Tutor Perini Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: The company generated a record $262 million in operating cash flow for Q2, marking the second-best quarter ever and exceeding expectations.
  • Positive Sentiment: Backlog climbed to an all-time high of $21.1 billion, up 102% year-over-year, driven by $3.1 billion in new awards and a 2.2× book-to-burn ratio.
  • Positive Sentiment: Tutor Perini raised its full-year 2025 guidance for the second time, now targeting GAAP EPS of $1.70–$2.00 and adjusted EPS of $3.65–$3.95, underscoring management’s confidence.
  • Negative Sentiment: Share-based compensation expense surged due to cash-settled awards, creating greater earnings volatility, although this is expected to decline once awards vest in 2026.
  • Neutral Sentiment: The Specialty Contractors segment posted an $18 million loss in Q2 on legacy claim settlements, but is forecast to break even and expand margins as new projects ramp up.
AI Generated. May Contain Errors.
Earnings Conference Call
Tutor Perini Q2 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good day, ladies and gentlemen, and welcome to the Tudor Purini Corporation Q2 twenty twenty five 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.

Operator

I will now turn the conference over to your host for today, Mr. Jorge Casado, Senior Vice President of Investor Relations. Please proceed.

Jorge Casado
Jorge Casado
SVP - IR & Corporate Communications at Tutor Perini

Hello and thank you all for joining us. With us today are Gary Smalley, CEO and President Ron Tudor, Executive Chairman and Ryan Saroka, 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 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.

Jorge Casado
Jorge Casado
SVP - IR & Corporate Communications at Tutor Perini

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 ks, which we filed on 02/27/2025 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, 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.

Jorge Casado
Jorge Casado
SVP - IR & Corporate Communications at Tutor Perini

Thank you. And with that, I will turn the call over to Gary Smalley.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thanks, Jorge. Hello, everyone, and thank you for joining us. Tutapirini 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 $262,000,000

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

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 $21,100,000,000 up 102% year over year and up 9% sequentially driven by $3,100,000,000 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 1,370,000,000 and our revenue for both the second quarter and the 2025 was the highest for each respective period since 02/2009, reflecting record quarterly and first half twenty twenty five revenue performance for the Civil segment and the best performance since 2020 for the Building segment.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Operating income was up 89% to $76,000,000 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 segment's 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 the previously low stock price, the company issued cash settled performance based awards weighted heavily towards enhancing total shareholder return.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

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 clear view of Tutor two to three'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 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 2026. Returning to our results.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

For the 2025, we delivered GAAP EPS of $0.38 up substantially compared to $02 for the same quarter of last year. Adjusted EPS for the second quarter was 1.41 compared to $0.34 for the 2024, again demonstrating our strong core operating performance and reflecting the impact of contributions from higher margin projects. Overall, Tuppernisse 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.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

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 $856,000,000 at the end of the second quarter, which is a reduction of $91,000,000 or 10%. Our CIE is now at the lowest level it has been in eight years.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Taking a closer look at our record $21,100,000,000 of backlog mentioned earlier, Following the strong first quarter that featured $2,000,000,000 new awards, our volume of bookings increased during the second quarter with an impressive 3,100,000,000 of new awards. This latest record backlog represents a nearly threefold increase since the 2022 and includes record highs in both the Civil and Specialty Contractors 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 $1,870,000,000 Midtown Bus Terminal Replacement Phase one project in New York, a $538,000,000 health care project in California, two civil works projects in the Midwest collectively valued at $127,000,000.90000000 dollars of additional funding for a mass transit project in California and $54,000,000 of additional funding for another healthcare project in California.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

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 preconstruction phase that are expected to advance to the construction phase later this year, including another California health care project valued at nearly $1,000,000,000 Some of our major upcoming project opportunities include the $12,000,000,000 Sepulveda Transit Corridor, the $3,800,000,000 Southeast Gateway Line, the $1,200,000,000 Valley Link Phase one rail project and the $650,000,000 Foothill Goldline light rail project, all of which are in California, and the $1,400,000,000 I-five 35 Blatnik 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 Pacific Deterrence Initiative.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

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 Tutor Perini's 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.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

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 Q and 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 1.7 to $2 up from the previous guidance of 1.6 to $1.95 Adjusted EPS for 2025 is expected in the range of $3.65 to $3.95 which compares to $2.45 to $2.8 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.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Moreover, the outlook for Tutor Peroni 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 vested. 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.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

We also do not currently foresee the risk of any of our major projects in 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. With that, I will turn the call over to Brian to discuss the details of our first quarter results.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Thanks, Gary. Good afternoon, everyone. I'll start off by discussing our results for the second quarter, after which I will provide some commentary on our balance sheet and our updated 2025 guidance assumptions. Revenue for the 2025 was $1,370,000,000 up 22% compared to $1,130,000,000 for the 2024. Civil segment revenue was $734,000,000 up 34% compared to $546,000,000 last year.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Building segment revenue was $462,000,000 up 11% compared to $418,000,000 last year and Specialty Contractors segment revenue was $177,000,000 up 9% compared to $163,000,000 last year. Our revenue growth was driven by increased project execution activities on various newer higher margin projects that all have substantial scope of work remaining. These projects included the Brooklyn Jail, the Honolulu Rail project, the Manhattan Tunnel, the Newark air train replacement and the Purple Line Section three stations project in California. Civil segment income from construction operations was $140,000,000 in the 2025, up 85% compared to $76,000,000 for the second quarter last year, with increase driven by contributions related to the strong revenue growth I mentioned for this segment as well as favorable adjustments totaling $28,000,000 due to the settlement of certain change orders and changes in estimates due to improved performance on a mass transit project in the Midwest. Building segment income from construction operations was $22,000,000 in the 2025 compared to $5,000,000 last year, with the increase primarily due to contributions related to the increased project execution activities I mentioned.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

The Specialty Contractors segment posted a loss of $18,000,000 for the 2025 compared to a loss of $8,000,000 last year. The increased loss was primarily due to unfavorable adjustments this quarter that totaled about $15,000,000 related to the settlement of certain legacy claims in the Northeast, partially offset by contributions associated with the revenue growth for the segment. We anticipate improved operating income over the rest of this year and next year for the Specialty segment as our revenue is expected to increase due to their involvement in several of our newer large projects that are ramping up, which will help to cover the segment's G and A cost. Segment operating margins for the 2025 were strong for the Civil and Building segments at nineteen point one percent and four point nine percent respectively. Other income was $6,000,000 level with other income reported in the second quarter last year.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Interest expense was $14,000,000 down 41% compared to $23,000,000 for the same period last year because of our substantial debt reduction since last year. Income tax expense for the 2025 was $22,000,000 with a corresponding effective tax rate of 31.8% compared to $7,000,000 for the same period last year with a corresponding effective tax rate of 31.3%. We had to true up our tax provision this quarter and our new projected effective tax rate for 2025 is now higher than previously anticipated, all due to the significant increase in shared based compensation expense that Gary mentioned and the fact that nearly all the higher expense is non deductible. On a GAAP basis, net income attributable to Tutor Perini for the 2025 was $20,000,000 or $0.38 of earnings per share, up substantially compared to $1,000,000 or $02 of earnings per share for last year's second quarter. For the 2025, net income attributable to Tudor Purini was $48,000,000 or $0.90 of earnings per share, also up substantially compared to $17,000,000 or $0.31 of earnings per share for the same period last year.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Our second quarter GAAP EPS was ahead of our expectations even with the impact of the significantly higher than anticipated share based compensation expense. Adjusted net income attributable to Tudor Purini, which again excludes the impact of share based compensation expense net of the related tax benefit was $75,000,000 or $1.41 of adjusted earnings per share for the 2025, up very meaningfully compared to $18,000,000 or $0.34 of adjusted earnings per share for last year's second quarter. For the 2025, adjusted net income attributable to Tudor Purini was $110,000,000 or $2.6 of adjusted earnings per share, also up substantially compared to $39,000,000 or $0.73 of adjusted earnings per share for the same period last year. As Gary mentioned, our operating cash flow for the second quarter and 2025 was stellar at $262,000,000 and $285,000,000 respectively, with both results setting new records for the periods. We expect that our operating cash flow will continue to be strong in 2025 as well as over the next several years, driven largely by organic cash collections, that is from new and existing projects and occasionally enhanced by collections associated with dispute resolutions.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Now I will address the balance sheet. Our total debt as of 06/30/2025 was $419,000,000 down 21% compared to $534,000,000 at the 2024. But perhaps more impressive is that due to our record operating cash flow in the second quarter, for the first time since 2010, our cash exceeded our total debt. As of 06/30/2025, our cash was $526,000,000 or $107,000,000 greater than total debt. As Gary noted, our CIE was $856,000,000 at the end of the second quarter, down $91,000,000 or 10% compared to the balance at the end of the 2025.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

And it stands at its lowest level it has been since the 2017. The CIE decrease was mostly due to billing and collections activity and to a much lesser extent from charges related to litigation and settlement on older disputes. Finally, let me provide you with our latest updated assumptions regarding our increased earnings guidance. G and A expense for 2025 is now expected to be between $360,000,000 and $380,000,000 with the increase from our previous assumption due entirely to increased share based compensation expense. Depreciation and amortization expense is still anticipated to be approximately $55,000,000 in 2025 with depreciation at $53,000,000 and amortization at $2,000,000 Interest expense for 2025 is still expected to be approximately $55,000,000 of which about $5,000,000 will be non cash.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

This is $34,000,000 or 38% lower than our interest expense of $89,000,000 in 2024. Our effective income tax rate for 2025 is now expected to be approximately 26% to 28%, higher than previously anticipated due to the increase in share based compensation expense, nearly all of which is non deductible. We now anticipate non controlling interest to be between $75,000,000 and $85,000,000 significantly higher than last year due to increased contributions from certain joint ventures. We still expect approximately 53,000,000 weighted average diluted shares outstanding for 2025. And capital expenditures are still anticipated to be approximately $140,000,000 to $150,000,000 with the vast majority of the CapEx in 2025 now estimated approximately $120,000,000 to $130,000,000 to be owner funded for large equipment items on certain large new projects such as tunnel boring machines.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Thank you. And with that, I will turn the call back over to Gary.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thank you, Ryan. To briefly recap, we delivered extraordinary results for the second quarter that once again exceeded our expectations with record operating cash flow and continued strong revenue, operating income and earnings growth and with backlog that has doubled year over year to a new all time record of $21,100,000,000 This record backlog should enable us to generate double digit revenue growth and strong earnings for the foreseeable future, while also serving as a catalyst for continued strong cash flow as the newer projects progress through design and into construction. Our outstanding performance to date, combined with our greater confidence in how the second half of this year should conclude, has enabled us to increase our 2025 EPS guidance for the second time this year, while still maintaining what we believe is an appropriate level of contingency for unknown or unanticipated developments. More specifically, we are raising the midpoint of our 2025 adjusted EPS guidance by a staggering $1.17 or 45% with this latest increase. Our strong results so far this year reflect the impact of contributions from higher margin civil and building projects, many of which are still in the early stages but are ramping up.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Last quarter, I concluded my earnings call commentary on May 7 by stating that, There has never been a better time to be a Tudor Purney shareholder as we believe we are at the dawn of a new era for the company. With the stock price doubling since then, combined with our outstanding second quarter results that we are reporting today, I think it is easy to see why I was so optimistic then. With what we continue to see on the horizon for this year and beyond, I still believe that statement to be true and there remains tremendous opportunity ahead for further substantial shareholder value creation. Thank you. And with that, I will turn the call over to the operator for your questions.

Operator

Thank you. We will now be conducting a question and answer session. Session. And our first question will come from Michael Dudas with Vertical Research.

Michael Dudas
Partner at Vertical Research Partners

Afternoon, gentlemen.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Hi, Mike.

Michael Dudas
Partner at Vertical Research Partners

Gary, kudos to the operating team. Terrific results. I mean, just it goes without saying, summarized very well. As we look in this quarter, maybe as we look through 2025, any major project closeouts that will you will be experiencing? And on and on top of that, how do you think about percentage or your win expectation rate on the new business that you listed some of the larger projects that may get announced here in the next several weeks or several quarters?

Michael Dudas
Partner at Vertical Research Partners

Is it do you have an expectation on that percentage or probability weighted and how that will continue to help offset some of the closeouts that we may see in the next six to nine months?

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yeah, Mike. Thanks. I'll take the first part and then let Ron help out also. Look, it's not really about projects wrapping up for us at this point. It's about projects starting up, ramping up and generating even more revenue and profit and cash than what they've done so far.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

So we don't see in the next quarter or so any short term period of time anything of significance winding down. On proposal front, Ron, with the prospects that we have out there, we we feel good about our our chances. Anything else you wanna add to that?

Ronald Tutor
Ronald Tutor
Executive Chairman at Tutor Perini

Yeah. There there's only two jobs of any consequence that are in the final stages, and those would be defined as finishing the end of next year. So any reduction in revenue on those two jobs as they work toward their completion is more than offset by the tremendous ramping up of all of these new jobs where they will continue to explode revenue wise this year, next year, and the following year, and you will see dramatic revenue increases from all these major new jobs hitting us in the next quarters and continuing.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yeah. So, Mike, to your your question on the the prospects, look, we feel really good about, you know, all the prospects. We're not gonna get them all, you know, these major ones, but we we know that we're one of one of the few bidding for them. And so we expect to land one or two of them. And that should help as they ramp up.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

As they materialize, they will replace the work that Ron just mentioned that work winding down next year at the 2026 and early in 2027.

Michael Dudas
Partner at Vertical Research Partners

Gary, you mentioned in your prepared remarks that even the first half results are better than you anticipated. Maybe you can assess how that occurred or what were some of the drivers of that relative to the plan and how the execution certainly came through this first half?

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yes. I think there are a couple of things. One, the project execution the ramp up of some of these projects was a little quicker than we anticipated. We factored in some contingency or some expectation that things would not go as brilliantly, let's say, as they did. So that certainly was a factor.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

We also had a real good quarter as we talked about in prepared remarks of reducing CIE, cost in excess of billings. That came down further than what we thought. The than what we anticipated for the first quarter anyway. We also benefited by the fact that there were a lot fewer write downs than what we had seen recently. We had put contingency in for that possibility, and we did not have to use much contingency there.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

And then overall, work in some of the units, some of the smaller work, it came in, we'll say, more timely than what we anticipated, and so that also helped. And I'll just say that, you know, we have contingency that we have for the year. We don't disclose, of course, what that is. But for half of the year, we've used about a third of the contingency. So I think that even with these outstanding results, we didn't use the contingency that we had anticipated that we would use for the first six months.

Michael Dudas
Partner at Vertical Research Partners

That's well said, Gary. My final question maybe maybe for Ryan. The pace obviously, the cash flow is going to continue be quite strong next couple of quarters into next year. Pace will track earnings. Any any adjustments that you can see there?

Michael Dudas
Partner at Vertical Research Partners

And then Gary, certainly, does the board stand on kind of figuring out what to do all the benefits that your company is generating here, especially as you bring this cash into the company?

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Yeah. I mean, I think in previous calls, stated that we expected cash to be closer to somewhere between what we produce in 2022 and 2023. So roughly 200,000,000 to $300,000,000 of operating cash. Obviously as we sit here at $285,000,000 of operating cash year to date, we're looking certainly north of that. Maybe on the lower end, $350,000,000 of operating cash and then at the higher end kind of approaching where we we achieved last year around 500,000,000

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yes, somewhere in that range. And then your question about what was your last question, sorry?

Michael Dudas
Partner at Vertical Research Partners

Just the Board and figure out an allocation policy.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yes. Look, we continue to talk to the Board. We will next week when we reconvene with them. There's still, of course, a lot of alternatives out there for us. Thing I will say, we are going to be fiscally conservative in this.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

We want to accumulate more cash. We're not quite ready to go down a path. We're still looking at all options. We will do something someday, but that day is not quite upon us. So we ask for everyone's continued patience in that.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Everyone's been patient for a long time to see the results that we've generated. We want to stock away some more cash, again, to be fiscally conservative than just start paying a dividend, let's say, or something. We also recognize that we need cash for working capital. We're growing the business at a very significant clip. So that adds to the reason for our conservatism in coming up with some type of capital allocation decision.

Michael Dudas
Partner at Vertical Research Partners

Well, patience has been rewarded in 2025, Gary. Thanks for your time and appreciate it.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thank you, Mike.

Operator

Our next question comes from Adam Thalhimer with Thompson Davis.

Adam Thalhimer
Director - Research at Thompson Davis & Co

Hey, good afternoon, guys. Congrats on all the success here.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thanks, Adam.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Thank you.

Adam Thalhimer
Director - Research at Thompson Davis & Co

Can you comment just on the project funnel and the project outlook? I'm just curious, you're obviously being more selective than you've been in the past, but do you still see a good flow of projects that meet your criteria?

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yeah. We we do, Adam. Look. Obviously, we can be even more selective than we have been in the past, and there aren't as many of these huge projects out there to bid because we ended up getting a lion's share of those projects. But where we're seeing projects now, we see some materializing larger project materializing in LA.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

We see in the Indo Pacific region and we see some opportunities in the Midwest. So there are significant opportunities out there. We'll be selective. We will be look for those projects that geographically make the most sense for us and where we can get higher margins with less competition. So but we there are opportunities out there.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

We just don't feel the need to, we'll say, be aggressive with price as we have not seen that need in the last couple of years.

Adam Thalhimer
Director - Research at Thompson Davis & Co

Great. And then, Ryan, I was hoping you could expand on you gave some color on your expectations for specialty going forward. I was hoping you could just kind of give a little bit put a little more meat on the bone in terms of the the revenue and the margins there.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

Yeah. I mean, as as we kinda look for the through to the second half of the year, I mean, ultimately, the the expectation is for specialty to end up around Breakeven or even North of Breakeven as they start to execute on some of the newer work that they performed that they're performing on which is a lot of that work in particular in the Northeast is on Tutor Perini project. So we have some good insights into those projects. As they expand and ramp up production is looking forward into 2026 and beyond. Obviously, we're looking at some growth that comes along with those larger projects that they're operating on and certainly expect the margins to continue to enhance.

Ryan Soroka
Ryan Soroka
Executive VP & CFO at Tutor Perini

I think ultimately the expectation once some of these legacy disputes are behind us is for specialty to get up into that 5% to 8% margin range.

Adam Thalhimer
Director - Research at Thompson Davis & Co

Great. I'll turn it over. Thanks guys.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thank you, Adam.

Operator

Moving next to Steven Fisher with UBS.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Thanks. Good afternoon. Congrats on the continued good progress. Just wanted to come back to the change in guidance again. It sounds like it's a combination of less contingency needs and maybe things ramping up a little bit faster.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Are there any other things that you can call out that sort of bridge the guidance to the extent that you can talk about whether it's in Civil, whether it's in Building? And is it the work that you've now put in the backlog in Q2 that might already have some impact in the second half? Just any of the other factors that drove the change here in the guidance.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yes. Certainly as we look ahead, Civil is going to continue to drive the company's results. It always has and it always will. But building is going to contribute quite healthily to the results as well because obviously we have the one of the two large jails really blowing and going now and the other one will soon, a year or so. So in the results to date, we I mentioned we had good progress in some settlements without any significant impact on the results on earnings.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

And one in particular, we had a really healthy project that was very successful for us and we advanced some settlement discussions and that came really close to completion and we were able to release some contingency, some reserves on that project. We don't have anything large in the back half of the year, but the adjusted EPS guidance was really as we mentioned in the prepared remarks, it all comes around the uncertainty with executive comp, the liability based executive comp awards that has created volatility. When we eliminate that with the adjusted EPS, the contingency that we have remaining is we think very healthy and very sufficient to accomplish the guidance that we're coming out with today. Hopefully, see Yes, that addressed your

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

that's helpful. I guess I'm wondering as we think about the modeling out the Civil segment for the second half of the year, are the margins that you embed in there now higher than what you had previously for the second half specifically?

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yeah. I would say they probably have ticked up a point higher. It depends geographically. That's why we always quote a range. But we're probably up to 15% now for civil segment margin where years ago we were eight to 10, then we're 10 to 12, and recently we've signaled 12 to 14.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

I'd say 12 to 15 is probably a good range for civil margins. We'd like to expand on that further, but in the short term, looks like 12% to 15 probably is the best range.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Okay. That's helpful. And then you mentioned that you don't expect any real impact from the tariffs. I guess I'm just thinking that the tariffs really haven't hit construction costs yet from what I can tell and chatting with folks in the industry. And so I'm wondering what happens if it's by the end of this year and we get into next year, if we really start to see costs picking up a little bit.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

How much wiggle room is there in contingency in your backlog to account for a few higher percentage points of overall construction cost?

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Yes. So let me explain. First of all, when we were talking about tariffs not having an impact, we're not just talking about up to now, we're talking about looking forward as well. For each of our major projects, what we did, we renewed or revisited an analysis that we had done last quarter and we looked at every one of these major projects to see any possible exposure that we might have for tariffs. And I can tell you that it was even less exposure than what we had seen last quarter.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

We've done a very good job in these projects, what we call buying out the materials and also subs such that the risk is just not there because now we pass the risk on to let's say vendors where we've locked in steel prices for various projects or other pricing. So we will not have an issue with the current projects that we have in backlog. We're absolutely confident of that. As we look ahead with future projects, then we'll, of course, bid at the higher rates, and then we'll do our best to mitigate that risk primarily through buyout and then also through contingency. And we just don't foresee that being the impact.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

So yes, the impact on the pricing is like what you said. It has not materialized, at least not in a significant way. But when it does, we're protected or we will be protected.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Perfect. I'll leave it there. Thank you.

Operator

Our next question comes from Liam Burke with B. Riley Securities.

Liam Burke
Liam Burke
Managing Director at B. Riley Financial

Yes. Thank you. In Good earlier discussions, you talked about your larger projects and you've worked yourself into a significant competitive advantage in terms of your bidding. But are you seeing less competitive bidding on the bidding front?

Ronald Tutor
Ronald Tutor
Executive Chairman at Tutor Perini

What do you mean by less competitive bidding? Well,

Liam Burke
Liam Burke
Managing Director at B. Riley Financial

are you seeing fewer competitors looking to bid against you on larger projects?

Ronald Tutor
Ronald Tutor
Executive Chairman at Tutor Perini

Well, well, I've talked about that for the last two, three years. We have never seen more than one other bidder in the last two years. And on one occasion two occasions, we were the only bidder. So, yeah, nothing's changed. The competition is minimal.

Liam Burke
Liam Burke
Managing Director at B. Riley Financial

Fair enough. And there seems to be a little more support from the Department of Transportation on transit investment. Are you seeing any of that now, or are you just working on the funded projects?

Ronald Tutor
Ronald Tutor
Executive Chairman at Tutor Perini

Well, all of our work is funded and a great deal of which by the FDA and the federal administration. Our air train is a is a typical transit funded project. It there's more and more money going into transit, is our biggest strength. So you're right. So we're the beneficiary of that, and, hopefully, it continues.

Liam Burke
Liam Burke
Managing Director at B. Riley Financial

All righty. Thank you.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thanks, Liam.

Operator

And there are no further questions at this time. I would like to turn the floor back over to Gary Smalley for closing comments.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

Thank you very much. You know, so we are, what, six months, really seven months into the year, and things are are going better than what we thought. There's an expression so far so good. I'd like to modify that expression at this point and say so far so excellent because we know that we still have a long way to go, but I think you can see the exceptional progress that we're making here at Tutor Perini really across the board. So we look forward to demonstrating that this excellence will continue as we move forward.

Gary Smalley
Gary Smalley
CEO & Director at Tutor Perini

I want to thank you for your continued support in what we are doing, and we look forward to talking to you again next quarter.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Executives
    • Jorge Casado
      Jorge Casado
      SVP - IR & Corporate Communications
    • Gary Smalley
      Gary Smalley
      CEO & Director
    • Ryan Soroka
      Ryan Soroka
      Executive VP & CFO
    • Ronald Tutor
      Ronald Tutor
      Executive Chairman
Analysts
    • Michael Dudas
      Partner at Vertical Research Partners
    • Adam Thalhimer
      Director - Research at Thompson Davis & Co
    • Steven Fisher
      MD & Equity Research Analyst at UBS Group
    • Liam Burke
      Managing Director at B. Riley Financial
Powered by Quartr