, which brings together our operational scale and digital capabilities. Iron Mountain has been a trusted records management partner for over 20 years and we built on that relationship to develop a comprehensive service offering that will see us manage their physical mail room sites across Australia and scan around 32 million images a year as we process mortgage documents, checks, vouchers and other banking documents. Our proven implementation methodology reassured the customer that we could execute a seamless transition of services and the innovative technology we are deploying will help them to realize significant efficiencies in the years ahead. Moving to our data center business. Through the first half of the year, we leased 97 megawatts, which includes 66 megawatts this quarter. Due to our strong pipeline, we feel confident we will exceed our original projection and now expect to lease 130 megawatts for the year. The speed of leasing in the first half of the year is thanks to the momentum that our team has built in our leasing pipeline. We are an attractive partner to customers looking for infrastructure, which can support their very dense IT workloads and associated with their AI-enabled services. Here are some examples of wins during the quarter from our U.S. and U.K. markets. At our Western Pennsylvania location, we welcomed a new hyperscale customer with a seven-year contract. Since signing the contract, the customer is already in discussions about potential expansion to some of our other campuses. A good example of our continued and growing partnerships with some of the largest hyperscalers, our recent wins this quarter with a single customer in both the U.S. and U.K. markets. This customer has placed a 10-year contract for us with us for almost 25 megawatts of capacity at our London data center campus and a 15-year contract for 36 megawatts at our data center campus in Phoenix, Arizona. Also at our Phoenix campus, we have won a 10-year colocation contract with one of Japan's largest banks. We will be providing 800 kilowatts of capacity to support the complete transformation of this customer's North American IT platform. Turning to our asset life cycle management business. We continue to see established Iron Mountain customers seek new solutions from our ever-expanding portfolio. A perfect example of this is how we expanded the relationship with an insurance company that has been an Iron Mountain customer since the late 1950s. Having secured a small ALM project with them last year, our customers' confidence in our capabilities and our delivery record has led them to make us their sole ALM provider. Finally, I'd like to share a last example of a customer that has added our ALM services to the Iron Mountain solutions from which they already benefit. This global cloud-based software company has asked us to manage an ALM program to securely destroy, remarket or recycle data center assets at more than 30 locations in North America, EMEA, Latin America and the Asian Pacific regions. Demonstrating we can provide a full-service global ALM offering is no small task, but our skilled and dedicated teams successfully met the challenge. We are now a proud ALM partner for this customer alongside the records management and digital solutions that we already provide. To conclude, we have thoughtfully and strategically curated a mountain range of best-in-class solutions in an effective operating model under Project Matterhorn. This quarter's successes are a brief testament to the value our strategy is already delivering and a window into the future we are building at Iron Mountain. As we continue to expand our footprint of storage and services and deliver tailored innovative solutions for each of our customers, I could not be more grateful for the hard work of our Mountaineers. Our strategy and execution is showing the way in delivering consistently strong revenue growth and the resulting financial model that delivers top-tier growth in both our AFFO and our dividend. We have an energized team of experienced proven operators who are committed to excellence and that gives us great confidence in our future. Thanks, Bill, and thank you all for joining us to discuss our results. I'll begin by providing an overview of our second quarter results and then go into more detail on each of our business segments before turning to our outlook for the third quarter and the full year. In the second quarter, our team achieved strong performance across all of our key financial metrics. We achieved record revenue of $1.534 billion, up 13% on a reported basis, driven by 11% storage growth and 17% service growth. We delivered 10% organic revenue growth. Revenue was ahead of the expectations we shared on our last call by more than $30 million. Total storage revenue was $920 million, up $89 million year on year. Storage growth was driven by revenue management and continued strong commencements in our data center business. Total service revenue was $615 million, up $87 million from last year, driven by strength in our asset life cycle management and Global RIM businesses. Adjusted EBITDA was $544 million, a new record, up 14% year on year, driven by strong growth in Global RIM as well as data center and asset life cycle management. Adjusted EBITDA margin was 35.5%, up 50 basis points year on year, which reflects improved margins across our business. AFFO was $321 million or $1.08 on a per share basis, up $34 million and $0.10 respectively, from the second quarter of last year. This represents growth of 12% for AFFO and 10% for AFFO per share. This is ahead of the guidance we provided for the second quarter, driven by higher adjusted EBITDA as well as lower-than-expected cash taxes, which is included in our guidance for the third quarter. The strength of the U.S. dollar continued to be a headwind in the quarter. On a constant currency basis, revenue was up 14% and AFFO was up 13%. Now turning to segment performance. I'll start with our Global RIM business, which achieved revenue of $1.25 billion, an increase of $91 million year on year with strong organic revenue growth of 7.9%. Revenue management and positive volume trends drove organic storage rental growth of 7.7%. Our team delivered organic service revenue up 8.3%. Global RIM adjusted EBITDA was $549 million, an increase of $50 million year on year. Global RIM adjusted EBITDA margin was up 40 basis points sequentially and 90 basis points from last year, driven by storage growth and continued productivity across our operations. Turning to global data center. The team delivered revenue of $153 million, an increase of $35 million year on year. From a total revenue perspective, we achieved 24% organic growth. Organic storage rental revenue growth was particularly strong at 27%, driven by commencements and improved pricing. GAAP mark-to-market in the second quarter was 12.3% and was benefited by a single relatively large renewal. We continue to expect mark-to-market to be up mid-to-high single digit in the second half. Data center adjusted EBITDA was $66 million, representing 23% growth. Turning to new and expansion leasing, we signed 66 megawatts in the quarter, bringing total bookings for the first half to 97 megawatts. As Bill mentioned, with our strong leasing and favorable outlook, we are increasing our full year projection to 130 megawatts. The data center market continues to develop rapidly. And with our strong and expanding hyperscale relationships, our pipeline continues to grow. I am pleased to report that we have increased our land bank by 57 megawatts. With those additions, our total data center capacity can now be built out to 918 megawatts over time with 347 megawatts held for development. Turning to asset life cycle management. Total ALM revenue in the quarter was $90 million, an increase of 111% year on year and 30% on an organic basis, driven by both improved volume and pricing. ALM continues to be a key beneficiary of cross-selling with over 95% of our bookings this quarter happening as a result of that initiative. The team at Regency Technologies continues to deliver results ahead of our plan, with revenue of $35 million in the quarter. We have seen our combination with Regency results in expanded client relationships and improved profitability. Turning to capital allocation. We remain focused on a disciplined approach to fund our growth initiatives and drive meaningful shareholder returns while maintaining a strong balance sheet. Capital expenditures in the second quarter were $399 million, with $362 million of growth and $37 million of recurring. Turning to the balance sheet. With strong EBITDA performance, we ended the quarter with net lease adjusted leverage of 5.0 times, which is the lowest level we have achieved since prior to the company's REIT conversion in 2014. Turning to our dividend. On a trailing four-quarter basis, our payout ratio is now 60%. Consistent with our target payout range and reflecting our positive outlook, we have increased our dividend 10%. Now turning to our projections. For the full year, we now expect to deliver results toward the high end of our guidance range on all metrics. For the third quarter, we expect revenue of approximately $1.55 billion, adjusted EBITDA of approximately $560 million, AFFO of approximately $325 million, and AFFO per share of approximately $1.10. In conclusion, our team delivered record results in the first half. We continue to perform ahead of our long-term growth objectives and our outlook is strong. I'd like to take this opportunity to thank all of our Mountaineers for their continued efforts to deliver on behalf of our customers. And with that, operator, would you please open the line for Q&A. [Operator instructions] And today's first question comes from George Tong with Goldman Sachs. Please go ahead. George Tong -- Analyst Hi. Thanks. Good morning. Your ALM business saw 30% organic revenue growth in the quarter. Can you discuss how much of the growth came from volumes versus pricing? And what assumptions for component prices you're baking into your guidance? William Leo Meaney -- President and Chief Executive Officer Thanks, George. Let me handle the first part, and then I'll let Barry talk a little bit more about the pricing trends that we're seeing. So first, we're really pleased with the growth in the organic growth that you highlighted in our ALM business this quarter. And you think about that, about two-thirds of that is driven by just pure volume. And the other third is the price improvement that we've seen from the record lows that were 12, 18 months ago. So we're really pleased with the progress. But I'd say most of the growth is from volume. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer And George, from a standpoint of what we're seeing in our view for pricing going forward is, as you know, pricing continues to be expected to trend higher. We've been somewhat conservative with respect to our outlook for pricing because we've seen some variation between the spreads between new year and secondary gear, particularly so on memory, it's widened some. But frankly it's narrowed those spreads on other gear like drives. So look, it's a very positive outlook for our ALM business because the team continues to win a lot of business. The cross-selling activity we have is immense. And we're expecting if you work through the guidance we just gave for the third quarter and implied for the fourth, you should be expecting our ALM business to be comping organically in the 40s in the back half, if not higher. So we're feeling really good. And I guess I should just call out since you asked about ALM, our Regency business is doing phenomenal. The team there continues to execute very, very well. We're seeing very strong productivity as a result of leveraging Regency's capabilities and their utilization is going up, thanks to historic Iron Mountain business that's being processed by Regency. So thank you, George. Operator Thank you. And our next question today comes from Kevin McVeigh at UBS. Please go ahead. Kevin McVeigh -- Analyst Great. Congratulations on the record results. I guess, I don't know if it's for Barry or -- can you reconcile kind of the two quarters of beat relative to the reaffirmed guidance and just the optimism that it seems like it's scaling on the ALM side. Just puts and takes around that. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Yeah. Kevin, good morning. We continue to feel very good, as we just noted about our guidance, and as you know, we beaten the first quarter, and we beat again here in the second quarter, actually a wider beat than the first. And our thought process is that things continue to trend very much in the right direction. That's why we pointed to the higher end of our guidance range for the year. I'll note FX continues to be a headwind, so you'll see the stronger dollar be an impact to our reported results in the third quarter probably of the order of the same magnitude as the second quarter, if not a little bit more. But what you're seeing is improving trends as compared to our initial outlook this year across the business. Global RIM continues to perform really well in the organic storage rental revenue growth accelerated in the quarter as we expected it to and as we forecasted last quarter, and we continue to expect that to be in the 7% to 8% range in the back half. And then in terms of data center, as we talked about before, that's a business that has a tremendous amount of visibility in the near term. And as we talked about the outlook for the long term, there is very robust in light of the leasing activity we've had. And I just mentioned ALM with George. So I appreciate the question. Operator Thank you. And our next question today comes from Nate Crossett of BNP. Please go ahead. Nate Crossett -- BNP Paribas Exane -- Analyst Hey. Good morning. Just wondering what you're expecting in terms of overall RIM volumes for 3Q in the balance of the year? And then can you -- I guess, you already talked about your expectations for pricing growth. So should we assume that the organic revenue growth is 7% to 8% in the back half? Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Hi, Nate. It's Barry. Consistent with our outlook for the last many quarters, we continue to expect our volume, physical volume to be flattish to slightly up. And it continued that trend, obviously, in the second quarter and we have a favorable outlook for it, again, to be in that vicinity in the third and in the fourth quarter. So we expect our volumes to be continuing to rise. I'll just note we have never stored more physical volumes than we are storing today. And so that is, I think, a testament to the team's diligence as it relates to serving our customers. And frankly, the value we're driving for customers as they continue to trust us with their important assets. In terms of organic growth in RIM on the storage side, you've got it right. So the volume would be a relatively small component of the growth and then the rest would be driven principally by revenue management. And I will note that our services business in Global RIM continues to be benefited both on the traditional side, but also and going forward, likely to be ramping some on the digital side, because the team in our Digital Solutions group just delivered the best bookings quarter we've ever had in digital. So that is a really nice performance by our commercial and digital teams. Thank you. And our next question comes today from Andrew Steinerman with J.P. Morgan. Please go ahead. Alex Hess -- JPMorgan Chase and Company -- Analyst This is Alex Hess on for Andrew Steinerman. I hope you're all well today. A quick question on data center capex. And then maybe a quick follow-up. On data center capex, do the assumptions that you guys made at investor day -- at your investor tvent in 2022 still hold. Obviously, we're seeing notable pickup in the guided capex numbers from the hyperscalers. And then maybe a structural question. Has the pool of hyperscalers, are those still, say, the same firms for you guys as three or four years ago? Or is there opportunity for some of these infrastructure software and AI start-ups to also be hyperscalers in your book as well? Thank you. William Leo Meaney -- President and Chief Executive Officer Good morning. I'll start with your second question and then Barry will follow up on the capex relative to our investor day. So I think what you see for us, hyperscalers are always kind of not just the largest cloud providers, but the largest SaaS providers as well. So people who need very, very large deployments in terms of megawatts of data center capacity. And usually, these are global firms. So I'm not saying that we won't see some of those firms -- some of the more newer firms that you're highlighting come into that fold, but I would say that the barriers to entry for these really very large hyperscaler just given the cost of leasing and building data centers. It is a fairly consolidated in tight group. I'm not saying that there couldn't be people that break into it, but I think for the moment, it's a pretty stable group, slightly increasing as some of the SaaS players get bigger in their own right. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Alex, it's Barry. I would say a couple of thoughts about your question on the capex use. We are continuing to see our data center business and actually the whole business run ahead of the expectations we shared at that investor day. As we talked about last quarter, for the first couple of years, we were well ahead. And if you look at what we're doing here this year, we're actually accelerating that level of beat. So we're generating more revenue, more EBITDA and more cash generation. And certainly, we continue to lease more and faster than we were indicating at the time of the investor day. So over time, I think it is possible that we may see a continued ramp in capital for data center. But I'll just note, we're constructing to leases with some of the best quality tenants you could imagine in the hyperscalers. And I mean a couple of statistics, we're 96% leased in our operating portfolio and in our under development construction portfolio, which is about 10% bigger than what we're operating, maybe even 15% bigger than we're operating, we're 96% leased on that as well on a pre-lease basis. So I will just underscore that when we are putting capital to work to build out our data center platform, it is because we have already signed contracts with clients, and we are very pleased with the level of returns that we have been generating on those deals. Operator Thank you. And our next question today comes from Eric Luebchow with Wells Fargo. Please go ahead. Eric Luebchow -- Analyst Thanks. Appreciate it. Just a follow-up on the data center conversation. I mean just based on all the opportunity you've had, the outperformance on leasing year-to-date. Maybe you could just talk about funding sources going forward. And given the fact that your stock has been so strong this year, your equity cost of capital is significantly lower than it has been in years past. Does this issuing equity enter the conversation going forward as you look at funding the data center business? Thank you. William Leo Meaney -- President and Chief Executive Officer Thanks, Eric. Let me start and then Barry you want to chime in as well. So first, we feel really good about, as you're highlighting, the growth and momentum that we're building in the data center business. And just in the colo, but more and more in the hyperscale and the majority is coming from hyperscale. But as Barry said, it's well over 90% like around 96% is all pre-leased and it's a fully funded plan as we highlighted in investor day. So we don't see any -- we feel really good in terms of the way that we're able to fund the growth. And so we're happy in terms of the trajectory that we have without going out and raising equity. I think we have a plan that works. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Eric, I would just add that if you look going forward, likely rates are probably coming down over time. So that makes it that much easier for us. And the business is so cash generative from the core. And as you see, the Hoovering business continues to deliver outstanding results. So I think from a standpoint of your point about the equity has risen a bit, that is true, but I think that's more a function of where it was. And if you look at us on a multiple versus the growth we're putting up, I think that bolsters the point Bill was just making as it relates to equity. Thank you. Operator Thank you. And our next question today comes from Shlomo Rosenbaum with Stifel. Please go ahead. Shlomo Rosenbaum -- Analyst Hi. Thank you very much. I just wanted to touch on two items, if I may. One, just on ALM, are you seeing the hyperscalers starting to really open up the inventory of gear that they had and really starting to sell it? Or are you still starting seeing the hesitation in case prices rise more. What I'm trying to understand is, are they starting to actually dump the stuff that they've been holding on to? And then just second, just if you can comment, Barry, on the storage gross margin had increased by 20 basis points sequentially, but the moving parts are very interesting, where you had like all other storage costs up like $10 million, but you had a rent to actually go down $2 million sequentially. Maybe you could talk about what the movements over there, how did rent go down? And what are those other storage costs that are going up? William Leo Meaney -- President and Chief Executive Officer Good morning, Shlomo. So I'll take the question on the ALM and then Barry can talk to you a little bit about the ins and takes in terms of storage costs. So on the ALM side, is the hyperscale is the reticence that you might have seen last year that I think we commented from the hyperscalers was less to do with the pricing on the components. It was more the availability of new kit that they had to actually refresh their data centers. And I think you've seen all the reporting from some of the largest hyperscalers in the last couple of weeks that you're all ramping up their refresh of their data centers to bring in the most capable GPUs, so that they are AI-ready, and they can build up some of their AI services. So we do see an uptick, to your point, in the volume that we're getting from the hyperscalers, but it's driven more because they're refreshing their data centers to be more AI-enabled and they're able to get the latest GPUs from the supplier, so they're able to accelerate some of that. So we do see a building volume from the hyperscalers right now in terms of decommissioning, which leads to more ALM volume in our business. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Shlomo, it's Barry. A couple of thoughts about the storage rental gross margin. First of all, we were really pleased with that at 70% and that being because really, if you look at our global RIM business, it was up very nicely year on year. Of course, part of that revenue management, part of that is the continued productivity that our operations teams are driving. And so the reason it was slightly down year on year is related to, as I talked about, hour as well as data center. As we've talked about sometimes before, data center is a lower gross margin, but it's, of course, accretive to our EBITDA margin. And so as data center continues to ramp at a very fast rate, it has a little bit of a level of mix. But obviously, it's very incremental. And on a sequential basis, you would expect on that all other storage costs, there to be some power inflation as commencements begin to ramp and folks start to drop out, if you know that, that's a direct pass-through. So it can actually also affect rate. So to have the storage gross margin up sequentially in light of that headwind is we thought very favorable about that. On the storage rent expense, it was down some sequentially and that's thanks to our team's continued productivity around warehouse efficiencies. We have, as you would have seen over the last few quarters, reduced some of our warehouses and thereby gotten to a better expense position. And the only other thing I'll mention is taking it up a level. Our gross margin in the quarter for the whole company was almost just under 56%. Now that's slightly down from last year but two things to think about. One, we're absorbing the mix issues, including the power that I mentioned in that number; and two, we've added Regency Technologies, which is, again, a mixed headwind on gross margin, but by the way, Regency performed extraordinarily well on EBITDA in the quarter. And so we feel really good about where the gross margin is trending and it's been ahead of our expectations. Operator Thank you. And our next question today comes from Brendan Lynch with Barclays. Please go ahead. Brendan Lynch -- Barclays -- Analyst Great. Thanks for taking my question. It came up a little bit already. But on the pricing front, your organic constant currency growth was 7.7% for storage rentals, up quarter-to-quarter, but down relative to the 2023 pace. I think you guys have one suggested mid-single digit pricing growth, which is possible over the next couple of years. But you've been at high single digits for a few years now. Is it transition to mid-single digits occurring now? And how should we think about you guys pushing price as inflation wanes? Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Brendan, we were very pleased with the 7.7%. And I think at that level, you can see the amount of EBITDA the business generates since it's a highly productive portion of our company. And as it relates to trending, we've indicated we feel like mid to upper single is the right kind of level over the longer term. And so I would say it trending in this vicinity would be very positive to the business model going forward. William Leo Meaney -- President and Chief Executive Officer Yeah. The only thing I would add is that it isn't so much inflation-based anymore. It's really about the value that we're adding to our customers. So if you look at our traditional records management business, is we've over the last few years have added a portfolio of services such as Smart Sort, Smart Reveal, and I highlighted on the call, some of the governance and compliance consulting and systems that we're able to install around their hard records management. And so we're really driving more value for our customers and the customers see value in that. So I think you can continue to expect that our pricing will remain some 300 to 400 basis points ahead of what you would think is normal inflation, but it's really driven by the value that our customers see from our services. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Brendan, the only other thing I'll add is that at the start of the year, we had suggested Global RIM might be in the vicinity of 6% total growth for the year. And so year to date, we're running seven and a half on that business. So we continue to see outperformance in global RIM. Some of that is driven off of revenue management, also incremental service uptake of the sort that Bill just mentioned. Operator Thank you. [Operator instructions] And your next question comes from Jonathan Atkin with RBC. Please go ahead. Jonathan Atkin -- Analyst Thanks. A couple of questions. Can you talk a little bit about ALM and to what extent Regency is sort of fully occupied? Or do you have the opportunity within that set of assets to see more productivity. And then secondly, on data centers, if there's anything to call out in terms of lead times around construction and delivery and the conversion of book-to-bill? Thank you. William Leo Meaney -- President and Chief Executive Officer Good morning, Jon. Let me start with the data center piece and then Barry can talk about Regency and more broadly, the ALM business and operating leverage. So on the data center side, is you're right to highlight the lead times for a lot of the build components, including the concrete panels or the actual physical construction of the shelf. The good news is that we've been able to manage that and keep the lead times similar to historical norms and what our customers are expecting because as we're building scale in our data center business, we're standardizing across a lot of those components in market, right? So across some of the like Europe versus the United States, you can't standardize as much. But within Europe, you can standardize a lot. Within the United States, you can standardize a lot. India, you can standardize a lot, et cetera. So we are doing that. And what that allows us to do is as we get scale is to be much more flexible in terms of having the right equipment for the right customer in the right location. So we feel pretty good in terms of our ability to manage the supply chain and keep our timing intact. Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Jon, this is Barry. As it relates to Regency and the opportunity to continue to utilize and optimize further, it is definitely there. There is a lot of opportunity. We have considerable capacity to expand the business, both in terms of what is already in place as well as the opportunity to expand the footprint at relatively low capex, I might add. So it's a very positive situation to be having Regency get further utilized, which I expected to over time. And I will say we have a very highly capable team at Regency that there is no doubt, can manage a much larger business and drive a tremendous amount of value for our shareholders. Operator Thank you. And our next question is from Shlomo Rosenbaum with Stifel. Please go ahead. Shlomo Rosenbaum -- Analyst Hi. Thanks for squeezing me in for one more. This is a little bit more of a technical one also. It looks like the real estate depreciation went up sequentially by like $14 million. Was there a major site that team on board during the quarter? Barry A. Hytinen -- Executive Vice President, Chief Financial Officer Shlomo, you should expect the depreciation, of course, to continue to ramp with all of the capex we've been doing on data center as well as some of our incremental new warehouses that we put in as well as some of the digital innovation that we have been driving internally for some time now. So that's the primary driver and it's in those that order.

Earnings call: AES Corporation boasts solid Q2 performance and tech innovation By Investing.com

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With a significant project backlog and a focus on U.S. dollar-based investment-grade off-takers, AES seems well-prepared to navigate the evolving energy landscape. AES Corporation's recent financial performance paints a picture of a company that is actively navigating the complexities of the energy sector with a strategic focus on growth and innovation. With a market capitalization of $12.16 billion and a forward-looking strategy, AES appears to be positioning itself for sustained success. InvestingPro Tips highlight that AES operates with a significant debt burden, which is an important consideration for investors assessing the company's financial stability. However, the company has demonstrated a commitment to shareholder returns, having raised its dividend for 12 consecutive years. This track record could reassure investors looking for consistent income streams. Moreover, analysts have revised their earnings upwards for AES, indicating a positive sentiment regarding the company's future performance. From the InvestingPro Data, we can glean that AES is trading at a low Price-to-Earnings (P/E) ratio of 15.78 relative to its near-term earnings growth, which might suggest that the stock is undervalued. The company's dividend yield stands at an attractive 3.85%, which is compelling for income-focused investors. Additionally, AES's Price/Book ratio is on the higher end at 4.21, which could be indicative of investor confidence in the company's asset value or future growth prospects. For investors interested in further details, there are additional InvestingPro Tips available on AES, which can be found at https://www.investing.com/pro/AES. These tips provide deeper insights into the company's financial health and market position, offering valuable information for making informed investment decisions. Operator: Hello, everyone, and a warm welcome to the AES Corporation Q2 2024 Financial Review Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to our host, Vice President of Investor Relations, Susan Harcourt, to begin. Susan, please go ahead. Susan Harcourt: Thank you, Operator. Good morning and welcome to our second quarter 2024 financial review call. Our press release, presentation, and related financial information are available on our website at aes.com. Today we will be making forward-looking statements. There are many factors that may cause future results to differ materially from these statements which are disclosed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Gluski, our President and Chief Executive Officer; Steve Coughlin, our Chief Financial Officer, and other senior members of our management team. With that, I will turn the call over to Andres. Andres Gluski: Good morning, everyone, and thank you for joining our second quarter 2024 financial review call. We are very pleased with financial performance so far this year. Today, I will discuss our results, the significant advancements we've made with large technology customers, and the work we are doing to incorporate generative AI in our portfolio to develop new competitive advantages. Beginning on slide three, with our second quarter results, we had a strong second quarter that was in line with our expectations, with adjusted EBITDA with tax attributes of $843 million, adjusted EBITDA of $652 million, and adjusted EPS of $0.38. We are on track to meet our 2024 financial objective, and we now expect to be in the top-half of our ranges for adjusted EBITDA with tax attributes and adjusted EPS. We are also reaffirming our remaining 2024 guidance metrics and growth rate to 2027. Steve Coughlin, our CFO, will give more detail on our financial performance and outlook. I'm also pleased to report that, since our last call in May, we have signed 2.5 gigawatts of new agreements in total, including 2.2 gigawatts with hyperscalers across our Utilities and Renewal businesses. This includes 1.2 gigawatts of new datacenter load growth across AES Ohio and AES Indiana. A PPA to provide 727 megawatts of new renewables in Texas, and a 310 megawatt retail supply agreement in Ohio. With these arrangements, we are expanding our work with the major datacenter providers to new areas of business. Turning now to datacenter growth at our U.S. utilities, on slide four, since our last call, we have signed agreements to support 1.2 gigawatt of new load across AES Ohio and AES Indiana, expected to come online in phases, beginning in 2026. Additionally, we're in advanced negotiations across several sites to support another 3 gigawatts of new load. These agreements are transformative for both utilities, with the potential to increase the peak load at both AES Ohio and AES Indiana by more than 50%. As a result, AES Ohio's rate base will consist predominantly of FERC-regulated transmission assets, receiving timely recovery through a formula rate. For AES Indiana, this growth creates the potential for significant investment in transmission, as well as additional build-out of new-generation assets. These opportunities will even further increase our industry-leading U.S. utility rate base growth plans. Our service territories are particularly well-positioned to serve datacenters and other large loads with available interconnection, lower rates, and land prices, access to water resources and local incentives. Turning to slide five, and the generation build-out at AES Indiana, we continue to make progress in upgrading and transforming our generation fleet as we shutdown or convert our coal units to gas, and build our renewable fleet. I am pleased to announce that we have signed a deal to acquire 170 megawatt solar plus storage development project that AES Indiana will construct and own. The project will require approximately $350 million of CapEx, with an expected completion date in late 2027. Once approved by the Indiana Utility Regulatory Commission, this will be the sixth project supporting AES Indiana's recent generation growth. Now turning to our Renewables business on slide six, since our last all in may, we have further expanded our partnership with Google, signing a 15-year PPA for 727 megawatts in Texas to power its datacenter growth. The agreement includes a combination of wind and solar to further Google's 24-7 carbon-free energy goals. These projects are expected to come online in 2026 and 2027. We also recently signed a retail supply agreement with Google for 310 megawatts to support their Ohio datacenters. This agreement demonstrates the strong trust and collaboration between our companies, which began with our original 2021 partnership to provide 24-7 renewable power in Virginia. We see further opportunities to add renewables to support Google's datacenter growth in Ohio. Turning to slide seven, with these major announcements today on our collaborations with hyperscalers, we have now signed a total of 8.1 gigawatts directly with technology companies, which is clearly a leading market position. As you can see on slide eight, our backlog of projects under signed long-term contracts now stands at 12.6 gigawatts. Our focus remains on maximizing the quality of megawatts over the quantity, which means delivering high-quality projects with higher returns and long-duration PPAs. We have never felt better about our key customer relationships, the long-term market dynamics that are supporting growth and value creation in our portfolio. Turning to slide nine, the demand for power that is coming from the rise in generative AI in datacenters, represents a significant structural change in the Power segment, and no one is better positioned than AES for sustained growth from this opportunity. Regardless of election or policy outcomes, we are confident in our ability to continue signing renewable PPAs with mid-teen IRRs. Our corporate customers value our unique record of bringing projects online on time over the past five years. Furthermore, looking at the interconnection queues, time to power and price certainty, we see renewables as the only source of new power that can meet most of the demand over the next decade. AES has a longstanding and deep relationship with hyperscaler customers. This includes our ability to co-create new offerings and structure innovative clean energy solutions, such as hybrid PPAs, shaped products, and 24/7 renewables. As you can see on slide 10, of the 3.6 gigawatts that we expect to bring online this year, we have already completed the construction of 1.6 gigawatts and expect the remainder to be weighted towards the third quarter. I should note that for the projects coming online this year, we have all of the major equipment already on site in almost all for 2025. Additionally, we expect a significant portion of our solar panels to be domestically produced beginning in 2026. All of the above combined with having panels on site for 2025 projects, greatly mitigates our exposure to any potential new tariffs. Our diversified and resilient supply chain has been and will continue to be best-in-class. Finally, turning to slide 11, not only is generative AI shaping the customer landscape, but it is also transforming how we work internally, providing new opportunities for efficiencies, customer service and innovation that will give us new competitive advantages. As you may have seen, in June, we announced a partnership with AI Fund to accelerate AI-driven energy solutions. Founded by AI leader, Andrew Ng, AI Fund is a venture studio that works with entrepreneurs to rapidly build companies. We are collaborating with AI Fund on co-building companies that leverage AI to address bottlenecks and improve efficiencies in the energy transition in areas such as developing and operating renewables and asset management. At the same time, we continue to leverage AI across our portfolio with our culture of innovation and continuous improvement. We are increasingly using proprietary tools across a wide range of our business operations, enabling our people to work faster and smarter. For example, our renewables team has built sophisticated tools that utilize generative AI to accurately predict the speed at which projects will move through interconnection queues, helping us more efficiently coordinate the various simultaneous development processes. As you can see on slide 12, earlier this week, we launched the world's first AI-powered solar installation robot, Maximo, which uses state-of-the-art AI and robotics to complement our construction crews in the installation of solar modules. Maximo enables faster construction times and reduces overall project costs. It can work three shifts, even in the worst weather conditions, with a more inclusive workforce. Not only does it reduce time to power, which is highly valued by our customers, but it will boost overall project returns. We plan to ramp up our use of Maximo in 2025 and are already utilizing it to construct a portion of our two gigawatt Bellefield project in California, which is the largest solar plus storage project in the U.S. and is contracted to serve Amazon (NASDAQ:AMZN). With that, I would now like to turn the call over to our CFO, Steve Coughlin. Steve Coughlin: Thank you, Andres, and good morning, everyone. Today, I will discuss our second quarter results and our 2024 guidance and parent capital allocation. Turning to slide 14, adjusted EBITDA with tax attributes was $843 million in the second quarter versus $607 million a year ago. This was driven by growth in our renewables SBU, new rates and growth investments in our U.S. utilities, and higher margins in our energy infrastructure SBU. Turning to slide 15, adjusted EPS for the quarter was $0.38 versus $0.21 cents last year. Drivers were similar to those of adjusted with tax attributes, but partially offset by higher depreciation and higher interest expense as a result of our growth. I'll cover the performance of our SBUs or Strategic Business Units on the next four slides. Beginning with our renewables SBU on slide 16, higher EBITDA with tax attributes was driven primarily by contributions from new projects, but was partially offset by lower availability from a forced outage event at our 1 gigawatt Chivor hydroplant in Columbia. The outage was caused by record water inflows in early June, which brought significant sediment into the plant and damaged the units. Repairs of the plant were completed quickly and all units resumed operations by mid July. Higher adjusted PTC (NASDAQ:PTC) at our utilities SBU was mostly driven by higher revenues from the $1.6 billion we invested in our rate base in the past year, new rates implemented in Indiana in May, year-over-year low growth of 3.1% as well as favorable weather. Higher EBITDA at our energy infrastructure SBU primarily reflects higher revenues recognized from the accelerated monetization of the PPA at our Warrior Run plant and higher margins in Chile. Partially offset by lower margins in the Dominican Republic and the sell-down of our gas and LNG businesses in Panama and the Dominican Republic. Finally, relatively flat EBITDA at our new energy technologies SBU reflects our continued development of early stage technology businesses. Partially offset by continued margin increases at Fluence. Now turning to our expectations on slide 20, as a result of our strong first-half performance and high confidence in a strong second-half, I am very happy to share that we now expect adjusted EBITDA with tax attribute to be in the top half of our 2024 expected range of $3.6 billion to $4 billion. Drivers of adjusted EBITDA with tax attributes in the year ago include higher contribution from new renewable commissioning, contributions from growth investment, and expected higher load at our U.S. utilities. Partially offset by expected closings in our asset sale program. Turning to slide 21, I am also very glad to share that we now expect our 2024 adjusted EPS to be in the upper half of our guidance range of $1.87 to $1.97. We increased our share of earnings in the first-half of the year from 25% in 2023 to nearly half in 2024. Growth in the year to go will have similar drivers as adjusted EBITDA with tax attributes. Partially offset by higher interest expense from growth capital. Now to our 2024 parent capital allocation on slide 22, sources reflect approximately $3 billion of total discretionary cash including $1.1 billion of parent free cash flow, $900 million to $1.1 billion of proceeds from asset sales, and $950 million of hybrid debt that we issued since our last earnings call in May. On the right-hand side, you can see our planned use of capital. We will return approximately $500 million to shareholders this year, reflecting the previously announced 4% dividend increase. We also plan to invest $2.4 billion to $2.7 billion towards new growth. Of which, 85% will go to renewable and utility. Turning to slide 23, we are well on our way to towards achieving our long-term asset sale target of $3.5 billion from 2023 through 2027. We signed or closed more than $2.2 billion of asset sales since the beginning of last year. And we are now nearly two-thirds of the way to reaching our target even though we are only 1.5 years into our five-year guidance period. We do not announce specific asset sales in advance. But the remaining proceeds could come from sell-downs of renewables projects, our intended coal exist, monetization of our new energy technologies businesses, and sales or sell-down of other noncore assets. In summary, we made excellent progress this quarter toward all of our strategic and financial targets. We have clear line of sight towards achieving the key drivers of our year-to-go earnings growth. And we are well-positioned to continue delivering on our financial goals beyond this year. We also made significant headway on our long-term funding plan which allows us continue simplifying and focusing our portfolio while we scale our leading renewables and utilities business. Our strategy to serve high value corporate customers including a rapidly growing base of datacenter providers across our Renewables and Utilities businesses is highly resilient, and will continue to yield financial success for AES and our shareholders. With that, I'll turn the call back over to Andres. Andres Gluski: Thank you, Steve. Before opening up the call for Q&A, I would like to summarize the highlights from today's call. With more than 8 gigawatts of agreements already signed directly with large technology customers, including 2.2 gigawatts signed since our last call. We continue to be the industry leader in this segment. At the same time, we continue to deliver our projects on time and on budget, with 1.6 gigawatts completed so far this year. We are fully on track to add a total of 3.6 gigawatts by the end of 2024. We see demand for power from datacenters in the U.S. growing around 22% a year. And we could not be better positioned to serve these customers, from our Renewable business to our Utilities. I would like to reiterate that with strong demand for the projects in our 66 gigawatt development pipeline and our existing 12.6 gigawatt backlog of signed long-term PPAs. We are very confident in our ability to continue to meet or exceed our long-term objectives. Operator, please open up the line for question. Operator: Thank you. [Operator Instructions] Our first question today comes from Durgesh Chopra with Evercore ISI. Durgesh, please go ahead. Durgesh Chopra: Hey, team, good morning. First off, congrats on a solid quarter and first-half. Too bad the market is [viscose] (ph) today. Maybe just I had one question on the numbers, and then I have just one high-level macro question. First, to Steve, could you update us on credit metrics, where did you end up as of Q2, and then were do you expect to be at the end of 2024 on FFO to debt? Steve Coughlin: Yes, sure. Hi, Durgesh, it's good to hear your voice. So, the credit is looking very, very strong. So, we continue to be on a path of improving credit. At the parent level, I expect will be even higher than last year's year-end. And so, it looks very good. There's obviously intra movement in quarters as we have some cash flow lumpiness coming up, but it continues very strong. I think we'll see the year end be even better than last year. Durgesh Chopra: So, just to be clear there, Steve, I think the target last year was 22%, if I have those numbers right on FFO to debt basis is the S&P methodology. Is that still kind of a good goalpost? Steve Coughlin: Yes. So, we have a threshold of 20%. So, you're referring more to, I think, where we ended, which had plenty of cushion above that. And I think we will likely see ourselves even higher than that at the end of this year. Durgesh Chopra: Okay, perfect. [A lot of] (ph) question on the balance sheet. Okay, then maybe just one election question. Andres, appreciate the commentary in your prepared remarks. But I'm just wondering, obviously a great quarter here. You added to the Utilities, you added on the Renewable side. But I'm just wondering if all the noise around repeal of tax credits and other policy chatter, does that hurt your ability to sign new contracts? Does that come up in your contract negotiation, is that a risk? Maybe just help us sort through that. Thank you. Andres Gluski: Sure, Durgesh. No, it's not slowing down our signing of contracts. What we really had is a situation that we had, to some extent; foreseen a couple years ago where it's really there's a shortage of renewable power for datacenters in many markets. So, what's the biggest concern of our clients is actually time to power, can you get me the power on time to power datacenters. And that's their main constraint. So, no, there has been anything holding us down or, quite frankly, a major issue of conversation with them. I do think we have to step back and say, "Look, ITC investment tax credits, production tax credits, they've been around for 32 years." Second, there's been a tremendous amount of investment related to the Inflation Reduction Act. And 85% of that investment has gone into republican districts. Today, there are eight million people working directly or indirectly in renewables in the U.S. So, a total dismantling is highly unlikely in any scenario, whether there are some changes around the margin; sure. But thinking about the sector, quite frankly we operate in markets where there are no subsidies. We actually make more money in those subsidies. And it would change somewhat the structure of the contracts. But we see a wholesale revision of this very, very unlikely. Something more likely what happened to NAFTA, where it became the USMCA, and actually was, quite frankly, updated and improved in some areas. So, that's where we se the market right now. Durgesh Chopra: Got it. [Indiscernible]. Thanks so much for the time, I appreciate it. Andres Gluski: You're welcome. Thank you. Operator: The next question comes from Richard Sunderland with J.P. Morgan. Please go ahead. Richard Sunderland: Starting on the Utility announcements, can you outline the utility load opportunity in terms of the breakdown of that 3 gigawatt in advanced negotiations between Indiana and Ohio, plus how much of that capital could fall into the transmission and generation buckets relative to what's in the plant today? Andres Gluski: Okay, look, that's a great question. But we will give you more color on that as time passes, because these are multiple agreements with multiple clients. And we'd really like to see how it shakes out. We're certain that there's going to be a lot of load added, a lot of transmission assets added. But this is between two utilities, between multiple clients. So, right now it's a little bit too early for us to give too much in term of exact load growth by business. Steve Coughlin: Yes, and just to add to that, Rich, we had previously guided to around 10% up for the utilities combined, this is definitely upside. There's significant acceleration of discussions. So, definitely upside to the plans that we've given in the past. Timing matters here though, so we'll see some within our long-term guidance period, and some beyond that. But we do see a lot more growth than we saw even at the start of this year. Richard Sunderland: Understood. Thanks for the color there. And then, your language in the slides on maximizing megawatt quality over quantity; that message has certainly been clear. But I'm curious if this is consistent with your raise per turn assumptions, I think that was back in 4Q. Or do you see further upside potential to returns given the supply and demand dynamics currently? Andres Gluski: Okay. Basically, I think there's several things. One, when we talk about pipeline, that means we have something in the interconnection queue. And we have some degree of land control. So, I would say not all pipeline were created equal. And when we talk about backlog, that's actually contracts that are signed and that we have to deliver, and people have to buy that energy. So, we've never taken anything material out of our backlog, even during COVID. So, what we're saying here with -- the basic message is, one, yes we increased our average rate of returns on these projects. We're not talking about mid-teens. The other thing is that rather than sign like one umbrella agreement with one particular client, we're optimizing the value of this resource among various clients and among opportunities. So, we see this as something where we invest in, we create this real pipeline. And then, we want to optimize the value from it. Will the average returns go up further? Well, I think it would depend market by market, and the opportunity. But right now, we feel very good about the mid-teen returns that we talked about. And we also feel very good about that we're making the best use of that pipeline to create value for our shareholders. Richard Sunderland: Great, thank you for the color there. I'll leave it there. Andres Gluski: Okay. Thanks, Rich. Operator: The next question comes from Antoine Aurimond with Jefferies. Please go ahead. Antoine Aurimond: Hey, guys. Hope you're well. Thank you for taking my question. Andres Gluski: Good morning. Antoine Aurimond: Good morning. I guess to follow-up on Durgesh on the credit side, how do you frame the prospects of going towards a mid-BBB rating and what would be the timeline, we'll be contemplating? Steve Coughlin: Yes. So, as I said, credit metrics are definitely continuing to improve and so I see that as a possibility in a matter of years, not this year, that will be have those metrics. So, we don't have a specific target to share with you at this point, but I expect to be higher than last year and I expect it to continue to improve. As the installed base of our growth continues to grow and add cash. Today, we do carry construction debt that's not yet yielding. But relative to the base, the base is increasing every year significantly in this moment that we are in. So, yes, I think that's very possible, but I don't have a specific date to share with you at this point. Andres Gluski: One thing I'd like to add, as we exit countries and as we're investing primarily in long-term contracted with investment grade off takers in renewables, or our U.S. utilities, which also with this transformation are moving more towards a transmission rate base. The quality of our cash flow continues to improve. So, it's not only a question of the metrics, which as Steve said are improving, but the quality of that cash flow or how it's seen by credit rating agencies is improving as well. So, on both sides, we feel very good about it. Steve Coughlin: Yes, and actually, I guess we'll keep going here because I have just that reminds me of another topic really here. Keep in mind that 80% of our debt is nonrecourse to the parent, and nearly all of that is amortizing investment grade rated subsidiary debt. So, it's a very high quality structure, and the agencies are seeing that. So, I think this, both the quantified metrics as I've mentioned as well as Andres said in the quality and looking at the debt structures, amortizing investment grade, it's a very, very robust, healthy structure. Antoine Aurimond: Got it. Yes, that makes sense guys. I guess on that note, with 85% of the CapEx going towards U.S. based businesses, where do you see the geographical mix trending towards the end of the time period? Steve Coughlin: Okay. Look, I'd say we can I think there's a transformation in terms of, we're moving more towards U.S. dollar based investment grade off takers? So, yes, there's going to be heavier weighting towards the U.S. We do have opportunities to serve the same type of clients outside the U.S., with your investment grade dollar contracts, many times with the same, with the same client. So, if we serve hyperscalers in the U.S. and they want the same services, say, in Chile or in Mexico, then we can service. And that is a competitive advantage we have. Antoine Aurimond: Got it. Okay. That makes sense. And then, I guess, so you mentioned more sort of quality of megawatt versus this is just volume. We're going to do, what 3.6 gigs this year. How should we think about that number evolving? Assuming it's still going to increase, but I guess you mentioned more quality, right? So what's sort of like that number fast forward a couple years? Andres Gluski: Look, when I put it this way, we have a backlog of more than 12 gigawatts of signed PPAs we have to deliver. The majority of that will be within the period of by 2027. So, that gives you -- that that's a guaranteed build out that we have to do over the next three years. So, over time, assuming we're signing somewhere about 4.5, 5.5 gigawatts of new PPAs, those numbers have to converge. Unless, we grow the number of megawatt, PPAs that we're signing, and then it'll take a little bit more time to converge. But given -- that gives you sort of the run rate. Yes. We'll be 4 plus in coming years just from the backlog we have today, and expect that to grow over time past that period of time of 2027. Antoine Aurimond: Yes, that makes sense. Okay, great. Well, Andres, thank you so much. David Arcaro: Hey, good morning. Thank you. Maybe back on the utility side of things, it's great to see all that load growth opportunity coming. When do you think you'd have an opportunity to relook at the CapEx outlook? And then at a high level, how do you think about financing, upsides in the utility CapEx trajectory? Andres Gluski: Yes, hey, David. Good morning. So, as we are looking through the details of the timing of what we've recently signed, we'll flesh that out in our planning process, in the second-half of this year and bake that into our update of guidance for the beginning of next year. So, definitely, I would see in the long-term horizon that we have out there through '27, this will start to come into play in the capital plan, but our funding plan, I don't expect to change at all. We have really done well on our asset sale plan. We are two-thirds of the way through, after only 18 months on a five year plan. We've got a lot of flexibility there. We have partnership capital. So, there is no shortage of capital to invest in the utility growth here. It's a very attractive profile. And so, I see it becoming material, but I see it within the funding plan that we've already released through '27. David Arcaro: Got it. That's really helpful. Thanks for that. And then, just appreciate the comments on the supply chain outlook on the renewable side. I was just curious if I could get your sense, like how much line of sight do you have right now for that domestic supply in 2026, just as we think about navigating some of the tariffs on solar panels and battery storage? How are you feeling right now in terms of the line of sight for both of those supply chains? Andres Gluski: Well, we're feeling very good. And what I would say is, as we've mentioned, we have everything we need for this year, for 2024, and most of you know, vast majority of what we want for 2025. And then, we have signed agreement with domestic suppliers for starting in 2026. So, we feel very good about our ability to execute, deliver on our backlog in the U.S. And I would say that again, to date, we have not had to postpone or abandon any material project in our pipeline over the last five years. So, compared to what happened to supply chains with COVID, this is much more predictable. So, we feel very good about it. And basically, we're again going to make that switch to domestic supply starting in 2026. Unidentified Analyst: Hi, good morning. Thanks very much for taking my question. So, I guess just first quickly on renewable execution, really great to see the guidance update in terms of EBITDA with tax attributes. I guess, could you maybe just talk about, given the backlog, the PPA signing cadence, the ability to bring projects online, how does your EBITDA excluding tax attribute would trend, I guess given where it is now year-to-date? Seems a little light, but just wanted to see how should we think about it going deeper into the year? Thanks. Steve Coughlin: Yes, good morning. Thanks. So, we do have a significant upside in our tax credits as I mentioned in my remarks, primarily that's driven by -- we're qualifying for more energy communities than originally anticipated. And we also have seen the valuation of our tax attributes, particularly through transfers, be valued at a higher level. What's important, as I've always emphasized is that these are cash. It's a very attractive profile. This is not just earnings, but it's cash coming in, which is a very early return of a significant amount of capital 30% up to 50%. So, we're really, really pleased with this upside. There are a few other upsides in EBITDA as well. So, we have had higher margins and higher dispatch in our gas business in the Dominican Republic. We've also continued to drive efficiency and productivity in our renewables and utilities businesses where we're very focused on growth. And in fact, growing those businesses is actually costing less than we anticipated. So, we see favorability in costs going through EBITDA this year. So, as you caught on, there has been an offset to that, and it's what I mentioned in my remarks, which is primarily the Columbia outage. It was a record amount of flooding and inflow that took the units out for all of the month of June and the first part of July. So, that unfortunately did offset and is a negative driver to EBITDA this year. And then, the other, and I think we mentioned this, we did have a very low wind resource in Brazil, more so in the first quarter, but that also had impacted our EBITDA this year. So, we have some offsets, but overall really pleased with the growth, the cash-driven growth, and that we continue to be even more efficient in our renewables and utilities growth machines. Unidentified Analyst: Got it. No, that's very helpful. I guess second, we noticed a comment on being able to bring the majority of the backlog online by 2027. I guess with this year, 2024, a targeted 3.6 gigawatts of new projects online, could you talk about the cadence on bringing new projects online -- just on this front, from this year through 2027, and what kind of lumpiness should we expect coming out of it? Andres Gluski: Yes, well, I think we've very much smoothed out the cadence of bringing projects online. At the beginning where we were ramping up very fast, in fact, last year we grew 100% the number of projects we're bringing online. So, this year we're able to manage it much better in the sense that it's almost about half is being done in the first-half, and the third quarter is going to be quite heavy as well. So, the cadence is going to be much more even throughout the year, as again, the growth rate is not 100% in one year, and obviously it will increase because again, we have to deliver 12.6% over the next three years. And so, most of that is it gets your numbers closer to four. So, we feel very good about the cadence. The biggest challenge was to ramp up 100%, and we did that, and we actually did all of our projects that we needed to get done last year on time. Unidentified Analyst: That's great. Really appreciate the colors from both. Thanks. Operator: The next question comes from Michael Sullivan with Wolfe Research. Please go ahead. Michael Sullivan: Yes. Hey, Andres. A couple of questions, I know there's been some on the utility growth, but 50% plus load growth seems pretty eye-popping, and I'm just curious, like, how you're feeling about the supply side and ability to serve that. Like, for example, if I just look at, you have an AES Indiana, I don't know, I mean, there's like a planned conversion, and then a handful of renewables, and a lot of load growth coming. And then, obviously, in Ohio, you have less control over the supply, and we got a data point on that earlier this week. I guess, yes, just how explosive load growth, how are you feeling about the ability for generation to serve that in those two states? Andres Gluski: Yes. Look, that's a great question. This is going to be timed over the years, so it's not like all at once we have to deliver this in the next two years. So, it represents opportunities, definitely, for additional generation. And as I've been saying in my remarks a good part of that's going to come from renewables. Some of that increased demand may come from gas in some locations. So, definitely all of this is we feel it will get done, and the solution will be different in MISO or PJM, there will be differences, and it'll be different between the two utilities, in terms of one of them will involve more direct securing the generation itself. So, this will pan out, but it's a very good question, because yes, there is quite a high number of growth. It represents a great opportunity, but we wouldn't have said it if we didn't know how this could be served. Steve Coughlin: Yes. And I would just add to Andres' point in Indiana, where generation will be part of the solution keep in mind, we have multiple existing gas sites. So, we have the conversion at Petersburg, but we also have space for additional gas at Eagle Valley, at Harding Street, and at the Georgetown site. So, we are seeing the whole package being able to support datacenter growth there. In Ohio, of course, you mentioned that that's a distribution transmission. We have a very attractive area for datacenters, our service territory is quite large, a lot of available cheap land, very centrally located to fiber networks and data load, accessible water. So, it is a very appealing area. You can see from the -- I think you're referring to the PJM capacity auction, was quite high, demonstrating how significant demand has increased. But within PJM, I think our territory in Western Ohio is one of the most attractive areas, if not the most. Michael Sullivan: Yes, appreciate all that Color. Just to follow up on that last point this came up on some of your peers' calls, but any appetite from your standpoint to own regulated generation in Ohio, and what could that look like if it turns out that this can't be done through competitive markets? Andres Gluski: Yes, look, right now we have no appetite for generation in Ohio directly, but again, this represents opportunities for our renewables team. So, I would say stay tuned, but certainly we feel that these targets can be met, but again realize this is going to happen over time, as Steve had said in his comments. Michael Sullivan: Okay, great. And then, just one more, over to like the renewable side, I think since the last call we had the Brazil asset sale announcement, should we just think about that as fully embedded in your longer-term guidance, or is there like more additions than expected that are going to kind of backfill that in terms of the longer-term growth? Andres Gluski: No, that's already embedded in our guidance. Steve Coughlin: Yes, both this year and obviously the long-term Brazil exit is included in our numbers. Operator: The next question comes from Willard Grainger with Mizuho. Please go ahead. Willard Grainger: Thanks for taking my question. Just maybe one, with the results of the PJM capacity auction coming out this week and just directionally higher power prices and projects coming out of the queue for next year, just how are you thinking about the cadence of your development pipeline? And any color on that would be super helpful. Thank you. Andres Gluski: Look, we have been saying, again, for several years that we were seeing shortages developing, just looking at the corporate demand, especially for renewables, and the ability of suppliers to ramp up to meet that demand. So, to some extent, what is happening in the market is what we expected. This is not going to make any difference to our plans. Again, we have contracts, we have sites, we've already locked in financing, et cetera. So, equipment prices, so it doesn't make any change to our plans. What it does, I think, signal is the value of our existing assets are going to go up as this shortages materialize. So, no effect in the, generally, in the shorter term, but in the longer term, it means that our assets are more valuable, and to some extent, it's what we've been planning for. So, it's not, of course, a specific option, we don't intend to be clairvoyant, but the general direction of the market that's unfolding is what we expected. Willard Grainger: I appreciate the color there. Most of my questions have been answered. Thank you. I'll get back in queue. Andres Gluski: Okay. Thank you. Operator: The next question comes from Angie Storozynski with Seaport. Please go ahead. Angie Storozynski: Thank you. So, I have lots of questions. So, first, maybe in this low interest rate environment, I'm just, I'm actually wondering. So, first, again, so does that actually help further boost the profitability of the projects that are yet to be built? Meaning, I mean, you have embedded certain assumptions about interest rates for like construction financing, for cost of debt, et cetera. So, do I get actually an incremental benefit now that we're seeing seemingly in a lower interest rate environment? Steve Coughlin: So, Angie, this is Steve. Good morning. So, look, we can't have it both ways. So, we have, as I've often talked about, a very low risk way of executing, which means we lock in almost all of our costs when we sign our PPAs, including hedging the long-term financing. So, for anything that we've signed, we're pretty much, we've baked in the price of that financing. But on a go-forward basis, look, lower interest rates are a good thing. They reduce the cost of new infrastructure, and so reduce the cost to the customer. So, overall, I think it's a further catalyst to demand and will help the whole sector. But we maintain a low risk structure in the way we execute. Andres Gluski: Obviously, we are highly contracted for future cash flows. So, lower interest rates means a lower discount rate. It means those cash flows are worth more. But the benefits on a sort of new contract basis will be for new contracts being signed, but not for the backlog. Angie Storozynski: Okay. So, then, changing topics, so those emission reduction targets or renewable power targets for hyperscalers, so obviously, here are those points that they're making, but I also see a number of these datacenters being developed on very coal-heavy grids, like Kentucky and Mississippi. I mean, and then the utilities that are on the other side of those transactions are basically saying that hyperscalers have eventual targets for emission reductions or carbon goals. But they're happy with just absorbing carbon-heavy power early on and then dealing with that carbon footprint later. So, how does that tie into this pitch that, in a sense, they have to just procure renewable power when, again, when we have these instances where they're just going for large quantities of available power, largely regardless of the carbon footprint? Andres Gluski: That's a great question. The way I would put it is their preference is renewable power. Right? So basically, you're talking about situations where they have no other alternative. So, they're not happy to suck up coal power from the grid. They basically will either have offsets with a VPP or by RECs, and quite frankly, in most cases, will require that renewables come online in the future. So, you have to put it like this is the last alternative. And so, obviously, if you have a datacenter, the most important thing is to have power. So, if you have no other alternative, you will not go for renewables. But they do have the renewables goals, and they do want that power to be as low carbon as possible. So, that's in terms of the demand. Now, let's look at the supply. If you look at what's in the interconnection queue, almost all of it is renewables, if you include batteries. So, the fact is what can get built, let's say, over the next five years, for sure, is going to be very heavily weighted towards renewables. As Steve mentioned, you have to combine these in the lowest carbon way possible. And if that means adding some gas plants, that will be done. But I think that the direction is clear, because I remember you on one call said that it's all going to be nuclear. And I kind of laughed, we both laughed and said, tell me what the price of an SMR is? How can we sign a PPA with embedding nuclear? Second of all, the regulatory hurdles to bringing on nuclear are still very significant. And we really don't have price certainty on it. So, renewables are going to be the bulk of that add-on. That's what they want. Again, yes, they will make deals for the short run if that's the only alternative. But it's not their preferred route. Angie Storozynski: No, I understand. But again, I obviously hear your point, yes. It's just that I'm wondering if renewable power is more like a source of basically carbon-free credit, or is it the source of energy? Because again, one could argue that the datacenters are basically using traditional thermal power for the supply of energy. And then, renewables, again, just offset the carbon footprint. And I'm not sure if that's actually bad or good. I'm debating it myself; it depends on my question. But I'm just again. Andres Gluski: Yes, I think it depends on the client, quite frankly. Some clients are much more stringent. Some clients actually want hourly-matched renewables. Some clients require additionality. Most of them require additionality. So, it's not just one-size-fits-all. I think the renewable standards will differ among them. But the direction is very clear. So, I don't see anybody sort of walking away from it at this point. And quite to the contrary, they're under pressure a lot because as they ramp up very significantly their datacenters and they're taking some power which is not renewable, their total carbon footprint goes up, and that's something that they've had to address. So, I would say that, yes, they're being pragmatic. But in terms of their goals and desires, those remain unchanged. And it's not uniform across all of them. It's not one-size-fits-all. Angie Storozynski: And then lastly, you have this page where you mention all of these additional transactions you've entered into with hyperscalers. So, is this co-location? Is it that this is sort of a set of assets located at least in the same sort of zone, like say in PJM or again, I'm just -- I'm not trying to be facetious here? But I'm just wondering, so is this power really directly feeding into these hyperscalers? Or is it just like being commingled with other power and it's, again, this sort of a carbon attribute as opposed to the energy? Steve Coughlin: Yes. So, I'll just add on to what Andre said. So, in almost all these cases, even you're talking about, Angie, not to say, yes, these are resulting in renewable PPAs, some cases in the same location or nearby locations, and others where they're focused on time to power going to the grid, but then also contracting for renewables perhaps further away. Most of what we are doing is I would say you would call more of a co-location regionally where we're supplying energy, including most of what we signed recently in the same grid and relatively close to the datacenter. So, that is by and large what we've seen most looking for. But when time to power is, of course, a priority, they're looking for alternatives. But the great thing is that in all cases, the additionality of renewables, whether it's direct or through RECs, is a top demand from these customers. Angie Storozynski: Okay. And then, lastly, so what happens, for example, with AES Ohio now that we have this pickup in capacity prices, most of the energy prices will follow. I mean, this is a wires only business. Are you concerned about the impact on electric bills and affordability and how that might suppress any sort of a T&D investment? Andres Gluski: I would say, look, first, we have the lowest rates in the state. So, we're starting off from the best position of anybody. Second, realize that our new additional growth, these are people who, again, the most important thing is to find a good location and to have the power and the other services that they need. So, that does not concern me in terms of, let's say, saying, well, this growth will not happen because the capacity prices went up. And as I've said before, to some extent, not this particular auction, not the extent of this one-time jump. But we had been expecting this. So, this is not something that's like out of left field and we have to scramble. We have been talking about, and you can hear from all our earnings calls, and we've been saying, look, there's going to be a shortage. And returns are going to improve over time. And so, directionally, this is very much what we expected. Biju Perincheril: Yes, thanks for taking my question. A question on domestic content bonus, can you talk about when your projects might -- when you're targeting your projects to be eligible for that and maybe the implications for your returns? And if you could talk to separately the solar and storage projects, that would be great. And then, I have a follow-up. Andres Gluski: Okay. So, first, I'd say in terms of domestic content, in terms of our wind project, those already meet the criteria. Remember, it's a criteria based on the total cost of the project, the different components. In terms of solar panels, again, we expect to be meeting that by 2026. In terms of batteries, our main supplier is Fluence, and they should be meeting that, quite frankly, starting in 2025. So, all together we feel very good about meeting domestic content requirements. And then, there are other things like trackers, inverters, et cetera, that we've been working on as well. So, I think the team's done a very good job to combine the various assets such that they do meet the domestic content criteria. So, it's not one-size-fits-all. It's like what's available and if you have wind, it may be greater. If you have, say, solar panels, it may be lesser, but you put it together and the total meets it. So, we feel very good about that meeting the domestic content criteria. Steve Coughlin: And I would just add, keep in mind that the adder is across the entire capital cost of the project once you meet the threshold for the certain components that have to be domestically sourced. So, it's a 10% across not just those components, but the whole thing, which is really attractive. Andres Gluski: Yes. And we have no trouble meeting things like prevailing wage, et cetera. Steve Coughlin: Right. Andres Gluski: So again, the team's been working very hard on this, and we feel that we're very well positioned. Biju Perincheril: And is your expectation that you would be able to retain most of that or you would have to pass along that in terms of PPA pricing, just trying to understand the impact to your returns? Andres Gluski: Again, I think it's on a case-by-case basis. It depends on the demand supply in the particular market. So, -- Biju Perincheril: Okay. Andres Gluski: I think the best answer would be shared. And then, the vision of spoils will depend on the particular circumstances. Biju Perincheril: Got it. My follow-up was -- and we talked about a lot about sort of time to power. So, for renewables projects, can you talk about sort of the advantages or what you bring to the table specifically from a technology perspective? I think last quarter you sort of talked about DLR and batteries and that almost that or there are other solutions that you could bring to the table in terms of addressing that concern for your end customers. Andres Gluski: Yes, we really look at this sort of holistically and we tend to co-create with the client. Say, look, what do you want? And then we'll bring the technologies to bear. We don't come and say, look, we have this really neat widget. This is what you should buy. Now, given the new technologies I really do feel that we've been a leader in this. So, in everything from we did invent lithium ion -- the use of lithium-ion batteries for grid stability. We started that 14 years ago. We do have the biggest dynamic line rating project in the country. Fluence is doing a number of very innovative things to use batteries to be able to get more use out of existing transmission lines. We also were the first to do hourly matched 24/7 long-term contracts for hyperscaler clients. So, we continue to do that. And with Uplight, there's a number of VPP facilities that's well-managed -- energy management. And finally, I think Maximo is a great example of we are thinking about the future. One of the constraints, and I am sure you've heard it, was like labor force for building solar projects. And the fact is you have lift 65 pound today solar panels. In heavy heat the restrictions, crews can only work six hours for example. And it takes a very strong individual to be able to do this task at all. So, with Maximo this really allows us, first, to do it much more quickly. You can work three shifts even in terrible weather or hot weather conditions. In addition to that, we don't have to be particularly physically strong to do it. You have to be able to supervise the robot. So, Maximo is an example of how we would bring projects online faster and also with cost at damages as well. So, this is the first step. We are starting to use it. Next year, we will be ramping up. But after that, we can see a fleet Maximo out there, which would give us a competitive advantage. In other words, that we could bring -- we wouldn't say it's labor shortages, because we can hire a much broader universe of individuals. We can work in three shifts in all weather conditions. And we can quite frankly do it faster and better. So, that's another example. So, again, I think our AES Next and our views on technology have been really industry leading. Operator: Those were the questions we have time for today. And so, I'll turn the call back to Susan for any closing remarks. Susan Harcourt: We thank everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. Thank you. And have a nice day. Operator: Thank you everyone for joining us today. This concludes our call. And you may now disconnect your lines.

Earnings call: Fluor Corporation reported revenues of $4.2 billion By Investing.com

Fluor Corporation (NYSE: NYSE:FLR), a global engineering and construction firm, announced a strong second quarter of 2024 with revenues of $4.2 billion and a consolidated new awards total of $3.1 billion. The company's backlog stands at an impressive $32.3 billion, with a significant portion being reimbursable contracts. Adjusted earnings per share (EPS) reached $0.85, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were reported at $165 million. Fluor also highlighted key partnerships and project milestones, including a new collaboration with Worley and the completion of the final weld on Train 1 of a major project. Key Takeaways Company Outlook Bearish Highlights Bullish Highlights Misses Q&A Highlights Fluor Corporation's second quarter of 2024 demonstrated the company's resilience and strategic focus on high-margin sectors and growth opportunities. With a solid backlog and a clear vision for the future, Fluor is well-positioned to capitalize on the evolving demands of the global construction and engineering markets. InvestingPro Insights Fluor Corporation's (NYSE: FLR) recent financial performance and strategic achievements align with some intriguing insights from InvestingPro. With a market capitalization of $8.07 billion and a Price/Earnings (P/E) ratio of 28.41, which adjusts to 30.12 for the last twelve months as of Q1 2024, Fluor trades at a higher earnings multiple than some of its peers. This could indicate that investors have high expectations for the company's future earnings growth. An InvestingPro Tip notes that Fluor holds more cash than debt on its balance sheet, which provides financial flexibility and may be reassuring to investors concerned about the company's ability to manage its liabilities. Additionally, another InvestingPro Tip indicates that analysts expect the company's net income to grow this year, aligning with Fluor's optimistic outlook on growth opportunities in various sectors. Fluor's revenue has grown by 7.53% over the last twelve months as of Q1 2024, showing a healthy expansion in its business operations. Despite a slight quarterly revenue dip of 0.48% in Q1 2024, the company's gross profit margin stands at 3.97%, reflecting some challenges in maintaining higher profitability. Investors looking for additional insights will find more InvestingPro Tips on Fluor, including analyses on earnings revisions, industry positioning, and stock price volatility. There are currently 14 additional tips listed on InvestingPro, providing a deeper dive into the company's financial health and market performance (https://www.investing.com/pro/FLR). These metrics and tips provide a nuanced view of Fluor's financial standing and future prospects, helping investors make more informed decisions. Full transcript - Fluor Corp (FLR) Q2 2024: Operator: Good morning, and welcome to Fluor's Second Quarter 2024 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 the 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 website replay will be available for 30 days. A telephone replay will also be available for seven days through the registration link, also accessible on Fluor's website at investor.flour.com. At this time for opening remarks, I would like to turn the call over to Jason Landkamer, Head of Investor Relations. Please go ahead, Mr. Landkamer. Jason Landkamer: Thank you, Ellie, and good morning. Welcome to Fluor's 2024 second 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 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 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 2023 Form 10-K and in our Form 10-Q, which was filed this morning. 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. I'll now turn the call over to David Constable, Fluor's Chairman and Chief Executive Officer. David? David Constable: Well, thank you, Jason. Good morning, everyone, and thank you for joining us today. Please turn to Slide 3. To get started today, I wanted to briefly highlight the Fluor Fellows program. Fluor Fellows are a distinguished group of world class subject matter experts whose knowledge and experience contribute significantly to Fluor's success, both internally and externally. Our fellow's technical expertise sets Fluor apart from its competitors and frequently become the decisive factor for clients when selecting Fluor for future work. The Fluor Fellows program involves a robust nomination process. Candidates are nominated by department managers, executive management, and existing fellows and senior fellows. Fellows are selected based on their expertise, recognition from both peers and clients and the value they bring to the company on a global basis. These leaders have roles beyond projects, helping drive innovation and performance across the organization. I'm pleased to say that with the 2024 class, we now have 91 fellows and senior fellows driving world class technical excellence. Now let's turn to our operating review beginning on Slide 4. Revenue for the second quarter was $4.2 billion. Consolidated new awards for the second quarter were $3.1 billion, led by key awards in our Urban Solutions segment. Awards for the quarter do not reflect our substantial minority ownership in a joint venture that recently won the $30 billion Pantex M&O contract. More on that in a moment. New awards were 82% reimbursable and our total backlog is now $32.3 billion, of which 81% is reimbursable. Strong demand for our services continues to drive new award margins above the 4% to 6% segment margin range that underpins our strategy. Specific to the margin profile, new award margins continue to outpace margin on existing backlog by an average of over 150 basis points for the past six quarters. Our margin story is driven by strength in service margins, which have been in the 20% range this year for our traditional EPCM businesses. This strong demand for our services is driving our investment in resources and people. Our shift to an asset light company provides us the opportunity to move resources quickly, as we pursue a wide range of requests, which includes everything from pre-FEED and studies to large EPCM programs. This flexibility also supports our diverse pipeline of opportunities in advanced technologies and life sciences, mining and metals, production and fuels and more broadly, energy transition. Moving to our business segments. Please turn to Slide 6. Urban Solutions, our most diverse segment, reported $105 million profit in the second quarter. Results in this segment reflect increased execution activities on multiple advanced technology and life sciences projects and the effects of a change order on a legacy infrastructure project. This change order covers many of the matters that gave rise to the charge we recognized in second quarter of 2023. New awards for the quarter were $2.4 billion compared to $2.3 billion a year ago. Ending backlog continues to reflect the strength of our end markets and now stands at $19.6 billion. This represents an increase of nearly 70% over the past 12 months. Now please turn to Slide 7. During the quarter, Mining and Metals received a $1.1 billion incremental award for an aluminum rolling facility in Alabama. Clients in this space continue to have a steady long term vision for their CapEx plans. Over the next few quarters, we are preparing for new awards to support rare earth refining, iron ore port debottlenecking and a lithium project in the United States. Moving to Slide 8. Advanced Technologies and Life Sciences continues to ramp up to meet sustained client demand. New awards for the quarter included Phase 1 of the Northvolt's large-scale lithium-ion battery manufacturing facility in Germany for $361 million. Northvolt headquartered in Sweden manufactures batteries for consumer and industrial products, electric vehicles, and solutions for energy storage systems. During the quarter, our ATLS business line formed an alliance with Topsoe and ABB (ST:ABB) Limited to streamline construction of state-of-the-art electrolyzers for effective production of green hydrogen. We look forward to providing EPC support for this key energy transition effort. We continue to see strong investments in the semiconductor space, where the outlook is supported by the CHIPS Act funded here in the United States. From smaller tool install opportunities all the way up to large fabrication facilities, there's over $5 billion in potential prospects over the next 12 months. Over the next few quarters, the ATLS business line is pursuing opportunities in data centers and additional phases on large life sciences projects. In the data center market, we're building our relationships with large tech companies that are taking a disciplined approach to capital expenditures. In infrastructure, productivity remains strong across the portfolio. During the quarter, we completed the deck connection on the Gordie Howe project. This bridge is the longest cable state bridge in North America and the longest composite steel and concrete deck cable stay bridge in the world. The team is currently focused on completion and handover of both ports of entry. On the LAX Automated People Mover project in Los Angeles, our joint venture has reached a settlement with the client that covers already completed extra work dating back to August 2018 and the longer than anticipated construction time line. We will continue to work with the client while we seek final approval of the change order with the city of Los Angeles. While we recognized a $39 million improvement to our previous disclosed position for our portion of the settlement, this project remains in a loss position. Finally, plant and facility services secured a $533 million renewal from a large consumer products manufacturing client, where we are providing ongoing construction management services. Moving on to Slide 9. Mission Solutions reported segment profit of $41 million for the second quarter compared to $40 million a year ago. New awards for the quarter were $63 million and included various task orders for FEMA. Ending backlog for the quarter was $3.8 billion. During the quarter, our Paducah contract was extended for two years through June 2027. We have also received a notice of intent to extend our Portsmouth and DUF6 contracts for up to one year through September 2025. I'm pleased to report that the F.E. Warren nuclear weapon storage and maintenance facility is substantially complete. The project represents the last legacy project in the Mission Solutions portfolio. In early July, notices to proceed were issued to two joint ventures in which Fluor has minority ownership interest. As previously mentioned, the NNSA Award awarded the Pantex M&O contract in Amarillo, Texas. Based on all three of the five year contract options being exercised. The contract will span 20 years at an estimated funding level of approximately $30 billion. The protest period on this project has passed and transition from the incumbent is underway. Also, we were notified in July that the protest for the incumbent on the Air Force test operations and sustainment contract was denied, and transition on this project is underway. Because we are a substantial minority partner in both joint ventures, our portion of earnings will be recognized as equity method income and not revenue. With the additional contributions from these two projects accounted for under the equity method of accounting, this segment is currently managing over $5 billion of additional project scope annually that is not reflected in our revenue. Other prospects for Mission Solutions include the Hanford Tanks project, which we have won, but are awaiting conclusion of the protest process. In addition, we are positioned to win additional work in the intelligence services space. Before I move to Energy Solutions, I want to highlight a new 50-50 partnership with Worley to pursue opportunities that support the Australia, U.K., USA trilateral security partnership, formerly known as AUKUS. The partnership brings deep maritime, defense and nuclear competencies required to build and maintain a nuclear Navy capability, while also enabling the uplift of Australia's sovereign defense industrial base. Please turn to Slide 10. In Energy Solutions, segment profit was $75 million for the second quarter compared to $89 million (ph), we are close to reach an agreement with our client on the cost to complete this project. New awards for the quarter totaled $582 million and included incremental work for a petrochemical facility in Canada and an engineering study for Aramco (TADAWUL:2222). The Energy Solutions team had a number of accomplishments in the second quarter. First, we moved our lead Energy Solutions office from our long-time location in Sugar Land, Texas, to a fit for purpose location in Houston's Energy Corridor. This location optimizes our real estate footprint and increases exposure to a tremendous concentration of industry talent for our expected growth. Next, we opened a second office in India to support our global execution platform and to position us for significant in-country market growth. Finally, Energy Solutions only legacy contract, the Penguin's FPSO project was turned over to the client and towed to its final destination in the North Sea. Shifting to LNG Canada, our team celebrated a major milestone with the final weld on Train 1. The weld took 48 hours of continuous work from teams of welders working in shifts. More than 380 pipe welders have worked on the project since construction began in 2018. To date, we have turned over one-third of the systems of the client and will be ready to import refrigerants in mid-August. This week, we announced a key contract award for the next phase of engineering and design for RoPower's Small Modular Reactor facility using NuScale power's industry-leading technology. As a reminder, Fluor has a development agreement with NuScale, where we have a preferential right for work related to SMR opportunities. For the remainder of 2024, prospects are led by traditional refining and battery manufacturing. After a six year cycle delivering on large-scale programs, including LNG Canada and TCO, we are now seeing this mature EPC backlog replaced by higher margin pre-FEED and FEED opportunities that set the stage for new large-scale projects. With respect to the nuclear industry, I recently had a call with Energy Secretary Granholm about the importance of nuclear and the SMR specifically, and how Fluor can play a key role in supporting a transition to low carbon power in the United States. I'm optimistic that the recently passed ADVANCE Act will increase the aperture for nuclear opportunities that the company is well positioned for. Finally, for fiscal year 2025, the House Energy and Water Appropriations Committee recently added $8 billion to the $900 million in fiscal year '24 to fund the completion of the advanced reactor demonstration program, as well as an SMR demonstration project. While not law, this is a critical step to making advanced nuclear power a reality by the end of the decade. With that, let me turn the call over to Joe for the financial update. Joe? Joseph Brennan: Thanks, David, and good morning, everyone. Today, I will review our results for the second quarter and go over financial outlook assumptions that support our guidance. Please turn to Slide 12. As David mentioned, for the second quarter of 2024, revenue was $4.2 billion. Our consolidated segment profit for the quarter was $194 million. Adjusted EBITDA for the second quarter was $165 million compared to $181 million a year ago. Our adjusted EPS was $0.85 compared to $0.76 in Q2 of 2023. EPS results benefited from a lower tax rate as revenue and tax advantaged locations increased. When you adjust for the change order in infrastructure, the incremental cost growth on a project in Mexico and the timing of revenue contributions from large projects and energy solutions, Q2 results support our full year guidance. Our adjusted results for the quarter exclude $20 million for the positive income effects of FX on embedded derivatives in Mexico and nearly $50 million of other FX gains. G&A expenses for the quarter were $50 million, down from $60 million a year ago. Net interest income for the quarter was $38 million compared to $37 million a year ago. Net interest contributions reflect a higher for longer interest rate environment and our low cost fixed rate debt. We anticipate interest income to remain near this level for the next two quarters. New awards of $3.1 billion in the quarter resulted in our ending backlog balance of $32.3 billion, which now stands at 81% reimbursable. Based on our prospect pipeline, we anticipate a book-to-burn ratio equal to 1 for the third straight year. The book to burn would be much higher if you included the unconsolidated revenue that Mission Solutions manages. Moving on to Slide 13. Our cash and marketable securities balance for the quarter was $2.6 billion. This excludes amounts held by NuScale. Operating cash flow for the second quarter was $282 million compared to $62 million outflow a year ago. This reflects distributions from our joint ventures, customer payments on several large projects and a refund from the IRS amounting to $77 million. Additional IRS refunds of approximately $90 million are anticipated to be recovered later this year. During the quarter, we distributed $21 million in cash to fund legacy projects. We currently estimate that our funding requirements on the three remaining legacy projects is $50 million for the balance of 2024. The sale of storage U.K. operations is progressing and dependent upon regulatory approval timing, which is likely to happen towards the end of 2024. Regarding NuScale, I want to note that NuScale's ongoing capital efforts may reduce Fluor's ownership below the threshold for consolidation. While this would result in us no longer consolidating NuScale, we would expect to recognize our investment under the equity method. Before I close with details on our outlook, I want to provide an update on our view of capital structure. Year-to-date, we have made considerable progress in entitlement negotiations, free cash flow conversion and investing in our people. These elements all support our stated goal of initiating a plan to return capital to shareholders. Please turn to Slide 14. We are affirming our 2024 adjusted per share guidance of $2.50 to $3 and tightening our adjusted EBITDA guidance range from $600 million to $700 million to a range of $625 million to $675 million. Our expectations for operating cash flow are now between $500 million and $600 million. Our assumptions for 2024 include revenue growth of approximately 15%; G&A expense of approximately $215 million, and an effective tax rate of between 30% to 35%. Our expectations for 2024 full year segment margins are approximately 5% in Energy Solutions, approximately 4% in Urban Solutions and approximately 6% in Mission Solutions. Before we head to Q&A, I'll turn the call back over to David for an organizational change announcement. David? David Constable: Thanks, Joe. As we enter the second half of the year and successfully wrap up Chapter 1 of our building a better future strategy, we're looking ahead and developing plans for the next chapter. Going forward, our objectives will be to maximize opportunities in growth markets, remain laser focused on execution, generate consistent operating cash flow and continue to develop our pipeline of talent. In support of our objectives, we are making changes to our Fluor management team. To prepare for the future, we require a more holistic view of our markets, strengths and needs in project execution and talent allocation across our businesses. Please turn to Slide 16. To this end, effective August 5, Jim Breuer, who is currently the Group President of Energy Solutions will assume the role of Fluor's Chief Operating Officer reporting to me, with our three business segment Group Presidents for Energy, Mission and Urban Solutions reporting to Jim. Succeeding Jim as Group President of Energy Solutions is Mike Alexander, currently the Chemicals Business Line President within the segment. Next, to strengthen and optimize our supply chain capabilities, effective October 1, Raj Desai will join the Fluor management team as Fluor's Chief Procurement Officer. Currently, Raj is responsible for our supply chain and commercial strategies groups. In addition to these duties, Raj will also assume responsibility for our information and technology organization, furthering Fluor's expertise in leveraging technology and product execution. Robert Taylor, our current Chief Information Officer, has advised an intention to retire at the end of 2025 -- March 2025 after nearly 34 years with Fluor. And lastly, after a career with Fluor that spans almost 40 years, John Reynolds, our Chief Legal Officer and Corporate Secretary, confirmed its decision to retire from the company effective mid-May 2025. Effective August 5, Kevin Hammonds will join the Fluor management team as Chief Legal Officer. Over the coming months, John will transition his responsibilities to Kevin for the past several years, served as Senior Vice President and Managing Counsel of the Americas. Until his retirement in May 2025, John will remain in service to the company as Corporate Secretary to the Board of Directors. I'd like to take this opportunity to warmly thank Robert and John for their service and dedication to Fluor Corporation and congratulate Mike, Raj and Kevin on their upcoming appointments to the FMT and Jim on his new role as Chief Operating Officer. For your reference, the bridge profiles for Jim, Mike, Raj and Kevin are attached as an appendix to the earnings call presentation. And with that, operator, we're now ready for our first question. Operator: Thank you very much. We are now opening the floor for question-and-answer session. [Operator Instructions] Our first question comes from Sangita Jain from KeyBanc Capital Markets. Your line is now open. Sangita Jain: Hi. Good morning and thank you for taking my questions. So if I could start with the capital allocation comments that you guys just made and the plan to return cash to shareholders. Can you tell us a little bit more about that on what that exactly means and what the timing of that would be? Joseph Brennan: Yeah. Thanks. Thanks for Sangita for the question. I think as we laid out at the beginning of the year, by the end of the year that we would be kind of in a position to firm up what that plan would look like and the timing of it. I think one of the elements, I think we satisfied a lot of what we're doing internally. And as we're embarking on the 2024 strategic plan I think that's the last piece of this to kind of close off the circle and allow us to kind of roll out what our communication related to the shareholder allocation plan will be. So we're kind of in that process. We'd like to bet off one more thing. But it's coming by the end of the year. And then we'll be a little bit more granular about what that looks like. I don't think we're prepared to talk about the granularity of it. But I would say, a lot of the things that are occurring in the quarter are giving us more and more confidence. And as we close off the strategic plan, I think we'll be in a good position to have that discussion. Sangita Jain: Great. And one more on the lost project outlay that seems to be now lower than the $150 million that you gave last quarter? Is it fair to assume that, that's a reflection on the positive adjustment at LA People Mover? Joseph Brennan: It is in, in terms of the settlement value and the fact that we don't have that cash outlay, Sangita, that's a fair logic tie there. That's a piece of it, for sure. Sangita Jain: Okay. Understood. Thank you so much. Operator: Our next question comes from Jamie Cook from Truist Securities. Your line is now open. Jamie Cook: Hi. Congratulations on a fairly clean quarter here. I guess, my first question, Joe, just on the cash flow guide increase. It was nice to see. What was not embedded in your guidance? I'm just wondering, I know you said the cash reflects distributions from joint ventures and you had the IRS refund and etc. I'm just wondering how much cash outperformed your initial expectations. And then it's nice to see you're starting to get cash from the joint ventures, what's embedded in the guide or where would there be upside? I'm just wondering, if we should get more positive that these distributions are coming and sort of the magnitude of that? And then I guess, David, on the bookings for the rest of the year, I think before you've talked about a book-to-bill of over 1. I know bookings are lumpy. Just your confidence level there, in particular, what you're seeing on the data center side? Thank you. Joseph Brennan: Thanks, Jamie. I'll start with the cash. We had an outlay at the beginning of the year from a planning perspective of $360 million to fund legacy projects. And today, we currently have managed through the reestablishment of entitlements and excellence in execution. We've dropped that number from a $360 million outlay potentially to now $126 million. And even within that $126 million and the balance of 2024, I see ways to kind of improve that outlay. So I think that's going to help us drive to the upper end of the guide that we've laid out relative to OCF. And I'm getting more and more confidence that, that's kind of the direction that we're heading. But I see more opportunity to get to the upper end of that guide, but I think some time needs to play out here. David Constable: Okay. Good morning, Jamie. On the book-to-bill and the 1.0 (ph) confidence, we've had a really good first half, right? We booked 10 billion in the first half of the year. So basically right on track with our -- that's $50 billion over the past 2.5 years and booking $20 billion in each of the -- in '22 and '23, so about the same run rate. New award bookings remain strong, right, higher margin profile versus the existing backlog as we mentioned in the prepared remarks. Q2, in fact, new awards were 250 basis points above the backlog margin, so that's great to see. As far as what it's shaping up like for new awards in the second half, ATLS and mining markets remain very promising. But also if you look at the Q3 major prospects, they'll be in mining, traditional refining, chemicals, semiconductors, DOE maintenance and energy transition projects across the portfolio. And then, in Q4, DOE environmental management bookings, more mining, LNG, data centers, some large data center work and then some more chemicals prospects. So confidence level, yeah, I'd say we'll be right around 1, I think thereabouts, I think that's what we've been messaging for the past several quarters. And obviously, we've got revenue growth of about 15% guidance this year, just so you can track it that way as well to get to what that book to burn would be. So that's where we're at. Jamie Cook: Thank you. Operator: Our next question comes from Andy Kaplowitz from Citi Group. Your line is now open. Andrew Kaplowitz: David, maybe I'll follow up on Jamie's questions around data centers. You mentioned that you're building relationships with tech customers, and they're taking a disciplined approach to projects. So maybe what does that mean? Do you start seeing more bookings this year? Is it more a 25% ramp up in bookings there? And maybe talk about Fluor's competitive positioning, do you think the majority of the projects will actually be cost invisible. David Constable: Yeah. So like I said to Jamie, the data center work right now for the larger programs are starting in Q4 is what we're seeing right now, and then into 25 like you mentioned. So that's where we're at with data centers. It's just a really big demand right now. I think as everyone on the call knows the need for data centers has rapidly increased based on cloud-based technology and artificial intelligence, right? So in the U.S. market alone, the power consumption to reflect the number of servers of data centers that they can house is going to reach, we think, or we've looked at the data, and we think it will reach about 35,000 megawatts by 2030. And there's, what about 17,000 in place right now. So a huge growth in data centers. And the U.S. is going to account for 40 -- it accounts for 40% of the global market. So lots of data center work to say grace over here. And from what we've seen, it is primarily reimbursable, right? So that's also encouraging or reimbursable with incentives on cost and schedule. So right in our wheelhouse to -- in our contract, our risk profile and fair and balanced contract term strategic priority to go after these data centers. And they are large, right? So there's only a few contractors in the country who can really take on these really large projects. And Fluor is obviously one of those that will be right in the mix for the data center build-outs that's coming. So we're very bullish on data centers, but also semiconductor facilities right now more in the global markets and also life sciences in ATLS. So ATLS is shaping up very nicely here going forward. Andrew Kaplowitz: Helpful, David. And maybe can you give us more color regarding what you're seeing specifically within Energy Solutions. Backlog is up year-over-year, but revenue is down and you have Land Canada, as you said, winding down. So what kind of visibility toward revenue growth in the business do you have over the coming quarters and in '25. Could there be a low before as you said, you do a bunch of FEEDs, but then you get into TPC, I guess, later in '25 or '26. How does it evolve? David Constable: Yeah. It's -- we've had a good run in Energy Solutions. Backlog is up, as I mentioned, right, up to $8.5 billion, up quite a bit over Q2 of '23, so that's good news. But also, we have been finishing off some major projects coming to the end at LNGC and TCO is ramping down somewhat. But as we look at all the FEED work and prospects in FEED work, there's about $420 billion of potential projects out there that we can go after. And a good portion of that is in Energy Solutions, right? Just in the -- if you just look at the prospects of front-end work, it split pretty evenly between -- of the $207 billion that we're tracking right now. It's split very evenly between Energy Solutions and Urban Solutions, about $104 billion for Energy Solutions. And that's across chemicals and refining, refining in Mexico, specifically nuclear power. And then a very big chunk is in downstream production and fuels, which covers off a lot of the energy transition. So I think with everything that's either in-house, which is another $200 billion studies that we've got that we think will proceed. A lot of good things are coming. If you look at full projects, EPCM -- EPC, EPCM, there's about $60 billion of prospects in the next 18 months for the company and $25 billion of that is Energy Solutions. So yeah, it's -- I wouldn't call it a lull, but it's going into that front end work where we -- our strategy is to get in early and stay late. So we're busy on some more front-end work in energy solutions that will see them growing nicely in the coming quarters. Operator: Our next question comes from Steven Fisher from UBS. Your line is now open. Steven Fisher: Great. Thanks. Good morning and congratulations. I just wanted to clarify whether the Urban Solutions change order you had in the quarter was already kind of probability weighed in the guidance? And if it was, was there something else that offset that since the midpoint of EBITDA was kept the same. And then I'll just ask my second question now. David, you cited that the average of 150 basis points of higher margins going into backlog over the last six quarters. How should we think about the trajectory of margins going into backlog from here kind of relative to that 150 basis points. Is that kind of flattening now or do you think there's still room for putting higher margins in? Thank you. Joseph Brennan: Steven, I'll take kind of the view on guidance for the quarter. I guess the way I would frame it for you is, the results for the quarter kind of reflect the underlying quality of the existing backlog that we booked over the last couple of years, that $50 billion up through the end of 23, an additional $10 billion plus what's coming in on Pantex. We understand there were some puts and takes in the quarter, but we still have confidence in our core results and I think those results suggest the run rate of $165 million that we've shown in the quarter. As we move forward, Steven, I think what we'll see is less and less volatility as the results, we're continuing to close out our existing legacy projects. We've made significant progress there. And our derisked project portfolio of 80% reimbursable will begin to mature as it pulls through the pipeline. But as we laid out in prepared remarks, we did have some delayed revenue recognitions over some of our major programs in Energy Solutions, which are coming in, in the back half of the year. And so that gives us the confidence in being able to support the guidance and certainly up to the midpoint at this point. David Constable: Yeah. Good morning, Steven. Yeah. On margins and going into backlog, that's been a good run that we've seen, and it continues to pull our backlog margins up. So we've -- our backlog continues to get healthier. As we've said, we're over 80% reimbursable now, which has met our surpassed our strategic priority target of reimbursable work in backlog. So I'd say, it's looking at it, I'd say, it will continue. I think we'll continue to book new awards above our plan margins. A lot of it has to do with services margins that we're booking right now. A lot of this front-end work that we're back into in Energy Solutions, obviously brings with it much higher margins when it services only. So that's a big contributor to what we'll be seeing over the next several quarters. So I think that will continue, I wouldn't want to - it's better to get there and then tell you what it is after the fact. But I think we'll continue to see margins coming into new awards that are above our planned expectations. Operator: Our next question comes from Mike Dudas from Vertical Research Partners. Your line is now open. Michael Dudas: First for Joe. Joe, with the positive success of cash flow improvement this year and versus a year ago, after we go through all the puts and takes and the legacy projects moving out and some of the better business moving in backlog through the P&L. What do you expect from a normalized kind of conversion rate, when Fluor is kind of running on those cylinders without some of the -- even though there will be some special movements intra quarter what that can be and has that changed from what your expectations would have been? Joseph Brennan: No. Thanks for the question, Mike. We have stated that 60% to 70% conversion rate as we move forward, and I would expect -- if I -- I've gone back and kind of looked at our historical Fluor and at times, we've been up in the 75% range in a similar asset light model. So I think the goal would be to drive to levels in the 70% to 75% range. But as we transition here, I think that 60% to 70% conversion view is probably an appropriate one, as we kind of progress through the next few quarters. Michael Dudas: That's helpful, Joe. And for David, you mentioned in your prepared remarks the booking from the NuScale and RoPower, your discussion with the Department of Energy Secretary. How real, how are your thoughts on what potential that could be for [indiscernible] whether it's through at NuScale or other opportunities at other areas on the nuclear side and maybe an update on monetization opportunities for your majority of your holdings? David Constable: Yeah. Good morning, Mike. Yeah. Great topic right now based on -- as we talked about the data centers and everything that's going on for power demand requirements not only in the U.S., but globally. I think we said last quarter, the demand -- or the interest, I'll say, the interest in SMR technology, carbon-free power has never been greater. We obviously are seeing supporting NuScale, but also supporting their commercialization and their development partner and commercialization globally. So we've got a pretty good insight into all the opportunities out there with tech companies and with utilities to crack this nut on power demands and the requirement for it to be clean energy. So pretty exciting times. We're excited about RoPower. We're excited for NuScale about their technology being chosen over their support from the U.S. government as well. And we're looking forward to getting started on that front-end package for RoPower. And we believe there's going to be a lot more of it, both internationally. And I think the floodgates will start to open here in the U.S. as well as either with utilities taking on the assets in their facilities or over the fence, build on operate. Different business models are available and the tech companies are coming. I think they'll lean more towards PPA's power purchase agreements with the SMR developers out there. So Yes. times are good. Like I said, we have preferential rights with NuScale, and we know the technology best from an engineering design and constructability perspective. So it's shaping up to be something going forward that we'll be all over, so exciting times. On the monetization, we're still working with our strategic investor, I think everything I've just said about how positive things are shaping, that is definitely going to get the investment, I think, over the goal line here, we'll probably be talking more about it at the end of the year and letting where that stands with Fluor's shares and selling down the majority of our shares to a strategic investor that will take the commercialization forward. Thanks, Mike. Operator: Thank you. Our next question comes from Andy Wittmann from Baird. Your line is now open. Andrew Wittmann: Great. Thanks for taking my question. I guess, just wanted to ask on the SG&A guidance. I guess, is up this quarter versus what you were thinking last quarter. And so I was wondering if you could discuss what's in there, Joe. Is there something one-time? Is it incentive comp because you're turning out well? Maybe if you could just talk about the change there? Joseph Brennan: No. It's a one-time impact, partly due to some of the investment that flowed through into the build-out of our office in Houston, and it will be non-recurring, Andy, as we move forward. Andrew Wittmann: Got it. Okay. So we still like the $190 million as kind of the underlying rate for the company. David Constable: That is right. That's fair. Andrew Wittmann: Yeah. Okay. I just wanted to talk about the change order that you got in infrastructure on People Mover. During the quarter, there was an announcement publicly about some resolutions in the change order. Then there was a second announcement from [indiscernible] on this one, that was actually more substantial in the headlines. But I don't know, if that was Fluor's scope. So I was hoping you could clarify that. So was there any scope, or is there any relief given in the second wave of [indiscernible] money? And was that recognized in the quarter -- in the second quarter or could that be recognized in the third quarter? Just thought maybe you could comment on that one, too, Joe. Joseph Brennan: Sure, Andy. Yeah. The settlement that we've reached is a global settlement and the position that we've taken reflects our position to complete the project. Andrew Wittmann: Okay. Entirely the second quarter, yeah. Joseph Brennan: This settlement gets us to the finish line. And we don't expect any other changes other than if we're able to execute the job in terms of how we utilize reserves and contingencies. But this is the settlement that sets the kind of the mark for handing over the facility to the client. Andrew Wittmann: Okay. Those are my only technical questions for today. Thank you very much and have a good day. Operator: Our next question comes from Brent Thielman from D.A. Davidson. Your line is now open. Brent Thielman: Hey, thanks. Good morning. David or Joe, I actually just wondering if you can clarify why the upper end of the EBITDA guidance range came down. It seems like you've got some really good momentum going into the second half? Is it just the pace that you're seeing the new mid business deploy or anything else? Joseph Brennan: It's a good question, Brent. It is the pace of the deployment of some of these programs and they're coming online. It's more of where we are in the cycle, the burn cycle and the maturity of those projects. And as we see kind of where kind of we are in that progress, it made sense to kind of bring us off the top end of the range. and hold the midpoint. But all that backlog is going to continue to burn as we move out through '24 and into '25. So this is more just a function of where we are in the maturity of the cycle relative to the work that we've onboarded, the $60 billion plus of work that we've onboarded in the last three years. Brent Thielman: Okay. I appreciate that, Joe. And I guess my second question, I mean, it's sort of interesting. I mean, Urban Solutions now 60% of your backlog compared to less than 40% a few years ago, just curious, bigger picture, is this sort of a new look for Fluor going forward? I know you've got this potential pipeline of work energy solutions that could come down the line. But I guess, I'm just curious whether -- yeah, so this is sort of a new look for Fluor going forward or just a product of where the markets are right now? David Constable: Yeah. Thanks for the question. It's really encouraging to see that our strategic priority that we said back in early '21, based on mega trends we were seeing around the world driving growth across the portfolio outside of traditional energy, outside of traditional and gas has really come to fruition and really lined up exactly as we thought it would, and you're seeing that in Urban Solutions backlog of almost $20 billion. But we've also -- at that same time, we also wanted to grow traditional and gas, and we're happy that could come along and be a strong part of the mix, and I think it will be for the future, both in energy transition, but also in traditional. So -- and nuclear sits in energy solutions as well. Just be aware that, that, as we just talked about with Mike, we'll be sitting at -- those projects will be sitting in Energy Solutions going forward. So going forward, we're hoping and thinking that all boats will be raised across the three segments. And we'll enjoy watching energy solutions and Urban Solutions battle it out for who's got the most backlog. But right now, it's definitely ATLS based on data centers, semiconductor Life Sciences, Mining and Metals is very, very strong, as we've talked about. So yeah, I guess I'd say it's coming across all the business lines. Operator: Thank you. That concludes our question-and-answer session for today. I'd now like to hand back the call over to Mr. David Constable for final remarks. David Constable: Thank you, operator. Many thanks to all of you for participating on the call today. I'm very pleased with the company's performance to date and our trends for 2024, and our focus on bidding discipline and product performance continues to serve us well. So I appreciate your interest in Fluor. Thanks again for joining. Thanks. Operator: Thank you for joining today's conference call. Have a wonderful day. You may now disconnect.

Earnings call: Enbridge raises 2024 EBITDA forecast on strong Q2 results By Investing.com

Enbridge Inc. (NYSE:ENB), a leader in energy transportation, has announced a positive shift in its financial outlook during the Second Quarter 2024 Financial Results Conference Call. CEO Greg Ebel expressed confidence in the company's strategic advancements and robust second-quarter performance. Enbridge raised its 2024 EBITDA forecast to $17.7 billion to $18.3 billion, attributing this increase to the contributions from recent U.S. Gas Utilities acquisitions. The company also emphasized its commitment to shareholder returns and outlined its plans for capital allocation, including growth investments, debt reduction, and dividend payments. Enbridge Inc. remains focused on maintaining a strong balance sheet, seeking new projects, and prioritizing value-added projects with low build costs. Despite not providing guidance for the next year, the company's positive outlook and strategic initiatives suggest a robust path forward. As Enbridge continues to expand its operations and explore new opportunities, it demonstrates a commitment to both shareholder value and sustainable growth. Enbridge Inc. (ENB) has been a model of consistency and resilience in the energy sector, as evidenced by its recent financial performance and strategic initiatives. As the company navigates the complexities of the energy market, it's important for investors to consider key metrics and insights that could impact their investment decisions. InvestingPro Data highlights a Market Cap of approximately $81.85 billion, showcasing the company's significant presence in the industry. With a P/E Ratio of 19.77 and an adjusted P/E Ratio for the last twelve months as of Q1 2024 at 19.51, Enbridge presents a valuation that could be seen as reasonable in light of its near-term earnings growth. Moreover, the company's Dividend Yield stands at a robust 6.95%, reflecting its commitment to rewarding shareholders. Among the InvestingPro Tips, two particularly stand out for Enbridge. The company has raised its dividend for 21 consecutive years, signaling a strong and stable financial position that is capable of providing consistent returns to investors. Additionally, Enbridge is recognized as a prominent player in the Oil, Gas & Consumable Fuels industry, which is critical for investors looking for a well-established company with a commanding market presence. Investors interested in a deeper analysis of Enbridge's financial health and future prospects can find a comprehensive list of InvestingPro Tips, including 12 additional insights, at https://www.investing.com/pro/ENB. These tips provide valuable context for understanding the company's performance and potential, particularly in the current economic environment. Enbridge's commitment to shareholder returns and its strategic advancements, such as the U.S. Gas Utilities acquisitions and the progress in renewable energy projects, are reflected in these metrics and tips. As the company continues to execute its $25 billion in projects and seeks new opportunities, these insights can help investors make informed decisions about the potential risks and rewards associated with investing in Enbridge. Rebecca Morley: Good morning, and welcome to the Enbridge Inc. Second Quarter 2024 Financial Results Conference Call. My name is Rebecca Morley and I'm the Vice President of the Investor Relations team. Joining me this morning are Greg Ebel, President and CEO; Pat Murray, EVP and Chief Financial Officer and the Heads of each of our business units, Colin Gruending, Liquids Pipelines; Cynthia Hansen, Gas Transmission and Midstream; Michele Harradence, Gas Distribution and Storage; and Matthew Akman, Renewable Power. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session for the investment community. [Operator Instructions]. Please note that this conference call is being recorded. As per usual, this call is being webcast and I encourage those listening on the phone to follow along with the supporting slides. We'll try to keep the call to roughly one hour and in order to answer as many questions as possible, we will be limiting the questions to one plus a single follow-up, if necessary. We will be prioritizing questions from the investment community. So if you are a member of the media, please direct your inquiries to our communications team, who will be happy to respond. As always, our Investor Relations team will be available following the call for any follow-up questions. On to Slide 2, where I will remind you that we'll be referring to forward-looking information on today's presentation and Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We will also be referring to non-GAAP measures summarized below. And with that, I will turn it over to Greg Ebel. Gregory L. Ebel: Well thanks very much Rebecca and good morning everyone. We appreciate you joining us on the call today. I am pleased to be here to highlight the significant progress we have made on our strategic priorities and to discuss our strong second quarter results. I will start by providing a mid-year update outlining the team's strong execution of our financial, operational, and growth priorities. We have accomplished exactly what we said we would and then some and look forward to continuing the momentum through the balance of the year. I will give an overview on the utilities acquisitions and highlight what the team has managed to accomplish since we announced the deal less than a year ago. I will also provide an update on each of the businesses and highlight key developments there. And then before having Pat take us through the details of the financial results, I'll take the opportunity to share how we are seeing our scale and connectivity extending growth and providing opportunities across all our four business franchises. And more specifically, how we're seeing this play out in the market with growing power, natural gas, and oil demand. As some of you have heard me say, you can't run a full-time economy on part-time power and Enbridge is in a position to serve our customers and their growing demand full-time through multiple service offers. Once Pat wraps up, I'll close with a few key messages and then our management team will be pleased to answer questions following our presentation. Before I jump into the progress we've made this year, I want to acknowledge everyone impacted by the ongoing wildfires in Northern Alberta and British Columbia. We're committed to supporting our partners, customers, and communities during this challenging time. And while we've seen no impact on the operations to date, safety will be our number one priority as we continue to monitor the situation. Now onto the mid-year update. As you can see, we've achieved or made significant headway on the commitments we laid out at the start of the year. I'm pleased to share that the U.S. Gas Utilities acquisition funding is now fully complete. Moving forward, we don't see returning to the public markets for the equity portion of our capital needs, and consistent with that, we have now cancelled our ATM program. I'm pleased to report our base business performance is very much on track through the first half of the year. Separately, you will see that we are recasting our full-year financial outlook by adding to that original 2024 guidance the expected contributions from the two U.S. Gas Utilities we have closed, the expected closing of PSNC, and all of the associated acquisition financing. Pat will talk more about this later in the call. Our balance sheet remains strong with debt to EBITDA well within our targeted range at 4.7 times, providing financial flexibility to execute on our capital allocation priorities. I'm really proud of the team's execution and focus on operational safety and excellence. So far this year, we've had strong asset performance with high utilization across our franchises. As an example, just look at what's happening in liquids. During the second quarter, we achieved record volumes on the mainline and at our Ingleside export facility. As mentioned, we've closed two of the three U.S. Gas Utilities that we acquired representing what will ultimately be approximately 80% of the total annualized EBITDA, and have reached a settlement in principle with the public staff for the North Carolina Utility Commission. PSNC remains on track to close in Q3. We're also pleased to have reached a pre-packaged rate settlement on our Texas Eastern pipeline with customers. This reflects our continued focus on optimizing our return assets to ensure we are earning a reasonable return while delivering safe and reliable energy for customers. And I'm pleased to report that the FERC has now approved this customer settlement. On growth, we've made good progress executing opportunities in our development pipeline. We sanctioned the 130 megawatt Orange Grove Solar project in Texas backed by a long-term PPA with AT&T. Through our Whistler joint venture we have reached final investment decision for the Blackcomb pipeline, which will provide up to 2.5 BCF of much-needed natural gas egress for Permian shippers. And we sanctioned an expansion of our Gray Oak pipeline in our Liquids business. With clear line of sight to the U.S. Gas Utilities acquisition closing, let me take a moment to highlight our strong execution of that transaction. We're ahead on our plan to complete the $19 billion acquisition of these three gas utilities that we announced just last September. This reinforces our proven track record of effective M&A execution and highlights the strength of our relationships with all our stakeholders, including customers, regulators, and governments right across North America. Federal Approvals were all received due course with the closing of East Ohio Gas occurring well before our expectations in early March. We look forward to continuing to build long-term productive relationships with all stakeholders in Ohio as we integrate that premier utility business. Next, we announced the closing of Questar and Wexpro in early June. Again, our experience and relationships helped ensure timely regulatory approvals were obtained to welcome a growing multi-state utility into our Enbridge family ahead of expectations. Integration is going well so far and we will continue to provide safe, reliable, and affordable energy for our customers throughout the transition. In North Carolina, we are on track to receive regulatory approval and close in Q3. The team's dedication to executing these transactions, completing the financing, and integrating these assets which diversify our business and enhance our stable cash flow and growth profile has been straight. Now let's jump into the exceptional performance at each of the BUs. We saw high utilization across our Liquid system, once again this quarter. This highlights the demand pull nature of our systems and continued need for crude oil to fuel everyday life in North America and beyond. The main line transported record second quarter volumes of 3.1 million barrels per day and has so far been apportionment for all months in 2024. July volumes are also expected to be strong and we are expecting apportionment again in August. The utilization year-to-date and the great macro backdrop keeps us confident in our 3 million barrels per day estimate on the main line for 2024 and underpins discussions with customers for expansions in 2026 and beyond. I will also note that this marks our first full year under the new main line tolling settlement. The agreement has proven to be a win, win, win for us, our customers and the markets we serve. And as a reminder, we have annual toll inflators for operating expenses and power that were effective July 1st. We are also earning in the upper half of the RO lead performance color. In the Permian, we sanctioned 120,000 barrels per day expansion of the Gray Oak pipeline following a successful open season this quarter and expect this expansion will come fully online in 2026. The incremental volumes will serve growing demand at our Ingleside facility and we expect the expansion to be capital-efficient with an EBITDA multiple below five times. We now have 18 million barrels of storage capacity at Ingleside with an additional 2.5 million barrels under construction. Of note, Ingleside also set a quarterly record for exports and saw a single day loading record of more than 2.3 million barrels. This again underscores our belief that cash flow from that asset will be sustainable and growing for many years to come. Now let's take a look at gas transmission. We optimized our assets and advanced our U.S. Gulf Coast strategy during the quarter. As mentioned on Texas Eastern, we reached and the FERC approved a negotiated settlement with shippers effective October 1st. Base rates are expected to increase by 6% through 2025 with an additional uplift of approximate 3% in 2026. In the Permian, we closed the previously announced acquisition of an interest in the Whistler JV which brought into service the ADCC pipeline on July 1st. That asset will support U.S. LNG exports to global markets. In addition, the JV recently reached FID for the Blackcomb pipeline after securing firm transportation agreements. When completed in 2026, Blackcomb is expected to add up to 2.5 billion cubic feet per day of desperately needed natural gas egress for our Permian customers. The Venice Extension, another project serving LNG exports on the Louisiana Coast through the Plaquemines LNG facility, is on budget and on track to enter service later this year. Now, let's move on to our gas distribution segment. As I mentioned earlier, we closed the acquisition of Questar and Wexpro at the end of May, and we are well on our way to creating the largest natural gas utility in North America and expect North Carolina to close in the third quarter. As a reminder, each of these utilities have attributes that position us for long-term growth. Enbridge Utah is a fully regulated gas utility that serves more than 1.2 million customers, and we are excited about the data center opportunities we are seeing there. Utah's projected population growth is 5% annually through at least 2028, which we expect to drive rate-based growth for years to come. Enbridge Gas Utah rates are effective until 2026. In Ontario, we have almost 4 million customers and expect residential and industrial growth as well as system modernization will backstop ongoing rate-based growth in Ontario. In Ohio, we have another 1.2 million customers connected to our utility. We expect to continue growing rate-based through necessary investments, which will modernize existing infrastructure, ensuring reliable and affordable energy for our customers. Enbridge Gas Ohio has a rate case ongoing with new rates expected in 2025. All of our utilities, including PSNC, which we expect to close in the coming months, have attractive returns on equity and are located in natural gas supportive jurisdictions. Now let's turn to the renewables business and we made great progress on the growth commitments late at our Investor Day for that business. We previously announced the plan to develop the Seven Stars wind project in Saskatchewan with FID expected in 2025. This 200 megawatt wind farm will have greater than 30% indigenous participation and is backed by government loan guarantees. The project is expected to provide emissions-free power to more than 100,000 Saskatchewan homes and is a great example of how the cross pollination of our business units is generating growth. Moving on to solar, we expect to complete our investment in Fox Squirrel Phase 2 in Q3. Similar to Phase 1, Phase 2 is backed by a long-term PPA with Amazon (NASDAQ:AMZN) for 100% of the energy production. We also sanctioned the 130 megawatt Orange Grove Solar project in Texas with an in-service expected in 2025. This project is backed by a long-term PPA with AT&T for 100% of the off-take. In our conversations, we're finding more and more that hyperscalers value the reliability, experience, and proven track record that Enbridge brings to the table as a truly diversified energy provider. And finally, Fécamp is now fully operational, supplying nearly 770,000 people with low carbon electricity across the Seine-Maritime region in France. With four growing franchises and gas utility acquisitions almost complete, let's take a look at Enbridge's collective offering and why we're positioned to benefit from growing global demand. Our asset footprint makes up North America's first choice energy provider. In fact, we don't just have assets, we have franchises in each of the businesses where we're involved. Each of those franchises contain super-system, which are integrated value chains connecting the best supply basins in North America to key domestic demand markets and export terminals. Strong relationships with governments, regulatory, and tribal bodies makes us the first choice for energy delivery within the jurisdictions we serve. We have a strong track record of operational excellence, utilizing technology and innovation to drive efficiencies. Diversification and asset interconnectivity makes us a one-stop shop, which attracts high quality customers and partners like AT&T, Amazon, Exxon (NYSE:XOM), BT (LON:BT), Suncor, and NextEra to name but a few. Lower carbon optionality exists throughout our balanced conventional portfolio, and we plan to focus on investments that match the pace of global energy transition. And importantly, we believe all these growth opportunities can be equity self-funded through our strong balance sheet and disciplined capital allocation. Scale and connectivity are key competitive advantages that are driving new growth opportunities, so let me touch on those briefly. Our large income and asset position allows us to provide differentiated service offerings that is driving value for our customers. It's still in the early innings for us, fully realizing the advantage of our vast position, but we're seeing growing opportunities across our footprint due to increasing natural gas and renewable power demand and their interconnectivity. As an example, in our gas utility business, data center growth in Utah is being driven by the need for reliable and affordable energy. In this quarter, we added 50 megawatts under contract and have numerous additional inquiries to provide natural gas brought to an additional 1.5 gigawatts of capacity. Throughout our utility footprint, we are engaged in additional early stage discussions with data centers that we expect to translate into future growth. In gas transmission, our assets are ideally located and well connected. We are within 50 miles of 45% of all natural gas power generation in North America. In fact, in July, we achieved seven of our highest ever daily deliveries to U.S. power plants from our gas transmission system. We've had a range of customers in the U.S. Southeast that expressed interest in securing approximately 700 million cubic feet a day of transmission capacity to serve up to 5,000 megawatts of new gas power demand. In renewable power, our scale, financial and execution capabilities are differentiators. Data centers need base low power solutions such as natural gas to support the 24x7 energy demands of hyper scalers. But many customers are balancing that reliability requirement with their renewable energy commitments. It's not always possible to co-locate or develop behind-the-meter power solutions to support new data centers, so we are having discussions with large blue chip customers to provide traditional and virtual long-term PPAs. Virtual long-term PPAs are where customers may look at signing long-term offtake agreements to support development of clean energy products to offset emissions produced elsewhere in the business. We have over 2 gigawatts of regionally diverse wind and solar projects in development that we talked about at Investor Day, which are capable of serving new data center load with in-service expectations in 2026 and beyond. The collective strength of our franchises lends well to the growth opportunities in front of us, and I'm confident Enbridge will play an essential role of delivering energy everywhere people need it. With that, I'll pass it over to Pat to walk through yet another strong quarter of financial results. Patrick Murray: Thanks, Greg and good morning, everyone. It's been a very strong quarter for Enbridge and as Greg noted, we had continued high utilization across all of our franchises. Questar closed in May, and we've now brought in roughly 80% of the total annualized U.S. LDC EBITDA in-house. I'll be speaking to adjusted results on this slide inclusive of the utility acquisitions. Year-over-year, second quarter adjusted EBITDA is up 8% and DCF per share of $1.34 includes a higher share count from all the prefunding of the U.S. Gas Utilities. Liquids volumes were high across the board with the mainline transporting 3.1 million barrels per day, a second quarter record. Ingleside also broke its previously quarterly and daily records for export volumes. In GTM, lower operating costs as well as the Aitken Creek and Tomorrow RNG acquisitions more than offset the sale of Alliance and Aux Sable on April 1st. A full quarter of Enbridge Gas Ohio and partial contributions from our Questar acquisition added approximately $175 million of EBITDA as compared to Q2 in 2023. And in Canada, a higher distribution margin and customer additions over the last year helped offset the negative impact of warm weather at our Ontario utility. Below the line, higher financing costs on floating rate debt and new issuances and the higher share count that I mentioned before, impacted per share metrics. As you can see at the bottom of the slide, the base business continues to deliver strong financial results. So let's look ahead to how the rest of the year is shaping up. With two gas utilities in the door, all the financing complete and a good line of sight to closing PSNC, we're pleased to be able to recap Enbridge's 2024 financial guidance. We're raising our 2024 EBITDA range to $17.7 billion to $18.3 billion. This increase reflects partial year contributions from each of the U.S. Gas Utilities and assumes we closed PSNC mid-third quarter. Even with the partial years of EBITDA, all of the funding completed for these transactions, we're still maintaining our DCF guidance range of $5.40 to $5.80 per share. I'm also reaffirming our near-term financial outlook of 7% to 9% EBITDA growth through 2026, 4% to 6% EPS growth, and approximately 3% BCF growth per share. All in all, it's shaping up to be another strong year with base business performing well and great execution on both the closings and the full financing of the U.S. Gas Utilities. Now let's turn to the balance sheet. In reaction to closing Questar and the progress on the acquisition funding plan, DBRS and S&P took positive actions on our credit ratings during the quarter. DBRS upgraded Enbridge to A low and S&P removed the negative outlook, affirming Enbridge's BBB+ stable outlook. Fitch also reaffirmed our BBB+ rating. While not unexpected, we're pleased to see that the agencies share a view that our long-held leverage target of 4.5 to 5 times is a sweet spot for Enbridge. As we previously communicated, we expect leverage to peak after closing the PSNC acquisition and decreased throughout 2025 as we earn annualized EBITDA contributions from all the utilities. With that, let me move on to capital allocation. Our priorities remain unchanged, and we're laser-focused on the balance sheet. We canceled the remaining ATM this morning as we return to our equity self-funding model. We're well within our target debt-to-EBITDA range despite only partially EBITDA contributions from our newly acquired U.S. LDCs. The dividend remains a staple of our investment offering, and we're committed to extending our 29-year track record of responsible dividend growth by continuing to grow the business in a very sustainable manner. Our $24 billion of secured capital backlog, which is underpinned by low-risk commercial terms, will be funded entirely through internally generated investment capacity. We plan to deploy approximately $6 billion to $7 billion per year in growth capital, leaving us another $2 billion that can be allocated towards the next available opportunities whether that be sanctioning new strategic projects, accretive tuck-in M&A or debt reduction. With that, I'll pass it back to Greg to close off the call. Gregory L. Ebel: Great financial overview, Pat. Thanks very much. Now let me conclude with why we think we're a first choice investment opportunity. We have a consistent track record of sustainably returning capital to shareholders, supported by a visible growth pipeline. This has resulted in an annual total share return of greater than 10% over the past 20 years, and we see no change to that proposition going forward. We expect cash flow to grow 5% over the longer term and when coupled with a growing dividend, investors are positioned to realize an annual TFR of 10% to 12% for the foreseeable future, supported by our low-risk business model, which includes 98% of our cash flows generated from either cost of service or take-or-pay contracts, a customer base that is over 95% investment grade and 80% of the EBITDA earned from assets with protection against inflation. And our debt portfolio, which is less than 5% exposed the floating rate volatility. In short, we have diversified utility-like cash flows, a strong balance sheet, and visible growth opportunities across each business unit franchise that will support and extend our 29 consecutive years of dividend increases. We remain committed to continuing the strong track record of returning capital to shareholders and believe it positions us as a first choice investment. Thank you again. And operator, please open up the line for questions. Operator, please open up the line for questions. Operator: Thank you. [Operator Instructions]. Your first question comes from the line of Rob Hope from Scotiabank. Your line is open. Robert Hope: Good morning everyone, thanks for taking my call or my questions. Maybe to start off with the TEPCO rate case. Can you walk us through kind of what the key drivers of the change there are, whether there were kind of some key roadblocks there and as well as kind of what you think it does mean in terms of an EBITDA or income uplift in 2025 and 2026? Cynthia L. Hansen: Thanks, Rob, it's Cynthia. So the settlement, as you know, basically is a black box prepackaged settlement. So there's a whole bunch of items that came into consideration. So the team, our team at Enbridge looks at what capital we've spent, what our operating costs are, forecasting that out into the future. We also look at what our rates are going to be impacted, have lots of that kind of conversation. So a lot of stuff goes into determining what those components are. And we don't specifically identify any one thing. But what it does allow us to do is to continue to earn that fair return into the future. And basically, as was noted, that's a 6% increase as of October of this year and then a further 2.75% in January of 2026. So with that rate all in, basically, we're in a position to continue to get a fair return. The next time we'll go back, we have a moratorium up until October of 2027, but a comeback by Q3 of 2030. So we're just well positioned to continue to earn a strong return on those assets. Robert Hope: Alright, appreciate that. And then maybe moving over to the 2024 recast EBITDA guidance range. Can you walk us through the puts and takes there, it does seem like H1 has outperformed expectations, especially on the Liquid side and layering in the Dominion assets gets us towards the upper end of the range. Just want to get a sense of whether or not you have adjusted the other businesses or just layered in Dominion or are there some specific headwinds we should be looking for in H2? Gregory L. Ebel: Yes. Thanks, Rob, it's Greg. Yes, this is solely just based on layering in the utilities and the -- assuming that we get PLC here in the next couple of months and the related financing. As has been our practice, we don't change midyear the other business units. But you pointed it out well. Obviously, the base business are all doing really great, utilization, volumes, etcetera. So a super strong quarter. So yes, obviously, if you were just looking at the base business, you'd be at that upper end. Robert Hope: Alright, appreciate that color. Thank you. Operator: Your next question comes from the line of Robert Catellier from CIBC. Your line is open. Robert Catellier: Hey, good morning guys. Just a follow-up on the utilities here. What drove the decision to use the ATM versus asset sales and understanding that you're fully funded for the acquisitions, what do you expect in terms of any asset sales going forward given that you have that ongoing capital recycling program? Gregory L. Ebel: Yes. Thanks for the question on that. Here's how we looked at it. Obviously, we had a super high level of confidence in terms of getting all the utilities closed, even a little faster than we had expected. So with that in mind and the fact that we saw the better economics than what was even in our deal model, we moved quickly, confidently to get all the financing done. So that's done. It may not fit everybody's model, but definitely exceeded the deals economic assumptions that we had. With that behind us, the ATM terminated, it's really about now focusing on the business, get it at a great price, and how do we keep moving this transaction forward and combine it with the rest of the assets. And as you would recognize and definitely didn't know if it would work, even with all that, financing in the way in which we did it, we're going to be well within our guidance range. And as we just talked about, the base business would even look like it's better than that. So a great setup on that front. Asset sales still very much part of what we look at. Let's not forget, we did a large asset sale earlier this year with Alliance and Aux Sable, but we're always looking at stuff. I wouldn't say there's anything near term that we have to do. And I think that's the key component here. Balance sheet in good position, financing done, businesses all running well. If we do anything significant on the asset sale side, it will be solely as a result of getting a great price on something. Robert Catellier: Okay, thanks for that. And then just on the mainline, clearly, it's been a good quarter despite the on-site of TMX. But I have a couple of questions about the near term and the long-term outlook. First, just in the near term, I'm happy to hear your expectations of apportionment in August. But I'm just wondering what you're seeing in terms of risk of producer shut-ins in light of the forest fires and then if you look longer term, the need for egress in post 2026, what level of political risk do you see there, in other words, do you think the producers are going to need that capacity respective of what government is in place in Canada or do you think they are probably waiting for the Canadian Federal Election to get better clarity on carbon prices moving forward? Colin K. Gruending: Hey Robert, yes, it's Colin. Thanks for the question on the mainline. And indeed, it's performing well. Business is good. We are apportioned in August. And I think Greg mentioned that we're very comfortable with the 3.0 million barrels per day full year guide. We're probably likely to exceed that, all things equal. But you did mention the risk of forest fires, I think that remains a present risk, maybe similar to last year. So to date, really negligible impact on mainline volumes and basin production. There are active fires in the region. As you know, we're in close coordination with all our producers and have, I think, collective everyone's enhanced their investments in mitigation since 2016 but mother nature is there. So we'll watch that carefully through August, September here. But so far, we're looking pretty strong for the year, all things equal. That's the near term. So on the long term, I think on egress Greg mentioned, we're teeing up some insurance egress at a minimum. It's likely they will get used on the 2026, 2027 period. We're socializing that with industry. There's a significant interest at this time. I think if you look at each producer's book of supply optimization, debottlenecking, and modest kind of modular growth, I think that's all also as announced by each of them, and we track it, bottom up and top down, it is likely to proceed kind of irrespective of any administration. It's all manageable, and I think will fit within climate policies stated. There's potentially upside to that, I think, if things change, and we'll be on top of that. I mean I'm not really that concerned with egress bottlenecking here again, industry and collectively has a good beat on that. And I'm virtually there to serve as we've done in the last couple of decades. Robert Catellier: Okay, thanks for those answers. Operator: Your next question comes from the line of Ben Pham from BMO. Your line is open. Benjamin Pham: Hi, thanks, good morning. Just on the data center comments and that slide you had, the map and the blobs there. Could you comment on which is the segment you expect to see the best reward or the highest investment opportunity and are you indifferent somewhat to where you're allocating capital towards that growing opportunity? Gregory L. Ebel: Yes. Good question. I think they're all going to benefit, maybe not liquids as much, but it's got its own great opportunities. Probably the initial phase you see is GDS. And you saw we announced one today, and Michele and the team there signed up a 50-megawatt lateral into -- or a lateral 450-megawatt plant there. So I think that's probably the easiest move right away. But gas transmission has a lot of opportunities, too. As I mentioned during my opening comments, there's 600, 700 a day of request for capacity in the Southeast. Some of that will be coal to gas changing, but a lot of its data center driven, things like storage. Obviously, that exists both in GTM and GDS. And then let's not forget Matthew's business on the power side. And obviously, data centers, a lot of those folks are trying to meet just like a lot of other folks, to lower emission goals. And so they may like the gas for the reliability side. They'll help fund some of these projects with very long-term contracts, kind of like what you saw today. In terms of which ones get the capital, that's a classic risk-adjusted return base. It's obviously very, very safe capital that goes into the distribution business. If you've got long-term power purchase agreements on the renewable side, same thing. And obviously, there's a tax kicker there that we like. And then TTM, same thing. So they all have great returns on the equity portion, and then it's a classic discussion of how fast, how quick cycle the capital can be and the quality of the off taker. So I think the key is, unlike anybody else, we have an opportunity to play in all elements of that. So when you look right across the entire system, liquids demand is up, NATI is up, electrons are up. If you look at the supply side, the same thing, liquids are up, NATI is up, electrons are up. And if you've got linear infrastructure and all those pieces, you win. So I think you'll increasingly see us use that interconnectivity to give exactly what our customers want and something that's a differentiated offering from what anybody else has all of which is a great setup for us to allocate capital to those best opportunities. Benjamin Pham: Alright, that's great context. Thank you. And maybe a second question on the U.S. gas utility acquisitions, now you're closing or soon to be close all of them. Like what's the near-term focus or initiatives those buckets and can you comment on that 8% rate base growth visibility or expectation on how long that could persist? Gregory L. Ebel: Sure. Michele is here. I'll let her respond. Michele E. Harradence: Sure. So of course, initially, we're really focused on integrating the utilities into gas distribution and storage. We stood up an organization to do that even before we announced the deal, and we've been very focused on it. We brought in Ohio now in March. We brought in Utah with that Idaho, Wyoming and of course, the Wexpro assets in June. And that comes with about 2,500 employees, that comes with almost 2.5 million customers, and it's gone very, very smoothly so far. And you'll recall that we have a lot of experience in doing this with the Union Enbridge Gas merger that we did in Ontario. So feeling good about that. We've got about 30 months to work through our TSA with Dominion Energy (NYSE:D), so lots of support for them. Of course, the first thing we've been doing is we've been bringing these utilities in and being able to look under the hood. A bit more is really testing and understanding those growth opportunities. And I've got to tell you guys, still really love these utilities. I love the diversification of the growth that we get from these utilities. So Ontario -- and let's not forget about Ontario. Ontario is still going strong with its economic growth about 40,000 customers a year that we're signing up there. Utah, like Greg mentioned it in his overview, top-tier population growth, about 5% annually through 2028. So they're attracting over 20,000 customers a year. And then along with that rate base growth, Utah has a regulatory approved rider programs that support things like rural expansion. And of course, we just talked about the data center growth that they're seeing along the Wasatch [ph] front. Similarly, Ohio great growth that's driven primarily through the rider eligible modernization program. Lots of work to do there to upgrade those systems. But again, that's going along really smoothly. And I'm quite confident we'll be just as pleased with North Carolina. So the growth projections we've given, we feel very, very good about for the next several years. Gregory L. Ebel: Yes. I think at 8% CAGR on a rate base through 2027 doesn't really take into account the data center [Multiple Speakers] call early days. So anything we get on that front will be additive. So -- and I like -- equally, so it's not just the rate base growth is different in each area, which I think underlines the ability. Depending on where you are in the cycle, it might be modernization, it might be growth, it might be data center, new builds, maybe changes from coal to gas, all of those pieces. And then I think the other thing we're really focused on as well is just that interconnectivity, where can we utilize gas transmission and/or power to help the utilities or vice versa? Benjamin Pham: Okay, got it, thank you. Operator: Your next question comes from the line of Jeremy Tonet from J.P. Morgan. Your line is open. Jeremy Tonet: Hi, good morning. We've heard a lot about data centers South of the 49th parallel. I'm wondering if you see anything percolating North of the 49th parallel that you could capitalize on? Michele E. Harradence: Yes, it's Michele here. So let me talk about Ontario a little bit. And for some of you who may have seen it, I've been told that the grandfather of AI is out of the University of Toronto. And more recently, I heard a statistic that there are over 250,000 jobs in Ontario tied to AI, in fact, more than in Silicon Valley. So without question, there's a lot of inbounds going on in Ontario right now about data center growth. I think the ISO is taking a good hard look at things. We know there's a certain amount of, let's call it, forum shopping that's going on, seeing where they can get that. But certainly in the GTA in particular, the Southwest GTA, lots of inquiries about data centers. And given that the timelines to build transmission and other support, there are absolutely going to be opportunities for behind-the-meter support that we can give on the gas distribution system. Gregory L. Ebel: Kind of analogous in Ontario to how we are seeing the greenhouse business change over the last 20 years, right. Good land, good location, great access to obviously gas infrastructure, nearness to the border, etcetera. So I wouldn't be surprised to see maybe not the same kind of explosive growth that we've been able to see on the greenhouse side, but definitely a good setup. Jeremy Tonet: Got it. That's very helpful there, thanks. And then just looking at the mainline and looking forward a bit more, just curious for any other color that you could share in particularly looking even later dated. I think in the release you talked about your conversations with regards to incremental egress opportunities. Just wondering if you could expand a bit more on what you see there? Gregory L. Ebel: Yes, sure. Indeed, I think with the strength in supply growth and appetite to get to U.S. markets continually in the bid, pulling it that way, industry is casting inside to the future. I like your question. And indeed, we are designing and socializing, as I mentioned, an expansion of the mainline in that late 2026, 2027 period. It would be very capital efficient as our historic expansions have been. This would be in right away, very brownfield, more optimization than expansion, so to speak. But we would be looking to add circa 150,000 barrels a day. Let me say, I think it's quite executable and very economic for industry. So I think that's the next major tranche of egress expansion we have on deck there, but there's also continuing optimizations like we do every month and have for decades. So like I say, I think if you're looking at things base differentials and things, I'm not that concerned that they're going to blow out again. I think there's going to be solutions that they're ready here in time. Jeremy Tonet: Got it, that's very helpful. Thank you. Operator: Our next question comes from the line of Manav Gupta from UBS. Your line is open. Manav Gupta: Thank you guys and positive update on the data center side. Can you just go back and talk a little bit more about the JV that you announced last quarter with MPLX (NYSE:MPLX), Whitewater and the benefits of that going ahead? Also, you guys have a track record of eventually becoming the operators of assets like Gray Oak. So would there be a desire to eventually operate this from the Enbridge side? Cynthia L. Hansen: Thanks, Manav, it's Cynthia. Yes, it's -- we're very pleased with the investments that we made in Whitewater. As you know, we have 19% of those assets. And of course, that includes the 100% of the Whistler pipeline that provides an incredibly important egress from the Permian, as well as 50% of the Waha gas storage and then 70% of the ADCC pipeline that just went into service on July 1st. So we have, with the announcement of the Blackcomb expansion, that's the kind of expansions that we were really excited about, and it's coming to fruition in a very short period of time. They're great assets, they're great operators. We're happy to be a part of that. We see opportunities for growth. Of course, now that we're just a minority interest in that, but we have, as part of that, our Rio Bravo pipeline is now going to be operated and constructed through Whistler. So these are all great assets. We're happy to work with our partners on that. It allows us to fully participate in that Permian expansion, something that we've looked at for a long period of time. Now the future, I think, is very bright. We'll continue to have opportunities to participate there and looking for future opportunities in that space. Gregory L. Ebel: Yes, I think well said. We're good JV operators too. We've had a long history of working in JVs with great partners. Those are great partners. So I think the future with the structure that exists there today is going to deliver a ton of value, and it's been a great job the team putting it together. Manav Gupta: Thank you for the detailed response. I will turn it over. Thank you. Operator: Your next question comes from the line of Robert Kwan from RBC Capital Markets. Your line is open. Robert Kwan: Thank you, good morning. If I can just start with your strategic priorities and just what do you see as the top two or three over the next 12 to 24 months, but can you also specifically comment on whether there are any large projects that you haven't announced yet or other major asset bases or platforms that you feel are important to execute on your strategy that you need to action on that in that similar timeframe? Gregory L. Ebel: Well, here's the first three, I'd give you, Robert. So the first one is, as always, we're doing it, and you see we've made some adjustments this year, it's getting most out of the base assets that we have. How do you get the return on the capital that you already have employed improved, that's exactly how you get 1% or so of growth out of constantly doing that and we've got a great track record and very focused on that. So that's number one. Number two, integrate the utilities that we've just bought both from an operational perspective, but also what other opportunities could exist there commercially, etcetera. Number three, we got $25 billion of projects, which maybe gets to your second question as well. $25 billion of projects that we're executing, $18 billion or so which are in the power and gas side. That's a huge element because that's all about future growth. And doing that all within our ability to keep the balance sheet between 4.5 and 5 times that's the primacy out there right now. So those are what I'd say the top three things to focus on right now, and that's a handful. We're always looking for additional new projects. I think as Colin just laid out, as Cynthia has laid out, and even if you look at both the renewable backlog as well as the utility businesses, those don't have massive projects. They've got real value-added projects at relatively low build. So you're doing things in JVs, whether it's Whitewater, whether you're adding incremental egress that is actually low multiple builds or things like the Gray Oak stuff we're doing on the Gulf Coast, or quick cycle capital that we're seeing at the utilities, $1.5 billion or so going to maybe $3 billion that you can turn quickly. That's better than actually focusing on a $10 billion project that may take 10 years to build. And then of course, Matthew's got the same thing. Got out and bought the TGE assets, and that actually accelerates the growth pattern for renewables and not having to wait for six or seven years there. So I think it's a lot of singles and doubles that add up to a big home run for the corporation. Robert Kwan: Got it, thanks. And if I can just finish to better understand or more color on your guidance. First, just on the mainline, you mentioned 3 million barrels a day. You had 3.1 million the first half. So does that imply 2.9 million in the second quarter, and you can also say just what you are moving right now or what you moved in July, but just also as you get to DCF per share can you just talk about any of the adjustments to your original guidance or can we just take the base business reconciliation in the report and effectively annualize the quarter to get to some of the DCF changes? Patrick Murray: Yes. So Robert, it's Pat. I think on your volume question, I think Colin even mentioned that really confident with the 3 million barrels, probably even a little bit of upside there, given where we're at today. Remember, there is a bit of seasonality in the mainline and that heat restrictions sometimes costs come down a little lower in that kind of July, August, September timeframe. So we'll see a little bit of that. That has nothing to do with either the demand pull or supply push. It's just the way the pipeline operates. But feeling really good about that 3 million and even potential upward from there. I think the way to think about the new guidance is that -- or the recast guidance is that we really just layered on the utility. So the EBITDA, the partial years of EBITDA from each of them and then all of the financing that we did to kind of derisk the funding plan over the last 12 months. So from a DCF perspective, it really is just taking the extra shares and the hybrids and debt that we issued and layering that on to the base plan. It's kind of as simple as that. And I mean, I think it's a really good data point that we've mentioned, Greg mentioned we should be in that upper part of the EBITDA guidance, but that's what gives us a lot of confidence as well that will be in that kind of midpoint of our new DCF guidance range even with all the prefunding we did because we knew with partial year EBITDA that, that would bring that down a bit. So really pleased with the new guidance levels and the way the business is performing. Robert Kwan: Okay. But just on your reconciliation, we can take the maintenance CAPEX in the quarter for the most part and annualize it. It looks like there's absolutely no tax incremental involved? Patrick Murray: Yes, no meaningful cash tax from the transaction as we -- I think we mentioned originally. And from a maintenance capital, it will be a little bit more in the back half because of course, we didn't add Utah until, what, beginning of June. So we only have one month in the quarter for that. I mean, of course, we're going to add PSNC. It's the smallest of the three utilities. We've already got, tell it, 80% of the of the cash flow in, but there'll be a little bit more uptick in the back half of the year just because we'll have basically all three for almost the full back six months. Operator: Your next question comes from the line of Keith Stanley from Wolfe Research. Your line is open. Keith Stanley: Hi, good morning and congrats on a smooth process getting the gas LDCs done. Wanted to ask on the Ohio rate case that you're in right now. Just any impression of the staff rack that came out and then your level of confidence and visibility on reaching a settlement and constructive outcome there? Michele E. Harradence: Sure. It's Michele here, Keith. So as you noted, the staff filed a report in July. It's really not unusual for the regulator staff responses to be different than what we would file in our initial rate applications. As you note, I think the PUC in Ohio definitely has a preference to settle, and we certainly think that we should be able to do that with them, and we're looking forward to working with them on that agreement. I would say that we expect a final determination that should -- it will take several months to negotiate it. It should be -- it's something that gives us an opportunity in a fair return. And we definitely expect it to land within the model that we set for the transaction itself. So we're quite confident that we're going to get there. Keith Stanley: Great, thanks. And then in a prior question on strategic focus, I don't think you listed M&A as one piece of that strategic focus. Is that still on the back burner with the gas LDCs pretty much done now or do you think there will be opportunities over the near term that could make sense? Gregory L. Ebel: Well look, I mean, we always look at M&A. It's always -- given the size of the entity and how far and how many different businesses we're in, both on the buy and the sell side. But I didn't focus on it because I don't see anywhere as you just stated, something like the utility acquisition. That size of transaction, obviously, kind of a once-in-a-decade type opportunity. So yes, we'll look at that again, both on the buy and the sell. But I see that very much in the phrase that we use. The tuck-in size wouldn't be anywhere material like the utility side of things. Theresa Chen: Good morning. Just to dig a little deeper on the Blackcomb discussion. So with the FID, can you remind us if there are any downstream synergies to tie into your existing Texas transmission or storage assets and I understand you're a minority and a new partner or newer partner in this JV. Just looking at the future of the Permian, going back to some of Cynthia's comments in the visible gas growth and what seems to be a need for Greenfield pipe maybe every two years. Can you share why you think Blackcomb was the winning project given many projects in competition and with this commercial win, how the partnership is set up to grow in the outer years, given the visibility for additional gas and gross demand out of the basin? Cynthia L. Hansen: Yes. Thanks, Theresa. As you mentioned, Blackcomb is one of the winners in that space. I think one of the reasons that the JV with Whistler is set up to be successful is that they have a really strong track record of delivering on time, on-budget projects there. So I think that probably is something -- that's one of the reasons we were attracted to entering into the JV. And I'm sure that, that was a contributing factor for why they were successful or we're successful with Blackcomb. As you look at the timing of it, it's something that because it's an interstate pipeline, they're able to execute quickly. So the completion date for Blackcomb is in the second half at 2026, that's fantastic. For commercial reasons, any specific questions need to be directed to Whitewater as to what their future is. But from our point of view, they're very well positioned to continue to expand in the Permian. For the infrastructure, as it ties into us, of course, we have a very significant presence in that Aguadulce area with their infrastructure there. And it's great just to see more and more investments and more volumes flow in. So I think that, that all bodes well for our overall infrastructure in that area. But it is, again, one of the reasons why we were so excited to execute on this transaction and be part of the joint venture. There is a very strong operating history for Whistler and they are very well positioned in the Permian to continue to expand. Gregory L. Ebel: Theresa, I'd only add that this is kind of a copy paste of the super system built on the Liquid side, right. We first entered into Ingleside and then a bunch of JVs and things like Gray Oak can catch us, too. And so all to feedback into what customers want, an integrated system back to the Permian and I think as Cynthia just went, whether it's the JV or additional assets, it's optionality. And that's what we're trying to build down there, that's what customers want. And I think that's a winning combination, which you're seeing play out. Theresa Chen: Thank you. And turning to the liquids side, the contribution from other systems seem pretty strong over the last two quarters, real step-up since last year. Is this a new normal range at this point, are you still seeing strong utilization of Express Plus, for example, even with narrowing WCS during the quarter and how should we think about that line? Patrick Murray: Yes, it's Pat here. Yes, I think you're seeing really good performance out of assets like Express-Platte out of the Bakken system. You also have the Southern Lights in there and the new accounting around some of that. But generally, they've all been operating kind of in line with our expectations, but a little bit better than the prior year. So we continue to see that being around the track record. You see, I think, in fact, I think the sum of the two quarters is almost exactly the same. So that's a pretty good run rate as we move forward here. Colin, I don't know if you have anything to comment on Express additionally. Colin K. Gruending: Yes. I mean just business is good across all three basins we're in, Canada, the Bakken and the Permian. I think record set kind of on a quarterly basis here again. Oil is on. And I think you can count on this generally repeating. We're not giving guidance today for next year, but it's strong. Patrick Murray: Yes. Volume up, demand up, infrastructure up. We already got it in the ground. So I think you can continue to see that happen. Praneeth Satish: Thanks all. So I guess, first on data centers, with the emerging opportunities in the LDC segments -- in the LDC segment. Just two questions here. First, how are you assessing the CAPEX profile of the LDCs, does the increase in demand for data center connections, does that impact the $1.7 billion to $2 billion per year of LDC CAPEX that you previously highlighted? And then second, how do you see support for data centers evolving from both regulatory agencies and also just public perception as it relates to rates and grid stability? Patrick Murray: Checking from a capital profile, it's Pat, I can take that. I think it's a little early to say that it's going to be significantly more than that in the next year or two here, but we see some more opportunities. So there's probably upside to that number. I think the important part in my mind is that Greg and Michele both talked about the diversity of capital and the way it grows and the way that we can use riders to get the return on that as quickly as possible. I think this has one more diverse growth factor in many of the regions we're in. So I don't think we're at the point yet where we would adjust up that guidance that we are speaking of, but I think there's an upward bias for sure as a result of what's going on. And maybe Michele can speak about the cost and those discussions. Michele E. Harradence: Yes, you bet. I mean, it certainly, we would see it as upside. It's not something that we had in our model. And I think it's important to note, Utah and North Carolina, Ohio, they do have expenses to the riders, but Utah and North Carolina going in for rate case every two to three years as well. So it's very prick-cycle capital as that comes. And if things start to shift we'll be able to get that capital in there. And there is, particularly in Utah and North Carolina, a lot of demand for data centers. Ohio, we're a little on the edge of where the demand center growth is, but we would see that demand backing up into our regions as well. And then with Ontario, of course, we have our ICM, our incentive capital module that we're in the middle of working through the Phase 2 rate case to work out right now. So all of them, we would see as upside. In terms of the -- what the regulators are thinking about it, I do think that the regulators are trying to understand what, if any, policy decisions they need to make with regard to data centers, it is a different type of growth and demand on the system in a world where there's all sorts of demand for that reliable energy and a reliable electricity. So again, though, that's where our natural gas system really steps in to provide that support for that resilience and reliability and affordability that those data centers are looking for. Not to mention, as we've talked about on the renewables side, as well. So we feel extremely well positioned with it. Gregory L. Ebel: Yes. We may -- look, we often talk about being first choice for customers, but also for regulators and policymakers. I mean, one of the ways to deal with if there are concerns about that from a rate perspective is you do it through GTM. And you build a lateral there and storage which is more on a contractual basis, as you know, doesn't hit others. I think the key here is you want to have lots of tools and we have them. And you want to be in a lot of jurisdictions. I know a lot of discussion about Virginia being a great place for [indiscernible], that's true. It's also a highly dense population area, where Utah, parts of North Carolina, may not be as safe. And also it is hugely known Utah is the silicon slope and obviously, the technology triangle in North Carolina, too. So there are more places to be able to build. And if you're in those locations, you've got the opportunity. So I think it's -- let's call it often called the liquid system, a bit of a tool in a kind of knife. Patrick Murray: Swiss Army knife. Gregory L. Ebel: Swiss army knife, there we go. So that's -- I think that's the same thing right across the entire system. So yes, it came on for us. Praneeth Satish: Yes, that makes a lot of sense. And just quickly on mainline. With it being apportioned every month this year, can you help quantify how much headroom is remaining within the ROE collar, I know you said you're earning in the upper half, but I guess I'm just curious how close you are to the ceiling and whether you're on pace to hit the ceiling if current market conditions persist? Colin K. Gruending: Yes, thanks. So I think we are just above the midpoint of that in 2024. I think 2025, we're probably a little higher yet and in 2026, we're probably approaching the top. So it's all working kind of as intended. It's a win for everyone here. We're moving a lot of volumes, keeping attractive economics for all our customers. Praneeth Satish: Got it, thank you. Operator: Your final question comes from the line of Patrick Kenny from National Bank Financial. Your line is open. Patrick Kenny: Yeah, good morning. Just a follow-up on the discussion around further asset sales outside of receiving an attractive financial. Just wondering if more so from a strategic standpoint, if you're still actively pursuing additional minority sell-down opportunities with indigenous groups and if so, which regions or franchises might you be keen to execute partnerships for similar to your deal that you did on your oil sands pipelines? Gregory L. Ebel: Yes, for sure. Look, I think we've one of the trailblazers on that front you just saw this quarter, we announced not a sell-down, but a go-forward project in Saskatchewan that's very much a collaboration between the renewables group and the Liquids group. We've always talk about are there other opportunities on the liquid side. I know Cynthia and her team are looking at that as well on the gas side. So I think right across the board, yes, that's different than saying selling an asset to raise funds. We don't need to do that. This is really when you do those, it's about relationships, about doing the right thing. It's about future opportunities, and there's a lot of stakeholders to deal with. And we believe that if you do these transactions wisely with respect in the heart of reconciliation, that's going to help you in the community overall, that's going to help you deliver on those projects, and all that is value-adding to Enbridge's proposition. I don't know, team, if there's anybody else who wants to, Cynthia? Cynthia L. Hansen: Well, yes, we've said this before with all the work that we're doing in British Columbia, it's obviously an area that we're looking at. We have recently filed with the CER, an opportunity to allow us to do that in British Columbia with our West Coast system. So it's something that we're always actively looking at to make sure that we can support our -- the indigenous economic reconciliation. Gregory L. Ebel: Hey Pat, just if you're keeping track, we've got, I think, four announced co-investment partnerships now, right? So Thailand, Ontario, Northern Alberta on a liquid system, the carbon hub near Edmonton and the Weyburn. So that's lost track, but there's three or four different asset classes there. And just you're probably looking at it from a financial lens but if you haven't checked it out, we've got a published indigenous reconciliation action plan on our website. Economic participation is a major tenet of that plan. Patrick Kenny: Okay, that's perfect. Thanks for that. And then maybe on Ingleside and the record exports there in the quarter, just wondering if you could provide any additional color on the contracting profile of the facility and perhaps an update on how your volumes might be protected from competing export terminals potentially coming online along the Gulf Coast, as well as how we should be thinking about further upside and throughput based on some of your near-term initiatives underway? Colin K. Gruending: I'll try to abbreviate the answer. There's a lot in there. Listen, I think we feel really good about our position there. It's the number one market share terminal in the U.S. and it has its advantage, as we've talked about in many respects. So customers want to come there. We've been quite busy there recently. The trends are encouraging. There's another million barrels a day of Permian volume coming. I think we'll capture our share of that given that advantaged math. Here's a stat for you, the facilities to date has moved 3 billion barrels of oil off the dock. It's a major and central part of the plumbing in the Permian. I think it's going to ensure where we have life left on our contracts here. And as we look at, I guess, competitive situations there and I'm not sure which competitors you're referring to but potentially, you're thinking about offshore buoys that are conceptually out there. I think we're going to compete fine with them. I think if they do come into play, I think the smaller, older, less advantaged terminals will may lose some market share there. So we think we're in pretty good shape here. We're going to grow this. It is the Swiss Army knife, and we're also going to bring other commodities to this facility for the same advantages it has. Patrick Kenny: That's great Colin. Thank you very much. Operator: And that concludes our question-and-answer session. I will now turn the call back over to Rebecca Morley for closing remarks. Rebecca Morley: Great. Thank you, and we appreciate your ongoing interest in Enbridge. As always, our Investor Relations team is available following the call for any additional questions that you may have. Once again, thank you, and have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.