Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tutor Perini Corp (TPC, Financial) reported a 10% consolidated revenue growth for the second quarter of 2024.
- The civil segment showed strong profitability with a segment operating margin of 13.8%.
- The company generated $53 million in operating cash flow for the second quarter and $151 million year-to-date, marking the second highest result since the 2008 merger.
- Total debt declined by $223 million or 25% since the end of last year, indicating significant deleveraging.
- TPC's backlog grew to $10.4 billion, with significant new awards and contract adjustments, including major projects like the Connecticut River replacement bridge and the Fort Lauderdale International Airport terminal connector.
Negative Points
- Earnings per share were negatively impacted by $0.19 due to an increase in share-based compensation expense.
- An unfavorable project adjustment related to two completed highway projects in the Northeast impacted earnings by $0.17 per share.
- The specialty contractors segment posted a loss from construction operations of $8 million in the second quarter of 2024.
- Corporate G&A expense increased to $32 million in the second quarter of 2024, up from $19 million the previous year, primarily due to higher share-based compensation expenses.
- The company still faces legacy losses, particularly in Five Star Electric and WDF, which are expected to continue until the end of next year.
Q & A Highlights
Q: Can you give us a sense of the earnings ramp-up expected in the second half of the year?
A: Gary Smalley, President: The second half will be stronger, with Q4 likely being a bit stronger than Q3. This improvement will be driven by continued improvements in specialty segments and higher volume of earnings from larger projects.
Q: What is still generating losses in the specialty segment, and when do you expect it to turn profitable?
A: Ronald Tutor, CEO: We have legacy losses, particularly in Five Star Electric and WDF. Although some issues will be resolved this year, we expect to be out of these issues by the end of next year. The losses are diminishing, but it will take time.
Q: Did you have a settlement in Q2 that hit the P&L but not yet collected the cash?
A: Gary Smalley, President: Yes, we had a significant settlement in Q2. We've collected about 60% of it, with the rest expected in Q3, which will positively impact Q3 cash flow.
Q: Should we expect stronger operating margins for the civil segment in the second half of the year?
A: Ronald Tutor, CEO: The civil segment margins will continue to improve, but not necessarily because of new projects. The high-margin projects from the last two years are coming online, contributing to overall margin improvement.
Q: What percent of Q2 cash from operations was from settled claims?
A: Gary Smalley, President: Roughly 50% of the Q2 cash from operations was from settled claims.
Q: Do you see intersegment revenue continuing at the current rate?
A: Ryan Soroka, CFO: Yes, it will likely continue at the current rate, especially as the specialty segment supports other segments like civil and building.
Q: Is there potential for specialty construction revenue to grow next year?
A: Ronald Tutor, CEO: Definitely. Many of the large prospective projects are in the Northeast, which will positively impact our specialty segment, particularly Five Star Electric and WDF.
Q: Can you provide a high-level update on terms and retainage?
A: Ronald Tutor, CEO: We do not accept retainage above 5% and always negotiate out onerous terms. With limited competition, we've been able to successfully negotiate favorable terms consistently.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
