Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to Tudor Perini Corporation third quarter 2022 earnings conference call. My name is Sherry 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 your participation 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 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 disclosures about our 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 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. Thank you, and I will now turn the call over to Ronald Tudor.

Thanks, Jorge. Good day, and thank you for joining us. Our third quarter 2022 results were once again mixed. On the positive side, we continued to generate strong operating cash of $73 million for the quarter, which combined with the record cash we generated during the first six months of the year totals $251 million of positive cash for the first nine months of 2022. By far the best nine-month operating cash result we have delivered since the merger of Prini Corporation and Tudor Saliba in 2008. Our operating cash was partly driven by the resolution of certain disputes, as well as solid overall collection activities and resolves on major open changes that continue to lag. Also on the positive side, our backlog remained healthy at $8.4 billion compared to the backlog we had at the end of the third quarter of last year and does not yet include either the Raritan Bridge or the Maryland Highway, which should add more than $4.5 billion when they are finally awarded. We booked $885 million of new awards and contract adjustments during the third quarter of this year. Later, I will discuss some of the more significant new awards as several of our major prospective opportunities. Our third quarter earnings, unfortunately, were negatively impacted by continued reduced volume and lower profit margins, of course, from the Newark Terminal project which is completing this month in November, which as a result shuts off a flow of profit from those projects to the various divisions. Consequently, we reported a loss of 63 cents by diluted share for the third quarter. Although disappointed with the various negative impacts to earnings for the quarter and year to date, we continue to make significant progress in resolving the various unapproved change orders and claims which have had and will continue to have a positive impact on cash flow this year and next. Since our last earnings call, we have continued our efforts to settle certain significant disputes on major projects, but while we believe we are making excellent progress, We have not yet concluded these negotiations. As a result, there remains uncertainty with respect to the outcome of these potential settlement discussions, making it still too difficult to reliably predict our expected earnings in both the fourth quarter and, of course, finally, 2022, as settlements can positively or negatively impact earnings, although generating very significant cash. Consequently, we are holding guidance for 2022. We anticipate providing EPS guidance for 2023 when we issue our fourth quarter results in February next year. In today's inflationary and potentially recessionary environment, we are fortunate that once again is repeated many times in the past, the construction industry and particularly infrastructure is largely resilient to the effects of economic downturns. We have not seen nor do we expect to see any notable reduction in the strong level of demand for our services in very large complex civil projects, if anything, even more demand than ever. Our civil business in particular, the core driver of our future growth and profitability, is and has historically been extremely resilient during economic terms where governments over the last 50 years have typically leaned to increasing investments in a U.S.-wide decaying infrastructure such that those projects support good union and non-union jobs and promote long-term economic growth and benefits. Add to that the fact that there is a $1.2 billion bipartisan infrastructure fund established by law. We have already seen billions of dollars of funding beginning to flow into the jobs we're currently looking at bidding over the next 18 months. which much more expected to flow and the direct benefits proceeding to the infrastructure industry over the next five years. As I mentioned, we booked 80, 885 million of new awards and contract adjustments in the third quarter of 2022. The most significant included $126 million military facility in Puerto Rico, and a $32 million hospitality project in California, both for Perini Management Services. $142 million of additional funding for two educational facilities for Rudolph and Sletten in California, a $56 million funding of a mass transit project for Lunda Construction in the Midwest, and a $48 million mining award for Frontier Camper in Virginia. As I mentioned earlier, our backlog does not yet include the Raritan River Bridge, where we expect to add that to the backlog by the end of the year, and the same Phase I south of the American Legion Bridge, which we anticipate booking into backlog sometime during the second quarter of next year. Collectively, these could increase our backlog to a new record high over the coming month. In addition, Rudolph and Sletten began negotiating a new $300 million healthcare project in Northern California that should be added incrementally to backlog over the next year. In addition, there are two other awards pending gaming projects in California, where we have pre-construction agreements collectively valued at 500 million, which we believe will be awarded by the second quarter next year. Beyond these pending awards, some of our larger near-term bidding opportunities include the Brooklyn and Queens jails, each valued at in excess of $3 billion for the New York City Department of Design and Construction, with Brooklyn proposal being tendered on November 14th and the Queens prison in mid-May 2023. The $1.5 billion East San Fernando Light Rail project was turned in today to Los Angeles MTA. The $1.5 billion JFK Roadways and Ground Transportation Center is due in January of 2023, or 60 days from now. In addition, the $1.5 billion Inglewood Automatic People Mover which is situated 30 minutes from our main office in Southern California. We'll proposal will be tendered in the third quarter of 2023. Last but not least, we have talked to the Hawaii rapid transit district on the heart project that I remind you two years ago, we were low bidder at 2.7 million and it was rejected because it was far over budget. They have reduced the scope by 25%, and although they'll suffer the escalation, they're coming back out to bid by the second quarter next year. So needless to say, these are only some of the best of the major infrastructure, so we are overwhelmed in trying to select those best suited to us in a marketplace where I continue to state there's very little competition. As previously discussed, we're continuing to make excellent progress in resolving disputes and collecting the associated cash and expect these efforts to conclude successfully over the next 18 months. We look forward to substantially growing our backlog in the near term to historically high levels that will set new records providing the solid foundation for our future success. Thank you, and with that, I turn the call over to Gary Smalley.