TPC earnings call analysis

NYSE:TPC Q1 2026 Earnings Call Transcript Generated on 6/6/2026 Rob | Conference Operator: Good day, ladies and gentlemen, and welcome to the Tudor Perini Corporation first quarter 2026 earnings conference call. My name is Rob, and I will be your coordinator for today. All participants are currently in a listen-only mode. Following management's prepared remarks, we will be opening the call for a question and answer session. As a reminder, this conference call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I'll now turn the call over to your host for today, Mr. Jorge Casado, Senior Vice President of Investor Relations.

Please proceed. Jorge Casado | Senior Vice President, Investor Relations

Hello, everyone, and thank you for joining us. With us today are Gary Smalley, CEO and President, and Ryan Soroka, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during today's call, we will be making forward-looking statements, which are based on management, current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find disclosures about risk factors that could contribute to such differences in our Form 10-Q, which we are filing today, and in our Form 10-K, which was filed on February 26, 2026. The company assumes no obligation to update forward-looking statements, whether due to new information, future events, or otherwise, other than as required by law. In addition, During today's call, management will be referring to certain non-GAAP financial measures. You can find information and a reconciliation of these non-GAAP financial measures in the earnings release that we issued today and in the Form 10-Q being filed today, both of which can be found in the Investors section of our website. Thank you, and with that, I will turn the call over to Gary Smalley.

Gary Smalley | CEO and President

Thanks, Jorge. Hello, everyone, and thank you for joining us. Before we discuss our first quarter results, we wanted to share with you tragic news regarding a recent incident that affected the Tutiprini family. A few weeks ago, during Super Typhoon Sinaklu, our offshore cargo vessel, the Mariana, capsized at sea with a six-member crew that included two of our employees near the island of Saipan in the northwestern Pacific Ocean. It's an unimaginable loss for all of us at Tutiprini, and we extend our deepest thoughts, prayers, and heartfelt condolences to the crew's families, loved ones and the entire affected community. We have been in close contact with the families to provide them with updates and to offer our support. We remain committed to the families and will continue to work with them to provide whatever support we can. I would like to express our sincerest appreciation to the U.S. Coast Guard, the U.S. Air Force, U.S. Navy, as well as search teams from the Japan Coast Guard, and the Royal New Zealand Air Force for their professionalism and tireless efforts during an intensive nearly two-week search and rescue mission. One of the bodies of the crew was found, but the other five were not. Before proceeding, I will now pause for a moment of silence to honor and remember the crew members and pray for their families and friends. Thank you. Turning to our usual agenda. We delivered strong first quarter results highlighted by record operating cash flow of $147 million, by far the highest first quarter result ever, which was driven by collections on new and ongoing projects. Our revenue grew 11% year over year to $1.4 billion, the highest revenue of any first quarter since 2009, driven by contributions from various larger higher margin projects that are in the early stages with significant scope of work remaining. Brian will get into more of the details of our financial results shortly. Our backlog remains very strong at $19.8 billion at the end of the first quarter, and we continue to expect that it will feel much higher revenue and earnings, increased profitability, and continued strong cash flow this year and beyond. The civil segment produced its highest ever first quarter operating income which was up 10% year over year and delivered a 12.6% operating margin, solid results for a first quarter, which is typically a slower quarter for us due to seasonality. The building segments operating income was up an impressive 56% year over year with an operating margin of 3.5%. And the specialty contractor segment continues to deliver solid execution on its current projects, improved operating results, as evidenced by the fact that they were marginally profitable for the quarter, with further improvement still expected as the year unfolds. In fact, we see higher margins ahead for all three segments as many newer large projects continue to ramp up. In the first quarter, we booked nearly $700 million of new awards and contract adjustments. The largest additions to backlog included the following, which are all in California. $186 million of additional funding for the Eagle Mountain Casino Phase II expansion project, $97 million of additional funding for a healthcare project that entered the construction phase, and approximately $66 million for two mass transit projects. Our strong backlog, which includes the nine megaprojects we won over the last one to three years, provides us with excellent visibility for our future revenue and earnings over the next several years. Recently, one of our major projects, the Brooklyn Jail in New York, reached a key milestone. The project held its topping out ceremony, marking the completion of the structure's steel frame with the placement of the final and highest structural beam. Workers and dignitaries watched as the final beam, adorned with the traditional evergreen tree and American flag, rose 15 stories to its destination atop the building that, when completed, will be a $1 million square foot facility and have 1,040 beds. This project and all of our other major projects are all running very smoothly with solid business execution and strong financial performance. As I have discussed previously, customer demand remains strong and we continue to have numerous significant project bidding opportunities, particularly in the Northeast, the Midwest, the West Coast, and the Indo-Pacific region. We believe we're all well positioned to continue winning our share of new projects later this year and over the next several years. We will continue to be very selective when we bid future projects, which will continue to enhance and help maximize shareholder value. Our focus remains on bidding projects with favorable contractual terms, limited competition, and higher margins. In addition to vibrant demand across the markets we serve, Some of our existing projects are expected to spawn significant incremental work, which bolsters our confidence that our backlog will remain elevated. For example, we anticipate adding approximately $1 billion of additional backlog in the second half of the year for the finished trades scope of work for phase one of our midtown bus terminal replacement project in New York. Also, some of our building segment projects that are currently in the pre-construction phase are anticipated to advance to the construction phase later this year and the next year. The largest of these is a multi-billion dollar healthcare project in California expected to begin construction in late 2027, for which we currently only have a nominal amount of backlog. Let's talk about some of the significant bidding opportunities we expect to pursue over the next 12 to 18 months. They include the multibillion-dollar Penn Station transformation project in New York, for which the U.S. Department of Transportation has recently announced a substantial amount of committed funding and for which the selected development team is expected to be chosen later this month. The $1.4 billion I-535 Blatnick Bridge project in Minnesota, for which the selected contractor is expected to be announced next month. A multibillion-dollar additional segment of the California High-Speed Rail project bidding later this year. The $1 billion I-69 ORX Section 2 project connecting Indiana and Kentucky also bidding later this year. The Sepulveda Transit Corridor Program in Southern California believed to be valued at approximately $12 billion and expected to be awarded under multiple contracts with the initial contract expected to be bid next year. The $3.8 billion Southeast Gateway Line also in Southern California and bidding next year and the $3 billion Newark Liberty International Airport Terminal B project in New Jersey, very similar to the award-winning Terminal A project that we recently completed at the same airport. This enormous number of significant opportunities I just mentioned doesn't even include numerous projects we are pursuing in the Indo-Pacific region, which collectively total more than $4 billion and include military infrastructure improvements at Naval Base Guam, airport and harbor projects on the island of Yap, and wharf and harbor improvement projects in the Republic of Palau. We also continue to have several large healthcare project opportunities on the West Coast and hospitality and gaming opportunities mostly in the Southwest. As a reminder, the majority of these opportunities start bidding and are expected to be awarded in the middle or second half of 2026 or to continue bidding through next year. Due to this timing, and the significantly higher revenue we expect to recognize this year for work already in backlog, we continue to anticipate a modest sequential backlog reduction in the near term, followed by resumed backlog growth as we capture our share of major new projects. We are confident in our ability to drive continued backlog growth over the medium to longer term, even as we focus on profitability, free cash flow, earnings growth, quality, and safety as our primary performance indicators. As you recall, last November, our Board of Directors authorized our first-ever quarterly cash dividend of $0.06 per share, as well as a share repurchase program totaling $200 million. Today, the Board declared another $0.06 quarterly dividend, which will be paid on June 4th. And earlier this year, in the first quarter, we completed the first repurchase under our share repurchase program, buying back approximately 278,000 shares on the open market for $20 million at an average price of approximately $72 per share. We expect to make additional opportunistic share buybacks moving forward under this authorization to return excess capital to shareholders. Next, let's turn to our outlook and guidance. First, I am pleased with the excellent start to the year as we delivered results in line with our expectations. We continue to benefit from favorable macro and economic tailwinds that are driving strong, sustained market demand across all segments which is a great sign for future awards, growth, and value creation. Our business is resilient and we remain confident in our outlook for consistent revenue and earnings growth over the next several years. Based on our outlook and assessment of the current market, we continue to anticipate double-digit revenue growth and strong earnings in 2026, with even higher earnings expected in 2027, by which time many of the newer large projects in our backlog should be in the construction phase. Accordingly, we are affirming our 2026 adjusted EPS guidance in the range of $4.90 to $5.30 per share. Our guidance continues to factor in a significant amount of contingency for unknown or unexpected outcomes and developments in 2026, including the possibility of a lower than anticipated success rate for future project pursuits, the potential for project delays, slower ramp-ups for our newer projects, and any unexpected settlements and or adverse legal decisions associated with the resolution of disputes. We also continue to expect strong operating cash generation in 2026 and beyond due to increasing project execution activities on our newer mega projects and the anticipated resolution of remaining legacy disputes. Before I turn the call over to Ryan, I'd like to comment on one of those remaining legacy disputes. Last month we received an unfavorable legal ruling and were assessed damages of approximately $175 million related to a dispute with our customer regarding the W Element Hotel in Philadelphia, a building segment project that we completed in 2021 and that opened to the public the same year. We strongly disagree with the ruling and firmly believe it does not reflect the merits of the case. To be respectful to the legal process and since it is ongoing litigation, we will not comment specifically about what we believe to be significant legal flaws in the court's decision. We do intend to appeal and will continue to vigorously pursue all appropriate legal remedies to defend ourselves against the damages awarded to the customer and to collect amounts contractually due to us. The appeal process is likely to take two years, perhaps even longer, so this recent development represents another step along the path of an ongoing lengthy legal dispute. As a result of the ruling and after a close review of our claims against the owner and certain subcontractors, we recognized an immaterial charge earnings in the first quarter. Thank you. And with that, I will turn the call over to Ryan to discuss the details of our financial results.

Ryan Soroka | Executive Vice President and CFO

Thanks, Gary. Good day, everyone. I will begin by discussing our results for the first quarter, after which I'll provide some commentary on our balance sheet and our 2026 guidance assumptions. All comparative references will be against the first quarter of last year, unless otherwise stated. As Gary mentioned, we generated a record $147 million of operating cash for the quarter, up 542% year over year, and well ahead of any first quarter cash flow result ever. I'm pleased to see our cash flow momentum from last year's record year continuing this year. Our cash flow this quarter was largely driven by collections from newer and ongoing projects. reflecting a significant increase in project execution and improved working capital management, with only an immaterial amount attributable to the resolution of disputes. We anticipate that we will continue to generate solid cash flow in 2026 and beyond, with most of our cash to be derived from organic operations, that is, from the new and existing projects, and enhanced from time to time by cash collected following dispute resolutions. Revenue for the first quarter of 2026 was $1.4 billion, up 11%, with the growth primarily due to increased project execution activities on certain large, newer, and higher margin civil and building segment projects, especially in the Northeast. This included, among others, the Midtown Bus Terminal Phase 1 project, the Manhattan Tunnel project, the Manhattan Jail, and the Newark Air Train replacement. Bill segment revenue was $698 million, up 14% due to increased project execution activities on some of the projects I just mentioned, which have substantial scope of work remaining. It was a civil segment's highest revenue of any first quarter ever, reflecting the solid, sustained demand that Gary noted. Building segment revenue was $473 million, up slightly compared to the first quarter last year, but the segment's revenue growth expected to increase substantially later this year. All our major building segment projects, including the Brooklyn and Manhattan jail projects in New York and a large healthcare campus project in California, are running smoothly and also have substantial scope of work remaining. Specialty segment revenue was $219 million, up a solid 24%, with the segment's growth continuing to be primarily driven by increased activities on various electrical and mechanical projects in New York and Texas. The specialty segment's strong revenue growth began in the second half of 2025, and we expect the growth to continue this year and next year as those projects and other newer mega projects advance. Our operating income for the quarter was $59 million, down 9% compared to last year. Our operating income was driven by improved contributions from each of our three segments, but those contributions were offset by a $23 million increase in shared base compensation expense in the first quarter of 2026 compared to the first quarter of 2025. primarily due to our stock price being substantially higher in 2026 as compared to the same period last year, which affects the fair value of liability classified awards. As a reminder, our share-based compensation expense is expected to decrease in 2026 and to decline much more significantly next year as some of these liability classified awards vested at the end of last year and most of the remaining awards will vest by the end of 2026. We are no longer awarding liability classified awards, which should meaningfully reduce earnings volatility starting next year. Civil segment operating income was $88 million, up 10 percent, and the highest first quarter result ever for the segment, with a corresponding segment operating margin of 12.6 percent, a very solid result for a first quarter given typical seasonality. The increase in the operating income was primarily due to contributions associated with the increased project execution activities on various higher margin projects that are ramping up, partially offset by an unfavorable adjustment of $16 million in the first quarter of 2026 on a mass transit project in California due to changes in estimates resulting from ongoing negotiations of change orders, which we will expect will generate significant cash once they are ultimately approved. We anticipate continued civil segment margins in the range of 12% to 15%. Building segment operating income was $16 million, up a strong 56% with the increase driven by contributions from certain newer, higher margin projects in New York and California with substantial scope of work remaining. The segment's operating margin was 3.5% compared to 2.3% last year with the improvement primarily driven by contributions related to the increased higher margin project execution activities I mentioned. We anticipate building segment margins in the range of 3% to 6% fueled by continued contributions from certain higher margin projects. Specialty contractor segment operating income was approximately $600,000 for the quarter compared to a loss from construction operations of $7 million for the first quarter of last year. The improvement compared to last year was primarily due to contributions related to increased project execution activities on the electrical and mechanical projects I mentioned earlier. Many of these projects are in the early stages and are expected to ramp up substantially over the next several years. The specialty segment had a handful of small, immaterial, unfavorable project adjustments this quarter related to legacy disputes that adversely affected its results for the quarter, though the segment was still profitable and its results reflected a significant improvement year over year. Corporate G&A expense for the first quarter of 2026 was $45 million compared to $18 million last year. with increase mostly due to the substantially higher share-based compensation expense that I mentioned. Income tax expense for the quarter was $17 million with a corresponding effective tax rate of 30.1% for the period compared to $13 million last year with a corresponding effective tax rate of 23.2% in that period. The higher effective tax rate this year is attributable to the significant increase in share-based compensation expense, which is almost entirely non-deductible. Net income attributable to Tudor Perini for the first quarter of 2026 was $26 million, or 48 cents of GAAP earnings per share, compared to $28 million, or 53 cents of GAAP earnings per share in the first quarter of last year. Excluding the impact of share-based compensation expense, net of the associated tax benefit, adjusted net income attributable to Tudor Perini for the first quarter of 2026 was $55 million, or $1.03 of adjusted earnings per share, compared to $34 million or 65 cents of adjusted earnings per share in the same quarter last year. As you can see, our adjusted EPS was up a strong 58% year over year, reflecting the high margin contribution and outstanding performance we were seeing from our projects and backlog. Now I'll address the balance sheet. Our record cash generation enabled us to continue paying down our total debt, which stood at $399 million at the end of the first quarter. We ended the quarter with cash and cash equivalents exceeding total debt by $404 million, a very strong net cash position, and $533 million better than we were just one year ago when we were in a net debt position. Our cash available for general corporate purposes was $321 million at the end of the first quarter of 2026, up 18% compared to $271 million at the end of 2025. Our balance sheet is stronger than it's ever been, and our solid net cash position presides with excellent capital allocation flexibility. We anticipate refinancing our existing senior notes by around mid-year to secure a more favorable interest rate and extend our debt maturities, which should result in substantially reduced interest expense going forward. Lastly, all assumptions I provided last quarter pertaining to our 2026 guidance remain unchanged. Thank you. And with that, I will turn the call back over to Gary.

Gary Smalley | CEO and President

Thank you, Ryan. To recap, we have kicked off 2026 with excellent first quarter results marked by record operating cash flow of $147 million, solid revenue growth, adjusted EPS of $1.03, which was up 58% year over year, and continued strong backlog of approximately $20 billion. This backlog underpins the confidence we have in our ability to deliver double-digit revenue and earnings growth, and continued strong annual cash flow in 2026 and beyond as our newer projects progress through design and into construction. Our business continues to perform well, and we expect our solid project execution to continue. The long-term outlook for TutorPrinti remains very bright given today's backlog of long-duration, higher-margin projects with improved contractual terms, operational improvements we have made in our specialty contractor segment, persistent favorable macroeconomic tailwinds, and strong public and private customer funding that is fueling vibrant market demand and numerous major bidding opportunities. And importantly, we also believe that we are getting closer to the time when all of our segments will be firing on all cylinders, which will allow us to demonstrate more fully our growth and earnings potential. Thank you. And with that, I will turn the call over to the operator for your questions.

Rob | Conference Operator

Thank you, we will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Michael Dudas with vertical research partners. Please proceed with your question.

Michael Dudas | Analyst, Vertical Research Partners

Good afternoon, gentlemen.

Gary Smalley | CEO and President

Hi, Mike.

Michael Dudas | Analyst, Vertical Research Partners

Hello. And I share my prayers for the family and those families as well. First, Gary. Sure. First, Gary, so you talked about several large projects that will be coming up for bid second half this year, 2027. But maybe you could assess that relative to what projects may be rolling off in some of those regions, and it seems like there's so much business that can be done in the Northeast, especially in the New York area, certainly in California. I mean, again, all over, but how you're balancing where the opportunities are, your capacity, and maybe even seem to think a little bit more on the Guam because you mentioned some pretty large numbers and some opportunities in the Indo-Pacific, which certainly should have a pretty good tail given all the money that's been spent over there.

Yeah. Gary Smalley | CEO and President

Yeah, great, Mike. First of all, some of these opportunities are already in the hopper, so to speak. They've been submitted. We're waiting on the results. So we should know something, as we talked about in some cases, later this month, sometime in some cases next month. So capacity, look, you should feel just rest assured we're not going to pursue something we can't handle. We do have some work that's that's winding down in California, and we'll use some of those resources to staff this other work. But all the work we're pursuing, we have people ready and raring to go, and we will execute the work soundly. Yeah, so I don't think that should be a concern. If I would look at what's out there and what we would expect to book, provided we get anywhere close to our fair share, I would say that's going to be by far a net add. There are just so many opportunities, as you noted. The opportunities that we have as we sit here today and we compare that to the last time we talked, there's more out there. Some of it's moved closer to fruition. In other cases, there are new opportunities that we're pursuing. So the pipeline is rich, and we think we're well positioned for a fair amount of these opportunities. And then You know, if we get to a point, and we'd love for this to happen, if we get to a point where, you know, we can't handle anymore, then we'll sit on the sidelines. But we're not there yet. We don't think we will be there at this point. And we look forward to, you know, when we get together another quarter or two to report on increased backlog as these opportunities come home.

Michael Dudas | Analyst, Vertical Research Partners

I appreciate that. And my follow up, Gary, would be as you as you assess the margin performance, which again for Q1 seemed quite solid across the board, but the cadence of it as we move through 2026, is it just a function of ramping up the volume and capacity? And are there some other opportunity areas where, you know, between the low and high end of those ranges where what could help you achieve those versus maybe pushing them out to say 2027?

Gary Smalley | CEO and President

It's exactly what you said. It's about volume. You know, the first quarter is always a slower quarter for us. It's difficult to, you know, to estimate what the first quarter is going to be. It's harder than the others because you don't know the extent of, you know, we didn't know we were going to have all the rain that we had in Southern California, for example. And we didn't know that, you know, New York out your way. Mike, I had a trip that I canceled because of, you know, the weather being so bad and the airport being closed and things of that nature. So you just don't know. But as we progress during, you know, through the year, the volume goes up. We also, our margins are expected to go up. These larger projects that we've been booking, you know, they're ramping up right now. They're only going to get stronger as the year progresses. And some of that is the weather itself. But the other factor is that they're just early in their development, and so they're going to start blowing and going. Some already have, and others will gain more momentum as we continue. So I would expect 26 to gain strength each quarter, and 27 will just be a follow-on to that. Excellent. Thank you, Gary.

You're welcome. Thanks. Rob | Conference Operator

Our next question is from Judah Aronowitz with UBS. Please proceed with your question.

Judah Aronowitz | Analyst, UBS

Hey, good evening. Thanks for taking my question. On for Steve Fisher. The first question, I noticed that you changed the language around 2027 UPS expectations to significantly higher on the upper end of the 2020s guide from just higher. Is that right? And if so, I guess what makes you more confident now relative to three months ago? You know, can you talk about your confidence level in achieving this level of earnings in 27? And specifically, is the work already in backlog, or is there still more work to book?

Gary Smalley | CEO and President

Yes, if we didn't book any more work, 27 is going to be a blowout year, as is 26. But, you know, there is going to be more work to book, so it will be even better. So what gives us a little bit more optimism or confidence, Judah, is, you know, time has gone by. We see how things have developed. We see how the new work is progressing. We see how settlement discussions are progressing. So all those things together make us as confident as we can be. And look, we affirmed guidance. We didn't raise guidance. And that's always something, at least as we go forward, that you should expect is maybe a raise or at least consideration for it. We did consider it this time because we do feel a lot better about how things are shaping up. But we also want to be conservative and in our approach. So yes, we do feel more confident and it's just the way all the details are coming together right now. We were very pleased with where we are with respect to the execution of all this new work and also very optimistic about building on this great backlog we already have.

Judah Aronowitz | Analyst, UBS

Okay, that makes sense. Good to hear. And then my follow up relative to inflation, what are you seeing in the business now? And how comfortable are you with your contingent contingencies, you know, in areas where you don't have the ability to reindex to inflation?

Thank you. Gary Smalley | CEO and President

Yeah. Yeah. Good question, because you even indicated that in some cases, you know, you implied that we do have the ability to reindex with inflation. And that is the case. But in those instances where we're still being impacted by inflation, as everyone else is, you know, look, we're covered. We we're very conservative in how we addressed contingency, but also we have this buyout that we talked about before on calls where early on we look at firming up commitments with respect to subcontractors and also vendors to make sure that we pass that risk on to them if there's any change in pricing. So we're good with respect to inflation.

Judah Aronowitz | Analyst, UBS

Got it.

Gary Smalley | CEO and President

Thank you. Thanks, Judah.

Rob | Conference Operator

Our next question is from Liam Burke with B Reilly Securities. Please proceed with your question.

Liam Burke | Analyst, B. Riley Securities

Thank you. Good evening, Gary, Ryan, Jorge.

Gary Smalley | CEO and President

Hi, Liam.

Liam Burke | Analyst, B. Riley Securities

Hi. Gary, your balance sheet is much stronger. Your cash position is great. You're returning cash to shareholders.

Gary Smalley | CEO and President

strong liquidity position allow you to undertake larger projects without having to consider a joint venture partner you know what it absolutely does and uh and that's what our preference is of course because um we have great joint venture partners and we appreciate what they bring to the table but at the same time if um if we can do the work on our own and not have to share 20 or 25 or 30 percent uh margin and cash with them that's the ideal position that we'd like to be in. And certainly when you're a stronger company, as we are now compared to a year ago and the year before that, then that does offer us opportunities to do more things on our own.

Liam Burke | Analyst, B. Riley Securities

Great. And in terms of talking about bidding activity and potential projects expanding, is that Robert Marlayson, Increasing the competitive field or things pretty much the same part of it is that data Center activity is pulled some of the competitors off off the projects that you're bidding on.

Gary Smalley | CEO and President

David Miller, yeah I would say that if there is a change it's you know from last quarter there's probably not much of a change, to be honest with you, but. David Miller, But you know look the the trend has been to be less competitive and whether it's data centers adjust the volume of work, such as what we've we've talked about. So, you know, I certainly there's not going to be more competition, at least in the short term, medium term, or even as far as we can see looking out because of all the just the magnitude of work. And so few of us that can do the complex work that we pursue. So so I would say that, you know, the competition is is probably a little less and would likely be continue to be less than what it is currently. But certainly we don't see. new competitors coming into the market right now.

Liam Burke | Analyst, B. Riley Securities

Great. Thank you, Gary.

Gary Smalley | CEO and President

Yeah.

Thank you. Rob | Conference Operator

Our next question is from Min Cho with Texas Capital Securities. Please proceed with your question.

Min Cho | Analyst, Texas Capital Securities

Great. Thank you. Thanks for taking my questions. My first question has to do with black construction. So I know that's a higher margin business for you. Can you talk about your annual run rate of revenue there and kind of what you have in backlog? And how big do you feel like that business can get? And if you can just talk about any of the bottlenecks to driving more growth from block construction.

Thank you. Gary Smalley | CEO and President

Hi, Min. In the past, we've really steered away from talking too much about specific business units and what type of you know, what they bring to the overall consolidated Tutor-Perini. Just, I guess, but to try to address your question in some way, we're looking at black. I won't talk about revenue, but I'll talk about backlog. It exceeds a billion dollars. And, you know, if you look at the run rate, some of their work is, you know, two, three years in duration. Other projects are, you know, a bit longer, maybe four or five years. And, you know, we're looking to build that. We've got the capabilities there. It's an extraordinary business for us, just very talented workforce. So, you know, look for that. It probably won't double, but it could grow significantly from that, you know, beginning point.

Min Cho | Analyst, Texas Capital Securities

Great. Thank you. And then also your recent Army Corps MATOC Award to support the energy resilience conservation investment program. How much of that $2 billion is within TPC's kind of addressable business? And if you can just talk a little bit about the types of construction projects that are expected there.

Gary Smalley | CEO and President

Yeah. All of it is within what we do and what we do well. And the type of work for, you know, that's available under that ATOC is It varies. It can be building work. It can be civil work. It can be specialty work as well, specialty contractors work. Our workforce at Black and Guam and the surrounding areas, again, I mentioned before it was very talented, but we're very diversified. We can do whatever work that's out there. We also have PMSI as one of our Uh, business units, and likewise, they are very equipped in whatever part of the world that they operate to to do all types of building work or all types of construction work. Their emphasis is generally more on the building side. Uh, but, um, but really between the 2 of those entities, we can do just about anything.

Min Cho | Analyst, Texas Capital Securities

Excellent if I can just squeeze in one more question, can you just talk a little bit about tutors position currently on pursuing some of the mission critical and high tech projects like the data centers or semiconductor campuses.

Gary Smalley | CEO and President

Yes, so this is you know something that we're looking at very closely, we do, we are actually doing some data Center work with in on the specialty side. And we are looking to, we're exploring ways to expand that currently. So, you know, we want to make sure that we don't give up the core market because we know one day that, you know, and who knows how long down the road that will be, whether it's five years or 10 years down the road, that, you know, the data center work at some point in time probably won't be there, at least not as strong as it is now. So we want to make sure that, you know, we're still well positioned to do the work that is our standard bread and butter. But at the same time, the data center work is very exciting for us. We see it as an opportunity where we can expand margins and increase revenue as well. So we're looking at it very closely. And I think not too far down the road, certainly for the years up, you'll hear more from us as far as maybe new strategy to explore some of that market. or at least explore what we're already doing. And we'll talk more publicly about it at some point too. We just, we're not quite there, but we're getting closer.

Min Cho | Analyst, Texas Capital Securities

Great.

Thanks for the call. Rob | Conference Operator

Thank you. Our last question is from Adam Tallheimer with Thompson Davis. Please proceed with your question.

Adam Tallheimer | Analyst, Thompson Davis

Hey, good afternoon, Gus.

Great quarter. Gary Smalley | CEO and President

Yeah, thanks, Adam.

Adam Tallheimer | Analyst, Thompson Davis

Thanks. We're happy. I liked Min's question. Can I just keep going on that? Are you thinking that you might look at data center work for other segments or just within the specialties?

Gary Smalley | CEO and President

Yeah, right now it's a little too early to get out in front of any more than what I said, Adam. But specialty is probably where we see the most, we'll say, current type opportunities coming. Um, and, uh, but we're looking at other areas as well. And it's something that, uh, you know, we're talking about as management, we'll talk more about it with the board as we learn a little bit more, but certainly there's a lot of, um, excitement, uh, in internally, uh, as we look at opportunities that, um, could, could be out there for two to pretty.

Adam Tallheimer | Analyst, Thompson Davis

Okay. Great. Um, the buyback, I was curious, good to see you do 20 million in Q1. How would you. like to pace that from here?

Gary Smalley | CEO and President

Well, it's certainly something that would we buy back at $72 on the average price, right? Right. Nicely done. Yes. And we, you know, there's some, you know, it wasn't without some debate internally because, you know, we're a stock that has grown quite well over the last year or so. And some of us felt a strong conviction to even buy with our own money, such as myself. And I've done that a couple times in the last several months. So for me, it was pretty easy on the buyback. Now that we're 90-ish or something like that, it's not as compelling for us. But at the same time, we know that we've got a lot of upward momentum trajectory that's that's to come. And so I think there will be, we're going to be opportunistic. And I think there will be opportunities in front of us, but we're not really planning it to say, Okay, we're going to do x million dollars every quarter or six months, we're just see where the opportunities are, weigh that with, you know, the cash needs and how quickly we're building our cash balances, and then go from there. So I know it's not a specific answer for you, but we're very aware that we've got a lot of room left with the buyback. We are very bullish on what the opportunities are right now, very bullish on what the share price could continue to do. So either on a personal basis or a company basis, I think there will be more coming, but again, we just don't know exactly when.

Adam Tallheimer | Analyst, Thompson Davis

Great. Ryan, the refinancing you said is coming in the next few months. Can you give us a sense for the target structure and potential interest rate savings?

Ryan Soroka | Executive Vice President and CFO

Yeah, sure. I think at this point, we're looking to refinance the notes one-to-one. Maybe that could change a little We're looking at interest savings of somewhere between 400 or 500 basis points as we look at the marketplace. Again, there's still a little bit of volatility out there related to some of the geopolitical issues going on, so that remains to be seen. But I think at the same time, what we also intend to do is take a look at our credit facility. Right. And looking to to upsize that and extend those maturities. So ultimately, the goal is to, you know, refinance the notes with significant interest savings and then extend the maturity and have some extend the maturity on the credit facility with significant extension and maturity as well.

Gary Smalley | CEO and President

Our goal is to get somewhere with the six handle compared to the horrible rate that we have right now on the bonds. Yep, that'd be great.

Adam Tallheimer | Analyst, Thompson Davis

And then last one for me, you gave the margin outlook for the other segments, Ryan, but I didn't hear it for specialty. I was curious what the range is there that you're working towards. And also, what percent of their work now is for other TPC segments?

Sure. Ryan Soroka | Executive Vice President and CFO

For 2026, we're probably looking in the call one, two to three percent range. Ultimately, we expect that, you know, especially to get up into the 5 to 8% range. I mean, look, we still have a little bit of overhang with some legacy disputes. That's why I'm kind of tempering 2026 in that 1 to 3% range. And at this point, specialties backlog, about two-thirds of it is with, you know, is on called other Tudor Perini subsidiary projects.

Adam Tallheimer | Analyst, Thompson Davis

Great. Thank you, Gus.

Ryan Soroka | Executive Vice President and CFO

Thank you.

Thank you. Rob | Conference Operator

There are no further questions at this time. I would like to turn the floor back over to Gary Smalley for closing comments.

Gary Smalley | CEO and President

Thank you everyone for your participation today. We look forward to continuing to deliver excellent results and to speaking with you again next quarter.

Thanks again. Rob | Conference Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090504-00'00'

NYSE:TPC Q4 2025 Earnings Call Transcript Generated on 6/6/2026 LaTanya | Conference Coordinator: Today, ladies and gentlemen, and welcome to the Tutor Perini Corporation's fourth quarter 2025 earnings conference call. My name is LaTanya, and I will be your coordinator for today. All participants are currently in a listen-only mode. Following management's prepared remarks, we'll be opening the call for a question and answer session. As a reminder, this conference is being recorded for replay purposes. If anyone should require operator assistance, please press star zero on your telephone keypad. I will now turn the conference over to your host today, Jorge Casado, Senior Vice President of Investor Relations. Thank you.

You may proceed. Jorge Casado | Senior Vice President of Investor Relations

Hello, everyone, and thank you for joining us. With us today are Gary Smalley, CEO and President, Ron Tudor, Executive Chairman, and Ryan Soroka, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during this call, we will be making forward-looking statements. which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could contribute to such differences in our form 10K, which we are filing today. The company assumes no obligation to update forward-looking statements, whether due to new information, future events, or otherwise, other than as required by law. In addition, during today's call, management will be referring to certain non-GAAP financial measures. You can find information and a reconciliation of these non-GAAP financial measures in the earnings release that we issued today and in the Form 10-K being filed today, both of which can be found in the Investors section of our website. Thank you, and with that, I will turn the call over to Gary Smalley.

Gary Smalley | CEO and President

Thanks, Jorge. Hello, everyone, and thank you for joining us. Tudor Perini had a tremendous year in 2025, perhaps her best year ever. Our results were highlighted by a record $5.5 billion of revenue, a return to strong profitability that produced $4.29 of adjusted earnings per share, a fourth consecutive year of record operating cash flow with $748 million of cash that shattered last year's record. This enormous cash generation was largely due to the contributions from new and ongoing projects And our record revenue is driven by double-digit backlog growth that we expect will fuel even higher revenue and earnings, increased profitability, and continued strong cash flow in 2026 and beyond. A year ago on our earnings call, I shared some of my top priorities as TutorPrinti's then newly appointed CEO, which included a sustained focus on cash, the return to profitability, and providing ambitious yet reasonable earnings goals. All with the goal of significantly increasing short and long-term shareholder value. I'm pleased to report that we have delivered on each of these priorities, which together have helped us to achieve unprecedented share price performance and record returns for our shareholders. There's a lot of enthusiasm here at Tudor Perini and among investors and other business partners about the progress we have made and especially about what the future holds. So it continues to be an exciting time to be a Tudor Perini shareholder and we want to thank those of you who are shareholders for your support. Our revenue growth accelerated progressively throughout each quarter of 2025 and our record revenue was primarily driven by contributions from various larger higher margin projects. As many of these projects continue to ramp up, we expect they will generate further double digit revenue and earnings growth over the next two years. The civil segment, our highest margin segment, generated more than $2.8 billion of our total revenue in 2025, the highest ever annual revenue for the segment. Consolidated operating income was up significantly in 2025, driven by our larger, higher margin projects, as well as significantly less negative impacts on earnings from legacy dispute resolutions as compared to 2024. In addition to generating record annual revenue, the civil segment produced its highest-ever annual operating income and operating margin in 2025. The building segment's operating income for 2025 was its highest since 2011, and importantly, the specialty contractor segment returned to profitability in the second half of 2025 ahead of expectations. We see higher margins ahead for the building and specialty contractor segments and sustainably strong margins for the civil segment as many newer large projects continued to ramp up. We concluded 2025 with a robust backlog of $20.6 billion, up 10% year over year, and had a solid book to burn ratio of 1.34x for the year. Our backlog growth was driven by $7.4 billion of new awards and contract adjustments that we booked during the year, the largest of which included the $1.87 billion midtown bus terminal replacement phase one project in New York, the $1.18 billion Manhattan tunnel project also in New York, the UCSF Benioff new children's hospital in California valued at approximately $1 billion, a $538 million healthcare project in California, $241 million of additional funding for the Apra Harbor waterfront repairs project in Guam, a $182 million military defense project in Guam, the $155 million Diego Rivera Performing Arts Center at City College of San Francisco, $131 million of additional funding for an electrical project in Texas, and an electrical project at Cook Children's Medical Center in Texas valued at more than $100 million. Looking back a bit further, Over the past three years, we have won nine mega projects totaling approximately $16 billion, each valued at approximately $1 billion or more. Three of these were among our major awards of 2025, and all but one were awarded since the summer of 2024. These projects all have very healthy margins, more favorable contractual terms, and longer durations than many other large projects we have booked in the past. They also provide us with excellent visibility into our future revenue and earnings over the next several years. We believe our backlog will remain strong in 2026 and beyond. We anticipate booking approximately $1 billion into backlog later this year for the finished trade scope of work for phase one of the Midtown Bus Terminal project in New York City. And earlier this month, we received $204 million of funding for the Eagle Mountain Casino Phase 2 Expansion Project in California, a project that was originally awarded announced last summer. In addition, our subsidiary, Rudolph & Sletten, was recently selected for a large new multi-billion dollar healthcare project in California, which is currently in the pre-construction phase. We expect to book significant additional backlog as this and several other building segment projects, also currently in the pre-construction phase, advanced to the construction phase over the next several years. Furthermore, we continue to see numerous major bidding opportunities for our civil and building segments, many of which should include significant work for our electrical and mechanical business units within the specialty contractor segment. Our most significant bidding opportunities over the next 12 to 18 months include a program believed to be valued at approximately $12 billion for the Sepulveda Transit Corridor, the $3.8 billion Southeast Gateway Line, and the $700 million Metro Gold Line Foothill Extension, all three of which are in California, as well as the multi-billion dollar Penn Station Transformation Project in New York, the $3 billion Newark Liberty International Airport Terminal B project in New Jersey, very similar to the award-winning Terminal A project that we recently completed. the $1.4 billion I-535 Blatnick Bridge project in Minnesota, and the $1 billion I-69 ORX Section 2 project connecting Indiana and Kentucky. There are also several large hospitality and gaming opportunities we are pursuing, mostly in the southwest of the United States. In addition, we continue to have significant Indo-Pacific opportunities driven by the federal government's Pacific Deterrence Initiative, Black Construction, our Guam-based subsidiary, has been tremendously successful in winning various new projects throughout the region and continues to be well positioned to capture additional major projects over the coming years. We remain highly selective as to which opportunities we will pursue with continued focus on bidding projects with favorable contractual terms, limited competition, and higher margins. Due to the timing of our significant prospective opportunities, David Miller, Most of which start bidding around the middle of 2026 and continue through the first half of next year. David Miller, And because of the significantly higher revenue, we expect to recognize for work already in backlog. David Miller, We anticipate a modest backlog reduction in the near term, followed by resume backlog growth as we capture our share of major new projects. David Miller, So expect a bit more lumpiness in our backlog as we move forward with growth still expected over the medium to longer term. rather than the steady backlog increases we have seen virtually every quarter over the past two years. That said, growth remains a priority for us in this environment, and we believe we can scale up resources as necessary. While our civil business is expected to continue to drive most of our future growth and profitability as it typically does, a substantial proportion of our building segment backlog is operating at significantly higher margins than what we have seen historically. For example, our two New York City jail megaprojects carry margins that are consistent with large complex building projects of a fixed price nature. In addition, today's large healthcare campus projects are more technically complex than more traditional commercial office building projects of the past, and therefore also command higher margins. Last November, our Board of Directors authorized our first ever quarterly cash dividend of six cents per share, As well as a share repurchase program totaling $200 million. And today the board declared another 6 cent quarterly dividend, which we've paid on March 26th. Next, let's turn to our outlook and guidance. Tutor Pruney continues to benefit from favorable macroeconomic tailwinds that are driving strong sustained market demand for construction services across all segments. We believe these tailwinds will persist due to the substantial amount of funding that is in place. and because our country has, for decades and until recently, inadequately funded and prioritized the types of substantial infrastructure investments being made today. Based on our assessment of the current market and business outlook, we anticipate double-digit revenue growth and strong earnings in 2026, with even higher earnings expected in 2027, by which time newer large projects should be in the construction phase. For 2026, We expect adjusted EPS in the range of $4.90 to $5.30. As we did last year, we have factored into our guidance a significant amount of contingency for unknown or unexpected outcomes and developments in 2026, including the possibility of a lower than anticipated success rate for future project pursuits, the potential for project delays, slower ramp-ups for newer projects, and any unexpected settlements and or adverse legal decisions associated with the resolution of disputes. We also continue to expect strong operating cash generation in 2026 and beyond due to increased project execution activities and the anticipated resolution of remaining legacy disputes. We have continued to chisel away at a remaining legacy disputes and made excellent progress in 2025, resolving certain longstanding matters. We are already off to a strong start this year, having recently reached an agreement in principle regarding one of our larger disputes related to a long-completed project. We believe that we will finalize a settlement agreement in the coming days, which will not have a material impact on our earnings. However, the settlement is expected to result in the collection of approximately $40 million for TutorPrinti in the near term. Because of our tremendous backlog and ample bidding opportunities, the outlook for TutorPrinti remains incredibly positive even beyond 2026. Thank you. And with that, I will now turn the call over to Ryan to discuss the details of our financial results.

Ryan Soroka | Executive Vice President and CFO

Thanks, Gary. Good day, everyone. I will start by discussing our results for the year, after which I will review the fourth quarter and then provide some commentary on our balance sheet and our 2026 guidance assumptions. All comparative references will be against the same period of last year unless otherwise stated. Operating cash flow was certainly one of the most noteworthy highlights of 2025. As Gary mentioned, we generated a new record operating cash flow of $748 million for the year, up 49% compared to the previous record of $504 million for 2024. This was our fourth straight year of record operating cash, and it was driven by strong collections on newer and ongoing projects, reflecting a significant increase in project execution and improve working capital management, with less contribution from dispute resolutions in 2025 compared to previous years. We expect that we will continue to generate strong cash flow in 2026 and beyond, with most of our cash to be generated from organic operations, that is, from new and existing projects and occasionally enhanced by dispute resolutions. Revenue for 2025 was $5.5 billion, up 28%, with robust growth primarily due to the increased project execution activities on certain large, newer civil and building segment projects in the Northeast, Hawaii, and Guam. This included, among others, the Newark Air Train replacement, the Midtown Bus Terminal Phase 1 project, the Brooklyn and Manhattan Jails, the Honolulu Rail Project, and the Apra Harbor Waterfront Repairs Project in Guam. Civil segment revenue was $2.8 billion. up a solid 34% due to increased project execution activities on certain large, higher margin projects in the regions I just mentioned, all of which have substantial scope of work remaining. It was a civil segment's highest annual revenue ever, reflective of the robust, sustained demand that Gary noted we are seeing for our services. Building segment revenue was $1.9 billion, up 15% primarily due to increased activities on the Brooklyn and Manhattan jail projects in New York and a large healthcare campus project in California, all of which also have substantial scope of work remaining. The building segment delivered its highest annual revenue since 2020. Specialty contractor segment revenue was $844 million, up a strong 43%, with the growth primarily driven by increased activities on various electrical and mechanical components as some of the large civil and building projects I mentioned. The specialty segment revenue really started to show strong growth in the second half of 2025, and we expect this growth to continue this year and next year as these and other newer projects advance. Our operating income was driven by higher margin contributions from various civil and building segment projects, as well as the absence of certain net unfavorable adjustments that impacted our results last year. operating income was up significantly despite $110 million increase in share-based compensation expense tied to the near tripling of our stock price in 2025, which affected the fair value of liability classified awards. Our share-based compensation expense is expected to decrease in 2026 and decline much more significantly in 2027, as some of these liability classified awards have now vested and most of the remaining awards will vest by the end of 2026. We are no longer issuing liability classified awards, which should meaningfully reduce earnings volatility. Civil segment operating income for 2025 nearly tripled to $391 million compared to $138 million in 2024, with a segment operating margin of 13.7% for the year, within the range of 12% to 15% that we expected. It was the segment's highest ever operating income and operating margin of any year. The strong increase was primarily due to contributions related to the segment's increased project activities that I mentioned and the absence of certain prior year net unfavorable adjustments. Earlier in 2025, we recorded favorable adjustments that resulted from the settlement of certain change orders and changes in estimates due to improved performance and a favorable project closeout on a domestic mass transit project. These were mostly offset by an unfavorable adjustment in the fourth quarter, which was mostly non-cash and associated with the settlement of a legacy dispute on a tunneling project in Canada. Building segment operating income was $58 million, a substantial turnaround compared to the operating loss of $24 million in 2024. The segment's margin for 2025 was 3.1% compared to a negative 1.5% last year. The significant improvement was driven by contributions related to the increased higher margin project activities I mentioned in the absence of certain prior year unfavorable adjustments. We anticipate building segment margins in the range of 3% to 6%, fueled by contributions from certain higher margin projects. The specialty contractor segment returned to profitability in the second half of 2025, ahead of expectations but posted a slight operating loss of $7 million for 2025 compared to a loss of $103 million in 2024. The significant improvement was primarily due to contributions related to the increased activities I mentioned on the electrical and mechanical components of certain civil and building segment projects. Many of these projects are in the early stages and are expected to ramp up considerably over the next several years. The improvement was also driven by the absence of certain prior year unfavorable adjustments on several completed projects. Corporate G&A expense was $211 million in 2025 compared to $110 million in 2024, with the increase primarily due to the substantially higher share-based compensation expense that we had in 2025, as discussed earlier. Income tax expense was $61 million in 2025, with an effective tax rate of 30% for the year. compared to a tax benefit of $51 million with an effective tax rate of 29.3% in 2024. Net income attributable to Tudor Perini for 2025 was $80 million, or $1.51 of GAAP earnings per share, compared to a net loss attributable to Tudor Perini of $164 million, or a loss of $3.13 per share in 2024. Excluding the impact of share-based compensation expense, net of the associated tax benefit, adjusted net income attributable to Tudor Perini for 2025 was $229 million, or $4.29 of adjusted earnings per share, compared to an adjusted net loss attributable to Tudor Perini of $124 million, or an adjusted loss of $2.37 per share in 2024. Now, let's turn to the fourth quarter results. We had a solid turnaround performance across all segments in the fourth quarter in terms of revenue, operating income, and margins. As Gary mentioned, our revenue growth accelerated sequentially throughout 2025 with particularly strong growth in the second half of the year that is continuing into 2026. Revenue was $1.5 billion, up 41% compared to $1.1 billion for the fourth quarter of 2024. Double segment revenue, for the quarter was $732 million, up 32%. Building segment revenue was $512 million, up 45%. And specialty contractor segment revenue was $263 million, up 63%. The strong growth was due to the increased project activity, as I mentioned earlier, on various projects that are ramping up and have significant scope of work remaining. Civil segment operating income was $72 million for the fourth quarter of 2025, up very substantially compared to $4 million of operating income for the fourth quarter of 2024. The significantly lower than normal operating income and margin in the 2024 period was due primarily to a temporary earnings reduction of $32 million that resulted from the successful negotiation of significant lower margin and lower risk change orders on a West Coast project. The civil segments operating income and margin for the fourth quarter of 2025 would have been substantially higher had it not been for the unfavorable adjustment I mentioned earlier. Building segment operating income was $11 million for the fourth quarter of 2025 compared to a loss from construction operations of $41 million for the fourth quarter of 2024. The improvement was driven by contributions from certain higher margin projects as well as the absence of prior year unfavorable adjustment on a government building project in Florida. Specialty contractor segment operating income was $11 million for the quarter, with a margin of 4.4% compared to a loss of $20 million in the fourth quarter of 2024. The segment's performance has continued to improve significantly as their involvement in our large civil and building projects grow. We expect the segment to eventually and consistently generate margins in the 5% to 8% range. For the fourth quarter of 2025, net income attributable to Tudor Perini was $29 million, or 54 cents of GAAP EPS, compared to a net loss attributable to Tudor Perini of $79 million, or a GAAP loss of $1.51 per share in last year's fourth quarter. Adjusted net income attributable to Tudor Perini for the fourth quarter of 2025 was $58 million, or $1.07 of adjusted earnings per share, compared to an adjusted net loss attributable to Tudor of $78 million or an adjusted loss of $1.49 per share in the fourth quarter of 2024. And now I'll address the balance sheet. In 2025, we paid down our total debt by 24% and reduced our CIE by 13%. The CIE reduction was mostly driven by billings and collections, including those associated with the resolution of various previously disputed matters. Our CIE is expected to continue to decrease over time as we resolve the remaining legacy disputes. Due to our record cash generation, we ended the year in a healthy net cash position with cash and cash equivalents exceeding total debt by $327 million as compared to our $79 million net debt position at the end of 2024. Cash available for general corporate purposes was $271 million at the end of 2025. Overall, our balance sheet is healthier than it's ever been. and our solid net cash position provides us with excellent capital allocation flexibility. Lastly, I'll provide some assumptions regarding our guidance for modeling purposes. G&A expense for 2026 is expected to be between $400 million and $410 million. Depreciation and amortization expense is anticipated to be approximately $50 million in 2026, with depreciation at $48 million and amortization at $2 million. Interest expense for 2026 is expected to be between $40 million and $50 million, of which about $3 million will be non-cash. Our effective income tax rate for 2026 is expected to be approximately 27% to 30%. We anticipate non-controlling interest to be between $75 million and $85 million. We expect approximately 54 million weighted average diluted chairs outstanding for 2026. And capital expenditures are anticipated to be approximately $125 million to $135 million, with a vast majority of the capex in 2026 approximately $75 million to $85 million being owner funded for large equipment items on certain large new projects. Thank you, and with that I will turn the call back over to Gary.

Gary Smalley | CEO and President

Robert Marlayson, Thank you Ryan, in summary, we had our best year ever in 2025 marked by record operating cash flow record revenue that grew 28% year over year. Robert Marlayson, Strong operating income and profitability with record annual results for high margin civil segment, as well as robust year end backlog of $20.6 billion that was up 10% year over year. With this tremendous backlog, we are confident in our ability to produce double digit revenue and earnings growth and continued strong annual cash flow in 2026 as our newer projects progress through design and into construction. The outlook for Tudor Perini remains very bright over the next several years as we continue to benefit from favorable macroeconomic tailwinds and strong public and private customer funding that is fueling sustained market demand and numerous major bidding opportunities. As I mentioned earlier, it's an exciting time to be with Tudor Perini, whether as an employee, an investor, or other business partner. Thank you, and with that, I will turn the call over to the operator for your questions.

LaTanya | Conference Coordinator

Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. you may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Once again, that's star one at this time. One moment while we pull for the first question. The first question comes from Steven Fisher with UBS.

Please proceed. Thanks. Steven Fisher | Analyst, UBS

Good afternoon, and sorry for the background noise here. congratulations on a very strong 2025. Just a couple of questions to start off on the guidance. Wondering if you could just talk about the coverage you have in your backlog on the outlook. I would think it would be pretty strong in light of all the bookings that you have, but just curious if there's any particular things you need to see still happen and get booked to hit the numbers. And then just from a cadence perspective, first quarter tends to be fairly light relative to the full year due to seasonality. And we've obviously had some pretty tough weather here in parts of the country in the first quarter. So I'm just curious, is there any expectations you want to set there?

Gary Smalley | CEO and President

Yes, Steve. Thanks for the congrats. This is Gary. Yeah, first of all, we've got great visibility into the results for 2026 and really beyond. There's not much that has to happen for us to hit the numbers that we've we've represented, there are going to be some additional awards that could enhance things. And there's some, you know, built in awards that we're expecting that, you know, technically, we'd need to hit the numbers, but it's going to happen. It's not, it's not like we're expecting, you know, some large projects to come our way in order to, to be able to hit 2026. As far as the seasonality, you're right, Q1 is usually light for us, it's typically the way it goes. It'll be the same this year. What's happened primarily in New York with the large snowstorm, that hasn't really, it's not going to have much of an impact. We've got contingency for that. We've also budgeted expecting Q1 to be light. And then I might as well throw in Manhattan Tunnel. We're back working after about a two-week suspension, and that's all accounted for in the guidance as well, accounted for with contingency.

So we feel good. Steven Fisher | Analyst, UBS

That's great. And then just from a backlog perspective, it sounds like you expect some, I think lumpiness was the word that you used, but you did cite some potential larger awards in the second half of the year. Just curious, should we be expecting some net burn this year on the backlog? Or do you think there's still enough opportunity to kind of keep it steady at the level kind of where we are now? And then maybe the bigger picture question is just on Steve, on the civil side, is there any kind of view you have on where we are in the cycle of bigger projects? I know this is an area where you've had relatively limited competition recently. I'm just kind of curious where you think we are in sort of the bigger picture cycle there.

Thank you. Gary Smalley | CEO and President

Sure, Steve. Look, taking the last part first, we've got good visibility, again, on a lot of these larger projects for civil projects. We think that they're on pace to what we are expecting and making good progress on things. And we don't disclose every large project that's out there, just the biggest ones and ones that are most likely to happen in the near term. We've got the first part of your question again. Did it remind me of something?

Steven Fisher | Analyst, UBS

Yeah, do you think it will be net burn in the backlog this year?

Gary Smalley | CEO and President

Look, we think at the end of the year, we should be our our plan shows us a little north of where we are currently. I want to introduce the lumpiness concept because we've we've kind of spoiled everyone, I think, to some extent, because over the last two years, almost every quarter we've grown backlog. And, you know, it didn't happen this particular quarter. with, you know, a modest adjustment, you know, on a percentage basis. And just wanted everyone to know that it could be lumpier than it has been over the last couple of years, where every quarter seemed like we're hitting a new record. But the pipeline is rich. There's a lot of really strong work out there. Look, we won nine out of 11 of the large awards, you know, over the last year and a half or so. Don't know if we'll continue that win rate, but we should have a a good win rate because we target those projects that we think suit us best and where we think we have a good chance of winning. So I think it all adds up to backlog growth. And whether it's by the end of the year or into next year, it's coming. I can say that. But it's hard to predict exactly when those projects are going to hit backlog. But I wanted just to emphasize that it could be a little bit lumpier than it has been, but we're going to see growth. And, you know, I guess the last factor is we're going to be generating revenue at an all-time rate. 2025 was a record. 26 and 27 is going to go forward, even going to be higher. So it just means that to sustain backlog, you have to have significant awards. So, again, that's the reason for the words of caution.

Steven Fisher | Analyst, UBS

Sounds good.

Thanks a lot. Gary Smalley | CEO and President

Thank you.

LaTanya | Conference Coordinator

The next question comes from Alex Regal with Texas Capital.

Please proceed. Alex Regal | Analyst, Texas Capital

Thank you, Gary and Ryan. Very nice quarter. Congratulations. Thank you. A couple questions. Gary, can you go a little bit deeper on sort of the improvement in contract terms on new awards and talk about what that means longer term for tutor preemie?

Gary Smalley | CEO and President

Yes, we'll do. Look, in the past when the competition was heavier for these projects that we pursued, the larger projects, you know, we wanted to change contractual terms, but we were unable to because there's always somebody else that would have accepted the terms and taken the contract. Now what we've been able to do with the limited competition is to work with our customers, our owners, in order to drive better payment terms, better terms with respect to no damages for delay, especially in New York, just damages, damages provisions, also on differing site conditions, things that in the past could, and sometimes did impact us in a negative way and things that, um, uh, you know, like, uh, no damage for delay is something that, uh, is just the way the statute is written. It's tough to work around in court if you happen to go to, to, uh, to go to court. So now eliminating that provision, the contracts certainly beneficial. So I think what you'll see is, is less disputes as we go forward. And then, and, and part of that is, uh, just because it's really a clarification of terms. But also, I think that we'll less likely end up in court because the pendulum is more, swung more toward our side, more in the middle, so that I think you'll get negotiations and meaningful negotiations before you go to court, preventing you from having to go to court.

Alex Regal | Analyst, Texas Capital

And then secondly, I believe those are relates to Rudolph and Slayton. From a clarity standpoint, did you say It was looking at a multibillion-dollar health care facility, so maybe expand upon that. And then any commentary about opportunities over the next handful of years as it relates to high-tech manufacturing and reshoring?

Gary Smalley | CEO and President

Yeah, so first on the multibillion-dollar project, it's a confidential project, so we can't say a whole lot about it. The multibillion-dollar side, it's closer to two than anything above that. But we really can't offer much on that other than we're in pre-construction. And usually when something's in pre-construction, our history shows us a 90% plus chance of, you know, heading to construction down the road. So that's what we expect that when we think that will end up as a construction contract for us. The timing of which, you know, some of that will come in this year, but probably the majority of it's going to be in 2027. And then could you elaborate on your second question?

Alex Regal | Analyst, Texas Capital

And then are you seeing developing opportunities from large manufacturing facilities, fab plants and whatnot, and how that might play out over the next handful of years?

Gary Smalley | CEO and President

No, not really. You know, of course, that doesn't hit us on the civil side, but on the building side, the focus right now is on health care, some educational facilities and some multipurpose facilities. Robert Marlayson, hotels casinos things like that, but but that's really where our focus is. Robert Marlayson, helpful Thank you.

LaTanya | Conference Coordinator

Robert Marlayson, The next question comes from Adam thalheimer with Thompson Davis please proceed.

Adam Thalheimer | Analyst, Thompson Davis

Hey good afternoon guys congrats on the strong year. Robert Marlayson, I wanted to start the the can you give more color on the Canadian project and. Robert Marlayson, How much was the negative impact to civil in Q4.

Gary Smalley | CEO and President

Yeah, in Q4, I think it was 42 million, as I recall. And, you know, that's a consolidated joint venture. That's the joint venture portion of it. And there was, you know, call it a dozen, you know, 12 or 13 million earlier in the year. That's behind us. You know, it's roughly offset by a Midwest project that uh, really of the same magnitude, maybe a little bit more that we recognized over, you know, probably the last three quarters of the year. Uh, so, um, anyway, it's, uh, one of our larger disputed items. We just felt like it was better to, to resolve that one than to, uh, proceed, you know, down the path of litigation.

Adam Thalheimer | Analyst, Thompson Davis

Yeah, absolutely. And then, um, how many legacy jobs are left to settle?

Gary Smalley | CEO and President

Yeah, let's just say about a dozen. Um, you know, it's, um, and you know, there, there's some, there, yeah, we, we've got, um, you know, around a dozen, you know, there, and those are of some significance. There are some, you know, cats and dogs out there that are smaller amounts that, um, are less meaningful. And, uh, as, as Ron was just noting here, you know, he's right. We started with, um, about 50. So we went, we've gone from about four dozen to a dozen and, um, and we're making progress on, on some of the others, as you heard, um, One was just cleared within the last week and a half. So we'll continue that focus. We're optimistic that some turn favorably for us, right? Some are right ups, not right downs. And we hope that's the case with what we have left, but time will tell. But in the meantime, we've tried to put aside contingency, not just for that, but a lot of other unknowns. We think that we have enough contingency to cover any unexpected delays, anything that is just not forecasted, including the potential for any write-downs due to litigation outcomes.

Adam Thalheimer | Analyst, Thompson Davis

Okay. So it really was a great quarter if you strip that out.

Gary Smalley | CEO and President

Yes, it was.

Thanks. Adam Thalheimer | Analyst, Thompson Davis

And then I wanted to ask, so you brought up, you made a comment about Gary Smalley | CEO and President: 2027 construction starts and I don't expect you to give 27 guidance but just hope you could expand on that and uh you know what you are trying to say about the 2027 visibility yeah and and Adam you know you just said um it was a great uh great quarter um you know given you know that well look um even with that write down it was a it's a great quarter I think that shows the strength of what we're building here with this new work that we have And that new work carries us past 26 into 27. And you're right, we don't guide multi-year. But 27 is going to be better than 26. I think that's clear. We've said last year around this time, we're saying 25 is going to be good, 26 is going to be better, and 27 is going to be better yet. And there's nothing that's changed from that for that guidance. Great. Thanks, guys.

Thanks again. LaTanya | Conference Coordinator

The next question comes from Liam Burke with B Reilly.

Please proceed. Liam Burke | Analyst, B. Riley

Yes, thank you. Ryan, you are bidding on larger and larger, more complex projects. Is there any risk of being resource constrained? And how would that affect your bidding process?

Ryan Soroka | Executive Vice President and CFO

Yeah, I think at this point, we certainly haven't seen any of the constraints on resources. It's probably important to point out that the majority of our labor is sourced from the union halls. And so we've got agreements in place, whether project-specific or with the union itself, for that labor to be supplied. So from our perspective, the day-to-day craft workers, we don't see any constraints, and we don't really see that going forward.

Gary Smalley | CEO and President

And from a management standpoint, I think we've talked in the past about that's really where our focus has been, because unions have always done a great job providing us skilled labor when we needed it. Um, but as we've grown, we've been, uh, very aggressive and in fact, in a constant recruiting mode to bring in, you know, the, the project managers, project executives that are needed to to manage this work. And we feel that we're. Well, equipped there, we're, we're always looking anyone out there listening to apply. We're, we're always looking, but at the same time, uh, we, we think that, uh, we're already staffed, uh, at an appropriate level for future growth.

Liam Burke | Analyst, B. Riley

Timm Johnson, Great and you mentioned in your earlier comments that the specialty margins could be in the we'll call it mid single digit range it's a business it's traditionally been marginally profitable at best, is it the same game plan is building and civil or is there something. Timm Johnson, Different about the business where you're going to have a pretty meaningful change of profitability.

Gary Smalley | CEO and President

Timm Johnson, yep. Look, I think what's happened is we have been able to weed out some of the poor contracts that we've had with the poor contractual terms in lower margin work. Now we have higher margin work, better terms. A lot of the litigation, a lot of the disputes are behind us there, most of them. And so, look, if you look at the last two quarters of 2025, I think what it was, a 2.7% operating segment margin and then 4.4%. 4.4% operating margin for the segment in just those last two quarters. That's the trend we're on right now. That's what the current work is producing. And so our 1 to 3%, it's really, it's got contingency in there. We know that the work that we have in hand is going to be in that mid single digit range. But then we want to make sure that we hedge it a little bit with any unexpected outcomes. But we feel real good as we clear 26 that we're going to see that 5% to 8% range that we've talked about for some time.

Great. Thank you. Welcome. LaTanya | Conference Coordinator

The next question comes from Michael Dudas with Vertical Research.

Thank you. Michael Dudas | Analyst, Vertical Research

Thank you, and good afternoon, gentlemen. Hi, Mike. Hello. Gary, just so as we enter into 2026, you talked about the nine mega projects, 16 billion in backlog. So as we move forward through 2026 to 2027, how do we assume that the project, the revenue conversion you'll be seeing over the next couple of years will be coming from the enhanced TNC, you know, better backlog or better margin backlog that has been booked and certainly on the targets that you have out and out into the market. I'm assuming there's similar targets relative to the margin expectations you have currently, or is there some range or some opportunities there elsewhere going forward?

Gary Smalley | CEO and President

Look, I think that margin will only build over time, and that's probably with all segments as these nine, the big nine, as we'll say, continue to move into full production. So, I think that will certainly have a positive impact on on earnings, but also on on revenue generation. And as those projects continue to mature. And continue to progress, we'll, we'll see. Uh, I think some margin enhancement and, you know, look, the new work that we're looking for. Um, you know, we, um, you know, as you, as you get more work, and this has been our strategy, we have been. I will say, I don't know if I guess it's more aggressive a margin, but expecting larger margin, you know, you start to fill your coffers and and, you know, every time we get another project, we raise margins next time. And it depends a little bit on competition. So can't say that there's a limit on that or there's no limit on that. And that will continue to grow margins for forever. But right now, that's that's the world we're living in. We're and that's what our focus is.

Michael Dudas | Analyst, Vertical Research

And the clients are getting more maybe they don't like it, but getting more comfortable with that environment given the tightness in the market?

Gary Smalley | CEO and President

Yeah, I guess that's one way to say it, Mike. I'd say another way is they like what we do. They like us. They like the performance that we provide. They like the quality. They like the timeliness of the work. And then you combine that where the competition in some cases is not bidding or in some cases we're clearly the best product and whether that's on the quality of the work or quality in price. And so I think those factors, we're bidding on work. It's not that they're just handing it out and they're giving it to us and they don't want to. I think we've got a good future here. The past is driving the future, and the past is just solid execution. And yes, we're raising margins, but that's the market that we're in. we'd be foolish not to as we survey the competition and look at what's in front of us.

Michael Dudas | Analyst, Vertical Research

Well said, Gary. Ryan, with the tremendous job you've executed here with the balance sheet over the last several years, how is that going to help with business and opportunities going forward in the size of projects and maybe being more sole source versus potential partners? And how do you look at the optimal size of the balance sheet or what kind of recapitalization can we see given where you are with the debt, the maturities, and the cash we're going to have and even further that you're going to be generating in the next few years?

Ryan Soroka | Executive Vice President and CFO

Yeah, all good questions. I'll try to answer them in order. Just starting with the balance sheet and looking at the debt that we have out there today, 11 and 7 eighths is a tough coupon to swallow, obviously. and certainly something that we're looking to refinance probably mid-year or so is the expectation for some significant interest savings. We're hopeful for a 500 basis point reduction. As far as the level of debt, we're comfortable at that 400-ish mark in particular if we extend that out longer term so we have that liquidity certainty. and also that longer-term liquidity view. As it relates to, you know, obviously the operating cash and pre-cash that we've kicked off over the past three years at record pace, obviously having that cash on hand also gives a better long-term liquidity view. And for other stakeholders like the sureties, giving them confidence to, as we look at some of these future opportunities, to bid that sole source as opposed to having to get a JV partner. In 2026 alone, we're talking about 75 to 85 million of non-controlling interest. We'd sure like to keep that in-house.

Gary Smalley | CEO and President

I think that's a great answer. Let me just throw something else out there that we haven't really talked a whole lot about. Earlier in the call, we talked about better contractual terms. I mentioned less litigation. Look, there's a We spent a lot of money over the last several years on litigation expense. And as we have progressed the last couple of years, we're seeing that amount come down. We expect to see that come down even further. Legal expenses are something that, of course, are necessary in business and certainly in this industry. But I think you'll see less and less legal expenses from us. And that's only going to drive, you know, profit improvement to.

Michael Dudas | Analyst, Vertical Research

That's not a terrible thing, is it? Unless you're one of our attorneys. Of course. Just to clarify, Ryan, your interest expense guidance doesn't assume any refinancing recapitalization, correct?

Ryan Soroka | Executive Vice President and CFO

We did broaden the range. Okay. Sorry, half the year or so. Yeah, yeah. a refinancing call, roughly mid-year.

Michael Dudas | Analyst, Vertical Research

Okay, good.

Ryan Soroka | Executive Vice President and CFO

Okay, just want to clarify that.

Michael Dudas | Analyst, Vertical Research

Thanks, gentlemen.

Thank you. LaTanya | Conference Coordinator

Thank you. At this time, I would like to turn the floor back to Gary Smalley for closing remarks.

Gary Smalley | CEO and President

Thank you all again for your interest and participation today. We look forward to continuing to deliver strong results as we go forward. We'll talk to you again next quarter.

Thank you. LaTanya | Conference Coordinator

Thank you. This does conclude today's teleconference. You may disconnect your lines this time. Thank you for your participation and have a great day. jsPDF 3.0.3 D:20260606090505-00'00'

NYSE:TPC Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now turn the conference over to your host today, Mr. Jorge Casado, Senior Vice President of Investor Relations.

Thank you. Please proceed. Jorge Casado | Senior Vice President of Investor Relations

Hello, and thank you all for joining us. With us today are Gary Smalley, CEO and President, Ron Tudor, Executive Chairman, and Ryan Sirocco, Executive Vice President and CFO. Gary and Ryan will review the details of the quarter and provide some commentary regarding our outlook and guidance. Ron is here to help answer any project-specific questions as he remains involved in the setup of our newer major projects. Before we discuss our results, I will remind everyone that during this call, we will be making forward-looking statements, which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could contribute to such differences in our Form 10-K, which we filed on February 27, 2025, and in our Form 10-Q that we are filing today. The company assumes no obligation to update forward-looking statements, whether due to new information, future events, or otherwise, other than as required by law. In addition, during today's call, management will be referring to certain non-GAAP financial measures. a reconciliation of these non-GAAP financial measures in the earnings release that we issued today and in the Form 10-Q that is being filed today, both of which can be found in the Investors section of our website. Thank you, and with that, I will turn the call over to Gary Smalley.

Gary Smalley | CEO and President

Thanks, Jorge. Hello, everyone, and thank you for joining us. As I mentioned during our last two earnings calls, it certainly is a great time to be a TutorPretty shareholder. Our business, and correspondingly our stock, has performed extremely well this year, yet we are just at the start of what we expect will be a very strong period of double-digit revenue growth, increased profitability, and solid cash generation over the next several years. With what we continue to see on the horizon, there remains tremendous opportunity ahead for further substantial shareholder value creation. Now let's talk about our third quarter performance. Tudor Perney delivered excellent results for the third quarter, once again setting new records across various key metrics. Our operating cash flow was extraordinarily strong for the quarter at $289 million and $574 million through the first nine months of 2025, setting new records for both respective periods. The strong cash flow was almost entirely driven by collections from newer and ongoing projects. Our third quarter cash flow was the second best for any quarter ever, and our cash flow through the first nine months of this year is already well in excess of last year's full-year record operating cash flow. With what is now our fourth consecutive year of record operating cash generation, the cash on our balance sheet is quite healthy. We plan to continue building our cash position until our general corporate purpose cash reaches a level at which we can comfortably initiate one or more strategic capital allocation alternatives, most likely in the form of recurring dividend, and or a share repurchase program. Tudor Verney has been benefiting from favorable macroeconomic tailwinds, which are driving strong sustained market demand for construction services across all segments. We believe that these tailwinds will persist due to the tremendous amount of federal, state, and local level funding that are now in place and because our country has for decades and until recent years neglected to adequately fund and prioritize the types of substantial infrastructure investments being made today. We have continued to be successful in capitalizing on major project opportunities, adding $2 billion of new awards and contract adjustments in the third quarter, which increased our backlog to a new record of $21.6 billion, up 54% year over year. Backlog for both the building and specialty contractor segments also set new records. Our book-to-burn ratio for the third quarter was 1.4x. I'll provide further details on some of our new awards shortly. Our third quarter revenue was strong, up 31% year over year, and revenue for the first nine months of 2025 was the highest since 2009, achieving record quarterly and first nine months revenue performance for the civil segment and the best performance since 2020 for the building segment. Operating income was up significantly this quarter despite a further substantial increase in our share-based compensation expense that resulted from the dramatic growth in our stock price, which has nearly tripled since the end of last year, reflecting our continued strong operating performance driven by contributions from various newer higher margin projects in the civil and building segments. I will note that while we expect our share-based compensation expense to be higher than previously anticipated for the full year of 2025, it is still projected to decrease considerably in 2026 and further in 2027 once certain awards have vested. The civil segment continues to perform at record levels, delivering its highest segment operating income ever for both the third quarter and first nine months of the year, with strong margins that are sustainably above the historical range for the segment. The building segment's operating income for the first nine months of 2025 was the highest since 2011. And importantly, the specialty contractor segment returned to profitability this quarter ahead of expectations. Adjusted earnings per share for the third quarter, which excludes the impact of share-based compensation expense net of the associated tax benefit, was $1.15 up significantly compared to the adjusted loss per share of $1.61 reported for the third quarter last year, again demonstrating our strong core operating performance and contributions from various newer, larger, and higher margin projects, many of which are just ramping up. Our GAAP EPS was $0.07 for the third quarter, a substantial improvement compared to a loss of $1.92 per share for the same quarter last year. Overall, Our business continues to perform extremely well this year, significantly better than we anticipated at the start of the year. The newer, larger projects I mentioned are expected to drive very substantial growth, strong profitability, and solid cash flow over the next several years. Now, taking a closer look at our new awards in the third quarter, the largest of these included the UCSF Benioff New Children's Hospital in California valued at approximately $1 billion, a $182 million defense system project in Guam, and a $155 million education facility project in California. We also listed several other smaller new awards in our earnings release today. Looking ahead, we believe that our backlog will remain strong as we continue to see numerous major bidding opportunities for our civil and building segments, many of which should also include a significant role for electrical and mechanical business units within the specialty contractor segment. Our most significant new project opportunities over the next several years are primarily located in California, New York, the Midwest, and the Indo-Pacific region. Among these opportunities are several building segment projects currently in the pre-construction phase that are expected to advance to the construction phase a few later this year and others over the next two years. We have well over $25 billion of upcoming bidding opportunities over the next 12 to 18 months, the largest of which include the $12 billion Sepulveda Transit Corridor, the $3.8 billion Southeast Gateway Line, and a $2 billion replacement hospital, all of which are in California, as well as the $5 billion Penn Station Transformation Project in New York, the $1.4 billion I-535 Platnick Bridge Project in Minnesota, and the $1 billion I-69 ORX Section 2 project connecting Indiana and Kentucky. In addition to these billion-dollar-plus projects, we have an even firmer opportunity that is on the near-term horizon. We expect to add approximately $1 billion to backlog by second quarter of next year for the finished trade scope of work for Phase 1 of the Midtown bus terminal in New York City. Recall that we were awarded the first part of phase one of the bus terminal project last quarter for an announced value of $1.87 billion. We also continue to have significant Indo-Pacific opportunities, largely driven by the federal government's specific deterrence initiative. Black Construction, our Guam-based subsidiary, has had tremendous success in winning various new projects throughout the region and continues to be well positioned to capture additional major projects over the coming years. We remain highly selective as to what opportunities we will pursue with a continued focus on bidding projects with favorable contractual terms, limited competition, and higher margins. We're pursuing projects that will highlight TutorPrinti's differentiated approach, depth of operational talent, and history of outstanding project execution. Based on our outstanding performance to date and strong confidence in the results we expect to deliver for the fourth quarter, we are raising our guidance for the third consecutive quarter. Our adjusted EPS for 2025 is now expected to be in the range of $4 to $4.20, up from our previous guidance of $3.65 to $3.95. Importantly, the outlook for TutorPrinting remains very positive beyond 2025. We still anticipate that our adjusted EPS in 26 and 27 will be significantly higher than the upper end of our increased guidance for 2025, and we expect strong operating cash flow for the rest of this year and beyond. Finally, I will reiterate and expand a bit on what we have said earlier this year regarding the broader macro environment. We still do not anticipate that tariffs will have a significant impact on our business. We also do not currently foresee the risk of any of our major projects and backlog being canceled, delayed, defunded, or otherwise materially impacted by the administration's targeted funding cuts or by the recent federal government shutdown, including our work on the first phase of the California High-Speed Rail project or any of our projects in New York. We have had discussions with our customers, and they have confirmed that our projects are funded and authorized, and they are not expected to be adversely impacted. So for us, it continues to be business as usual at this time on all of our major projects. Thank you, and with that, I will turn the call over to Ryan to discuss the details of our third quarter results.

Ryan Sirocco | Executive Vice President and CFO

Thanks, Gary, and good afternoon, everyone. I'll start with a discussion of our third quarter results, after which I'll provide some commentary on our balance sheet and our latest 2025 guidance assumptions. All comparative references will be against the same quarter of last year, unless otherwise stated. Revenue for the third quarter of 2025 was $1.42 billion, up 31% year over year. Civil segment revenue was $770 million, up 41%. Building segment revenue was $419 million, down slightly compared to last year, but expected to increase substantially over the coming quarters. Specialty contractor segment revenue was $226 million, up a very strong 124%. Our revenue growth for this quarter continued to be driven by increased project execution activities on various newer, larger, and higher margin projects that all have substantial scope of work remaining. These included the Midtown bus terminal phase one project in New York, a new hospital project in California, the Brooklyn and Manhattan jails, the Honolulu rail project, the Manhattan tunnel, the Newark air train replacement, and the Kensico ECU connection tunnel. All of these projects are in their early stages and are expected to ramp up substantially over the next several years. Civil segment income from construction operations was $99 million in the third quarter of 2025, up substantially compared to a loss of $13 million. Last year's third quarter loss was due to a significant charge that resulted from an adverse arbitration decision on a completed bridge project in California, which we are appealing. The improvement this quarter was otherwise driven by contributions related to the strong revenue growth from higher margin projects that I mentioned for the segment. Civil segment operating margin was solid at 12.9% for the third quarter of 2025 and 15.1% through the first nine months of 2025, both well ahead of the segment's historical 8% to 12% range and in line with our expectations for 13% to 15% for this year. Building segment income from construction operations was $14 million in the third quarter. also up considerably compared to a loss of $4 million last year, which was mostly due to a charge we took during last year's third quarter for the settlement of a legacy dispute on a completed government facility project in Florida. The profit increase in the current year quarter was primarily due to contributions related to the increased project execution activities I mentioned. Building segment operating margin was 3.4% for the third quarter of 2025, in line with expectations. We believe this margin will continue to increase over the next several quarters as volume from certain higher margin projects grows. Specialty contractors segment income from construction operations with $6 million for the third quarter, reflecting an earlier than anticipated return to profitability and compares to a loss of $57 million last year. The improvement was primarily due to the absence of certain prior year unfavorable adjustments, as well as a current year contributions related to the segment's very strong revenue growth, with increased project execution activities on various newer projects across diverse end markets. Specialty contractor segment operating margin was 2.7% for the third quarter of 2025. Other income for the third quarter was $7 million compared to $4 million last year. Interest expense was $14 million, down 36% compared to $21 million last year because of our significant debt reduction since last year. Income tax expense for the third quarter was $15 million with a corresponding effective tax rate of 44.6% compared to an income tax benefit of $34 million last year with a corresponding effective tax rate of 27.5%. We treat up our tax revision again this quarter and our new projected effective tax rate for 2025 is now higher than previously anticipated entirely due to the significant increase in share-based compensation expense that Gary mentioned, and the fact that nearly all of that higher expense is non-deductible. On a GAAP basis, net income attributable to Tudor Perini for the third quarter of 2025 was $4 million, or 7 cents of earnings per share, a result impacted by the further increase in our share-based compensation expense, but still a substantial improvement compared to the net loss attributable to Tudor Perini of $101 million, or $1.92 loss per share in last year's third quarter. Adjusted net income attributable to Tudor Perini was $62 million, or $1.15 of adjusted earnings per share for the third quarter, up very substantially compared to adjusted net loss attributable to Tudor Perini of $85 million, or an adjusted loss of $1.61 per share for last year's third quarter. For the first nine months of 2025, adjusted net income attributable to Tudor Perini was $171 million, or $3.22 of adjusted earnings per share, also up very meaningfully compared to an adjusted net loss attributable to Tudor Perini of $46 million, or an adjusted loss of 88 cents per share for the same period last year. As you can tell, our business is performing well with core operations performance driving very solid earnings this year and reflecting a dramatic turnaround compared to last year. As Gary mentioned, our operating cash flows for the third quarter and first nine months of 2025 were record-breaking at $289 million and $574 million, respectively. We expect that our operating cash for the full year of 2025 will shatter last year's record and will represent our fourth straight year of record cash generation. We also anticipate that our cash flows will continue to be strong well beyond 2025, driven by organic cash collections, that is, from new and existing projects, and occasionally enhanced by collections associated with dispute resolutions. Next, I'll address our balance sheet. Our total debt at September 30, 2025, was $413 million. down 23% compared to $534 million at the end of 2024. Our cash balance has grown substantially this quarter due to our record operating cash flow, and it continues to significantly exceed our total debt, now by $283 million. Our cost and estimated earnings in excess of billings, or CIE, declined again this quarter and is at the lowest level it has been since the first quarter of 2017. CIE has declined by $95 million, or 10%, since the end of last year, mostly driven by the resolution, billing, and collection of various disputed matters, as opposed to project charges. Our CIE is expected to continue to decrease as we resolve the remaining legacy disputes. Finally, here are our latest updated assumptions regarding our increased earnings guidance. G&A expense for 2025 is now expected to be between $410 million and $420 million, with the increase from our previous assumption due entirely to increased shared base compensation expense, as our share price has continued to climb. Depreciation and amortization expense is now anticipated to be approximately $50 million in 2025, with depreciation at $48 million and amortization at $2 million. Interest expense for 2025 is still expected to be approximately $55 million, of which about $5 million will be non-cash. This $34 million, or 38%, lower than our interest expense of $89 million in 2024. Our effective income tax rate for 2025 is now expected to be approximately 30% to 32%, higher than previously anticipated due to increase in share-based compensation expense. nearly all of which is non-deductible. We still anticipate non-controlling interest to be between $75 million and $85 million, significantly higher than last year due to increased contributions from certain joint ventures. We still expect approximately 53 million weighted average diluted shares outstanding for 2025. And capital expenditures are now anticipated to be approximately $170 million to $180 million, with the vast majority of the capex in 2025 estimated at approximately $120 million to $130 million to meet owner-funded for large equipment items on certain large new projects, such as tunnel boring machines. Thank you. And with that, I will turn the call back over to Gary.

Gary Smalley | CEO and President

Thank you, Ryan. In summary, we delivered extraordinary results for the quarter that exceeded expectations. With record operating cash flow, continued strong revenue growth, solid operating income and profitability across all segments, and strong bottom-line earnings, as well as backlog that climbed to a new all-time record of $21.6 billion. This record backlog should enable us to produce strong double-digit revenue growth and significantly higher earnings in 2026 and 2027, while serving as a catalyst for continued strong annual cash flow as our newer projects progress through design and into construction. Our excellent performance to date, combined with our confidence in the results we expect to deliver for the fourth quarter, has enabled us to raise our 2025 EPS guidance for the third consecutive quarter. The outlook for Tutoprini is very bright over the next several years as we continue to benefit from favorable macroeconomic tailwinds and strong public and private customer funding that are fueling sustained market demand for our services. Finally, and just to reiterate, Despite the dramatic growth we have seen this year in our stock price, I still believe we have tremendous opportunity ahead for further substantial shareholder value creation. Thank you. With that, I will turn the call over to the operator for questions.

Operator | Conference Operator

Thank you. With that, we will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate that your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing star keys. One moment while we poll for questions. And our first question comes from Adam Thalheimer with Thompson Davis and Company. Please proceed with your question.

Adam Thalheimer | Analyst, Thompson Davis and Company

Hey, good afternoon, guys. Great quarter. Thanks, Adam. Can you give a little more color on specialty turning positive? What drove that? And what's your expectation for the next few quarters?

Gary Smalley | CEO and President

Yeah, Adam, look, what's really driving specialty performance is the work that we have, the non-claim resolution or dispute resolution work is just going extremely well. We're making heck of a lot of money, and that is the work that we're primarily doing is for TutorPrinti, but also the work that we're not doing for TutorPrinti is just doing extremely well. So we have a quarter that had very little noise from dispute resolutions, and that's what's really driving it. So whenever we have quarters like that throughout the business, but especially for specialty at this point, you're going to see much improved results.

Adam Thalheimer | Analyst, Thompson Davis and Company

Is the Does the specialty revenue trend up from the Q3 level?

Gary Smalley | CEO and President

Yes. It will because, you know, keep in mind that most of the work that they're doing is for these larger projects that we've been announcing awards of over the last year and a half or so. And as those projects continue to ramp up, their participation will continue to ramp up. So their revenue is going to go up significantly, particularly New York-based revenue.

Adam Thalheimer | Analyst, Thompson Davis and Company

And then can you just level set us lastly on – how many of the legacy disputes are remaining?

Gary Smalley | CEO and President

Yeah, we're looking at about a dozen, let's say, of any significance. There's some cats and dogs, odds and ends out there too, but 10, 12 of any significance.

Adam Thalheimer | Analyst, Thompson Davis and Company

Great. Nice job.

Thank you. Thank you. Operator | Conference Operator

Thank you. And our next question comes from the line of Liam Burke with B Reilly Securities. Please proceed with your question.

Liam Burke | Analyst, B. Riley Securities

Yes, thank you. Good afternoon. Hi, Liam. Hey, Ray. Hi, Gary. As you move on with better terms and better margins on these contracts, the rolling overs we can see in your operating margins, is your bidding activity staying robust, or have you been – seeing less interest in certain areas?

Gary Smalley | CEO and President

No, it's still very robust. We've got a load of work that's coming up in different geographies, really led by New York still. And a lot of things happening in California. We still have Indo-Pacific that's looking very strong, as well as the Midwest. So in all of our major geographies, there's still a really strong pipeline of work yet to be bid.

Liam Burke | Analyst, B. Riley Securities

Great. And I don't want to keep harping on specialty contractors, but you had a pretty nice quarter in awards and the announcements, which we really don't hear a lot about. Is there something changing in terms of the amount of awards that specialty contractors are getting?

Gary Smalley | CEO and President

No, not really. Just keep in mind, though, for these larger projects, particularly in New York that we've been announcing, their participation is very strong in each one of those projects. So, you know, that means that as the backlog was building for the whole company, the specialty backlog, particularly in New York, has also been building. And this is higher margin work for them than what they've seen in the past. So expect higher margins to be reported as we move forward.

Liam Burke | Analyst, B. Riley Securities

Great. Thank you, Gary.

Operator | Conference Operator

Yeah.

Liam Burke | Analyst, B. Riley Securities

Thank you. On this side of that, I must.

Operator | Conference Operator

Thank you. And our next question comes from the line of Min Cho with Texas Capital Securities. Please proceed with your question.

Min Cho | Analyst, Texas Capital Securities

All right. Thank you. Congratulations on another strong quarter and guidance raise. Thank you, Min. So you went through your, yeah, you went through your 12 billion kind of near-term bid pipeline pretty quickly. I know the awards and backlog can be kind of lumpy from time to time, but based on that pipeline, and just the timing of the pipeline. Could you exit the fourth quarter at another record, or are we expecting something a little bit more flattish?

Gary Smalley | CEO and President

Yeah, it's probably a little bit more flattish in the fourth quarter. It's going to be lumpier. Lately, it's been every quarter seems increased new record, new record, new record. And we're not going to see that going forward in the short term. We may have new records, but it won't be consistently quarter after quarter. So a little bit, a little bit lumpy, but, um, you know, flattish over the, uh, the short term, short to medium term anyway.

Min Cho | Analyst, Texas Capital Securities

Right. That's still just a very high level. So that's great. Um, also kind of going back and maybe Ryan, I'm on the specialty contracting, um, business. Nice to see it back in the black. Um, by 2026, could you kind of be at your target of five to 8% or given what's in the pipeline, do you expect that could take a little bit longer?

Ryan Sirocco | Executive Vice President and CFO

Yeah, I think there's certainly certainly potential to to get up to that 58%. In particular, looking forward as these newer projects ramp up and and that are obviously coming along with the with the significant civil work and building work. So I think as those revenues and margins come through, I think you're going to see those margins continue to elevate.

Min Cho | Analyst, Texas Capital Securities

Excellent and then just finally Gary, So obviously the directional outlook for 2026 is still to be up substantially from the high end of 25. But from even the last quarter, are you feeling better or the same about 2026? And if you can just talk about what's maybe changed.

Gary Smalley | CEO and President

Yeah, I would say at least as good, if not better. What's happening is we continue to have exceptional results in resolving the things of the past. And so that certainly is helpful. But Also, as we go forward, you know, we're seeing more clarity on the work that we were booking. We've been able to do a better job negotiating what we call buyouts. So, in other words, we offload risk to vendors and subcontractors. And for these lump sum projects, we've done a better job than what we thought. So, everything is – and then the early performance is also really better than what we thought. So I would say that, you know, we expect, we just are more bullish now over 26 and even 27 than we were before. But it's always been, you know, very, you know, high expectations. And so we still have those, but with a little bit more.

Min Cho | Analyst, Texas Capital Securities

Great. Thank you so much and good luck.

Gary Smalley | CEO and President

All right. Thank you, Mitch.

Operator | Conference Operator

Thank you. The next question comes from the line of Michael Dennis with Vertical Research Partners. Please proceed with your question.

Michael Dennis | Analyst, Vertical Research Partners

Good afternoon, gentlemen.

Operator | Conference Operator

Hi, Mike.

Michael Dennis | Analyst, Vertical Research Partners

Mike? Not sure who's had a better year, to the Perennials or the Dodgers?

Gary Smalley | CEO and President

That's a good question.

Michael Dennis | Analyst, Vertical Research Partners

You can ponder that offline. Gary, we've talked a couple of the response to the questions about the bookings that you're looking at and the bidding activity. There's several and they're large. How do you look at that relative to like where your business is today, what regions, your capacity, the ability to kind of continue to execute at this high level? And is this, is the market set up for maybe not in the next few quarters, but maybe the next 12 to 30 months? Do you have another uptick in what the backlog can be and what the visibility can be out to the end of the decade?

Gary Smalley | CEO and President

Yeah, it certainly can have an uptick as we progress through these bids. It really depends on the timing of when the bids come to fruition and then, of course, our success rate. But there are some large projects that you've heard. We like our chances. As far as capacity, we're not going to overextend ourselves. We're very disciplined in the approach. We still have capacity for more, but we also are working off projects, too. So as projects get worked off, we have staff that become available, and we insert those individuals, those key leaders where we need them most. So we feel really good about where we're staffed, and we feel good about what the long-term prospects of this backlog can look like.

Michael Dennis | Analyst, Vertical Research Partners

I appreciate that. My follow-up is, Gary, the cash performance has been outstanding. It goes without saying. Maybe as we think about it, you're going to need some cash to grow the business, I'm assuming, as these projects wrap up on the cash cycle. And you did mention about what to do once you get to this certain level on cash. And maybe you could share a little bit about what you're thinking. Maybe the board might be thinking internally on this concept And, you know, over how much more, what kind of level is required to maybe start thinking about that in a more tangible thought process?

Gary Smalley | CEO and President

I won't give you an exact timeline, but I will say that it is a topic of conversation every time we get together with the board, and the next time is next week. And I think that we're unanimous in believing up until the latest conversations is that it would be prudent to continue to accumulate more cash because of exactly what you said. There's you know, we still have to look at future needs for the cash. Um, you know, so we'll, we'll be a conservative, um, we'll, we'll be, um, intelligent with what we do. And, um, as far as the timing, um, you know, I won't, uh, we won't have a spoiler alert at this point because we got to get through the, the meeting next week. And then we'll, we'll, uh, if there's any news, then, uh, we'll roll it out as soon as possible. But, but, you know, look for a continued conservatism and just, um, caution to make sure that, uh, that we have excess cash rather than needing to draw down on some revolver or anything.

Michael Dennis | Analyst, Vertical Research Partners

That makes perfect sense. Just a quick follow-up on the bidding opportunities. Are you bidding on those by yourself, or are there any joint venture partners in many of these projects? I'm assuming most of them are going to be on your own, or is there some that you might join with some partners?

Gary Smalley | CEO and President

Yeah, it's a mix. You know, when the projects get as large as the ones that we were talking about, it's likely that there's a JV partner. But look, we do very well with respect to surety support, being able to deliver projects ourselves without the need for others to participate. We also have, you know, capabilities internally that we don't always need help. But these are huge programs, so look for we'll say a good many of those to have a JV partner. And then we'll rely on our experience with our JV partners in the past. We've always had very successful JVs and would look to go back to our established partners. Thank you, Gary.

Operator | Conference Operator

Thank you. And our final question comes from the line of Stephen Fisher with UBS. Please proceed with your questions.

Stephen Fisher | Analyst, UBS

Thanks. Good afternoon. Congratulations also on the cash generation there. Just curious on that point, what's the outlook for the mobilization payments or upfront payments that you're getting? Is that now mostly kind of happened as your sort of backlog is flattening before this next wave? And is cash going forward for the next handful of quarters going to be more red? It's just of ongoing project burn?

Gary Smalley | CEO and President

Yeah, most of the mobilization payments have happened. There's still a couple fragments to go. I would look at cash continue to be strong, not as strong as what we had in the third quarter. That's just really phenomenal, the $289 million. So it'll still be very strong compared to where we've been historically. And we'd look for continued strong cash going into 26 and 27 and beyond that too.

Stephen Fisher | Analyst, UBS

Okay, that's helpful. And just in terms of impactful margin momentum, I mean, clearly going specialty from negative to positive is important, but on the scale of dollars, it's maybe not as big as what could happen with the building segment. So just trying to get a sense of the, both the timing and the magnitude of that momentum in the building side. And so maybe you can help me with this in terms of, as we think about the revenue mix of the building segment over the next couple of years, what percent of that do you think is going to be sort of the typical lower margin GC work for a lot of the subcontractor pass-throughs versus you know, the larger prison-type projects where you've got, you know, more higher margin profile? Is this going to be like, you think, 50-50 within that segment or more weighted towards those kind of fixed-price projects like the prison-type thing?

Gary Smalley | CEO and President

Yeah. Yeah, look, you know, as always, our margin profile is dependent on a large mix of work A good bit of the work that we're doing now is the, you know, you mentioned the prisons, but it's work like that that is higher margin. Even the traditionally lower margin work that we're doing now, some of those projects are showing increased margins, too. So, you know, without giving you an exact percent, the mix is better than it's ever been. You know, certainly the fixed price work impacts that, but also the the complexity of some of the work that we're doing and the absence of bidders, not even talking about the fixed price work, that's helping us to demand higher margins there too. So that's why we're so bullish on building margins improving because the content of this newer work that's higher margin is just going to feed the margin growth in the building segments.

Stephen Fisher | Analyst, UBS

Makes sense. And then just a quick follow-up there is when do you think you'll hit the point where the building segment margins are really reflecting the solid burn on all the work that's gone in there? Is that sort of a 2027 timeframe or could it be sometime before then?

Gary Smalley | CEO and President

No, I think you're going to see by mid-2026, you're going to see a significant impact and it's going to be improved by the time you get to 2027. But 26, I think, I mean, a lot of part of 26 is going to look much better than where we are even now with the, you know, the elevated margins in 25.

Stephen Fisher | Analyst, UBS

Okay. And then I guess the last question here, I suppose I have to ask on the government funding side, you mentioned, Gary, that the government shut down and the budget cuts aren't going to have an impact. I guess I'm curious to hear what you think about the dynamics with the mayor-elect in New York City here versus the Trump administration and what that could mean for ongoing projects and perhaps, importantly, something like Port Authority, which you have, it sounds like another slug coming. So what do you think about those dynamics and how they could play out?

Gary Smalley | CEO and President

Yeah, look, it's hard to predict what the future might hold, but we're not expecting any significant impacts. And you mentioned the Port Authority. Look, the Port Authority is not a city agency. It's a state agency between two states, New Jersey and New York. And we just don't anticipate any impacts, nor do our owners, our customers. We're having active dialogue with them as developments occur. And so far, you know, we don't see any impact at all.

Stephen Fisher | Analyst, UBS

Okay, terrific.

Thanks very much. Operator | Conference Operator

Thank you. Thank you. And with that, that does conclude the question and answer session. I would now like to turn the floor back over to Gary Smalley for closing remarks.

Gary Smalley | CEO and President

Well, thank you, everyone, again, for your interest and participation today. We look forward to continuing to deliver strong results going forward as we have for the first three quarters of this year. Look, we appreciate your support and confidence in the improvements that we are making and your patience for those of you who have been with us for a long time. For those of you who have been in wait and see mode, you know, that's okay. I get it. But we believe that there's still a lot more good to come. So get on board. There's still time. And look, we look forward to talking to you again next quarter.

Thank you very much. Operator | Conference Operator

Thank you. With that this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090506-00'00'