Sterling Reports Record First Quarter 2023 Results

Sterling Infrastructure, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the first quarter 2023.

The financial information herein is from continuing operations and comparisons are to the prior year quarter, unless otherwise noted.

First Quarter 2023 Results

  • Revenues of $403.6 million, an increase of 10%
  • Gross margin of 15.3%, an increase from 15.1%
  • Net Income of $19.6 million, or $0.64 per diluted share, an increase of 11% and 8%, respectively
  • EBITDA(1) of $45.9 million, an increase of 14%; Adjusted EBITDA(1) of $46.1 million, an increase of 13%
  • Cash flows from operations of $49.1 million for the first quarter
  • Cash and Cash Equivalents totaled $202.6 million at March 31, 2023
  • Backlog at March 31, 2023 was $1.62 billion, an increase of 15% over December 31, 2022
  • Combined backlog(2) at March 31, 2023 was $1.75 billion, an increase of 4% over December 31, 2022

(1) The Company defines EBITDA as GAAP net income attributable to Sterling’s common stockholders, adjusted for depreciation and amortization, net interest expense and taxes. See the “Non-GAAP Measures” and “EBITDA Reconciliation” sections below for more information.

(2) Combined Backlog includes Unsigned Awards of $130.5 million and $275.0 million at March 31, 2023 and December 31, 2022, respectively.

CEO Remarks and Outlook

“Our first quarter results reflect excellent execution from our teams despite the ongoing economic challenges. Our performance drove strong revenue growth of 10% and gross margin expansion of 20 basis points, yielding first quarter EPS of $0.64,” stated Joe Cutillo, Sterling’s Chief Executive Officer.

“E-Infrastructure Solutions, our largest, fastest-growing and highest-margin segment, grew 22%. This reflects high levels of demand from data center and advanced manufacturing customers. Our Transportation Solutions segment saw a 4% decline in revenue due to the reallocation of resources into higher-margin E-Infrastructure work and the timing of project execution. Our continued efforts to improve mix drove an increase in Transportation Solutions operating income of 19%. Our Building Solutions segment grew revenue by 7%, reflecting higher levels of commercial revenue. Our residential revenues were essentially flat despite a mid-single digit decline in slab volumes. Buildings Solutions margins were lower relative to the prior year quarter due to mix impacts, as we anticipated,” continued Mr. Cutillo.

“Our year is off to a strong start with record backlog, new high-value E-Infrastructure project awards, increased transportation funding, and emerging improvement in housing starts. Our solid first quarter results and the favorable growth opportunities across our markets give us confidence that we are trending toward the higher end of our guidance range. The high end of our guidance ranges would offer an improvement in revenue by 13.0% and net income by 13.7% over 2022,” Mr. Cutillo concluded.

Full Year 2023 Guidance

  • Revenue of $1.9 billion to $2.0 billion
  • Net Income of $104 million to $110 million
  • EPS of $3.33 to $3.53
  • EBITDA(1) of $220 million to $235 million

(1) The Company defines EBITDA as GAAP net income attributable to Sterling’s common stockholders, adjusted for depreciation and amortization, net interest expense and taxes. See the “Non-GAAP Measures” and “EBITDA Reconciliation” sections below for more information.

Conference Call

Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, May 2, 2023 at 9:00 a.m. ET/8:00 a.m. CT. Interested parties may participate in the call by dialing (201) 493-6744 or (877) 445-9755. Please call in 10 minutes before the conference call is scheduled to begin and ask for the Sterling Infrastructure call. To coincide with the conference call, Sterling will post a slide presentation at www.strlco.com on the Events & Presentations section of the Investor Relations tab. Following management’s opening remarks, there will be a question and answer session.

To listen to a simultaneous webcast of the call, please go to the Company’s website at www.strlco.com at least 15 minutes early to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company’s website for 30 days.

About Sterling

Sterling operates through a variety of subsidiaries within three segments specializing in E-Infrastructure, Transportation and Building Solutions in the United States, primarily across the Southern, Northeastern, Mid-Atlantic and Rocky Mountain regions and Hawaii. E-Infrastructure Solutions provides advanced, large-scale site development services for data centers, e-commerce distribution centers, manufacturing, warehousing, energy and more. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail and storm drainage systems. Building Solutions projects include residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs and other concrete work. From strategy to operations, we are committed to sustainability by operating responsibly to safeguard and improve society’s quality of life. Caring for our people and our communities, our customers and our investors – that is The Sterling Way.

Joe Cutillo, CEO, “We build and service the infrastructure that enables our economy to run,

our people to move and our country to grow.”

Important Information for Investors and Stockholders

Non-GAAP Measures

This press release contains “Non-GAAP” financial measures as defined under Regulation G of the amended U.S. Securities Exchange Act of 1934. The Company reports financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), but the Company believes that certain Non-GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and are useful for period-over-period comparisons of those operations.

Non-GAAP measures may include adjusted net income, adjusted EPS, EBITDA and adjusted EBITDA, in each case excluding the impacts of certain identified items. The excluded items represent items that the Company does not consider to be representative of its normal operations. The Company believes that these measures are useful for investors to review, because they provide a consistent measure of the underlying financial results of the Company’s ongoing business and, in the Company’s view, allow for a supplemental comparison against historical results and expectations for future performance. Furthermore, the Company uses each of these to measure the performance of the Company’s operations for budgeting and forecasting, as well as employee incentive compensation. However, Non-GAAP measures should not be considered as substitutes for net income, EPS, or other data prepared and reported in accordance with GAAP and should be viewed in addition to the Company’s reported results prepared in accordance with GAAP.

Reconciliations of Non-GAAP financial measures to the most comparable GAAP measures are provided in the tables included within this press release.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that are considered forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about: our business strategy; our financial strategy; our industry outlook; our guidance; and our plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this press release, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this press release are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this press release are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission and elsewhere in those filings. Additional factors or risks that we currently deem immaterial, that are not presently known to us or that arise in the future could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made. The forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise, notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Continuing Operations:

 

 

 

Revenues

$

403,579

 

 

$

365,962

 

Cost of revenues

 

(341,837

)

 

 

(310,813

)

Gross profit

 

61,742

 

 

 

55,149

 

General and administrative expense

 

(23,321

)

 

 

(20,297

)

Intangible asset amortization

 

(3,736

)

 

 

(3,568

)

Acquisition related costs

 

(190

)

 

 

(255

)

Other operating expense, net

 

(1,868

)

 

 

(1,666

)

Operating income

 

32,627

 

 

 

29,363

 

Interest income

 

1,974

 

 

 

8

 

Interest expense

 

(7,528

)

 

 

(4,650

)

Income before income taxes

 

27,073

 

 

 

24,721

 

Income tax expense

 

(7,033

)

 

 

(6,778

)

Net income, including noncontrolling interests

 

20,040

 

 

 

17,943

 

Less: Net income attributable to noncontrolling interests

 

(391

)

 

 

(271

)

Net income from Continuing Operations

$

19,649

 

 

$

17,672

 

 

 

 

 

Discontinued Operations:

 

 

 

Pretax income

$

 

 

$

1,399

 

Income tax expense

 

 

 

 

181

 

Net income from Discontinued Operations

$

 

 

$

1,580

 

 

 

 

 

Net income attributable to Sterling common stockholders

$

19,649

 

 

$

19,252

 

 

 

 

 

Net income per share from Continuing Operations:

 

 

 

Basic

$

0.64

 

 

$

0.59

 

Diluted

$

0.64

 

 

$

0.59

 

 

 

 

 

Net income per share from Discontinued Operations:

 

 

 

Basic

$

 

 

$

0.05

 

Diluted

$

 

 

$

0.05

 

 

 

 

 

Net income per share attributable to Sterling common stockholders:

 

 

 

Basic

$

0.64

 

 

$

0.64

 

Diluted

$

0.64

 

 

$

0.64

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

Basic

 

30,618

 

 

 

29,964

 

Diluted

 

30,789

 

 

 

30,112

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

Revenues

2023

 

% of Revenue

 

2022

 

% of Revenue

E-Infrastructure Solutions

$

205,840

 

 

51

%

 

$

168,927

 

 

46

%

Transportation Solutions

 

111,139

 

 

28

%

 

 

116,141

 

 

32

%

Building Solutions

 

86,600

 

 

21

%

 

 

80,894

 

 

22

%

Total Revenues

$

403,579

 

 

 

 

$

365,962

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss)

 

 

 

 

 

 

 

E-Infrastructure Solutions

$

24,269

 

 

11.8

%

 

$

21,285

 

 

12.6

%

Transportation Solutions

 

5,306

 

 

4.8

%

 

 

4,443

 

 

3.8

%

Building Solutions

 

8,701

 

 

10.0

%

 

 

9,358

 

 

11.6

%

Segment Operating Income

 

38,276

 

 

9.5

%

 

 

35,086

 

 

9.6

%

Corporate

 

(5,459

)

 

 

 

 

(5,468

)

 

 

Acquisition Related Costs

 

(190

)

 

 

 

 

(255

)

 

 

Total Operating Income

$

32,627

 

 

8.1

%

 

$

29,363

 

 

8.0

%

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

March 31,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

202,576

 

$

181,544

Accounts receivable

 

230,148

 

 

262,646

Contract assets

 

125,494

 

 

109,803

Receivables from and equity in construction joint ventures

 

13,648

 

 

14,122

Other current assets

 

16,094

 

 

29,139

Total current assets

 

587,960

 

 

597,254

Property and equipment, net

 

215,217

 

 

215,482

Operating lease right-of-use assets, net

 

62,278

 

 

59,415

Goodwill

 

262,671

 

 

262,692

Other intangibles, net

 

295,387

 

 

299,123

Other non-current assets, net

 

7,615

 

 

7,654

Total assets

$

1,431,128

 

$

1,441,620

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

119,450

 

$

121,887

Contract liabilities

 

242,326

 

 

239,297

Current maturities of long-term debt

 

35,059

 

 

32,610

Current portion of long-term lease obligations

 

17,376

 

 

19,715

Accrued compensation

 

16,904

 

 

24,136

Other current liabilities

 

13,574

 

 

8,966

Total current liabilities

 

444,689

 

 

446,611

Long-term debt

 

365,548

 

 

398,735

Long-term lease obligations

 

45,164

 

 

40,103

Members’ interest subject to mandatory redemption and undistributed earnings

 

18,419

 

 

21,597

Deferred tax liability, net

 

54,387

 

 

51,659

Other long-term liabilities

 

4,666

 

 

5,116

Total liabilities

 

932,873

 

 

963,821

Stockholders’ equity:

 

 

 

Common stock

 

308

 

 

306

Additional paid in capital

 

288,328

 

 

287,914

Retained earnings

 

206,028

 

 

186,379

Total Sterling stockholders’ equity

 

494,664

 

 

474,599

Noncontrolling interests

 

3,591

 

 

3,200

Total stockholders’ equity

 

498,255

 

 

477,799

Total liabilities and stockholders’ equity

$

1,431,128

 

$

1,441,620

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net income

$

20,040

 

 

$

19,523

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

13,692

 

 

 

11,767

 

Amortization of debt issuance costs and non-cash interest

 

422

 

 

 

556

 

Gain on disposal of property and equipment

 

(1,672

)

 

 

(228

)

Gain on debt extinguishment, net

 

 

 

 

(2,428

)

Deferred taxes

 

2,728

 

 

 

5,640

 

Stock-based compensation

 

3,240

 

 

 

2,611

 

Change in fair value of interest rate swap

 

 

 

 

(90

)

Changes in operating assets and liabilities

 

10,608

 

 

 

(10,783

)

Net cash provided by operating activities

 

49,058

 

 

 

26,568

 

Cash flows from investing activities:

 

 

 

Disposition proceeds

 

14,000

 

 

 

 

Capital expenditures

 

(14,221

)

 

 

(14,969

)

Proceeds from sale of property and equipment

 

6,726

 

 

 

406

 

Net cash provided by (used in) investing activities

 

6,505

 

 

 

(14,563

)

Cash flows from financing activities:

 

 

 

Repayments of debt

 

(30,843

)

 

 

(5,928

)

Withholding taxes paid on net share settlement of equity awards

 

(4,288

)

 

 

(7,385

)

Net cash used in financing activities

 

(35,131

)

 

 

(13,313

)

Net change in cash, cash equivalents, and restricted cash

 

20,432

 

 

 

(1,308

)

Cash, cash equivalents and restricted cash at beginning of period

 

185,265

 

 

 

88,693

 

Cash, cash equivalents and restricted cash at end of period

 

205,697

 

 

 

87,385

 

Less: restricted cash - Continuing Operations

 

(3,121

)

 

 

(3,721

)

Less: cash, cash equivalents and restricted cash - Discontinued Operations

 

 

 

 

(14,264

)

Cash and cash equivalents at end of period - Continuing Operations

$

202,576

 

 

$

69,400

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

EBITDA FROM CONTINUING OPERATIONS RECONCILIATION

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Net income from Continuing Operations

$

19,649

 

$

17,672

Depreciation and amortization

 

13,692

 

 

11,363

Interest expense, net of interest income

 

5,554

 

 

4,642

Income tax expense

 

7,033

 

 

6,778

EBITDA from Continuing Operations (1)

 

45,928

 

 

40,455

Acquisition related costs

 

190

 

 

255

Adjusted EBITDA from Continuing Operations (2)

$

46,118

 

$

40,710

(1)

The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes.

(2)

The Company defines Adjusted EBITDA as EBITDA excluding the impact of acquisition related costs.

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

EBITDA GUIDANCE RECONCILIATION

(In millions)

(Unaudited)

 

 

Full Year 2023 Guidance

 

Low

 

High

Net income attributable to Sterling common stockholders

$

104

 

$

110

Depreciation and amortization

 

55

 

 

59

Interest expense, net of interest income

 

21

 

 

24

Income tax expense

 

40

 

 

42

EBITDA (1)

$

220

 

$

235

(1)

The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, and taxes.

 

Contacts

Company Contact:

Sterling Infrastructure, Inc.

Noelle Dilts, VP IR and Corporate Strategy

281-214-0795

Investor Relations Contact:

The Equity Group Inc.

Jeremy Hellman, CFA

212-836-9626

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