Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tudor Perini Corporation second quarter 2022 earnings conference call. My name is Rob, and I'll be your coordinator for today. At this time, all participants are in 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 call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. At this time, I'll 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. With me today 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 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 potentially contribute to such differences in our Form 10-K, which we filed on February 24, 2022, and in the Form 10-Q that we filed earlier 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. Thank you, and I will now turn the call over to Ronald Tudor. Thanks, Jorge.

Good morning, and thank you for joining us. As you have Probably seen from our earnings released this morning, we delivered mixed results for the second quarter of 2022. The positive highlight is we continue to generate very strong operating cash of $58 million for the quarter, which when combined with the record cash we generated in the first quarter, totaling just under $179 million for the first six months of 2022, an amount that is already greater than any full year of operating cash we've produced since the merger of Perini and Tudor Saliba in 2008. Unlike last quarter, our operating cash was largely driven by the resolution of certain disputes and collections of certain successfully negotiated and approved change orders. I will add that we are still anticipating significant cash generation through the remainder of this year, as well as, of course, in 2023. New awards and backlogs were another highlight of our second quarter results. We booked 1.1 billion of new awards and contract adjustments during the second quarter, which helped us to achieve solid year-over-year backlog growth of 14%. Our backlog now stands at $8.5 billion compared to $7.5 billion in June of 2021, and nearly 60% of our current backlog is comprised of higher-margin civil work, which bodes well for our earnings potential over the next several years. We will detail some of our major new second quarter awards as well as our opportunities in a bonus. Unfortunately, our second quarter earnings were negatively impacted by several factors, including certain unfavorable project adjustments, certain settlements of claims and change orders, an unexpected partial reversal of previously awarded legal damages in a judgment form, and the reduced profits due to lower revenue volume in the quarter. Gary will provide you some of the details regarding these impacts a bit later. Consequently, we reported a loss of $1.23 per diluted share for the second quarter of 2022. Despite our obvious disappointment in these earnings for the quarter and the year to date, we continue to make major progress in resolving unapproved change orders and claims. which had and will continue to have a positive impact on cash flow. Over the next 30 to 60 days, we will be attempting to settle significant disputes on certain major projects. The uncertainty related to the outcome of these settlement discussions makes it very difficult to reliably predict at this time what our expected earnings will be for the remainder of the year. settlements can positively or negatively impact earnings while generating significant cash. Consequently, we have decided to withdraw our guidance for 2022 and expect to issue new guidance once we have better visibility into this potential timing and magnitude of settlements, which we expect to have by this time in the third quarter earnings announcement. I'm encouraged that we continue to experience strong demand for our services, even in spite of the current inflationary environment and concerns over a potential recession. Our civil business in particular is and has historically been very resilient during economic downturns as governments tend to invest even more in civil infrastructure during such period as a means of bolstering jobs and promoting long-term benefits. This is certainly even more true today given the passage of last year's infrastructure bill for which funding to project owners is beginning to flow. As I mentioned, we booked 1.1 billion of new awards and contract adjustments in the second quarter. The most significant awards included $293 million of additional funding of changes on the mass transit project in California high-speed rail, $95 million for an educational facility in California, an $85 million housing project in Alaska, and several projects in Guam, including $107 million military housing, an $84 million wharf improvement, and two other military facilities at $73 and $49 million, respectively. In addition to awaiting imminent owners' decisions and announcements on two very large prospective opportunities, namely the $3 billion Newark Air Train replacement project, for which I expect to have an announcement within 30 days, and Two projects that comprise the $5 million Maryland Express Lanes project for Accelerate Maryland Partners, which we expect an announcement in two weeks. We are preparing to bid and hopefully capture our share of various other large new projects later this year and in 2023. Including the $3 billion shipyards and dry dock project in Hawaii for the US Navy, which bids in October of 2022. The 2000 excuse me, the $2 billion Brooklyn jail project for the New York City. Department of Design and Construction, which should propose an award in the first quarter of 2023. The $1.5 billion JFK Roadways and Ground Transportation Center for the Port of New York, which we have asked for an extension and expect to bid in the first quarter of 2023. The $1.5 billion East San Fernando Light Rail Project for the Los Angeles MTA, again, first quarter of 2023. and the $1.5 billion Inglewood Automated People Mover, which we have put back into the third quarter of 23. Last week it was announced we are the apparent low bidder for the $519 million Raritan River Bridge replacement project in New Jersey. There were only two other bidders for the project, which is a further example of the limited competition that we are often seeing for major projects we are pursuing. We anticipate a contract award for the Raritan River Bridge in the fourth quarter of this year. In addition, last week Rudolph & Slutton was notified by one of its major customers that it has been selected as the preferred general contractor to be awarded a large new hospital campus project in California. The initial Contract award will be rather modest as it will represent only early stage preliminary work. After this initial work and subsequent pre-construction is completed, we anticipate booking approximately $800 million in the backlog by approximately the fourth quarter of 2023. We were also infirm this week that we are the low bidder with written notification to follow shortly on a very significant civil project on the East Coast. We will be providing further information regarding this project in the next 30 days. Finally, we still have other new awards pending, including two gaming projects in California collectively valued at over $5 million that we now believe will be awarded in the fourth quarter. 500 million. 500 million, excuse me. It is unfortunate that our strong second quarter and record year-to-date cash flow and our backlog growth were overshadowed by the various negative impacts to earnings. However, we are collecting cash and we are encouraged by the progress in resolving these continuing disputes, which I've stated in the past, the majority of which should be concluded by the end of 2023. And we anticipate substantial further backlog growth over the next two quarters. Thank you. And with that, I'll turn the call over to Gary.