Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Third Quarter 2021 Earnings Conference Call. My name is Kyle, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will be opening the call for our question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. At this time, I will turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Hello, everyone, and thank you for your interest and participation. With us on today's call are Ronald Tutor, Chairman and Chief Executive Officer; and Gary Smalley, Executive Vice President and Chief Financial Officer. Before we discuss our results, I will 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 potentially contribute to such differences in our Form 10-K, which was filed on February 24, 2021, and in the Form 10-Q that we are filing today. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. With that, I will now turn the call over to Ronald Tutor.

Thanks, Jorge. Good afternoon and thank you for joining us. As anticipated, we had a strong third quarter of new award bookings, which totaled $2.1 billion and drove a 12% quarter-over-quarter increase in our backlog to a very solid level at $8.4 billion. Major new awards included the Cedars-Sinai Marina del Rey Replacement Hospital Los Angeles County for Rudolph and Sletten, the $471 million LAX Airport Metro Connector for the Los Angeles Metropolitan Transportation Authority, the $220 million I-70 Missouri River Bridge for Lunda Construction, a $122 million military firing range project in Guam and a $98 million military housing project in Guam for Black Construction, and of course, our $71 million share of the Friant-Kern Canal project in California. Customer demand for our construction services remains very strong as evidenced by the extraordinary sustained pipeline of large projects that we have been bidding recently and will continue to bid over the next several quarters. Currently, we are awaiting decisions on several projects bid in the last 45 days, those projects being the $3 billion-plus JFK Terminal 1 project, the $2-plus billion Maryland light rail project, and the $2-plus billion Metro-North Penn Station Access project in New York City. In addition, we are optimistic that the substantial incremental funding expected to eventually flow from the proposed federal infrastructure bill will result in significantly extended duration of even greater demand with a large number of high-margin civil projects that we will be able to pursue and free up resources on ongoing projects as almost every one of our agencies will receive further funds. Until recently, the COVID-19 pandemic has had an adverse effect on both the volume and timing of new awards, with new awards and bid projects basically frozen for the last 18 months until the last 60 to 90 days. In other words, had COVID not occurred, obviously, our backlog would be substantially higher today because of the frozen period of 18 months where very little work was awarded. Our third quarter revenue as a result thereof came in below budget, partly as a result of these impacts, but also due to lower-than-anticipated contributions from certain building projects in California and the Gulf Coast that were delayed. Compared to last year's third quarter, which was particularly strong revenue-wise, we experienced reduced activity in this year's third quarter on various building segment projects in California and Oklahoma that have recently completed or will complete very shortly. However, now that our backlog has started growing again and we anticipate further increases significantly, as we win our expected share, we believe our revenue should begin to stabilize and eventually grow again as it did last year, with more substantial growth starting in the first quarter as anticipated when these construction phases hit our backlog. Our strong Civil segment operating margin of 11.9% through the first nine months of 2021 continues to reflect a favorable mix shift toward higher-margin projects. This margin is up 100 basis points compared to the first nine months of 2020. Certain lower-margin civil projects that were previously awarded years ago are winding down, and that work is being replaced by newer, higher-margin projects in California and Guam and with the surge of work in New York. Major projects contributed to our third quarter revenue included California High-Speed Rail, Purple Line sections 2 and 3 for LA Metro and the Vision 20 Portal Widening project in Los Angeles, again for Los Angeles Metro, the San Francisco Central Subway project as it nears completion, the Minneapolis Southwest Light Rail project and the Newark Airport Terminal 1. Our earnings per share for the third quarter also came in below budget, largely due to certain project write-downs that we recorded in the Specialty Contractors segment. Next, I will update you on the status of some of the major projects that we have recently bid and are preparing to bid over the coming months. Team selections and contract awards for the aforementioned JFK Terminal 1 and Maryland Purple Line projects are imminent. Early this week, on November 1, we submitted our bid for the Metro-North Railroad Penn Station Access project. In addition, we expect to bid several other large projects in the first quarter of 2022, including the $1 billion first phase of the Maryland Express Lanes for Accelerate Maryland Partners as well as the $700 million Inglewood automated people mover in Los Angeles and a $600 million government facility in Northern California for Sonoma County. The $1.4 billion Newark AirTrain replacement will bid in April of 2022, with that award decision expected by the third quarter. The LaGuardia AirTrain has been put on hold, pending a new governmental assessment of the project. Finally, Black Construction, our Guam subsidiary, is still awaiting the outcome of recent bids for major military projects exceeding $550 million as we continue to bid one- and two-year military projects every month in Guam. Based on our results to date through the third quarter and our outlook for the remainder of the year, we have determined to adjust our EPS guidance for 2021 to a range of $1.70 to $1.85. Thank you. And with that, I will turn the call over to Gary to present the details of our financial results.

Thank you, Ron. Good afternoon, everyone. As usual, I will begin with a discussion of our results for the third quarter, including cash flow, followed by some commentary on our balance sheet and then some updates regarding assumptions in our adjusted 2021 guidance. Revenue for the third quarter of 2021 was $1.2 billion compared to $1.4 billion for the same quarter last year. The decrease was largely driven by reduced project execution activities in the Building segment, as various projects have completed or are nearing completion, while newer projects that have been recently awarded are yet to contribute to revenue. The COVID-19 pandemic reduced revenue in the third quarter of both 2020 and 2021, with the current year impact predominantly associated with pandemic-induced delays on the awarding of new projects in prior periods that Ron mentioned. Civil segment revenue for the third quarter was $546 million compared to $612 million for the third quarter of 2020. The decrease was primarily due to reduced project execution activities on various projects in the Northeast that are also completed or are nearing completion. Building segment revenue was $361 million compared to $508 million for the third quarter of last year, with the decrease due to the aforementioned reduced project activity and delayed timing of contributions from newer projects. Specialty Contractors segment revenue was $271 million compared to $322 million for the third quarter of last year, with the reduction mostly driven by a net decrease in project execution activities on certain mechanical and electrical projects in the Northeast and in California. As Ron indicated, we booked several significant new awards in the third quarter and are awaiting imminent decisions and potential contract awards for some very large projects that we recently bid. As the recent new awards and other new large projects, if awarded to us, start to contribute significantly, the revenue from the new projects should eventually more than offset declining revenue contributions from projects that are completing and nearing completion. So I'd emphasize again that we do believe that revenue growth is on the horizon. It simply remains a matter of timing as to when the new projects are awarded and start to contribute more meaningfully to our results and counterbalance the declining revenue of the projects that are concluding. Income from construction operations for the third quarter of 2021 was $52 million compared to $83 million for the same quarter of last year. The decrease was largely due to the net impact of incrementally larger unfavorable adjustments on certain electrical projects in the Northeast in our Specialty Contractors segment in the third quarter of 2021 compared to the third quarter of last year as well as the absence in the current year third quarter of the net impact of a $19.6 million prior-year gain from a favorable arbitration decision and a $15.2 million prior-year charge due to an unfavorable legal ruling pertaining to a mechanical project in California. To a lesser extent, the decrease was also due to lower contributions from certain Civil segment projects in the Northeast and reduced contributions in all segments related to the COVID-19 impacts on revenue due to delays in new awards in prior periods. Civil segment operating income for the third quarter of 2021 was $63 million compared to $70 million for the same quarter of last year, with a decrease in line with the volume reduction. Building segment income from construction operations was $11 million compared to $16 million for the third quarter of 2020, with the decrease also primarily due to the volume reduction. The Specialty Contractors segment had a $5 million loss from construction operations in the third quarter of 2021 compared to $10 million of income from construction operations for the same quarter of 2020. The decrease was primarily due to larger net unfavorable adjustments on certain projects in the current year quarter compared to the prior year period. Operating margins by segment for the third quarter of 2021 were 11.5% for Civil, 3% for Building and negative 2% for Specialty. As Ron also indicated earlier, our strong year-to-date Civil segment operating margin of 11.9% is up 100 basis points compared to the same period last year and reflects a favorable project mix shift, including strong contributions from certain higher-margin projects. Corporate G&A expense for the third quarter was $16 million compared to $13 million for the same quarter of 2020. The increase was primarily driven by higher compensation and travel-related expenses. Interest expense for the third quarter of 2021 was $17 million compared to $26 million for the same quarter of last year with a $9 million reduction largely due to the absence of debt extinguishment costs recognized in the third quarter of 2020 related to balance sheet refinancing. Income tax expense for the third quarter was $9 million compared to essentially zero tax expense for the third quarter of last year. In 2020, we had favorable tax benefits related to a net operating loss carryback as a result of the CARES Act. Net income attributable to Tutor Perini for the third quarter 2021 was $15 million compared to $37 million for the same quarter of last year. Diluted EPS for the third quarter was $0.30 compared to $0.72 for the third quarter of 2020. The decreases were mostly driven by the factors I mentioned earlier that resulted in reduced income from construction operations. Now let's talk about operating cash, which was once again lower than anticipated for the quarter. We used $21 million in operating cash in the third quarter, primarily due to continued growth in our costs and estimated earnings in excess of billings, or what we've commonly referred to as CIE, or unbilled costs. Similar to last quarter, the CIE increase was largely driven by lingering COVID-19 impacts, which have continued to cause delays in the resolution of certain claims and unapproved change orders. Most notably, COVID has constrained some of our customers' revenue and funding sources, thereby limiting their ability and budgetary discretion to pay us timely for certain in-scope work as well as some out-of-scope work that we have performed at their direction. As a result, we have had to temporarily fund certain project costs that would normally be more promptly negotiated, billed to and collected from these customers, which has negatively impacted our operating cash flow and largely contributed to the increase in CIE for the quarter and for the year. The majority of the CIE buildup this quarter again occurred on several projects in the Northeast. We are continuing our discussions with these and other customers to negotiate amounts we are owed on the various projects and anticipate that we will resolve and collect much of the cash that we are owed over the next few quarters. Now let's turn to our balance sheet. Our total debt as of September 30, 2021, was $968 million, down 6% compared to the end of 2020. Our credit facility once again had a zero balance at the end of the third quarter. We remain well within our debt covenant compliance limits and anticipate that this will continue to be the case in the foreseeable future. As Ron mentioned earlier, we are adjusting our 2021 EPS guidance to a range of $1.70 to $1.85 per share based on our results to date and our assessment of current market conditions and the outlook for the remainder of the year. As you can tell by our revised guidance, we expect that our fourth quarter results will be notably stronger than the third quarter results. Finally, let me update you on some of the assumptions factoring into our revised 2021 guidance. G&A expense for 2021 is now expected to be between $245 million and $255 million, which is another $5 million less than previously anticipated. Our effective income tax rate for this year is now expected to be between 22% and 24%, improved by another 1% at both the top and bottom ends of the range. Lastly, capital expenditures are now anticipated to be approximately $35 million, of which $7 million will be owner-funded and project-specific. All other assumptions remain unchanged from what we last provided. Thank you. And with that, Ron, I'll turn the call back over to you.

Thanks, Gary. In summary, I was pleased with the increased awards in the third quarter that drove our backlog up to $8.4 billion, and that was without the benefit of any of the major proposals we've recently turned in. In addition, our year-to-date Civil segment continues to support the fact that our margins are up significantly and continue to grow. While our third quarter results were disappointing and lower than expected, I believe that we will close out 2021 with a strong fourth quarter as we continue to execute effectively on our major civil projects. As mentioned earlier, there is no question in my mind that over the next two quarters, we will significantly add to our already strong backlog, primarily in the civil sector, given the tremendous bid opportunities I spoke to earlier, which are likely to continue to be expanded given the fact that the federal infrastructure bill remains day-to-day in its passage. We continue to anticipate the same limited competition as the projects I spoke to had no more than a total of three bidders and in most cases two, which should continue to lead to strong operating margins and growth for our Civil segment. Thank you. And with that, I'll turn the call over to the operator for questions.

Our first question is from Alex Rygiel with B. Riley. Please proceed with your question.

Thank you. Good evening, gentlemen.

Hi, Alex.

Hey, Ron and Gary, just jumping straight at the unbilled receivables line item. What are some of the things we should be watching for that could suggest that your customers will be or are in a better position to start to pay up on the monies that they owe you?

Passage of the infrastructure bill. For example, we actually settled a very large claim and rather than delay the settlement, we agreed to lend the owner back $28 million that he could pay us on a large public works project and pay a 6% interest and gave them over a year to pay us back. That's the kind of madness we're dealing with. Another one of our receivables is a $53 million change order I settled with an unnamed owner last February, and it's already November, and we still haven't got the final executed change order so that we can bill it, although we've done all the work. So COVID has had a devastating impact on all our public agencies. And unfortunately, with all their cash flow shortfalls, it's fallen upon us. So the moment that infrastructure bill passes and there is money fed to all of these major public agencies in New York, California, et cetera, which, of course, New York and California are the primary beneficiaries of the bill, I think we'll see cash flow begin to ease up because I get tired of people telling me they owe me, but they don't have the money to pay, you're going to have to wait.

This clearly is not a—go ahead, Gary.

Yes. Sorry, Alex. We also have various arbitration and litigation dates that are coming up over the next several months, and that should also resolve some of these costs in excess of billings.

Well, as I've said time and again, 2022 is an enormous year for us because we probably have trial dates on 12 or 15 major cases that our owners have stalled for eight, 10 and 12 years. But the day of reckoning is finally here. So 2022, we believe, will be an extremely positive year for collections and not the least of which will settle around this infrastructure bill, funding all of our owners. In addition, our owners are beginning to understand there's only us and two or three other contractors in the United States that can build their large projects. And as I continue to remind them, you have to pay us if we're going to continue to do business with you. So it's an interesting turn, but it's been very unpleasant this year as we deal with the fallout of COVID and the fact that all our agencies don't have the working capital, and they seem to think that we should help them carry the burden.

Gary or Ron, is there any way to maybe quantify sort of possibly the cash receipts that you probably should collect in the next 12 to 18 months to sort of get to a more kind of balanced or level playing field here?

Well, we have that, of course, and we go over that with our Board regularly. And the only thing I can tell you, it's enormous. But I don't think, unless we talk to counsel, that we can speak to that publicly. Otherwise, I'd love to be able to tell you, candidly.

Yes, Alex, look, we do this—Ron sometimes, it will be—every weekend he'll look at it for some period of time and rehash it, and then we talk about it. We know what the targets are, and they are significant, as Ron mentioned. But so much is dependent upon court dates that can get frozen or get moved. And we have a lot of court dates, as Ron said, where it looks like they're not going to move. But who knows, we'd hate to commit to a number as we've done before and then disappoint. So we'll just say it's a very big number, and it's on the horizon.

Fair enough. And then lastly, Gary, clearly, you mentioned that there could be a gap in revenue from projects nearing completion versus projects that you're expected to be awarded shortly. Is that gap more of a fourth quarter gap? Or is that gap more of a sort of first quarter, second quarter gap next year?

Yes. I think it's more of a fourth quarter gap, at least that's what we're looking at right now. Now keep in mind that first quarter, there's always the seasonal gap, if you will. So we would expect that first quarter to be down, but down to the extent that it normally is. And I think we're looking at fourth quarter to be really where the shortfall is at least compared to, let's say, prior year, but we hope to start building momentum in the fourth quarter.

Okay. Helpful. Thank you very much.

You're welcome.

Our next question is from Steven Fisher with UBS. Please proceed with your question.

Great. Thanks. Can you hear me, guys?

Yes, we can, Steve.

Okay. Great. Just maybe following up there. Any help you can give us on the distribution of margins that are implied in the fourth quarter guidance? Just a little bit of color by segment and what we should expect for margins in Q4.

Well, you see that our margins continue to grow in the Civil sector, and we have certain civil jobs that I won't get specific on that are even significantly above the 11% we are talking about. I don't want to get into the individual jobs, but there will continue to be growth in the Civil sector margins as we report because, as we pointed out, the older jobs, as they finish and drop off, they're replaced with only the newer jobs at much higher margins, which are continuing to make those margins. And as the lower-margin seven-, eight-, nine-year-old jobs, particularly in New York, drop off the backlog that growth will continue.

And what about Specialty? That was the first loss, I think, and maybe since the pandemic quarter. But—so what—can you just give us the latest of what's going on there and when that improves?

It's predominantly in New York. We struggle with both our electrical subsidiary and our mechanical subsidiary on certain major projects where they've had to take write-downs that simply were appropriate. And they continue to struggle. We cut back their revenues. We've reduced many of their operations. They work for us and only certain selected other builders or owners. And we continue to try and control that. Hopefully, the two worst jobs that they have will finish at the end of the year, in January, and it will be a new horizon. But I can't say that they haven't plagued us for years in New York City with their problems. They may be strategically very positive, but operationally continually a challenge.

And Steve, more specifically to the fourth quarter, we are definitely not forecasting another loss from Specialty in the fourth quarter. Whether we get to the 5% to 7% segment margin range that is our target, I wouldn't go that far, but it should be positive.

Okay. And it was nice to see the backlog growth this quarter. When do you think you could actually start to see the revenues grow on a year-over-year basis again? Is that sometime later in 2022? Or could that be sooner than that?

Well, let's say that I think California High-Speed Rail should go back to work in the first quarter, which has been a significant reduction in revenue because of the continuing delays there. I've met with their principals. It appears they're overcoming the delays, and we can finally get that work going again at the rate in which it should. Purple Lines two and three are beginning to grow in revenue because we're coming out of the ground, the tunnels. I think most of the existing work will ramp up dramatically. And the key element will be of these three jobs we bid, which totaled $7.5 billion, what, if any, of them will be awarded? Will we get all three, one out of three? We got to wait and see. And then fortunately, there's more right behind it. So it's hard to be specific, but my assumption is by next summer, we would have achieved such a significant backlog beyond anything we ever dreamt of, that as that catches up, our revenue will increase accordingly and with it, the profit. But the work's got to get released. COVID's got to get put behind us and these government fundings have to happen.

Okay. And then just lastly, Portal Bridge, anything we can learn about the nature of the competition there on pricing?

There was one other bidder, and it was Skanska, and they're a very good company. They beat us $200 million on a—I was over $1.7 billion, and they were in the $1.5 billion range. And obviously, they were satisfied with a lesser price than we were. So it's all a matter of what you want to do. We're completely satisfied that the price we bid—I bid at the same way tomorrow, and we are determined to raise the prices in our industry.

Terrific. Thanks, guys.

Thanks, Steve.

We have reached the end of the question-and-answer session, and I will now turn the call over to Ronald Tutor for closing remarks.

Thank you, everybody, for joining us and until the next quarter and year-end.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.