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Edited Transcript of TPC.N earnings conference call or presentation 4-Nov-20 10:00pm GMT

·32 min read

Q3 2020 Tutor Perini Corp Earnings Call SYLMAR Nov 5, 2020 (Thomson StreetEvents) -- Edited Transcript of Tutor Perini Corp earnings conference call or presentation Wednesday, November 4, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Gary G. Smalley Tutor Perini Corporation - Executive VP & CFO * Jorge Casado Tutor Perini Corporation - VP of IR & Corporate Communications * Ronald N. Tutor Tutor Perini Corporation - Chairman & CEO ================================================================================ Conference Call Participants ================================================================================ * Brent Edward Thielman D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst * Steven Fisher UBS Investment Bank, Research Division - Executive Director and Senior Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Third Quarter 2020 Earnings Conference Call. My name is Paul, and I will be your coordinator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. (Operator Instructions) At this time, I will turn the conference over to your host, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed. -------------------------------------------------------------------------------- Jorge Casado, Tutor Perini Corporation - VP of IR & Corporate Communications [2] -------------------------------------------------------------------------------- Hello, everyone, and thank you for joining us today. With us on the call are Ronald Tutor, our Chairman and CEO; and Gary Smalley, Executive Vice President and CFO. Before discussing our results, I will remind everyone that during today's 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 most recent Form 10-K, which was filed on February 26, 2020, 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. And with that, I will turn the call over to Ronald Tutor. -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [3] -------------------------------------------------------------------------------- Thanks, Jorge. Good afternoon, and thank you, everyone, for joining us. As expected, this year is continuing to progress extremely well despite the impacts of COVID-19 that we have been experiencing during the entirety of the year. In the third quarter, COVID-19 had a lessening impact on our business as the vast majority of our projects have been considered essential and are still working. And I will try not to dwell on COVID-19. It is a part of our life, but we are prospering despite it. This has allowed us to progress our work, subject only to the timeliness of manpower reductions, when one of our workers contacts COVID-19 and then we quarantine those workers that work in this area or associated with those employees. As a result, the impact on our workforce so far has not been significant as whenever we've been losing people to COVID, we replace them from the unions and been able to work accordingly. However, as an aside, most of our public agencies, in particular, the transit authority agencies, have recognized COVID as a cost reimbursable event and are preparing to pay us the direct cost, namely layoffs, cost of sick leaves, et cetera. So I don't know that we'll get reimbursed for impacts on schedule or loss of revenue. I doubt it. However, we are being [reimbursed] (corrected by company after the call) -- or we are being paid some of the direct costs. Moving on, we delivered another set of solid results this quarter with particularly strong performance from our Civil and Building segments. Our revenue grew 21% year-over-year in the third quarter, driven by double-digit growth across all segments. We continued executing substantial work on several large civil projects, including California High-Speed Rail, Minneapolis Southwest Light Rail Transit, Purple Lines 2 and 3 stations as well as Purple Line 3 tunnels in Los Angeles and the Newark Airport Terminal One as well as on large building projects such as the Choctaw Casino in Oklahoma and another large hospitality and gaming project in California and a large technology building project in California. I don't mention those specific names because they're under confidentiality, but they are what they are. Our revenue growth through the first 9 months of this year has been equally strong at 21%. In fact, we delivered the highest third quarter revenue growth since 2014 and the highest revenue growth for the first 9 months of any year since the merger in 2008. We generated $73 million of operating cash in the third quarter, another great result that followed the $92 million of operating cash generated in the prior quarter. More importantly, we generated $131 million of operating cash through the first 9 months of 2020, which also set a new record since our merger in 2008. This was consistent with our expectations for continued strong cash flow in the second half of this year. We anticipate that we will again produce a healthy cash result for the fourth quarter concluding which is now to be a record year of operating cash. Our operating cash this quarter was largely driven by collections associated with major civil jobs and continued progress made on certain settlements. Strong cash generation in the third quarter keeps us well ahead of expectations for operating cash through the first 9 months of 2020. Operating income of $83 million was another highlight of our third quarter results. It was the highest third quarter results again since the merger in 2008 and was up 73% compared to the same quarter last year. The significant increase was a result of continued progress on several high-margin civil jobs that I mentioned earlier as well as a favorable arbitration ruling that we announced a few weeks ago. Our operating income this quarter would have been significantly higher had it not been for that, a $15 million charge we were required to take in the Specialty Contractors segment due to an adverse legal ruling we received pertaining to a completed mechanical project in California that was concluded 4 to 4.5 years ago. In a moment, Gary will review all the financial results of the quarter, including specifics around the COVID-19 impact year-to-date. But I will reiterate that our results for the third quarter were very strong and particularly outstanding for operating income and operating cash. Our major design-build projects are all advancing well, which gives me confidence we'll continue to see strong growth and profitability this year and next. Our backlog remains solid at $9.2 billion at the end of the third quarter. And importantly, the backlog is of longer duration than what you might expect as it includes certain very large design-build projects such as all of those on the Purple Line in Los Angeles as well as even the residue of high-speed rail that are expected to continue advancing for another 4 years. It really should come as no surprise to anyone that our backlog has decreased this year given our strong revenue growth, combined with a relatively low volume of new awards during the first 6 months of the year compared to last year. That lack of awards is simply projects being stopped, work not going out to bid, while all our agencies try to determine how they're going to fund all of their growth desires. These are all delayed until I believe after the election and there's a direction going forward, and at the very least, rescue packages by the federal government. We booked $625 million of new awards and contract adjustments in the third quarter of 2020. The most significant of these included $121 million for our share of the South Coast Light Rail project in Massachusetts, where we're in a joint venture with Middlesex, a local contractor in the area; $75 million of additional funding at Rudolph and Sletten for various building projects in California, a $54 million mix-use building project in California; and a $47 million military facility for Black Construction. Speaking of Black, they are not only having an extraordinarily successful year, but the future bodes extremely well because all of the discussions for many years of the Marines moving from Okinawa to Guam is absolutely taking place, with bidding opportunities in the range of over $2 billion over the next 18 months on the Island of Guam sponsored by the U.S. Navy. Black's revenue and profits are growing at nearly double any prior previous years with an extraordinary increase in all the construction on Guam, where we've been dominant for the last 40 years. We believe that our backlog still has the potential to grow over the next few quarters as we have already submitted several bids for new large projects that are pending customers' decisions and contract awards in the coming months. For example, we are awaiting the outcome and next steps related to the bid our team submitted for the Honolulu Rail Transit P3 projects. We are also awaiting decisions regarding our submitted bid for the early stage work on what will eventually be the $8 billion Sepulveda Transit Corridor P3 project in Los Angeles. In addition, we anticipate bidding in early December, the LAMTA's $450 million LAX Airport Metro Connector project, with an award expected by the first quarter of 2021 as well as bidding on several large Civil segment projects during the first half of 2021. As we noted last quarter, several major bid opportunities over the next year have been deferred while public agencies await federal supplemental funding and budgetary certainty. Once we move past the election results, we are optimistic that the sorely needed federal funding for infrastructure will be authorized sooner than later. Most in our industry continue to expect that the federal government will approve a substantial supplemental funding package aimed at supporting state and local transportation agencies' critical infrastructure needs, as well as their tremendous revenue shortfalls necessary for them to continue to function. Other large forthcoming bids include the $2 billion Newark Airport AirTrain; the $2 billion JFK airport land way development project. The $1.4 billion Portal Bridge replacement in New Jersey, which we now expect to bid in the third quarter next year; and a $1.2 billion Metro-North Penn Station access in New York. It also appears that in the third quarter of 2021, we expect to bid the $2 billion Bay Area Rapid Transit Silicon Valley Phase 2 extension, which is a very large tunnel and the excavation and support of 2 stations. Further out on the horizon, we are looking forward to the $4 billion West Santa Ana Transit Corridor and a $1.5 billion East San Fernando Valley Corridor, both for Los Angeles Metropolitan Transit Authority. In New York, we have been following, as we've spoken to previously, the [$3.5 billion] (corrected by company after the call) Port Authority bus terminal and, of course, the $2 billion LaGuardia AirTrain. Our Building segment's larger prospective opportunities include approximately $2.1 billion for 6 large hospitality and gaming projects in Virginia, California, Louisiana and North Carolina; an $800 million new hospital in Northern California; the $500 million Burbank Airport terminal replacement; and a $265 million Veterans Home facility in Northern California. In fact, we were provided a notice of intent within the last few days by a confidential customer for 1 of those 6 hospitality projects with a value of approximately $350 million, the construction of which is expected to begin in the second quarter of 2021. In all, we are tracking approximately $30 billion of project opportunities, nearly $20 billion of which are civil, bidding over the next 18 months; and more than $10 billion of building projects, bidding or proposing over the next 12 months, with significant work envisioned to be formed on many of them by our Specialty Contractors units. As you can tell and as we have been asserting for some time, the volume of prospective projects remains unprecedented despite the funding challenges presented by COVID-19. Our large Civil opportunities are likely to grow even more once the federal government finally authorizes the long anticipated infrastructure program. Finally, though our year-to-date earnings per share results are ahead of budget expectations and we have been able to offset all of the impacts of COVID-19 to date, we remain cognizant of the uncertainties. And as such, based on our current assessment of market conditions and our forecast for the remainder of the year, we will maintain our 2020 earnings per share guidance in the range of $1.80 to $2.10. With that, I turn the call over to Gary Smalley to present the details of our financial results. Thank you. -------------------------------------------------------------------------------- Gary G. Smalley, Tutor Perini Corporation - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Ron. Good afternoon, everyone. I will start with a discussion of our results for the third quarter, including cash flow, followed by some commentary on our balance sheet and then our latest 2020 guidance assumptions. Revenue for the third quarter was $1.4 billion, up $253 million or 21% compared to $1.2 billion for the same quarter last year. And as Ron mentioned, it was our highest quarterly revenue in more than 10 years and featured double-digit growth across all segments. The strong growth was driven by increased activities on the large infrastructure projects that Ron referred to earlier, as well as on certain building projects in California and Oklahoma. The COVID-19 pandemic only had a minor impact to revenue of approximately $40 million in the third quarter, well under the $130 million revenue impact in the second quarter. The impact in the third quarter was largely associated with a single building project where our customer requested that we slow our pace of progress, probably until the beginning of 2021. Civil segment revenue for the quarter was $612 million, up a strong 17% year-over-year, driven by contributions from the same larger infrastructure projects. Revenue for the Building segment increased significantly to $508 million, which is up 22% compared to the same quarter of 2019, also predominantly due to the California and Oklahoma Building projects I just referred to. Specialty Contractors segment revenue was $322 million, up an impressive 29% year-over-year, primarily due to increased activities on the Newark Airport project and a hospitality and gaming project in California. Income from construction operations for the third quarter was $83 million, an increase of 73% compared to $48 million for the same quarter of last year. The significant increase was due to contributions associated with the significant volume growth we experienced this quarter across all segments, along with reduced G&A expense due to the impact of the favorable arbitration decision that we announced recently. The third quarter COVID-19 impact to income from construction operations was only approximately $3 million compared to $9 million in the second quarter, with about $2 million of the $3 million of the third quarter impact being in the Building segment. We are hopeful that barring any significant worsening of the pandemic effects upon our operations, the large impacts are behind us. As Ron mentioned earlier, we took a charge of $15 million in the Specialty Contractors segment due to an adverse legal ruling on a mechanical project in California. So our income this quarter included approximately $5 million of net positive impact resulting from the favorable arbitration ruling and the adverse legal ruling. Civil segment income from construction operations was $70 million compared to $51 million for the same quarter of last year. The segment's income grew 39% year-over-year primarily because of strong contributions from our large mass transit projects in California. This growth in the Civil segment's income was even more impressive when considering that it was reduced by $8.4 million of incremental noncash amortization expense in the quarter related to the increased equity interest in the joint venture that we acquired in the fourth quarter of last year. Even with this additional amortization expense, the Civil segment's operating margin was once again strong at 11.5% for the third quarter of 2020 compared to 9.7% for the same quarter of last year. So Civil segment operating margin remains at the high end of the 10% to 12% margin range we have historically seen for the segment. Building segment income from construction operations was $16 million, more than doubled the results for the third quarter of last year. The strong increase was mostly driven by contributions from certain projects in California and Oklahoma. The Building segment's third quarter operating margin was 3.1% compared to 1.8% for the same quarter last year, with the increased margin reflecting contributions from certain higher-margin projects. Building segment operating margin for the full year of 2020 is still expected to be in the 2% to 3% range. Specialty Contractors income from construction operations for the third quarter was $10 million, up 34% compared to $7 million for the same quarter of last year. The increase was primarily due to the segment's volume growth as well as the net positive impact mentioned earlier that resulted from the favorable arbitration decision and adverse legal ruling, partially offset by various other immaterial adjustments to project estimates. We remain optimistic that as the Specialty segment's newer, higher-margin projects continue to advance, its operating results will improve significantly. Other expense in the third quarter was $8 million compared to other income of $2 million in the third quarter of 2019. The other expense for this year's third quarter included a charge related to the resolution of a dispute pertaining to a past business acquisition. Interest expense for the third quarter of 2020 was $26 million compared to $17 million for the same quarter of last year, with the increase primarily due to noncash debt extinguishment costs related to our debt restructuring transactions in August of this year, the majority of which we had budgeted for the fourth quarter. We had a very nominal income tax expense of $37,000 for the third quarter of 2020 compared to income tax expense of $5.6 million for the third quarter of 2019. The nominal expense in this year's third quarter primarily resulted from benefits associated with the CARES Act, which was enacted in March of this year. Under the CARES Act, the net operating loss, or NOL, that we generated in 2019 may be carried back up to 5 years as under previous rules the NOLs were only allowed to be carried forward. This allowed us to realize the benefit of the tax rate differential by carrying back the NOL to tax years when the federal tax -- statutory tax rate was 35% rather than the current rate of 21%. The majority of the NOL benefit was recorded in the third quarter of 2020 when the final tax return information was received from our joint venture partners. Net income attributable to Tutor Perini for the third quarter of 2020 was $36.8 million or $0.72 per diluted share compared to $19.3 million or $0.38 per diluted share for the same quarter of last year. This near doubling of net income and EPS in this year's third quarter was due to the facts I mentioned that drove the increases in revenue and income from construction operations as well as the tax benefits I discussed. As Ron indicated earlier, on a year-to-date basis, our EPS of $1.43 is ahead of budget, and this is even after a $0.21 per -- year-to-date EPS unfavorable impact from COVID-19 as well as $0.12 of net unfavorable impacts that resulted from a couple of adverse rulings, one in the second quarter, one in the third quarter, which were partially offset by the favorable arbitration decision in the third quarter. Next, let's discuss operating cash, which was definitely one of the major highlights of our third quarter. Our operating cash generation for the quarter was $73 million, a very solid result for us. Even more impressive is that our operating cash generation year-to-date through September 30, 2020, was $131 million, which, as Ron mentioned, was the highest result for the first 9 months of any year since our merger in 2008. Strong cash contributions associated with increased project execution activities on certain higher-margin projects, driven by our near record backlog at the end of last year, were enhanced by progress made on the resolution and collection of certain disputed balances. Our year-to-date operating cash is well ahead of our budgeted expectations and 18% better than our operating cash performance through the first 9 months of last year. As Ron mentioned, we expect to finish the year strongly and anticipate that we will set a new record for operating cash in 2020. Lastly, we anticipate operating cash to comfortably exceed net income for 2020, which will mark the fourth time in the last 5 years that we have accomplished this goal. Our net debt as of September 30, 2020, was $673 million, up modestly compared with $641 million at the end of 2019. During the third quarter, we refinanced our debt, replacing our former $350 million credit facility with a new $175 million revolver and securing a $425 million term loan B. The financial markets were favorable at the time we executed the refinancing, and as a result, demand for our term loan B was robust. This enabled us to upsize the term loan B and, at the same time, drive more favorable interest rates and other terms than expected. We used a portion of the proceeds from the term loan B to repurchase $130.1 million of our convertible notes and placed $69.9 million of the proceeds into a restricted account, which will be drawn upon to repurchase or retire a remaining outstanding convertible notes at or before the maturity date in June of next year. As a result of our strong cash generation in the third quarter, our new revolver had a $0 balance as of September 30, 2020, so we had ample liquidity for our anticipated business needs. As many of you know, our previous credit facility included a spring forward maturity provision whereby it would have matured on December 17, 2020, if our convertible notes [are] (corrected by company after the call) still outstanding at that time. We're very pleased with the outcome of our refinancing, which eliminated this issue that had been a source of concern for some investors. In addition, our refinancing enabled us to extend our debt maturities and provided us with increased liquidity under more favorable terms compared to our prior debt facilities. We are well within the limits of and in compliance with our debt covenants at the end of the third quarter, and we anticipate that we will continue to be comfortably within our covenant limits in the future. As Ron stated earlier, we are maintaining our 2020 EPS guidance range at $1.80 to $2.10 per share based on our strong year-to-date results and our expectations for continued solid performance for the remainder of the year. Now let me provide an update of some of the assumptions in our guidance. G&A expense for 2020 is now expected to be approximately $230 million to $235 million, which is lower than previously anticipated, mostly due to the impact of the favorable arbitration decision in the third quarter. Interest expense is now expected to be about $76 million, of which $20 million will still be noncash and includes approximately $8 million of debt extinguishment costs. Our effective income tax rate for 2020 is now anticipated to be approximately 15% to 16% with the reduced tax rate driven by the tax benefits we realized in the third quarter. Finally, capital expenditures for the year are now expected to be approximately $55 million to $60 million, of which about $40 million to $45 million will be for owner-funded project-specific equipment. Apart from these, all other assumptions remain unchanged from last quarter. With that, Ron, I'll turn the call back over to you. -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [5] -------------------------------------------------------------------------------- Thanks, Gary. In summary, we delivered a very strong quarter, underscored by double-digit revenue growth across all segments, obviously, excellent operating income, with particularly good margins in the Civil and Building segments, and most importantly, very strong operating cash flow, all of which were within line or exceeded our expectations. As we said before and over and over, we're hopeful that the impacts of COVID-19 will continue to diminish, and we will continue to monitor the developments and any potential impacts of COVID-19 on our business. Furthermore, I believe our business will continue to grow into 2021 and beyond, not only based on our solid backlog, but the number of large project opportunities ahead that we have been monitoring, some of which we've already bid and others that we expect to submit bids over the next 12 to 18 months. As a reminder, we are still seeing limited competition for many of the larger projects that we are pursuing and expect that this will continue to be the case well into the future. Our marketplace continues to be the largest and most complex infrastructure projects in the country where we believe we have the best opportunity to succeed. We continue to believe we are in a multi-year period of solid growth and increasing profits and more importantly, the collection of our unbilled receivables. And importantly, we are delivering on our goal to significantly improve cash generation, something which we will sustain into the future. Thank you. And with that, I'll turn the call over to the operator for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question is from Steven Fisher with UBS. -------------------------------------------------------------------------------- Steven Fisher, UBS Investment Bank, Research Division - Executive Director and Senior Analyst [2] -------------------------------------------------------------------------------- Just -- Gary, thanks for some of the input on the Q4 guidance. Maybe just a few other points there. Just curious how you approached that guidance, and I think it's about a $0.36 to $0.66 range, if I have that right. What are the key swing factors operationally for that? How should we think about the margins? Is it the same kind of proportion of profitability you expect from the segments in Q4 as you achieved in Q3? -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [3] -------------------------------------------------------------------------------- There really shouldn't be any change. We had a number of legal settlements in the third quarter, some good, some bad. We continue to resolve issues that are nonlitigation in the fourth quarter. I believe the fourth quarter will be very consistent, along the lines of the operating results of the third quarter that's why I remain confident we'll achieve our target goals for earnings. -------------------------------------------------------------------------------- Steven Fisher, UBS Investment Bank, Research Division - Executive Director and Senior Analyst [4] -------------------------------------------------------------------------------- Okay. That's helpful. And then in terms of the cash flow, what do you guys have on the docket for potential resolution and collections from that process in the fourth quarter versus just ongoing operational cash flow? -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [5] -------------------------------------------------------------------------------- I'm confident that we've got 2 or 3 ongoing resolves on projects. We've been settling everything amicably with no lawyers. I expect the fourth quarter to be another positive cash flow result. I'm reluctant to say to what extent, but it will not be small. We will have a very positive cash flow for the quarter. -------------------------------------------------------------------------------- Steven Fisher, UBS Investment Bank, Research Division - Executive Director and Senior Analyst [6] -------------------------------------------------------------------------------- Okay. Fair enough. And I guess, wondering if you can maybe weigh in on a bit of a debate, that we observe in the marketplace as we're hearing mixed messages about the -- I would say, maybe as it relates to you guys, the building construction market, where things kind of been picking up over the summer. And it's hard to tell if that's just kind of peak construction season, along with some pickup following shutdowns during the pandemic versus other folks that are saying, there's just not a lot of visibility. We're seeing project deferrals and cancellations. And I'm curious where you guys stand in that. I know you mentioned $10 billion of building opportunities. I'm just kind of curious if you're seeing enough positive momentum to call this the start of the next cycle or is just sort of a lot of inquiry activity and just not clear of what's actually going to move forward. Curious for your perspectives on that based on your customer discussions. -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [7] -------------------------------------------------------------------------------- Well, as you know, Steven, the Building business is hardly our focus. However, we do have a large building operation. My feelings about the Building business are that it's been decent. There continues to be new work. We continue to have many public sector opportunities in the Building business that continue to grow. I don't see it as a growth sector. It's hard for me to get confident that it has even a smidgen of the potential that the Civil group has. However, our people have shared with me, they believe they'll be able to sustain our levels of revenue. And since we have no aspirations of growing the Building business, I don't see it as an issue, but I don't see it as the potential for growth that has to take place in infrastructure and civil work. -------------------------------------------------------------------------------- Steven Fisher, UBS Investment Bank, Research Division - Executive Director and Senior Analyst [8] -------------------------------------------------------------------------------- Okay. And then maybe just shifting to the Civil side since the large projects were a nice meaningful contribution here. How do we think about what is the timing of peak profitability on those projects? And then when do you -- by when do you need to replace that backlog and how smoothly do you think that process is going to go? I'm just kind of curious since we haven't resolved the election yet. Hard to know the timing of when those state DOT bailouts or support may come. So how do we think about when we might peak on the profitability contribution of the current backlog that you're seeing nicely now versus the need to replace that? -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [9] -------------------------------------------------------------------------------- Well, the reality is, if you take Purple Lines 2, 3, the Purple Line 3 tunnels and high-speed rail, which probably constitutes $4 billion of our backlog, all high margin, those are just beginning to peak in revenue. As you all know, we earn from costs. And that work is peaking, we will see peak revenue over the next 3 years, and then it will wind down toward completion in year 4. So I think we have a very solid high-margin revenue package in Civil over the next 3 years. One of the obvious things is, of course, the Civil bidding pipeline can't be shut down indefinitely. I anticipate from all of the agencies I talked to and their principals that we're not going to see any heavy activity until the second or third quarter next year. Once they're assured they're going to have a rescue package from the government, their revenues have stabilized, then we can have a better handle on how and when we replace our major works backlog in the Civil business. As I pointed out also, our competition continues to be minimal. There's a handful of contractors willing to bid the large work that we do. So we continue to see that as a great future. However, before we can replace backlog, we got to get the owners to get them out into the marketplace, and I see a lull over the next 6 months. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question comes from Brent Thielman with D.A. Davidson. -------------------------------------------------------------------------------- Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [11] -------------------------------------------------------------------------------- On the Civil business, a lot of growth this year, you still have a pretty large backlog you're sitting on at the end of the third quarter. Ron, do you need some more key wins in that segment over the next couple of quarters in order for the business to grow next year? Or do you still feel like you have what you need to grow into '21? -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [12] -------------------------------------------------------------------------------- Well, as I said earlier, the existing work will ramp-up in revenue. The only one we still continue to struggle with delays is, of course, High-Speed Rail, but that is just what it is. But the balance of them will increase in revenue. So I think we'll be able to sustain a level of growth over the next couple of years. We make no ands, ifs or buts, we've got to start replacing that backlog for the year 2022 and '23. And that's why I'm hopeful in assuming that the government will release funds. So that all of the dozen major projects that we've been talking to owners about for years and telling you about that are ready to go out on the marketplace will, in fact, go into that marketplace. But I would say that with our existing backlog and run rate, the next 2 years look good, but we need, obviously, to replace that backlog with new work. -------------------------------------------------------------------------------- Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [13] -------------------------------------------------------------------------------- Yes. Okay. And then on the -- maybe one on the Building segment from a different perspective. There's great levels of profitability for the business, at least. Any other opportunities like Newark out there that you're going after that can deal with that business or that project is done for the segment? -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [14] -------------------------------------------------------------------------------- Yes, there's another large project, actually larger than Newark that we're looking at and talking about. There are periodic very large building projects that we happen to have a particular appetite for, skill for, and there seems to be a couple of those on a national basis. But they're the exception, they're not the rule. The Building business is what you typically see a 2% to 3% margin business, where we generate a relatively consistent level of revenue. And with a few ups and downs, that's where it falls. The secret is when we get those large opportunities that are profitable because of their size and risk. And those do happen, but not too often. -------------------------------------------------------------------------------- Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [15] -------------------------------------------------------------------------------- Okay. And then you mentioned Guam, $2 billion in work you go after over the next -- next 18 months, mentioned you're the dominant player there. I mean any sense what you think is realistic that we could expect for your Guam... -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [16] -------------------------------------------------------------------------------- Well, we've doubled our revenues this year and doubled our products, the highest revenue we ever had, the highest profits we have. Unless I'm missing my own numbers, we doubled them. And next year should be bigger. We're literally flooded with work to bid there. And we are the only construction company with a major presence on the Island of Guam. We have dominated it since Mr. Black founded the operation in 1960. I bought Black in 1995. It's an extraordinary operation, and we're overwhelmed with work. And there is a limit, but how much more can we do? We are already sitting with $600 million in proposals and waiting for the Navy to make a decision. Our backlog in Guam between Guam and in the Philippines and Diego Garcia sits at $490 million. It's -- the operation is just dramatically increased size, revenue and profitability, and it will probably continue to until we just reach a limit to our own capacity. -------------------------------------------------------------------------------- Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [17] -------------------------------------------------------------------------------- Yes. And that $600 million, Ron, I mean, I imagine that bid, they're staggered over the next -- the awards are staggered over the next... -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [18] -------------------------------------------------------------------------------- No, those are bids that were sitting that we've turned in, and God forbid, they award them all to us. And one of our biggest complaints with the Navy is they bid these budgets, and they sit on them and look at them. For 6 months, we have no idea whether we're going to get overwhelmed with a whole slew of new work or we'll get 1 or 2 of them. So that's the challenge to try to manage the amount of work we do there. But right now, it's just been phenomenally successful, and we continue to support them and move people there to help execute the work. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- There are no further questions at this time. I would like to turn the floor back over to Ronald Tutor for any closing comments. -------------------------------------------------------------------------------- Ronald N. Tutor, Tutor Perini Corporation - Chairman & CEO [20] -------------------------------------------------------------------------------- Thank you, everybody, and we'll see you next quarter. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- That concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.