Q3 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to the tutor Perini Corporation third quarter 2019 earnings Conference call.
My name is Cabotegravir coordinator for today.
At this time, because pin certainly listen only mode. Following management's prepared remarks, we'll be opening the call for question answer session.
As a reminder, this conference call is being recorded for replay purposes. It pretty much require operator assistance. Please press star zero Wonder telephone keypad I would not turn the call over to our host for today Mr. Jorge Casado, Vice President Investor Relations. Please proceed.
Hello, everyone and thank you for your participation today, joining us on the call our Ronald tutor Chairman and CEO .
And Gary Smalley, Executive Vice President and CFO .
Before we discuss our results I will remind everyone that during today's call, we'd still be making forward looking statements, which are based on management's current assessment of existing trends and information there isn't 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 10-K, which was filed.
On February 27, 2019, or 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. In addition, during today's call we will be discussing certain non-GAAP financial measures the appropriate GAAP financial reconciliations can be found in our unaudited.
Masters report, which is posted in the Investor Relations section of our web site with that said I will turn the call over to Ronald tutor.
Thank you our hey, good afternoon. Thank you all for joining US as you saw in our earnings release in as we had expected in hope our operating cash generation was extraordinary in the third quarter setting a new quarterly record that shattered the previous record by 38% our strong cash flow was.
Driven by significant collections associated with several several months, which we discussed during during our last earnings call.
Well my progress made toward resolving a the dispute.
And overall effective management of our working capital as we continue advancing our larger projects.
Course, I'm pleased with the progress we've made on cash generation.
And expect that operating cash to be strong again in the fourth quarter and particularly strong in 2020 the next year.
Despite the fact that our third quarter earnings were reduced once again by weather delays a new work.
Older milestone delays on Purple line section two and a delayed start on the Minneapolis, South West rail.
Still remain confident in our ability to achieve the lower end of our 2019 earnings projections.
In addition, significant negotiations have taken place in the first three quarters of 2019, including the previously announced resolve a ball delays to date in the immediate payment for those delays on the high speed rail.
Furthermore, we are negotiating significant changes that have been added to the project by the owner.
Well the extension of over 12 miles of intrusion barrier walls as well, that's what we call the north do Medaire extension.
[noise]. However, once again, it's a very successful job that should have been done in 2018 and appears to be heading to the 2022 completion.
And as such it delays not only the revenue five four years, but of course, the profits associated with the project.
As I've said before there is no diminishment of profit in fact, it's an extremely successful and profitable job.
Unfortunately, as a public company, it's simply moves those earnings back year by year.
We continue to be an enviable advantageous position without significantly increasing market demand.
Among the obvious lack and diminished.
Number of competitors for major civil works.
Our recent success is reflected by our strong backlog growth this year and the dot opportunities ahead of us or a substantial.
Including several very large pending awards in a tremendous number.
Other sizable projects expected to be bid and awarded.
As an example in Los Angeles Metro rail system.
Which is right now the biggest construction project in America that promise as many billions of dollars' worth of work over the next years 10 years tutor Perini has been low bidder and awarded the first three major projects to the tune of $3 billion and we are low.
So bitter and believe will be awarded prior to December 15, The division 20 job for another $440 million.
As we did for many years in the eighties in 90 days, we believe we will be consistently prevailing in that enormous operation called L.A. Metro.
And we'll be the backbone of our growth going forward.
Of course, as we all know the growth the backlog and the margins are driven by our civil group.
I might also add its just a bit of color for those of you that are watching our public peers.
Without mentioning by name one by one over the last 12 months has announced enormous losses, and essentially said to the world, including the marketplace, where withdrawing from large design build civil work lump sum projects.
As the risks are two great.
Well that leaves us in only a handful remaining.
In the extraordinary market place called U.S. infrastructure.
We feel this will be significant in not only our continued growth in revenue, but much more impact on our profitability.
We booked 690 million of New awards in the third quarter and finished the quarter with a backlog of 10.9 billion up 28% year over year.
Significant awards included $178 million military housing project in Guam for Black construction.
Three electrical projects for FIS in Texas collectively valued at 99 million.
And Rudolph and sletten $59 million of incremental funding for an education building in Los Angeles, and the 51 million dollar Bayside performance Park in San Diego.
Additionally, our fourth quarter, New award bookings are already on pace to surpass our third quarter bookings as we anticipate adding into backlog two pending awards that we recently announced.
Those being the 440 million dollar Division 20 portal widening in turn back facility, which I mentioned earlier and the new P. three Miami Dade County courthouse, where the value in excess of 260 million.
As a reminder, over three quarters of our backlog is comprised of higher margins civil and specialty projects. Accordingly, our back Carl backlog growth has been and we'll continue to be strong this year and we expect further backlog growth next year, but more so.
Kimberly increased profits as margins are driven up.
We believe that as a result of that tremendous demand and lack of competition. We will generate continued strong revenue growth, but more importantly, higher operating margins and increased earnings in 2020 and the years.
To follow.
In mid November actually the 19th our civil group expects to bid the 400 million dollar Eighth Avenue communication based train control project for New York City trends.
Other sizable upcoming civil bids include two large projects from Los Angeles Mtpa, the four plus billion dollar West Santa Ana Transit corridor, and the 1.5 billion dollar East San Fernando Valley Corridor.
Both of which are expected to bid in the latter part of 2020.
In addition, we will be looking forward to the Port authority of New York.
Putting out the three and a half billion dollar bus terminal in Manhattan.
The.
2 billion dollar booked Brooklyn, Queens Expressway.
And the 1.2 billion dollar Penn station access by the M.T.A.
As well as the 1.4 billion dollar portal swing bridge replacement and the $450 million Railroad Dan River lift bridge, both in New Jersey bidding next year.
We've also been positioning to compete for various other large civil opportunities that will be.
Presented to US next year for proposals and those include two airtrain projects for the Port Authority of New York, One net new work, where we are currently building there $1.4 billion terminal.
And one at JFK, each of which are $2 billion.
Other major projects, we're tracking for pursuit include the 7 billion dollar suppose but a transit corridor project for which we are providing prequalification documents in the next two weeks.
The 400 million dollar Airport LTX Airport Metro connector, which will be a design build build lump sum, which we are also qualifying for for Los Angeles Metro.
And well over $15 billion rows of P. three projects all over the country, where in various qualification stages with our financial partners and those will probably propose over the next two years.
The special contractors group continues to bid and win new projects.
At higher margins than the past because they do have the same situation is us diminished.
Competition less capacity margins are driven up.
That group will be bidding on more than 2.9 billion of mechanical and electrical projects in New York, Texas, California, and Florida between November of 19 in the end of 2020.
Since the arrival of genre Eve biasi, our new CEO of the building and specialty contractors group.
He and I have had the opportunity to travel and work together to thoroughly assess the challenges and opportunities that we're facing in both groups and he will be focusing a 100% of his time to begin to bring those groups, where we need them to be and Thats concern.
Assistant leap profitable in a level of return acceptable to the parent company.
Next I will review some significant projects that contributed to our third quarter results in Los Angeles Major work is progressing on the 1.3 million dollar Purple line section to project.
As we have sunk the shaft at at century city and the total shaft across the street and we'll begin to took place in assemble the total machines before the end of December .
We expect to commence tunneling with both tunnel boring machines by February March of 2020.
In addition, we are completing major utility relocations and have started work on.
On a supportive excavation and excavation of the Wilshire Rodado station.
Also I might add as we were awarded.
Purple line, three funnels and stations in two separate contracts.
The Tpms work procured and are currently in manufacturing on Purple line three titles, which is a $420 million tunnel only contract and should arrive at the project site next spring with unfolding.
Work expected to commence by the end of next year.
In British Columbia Frontier Kemper's work on the 273 million dollar come on O'donnell project continues to progress with about two kilometers of the new tunnel drive completed with five to go which should be accomplished in the next 18 months.
In the Midwest Lunda construction continues to advance major work.
On the 800 million dollar Manila.
Minneapolis Southwest light rail and is also making significant progress on to 337 million dollar I 74 broad Jack in Iowa.
In the northeast our most active projects include the 1.4 billion dollar Newark Airport terminal at the New Jersey Airport. The 665 million dollar CMO seven for the New York Transit Authority, which is nearing completion.
The $660 million CS 179.
Train control insistence contract with New York Transit.
The $318 million C Q3 3 also.
On the east side access in New York Transit and last but not leased 190 million dollar Captain viaduct bridges in Maryland.
As a matter of interest we topped out the newer Newark terminal steel erection on October 24th.
And and the Port and our company celebrated that topping out as is customary in the building business.
We anticipate a note notable acceleration of project activities in the fourth quarter and continuing throughout the coming year on several large projects include including many of those just mentioned.
However, because of the temporary progress delays I spoke of earlier on several projects this past quarter and the corresponding impact those delays of add on our earnings. We now expect our 2019 earnings per share.
Excluding the impact of goodwill.
We'll be lower than previously anticipated and as such we are revising our 2019 adjusted earnings guidance to a range of $1.40 to $1.55.
Finally, I will provide an update on the progress, we're making in resolving our disputes and unbilled receivables.
Of the five significant matters, we indicated we had settled during our last earnings call, which totaled 225 million Weve. Thus far collected 101 million from three of those matters and still expect to collect $24 million between the fountain blue and.
Hi, 695 in the fourth quarter.
Regarding the negotiations we mentioned last quarter on 909 other individual issues totaling 257 million, we reached a partial settlement with the San Francisco Metropolitan Transit authority in the third quarter on the central subway.
Project.
And as a result collected $31 million.
For the damages.
Dictated by over two years of delay for which the owner except the full responsibility in paid accordingly.
We have a balance of other significant issues, but with the owners commitment in payment of all delays, we are well in our way and expect by January of 2022 of resolve the preponderance of the other issues.
Very little in the way of disputes.
As I've said before with negotiations there can be no certain that the amounts offered legitimately satisfies.
However, all of these cases are entitlements to receive additional amounts have been agreed and we are discussing the amounts that we are Roe.
I might also add in the significance of settlements to date every single one of them accumulated the total exceeded what we had booked.
We're also in currently in arbitration or litigation on several individual claims it should be concluded prior to March 30, Onest 2020.
The most significant of these is our litigation with the Washington Department of Transportation regarding the MSR 99 tunnels, which is now expected to conclude on or before December 15th of this year.
With a judgment rendered on or about that time.
Counting the current cases being arbitrated litigated in settlement discussions or Mediations, we expect resolution.
On disputes be it litigated or discussed with book amounts totaling 618 million to be concluded by the end to 2020.
And the balance of disputes deferred until 2021 and 2022.
Typically because of the time involved on the eastern Seaboard with getting court dates.
The moral of those pieces of information is everything is finally coming home to roost.
Whether it be negotiations mediations or outright litigations. These will be concluded and with our history of successes that litigation.
We are confident.
Meanwhile, we continue to focus on executing effectively on our work in backlog, while pursuing significant new opportunities, which will drive our growth in the years at.
I can speak to the newer terminal.
High speed rail.
All three purple line.
Two and three jobs, including the tunnels the total of which are probably.
$7 billion of work that reports directly to me.
We have no claims we have no disputes the jobs are moving the way they should and all appear to be extremely profitable.
With that I will turn the call over to guarantee present, the details of our financial results.
Thanks, Ron good afternoon, everyone.
I will begin with the discussion over results for the third quarter, followed by some commentary on our balance sheet cash flow and then revised guidance assumptions.
Revenue for the third quarter was $1.2 billion up 6% year over year, the strongest quarterly revenue growth, we have had in four years.
We expect further revenue growth in the fourth quarter and for the next several years.
Civil segment revenue for the third quarter was $525 million.
I will be strong 22% year over year, driven by increased activity on several newer projects that continue advancing our and our contributing meaningfully.
Revenue for the building segment was $415 million down 9% compared to the third quarter of 2018, but the reduction due to the timing of revenue burn for newer work.
Several newer building segment projects, most which are currently in early stages are expected to generate significant revenue next year as construction accu activities pickup.
Specialty contractor segment revenue was $249 million.
Up 6% year over year, primarily due to increased activity on the newer large mechanical project in New York that has begun to contribute significantly to the group's results.
We anticipate even larger contributions from various projects in the specialty segment that are in the early stages and are accelerating over the remainder of this year and into 2020.
Gross profit for the third quarter of 2019 was $115 million up 4% compared to the third quarter of last year, a corresponding gross margin of 9.7% that essentially the same as last year third quarter.
Today for the quarter was $67 million up 5% compared to last year, mainly due to higher legal and personnel related expenses.
As a result income from construction operations for the third quarter was $48 million.
Essentially level, but up slightly compared to the same quarter of last year.
Civil segment income from construction operations for the third quarter was $51 million up 23% compared to the same quarter of last year consistent with the increase of the segment's revenue in this quarter.
Segment's operating margin for the third quarter of 2019 was 9.7% level with last quarter in up marginally compared to the third quarter of last year.
We anticipate higher margins and the civil segment has several of the group's larger a newer projects contribute more substantially to our results over the coming quarters.
Building segment income from construction operations was not $8 million compared to $9 million in last year's third quarter, what the decline reflective of the segments lower volume.
The building segment's third quarter operating margin was 1.8% compared to 1.9% for the same quarter of 2018.
We anticipate that building segment.
Well report higher margins in 2020.
Several of the group's newer higher margin projects continue to advance.
Specialty contractors income from construction operations was $7 million compared to $12 million in the same quarter last year.
The decrease was principally due to the net impact of adjustments on certain electrical projects in New York.
Operating margin for the specialty contractor segment was 2.9% compared to 4.9% for the same quarter last year.
While we were pleased to see a return to profitability for this segment in the third quarter. The group's profitability remains below the 5% to 7% margin level that we expect the longer term.
As Ron mentioned earlier, we're working diligently to stabilize and improve the specialty groups performance.
Interest expense for the third quarter of 2019 was $17 million compared to $16 million in the same quarter last year. The increase was primarily driven by higher average revolver balance.
During this year's third quarter compared to the prior year period.
The effective tax rate for the third quarter was 17.3%.
Fair to 22.5% for the same period of 2018.
The lower rate for this year third quarter, primarily reflects the favorable impact of tax return provision adjustments.
A smaller unfavorable impact of share based compensation related charges and a higher content earnings from non controlling interest.
Net income attributable to tutor perini for the third quarter, 2019 was $19.3 million or 38 cents per diluted share compared to 21.3 million.
Or 42 cents per diluted share for the third quarter last year.
The lower net income in this year's third quarter was due to the higher income attributable to non controlling interest compared to the same quarter of 2018, where we consolidate the revenue, but only pick up our proportionate share of the earnings.
Also keep in mind that as Ron noted earlier, namely that the third quarter revenue shortfall that drove our revised EPS earnings guidance for 2019 does not represent lost earnings, but simply profit that did not materialize as quickly as we expected so just shifted into future periods.
Next I'll shift gears and discuss our balance sheet and operating cash.
Our project working capital decreased significantly by 10% in the third quarter compared to the second quarter, primarily primarily because of an increase in billings in excess of costs for advanced billings, which was partially offset by an increase in retainage receivables.
As I mentioned last quarter, we've been successful in continue continue continuing to advance bill several of our large fixed price projects.
Our operating cash generation third quarter of $223 million was beyond the outstanding operating cash flow that we predicted for the third quarter at our last earnings call.
This quarter's operating cash flow completely eclipsed our previous quarterly record of $162 million set in the fourth quarter of 2017.
As Ron mentioned, our record cash flow for the third quarter was the result collections of several of the items. We discussed last quarter that we had recently settled collections of other settlement amount and our continued focus on improving working capital management, including advanced billing the various projects.
Although we do not expect another record operating cash flow for the fourth quarter. We do fully expect to closely you are strong and finished this year with operating cash flow well in excess of net income excluding the second quarter goodwill impairment charge.
As a result, 2019 CE Mark three of the last four years that are operating cash flow has exceeded net income and we anticipate more of the same for next year and beyond.
Our total debt as of September Thirtyth 2019.
Was $836 million, a substantial reduction of $120 million or 13% compared to 956 million at the end of the second quarter.
The decrease reflects the significant pay down of our revolver balance enabled by the strong cash that we generated in the third quarter.
We are well within the limits of in compliance with our debt covenants for the third quarter and.
And we do not expect any issues related to covenant compliance going forward.
Ron mentioned earlier, our revised adjusted EPS guidance for 2019.
All of the previous assumptions associated with our guidance remain the same except for our estimated adjusted effective tax rate for 2019.
We now anticipate this rate to be between 26 and 27% for the year.
Slightly lower than the previously expected rate for the reasons I mentioned earlier that resulted in the lower tax rate for the third quarter.
With that Ron I'll turn the call back over to you. Thank you Gary.
Without or you're reiterating the obvious that our cash flow was remarkable than we expected to continue.
And the fact, our backlog is at record highs and we seem to be able to dominance dominate the low bid atmosphere in both Los Angeles and New York.
I am extremely optimistic about 2020 and 21 for one simple reason our civil group has always achieved and always led tutor perini with the significant earnings and maintain budgets and maintain the earnings expected.
With our struggles in the building group and the issues contained within our specialty group. It is always been a problem and never been consistent.
Which is why we always earn money, but on a number of years not quite what we should have in may of disappointed that only ourselves, but our shareholders.
But I would remind everyone as our disappointments relate to so many sensors share our public competitors are writing off hundreds of millions of dollars in the same time frames for their inability to review the same jobs were excelling at.
Given that in mind I expect the next two to three years to have more enormous opportunities and we can even accomplish and we'll continue to raise the margins until somebody finally beaches.
With that I'll turn the call back to you.
Thank you will now be conducting a question and answer session.
If you like to be placing the question Keith Please press star one of your telephone keypad.
Confirmation Tony will indicate your line is in the question Q.
You mean press star to if you'd like to move your question from the Q4 participants using speaker equipment and may be necessary to pick up or has that before pressing star one.
One moment, please what we pull for questions.
Our first question today is coming from Alex Riehle from B. Riley FBR Your line is allies.
Thank you Ron.
Great quarter on cash collection or congratulations.
Thanks.
Could you.
Just to clarify could you repeat on the cash collections that 257 million the United identified on your second quarter conference call to you're going to collect by the end of March 2020.
This call today did you just say that you expect most of this to be resolved by the end of January .
No we're not yet in reference to the la.
Thats FMT, a that's as FMT aon.
Okay.
Sure did.
Go ahead, and your visibility and confidence on the remaining balance to get to that 257 by the end of March how confident are you on that front.
Absolutely.
How many other projects make up that remaining balance there.
Oh, it's a it's about.
Yeah.
Yes.
Between maybe eight or nine something like that it's.
Not quite a dozen we even had a job is I project and I list I have my own list of every single Unbilled receivable claim and litigation.
And we had ticketed our Andrews Air Force base claim where we have sued the government for $39 million, we ticket it further adjudication.
2023, and the government called and said before we waste any money with lawyer they'd like a mediation and January .
For February of next year.
So what's happening and we'll continue to happen on a quarterly basis, one by one three by three five by five they're all coming to ahead.
And.
If we do what we've always done in the past we will prevail on if not every single one most of them.
And we'll report it as they come up whether its news releases or quarterly call.
Now lets if I could add this on this particular when Andrews that Ron was mentioning.
That's not.
Wasnt last quarter, and we have not adjusted.
You know the to 57 to include it in this quarter it could be as Ron saying that the 257, then is accelerated at least with respect to that one where it could even be larger.
But it's not in that 257, Okay and then.
You announced the 700 million of awards subsequent to the ended the quarter Ron can you free Pete and quantify the value of the projects that you are low bid on right now.
I got a little confused during the call. Thank you.
Well the biggest single one is the division 20 turned back again for Los Angeles, Mtpa, That's 440 million.
And then there were if I recall, a couple of building jobs.
Yes, all my excuse me, we have the Miami Dade County County, Courthouse, which was $260 million, which we've given a notice of awarded to feed three job and the only thing remaining is our Thethree financial partners are doing final terms and the two of those constitute 700 million.
Dollars.
And by the way the Division 20, we've been told will award on or before December 10th.
And lastly, given the increase in P. three opportunities in front of you can you comment on terms and conditions and risks that you see within those projects and how that compared to maybe terms and conditions and risk over the last couple of years.
Well, what I would add is is the times are very extraordinary. So I spent a lot of my time visiting with the principles of our largest owners.
Namely the Port Authority I don't talk to New York Transit Jack Frost, our president as seems to be in their office every week, but I am explaining to our owners for those of them that don't understand that whether its appeal three a design build or a design bid built they all fund.
Action around the general contractor.
Maybe a dozen financial leads in the Pvthree market, but they can't do anything without a giant like us to guarantee price and guarantee schedule in delivery.
So the handful of US left control that and let me simply add I meet with all our owners and agencies and say if your terms are not change to be contractor friendly.
With reasonable liquidated damages significant up paid up front mobilizations clauses that mandate resolves as you go.
We won't be it in.
And for the first time they get it in the greatest example is the newer terminal where were the only better than finally proposed and because they had to get it built they award.
The time for orders dictating terms has passed.
We don't get reasonable terms, we wave goodbye.
I got to call from the largest subway district in Canada. The principles of the agency, who are desperate for competition and there's not much left in Canada.
And asked because where the biggest transit builder in the US would we consider coming to their city in bidding their work.
Hi responses, it's very nice Perini was in Canada for 50 years in one of its biggest contractors. We are so busy here within the state of New York.
In California that even though it sounds wonderful and it's the work we do everyday no we're not going anywhere theres more work in the us that any simplistic review will tell you who in the world's going to build it.
Thank you.
Thank you. Our next question today is coming from Steven Fisher from US Your line is alive.
Thanks, Good afternoon.
Hi, David are you familiar voice.
Hey, Ron.
Just a its could see obviously, there's a strong cash on the quarter can you just break that 223 million down for us.
In terms of how much was the dispute collections versus just ongoing profit conversion versus.
Advance payments I think Gary you did mentioned there was some of that in the quarter. So just kind of break into those three buckets. If you can.
Yep.
Neither a lot of moving parts, but.
For the settlements that we have announced we had 101 million plus the 30 million for FMT.
So certainly we had done some smaller settlements also that brought in cash during the quarter.
We also had advanced billings that totaled about $180 million for the quarter. So that is indicative of billings in excess of cost of that.
Yes.
And.
The.
Yes, I would say then we also have other uses of of.
Of working capital.
The projects that offset some of some of those amounts, but those are our some of the biggest.
Factors driving that we settled to be direct we settled $126 million with California high speed rail and they prepaid it for the settlement of all delays to date, we settled 31 million with San Francisco Mtpa is they assumed responsibility for all the delays to date.
And just to support Guerrier Theres. So many other miscellaneous we had a numbers settlements in the $578 million range I've got three that we've settled and I'm waiting for documents to come through.
That's very helpful continue.
Yes, just kind of building on that just curious about what the base case for sort of minimum collections are or what is the starting point that 24 million that you mentioned from Fontainebleau and 695, and then is there some degree or some level of.
Advance billings that you expect to already based on some of these additional awards.
Well, yes, there will be we basically mandate that the jobs, we get we expect to get mobilization or what we call advance billings, we expect to work off the owners money not ours.
And those contracts that don't afford those we think seriously about not quoting unless theres no competition and we overcompensated margin, if they won't give us a decent contract.
But having having said that.
I think we covered the.
The settlements of claims right. So so Steve on besides the advanced billings that we expect to continue not quite up to clip that we had in less last quarter, but the twentyth remaining 24 million that you mentioned and then.
We are talking about $257 million that would be collected by the end of the third quarter excuse me first quarter of of next year end of March.
So we clarify let me correct that there is 257 that will be adjudicate that's right.
We havent collected it yet we just believe that it will be consummated one way or the other one is a large lawsuit. The rest are a whole series of settlements where were in various stages of agreement, where we got to come to a number that we've agreed to.
That is very helpful and then hi, Gary It looks like your Q4 margins and civil.
Our implied to have a pretty solid rebound there I am getting somewhere in the low teens levels is that the way you're thinking about it I think in your comments you said, yes, theres some of the newer projects that will be getting going so is that take you directly to that 13% and is that sort of a starting point.
Build on as you go through 2020 or.
Is it sort of kind of level off at that kind of 13 ish percent or so.
After after segment overhead.
We do expect to to be around that that range. We're hopeful that longer term, we drive at higher than that will be significantly higher going forward. We have historically for the last 10 years, our civil group has landed.
Lets say between 11 and 13 as is with those margins I can tell you that margins of all our new backlog is significantly higher than what our norm was over the last 10 years. So as that new work finally gets going in generates significant revenue and cost.
I expect to expand on the 13% somewhat significantly but it will require that the purple line tunnels and stations get going high speed rail gets released which is significantly better Newark is continuing the only thing we fight in Newark is most incredible.
Rave rain on a regular basis, but other than that the real answer is everything that we've been awarded in the last two years as it margins significantly higher than what has generated 11% to 13% in the past.
On that front sticking my neck out.
I love it.
And then maybe Ron just sort of big picture here you offered some interesting perspective about.
The industry in general and.
Acknowledge that 2019 was a pretty volatile year with moving parts on project timing changes and special items in the guidance just kind of wondering how you think about the potential for reduced volatility any outcomes and 29 2020 versus 2019 and related to that yes next quarter, we'll get your too.
20 guidance, so curious how youre going to approach that.
I think one of the things.
The good news is in even in our specialty group with all the problems we've had.
There there early projections for 2020, our outstanding we review the entirety of their work in process. They believe in I'm almost a secondary believer that the worst is behind them and their results will do better.
Candidly I think as we move forward.
With all the increased revenue and significantly higher margins, we have to do a better job of anticipating beyond anticipate which translates we have to hold more reserves, we have to be better about reporting what we're going to make not just based on.
All of our projections with some reserve for problems, but we've had a history of we do sometimes make our projections and others, we don't and.
Often times, it's whether its job delays this write down Theres a whole series of things however, as a public company.
Are you project $2 and you make $1.15 year damped.
It's interesting I look to all Mike public peers, and they virtually self destruct did in the same marketplace. We continue to make money and have announced to the world they're out there not doing anymore and by the way they lost hundreds of millions of dollars.
So we've got to learn from that and we've got to be more accurate in our projections and whatever it takes to be more accurate we've got to utilize it all shoulder the responsibility for that.
Yes, Steve just to expand on that little bit Ron I have talked.
This week about obviously as we put 2020 guidance out there for in this is consistent with what Ron saying, we just need to build in larger cushions to too.
To absorb some of those impacts that are impossible to predict.
Sure.
Alright, well thanks, a lot guys will talk to you soon.
Thanks, Steve.
Thank you. My next question today is coming from Brent Thielman from D.A. Davidson Your line is allies.
Great. Thanks, congrats on that collections and cash flow.
Yes, I'll pick up off that last point, Gary I guess.
We are talking 2020 specifics, yet, but you've got a really large backlog with job maybe in various stages and I guess is there any initial thoughts in the kind of growth rates you expect to see next year.
Now we.
We don't want to talk about 20 to 20. This time, because we haven't tough firmed up.
And my applied that cushion to it but we do expect there to be significant growth rate. We do have this large backlog as you mentioned, we're just coming down a little bit from our record backlog, we expect a new record backlog sometime in in 2020 and as that starts to burn as higher margin as well as Ron had indicated revenue should go up.
I've been in margins should go up so earning should go up appreciably.
Okay.
And then I guess with the job that Didnt necessarily progress this quarter I think in Seattle.
I guess at this point in Fourq you have you started seeing those move.
Hi, My started what the jobs that were not advancing that were the temporary progress delays that we had that are starting to see advance fourth quarters I know southeast railed. The light rail project in Minneapolis has finally gotten started there were just.
One difficult delayed the start after another and what should have been going three four months ago is finally getting going on any scale.
Purple line, two and three purple line three although awarded other than energy engineering revenue and cost and and mobilization, we really havent started construction and we won't start construction until fourth quarter of 2020.
Now the purple line.
Three titles, we have total machines coming in we expect tunneling to commence next year.
The problem jobs timing wise interestingly enough for amongst our most profitable.
New York for those of you that live in New Jersey, Youre or nearby New York City, the rain and weather delays beyond the norm for the last year have we've lost 120 days out of the last 400 days in rain wins in weather.
And of course, all the revenue cost in margin that goes with.
Are we done no we're still fighting whether in Newark, and it could potentially extend the cost.
Excuse me the schedule as much as six months. However, it won't affect our profit it will just effect schedule and the ability to earn the same margin within a short period at times. So it affects our ABS.
Hi speed rail.
Started at 960 million in appears to be heading north of 2 billion in a final contract price.
Has been delayed and delayed and as I said in the last call. We have agreed with high speed rail on virtually all delays they compensate us for all delays we've revised our completion date is the end of 2021.
They are still trying to get there easements and and right of ways procured, but it appears in December as I said earlier.
I will begin to once again build momentum at high speed rail. So that we can conclude the balance of the work.
Or approximately 50 cents per cent complete.
With 50% to go so you can imagine the kind to revenue that should generate over the next two years.
Okay. Thanks, Thanks for that detail and I guess my last question I guess with with all this work within civil still to come and potentially be booked over the next 12 plus months are you are you able to find that people are more importantly, the right people to manage all this.
Well I and all my executives I swear I'm like college recruit are looking for all Americans.
Interviewing top people every day the the only good news if it's really good news is.
As you know many of our peers have exited this type of work very large complicated civil work.
So all of their managers are available and I see resume after resume.
And I am interviewing and I have brought in a number of executives project executives, but I tell them you have to serve an apprenticeship with tutor Perini, where you go out on one of our very large job you're given a section to prove yourself.
And you work under one of our project exacts ultimately reporting to me.
That prove yourself period is approximately one year.
So we are recruiting we've literally infused over a million dollars into our training program.
We're doing everything we can to build up our physical capacity because there's no question.
The market is there for us if we have to be.
The only really impacting factor.
But we will grow our revenue as we are but at some point when you recognize the limited competition, we will run on a gas.
Hard to Fathom is that is it's a new world.
Okay. Thank you appreciate it.
Thank you we reached end of our question answer session I'd like to turn the floor back over to management for any further or closing remarks.
That's very good thank you everyone.
Thank you talked in next quarter that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.