Tutor Perini Corporation

ladies and gentlemen, and welcome to the Tudor Perini Corporation fourth quarter 2022 earnings conference call. My name is Joe, 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 is being recorded for replay purposes. If anyone should need 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, Vice President of Investor Relations. Please proceed.

Hello, everyone, and thank you for your participation. 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 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 due to 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 all for joining us. We delivered very mixed results in 2022 and experienced a challenging year from both a revenue and earnings perspective. Our revenue was down considerably compared to 2021 due to a lack of large new civil segment awards over the past few years, primarily caused by the effect of the COVID-19 pandemic, delaying bids and awards of various large projects, and induced significant budgetary constraints for certain customers whose bids came in significantly higher than their budget, but still low. These factors, as well as political and other factors, have resulted in us not being awarded large civil segment projects where we were the low bidder and the pending awardee that totaled more than 10 billion dollars. which as I had earlier pointed out, we had been the lower preferred bidder. Most of these projects contributed to the revenue decline in 2022, but are expected to be rebid later in this year or in 2024. The lack of new awards has prevented us from replacing revenue associated with certain projects that have completed or are nearing completion. Our lower revenue was all the result of significant delays we faced in 2022 on certain mass transit projects in California, occasioned by, in many ways, acts of the owner of inability to achieve right-of-ways and easements that further delayed our work performance. Our earnings in 2022 were negatively impacted by significant adverse judgments and settlements, several of which resulted in highly unexpected outcome, along with other significant charges and the impact of increases in unapproved work, all of which Gary will discuss in a moment. To give you a sense of the increases in unapproved work. This occurs when we are in receipt of over $150 million of various owner-initiated changes with entitlements. We are performing the work. However, we have not settled the final costs, even though we are being paid in the interim. Unfortunately, from an accounting perspective, That requires that all of those change orders be carried at cost with no margin, which dramatically reduces the earnings for the period, which is nothing more than a deferral until they are actually executed and completed. Gary will talk further about that in detail, but that had a dramatic impact as a part of our loss. As a result, we concluded 2022 with a diluted loss of $4.09 per share, including $1.80 per share for the fourth quarter. To the positive, we generated record operating cash of $207 million for the year, the highest operating cash result since the merger of Perini and Tudor Saliba in 2008. driven by the resolution of many disputes as well as solid overall collection activities. We anticipate that our cash generation will be even stronger for 2023. We are certainly disappointed with the various negative impacts to earnings in the fourth quarter. And for the full year of 2022, we strongly believe in our optimistic for better performance in 2023 and anticipating revenue growth and a gradual return to profitability. We also continue to make excellent progress resolving other unapproved change orders and claims which will continue to have a very positive impact on our cash flow. Another positive for 2022 is that we were able to maintain our year end backlog and 7.9 billion down modestly compared to our backlog at the end of 2021. Although still not recovered from its pre-pandemic level, of closer to, we were over 10 million pre-pandemic.