Tutor Perini Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Tutor Perini provides general contracting, project management and self-performed construction services through its Civil, Building and Specialty Contractors segments.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $1.049 billion | $776.3 million |
| Gross profit (loss) | $115.3 million | ($24.2 million) |
| Income (loss) from construction operations | $48.8 million | ($81.9 million) |
| Net income (loss) attributable to Tutor Perini | $15.8 million | ($49.2 million) |
| Diluted EPS | $0.30 | ($0.95) |
| Operating cash flow | $98.3 million | $21.3 million |
| Interest expense | $19.3 million | $21.5 million |
Gross margin was approximately 11.0%, versus negative 3.1% in the prior-year quarter. Construction-operations margin was approximately 4.7%, versus negative 10.6%. The improvement largely reflected higher project execution and the absence of significant prior-year unfavorable adjustments.
- Segments: Civil revenue was $472.2 million and construction income $70.7 million; Building revenue was $411.9 million and construction income $16.1 million; Specialty Contractors revenue was $164.9 million and construction loss $18.3 million.
- Cash and working capital: Cash and cash equivalents were $358.3 million at March 31, including only $128.9 million immediately available for general corporate purposes; much of the remainder was joint-venture cash restricted to JV-related uses. Working capital was $1.4 billion; current ratio was 1.70.
- Debt and liquidity: Reported debt was $801.2 million, including $498.7 million of 2017 Senior Notes and $267.0 million of Term Loan B. The company had $175 million of unused revolver capacity and was in compliance with its leverage covenant; first-lien net leverage was 1.12x against a 2.25x limit.
- Cash flow: Operating cash generation included working-capital effects, notably higher accounts payable. Investing activities used $10.3 million, and financing activities used $109.6 million, mainly for $100.2 million of debt repayment and $7.4 million of distributions to noncontrolling interests.
Changes and operating trends
- Revenue rose 35% in Civil and 79% in Building, while Specialty Contractors revenue fell 16%. Companywide growth reflected increased execution on selected transit, detention and health care projects.
- Backlog was $10.0 billion at March 31, down slightly from $10.2 billion at year-end 2023. New awards were $872.8 million, compared with $766.7 million a year earlier. Building backlog increased substantially year over year, while Civil backlog was $4.1 billion and Specialty Contractors backlog $1.7 billion.
- Remaining performance obligations were $7.0 billion: $4.1 billion Civil, $1.8 billion Building and $1.1 billion Specialty Contractors. These figures differ from backlog under the company’s definitions.
- Prior-year results included an $83.6 million non-cash charge from an adverse ruling on a completed New York mixed-use project and a $28.0 million unfavorable Civil project adjustment. Q1 2024 included a $12.0 million unfavorable arbitration adjustment in Specialty Contractors and a $10.2 million favorable Civil project adjustment.
Outlook, financing and risks
- Management said the outlook for revenue growth over the next several years remains favorable, citing public infrastructure funding and demand in transit, transportation, health care, education and detention. It expects strong operating cash flow for the rest of 2024, based partly on collections and resolution of claims and unapproved change orders; this is not a quantified earnings or revenue forecast.
- Management cautioned that project delays, award timing, inflation, interest rates and cancellations could impede growth. Higher rates could particularly affect economically sensitive Building markets such as offices and tenant improvements.
- On April 22, 2024, after quarter-end, the company issued $400 million of 11.875% Senior Notes due 2029. Together with cash on hand, proceeds were intended to redeem the $500 million 6.875% 2017 Senior Notes on May 2, 2024, reducing principal debt by a net $100 million. At the filing date, redemption was scheduled, not yet completed.
- An April 15 credit-agreement amendment would extend revolver maturity and reduce commitments from $175 million to $170 million, subject to conditions, including completion of the refinancing. The filing said the amendment could become void if not effective by May 15, 2024.
- Claims and unapproved change orders are significant components of contract assets: $519.4 million of claims and $558.5 million of unapproved change orders at March 31. Collection and resolution timing is uncertain. Retention receivable was $550.2 million.
- The Alaskan Way Viaduct insurance case, in which the company holds a 45% joint-venture interest, had a trial scheduled for September 2024; a related case against the project designer was scheduled for April 2025. Management records an estimate of probable recovery. The separate dispute with WSDOT was concluded after payment of the judgment in 2022.
- Management identified risks including litigation outcomes, contract-estimate revisions, execution and schedule problems, labor availability, bonding, joint-venture partner performance, government funding and interest-rate changes. It reported no material change to previously disclosed risk factors.
Investor facts to verify
- Whether the 2017 Senior Notes redemption and revolver amendment were completed on the stated terms, and the resulting debt, interest expense and liquidity.
- Cash conversion and availability: how much operating cash flow reflects sustainable earnings versus timing of payables, billings, collections and joint-venture cash restrictions.
- Recoverability and timing of the $1.08 billion combined claims and unapproved-change-order balances, retention receivables, and expected dispute-related collections.
- Whether Specialty Contractors can improve its losses and margins, and whether Civil and Building project execution sustains Q1 profitability.
- Backlog conversion, new awards and exposure to customer concentration; one customer represented 18.7% of Q1 revenue.
- Outcomes of the scheduled Alaskan Way Viaduct proceedings and other project disputes that could affect recorded estimates.