Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tudor Perini Corporation third quarter 2023 earnings conference call. My name is John, and I'll be your coordinator for today. All participants are currently 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. And I will now turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Thank you. Please proceed.

Hello, everyone, and thank you for joining us today. With us 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-Q, which we are filing today, and in our most recent Form 10-K, which we filed on March 15, 2023. 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.

Thank you, Jorge, and thank you all for joining us. We delivered mixed results for the third quarter of 2023 with very strong cash generation and year-over-year backlog growth, but with challenged earnings due to a number of write-downs that resulted from the resolution of various disputed matters. We generated 103 million of operating cash in the quarter, bringing our year-to-date operating cash flow to $181 million, which is just $26 million short of the full-year record of $207 million that we achieved last year. Both our third quarter and year-to-date operating cash flows were the second highest result for each respective period of any year since the 2008 merger between Tudor Saliba and Perini Corporations. Our consolidated revenue was level compared to the same quarter last year with increased contributions from the building and civil segments offset by lower revenue in the specialty contractor segment due to certain projects in the northeast that have been completed or are very nearly complete. We expect revenue growth in the fourth quarter compared to the fourth quarter of last year with better revenue growth next year and even stronger growth in 2025 as we should be entering the construction phase of multiple large projects starting in 2024. We have made continuing and significant progress on various claims and dispute settlements and expect to continue resolving the balance of longstanding disputes and collecting significant amounts of related cash over the next 12 months. We expect there to be a very limited number of outstanding disputes at the end of 2024, all of which should be resolved in the first two quarters of 2025. Considering our near record cash flow through the third quarter, as well as very strong collections thus far in the fourth quarter related to the resolution of disputed items, we are confident that our cash flow for 2023 will significantly exceed the record $207 million we generated last year. We are also optimistic that 2024 will even be a stronger year than 2023 in the resolve and generation of cash. We plan to use the excess cash generated between now and next spring to deliver our balance sheet as part of a planned refinancing early next year. For the past several months, we have been closely monitoring the markets and discussing various strategic refinancing alternatives with our advisors and have developed a plan that we will soon embark upon and that we expect will result in a timely refinancing of our debt in light of the springing maturities. We believe that the market concerns regarding those maturities and our ability to refinance have been a significant headwind of the valuations of both our equity and debt, so we look forward to concluding that refinancing to eliminate that valuation impediment. Our third quarter backlog was $10.6 billion steady compared to the second quarter of 23, and up 28% compared to the $8.4 billion for the same quarter last year. The strong year-over-year backlog growth was largely driven by our second quarter award of the $2.95 billion Brooklyn Jail Progressive Design Build project. Most significant other new awards and contract adjustments in the third quarter of 2023 include $115 million of additional funding for a healthcare project in California, $95 million and $81 million of additional funding for two different mass transit projects in California, the $47 million New Everglades National Park Visitor Center project in Florida, and a $42 million mining project in Virginia, as well as the Central District Wastewater Treatment Plan Electrical in Florida, valued at more than $40 million. From an earnings perspective, good contributions in the third quarter from our civil segment were offset by continuing challenges predominantly in our specialty contractors segment in New York. Gary will discuss these in a moment. Overall, we reported a consolidated pre-tax loss of $26 million and ended the third quarter with a loss of 71 cents per diluted share after adjusting for non-controlling interest. Our bidding pipeline continues to be very active and filled with various large project opportunities. We have been and will continue to be highly selective as to which owners and projects we pursue. and execute as well as under what contractual terms. Our most significant opportunities include the pending Queens Jail facility, a progressive design-build project similar to Brooklyn, estimated to be in excess of $3 billion, for which we have already submitted our initial proposal and are awaiting an owner selection decision most probably in January. Last week, we bid the $500 million RFK Bridge Retrofit and Rehabilitation Project in New York. And between now and the end of this year, we will bid four other projects, namely the billion-dollar Frederick Douglass Tunneling Project in Maryland, the $800 million Amtrak East River Tunnel Rehab Project in New York, a $200 million long-slip canal rail enhancement project in New Jersey, and the $225 million MD4 at Suitland Park Interchange in Maryland. We expect decisions on these by the end of the year or in early 2024. We are also anticipating a decision by either the end of this year or the first quarter next year on Frontier's Kemper's bid for the $500 million Great Lakes Tunnel project. In addition, we're currently preparing to bid with ONG Industries, our Connecticut partner, the $500 million Amtrak Connecticut River Bridge replacement in January next year. Other large near-term opportunities include the $1.5 billion Inglewood Automated PeopleMover project in Southern California, the $2 billion Honolulu Rail Transit project, which is still expected to bid in the spring of 2024. And as a reminder, we had originally been the low bidder back in 2020. And two sections of the Hudson River Tunnel project the $750 million Manhattan Tunnel in New York, and the $500 million Palisades Tunnel in New Jersey. Finally, in the spring of 2024, we plan to propose on the $2.6 billion DTX Tran Bay Transit Center project in San Francisco. Then in the summer, the $1.5 billion Newark Airtrain design-build project, which we were originally low bidder last year and was rejected as being over budget, and later next year, the $1.6 billion Amtrak Sawtooth Bridges replacement project in New Jersey. As competition, as I've said time and again, has diminished, we are confident that we win our share of these projects and continue to grow our backlog substantially. over the next 12 to 18 months. As you can tell from this bidding pipeline, there continues to be very strong demand for our services, and we expect that demand to increase as incremental funding from the bipartisan infrastructure law continues to flow to our public owners over the next several years. We expect improved performance in the fourth quarter of 2023 and next year. We're still not providing new guidance for 2023, 24, you may know that, 23, 23, for this year, we haven't provided.