Tutor Perini Corporation 2026 Q2 Earnings Call

Please proceed. Hello, everyone, thank you for joining us.

With us today are Gary Smalley, CEO and President, and Ryan Soroka, Executive Vice President and CFO. Before we discuss our results, I'll 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-Q, which we are filing today, and in our Form 10-K, which was filed on February 26, 2026. 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. 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 our earnings release and in our Form 10-Q, both of which can be found in the investors section of our website. Thank you. With that, I'll turn over the call to Gary Smalley.

Thanks, Jorge. Hello, everyone, thank you for joining us. We had an excellent second quarter, delivering very strong results, highlighted by record revenue and operating income, record operating cash flow of $334 million for the first half of 2026, and meaningfully and sequentially improved operating margins across all segments. Our record cash flow so far this year has been driven by higher volume and solid execution and collections on various large projects that are very profitable. Our second quarter revenue increased 19% year-over-year to $1.6 billion, driven by contributions from projects that are in the very early stages with significant scope of work remaining. With strong revenue growth, we generated operating income of $118 million, up 54% year-over-year, and produced an outstanding $1.74 of adjusted earnings per share, up 23% compared to the second quarter of last year.

Ryan will discuss the details of our financial results shortly, including some commentary about our recent successful debt refinancing. As I mentioned, our segment operating margins were all up significantly this quarter compared to the margins for the first quarter of 2026, as our work continues to ramp up on several of our mega projects. The Civil segment second quarter operating margin was 15.3%, a very solid performance that exceeded the high end of our anticipated full-year margin range for the segment. The Building segment's operating margin was 5.6% for the second quarter on operating income that was up an impressive 39% year-over-year. The Building segment's outstanding margin performance is already approaching the upper end of the range we expect for the segment this year. And the Specialty Contractors segment continues to deliver solid execution on its current projects with improved operating results.

Its operating margin for the second quarter was 2.2%, up nicely compared to the first quarter, and with further margin improvement still expected as the back half of the year unfolds. Overall, we are very pleased with the results we are delivering in terms of revenue growth and margin expansion, as well as with our substantial earnings and record cash generation. Now let's turn to the second quarter new awards and backlog. We booked $1.7 billion of new awards and contract adjustments, a book to burn of just over 1x, and finished the quarter again with a near record backlog of $19.9 billion, up slightly compared to the prior quarter.

The largest additions to backlog included the following: a $652 million project to modernize and protect critical power infrastructure at Naval Base Guam, $143 million for two U.S. Coast Guard projects, a housing project and a child development center project, both in Alaska. $130 million of additional funding for a new pediatric campus electrical project in Texas. $114 million for the Jones Hall project at the University of Mississippi, and $106 million for a bridge project in Minnesota. As we've indicated previously, our strong backlog, which includes nine mega projects we have won over the past few years with a combined value of about $16 billion, continues to provide us with excellent line of sight for future revenue and earnings over the next several years. We continue to expect that our backlog will fuel higher revenue and earnings, solid profitability, and strong cash flow this year and beyond.

Customer demand remains robust, and we continue to have numerous significant project bidding opportunities, particularly in the Indo-Pacific region, as well as in California, the Midwest, and the Northeast. Overall, we have a massive pipeline of more than $200 billion in potential project opportunities over the next three to four years, which is about three times larger than the pipeline we had just a couple of years ago. Many of these opportunities are expected to bid over the next one to two years, and we are very well positioned to win our fair share. We will continue to be quite selective in bidding and winning new projects, with our key overall objective being to maximize shareholder value. Consistent with our approach over the last several years, our focus will remain on bidding projects conservatively so that our project budgets reflect safe costs, adequate contingency, favorable contractual terms, and higher margins.

As we observe the market, we continue to see limited competition for the larger fixed-price work, which should help us achieve our goal of winning important and profitable contracts that enhance revenue, earnings growth, and margin expansion. Let's talk about some of the major bidding opportunities we expect to pursue over the next 12 to 18 months. We currently have more than $4.6 billion of Indo-Pacific opportunities with the federal government for our Guam subsidiary, Black Construction, including port and harbor improvements on the islands of Palau and Yap, a fueling facilities project at Wake Island, airfield and fueling facilities in Yap, and the Polaris Point submarine pier at Naval Base Guam. In addition, there are more than $1 billion of other opportunities already identified in the region beyond 18 months. We expect that our backlog will remain strong during the remainder of 2026 and beyond.

We still anticipate approximately $1 billion of additional funding later this year for the Midtown Bus Terminal Replacement Project in New York. We also have certain Building segment projects currently in the pre-construction phase that are anticipated to advance to the construction phase later this year and beyond. In the third quarter, we will be bidding various projects, including the $1 billion I-69 ORX Section 2 bridge project, connecting Indiana and Kentucky. In the Indo-Pacific region, Black Construction just last week submitted a bid for the half billion dollar Palau Port and Harbor Improvements project. Later this year, we will bid a multi-billion dollar jail project in Illinois, leveraging our success and experience with our ongoing Brooklyn and Manhattan jail mega projects. We'll also continue to have several new large healthcare project opportunities and hospitality and gaming opportunities, mostly in California and the Southwest.

In 2027, we expect to bid on several multi-billion dollar projects, including the Merced to Madera segment of the California High-Speed Rail project, as well as the initial contract for the Sepulveda Transit Corridor program in Southern California, a program believed to be valued at approximately $12 billion and expected to be awarded under multiple contracts. We have the $4 billion Southeast Gateway, the $2 billion Eastside Transit Corridor Phase 2, and the $1.5 billion K Line Extension to Torrance projects, also in Southern California. On the East Coast, the $3 billion Newark Liberty International Airport Terminal B project in New Jersey, very similar to the award-winning Terminal A project that we recently completed at the same airport.

Late next year or early the following year, we expect to bid on the second phase of the multi-billion dollar Midtown Bus Terminal Replacement project in New York, the phase that will demolish the existing bus terminal and build its permanent replacement. Because of the unprecedented pipeline of opportunities just mentioned and our competitive positioning, we remain confident in our ability to drive backlog growth over the medium to longer term, as we also continue to focus on earnings growth, margin improvement, free cash flow, quality, and safety. As we announced today in our earnings release, our board of directors has declared a $0.09 per share quarterly cash dividend payable to shareholders on September 3rd. This is a meaningful 50% increase compared to the previous $0.06 dividend.

The increased dividend reflects our continued confidence in the outlook for strong revenue, operating margins, earnings, cash flow, and liquidity over the next several years. Separately, during the second quarter, we repurchased approximately 137,000 shares on the open market for $10 million at an average price of approximately $73 per share. We still have $170 million available under our share repurchase program that was originally authorized late last year for $200 million. We expect to make additional opportunistic share buybacks in the future to return excess capital to our shareholders. Finally, let's turn to our outlook and guidance. As I mentioned earlier, I am very pleased with the financial results we have delivered thus far this year, results that were ahead of our expectations.