Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Fourth Quarter 2021 Earnings Conference Call. My name is Laura, and I will be your coordinator for today. At this time, all participants are 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. 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, and thank you for joining us today. With us on the call are Ronald Tudor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during today's call, we will be making forward-looking statements, which are based on management'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 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 said, I will now turn the call over to Ronald Suter.

Thank you, Jorge. Good afternoon, and thank you for joining us. We had a good year overall in 2021 and concluded with a solid fourth quarter of profitability, highlighted by strong performance in the civil segment, which delivered an impressive 15.1% segment margin for the fourth quarter and a 12.7% margin for the year, for the entire year, our highest annual civil margin since 2014. The civil segment's full year margin increased 150 basis points compared to its 2020 margin, reflecting the continued shift we've talked about toward higher margin civil projects discussed previously. For the year, we achieved earnings per share of $1.79, which included 57 cents for the fourth quarter. Our full year EPS was in line with a revided guidance. It was also lower than last year's EPS, partly because we had a lower effective task rate in 2020 compared to 21 as a result of the significant tax benefits from the CARES Act. We booked $4.5 billion of new awards during 2021 compared to just $2.4 billion in 2020 and ended 21 with a backlog of 8.2 million. I would further add that that backlog increase was almost entirely in building work and specialty work, as our civil work and major awards and civils lagged significantly, not only in 2020, but even more so in 2021, because the sector was basically frozen by COVID and a lack of funding. so that our civil backlog and the impact of it went down significantly. Major new awards in 2021 included the Cedar Sinai Marina Del Rey Replacement Hospital in Los Angeles County, the $471 million LAX Airport Metro Connector for the Los Angeles Metropolitan Transit Authority, the $269 million Yonkville Veterans Home in California, the $220 million I-70 Missouri River Bridge, the $162 million Tinian International Airport parking apron and taxiway in the Northern Mariana Islands, $152 million courthouse in Santa Rosa, California, and both a $122 million military firing range project and a $98 million military housing project in Guam. As you can see, Guam continues to boom with new awards and significant backlog. Despite the significantly higher volume of new awards in 2021, the COVID-19 pandemic continued to limit bidding and proposal activity, particularly in our civil business. Our 2021 backlog was significantly and negatively impacted by the lack of civil work of substance to bid, as I said previously, both in 2020 and 2021. Although our backlog remained flat compared to 2020, a large amount of that higher margin civil and specialty work was replaced by lower margin building work. And because building projects convert to revenue much more quickly than design-build civil work, revenue in 2022 is expected to be strong, but the amount of profit we expect to recognize will be substantially reduced. We remain confident in our bidding approach and are targeting various large prospective opportunities this year, which I will detail in a moment. We have certain awards pending, including a tunnel contract for Frontier Kemper in British Columbia, Canada valued at over $260 million, and two gaming projects in California we expect to sign in the next 90 days at over $500 million. Demand for our services continues to be strong, and we expect it to further increase meaningfully now that not only the federal infrastructure bill has been signed into law, but a whole array of major civil work that's been frozen are finally coming into the marketplace. As you may know, with respect to that federal bill, it provides for $1.2 trillion of infrastructure funding, including $550 million in new spending for improvements to the country's service, transportation network and enhancements to its core infrastructure. The infrastructure bill marks the largest federal investment in public transit ever, the single largest dedicated bridge investment since the construction of the interstate highway system, and the largest investment in passenger rail since the creation of Amtrak. All in addition to providing for regular annual spending for numerous infrastructure projects. Significant incremental funding is anticipated to be spent over the next 10 years, and much of it will be invested in those major markets that directly align with Tudor Perini's market focus, namely rail, subway, and transportation work. Funding from the bill will begin to flow to our customers or owners in earnest around the middle of this year. However, even ahead of the bill's impact, we are already tracking tens of billions of dollars of prospective civil projects that are expected to be bid and awarded over the next two years. Next, I will discuss some of the major prospective projects we will be bidding over the coming months. The Newark Air Train Replacement Project will be bidding on April 8th, with team selection and subcontract award anticipated soon thereafter. We will submit our bids for projects A and B of the $2 billion-plus Maryland Express Lanes Project, also known as the American Legion Bridge I-270 to I-70, for Accelerate Maryland Partners, the consortium developing the project, for the Maryland Transportation Authority. We anticipate team selection shortly thereafter and contract awards for both projects by the third quarter. Other significant projects we plan to bid this year include the $1.8 billion South Jersey light rail project in New Jersey, the $1.6 billion Burroughs-based jail, and the $800 million JFK Roadways and Ground Transportation Center, both in New York City. The $1 billion East San Fernando Light Rail Project for the Los Angeles MTA and the $700 million Inglewood Automated People Mover, both in Los Angeles, and lastly, the $700 million Burbank Airport Replacement Terminal. Also, I forgot to mention the $600 million government facility project in Sonoma County. Black construction or subsidiary in Guam continues to be inundated with major project opportunities due to the U.S. military's refocus and positioning of its assets toward the Asia-Pacific region. We currently have a value of $470 million of bids in awaiting determinations. And as you can see, we had three major projects awarded on this call already. We are continuing to bid with another major project bidding in Tinian in the next quarter and an even more significant job on the isolated island of Palau. Black expects the Navy to release eight more projects worth over $300 million in the next 90 days. Altogether, the Navy is expected to award between $1.1 and $1.3 billion a year for the next three years in the islands, including Guam. For comparison, the Navy awarded a total of $1.1 billion in 2021, of which Black won four projects valued at $450 million. What that doesn't tell you is the $580 million bachelor enlisted men's quarters, which assumed almost the balance, we were second bidder by $5 million, or we would have almost had a sweep of all the awards.