Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tudor Perini Corporation Q2 2025 Earnings Conference Call. My name is Carrie, and I will 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 on your telephone keypad. I will now turn the conference over to your host for today, Mr. Jorge Casado, Senior Vice President of Investor Relations. Please proceed.

Hello, and thank you all for joining us. With us today are Gary Smalley, CEO and President, Ron Tudor, Executive Chairman, and Ryan Soroka, Executive Vice President and CFO. Gary and Ryan will review the details of the quarter and provide commentary regarding our outlook and guidance. ron in his role as executive chairman is joining us to help answer any project specific questions as he remains involved in the setup of our newer major projects before we discuss our results i 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 contribute to such differences in our Form 10-K, which we filed on February 27, 2025, and in our Form 10-Q that 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. In addition, during today's call, management will be referring to certain non-GAAP financial measures. You can find information and a reconciliation of these non-GAAP financial measures in the earnings release that we issued today and in the Form 10-Q that is being filed today. Thank you, and with that, I will turn the call over to Gary Smalley. Thanks, Jorge.

Hello, everyone, and thank you for joining us. Tudor Perini had an outstanding second quarter, one of our best quarters ever, setting new records across various metrics. Operating cash flow was extraordinarily strong for the quarter at $262 million and $285 million through the first six months of 2025. setting new records for each respective period. And our second quarter cash flow was the second best for any quarter in the history of the company. In addition, our backlog climbed significantly to a new all-time record of $21.1 billion, up 102% year over year, and up 9% sequentially, driven by $3.1 billion of new awards that we booked during the quarter. I will provide further details on some of these new awards in a few moments. Our second quarter revenue was up 22% from last year to $1.37 billion, and our revenue for both the second quarter and the first six months of 2025 was the highest for each respective period since 2009, reflecting record quarterly and first half 2025 revenue performance for the civil segment and the best performance since 2020 for the building segment. Operating income was up 89% to $76 million, reflecting strong operating performance and contributions from higher margin projects in the civil and building segments. Our civil segment delivered its highest segment operating income ever for both the second quarter and the first six months of the year, with margins that were exceptionally strong. Our building segments operating income for both periods of 2025 was the highest since 2011, with margins that were also strong. Importantly, operating income for the quarter was very strong despite the substantial increase in share-based compensation expense that we experienced this quarter as reflected in today's earnings release. As you may recall, and as previously disclosed, over the past few years due to a depleted equity plan share pool combined with a previously low stock price, The company issued cash-settled performance-based awards weighted heavily towards enhancing TutorPrinti's total shareholder return. As a result of our significant share price increase year-to-date, our share-based compensation expense also increased significantly. In an effort to provide our shareholders with a clearer view of TutorPrinti's true overall business performance, starting this quarter, we have elected to report adjusted earnings. which exclude the impact of share-based compensation expense net of the associated tax benefit. It is important to note that at our recent annual shareholders meeting in May, shareholders approved management's proposal to authorize additional shares for incentive awards. So, going forward, the company intends to issue share-settled instead of cash-settled equity which should limit future earnings volatility and reduce our share-based compensation expense considerably once these older cash-settled incentive compensation awards vest, some at the end of this year and the rest at the end of 2026. Returning to our results, for the second quarter of 2025, we delivered GAAP EPS of 38 cents, up substantially compared to 2 cents for the same quarter of last year. Adjusted EPS for the second quarter was $1.41 compared to $0.34 for the second quarter of 2024, again demonstrating our strong core operating performance and reflecting the impact of contributions from higher margin projects. Overall, 2Proni's business continues to perform extremely well and, frankly, even better than we anticipated at the start of this year. We are at the beginning of the life cycle for several major higher margin projects that are expected to drive substantial growth, profitability, and cash flow as project execution activities continue. What you are seeing now is just a preview of what these projects should produce on a larger scale in the coming years. Our record-breaking operating cash flow for the first six months of 2025 was primarily driven by collections from both newer and ongoing projects. I should add, however, that we have continued to make good progress in the resolution of certain disputed items that have also had a positive impact on cash generation with only a modest impact on earnings. We expect the same formula to continue to drive strong cash flow for the remainder of the year. As a result of the continued progress we have made on dispute resolutions during the quarter, our Costs and Estimated Earnings in Excess of Billings, or CIE, is now down to $856 million at the end of the second quarter, which is a reduction of $91 million, or 10%. Our CIE is now at the lowest level it has been in eight years. Taking a closer look at our record $21.1 billion of backlog mentioned earlier, following the strong first quarter that featured $2 billion of new awards, our volume of bookings increased during the second quarter with an impressive $3.1 billion of new awards. This latest record backlog represents a nearly threefold increase since the end of 2022 and includes record highs in both the civil and specialty contractor segments. This strong foundation gives us tremendous confidence in our ability to deliver the substantial growth, profitability, and cash flow that I just mentioned we are expecting to generate over the coming years. Not surprisingly, our book-to-burn ratio for the second quarter was an impressive 2.2x. The most significant new awards and contract adjustments in the second quarter included the $1.87 billion Midtown Bus Terminal Replacement Phase 1 project in New York, a $538 million healthcare project in California, two civil works projects in the Midwest collectively valued at $127 million, $90 million of additional funding for a mass transit project in California, and $54 million of additional funding for another healthcare project in California. As we look ahead, we believe that our backlog will remain strong as our bidding pipeline for the civil and building segments remains full of opportunities this year and over the next several years, with key near- and medium-term prospects located mostly on the West Coast, in the Midwest, and in the Indo-Pacific region. Among these opportunities are several building segment projects currently in the pre-construction phase that are expected to advance to the construction phase later this year, including another California healthcare project valued at nearly $1 billion. Some of our major upcoming project opportunities include the $12 billion Sepulveda Transit Corridor, the $3.8 billion Southeast Gateway Line, the $1.2 billion Valley Link Phase I rail project, and the $650 million Foothill Gold Line light rail project, all of which are in California, and the $1.4 billion I-535 Blatnick Bridge project in Minnesota. As we have discussed previously, there are also significant Indo-Pacific opportunities driven in large part by the U.S. Defense Department's specific deterrence initiative, black construction, our Guam-based subsidiary, has had extraordinary success in capturing various new projects in the region and continues to be well-positioned to win other major projects there over the next several years. Our record backlog continues to enable us to be highly selective as to which opportunities we will pursue and to focus on bidding projects that have favorable contractual terms, limited competition, and higher margins. We are committed to pursuing projects where we can showcase two different needs differentiated approach, depth of operational talent, and history of outstanding project execution. As Jorge mentioned at the start of this call, Ron Tudor, in his role as executive chairman, continues to help drive the setup of our newer major projects that we were awarded over the past several quarters. The importance of proper project setup of these mega projects cannot be understated, as it is the first key step towards the successful execution of this work. These projects are in the early stages but are going very well thus far, and Ron is here to help answer any project-specific questions that may come up during the Q&A. As a result of our strong performance to date and greater confidence in what we expect to achieve for the rest of the year, I am pleased to announce that we are increasing our guidance for the second time this year and for just the second time in our history. Our GAAP EPS for 2025 is now expected to be in the range of $1.70 to $2, up from the previous guidance of $1.60 to $1.95. Adjusted EPS for 2025 is expected in the range of $3.65 to $3.95, which compares to $2.45 to $2.80, the range we would have provided last quarter had we provided non-GAAP EPS guidance. Importantly, our increased guidance continues to factor in a significant amount of contingency for various remaining unknown or unexpected outcomes and developments in 2025, including the potential for slower ramp-ups on our newer projects, project delays for existing and prospective work, lower than expected win rates for future bids, higher than currently anticipated share-based compensation expense, and settlements or adverse legal decisions associated with the resolution of disputes. Moreover, the outlook for Tudor pruning remains very bright beyond 2025. we anticipate that both our GAAP EPS and adjusted EPS in 2026 and 2027 will be significantly higher than the upper end of our increased guidance for 2025, and we continue to expect strong operating cash flow for 2025 and beyond. And to reiterate, while we expect share-based compensation expense to be higher than previously anticipated for the full year of 2025, it is projected to decrease considerably in 2026 and further in 2027 once certain awards have invested. Finally, let me provide a quick update with respect to the broader macro environment. As we mentioned last quarter, we do not currently anticipate that tariffs will have a significant impact on our business. We also do not currently foresee the risk of any of our major projects and backlog being canceled, delayed, or defunded, including our work on the first phase of the California High-Speed Rail Project. In recent discussions with this customer regarding the federal government's decision to reduce funding on the overall program, the customer confirmed that our project is funded and authorized and is not expected to be adversely impacted. Thank you, and with that, I will turn the call over to Ryan to discuss the details of our first quarter results.