Tutor Perini Corporation
08/06/2025 | Press release | Distributed by Public on 08/06/2025 15:07
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial position as of June 30, 2025 and the results of our operations for the three and six months ended June 30, 2025 should be read in conjunction with other information, including the unaudited Condensed Consolidated Financial Statements and notes included in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10-Q, the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the year ended December 31, 2024, and the information contained under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024 and in Part II, Item 1A below.
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements regarding future events and our future results, which are intended to be covered by the safe harbor provision for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Words such as "achieve," "anticipate," "assumes," "believes," "continue," "could," "estimate," "expects," "forecast," "hope," "intend," "may," "plan," "potential," "predict," "should," "will," "would," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statement that refers to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events, outcomes or circumstances, or the timing of those events, outcomes or circumstances, are forward-looking statements. Although such statements are based on currently available financial and economic data, as well as management's estimates and expectations, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable security laws. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors potentially contributing to such differences include, but are not limited to, the following:
•Unfavorable outcomes of existing or future litigation or dispute resolution proceedings against us or customers (project owners, developers, general contractors, etc.), subcontractors or suppliers, as well as failure to promptly recover significant working capital invested in projects subject to such matters;
•Revisions of estimates of contract risks, revenue or costs;
•Economic factors, such as inflation, tariffs, the timing of new awards, or the pace of project execution, which have resulted and may continue to result in losses or lower than anticipated profit;
•Contract requirements to perform extra work beyond the initial project scope, which has and in the future could result in disputes or claims and adversely affect our working capital, profits and cash flows;
•Risks and other uncertainties associated with estimates and assumptions used to prepare our financial statements;
•An inability to obtain bonding could have a negative impact on our operations and results;
•A significant slowdown or decline in economic conditions, such as those presented during a recession;
•Failure to meet contractual schedule requirements, which could result in higher costs and reduced profits or, in some cases, exposure to financial liability for liquidated damages and/or damages to customers, as well as damage to our reputation;
•Inability to attract and retain our key officers, and to adequately plan for their succession, and hire and retain personnel required to execute and perform on our contracts;
•Decreases in the level of federal, state and local government spending for infrastructure and other public projects;
•Possible systems and information technology interruptions and breaches in data security and/or privacy;
•The impact of inclement weather conditions, disasters and other catastrophic events outside of our control on projects;
•Risks related to our international operations, such as uncertainty of U.S. government funding, as well as economic, political, regulatory and other risks, including risks of loss due to acts of war, labor conditions and other unforeseeable events in countries where we do business, which could adversely affect our revenue and earnings;
•Client cancellations of, delays in, or reductions in scope under contracts reported in our backlog, as well as prospective project opportunities, including as a result of potential impacts from recently implemented tariffs or other government-related mandates;
•Increased competition and failure to secure new contracts;
•Risks related to government contracts and related procurement regulations;
•Failure of our joint venture partners to perform their venture obligations, which could impose additional financial and performance obligations on us, resulting in reduced profits or losses and/or reputational harm;
•Violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws;
•Significant fluctuations in the market price of our common stock, which could result in substantial losses for stockholders and potentially subject us to securities litigation;
•Failure to meet our obligations under our debt agreements (especially in a high interest rate environment);
•Downgrades in our credit ratings;
•Public health crises, such as COVID-19, have adversely impacted, and could in the future adversely impact, our business, financial condition and results of operations by, among other things, delaying the timing of project bids and/or awards and the timing of dispute resolutions and associated collections;
•Physical and regulatory risks related to climate change;
•Impairment of our goodwill or other indefinite-lived intangible assets; and
•The exertion of influence over the Company by our executive chairman due to his position and significant ownership interests; and
•Other factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in this Quarterly Report on Form 10-Q, our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC").
Executive Overview
Operating Results
Consolidated revenue for the three and six months ended June 30, 2025 was $1.4 billion and $2.6 billion, up 21.8% and 20.4% respectively, compared to $1.1 billion and $2.2 billion for the same periods in 2024. The Company experienced strong year-over-year growth in all three segments, primarily driven by increased project execution activities on certain newer, higher-margin projects, all of which have significant scope of work remaining. These projects included a detention facility in New York, which contributed to the revenue growth across all three segments, a Civil segment mass-transit project in Hawaii and increased project execution activities on certain other Civil segment mass-transit projects in California and the Northeast.
Income from construction operations for the three and six months ended June 30, 2025 was $76.4 million and $141.8 million, up 88.7% and 58.7% respectively, compared to $40.5 million and $89.3 million for the same periods in 2024. For both periods of 2025, the increase was primarily driven by contributions related to the increased project execution activities discussed above and by current-period favorable adjustments totaling $28.0 million due to the settlement of certain change orders, as well as changes in estimates due to improved performance on a Civil segment mass-transit project in the Midwest. Both periods of 2025 were negatively impacted by a significant increase in share-based compensation expense of $38.5 million and $39.5 million, respectively, as compared to the same periods in 2024. The increase in share-based compensation expense was primarily due to a substantial increase in the Company's stock price for both periods of 2025 as compared to the same periods of 2024, which impacted the fair value of liability-classified awards. These awards are remeasured at fair value at the end of each reporting period with the change in fair value recognized in earnings.
Income tax expense was $22.0 million and $34.9 million for the three and six months ended June 30, 2025, respectively, compared to $7.3 million and $14.6 million for the same periods in 2024. See Corporate, Tax and Other Mattersbelow for a discussion of the changes in the effective tax rate.
Diluted earnings per common share for the three and six months ended June 30, 2025 was $0.38 and $0.90, respectively, compared to diluted earnings per common share of $0.02 and $0.31 for the same periods in 2024. Adjusted diluted earnings per common share, which is a non-GAAP financial measure and excludes share-based compensation expense (and the associated tax benefit) for the three and six months ended June 30, 2025 was $1.41 and $2.06, respectively. The improvement for both periods in 2025 was primarily due to the factors discussed above that resulted in the positive change in income from construction operations for such periods. Refer to the Non-GAAP Financial Measuressection below for further information and a reconciliation of the Company's financial results reported under generally accepted accounting principles in the United States ("GAAP") to the reported adjusted results.
Consolidated new awards for the three and six months ended June 30, 2025 totaled $3.1 billion and $5.0 billion, respectively, compared to $1.6 billion and $2.4 billion for the same periods in 2024. The Civil segment was the primary contributor to the new awards activity in the second quarter of 2025. The most significant new awards and contract adjustments in the second quarter of 2025 included the $1.87 billion Midtown Bus Terminal Replacement - Phase 1 project in New York, a $538 million healthcare project in California; two civil works projects in the Midwest collectively valued at $127 million; $90 million of additional funding for a mass-transit project in California; and $54 million of additional funding for another healthcare project in California. The Company has been successful in winning its share of major new project opportunities due to a combination of its strategic bidding approach and favorable market dynamics, including limited competition in select markets for some of the larger projects. This environment, which is supported by strong public funding and demand, has allowed the Company to
differentiate itself and deliver compelling proposals that align with the customer's goals and expectations. The Company expects that this environment will continue for the foreseeable future.
Consolidated backlog as of June 30, 2025 was a record $21.1 billion, up 9% over the previous record backlog of $19.4 billion at the end of the first quarter of 2025. As of June 30, 2025, the mix of backlog by segment was approximately 53% for Civil, 33% for Building and 14% for Specialty Contractors. Backlog for the Civil and Specialty Contractors segments as of June 30, 2025 also set new records.
The following table presents the Company's backlog by business segment, reflecting changes from December 31, 2024 to June 30, 2025:
| (in millions) |
Backlog at
December 31, 2024
|
New
Awards(a)
|
Revenue Recognized |
Backlog at
June 30, 2025(b)
|
||||||||||
| Civil | $ | 8,835.6 | $ | 3,675.9 | $ | (1,344.2) | $ | 11,167.3 | ||||||
| Building | 7,026.9 | 806.1 | (921.9) | 6,911.1 | ||||||||||
| Specialty Contractors | 2,811.4 | 547.7 | (354.2) | 3,004.9 | ||||||||||
| Total | $ | 18,673.9 | $ | 5,029.7 | $ | (2,620.3) | $ | 21,083.3 | ||||||
____________________________________________________________________________________________________
(a)New awards consist of the original contract price of projects added to backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.
(b)Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 3 of the Notes to Condensed Consolidated Financial Statements. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog may include awards for which a contract has not yet been executed or a notice to proceed has not yet been issued, but for which there are no remaining major uncertainties that we will proceed with our work on the project (e.g., adequate funding is in place, we have received a notice of intent to award a contract, etc.).
With respect to potential concerns regarding the U.S. government's increased scrutiny and curtailment of various federal spending programs, as well as varying new tariff policies that have recently been implemented, the Company does not currently anticipate any significant impacts to its business related to these factors. From a project funding perspective, the Company does not currently foresee the risk of any of its major projects in backlog being cancelled, delayed or defunded. Most of the Company's major projects are funded at the state or local level, or with some combination of federal, state and local funding. For projects that are wholly or partially funded with federal dollars, the funding for those projects has already been committed and/or those projects are strategically important to the United States.
Specifically related to potential tariff impacts, the Company utilizes a pre-award and post-award strategy. As part of its pre-award strategy, the Company's detailed estimating process includes consideration of anticipated cost increases over the performance period of the contract, as well as additional contingencies to address other potential incremental costs related to unforeseen risks. Prior to its bid or proposal submission, the Company also works to negotiate favorable contract provisions that provide entitlement for certain compensable events, which may include price escalations and allowances. Once the project is awarded, the Company's strategy shifts to entering into purchase orders or "buy-outs" of materials, such as steel and concrete, as well as large pieces of equipment at the onset of projects, which mitigate the risk of future equipment and commodity price increases. Also at that time, the Company enters into fixed-price contracts with its key project subcontractors whereby the risk of unforeseen escalation is transferred to the subcontractor. The Company benefits from its long-term relationships with key suppliers, vendors and subcontractors, which minimize supply chain disruptions that could arise as a result of tariffs. While the Company believes this strategy appropriately mitigates the current risk of potential tariff impacts, there could be other unforeseen future developments. The Company will continue to monitor and assess its exposure to the economic environment.
The outlook for the Company's revenue growth over the next several years remains highly favorable due to strong new award bookings of large, long-duration projects over the past two years, as well as other significant new awards that are expected to be booked over the remainder of 2025. For example, the Company has various building projects in California, mostly in the healthcare sector, that are in the preconstruction phase. These projects are expected to move from preconstruction to construction later this year or in 2026, and they include a large healthcare project that is anticipated to be awarded the construction phase later in 2025 at a value of nearly $1 billion. Many of the Company's newer projects are design-build projects that have an initial design phase over the first six to eighteen months during which smaller revenue and earnings are generated prior to the start of a multi-year construction phase that generates substantially larger revenue and earnings. We anticipate that we will continue to win our share of significant new project awards resulting from long-term, well-funded capital spending plans by state, local and federal customers, as well as limited competition for many of the larger project opportunities.
Nationally, support for transportation-related ballot measures has remained high over the last decade. Since 2014, voters in 43 states approved 84 percent of nearly 3,000 state and local measures on general election ballots. The largest of these was in Los Angeles County, where in 2016 Measure M, a half-cent sales tax increase, was approved and is expected to generate $120 billion of funding over 40 years. Funding from this measure is supporting, and is expected to continue to support, several of the Company's current and prospective projects. More recently, in the November 2024 elections, voters approved 77 percent of 370 transportation funding measures on state and local ballots throughout the country. These measures are expected to generate an estimated $41.4 billion in new and renewed funding for roads, bridges, rail and other infrastructure. Additionally, interest rates were lowered in the fall of 2024, and some economists expect further rate reductions in 2025, though the actual timing and extent of any future rate reductions remains uncertain. Lower interest rates could support additional demand for continued infrastructure spending. In contrast, should interest rates rise, they could reach levels that may negatively impact demand, especially for certain types of Building segment projects that have already been experiencing such impacts, such as commercial offices and tenant improvement projects, which tend to be more economically sensitive than projects handled by our Civil segment.
The bipartisan Infrastructure Investment and Jobs Act (enacted in 2021) provides for $1.2 trillion of federal infrastructure funding, including $550 billion in new spending for improvements to the country's surface-transportation network and enhancements to core infrastructure. The law initiated the largest federal investment in public transit ever, the single largest dedicated bridge investment since the construction of the interstate highway system and the largest federal investment in passenger rail since the creation of Amtrak, all in addition to providing for regular annual spending for numerous infrastructure projects. The Company anticipates that this significant incremental funding will continue to be allocated through the end of 2026 with the funds spent over the 10 years from the law's enactment (through 2031), and much of the funding is allocated for investments in end markets that are directly aligned with the Company's market focus. Accordingly, the Company believes that this significant level of sustained, incremental funding has benefited, and will continue to favorably impact, the Company's current work and prospective opportunities over the next decade.
For a more detailed discussion of the operating performance of each business segment, corporate general and administrative expenses and other items, see Results of Segment Operations, Corporate, Tax and Other Mattersand Liquidity and Capital Resourcesbelow.
Non-GAAP Financial Measures
To supplement our unaudited condensed consolidated financial statements presented under GAAP, we are presenting certain non-GAAP financial measures. These non-GAAP financial measures are intended to provide additional insights that facilitate the comparison of our past and present performance, and they are among the indicators management uses to assess the Company's financial performance and to forecast future performance. By including these non-GAAP financial measures, we aim to provide investors and stakeholders a clearer understanding of our operating results and enhance transparency with respect to the key financial metrics used by our management in its financial and operational decision-making.
These non-GAAP financial measures, which exclude share-based compensation expense for the three and six months ended June 30, 2025 and 2024 (as well as the tax benefit associated with the expense), include adjusted net income attributable to the Company and adjusted earnings per share. We exclude share-based compensation expense because this expense could result in significant volatility in our reported earnings, driven primarily by fluctuations in the expense recognized for certain long-term incentive compensation awards with payouts that are indexed to the Company's common stock. By adjusting for share-based compensation, our non-GAAP measures present a supplemental depiction of our operational performance and financial health. This approach allows stakeholders to focus on our core operational efficiency and profitability without the variable impact to earnings caused by significant changes in our stock price. Our non-GAAP measures are intended to offer a consistent basis for evaluating the Company's performance, which management believes is meaningful to stakeholders.
The non-GAAP financial measures included in this Quarterly Report on Form 10-Q as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for the most directly comparable measures prepared in accordance with GAAP and should be read only in conjunction with financial information presented on a GAAP basis.
Reconciliations of these non-GAAP financial measures are found in the table below:
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (in millions, except per common share amounts) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net income attributable to Tutor Perini Corporation, as reported | $ | 20.0 | $ | 0.8 | $ | 48.0 | $ | 16.6 | |||||||||
|
Plus: Share-based compensation expense(a)
|
55.4 | 16.9 | 62.0 | 22.4 | |||||||||||||
| Less: Tax benefit provided on share-based compensation expense | (0.3) | (0.2) | (0.5) | (0.3) | |||||||||||||
| Adjusted net income attributable to Tutor Perini Corporation | $ | 75.1 | $ | 17.5 | $ | 109.5 | $ | 38.7 | |||||||||
| Diluted earnings per common share, as reported | $ | 0.38 | $ | 0.02 | $ | 0.90 | $ | 0.31 | |||||||||
| Plus: Share-based compensation expense impact per diluted share | 1.04 | 0.32 | 1.17 | 0.43 | |||||||||||||
| Less: Tax benefit provided on share-based compensation expense per diluted share | (0.01) | (0.00) | (0.01) | (0.01) | |||||||||||||
| Adjusted diluted earnings per common share | $ | 1.41 | $ | 0.34 | $ | 2.06 | $ | 0.73 | |||||||||
(a)The amount represents share-based compensation expense recorded during the three and six months ended June 30, 2025 and 2024. This includes expense associated with certain long-term incentive compensation awards that have payouts indexed to the Company's common stock. As such, significant fluctuations in the price of the Company's common stock during any reporting period have caused and could continue to cause significant fluctuations in the reported expense. The increase in the expense for the three and six months ended June 30, 2025 as compared to the prior-year periods was driven by the substantial increase in the price of the Company's stock during the 2025 period.
Results of Segment Operations
The results of our Civil, Building and Specialty Contractors segments are discussed below.
Civil Segment
Revenue and income from construction operations for the Civil segment are summarized as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | 734.2 | $ | 546.5 | $ | 1,344.2 | $ | 1,018.7 | |||||||||
|
Income from construction operations
|
140.1 | 75.6 | 219.7 | 146.3 | |||||||||||||
Revenue for the three and six months ended June 30, 2025 increased 34.3% and 32.0%, respectively, compared to the same periods in 2024. For both periods of 2025, the substantial growth was primarily due to increased project execution activities on certain large mass-transit projects in California and Hawaii, the Civil segment's share of a detention facility project in New York and two mass-transit projects in the Northeast, all of which have substantial scope of work remaining.
Income from construction operations for the three and six months ended June 30, 2025 was $140.1 million and $219.7 million, up 85.4% and 50.2%, respectively, compared to $75.6 million and $146.3 million for the same periods in 2024. The significant increase for both periods was primarily due to contributions related to the increased project execution activities discussed above and current-period favorable adjustments totaling $28.0 million due to the settlement of certain change orders, as well as changes in estimates due to improved performance on a mass-transit project in the Midwest.
Operating margin was 19.1% and 16.3% for the three and six months ended June 30, 2025, respectively, compared to 13.8% and 14.4% for the same periods in 2024. The increased operating margins were principally due to the above-mentioned factors that drove the increases in revenue and income from construction operations.
New awards in the Civil segment totaled $2.2 billion and $3.7 billion for the three and six months ended June 30, 2025 compared to $814.5 million and $1.1 billion for the same periods in 2024. The most significant new awards and contract adjustments in the second quarter of 2025 included the $1.87 billion Midtown Bus Terminal Replacement - Phase 1 project in
New York; two civil works projects in the Midwest collectively valued at $127 million; and $90 million of additional funding for a mass-transit project in California.
Backlog for the Civil segment was $11.2 billion as of June 30, 2025, up 156% compared to $4.4 billion as of June 30, 2024, and set a new all-time record for the segment. The segment continues to experience strong demand reflected in a large, multi-year pipeline of prospective projects, supported by substantial anticipated funding from various voter-approved transportation measures, the bipartisan Infrastructure Investment and Jobs Act, and by public agencies' long-term spending plans. We believe that the Civil segment is well-positioned to continue capturing its share of these prospective projects, with the majority of near-term opportunities on the West Coast, in the Midwest, and in the Indo-Pacific region.
Building Segment
Revenue and income from construction operations for the Building segment are summarized as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | 462.1 | $ | 417.9 | $ | 921.9 | $ | 829.8 | |||||||||
|
Income from construction operations
|
22.5 | 5.0 | 32.9 | 21.2 | |||||||||||||
Revenue for the three and six months ended June 30, 2025 increased 10.6% and 11.1%, respectively, compared to the same periods in 2024, primarily due to increased project execution activities on a detention facility project in New York and a healthcare facility project in California, both of which have substantial scope of work remaining, partially offset by reduced project execution activities on a mass-transit project in California that is nearing completion.
Income from construction operations for the three and six months ended June 30, 2025 was $22.5 million and $32.9 million, up 344.8% and 55.5%, respectively, compared to $5.0 million and $21.2 million for the same periods in 2024. The increase for both periods was primarily due to contributions related to the increased project execution activities discussed above.
Operating margin was 4.9% and 3.6% for the three and six months ended June 30, 2025 compared to 1.2% and 2.6% for the same periods in 2024. The increased operating margins were principally due to the above-mentioned factors that drove the increases in revenue and income from construction operations.
New awards in the Building segment totaled $664.0 million and $806.1 million for the three and six months ended June 30, 2025 compared to $436.7 million and $841.0 million for the same periods in 2024. The most significant new awards and contract adjustments in the second quarter of 2025 included a $538 million healthcare project in California and $54 million of additional funding for another healthcare project in California.
Certain Building segment end markets, such as healthcare, education, industrial/manufacturing, and hospitality and gaming, continue to show strong demand for new and renovated facilities. However, continued elevated interest rates and potential increases in materials and equipment costs due to recently implemented tariff policies could negatively impact this demand.
Backlog for the Building segment was $6.9 billion as of June 30, 2025 up 65% compared to $4.2 billion as of June 30, 2024. The Building segment continues to experience strong customer demand as reflected by a large volume of prospective projects across various end markets and geographic locations. In addition, there are various healthcare and education projects underway in California that are in the preconstruction phase, with only a portion of their full anticipated value included in our reported backlog. These projects are expected to soon advance to the construction phase - most of them later this year and a few in 2026, and consequently we anticipate that we will book significant additional backlog for these projects in 2025 and 2026.
Specialty Contractors Segment
Revenue and loss from construction operations for the Specialty Contractors segment are summarized as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | 177.4 | $ | 163.1 | $ | 354.2 | $ | 328.0 | |||||||||
|
Loss from construction operations
|
(18.0) | (7.8) | (25.1) | (26.2) | |||||||||||||
Revenue for the three and six months ended June 30, 2025 increased 8.8% and 8.0%, respectively, compared to the same periods in 2024, primarily due to increased project execution activities on the electrical and mechanical components of certain newer projects in the Northeast, California and Florida, all of which have substantial scope of work remaining.
Loss from construction operations for the three months ended June 30, 2025 was $18.0 million compared to $7.8 million for the same period of 2024. For the second quarter of 2025, the increased loss was primarily due to unfavorable adjustments totaling $14.6 million related to the settlement of certain legacy claims in the Northeast, none of which were individually material, partially offset by contributions related to the increased project execution activities discussed above. Loss from construction operations for the six months ended June 30, 2025 was $25.1 million compared to $26.2 million for the same period of 2024. For the first six months of 2025, the impact of the above-mentioned adjustments was largely offset by the absence of an immaterial prior-year unfavorable adjustment on a completed electrical project in New York. Both periods of 2025were favorably impacted by early-stage contributions of certain newer projects that are expected to ramp up substantially over the next several years.
Operating margin was (10.2)% and (7.1)% for the three and six months ended June 30, 2025 compared to (4.8)% and (8.0)% for the same periods in 2024. The changes in operating margin were principally due to the aforementioned factors that drove the changes in revenue and loss from construction operations.
New awards in the Specialty Contractors segment totaled $181.0 million and $547.7 million for the three and six months ended June 30, 2025 compared to $313.0 million and $453.3 million for the same periods in 2024. The most significant new awards and contract adjustments in the second quarter of 2025 included $43 million of additional funding on a detention facility project in New York.
Backlog for the Specialty Contractors segment was $3.0 billion as of June 30, 2025, up 61% compared to $1.9 billion as of June 30, 2024, and set a new all-time record for the segment. The Specialty Contractors segment continues to be primarily focused on servicing the Company's current and prospective large Civil and Building segment projects, particularly in the Northeast and California. We believe that the segment remains well-positioned to continue capturing its share of other new projects, leveraging the strong reputation held by the business units in this segment for high-quality work on large, complex projects.
Corporate, Tax and Other Matters
Corporate General and Administrative Expenses
Corporate general and administrative expenses were $68.1 million and $85.7 million during the three and six months ended June 30, 2025, respectively, compared to $31.5 million and $51.3 million for the same periods in 2024. The increase in corporate general and administrative expenses in 2025 compared to 2024 was primarily due to a substantial increase in share-based compensation expense that resulted from a higher stock price, which impacted the fair value of certain liability-classified awards. The Company expects share-based compensation expense to be higher than previously anticipated for the full year of 2025, but it is projected to decrease considerably in 2026 and further in 2027 once certain awards have vested.
Other Income, Net, Interest Expense and Income Tax Expense
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Other income, net | $ | 6.2 | $ | 5.8 | $ | 10.9 | $ | 11.1 | |||||||||
| Interest expense | (13.6) | (23.1) | (27.9) | (42.4) | |||||||||||||
| Income tax expense | (22.0) | (7.3) | (34.9) | (14.6) | |||||||||||||
Interest expense for the three and six months ended June 30, 2025 decreased $9.5 million and $14.5 million compared to the same periods in 2024 primarily due to lower outstanding debt driven by the payoff of the Term Loan B in the first quarter of 2025, as discussed further in Liquidity and Capital Resources.
The Company recognized income tax expense of $22.0 million and $34.9 million for the three and six months ended June 30, 2025 resulting in an effective income tax rate was 31.8% and 28.0%, respectively. The effective income tax rate for the three and six months ended June 30, 2025 was higher than the 21.0% federal statutory income tax rate primarily due to non-deductible expenses and state income taxes (net of the federal tax benefit), partially offset by earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company) and federal income tax credits.
The Company recognized income tax expense of $7.3 million and $14.6 million for the three and six months ended June 30, 2024, respectively. The effective income tax rate was 31.3% and 25.1% for the three and six months ended June 30, 2024, respectively. The effective income tax rate for both the three and six months ended June 30, 2024 was higher than the 21.0% federal statutory rate primarily due to non-deductible expenses and state income taxes (net of the federal tax benefit), partially offset by the earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company).
Liquidity and Capital Resources
Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. We have a committed line of credit totaling $170.0 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe that cash generated from operations, along with our unused credit capacity and available cash balances as of June 30, 2025, will be sufficient to fund working capital needs and debt maturities for the next 12 months and beyond, as discussed further below in Debtbelow. During the first quarter of 2025, we voluntarily repaid the remaining $121.9 million outstanding balance of the Term Loan B. We generated a record amount of operating cash in the first six months of 2025, as discussed below in Cash and Working Capital. We expect strong operating cash flow to continue for the remainder of 2025 based on projected cash collections, both from project execution activities and the resolution of outstanding claims and change orders. In addition, we expect to benefit from the utilization of available net operating loss carryforwards to reduce our cash outflows for income taxes.
Cash and Working Capital
Cash and cash equivalents were $526.1 million as of June 30, 2025 compared to $455.1 million as of December 31, 2024. Cash immediately available for general corporate purposes was $231.1 million and $265.6 million as of June 30, 2025 and December 31, 2024, respectively, with the remainder being amounts held by our consolidated joint ventures and also our proportionate share of cash held by our unconsolidated joint ventures. Cash held by our joint ventures is available only for joint venture-related uses, including distributions to joint venture partners. In addition, our restricted cash and restricted investments totaled $178.4 million as of June 30, 2025 compared to $149.1 million as of December 31, 2024. Restricted cash and restricted investments at June 30, 2025 were primarily held to secure insurance-related contingent obligations and deposits.
During the six months ended June 30, 2025, net cash provided by operating activities was $285.3 million, the largest result for the first six months of any year. The net cash provided by operating activities for the 2025 period was primarily due to cash generated by earnings sources and a decrease in net project working capital. The decrease in net project working capital was primarily due to an increase in billings in excess of costs and estimated earnings ("BIE") largely due to advanced payments on newer projects for mobilization and other initial project costs, partially offset by an increase in accounts receivable. In addition, the Company's balance of costs and estimated earnings in excess of billings ("CIE") was $856.4 million as of June 30, 2025, down $86.1 million (or 9%) compared to the balance at the end of 2024 and at the lowest level it has been since the second quarter of 2017. This reduction in CIE was primarily driven by the resolution and billing of various previously disputed matters. As of June 30, 2025, BIE of $1.7 billion exceeded CIE of $856.4 million resulting in a net BIE position. During the six months ended June 30, 2024, net cash provided by operating activities was $151.4 million. The net cash provided by operating activities for the 2024 period was primarily due to cash generated by earnings sources and a reduction in net project working capital. The reduction in net project working capital was primarily due to an increase in accounts payable, as a result of the timing of payments to subcontractors and vendors, partially offset by a decrease in BIE.
Cash flow from operating activities for the first six months of 2025 increased $133.9 million compared to the same period in 2024. The increase in cash flow from operating activities for the first six months of 2025 compared to 2024 primarily reflects higher cash generated by earning sources in the current period compared to the prior-year period, as well as a larger decrease in net project working capital in the current period compared to the prior-year period. The decrease in net project working capital in the 2025 period was primarily due to a current-year increase in BIE compared to a decrease last year, partially offset by a larger current-year increase in accounts receivable compared to last year, and a current-year increase in other current assets compared to a decrease last year. While both periods were positively impacted by collections associated with previously disputed matters as mentioned above, such collections in the 2024 period were significant whereas such collections in 2025 were lower relative to total operating cash flow.
Net cash used in investing activities during the first six months of 2025 was $67.7 million primarily due to the acquisition of property and equipment for projects (i.e., capital expenditures) totaling $56.9 million and other net cash used in investment transactions of $15.0 million. Net cash used in investing activities during the first six months of 2024 was $24.0 million primarily due to the acquisition of property and equipment for projects totaling $21.4 million.
Net cash used in financing activities was $134.7 million for the first six months of 2025, which was primarily driven by a $116.7 million net repayment of debt (including the $121.9 million repayment of the remaining balance on the Term Loan B discussed belowin Debt). Net cash used in financing activities was $242.6 million for the first six months of 2024, which was primarily driven by a $202.9 million net repayment of debt and $25.1 million of payments for debt issuance costs related to debt transactions during the period.
At June 30, 2025, we had working capital of $0.9 billion, a ratio of current assets to current liabilities of 1.32 and a ratio of debt to equity of 0.34, compared to working capital of $1.0 billion, a ratio of current assets to current liabilities of 1.41 and a ratio of debt to equity of 0.46 at December 31, 2024.
Debt
2024 Senior Notes Issuance and 2017 Senior Notes Redemption
On April 22, 2024, the Company issued $400.0 million in aggregate principal amount of 11.875% Senior Notes due April 30, 2029 (the "2024 Senior Notes") in a private placement offering. Interest on the 2024 Senior Notes is payable in arrears semi-annually in April and October of each year, beginning in October 2024.
Prior to April 30, 2026, the Company may redeem the 2024 Senior Notes at a redemption price equal to 100% of the principal amount plus a "make-whole" premium described in the indenture. In addition, prior to April 30, 2026, the Company may redeem up to 40% of the original aggregate principal amount of the 2024 Senior Notes at a redemption price of 111.875% of their principal amount with the "net cash proceeds" received by the Company from one or more equity offerings, as described in the indenture. On or after April 30, 2026, the Company may redeem the 2024 Senior Notes at specified redemption prices described in the indenture. If the Company experiences certain change of control events, holders of the 2024 Senior Notes may require the Company to repurchase all or part of the 2024 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
The 2024 Senior Notes are senior unsecured obligations of the Company and are guaranteed by the Company's existing and future subsidiaries that also guarantee obligations under the Company's 2020 Credit Agreement. In addition, the indenture for the 2024 Senior Notes provides for customary covenants and includes customary events of default.
The proceeds of the 2024 Senior Notes, together with cash on hand, were used to redeem in full, all of the outstanding obligations in respect of the 2017 Senior Notes. The redemption of the 2017 Senior Notes occurred on May 2, 2024 (the "2017 Senior Notes Redemption").
2020 Credit Agreement
On August 18, 2020, the Company entered into a credit agreement (as amended, the "2020 Credit Agreement") with BMO Bank N.A. (f/k/a BMO Harris Bank N.A.), as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders. The 2020 Credit Agreement originally provided for a $425.0 million term loan B facility (the "Term Loan B") and a $175.0 million revolving credit facility (the "Revolver"), which was subsequently reduced to $170.0 million following the effectiveness of the 2024 Amendment (as defined and discussed below), with sub-limits for the issuance of letters of credit and swing line loans up to the aggregate amounts of $75.0 million and $10.0 million, respectively. Prior to the 2017 Senior Notes Redemption, if any of the 2017 Senior Notes had remained outstanding beyond certain dates, the maturities of the Term Loan B and the Revolver would have been subject to acceleration ("spring-forward maturity"). However, following the 2017 Senior Notes Redemption and the consummation of the 2024 Amendment, the spring-forward maturity of the Term Loan B is no longer in effect and the spring-forward maturity of the Revolver has been extended (as described below).
On April 15, 2024, the Company entered into an amendment in respect of the 2020 Credit Agreement (the "2024 Amendment") which, among other changes, (1) extends the existing Revolver maturity date from August 18, 2025 to (a) if any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof) remains outstanding, the earlier of (i) May 20, 2027 and (ii) the date that is ninety (90) days prior to the final maturity of any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof), as applicable, and (b) if no obligations are outstanding with respect to any tranche of the Term Loan B, any incremental term loan or any refinancing term loan, August 18, 2027 and (2) permanently reduces the aggregate commitments in respect of the Revolver by $5.0 million from $175.0 million to $170.0 million. The 2024 Amendment became effective on May 2, 2024 upon the completion of the 2017 Senior Notes Redemption.
Subject to certain exceptions, at any time prior to maturity, the 2020 Credit Agreement provides the Company with the right to increase the commitments under the Revolver and/or to establish one or more term loan facilities in an aggregate amount up to (i) the greater of $173.5 million and 50% LTM EBITDA (as defined in the 2020 Credit Agreement) plus (ii) additional amounts if (A) in the case of pari passu first lien secured indebtedness, the First Lien Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 1.35:1.00, (B) in the case of junior lien secured indebtedness, the Total Net Leverage Ratio, as defined in the 2020 Credit Agreement, does not exceed 3.50:1.00, and (C) in the case of unsecured indebtedness, (x) the Total Net Leverage Ratio does not exceed 3.50:1.00 or (y) the Fixed Charge Coverage Ratio (as defined in the 2020 Credit Agreement) is no less than 2.00:1.00. The balances of indebtedness used in the calculations of the First Lien Net Leverage Ratio and the Total Net Leverage Ratio include offsets for cash and cash equivalents available for general corporate purposes.
As of June 30, 2025, the Revolver had unused available borrowing capacity of $170.0 million, and the outstanding balance of the 2024 Senior Notes was $400.0 million. During the first quarter of 2025, the Company voluntarily repaid the remaining $121.9 million outstanding balance of the Term Loan B.
Borrowings under the 2020 Credit Agreement bear interest at variable rates, which have increased since the latter part of 2022 due to changes in market conditions that resulted in increases in the Secured Overnight Financing Rate ("SOFR") (and the London Interbank Offered Rate ("LIBOR") prior to the transition to SOFR), in the case of the Term Loan B, and the administrative agent's prime lending rate, in the case of the Revolver. Effective May 2, 2023, the 2020 Credit Agreement was amended to transition the Company's original LIBOR option in respect of the Term Loan B to Adjusted Term SOFR. The average borrowing rates on the Term Loan B and the Revolver for the six months ended June 30, 2025 were approximately 9.2% and 10.8%,respectively. At June 30, 2025, the borrowing rate on the Revolver was 10.8%. For more information regarding the terms of our 2020 Credit Agreement, refer to Note 10 of the Notes to Condensed Consolidated Financial Statements.
The table below presents our actual and required First Lien Net Leverage ratio under the 2020 Credit Agreement for the period, which is calculated on a rolling four-quarter basis:
| Trailing Four Fiscal Quarters Ended | ||||||||
| June 30, 2025 | ||||||||
| Actual | Required | |||||||
| First lien net leverage ratio |
(0.78) to 1.00(a)
|
≤ 2.25 : 1.00 | ||||||
(a) The ratio was negative because the Company's cash and cash equivalents available for general corporate purposes exceeded secured Indebtedness, resulting in negative First Lien Net Indebtedness, both as defined in the 2020 Credit Agreement.
As amended, the 2020 Credit Agreement requires, solely with respect to the Revolver, the Company and its restricted subsidiaries to maintain a maximum First Lien Net Leverage Ratio of 3.50:1.00, effective the fiscal quarter ended December 31, 2022 and increasing to 3.75:1.00 for the fiscal quarter ending March 31, 2023 and subsequently stepping down to 3.00:1.00 for the fiscal quarter ending June 30, 2023, 2.50:1.00 for the fiscal quarter ending September 30, 2023 and 2.25:1.00 for the fiscal quarter ending December 31, 2023 and each fiscal quarter thereafter.As of June 30, 2025, we were in compliance and expect to continue to be in compliance with the covenants under the 2020 Credit Agreement.
Contractual Obligations
There have been no material changes in our contractual obligations from those described in our Annual Report on Form 10-K for the year ended December 31, 2024.
Critical Accounting Policies and Estimates
There has been no material change in our significant accounting policies and estimates disclosed in Note 1 of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2024 and in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
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