TPC earnings call analysis

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'

NYSE:TPC Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Carrie | Conference Coordinator: Good day, ladies and gentlemen, and welcome to the Tudor Perini Corporation Q2 2025 Earnings Conference Call. My name is Carrie, 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 will now turn the conference over to your host for today, Mr. Jorge Casado, Senior Vice President of Investor Relations. 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 Soroka, Executive Vice President and CFO. Gary and Ryan will review the details of the quarter and provide commentary regarding our outlook and guidance. ron in his role as executive chairman is joining us 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 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. 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 that is being filed today. Thank you, and with that, I will turn the call over to Gary Smalley. Thanks, Jorge. Gary Smalley | CEO and President: Hello, everyone, and thank you for joining us. Tudor Perini had an outstanding second quarter, one of our best quarters ever, setting new records across various metrics. Operating cash flow was extraordinarily strong for the quarter at $262 million and $285 million through the first six months of 2025. setting new records for each respective period. And our second quarter cash flow was the second best for any quarter in the history of the company. In addition, our backlog climbed significantly to a new all-time record of $21.1 billion, up 102% year over year, and up 9% sequentially, driven by $3.1 billion of new awards that we booked during the quarter. I will provide further details on some of these new awards in a few moments. Our second quarter revenue was up 22% from last year to $1.37 billion, and our revenue for both the second quarter and the first six months of 2025 was the highest for each respective period since 2009, reflecting record quarterly and first half 2025 revenue performance for the civil segment and the best performance since 2020 for the building segment. Operating income was up 89% to $76 million, reflecting strong operating performance and contributions from higher margin projects in the civil and building segments. Our civil segment delivered its highest segment operating income ever for both the second quarter and the first six months of the year, with margins that were exceptionally strong. Our building segments operating income for both periods of 2025 was the highest since 2011, with margins that were also strong. Importantly, operating income for the quarter was very strong despite the substantial increase in share-based compensation expense that we experienced this quarter as reflected in today's earnings release. As you may recall, and as previously disclosed, over the past few years due to a depleted equity plan share pool combined with a previously low stock price, The company issued cash-settled performance-based awards weighted heavily towards enhancing TutorPrinti's total shareholder return. As a result of our significant share price increase year-to-date, our share-based compensation expense also increased significantly. In an effort to provide our shareholders with a clearer view of TutorPrinti's true overall business performance, starting this quarter, we have elected to report adjusted earnings. which exclude the impact of share-based compensation expense net of the associated tax benefit. It is important to note that at our recent annual shareholders meeting in May, shareholders approved management's proposal to authorize additional shares for incentive awards. So, going forward, the company intends to issue share-settled instead of cash-settled equity which should limit future earnings volatility and reduce our share-based compensation expense considerably once these older cash-settled incentive compensation awards vest, some at the end of this year and the rest at the end of 2026. Returning to our results, for the second quarter of 2025, we delivered GAAP EPS of 38 cents, up substantially compared to 2 cents for the same quarter of last year. Adjusted EPS for the second quarter was $1.41 compared to $0.34 for the second quarter of 2024, again demonstrating our strong core operating performance and reflecting the impact of contributions from higher margin projects. Overall, 2Proni's business continues to perform extremely well and, frankly, even better than we anticipated at the start of this year. We are at the beginning of the life cycle for several major higher margin projects that are expected to drive substantial growth, profitability, and cash flow as project execution activities continue. What you are seeing now is just a preview of what these projects should produce on a larger scale in the coming years. Our record-breaking operating cash flow for the first six months of 2025 was primarily driven by collections from both newer and ongoing projects. I should add, however, that we have continued to make good progress in the resolution of certain disputed items that have also had a positive impact on cash generation with only a modest impact on earnings. We expect the same formula to continue to drive strong cash flow for the remainder of the year. As a result of the continued progress we have made on dispute resolutions during the quarter, our Costs and Estimated Earnings in Excess of Billings, or CIE, is now down to $856 million at the end of the second quarter, which is a reduction of $91 million, or 10%. Our CIE is now at the lowest level it has been in eight years. Taking a closer look at our record $21.1 billion of backlog mentioned earlier, following the strong first quarter that featured $2 billion of new awards, our volume of bookings increased during the second quarter with an impressive $3.1 billion of new awards. This latest record backlog represents a nearly threefold increase since the end of 2022 and includes record highs in both the civil and specialty contractor segments. This strong foundation gives us tremendous confidence in our ability to deliver the substantial growth, profitability, and cash flow that I just mentioned we are expecting to generate over the coming years. Not surprisingly, our book-to-burn ratio for the second quarter was an impressive 2.2x. The most significant new awards and contract adjustments in the second quarter included the $1.87 billion Midtown Bus Terminal Replacement Phase 1 project in New York, a $538 million healthcare project in California, two civil works projects in the Midwest collectively valued at $127 million, $90 million of additional funding for a mass transit project in California, and $54 million of additional funding for another healthcare project in California. As we look ahead, we believe that our backlog will remain strong as our bidding pipeline for the civil and building segments remains full of opportunities this year and over the next several years, with key near- and medium-term prospects located mostly on the West Coast, in the Midwest, and in 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 later this year, including another California healthcare project valued at nearly $1 billion. Some of our major upcoming project opportunities include the $12 billion Sepulveda Transit Corridor, the $3.8 billion Southeast Gateway Line, the $1.2 billion Valley Link Phase I rail project, and the $650 million Foothill Gold Line light rail project, all of which are in California, and the $1.4 billion I-535 Blatnick Bridge project in Minnesota. As we have discussed previously, there are also significant Indo-Pacific opportunities driven in large part by the U.S. Defense Department's specific deterrence initiative, black construction, our Guam-based subsidiary, has had extraordinary success in capturing various new projects in the region and continues to be well-positioned to win other major projects there over the next several years. Our record backlog continues to enable us to be highly selective as to which opportunities we will pursue and to focus on bidding projects that have favorable contractual terms, limited competition, and higher margins. We are committed to pursuing projects where we can showcase two different needs differentiated approach, depth of operational talent, and history of outstanding project execution. As Jorge mentioned at the start of this call, Ron Tudor, in his role as executive chairman, continues to help drive the setup of our newer major projects that we were awarded over the past several quarters. The importance of proper project setup of these mega projects cannot be understated, as it is the first key step towards the successful execution of this work. These projects are in the early stages but are going very well thus far, and Ron is here to help answer any project-specific questions that may come up during the Q&A. As a result of our strong performance to date and greater confidence in what we expect to achieve for the rest of the year, I am pleased to announce that we are increasing our guidance for the second time this year and for just the second time in our history. Our GAAP EPS for 2025 is now expected to be in the range of $1.70 to $2, up from the previous guidance of $1.60 to $1.95. Adjusted EPS for 2025 is expected in the range of $3.65 to $3.95, which compares to $2.45 to $2.80, the range we would have provided last quarter had we provided non-GAAP EPS guidance. Importantly, our increased guidance continues to factor in a significant amount of contingency for various remaining unknown or unexpected outcomes and developments in 2025, including the potential for slower ramp-ups on our newer projects, project delays for existing and prospective work, lower than expected win rates for future bids, higher than currently anticipated share-based compensation expense, and settlements or adverse legal decisions associated with the resolution of disputes. Moreover, the outlook for Tudor pruning remains very bright beyond 2025. we anticipate that both our GAAP EPS and adjusted EPS in 2026 and 2027 will be significantly higher than the upper end of our increased guidance for 2025, and we continue to expect strong operating cash flow for 2025 and beyond. And to reiterate, while we expect share-based compensation expense to be higher than previously anticipated for the full year of 2025, it is projected to decrease considerably in 2026 and further in 2027 once certain awards have invested. Finally, let me provide a quick update with respect to the broader macro environment. As we mentioned last quarter, we do not currently 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, or defunded, including our work on the first phase of the California High-Speed Rail Project. In recent discussions with this customer regarding the federal government's decision to reduce funding on the overall program, the customer confirmed that our project is funded and authorized and is not expected to be adversely impacted. Thank you, and with that, I will turn the call over to Ryan to discuss the details of our first quarter results. Ryan Soroka | Executive Vice President and CFO: Thanks, Gary. Good afternoon, everyone. I'll start off by discussing our results for the second quarter, after which I will provide some commentary on our balance sheet and our updated 2025 guidance assumptions. Revenue for the second quarter of 2025 was $1.37 billion, up 22% compared to $1.13 billion for the second quarter of 2024. Civil segment revenue was $734 million, up 34% compared to $546 million last year. Building segment revenue was $462 million, up 11% compared to $418 million last year, and specialty contractor segment revenue was $177 million, up 9% compared to $163 million last year. Our revenue growth was driven by increased project execution activities on various newer, higher margin projects that all have substantial scope of work remaining. These projects included the Brooklyn Jail, the Honolulu Rail Project, the Manhattan Tunnel, the Newark Air Train Replacement, and the Purple Line Section 3 Stations Project in California. Civil segment income from construction operations was $140 million in the second quarter of 2025, up 85% compared to $76 million for the second quarter last year, with increase driven by contributions related to the strong revenue growth I mentioned for the segment, as well as favorable adjustments totaling $28 million due to the settlement of certain change orders and changes in estimates due to improved performance on a mass transit project in the Midwest. Building segment income from construction operations was $22 million in the second quarter of 2025 compared to $5 million last year, with the increase primarily due to contributions related to the increased project execution activities I mentioned. The specialty contractor segment posted a loss of $18 million for the second quarter of 2025 compared to a loss of $8 million last year. The increased loss was primarily due to unfavorable adjustments this quarter that totaled about $15 million related to the settlement of certain legacy claims in the Northeast, partially offset by contributions associated with the revenue growth for the segment. We anticipate improved operating income over the rest of this year and next year for the specialty segment, as our revenue is expected to increase due to their involvement in several of our newer large projects that are ramping up, which will help to cover the segment's G&A cost. Segment operating margins for the second quarter of 2025 are strong for the civil and building segments at 19.1% and 4.9% respectively. Other income was $6 million, level with other income reported in the second quarter last year. Interest expense was $14 million, down 41% compared to $23 million for the same period last year, because of our substantial debt reduction since last year. Income tax expense for the second quarter of 2025 was $22 million, with a corresponding effective tax rate of 31.8%, compared to $7 million for the same period last year, with a corresponding effective tax rate of 31.3%. We had to true up our tax provision this quarter, and our new projected effective tax rate for 2025 is now higher than previously anticipated, all due to the significant increase in shared base compensation expense that Gary mentioned and the fact that nearly all the higher expense is non-deductible. On a gap basis, net income attributable to Tudor Perini for the second quarter of 2025 was $20 million, or $0.38 of earnings per share, up substantially compared to $1 million, or $0.02 of earnings per share for last year's second quarter. For the first six months of 2025, net income attributable to Tudor Perini was $48 million, or $0.90 of earnings per share, also up substantially compared to $17 million, or $0.31 of earnings per share for the same period last year. Our second quarter GAAP EPS was ahead of our expectations, even with the impact of the significantly higher than anticipated share-based compensation expense. Adjusted net income attributable to Tudor Perini which again excludes the impact of share-based compensation expense net of the related tax benefit with $75 million, or $1.41 of adjusted earnings per share for the second quarter of 2025, up very meaningfully compared to $18 million, or $0.34 of adjusted earnings per share for last year's second quarter. For the first six months of 2025, adjusted net income attributable to Tudor Perini was $110 million, or $2.06 of adjusted earnings per share, also up substantially compared to $39 million, or $0.73 of adjusted earnings per share for the same period last year. As Gary mentioned, our operating cash flow for the second quarter and first six months of 2025 was stellar at $262 million and $285 million, respectively, with both results setting new records for the periods. We expect that our operating cash flow will continue to be strong in 2025, as well as over the next several years, driven largely by organic cash collections, that is, from new and existing projects, and occasionally enhanced by collections associated with dispute resolutions. Now I will address the balance sheet. Our total debt as of June 30, 2025, was $419 million, down 21% compared to $534 million at the end of 2024. But perhaps more impressive is that due to our record operating cash flow in the second quarter, for the first time since 2010, our cash exceeded our total debt. As of June 30, 2025, our cash was $526 million, or $107 million greater than total debt. As Gary noted, our CIE was $856 million at the end of the second quarter, down $91 million, or 10% compared to the balance at the end of the first quarter of 2025, and it stands at its lowest level it has been since the second quarter of 2017. The CIE decrease was mostly due to billing and collections activity and, to a much lesser extent, from charges related to litigation and settlement on older disputes. Finally, let me provide you with our latest updated assumptions regarding our increased earnings guidance. G&A expense for 2025 is now expected to be between $360 million and $380 million, with the increase from our previous assumption due entirely to increased share-based compensation expense. Depreciation and amortization expense is still anticipated to be approximately $55 million in 2025, with depreciation at $53 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 is $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 26% to 28%, higher than previously anticipated due to the increase in share-based compensation expense. nearly all of which is non-deductible. We now 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 still anticipated to be approximately $140 million to $150 million. with the vast majority of the capex in 2025 now estimated at approximately $120 million to $130 million to be 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. To briefly recap, we delivered extraordinary results for the second quarter that once again exceeded our expectations with record operating cash flow and continued strong revenue, operating income, and earnings growth, and with backlog that has doubled year-over-year to a new all-time record of $21.1 billion. This record backlog should enable us to generate double-digit revenue growth and strong earnings for the foreseeable future, while also serving as a catalyst for continued strong cash flow as the newer projects progress through design and into construction. Our outstanding performance to date, combined with our greater confidence in how the second half of this year should conclude, has enabled us to increase our 2025 EPS guidance for the second time this year, while still maintaining what we believe is an appropriate level of contingency for unknown or unanticipated developments. More specifically, we are raising the midpoint of our 2025 adjusted EPS guidance by a staggering $1.17 or 45% with this latest increase. Our strong results so far this year reflect the impact of contributions from higher-margin civil and building projects, many of which are still in the early stages but are ramping up. Last quarter, I concluded my earnings call commentary on May 7th by stating that, quote, there has never been a better time to be a TutorPrinti shareholder as we believe we are at the dawn of a new era for the company, end quote. With the stock price doubling since then, combined with our outstanding second quarter results that we are reporting today, I think it is easy to see why it was so optimistic then. With what we continue to see on the horizon for this year and beyond, I still believe that statement to be true, and there remains tremendous opportunity ahead for further substantial shareholder value creation. Thank you, and with that, I will turn the call over to the operator for your questions. Carrie | Conference Coordinator: 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 pull for questions. And our first question will come from Michael Dudas with Vertical Research. Michael Dudas | Analyst, Vertical Research: Good afternoon, gentlemen. Gary Smalley | CEO and President: Hi, Mike. Michael Dudas | Analyst, Vertical Research: Gary, kudos to the operating team. Terrific results. I mean, just it goes without saying, you summarized very well. As we look this quarter, maybe as we look through 2025, any major project closeouts that you will be experiencing? And on top of that, how do you think about percentage or your win expectation rate on the new business that you listed some of the larger projects that may get announced here in the next several weeks or several quarters? Do you have an expectation on that percentage or probability weighted and how that will continue to help offset some of the closeouts that we may see in the next six to nine months? Gary Smalley | CEO and President: Yeah, Mike, thanks. I'll take the first part and then let Ron help out also. Look, it's not really about projects wrapping up for us at this point. It's about projects starting up, ramping up, and generating even more revenue and profit and cash than what they've done so far. So we don't see in the next quarter or so or any short-term period of time anything of significance winding down. On the proposal front, Ron, with the prospects that we have out there, we feel good about our chances. Anything else you want to add to that? Ron Tudor | Executive Chairman: Yeah, there's only two jobs of any consequence that are in the final stages, and those would be defined as finishing the end of next year. So any reduction in revenue on those two jobs as they work toward their completion is more than offset by the tremendous ramping up of all of these new jobs, where they will continue to explode revenue-wise this year, next year, and the following year, and you will see dramatic revenue increases from all these major new jobs hitting us in the next quarters and continuing. Gary Smalley | CEO and President: So, Mike, to your question on the prospects, look, we feel really good about all the prospects. We're not going to get them all, these major ones, but we know that we're one of a few. bidding for them, and so we expect to land one or two of them, and that should help as they ramp up, as they materialize, they will replace the work that Ron just mentioned that, you know, work winding down, you know, next year at the end of 26 and early in 27. Michael Dudas | Analyst, Vertical Research: Gary, you mentioned in your prepared remarks that even the first half results are better than you anticipated. maybe you can assess how that occurred or what was some of the drivers of that relative to the plan and how the execution certainly came through this first half? Gary Smalley | CEO and President: Yeah, I think, you know, there are a couple of things. One, the project execution, you know, the ramp up of some of these projects was a little quicker than we anticipated. You know, we factored in some contingency or some expectation that things would not go as brilliantly, let's say, as they did. So that certainly was a factor. We also had a real good quarter as we talked about in prepared remarks of reducing CIE, cost and excess of billings. That came down further than what we thought, what we anticipated for the first quarter anyway. We also benefited by the fact that there were a lot fewer write downs than what we had seen recently. We had put contingency in for that possibility. And we did not have to use much contingency there. And then overall, work in some of the units, some of the smaller work, it came in, we'll say, more timely than what we anticipated. And so that also helped. And I'll just say that we have contingency that we have for the year. We don't disclose, of course, what that is. But for half of the year, we've used about a third of the contingency. So I think that even with these outstanding results, We didn't use the contingency that we had anticipated that we would use for the first six months. Michael Dudas | Analyst, Vertical Research: That's well said, Gary. My final question, maybe for Ryan. Obviously, the cash flow is going to continue quite strong the next couple of quarters into next year. PACE will track earnings, any adjustments that you can see there? And Gary, certainly, where does the board stand on kind of figuring out what to do with all the benefits that your company is generating here, especially as you bring this cash into the company? Ryan Soroka | Executive Vice President and CFO: Yeah, I mean, I think in previous calls we stated that we expected cash to be closer to somewhere between what we produced in 2022 and 2023, so roughly $200 to $300 million of operating cash. Obviously, as we sit here at $285 million of operating cash year-to-date, we're looking certainly north of that. You know, maybe on the lower end, approximately $350 million of operating cash. And then at the higher end, kind of approaching where we, what we achieved last year, around $500 million. Gary Smalley | CEO and President: Yeah, somewhere in that range. And then your question about, what was your last question? Sorry. Michael Dudas | Analyst, Vertical Research: The board and, you know, figuring out an allocation policy. Gary Smalley | CEO and President: Yeah, look, we continue to talk to the board. We will next week when we reconvene with them. There's still, of course, a lot of alternatives out there for us. One thing I will say, we are going to be fiscally conservative in this. We want to accumulate more cash. We're not quite ready to go down a path. We're still looking at all options. We will do something someday, but that day is not quite upon us. We ask for everyone's continued patience in that. Everyone's been patient for a long time to see the results that we've generated. We want to stock away some more cash, again, to be fiscally conservative than just start paying a dividend, let's say, or something. We also recognize that we need cash for working capital. We're growing the business at a very significant clip. So that adds to the reason for our conservatism in coming up with some type of capital allocation decision. Michael Dudas | Analyst, Vertical Research: Well, the patience has been rewarded in 2025, Gary. Thanks for your time and appreciate it. Gary Smalley | CEO and President: Thank you, Mike. Carrie | Conference Coordinator: Our next question comes from Adam Solheimer with Thompson Davis. Adam Solheimer | Analyst, Thompson Davis: Hey, good afternoon, guys. Congrats on all the success here. Thanks, Adam. Thank you. Can you comment just on the project funnel and the project outlook? I'm just curious, you know, you're obviously being more selective than you've been in the past, but do you still see a good flow of projects that meet your criteria? Gary Smalley | CEO and President: Yeah, we do, Adam. Look, obviously, we can be even more selective than we have been in the past, and there aren't as many of these huge projects out there to bid because we ended up getting a lion's share of those projects. But where we're seeing projects now, we see some larger projects materializing in L.A. We see in in the Indo Pacific region, and we see in some opportunities in the Midwest. So there are significant opportunities out there will be selective. We will be look for those projects that geographically make the most sense for us and where we can get higher margins with less competition. So, but we, there are opportunities out there. We just don't feel the need to. you know, we'll say be aggressive with price as we have not seen that need in the last couple years. Adam Solheimer | Analyst, Thompson Davis: Great. And then, Ryan, I was hoping you could expand on, you gave some color on your expectations for specialty going forward. I was hoping you could just kind of give a little bit, put a little more meat on the bone in terms of the revenue and the margins there. Ryan Soroka | Executive Vice President and CFO: Yeah, I mean, as we kind of look through to the second half of the year, I mean, ultimately the expectation is for specialty to end up around breakeven or even north of breakeven as they start to execute on some of the newer work that they're performing on, which is a lot of that work, in particular in the Northeast, is on Tudor Perini projects. So we have some good insights into those projects. You know, as they expand and ramp up production as looking forward into 2026 and beyond, you know, obviously we're looking at some growth that comes along with those larger projects that they're operating on and certainly expect the margins to continue to enhance. I think ultimately the expectation, once some of these legacy disputes are behind us, is for specialty to get up into that 5% to 8% margin range. Adam Solheimer | Analyst, Thompson Davis: Great. I'll turn it over. Thanks, guys. Thank you, Adam. Carrie | Conference Coordinator: Moving next is Stephen Fisher with UBS. Stephen Fisher | Analyst, UBS: Thanks. Good afternoon. Congrats on the continued good progress. Just wanted to come back to the change in guidance again. It sounds like it's a combination of less contingency needs and maybe things ramping up a little bit faster. Are there any other things that you can call out that sort of bridge the guidance to the extent that you can talk about whether it's in civil, whether it's in building? And is it the work that you've now put in the backlog in Q2 that might already have some impact in the second half? Just any of the other factors that drove the change here in the guidance. Gary Smalley | CEO and President: Yeah, certainly, as we look ahead, civil is going to continue to drive the company's results. It's always has and it always will. But building is going to contribute quite healthily to the results as well, because, you know, obviously we have the one of the two large jails really blown and going now and the other one will soon, you know, a year or so. So, in the results to date, I mentioned we had good progress in some settlements without, you know, any significant impact on the results, on earnings. And one in particular, we had a really healthy project that was very successful for us, and we advanced some settlement discussions, and that came really close to completion and we were able to release some contingency, some reserves on that project. We don't have anything large in the back half of the year, but the adjusted EPS guidance was really, as we mentioned in the prepared remarks, it all comes around the uncertainty with executive comp, the liability-based, executive comp awards that has created the volatility. When we eliminate that with the adjusted EPS, the contingency that we have remaining is, we think, very healthy and very sufficient to accomplish the guidance that we're coming out with today. Hopefully, that addresses your question. Stephen Fisher | Analyst, UBS: Yeah, that's helpful. I guess I'm wondering... As we think about the modeling out the civil segment for the second half of the year, are the margins that you embed in there now higher than what you had previously for the second half specifically? Gary Smalley | CEO and President: Yeah, I would say they probably have ticked up a point higher. You know, it depends geographically. You know, that's why we always quote a range. But, you know, we're probably up to 15%. now for civil segment margin, where years ago we were 8 to 10, then we were 10 to 12, and recently we've signaled 12 to 14. I'd say 12 to 15 is probably a good range for civil margins. We'd like to expand on that further, but in the short term, it looks like 12 to 15 probably is the best range. Stephen Fisher | Analyst, UBS: Okay. That's helpful. You mentioned that you don't expect any real impact from the tariffs. I guess I'm just thinking that the tariffs really haven't hit construction costs yet, from what I can tell in chatting with folks in the industry. And so I'm wondering what happens if it's by the end of this year and we get into next year, if we really start to see costs picking up a little bit. How much wiggle room is there in contingency in your backlog to account for a few higher percentage points of overall construction costs? Gary Smalley | CEO and President: Let me explain. First of all, when we were talking about tariffs not having an impact, we're not just talking about up to now. We're talking about looking forward as well. For each of our major projects, what we did, we renewed or revisited an analysis that we had done last quarter And we looked at every one of these major projects to see any possible exposure that we might have for tariffs. And I can tell you that it was even less exposure than what we had seen last quarter. We've done a very good job in these projects, what we call buying out the materials and also subs, such that the risk is just not there because now we've passed the risk on to, let's say, vendors where we've locked in, you know, steel prices Um, for, you know, various projects or, um, other, um, you know, pricing. So we will not have an issue with the current projects that we have in backlog. We're absolutely. Confident of that, as we look ahead with future projects, and we'll, of course, bid at the higher rates, and then we'll do our best to mitigate that risk primarily through. Through buyout, and then also through contingency. And we just don't foresee that being the impact. So, yes, the impact on the pricing is like what you said. It has not materialized, at least not in a significant way. But when it does, we're protected or we will be protected. Stephen Fisher | Analyst, UBS: Perfect. I'll leave it there. Thank you. Carrie | Conference Coordinator: Our next question comes from Liam Burke with B Reilly Securities. Liam Burke | Analyst, B. Riley Securities: Yes, thank you. Good afternoon. In earlier discussions, you talked about your larger projects, and you've worked yourself into a significant competitive advantage in terms of your bidding. But are you seeing less competitive bidding on the bidding front? Ron Tudor | Executive Chairman: What do you mean by less competitive bidding? Liam Burke | Analyst, B. Riley Securities: Well, I mean less – Are you seeing fewer competitors looking to bid against you on larger projects? Ron Tudor | Executive Chairman: Well, I've talked about that for the last two, three years. We have never seen more than one other bidder in the last two years. And on one occasion, two occasions, we were the only bidder. So, yeah, nothing's changed. The competition is minimal. Liam Burke | Analyst, B. Riley Securities: Fair enough. And there seems to be a little more support from the Department of Transportation on transit investment. Are you seeing any of that now, or are you just working on the funded projects? Ron Tudor | Executive Chairman: Well, all of our work is funded, and a great deal of which by the FDA and the federal administration. Our air train is a typical transit-funded project. There's more and more money going into transit, which is our biggest strength. So you're right. So we're the beneficiary of that, and hopefully it continues. All righty. Thank you. Thanks, Liam. Carrie | Conference Coordinator: And 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 very much. You know, so we are, what, six months, really seven months into the year, and things are going better than what we thought. There's an expression, so far, so good. I'd like to modify that expression at this point and say, so far, so excellent, because we know that we still have a long way to go, but I think you can see the exceptional progress that we're making here at Tudor Peroni really across the board. So we look forward to demonstrating that this excellence will continue as we move forward. I want to thank you for your continued support in what we are doing, and we look forward to talking to you again next quarter. Carrie | Conference Coordinator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090508-00'00'