TUTOR PERINI CORP Q3 FY2024 earnings call

• Backlog Growth: Backlog soared to $14 billion, up 35% compared to the prior quarter, a new record since the 2008 merger. Notable awards include the $1.66 billion City Center Guideway and Stations Project in Honolulu, $1.1 billion Kensico-Eastview Connection Tunnel in New York, and a major healthcare campus project in California worth over $1 billion. Fourth quarter new awards include the $331 million Apra Harbor Waterfront Repairs project in Guam and a joint venture identified as the apparent selected proposer for the multibillion dollar Manhattan jail.
• Cash Flow: YTD operating cash flow through the end of the third quarter was $174 million. Q4 operating cash flow expected to be between $250 million and $400 million, with full year 2024 operating cash flow expected $425 million to $575 million, a record.
• Dispute Resolutions: Third quarter net charges of approximately $152 million related to dispute resolutions, expecting to collect $180 million in 30 to 60 days. Remaining legacy disputes reduced to a dozen or so, expected to resolve in 12 to 18 months.
• Debt Reduction: Already paid down $50 million of term loan B in Q4, plan to prepay $100 million to $150 million in Q4 and $50 million to $75 million in Q1 2025, aiming to significantly reduce debt.

Civil segment revenue for the third quarter of 2024 was $546 million, up 5% compared to the third quarter last year. YTD through the first nine months of 2024, Civil segment revenue was up 10% compared to the same period in 2023. Building segment revenue for the third quarter of 2024 was $436 million, up 19% year-over-year. Specialty Contractors segment revenue was $101 million, down substantially compared to the third quarter of last year, primarily due to reduced activities on various electrical and mechanical projects in New York and Florida, all of which are complete or nearing completion.

• Backlog: Expect further backlog growth by end of 2024 with potential awards for projects like the $1.5 billion AirTrain and $550 million Raritan River Bridge Replacement.
• Cash Flow: Full year 2024 operating cash flow expected $425 million to $575 million, with Q4 expected strong.
• EPS: Withdrew 2024 EPS guidance due to Q3 dispute charges, expect to initiate 2025 guidance in Feb 2025, anticipate return to profitability in 2025 and growth in 2026+
• Debt: Plan to continue reducing debt, expecting significant paydown by year end and possibly paid off by Q1 2025.

• Dispute Outcomes: Uncertainty around appeal outcomes of certain legal decisions from dispute resolutions could impact earnings.
• Market and Contract Risks: Potential impact of market conditions and contract terms on project profitability and execution.
• Interest Rate Fluctuations: Unpredictable interest rates could affect interest expense and financial results.

Q: Steven Fisher asks about the shape of revenue curve from new awards, when to see substantive revenue growth.

A: Significant construction begins between June-Sept 2025, with major impact in 2026-2028 as these are 5-year jobs.

Q: Steven Fisher asks about specialty business earnings and inflection to profitability.

A: Specialty group revenue was low, but new jobs have large components for specialty contractors, which will ramp up with significant margins.

Q: Steven Fisher asks about election outcome impact on construction industry.

A: Ronald Tutor is elated with Trump's win, but most projects are federally or state-funded, so impact unclear, but expects positive for business.

Q: Adam Thalhimer asks about contract differences from legacy projects and margin ranges.

A: Contracts now have better terms, upfront payments, reduced retention, etc. Civil margins 11%-12%, building and specialty with increased margins.

Q: Adam Thalhimer asks about Q4 profitability.

A: Q3 was impacted by disputes, Q4 expects better but dependent on remaining disputes resolving by mid-Dec.

Q: Alex Rygiel asks about value potential in remaining disputes and capital structure.

A: Remaining disputes value between $450 million-$500 million by end of next year. Optimal capital structure is to pay off debt, with excess cash to be decided.

Q: Michael Dudas asks about bidding capacity and risk mitigation.

A: Bidding on billion+ projects is reviewed for resources and contract terms; day-to-day smaller jobs are managed by subsidiaries.