Tutor Perini Corp (TPC) 2025 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation's fourth-quarter 2025 earnings conference call. My name is Latania, and I will be your coordinator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. (Operator Instructions)

I would now turn the conference over to your host today, Jorge Casado, Senior Vice President of Investor Relations. Thank you. You may proceed.

Hello, everyone, and thank you for joining us. With us today are Gary Smalley, CEO and President; Ron Tudor, Executive Chairman; and Ryan Soroka, Executive Vice President and CFO.

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 contribute to such differences in our Form 10-K which 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, management will be referring to certain non-GAAP financial measures. You can find the information and a reconciliation of these non-GAAP financial measures in the earnings release that we issued today and in the Form 10-K being filed today, both of which can be found in the Investors section of our website.

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

Thanks, Jorge. Hello, everyone, and thank you for joining us. Tutor Perini had a tremendous year in 2025, perhaps our best year ever. Our results were highlighted by a record $5.5 billion of revenue, a return to strong profitability that produced $4.29 of adjusted earnings per share, a fourth consecutive year of record operating cash flow with $748 million of cash that shattered last year's record. This enormous cash generation was largely due to the contributions from new and ongoing projects, and our record revenue is driven by double-digit backlog growth that we expect will fuel even higher revenue and earnings, increased profitability, and continued strong cash flow in 2026 and beyond.

A year ago on our earnings call, I shared some of my top priorities as Tutor Perini's then newly appointed CEO, which included a sustained focus on cash, the return to profitability, and providing ambitious yet reasonable earnings goals, all with the goal of significantly increasing short- and long-term shareholder value. I'm pleased to report that we have delivered on each of these priorities, which together, have helped us to achieve unprecedented share price performance and record returns for our shareholders.

There's a lot of enthusiasm here at Tutor Perini and among investors and other business partners about the progress we have made and especially about what the future holds. So it continues to be an exciting time to be a Tutor Perrini shareholder, and we want to thank those of you who are shareholders for your support.

Our revenue growth accelerated progressively throughout each quarter of 2025, and our record revenue was primarily driven by contributions from various larger, higher margin projects. As many of these projects continue to ramp up, we expect they will generate further double-digit revenue and earnings growth over the next two years. The civil segment, our highest margin segment, generated more than $2.8 billion of our total revenue in 2025, the highest-ever annual revenue for the segment.

Consolidated operating income was up significantly in 2025, driven by our larger, higher margin projects, as well as significantly less negative impacts on earnings from legacy dispute resolutions as compared to 2024.

In addition to generating record annual revenue, the civil segment produced its highest-ever annual operating income and operating margin in 2025. The building segments operating income for 2025 was as high since 2011. And importantly, the specialty contractor segment return to profitability in the second half of 2025 ahead of expectations. We see higher margins ahead for the building and specialty contractor segments and sustainably strong margins for the civil segment as many newer large projects continued to ramp up.

We concluded 2025 with a robust backlog of $20.6 billion, up 10% year over year, and had a solid book to burn ratio of 1.34x for the year. Our backlog growth was driven by $7.4 billion of new awards and contract adjustments that we booked during the year, the largest of which included the $1.87 billion Midtown Bus Terminal replacement phase one project in New York, the $1.18 billion Manhattan tunnel project also in New York, the UCSF Benioff New Children's Hospital in California valued at approximately $1 billion, a $538 million healthcare project in California, $241 million of additional funding for the Apra Harbor waterfront repairs project in Guam, a $182 million military defense project in Guam, the $155 million Diego Rivera Performing Arts Center at City College of San Francisco, $131 million of additional funding for an electrical project in Texas, and an electrical project at Cook Children's Medical Center in Texas valued at more than $100 million.

Looking back a bit further, over the past three years, we have won nine mega projects totaling approximately $16 billion, each valued at approximately $1 billion or more. Three of these were among our major awards of 2025, and all but one were awarded since the summer of 2024. These projects all have very healthy margins, more favorable contractual terms, and longer durations than many other large projects we have booked in the past. They also provide us with excellent visibility into our future revenue and earnings over the next several years.

We believe our backlog will remain strong in 2026 and beyond. We anticipate booking approximately $1 billion into backlog later this year for the finished trade scope of work for phase one of the Midtown Bus Terminal project in New York City. And earlier this month, we received $204 million of funding for the Eagle Mountain Casino phase two expansion project in California, a project that was originally awarded announced last summer.

In addition, our subsidiary, Rudolph and Sletten, was recently selected for a large new multi-billion dollar healthcare project in California, which is currently in the pre-construction phase. We expect to book significant additional backlog as this and several other building segment projects, also currently in the pre-construction phase, advance to the construction phase over the next several years. Furthermore, we continue to see numerous major bidding opportunities for our civil and building segments, many of which should include significant work for our electrical and mechanical business units within the specialty contractor segment.

Our most significant bidding opportunities over the next 12 to 18 months include: a program believed to be valued at approximately $12 billion for the Sepulveda Transit Corridor, the $3.8 billion Southeast Gateway Line, and the $700 million Metro Gold Line Foothill Extension, all three of which are in California, as well as the multibillion-dollar Penn Station transformation project in New York, 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. The $1.4 billion I-535 Blatnik Bridge project in Minnesota, and the $1 billion I-69 ORX Section 2 project connecting Indiana and Kentucky.

There are also several large hospitality and gaming opportunities we are pursuing, mostly in the Southwest of the United States.

In addition, we continue to have significant Indo-Pacific opportunities driven by the federal government’s Pacific Deterrence Initiative. Black Construction, our Guam-based subsidiary, has been tremendously successful in winning various new projects throughout the region and continues to be well-positioned to capture additional major projects over the coming years.

We remain highly selective as to which opportunities we will pursue with a continued focus on bidding projects with favorable contractual terms, limited competition, and higher margins. Due to the timing of our significant prospective opportunities, most of which start bidding around the middle of 2026 and continue through the first half of next year. And because of the significantly higher revenue we expect to recognize for work already in backlog, we anticipate a modest backlog reduction in the near term, followed by resumed backlog growth as we capture our share of major new projects.

So expect a bit more lumpiness in our backlog as we move forward with growth still expected over the medium to longer term, rather than the steady backlog increases we have seen virtually every quarter over the past two years. That said, growth remains a priority for us in this environment, and we believe we can scale up resources as necessary.

While our Civil business is expected to continue to drive most of our future growth and profitability as it typically does, a substantial proportion of our Building segment backlog is operating at significantly higher margins than what we have seen historically. For example, our two New York City jail mega projects carry margins that are consistent with large, complex building projects of a fixed-price nature. In addition, today’s large healthcare campus projects are more technically complex than more traditional commercial office building projects of the past and therefore also command higher margins.

Last November, our Board of Directors authorized our first-ever quarterly cash dividend of $0.06 per share, as well as a share repurchase program totaling $200 million. And today, the Board declared another $0.06 quarterly dividend, which will be paid on March 26.

Next, let’s turn to our outlook and guidance. Tutor Perini continues to benefit from favorable macroeconomic tailwinds that are driving strong, sustained market demand for construction services across all segments. We believe these tailwinds will persist due to the substantial amount of funding that is in place and because our country has, for decades and until recently, inadequately funded and prioritized the types of substantial infrastructure investments being made today.

Based on our assessment of the current market and business outlook, we anticipate double-digit revenue growth and strong earnings in 2026, with even higher earnings expected in 2027, by which time newer large projects should be in the construction phase. For 2026, we expect adjusted EPS in the range of $4.90 to $5.30. As we did last year, we have factored into our guidance a significant amount of contingency for unknown or unexpected outcomes and developments in 2026, including the possibility of a lower-than-anticipated success rate for future project pursuits, the potential for project delays, slower ramp ups for newer projects, and any unexpected settlements and/or adverse legal decisions associated with the resolution of disputes.

We also continue to expect strong operating cash generation in 2026 and beyond due to increased project execution activities and the anticipated resolution of remaining legacy disputes. We have continued to chisel away at our remaining legacy disputes and made excellent progress in 2025 resolving certain long-standing matters. We are already off to a strong start this year, having recently reached an agreement in principle regarding one of our larger disputes related to a long-completed project.

We believe that we will finalize a settlement agreement in the coming days, which will not have a material impact on our earnings. However, the settlement is expected to result in the collection of approximately $40 million for Tutor Perini in the near term. Because of our tremendous backlog and ample bidding opportunities, the outlook for Tutor Perini remains incredibly positive even beyond 2026.

Thank you. And with that, I will now turn the call over to Ryan to discuss the details of our financial results.

Thanks, Gary. Good day, everyone. I will start by discussing our results for the year, after which I will review the fourth quarter and then provide some commentary on our balance sheet and our 2026 guidance assumptions. All comparative references will be against the same period of last year, unless otherwise stated.

Operating cash flow was certainly one of the most noteworthy highlights of 2025. As Gary mentioned, we generated a new record operating cash flow of $748 million for the year, up 49% compared to the previous record of $504 million for 2024. This was our fourth straight year of record operating cash and it was driven by strong collections on newer and ongoing projects, reflecting a significant increase in project execution and improved working capital management, with less contribution from dispute resolutions in 2025 compared to previous years.

We expect that we will continue to generate strong cash flow in 2026 and beyond, with most of our cash to be generated from organic operations. That is, from new and existing projects and occasionally enhanced by dispute resolutions.

Revenue for 2025 was $5.5 billion, up 28%, with the robust growth primarily due to the increased project execution activities on certain large, newer Civil segment and Building segment projects in the Northeast, Hawaii, and Guam. This included, among others, the Newark AirTrain replacement, the Midtown Bus Terminal phase one project, the Brooklyn and Manhattan Jails, the Honolulu Rail Project, and the Apra Harbor waterfront repairs project in Guam.

Civil segment revenue was $2.8 billion, up a solid 34% due to increased project execution activities on certain large, higher margin projects in the regions I just mentioned, all of which have substantial scope of work remaining. It was the Civil segment’s highest annual revenue ever, reflective of the robust, sustained demand that Gary noted we are seeing for our services.

Building segment revenue was $1.9 billion, up 15%, primarily due to increased activities on the Brooklyn and Manhattan Jail projects in New York and a large healthcare campus project in California, all of which also have substantial scope of work remaining. The Building segment delivered its highest annual revenue since 2020.

Specialty Contractors segment revenue was $844 million, up a strong 43%, with the growth primarily driven by increased activities on various electrical and mechanical components of some of the large Civil and Building segment projects I mentioned. The Specialty segment revenue really started to show strong growth in the second half of 2025, and we expect this growth to continue this year and next year as these and other newer projects advance.

Our operating income was driven by higher margin contributions from various Civil and Building segment projects, as well as the absence of certain net unfavorable adjustments that impacted our results last year. Operating income was up significantly despite a $110 million increase in share-based compensation expense tied to the near tripling of our stock price in 2025, which affected the fair value of liability-classified awards.

Our share-based compensation expense is expected to decrease in 2026 and decline much more significantly in 2027 as some of these liability-classified awards have now vested and most of the remaining awards will vest by the end of 2026. We are no longer issuing liability-classified awards, which should meaningfully reduce earnings volatility.

Civil segment operating income for 2025 nearly tripled to $391 million compared to $138 million in 2024, with a segment operating margin of 13.7% for the year, within the range of 12% to 15% that we expected. It was the segment’s highest-ever operating income and operating margin of any year. The strong increase was primarily due to contributions related to the segment’s increased project activities that I mentioned and the absence of certain prior-year net unfavorable adjustments.

Earlier in 2025, we recorded favorable adjustments that resulted from the settlement of certain change orders and changes in estimates due to improved performance and a favorable project closeout on a domestic mass transit project. These were mostly offset by an unfavorable adjustment in the fourth quarter, which was mostly non-cash and associated with the settlement of a legacy dispute on a tunneling project in Canada.

Building segment operating income was $58 million, a substantial turnaround compared to the operating loss of $24 million in 2024. The segment’s margin for 2025 was 3.1% compared to a negative 1.5% last year. The significant improvement was driven by contributions related to the increased higher margin project activities I mentioned in the absence of certain prior-year unfavorable adjustments. We anticipate Building segment margins in the range of 3% to 6%, fueled by contributions from certain higher margin projects.

The Specialty Contractors segment returned to profitability in the second half of 2025, ahead of expectations, but posted a slight operating loss of $7 million for 2025 compared to a loss of $103 million in 2024. The significant improvement was primarily due to contributions related to the increased activities I mentioned on the electrical and mechanical components of certain civil and Building segment projects.

Many of these projects are in the early stages and are expected to ramp up considerably over the next several years. The improvement was also driven by the absence of certain prior year unfavorable adjustments on several completed projects.

Corporate G&A expense was $211 million in 2025 compared to $110 million in 2024, with the increase primarily due to the substantially higher share-based compensation expense that we had in 2025, as discussed earlier. Income tax expense was $61 million in 2025 with an effective tax rate of 30% for the year, compared to a tax benefit of $51 million with an effective tax rate of 29.3% in 2024.

Net income attributable to Tutor Perini for 2025 was $80 million, or $1.51 of GAAP earnings per share, compared to a net loss attributable to Tutor Perini of $164 million, or a loss of $3.13 per share in 2024. Excluding the impact of share-based compensation expense, net of the associated tax benefit, adjusted net income attributable to Tutor Perini for 2025 was $229 million, or $4.29 of adjusted earnings per share, compared to an adjusted net loss attributable to Tutor Perini of $124 million, or an adjusted loss of $2.37 per share in 2024.

Now, let’s turn to the fourth-quarter results. We had a solid turnaround performance across all segments in the fourth quarter in terms of revenue, operating income, and margins. As Gary mentioned, our revenue growth accelerated sequentially throughout 2025, with particularly strong growth in the second half of the year that is continuing into 2026.

Revenue was $1.5 billion, up 41% compared to $1.1 billion for the fourth quarter of 2024. Civil segment revenue for the quarter was $732 million, up 32%. Building segment revenue was $512 million, up 45%. And Specialty Contractors segment revenue was $263 million, up 63%. The strong growth was due to the increased project activity, as I mentioned earlier, on various projects that are ramping up and have significant scope of work remaining.

Civil segment operating income was $72 million for the fourth quarter of 2025, up very substantially compared to $4 million of operating income for the fourth quarter of 2024. The significantly lower-than-normal operating income and margin in the 2024 period was due primarily to a temporary earnings reduction of $32 million that resulted from the successful negotiation of significant lower margin and lower risk change orders on a West Coast Project. The Civil segment’s operating income and margin for the fourth quarter of 2025 would have been substantially higher had it not been for the unfavorable adjustment I mentioned earlier.

Building segment operating income was $11 million for the fourth quarter of 2025, compared to a loss from construction operations of $41 million for the fourth quarter of 2024. The improvement was driven by contributions from certain higher margin projects, as well as the absence of prior year unfavorable adjustment on a government building project in Florida.

Specialty Contractors segment operating income was $11 million for the quarter, with a margin of 4.4%, compared to a loss of $20 million in the fourth quarter of 2024. The segment’s performance has continued to improve significantly as their involvement in our large civil and building projects grow. We expect the segment to eventually and consistently generate margins in the 5% to 8% range.

For the fourth quarter of 2025, net income attributable to Tutor Perini was $29 million, or $0.54 of GAAP EPS, compared to a net loss attributable to Tutor Perini of $79 million, or a GAAP loss of $1.51 per share in last year’s fourth quarter. Adjusted net income attributable to Tutor Perini for the fourth quarter of 2025 was $58 million, or $1.07 of adjusted earnings per share, compared to an adjusted net loss attributable to Tutor Perini of $78 million, or an adjusted loss of $1.49 per share in the fourth quarter of 2024.

Now, I’ll address the balance sheet. In 2025, we paid down our total debt by 24% and reduced our CIE by 13%. The CIE reduction was mostly driven by billings and collections, including those associated with the resolution of various previously disputed matters. Our CIE is expected to continue to decrease over time as we resolve the remaining legacy disputes.

Due to our record cash generation, we ended the year in a healthy net cash position, with cash and cash equivalents exceeding total debt by $327 million as compared to our $79 million net debt position at the end of 2024. Cash available for general corporate purposes was $271 million at the end of 2025. Overall, our balance sheet is healthier than it’s ever been, and our solid net cash position provides us with excellent capital allocation flexibility.

Lastly, I’ll provide some assumptions regarding our guidance for modeling purposes. G&A expense for 2026 is expected to be between $400 million and $410 million. Depreciation and amortization expense is anticipated to be approximately $50 million in 2026, with depreciation at $48 million and amortization at $2 million.

Interest expense for 2026 is expected to be between $40 million and $50 million, of which about $3 million will be non-cash. Our effective income tax rate for 2026 is expected to be approximately 27% to 30%. We anticipate non-controlling interest to be between $75 million and $85 million. We expect approximately 54 million weighted average diluted shares outstanding for 2026.

And capital expenditures are anticipated to be approximately $125 million to $135 million, with the vast majority of the CapEx in 2026, approximately $75 million to $85 million being owner-funded for large equipment items on certain large new projects.

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

Thank you, Ryan. In summary, we had our best year ever in 2025, marked by record operating cash flow, record revenue that grew 28% year over year, strong operating income and profitability with record annual results for our high margin Civil segment, as well as robust year-end backlog of $20.6 billion that was up 10% year over year. With this tremendous backlog, we are confident in our ability to produce double-digit revenue and earnings growth and continued strong annual cash flow in 2026 as our newer projects progress through design and into construction.

The outlook for Tutor Perini remains very bright over the next several years as we continue to benefit from favorable macroeconomic tailwinds and strong public and private customer funding that is fueling sustained market demand and numerous major bidding opportunities. As I mentioned earlier, it’s an exciting time to be with Tutor Perini, whether as an employee, an investor or other business partner.

Thank you. And with that, I will turn the call over to the operator for your questions.

(Operator Instructions) Steven Fisher, UBS.

Congratulations on a very strong 2025. Just a couple of questions to start off on the guidance. Wondering if you could just talk about the coverage you have in your backlog on the outlook. I would think it would be pretty strong in light of all the bookings that you have, but just curious if there’s any particular things you need to see still happen and get booked to hit the numbers.

And then just from a cadence perspective, first quarter tends to be fairly light relative to the full year due to seasonality, and we’ve obviously had some pretty tough weather here in parts of the country in the first quarter. So I’m just curious if there are any expectations you want to set there.

Yeah, Steve. Thanks for the congrats. This is Gary. Yeah. First of all, we’ve got great visibility into the results for 2026 and really beyond. There’s not much that has to happen for us to hit the numbers that we’ve represented. There are going to be some additional awards that could enhance things, and there’s some built-in awards that we’re expecting that technically we’d need to hit the numbers, but it is going to happen. It’s not like we’re expecting some large projects to come our way in order to be able to hit 2026.

As far as the seasonality, you’re right. Q1 is usually light for us. It’s typically the way it goes. It’ll be the same this year. What’s happened primarily in New York with the large snowstorm, that hasn’t really -- it’s not going to have much of an impact. We’ve got contingency for that. We’ve also budgeted expecting Q1 to be light.

And then I might as well throw in Manhattan Tunnel. We’re back working after about a two-week suspension, and that’s all accounted for in the guidance as well, accounted for by with contingency. So we feel good.

That’s great. Then just from a backlog perspective, it sounds like you expect some, I think, lumpiness was the word that you used, but you did cite some potential larger awards in the second half of the year. Just curious, should we be expecting some net burn this year on the backlog? Or do you think there’s still enough opportunity to kind of keep it steady at the levels kind of where we are now?

And then maybe the bigger picture question is just on maybe on the Civil segment side, is there any kind of view you have on kind of where we are in the cycle of bigger projects? I know this is an area where you’ve had relatively limited competition recently. I’m just kind of curious where you think we are in sort of the bigger picture cycle there. Thank you.

Yeah. Sure, Steve. Look, taking the last part first, we’ve got good visibility again on a lot of these larger projects for civil. We think that they’re on pace to what we are expecting and making good progress on things. And we don’t disclose every large project that’s out there, just the biggest ones and ones that are most likely to happen in the near term.

We’ve got the first part of your question again, just remind me.

Yeah. Do you think it’ll be net burn in the backlog this year?

Look, we think at the end of the year, we should be -- our plan shows us a little north of where we are currently. I want to introduce the lumpiness concept because we’ve kind of spoiled everyone, I think, to some extent because over the last two years, almost every quarter we’ve grown backlog. It didn’t happen this particular quarter with a modest adjustment on a percentage basis.

And just wanted everyone to know that it could be lumpier than it has been over the last couple of years where every quarter we seem like we’re hitting a new record. But the pipeline is rich. There’s a lot of really strong work out there.

Look, we won 9 out of 11 of the large awards over the last 1.5 years or so. Don’t know if we’ll continue that win rate, but we should have a good win rate because we target those projects that we think suit us best and where we think we have a good chance of winning. So I think it all adds up to backlog growth.

And whether it’s by the end of the year or into next year, it’s coming, I can say that. But it’s hard to predict exactly when those projects are going to hit backlog. But I wanted just to emphasize that it could be a little bit lumpier than it has been, but we’re going to see growth.

And I guess we’re going to be generating revenue at an all-time (technical difficulty). 2025 was a record; '26 and '27 as we go forward, even going to be higher. So it just means that to sustain backlog, you have to have significant awards. Again, that’s the reason for the words of caution.

Alex Rygiel, Texas Capital.

Very nice quarter. Congratulations. Couple questions. Gary, can you go a little bit deeper on sort of the improvement in contract terms on new awards and talk about what that means longer term for Tutor Perini?

Yes, will do. Look, in the past, when the competition was heavier for these projects that we pursue, the larger projects, we wanted to change contractual terms, but we were unable to because there’s always somebody else that would have accepted the terms and taken the contract.

Now what we’ve been able to do with the limited competition is to work with our customers, our owners, in order to drive better payment terms, better terms with respect to no damages for delay, especially New York, just damages provisions, also on differing site conditions, things that in the past could and sometimes did impact us in a negative way. And things that, like no damages for delay is something that -- is just the way the statute is written. It’s tough to work around in court if you happen to go to court. So now, eliminating that provision in the contract is certainly beneficial.

So I think what you’ll see is less disputes as we go forward. And part of that is just because it’s really a clarification of terms, but also, I think that we’ll less likely end up in court because the pendulum is more -- swung more toward our side, more in the middle. So that I think you’ll get negotiations and meaningful negotiations before you go to court, preventing you from having to go to court.

And then secondly, I believe as it relates to Rudolph and Sletten, just from a clarity standpoint, did you say it was looking at a multi-billion-dollar healthcare facility? So maybe expand upon that. And then any commentary about opportunities over the next 10, 12 years as it relates to high-tech manufacturing and reshoring?

Yeah. So first on the multi-billion-dollar project. It’s a confidential project, so we can’t say a whole lot about it. It's a multi-billion-dollar side. It’s closer to 2 than anything above that. We really can’t offer much on that other than we’re in pre-construction. And usually, when something’s in pre-construction, our history shows there's a 90%-plus chance of heading to construction down the road. So that’s what we expect that when we think that will end up as a construction contract for us. The timing of which some of that will come in this year, but probably the majority of it’s going to be in 2027.

And then could you elaborate on your second question?

And then are you seeing developing opportunities from large manufacturing facilities, fat plants, and whatnot, and how that might play out over the next handful of years?

No, not really. Of course, that doesn’t hit us on the Civil side, but on the Building side, the focus right now is on healthcare, some educational facilities, and some multipurpose facilities, hotels, casinos, things like that. That’s really where our focus is.

Adam Thalhimer, Thompson Davis.

Congrats on the strong year. I want to start the -- can you give more color on the Canadian project? And how much was the negative impact to Civil in Q4?

Yeah. In Q4, I think it was $42 million, as I recall, and that’s a consolidated joint venture. That’s the joint venture portion of it. And there was a, call it $12 million or $13 million earlier in the year. That’s behind us. It’s roughly offset by a Midwest project that really of the same magnitude, maybe a little bit more that we recognized over probably the last three quarters of the year. Anyway, it’s one of our larger disputed items. We just felt that it was better to resolve that one than to proceed down the path of litigation.

Yeah, absolutely. How many legacy jobs are left to settle?

Yeah. Let’s just say about a dozen. There’s some -- yeah, we’ve got around a dozen, and those are of some significance. There are some cats and dogs out there that are smaller amounts that are less meaningful. And as Ron was just noting here, he’s right. We started with about 50. So we’ve gone from about [4 dozen] to a dozen, and we’re making progress on some of the others.

As you heard, one was just cleared within the last week and a half. So we’ll continue that focus.

We’re optimistic that some turn favorably for us, right? Some are writeups, not writedowns, and we hope that’s the case with what we have left, but time will tell. But in the meantime, we’ve tried to put away -- put aside contingency, not just for that, but a lot of other unknowns. So we think that we have enough contingency to cover any unexpected delays, anything that is just not forecasted, including the potential for any writedowns due to litigation outcomes.

Okay. So it really was a great quarter. Yeah. And then I wanted to ask, so you brought up -- you made a comment about 2027 construction starts. I don’t expect you to give 2027 guidance, but just hope you could expand on that and what you are trying to say about the 2027 visibility.

Yeah. And Adam you just said it was a great quarter given that -- well, look, even with that writedown, it was a great quarter. I think that shows the strength of what we’re building here with this new work that we have, and that new work carries us past '26 into '27. And you’re right, we don’t guide multi-year, but '27 is going to be better than '26. I think that’s clear.

We’ve said last year around this time, we're saying '25 is going to be good, '26 is going to be better, and '27 is going to be better yet, and there’s nothing that’s changed for that guidance.

Liam Burke, B. Riley.

Ryan, you are bidding on larger and larger, more complex projects. Is there any risk of being resource-constrained? And how would that affect your bidding process?

Yeah. I think at this point, we certainly haven’t seen any of the constraints on resources. It’s probably important to point out that the majority of our labor is sourced from the union halls. So we’ve got agreements in place, whether project-specific or with the union itself for that labor to be supplied. So from our perspective, the day-to-day craft workers, we don’t see any constraints, and we don’t really see that going forward.

From a management standpoint, I think we’ve talked in the past about that’s really where our focus has been because the unions have always done a great job providing us skilled labor when we needed it. But as we’ve grown, we’ve been very aggressive and, in fact, in a constant recruiting mode to bring in the project managers, project executives that are needed to manage this work. And we feel that we’re well equipped there.

We’re always looking. Anyone out there listening, if you want to apply, we’re always looking. But at the same time, we think that we’re already staffed at an appropriate level for future growth.

Great. And you mentioned in your earlier comments that the Specialty margins could be in the, we’ll call it, mid-single-digit range. It’s a business that’s traditionally been marginally profitable at best. Is it the same game plan as Building and Civil? Or is there something different about that business where you’re going to have a pretty meaningful change in profitability?

Yeah. Look, I think what’s happened is we have been able to weed out some of the poor contracts that we’ve had with the poor contractual terms in lower margin work. Now we have higher margin work, better terms. A lot of the litigation, a lot of the disputes are behind us there, most of them.

And so, look, if you look at the last two quarters of 2025, I think it was a 2.7% operating segment margin and then 4.4% operating margin for the segment in just those last two quarters. That’s the trend we’re on right now. That’s what the current work is producing. Our 1% to 3%, it’s really -- it’s got contingency in there. We know that the work that we have in hand is going to be in that mid-single digit range. But then we want to make sure that we hedge it a little bit with any unexpected outcomes. But we feel really good as we clear '26 that we’re going to see that 5% to 8% range that we’ve talked about for some time.

Michael Dudas, Vertical Research.

Gary, just so as we enter into 2026, you talked about the nine mega projects, $16 billion in backlog. So as we move forward through 2026 to '27, how do we assume that the project, the revenue conversion you’ll be seeing over the next couple of years will be coming from the enhanced T&C, better backlog, or better margin backlog that has been booked?

And certainly, on the targets that you have out into the market, I’m assuming there’s similar targets relative to the margin expectations you have currently. Or is there some range or some opportunities there elsewhere going forward?

Yeah. Look, I think that margin will only build over time, and that’s probably with all segments as these nine -- the big nine, as we say, continue to move into full production. So I think that will certainly have a positive impact on earnings, but also on revenue generation. And as those projects continue to mature and continue to progress, we’ll see, I think, some margin enhancement.

And look, the new work that we’re looking for -- as you get more work, and this has been our strategy, we have been -- we’ll say, I don’t know if I guess it’s more aggressive on margin but expecting larger margin. You start to fill your coffers, and every time we’d get another project, we’d raise margins next time, and it depends a little bit on competition. So can’t say that there’s a limit on that or there’s no limit on that and that will continue to grow margins for forever. But right now, that’s the world we’re living in where -- and that’s what our focus is.

And the clients are getting more -- maybe they don’t like it, but getting more comfortable with that environment given the tightness in the market.

Yeah, I guess that’s one way to say it, Mike. I’d say another way is they like what we do. They like us. They like the performance that we provide. They like the quality. They like the timeliness of the work. And then you combine that where the competition in some cases is not bidding or some cases, we’re clearly the best product and whether that’s on the quality of the work or quality end price.

And so I think those factors, we’re bidding on work. It’s not that they’re just handed away, handed out, and they’re giving it to us, and they don’t want to. I think we’ve got a good future here where the past is driving the future and the past is just solid execution. And yes, we’re raising margins, but that’s the market that we’re in. And we’d be foolish not to as we survey the competition and look at what’s in front of us.

Well said, Gary. Ryan, with the tremendous job you’ve executed here with the balance sheet over the last several years, how’s that going to help with business and opportunities going forward in the size of projects and maybe, being more sole source versus potential partners?

And how do you look at a more -- the optimal size of balance sheet? Or what kind of recapitalization can we see given where you are with the debt, the maturities, and the cash we’re going to have and even further that you’re going to be generating in the next few years?

Yeah. All good questions. I’ll try to answer them in order. Just starting with the balance sheet and looking at the debt that we have out there today. [11 7/8%] is a tough coupon to swallow obviously. And certainly, something that we’re looking to refinance, probably mid-year or so is the expectation for some significant interest savings. We’re hopeful for a 500-basis-point reduction.

As far as the level of debt, we’re comfortable at that 400-ish mark, in particular if we extend that out longer term, so we have that liquidity certainty and also that longer-term liquidity view.

And as it relates to obviously the operating cash and free cash that we’ve kicked off over the three years at record pace, obviously having that cash on hand also gives a better long-term liquidity view and for other stakeholders like the sureties, giving them confidence to, as we look at some of these future opportunities to bid that sole source as opposed to having to get a JV partner.

In 2026 alone, we’re talking about, what did we say, $75 million to $85 million of non-controlling interest. We’d sure like to keep that in-house.

I think that’s a great answer. Let me just throw something else out there that we haven’t really talked a whole lot about. Earlier in the call, we talked about better contractual terms. I mentioned less litigation. Look, there’s -- we spent a lot of money over the last several years on litigation expense. And as we have progressed the last couple of years, we’re seeing that amount come down. We expect to see that come down even further.

Legal expenses are something that, of course, are necessary in business and certainly in this industry. I think you’ll see less and less legal expenses from us, and that’s only going to drive profit improvements.

That’s not a terrible thing, is it? Less legal expenses. Just to clarify, Ryan, your interest expense guidance doesn’t assume any re-financing recapitalization, correct?

So we did broaden the range.

Okay. Half a year, is that it?

Yeah, yeah. So I mean, what we’ve assumed a refinancing call roughly mid-year.

Okay, good. Okay. Just wanted to clarify that.

Thank you. At this time, I would like to turn the floor back to Gary Smalley for closing remarks.

Thank you all again for your interest and participation today. We look forward to continuing to deliver strong results as we go forward. We’ll talk to you again next quarter. Thank you.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.