Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tudor Perrini Corporation second quarter 2021 earnings conference call. My name is Joe, and I will be your coordinator for today. At this time, all participants are in the 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 is being recorded for replay purposes. If anyone requires operator assistance during the conference, please press star zero on your cell phone keypad. At this time, I would like to turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Hello, everyone. Thank you for your participation today. With us on the call are Ronald Tudor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before discussing our results, I will remind everyone that during today's 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 potentially contribute to such differences in our Form 10-K, which was filed on February 24th, 2021, and in the Form 10-Q that we are filing today. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise other than as required by law. With that, I will now turn the call over to Ronald Tudor.

Thanks, Jorge. Good afternoon, and thank you all of us for joining. We are continuing to experience a strong year, having delivered second quarter and year-to-date results that once again were ahead of expectations. In particular, we generated the highest operating income of any quarter since the merger between Perini Corporation and Tudor Saliba took place in 2008. We also produced the highest civil segment operating income of any quarter since the merger and the highest civil segment operating margin since the fourth quarter of 2018, all of which contributed to very solid EPS results of $0.61 per share for the second quarter, a 65% increase against the comparable quarter last year. We are in the midst, as I've said previously, of the strongest business environment we have seen, which continues to give me confidence in our business outlook over the next several years, especially considering the even greater opportunities currently being created by the multi-year federal infrastructure spending program that is on the very horizon. With the solid results we have delivered to date this year combined with our expectations, for the rest of the year, we again affirm our EPS guidance for 2021. Just like we experienced in the first quarter, despite a modest revenue decline in the second quarter, our operating income actually grew 19% as a result of the continued favorable shift toward higher margin projects within our civil segment. As I've stated previously, we had anticipated this mixed shift at the start of the year because we knew that certain large civil projects in the Northeast would be completed or progressing toward completion this year, whereas certain newer significant high margin civil projects would be advancing, mostly offsetting the declining revenue and more than offsetting the reduction in profit contributions from the completing projects. We performed substantial work on several of our major design-build projects that contributed to our second quarter revenue, including California High-Speed Rail, Purple Lines 2 and 3, including Division 20 for the Los Angeles MTA in Los Angeles, the San Francisco Central Subway Project that is completing shortly, and the Minneapolis Southwest Light Rail, as well as the Newport Airport Terminal 1 and the Anderson Air Force Base Housing Project in Guam. In addition, our building group is currently preparing for the grand opening of the Choctaw Casino Resort in Durant, Oklahoma, which has been a very outstanding project with a dedication and opening to occur tomorrow, August 5th. Our backlog is $7.5 billion at the end of the second quarter. and remains at a solid level, although we expect to build substantially on that backlog later this year and in the first half of next year. Given the numerous large bids, we are preparing to submit an upcoming new awards that are pending. As a reminder, the COVID-19 pandemic has had a significant impact on the volume of work available and the timing of new awards, as well as the backlog. And so far this year, as the pandemic resulted in and could continue to cause impacts to our revenue sources and consequently temporary funding uncertainty. So our backlog decline over the past three to four quarters should come as no surprise. as the work was simply not available to replace the runoff. However, we are once again extremely optimistic that our backlog growth will be significant over the next 12 months with the obvious opportunities that we face. As mentioned, in addition to several new large projects we are preparing to bid, which I will discuss momentarily. We already have several pending new awards for significant projects that we expect to book into backlog in the third quarter of this year, including the previously announced LAX Airport Metro Connector, for which we just received notice of an intent to award in the amount of $471 million. as well as a $220 million Missouri River Bridge that London was low bidder and announced an award shortly. And Rudolph and Sletton, last but not least, a very significant hospital in the health care facilities in Southern California that we hope to conclude and enter into a contract within the next 30 to 45 days. The cumulative value of these projects should go into our third quarter backlog and have a significant impact. We added $643 million of new awards and contract adjustments during the second quarter of 2021, which, of course, was significantly below the norm given the frozen aspects of new projects. The largest award was to Rudolph and Slatton for the $152 million Santa Rosa Courthouse in California. Also in our civil segment, Lunda added $88 million more of new awards and adjustments in the Midwest. The balance of new awards and adjustments were smaller and spread throughout our various business units. Now I will update you on some of the major projects we are preparing to bid in the balance of this year and during the first half of next year. Rather than repeat the same multitude that I have spoken about, excuse me, on past earnings calls, I will focus on just the largest ones that are coming up, excuse me again, in the next six to nine months. In early September, we will be bidding on the $1.8 billion Portal Bridge project in New Jersey for the New Jersey Transit Group with an expected award within 90 days thereafter. In mid-September, our updated price proposal for the $4 billion JFK terminal is due, and we expect the owner to make a decision and award during the month of September. The proposal for the $2 billion-plus Maryland Purple Line project will now be submitted in the latter part of September with a contract award we would expect within the 60 to 90 days thereafter. The $1.5 billion Newark Air Train project for the Port Authority of New York proposals would be due in mid-January. Additionally, the FAA Excuse me once again. I guess I must be allergic to this call. The FAA administration recently gave its approval for the Port Authority of New York and New Jersey to proceed with a $2 billion LaGuardia air train project. As a result, we now expect to bid that project in the spring of next year, and we believe the Port Authority will act quickly and accordingly. And last but certainly not least, black construction, our subsidiary in Guam, is awaiting the outcome of recent bids for major military projects that exceed $1 billion in its overall magnitude, including one single large military bid exceeding $600 million on the island of Guam. We have also been on numerous projects on the island of Tinian for the U.S. Navy and and in the northern Marianas, and that continues to be a significant source of projects and revenue. We continue monitoring develops in Washington, D.C. in their efforts to pass a major federal infrastructure spending bill, which, of course, would further bolster already long-term business outlook. We believe that a package will soon be enacted and funding will flow quickly to major projects that have been long planned. But even without that infrastructure bill, I continue to remind everyone that there is a flood of major infrastructure contracts in the marketplace continuing to be offered taxing our capacity. Based on our results to date through the second quarter and our outlook for the remainder of the year, we are still affirming our earnings per share at $1.80 to $2.20. And with that, I'll turn the call over to Gary Smalley, our CFO.