STRL Sterling Infrastructure Inc

Increases 2023 Full Year Guidance

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

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

Second Quarter 2023 Results

• Revenues of $522.3 million, an increase of 13.1%
• Gross margin of 17.7%, an increase from 15.4%
• Net Income of $39.5 million, or $1.27 per diluted share, an increase of 40% and 37%, respectively
• EBITDA(1) of $73.5 million, an increase of 29%
• Cash flows from operations totaled $181.1 million for the six months ended June 30, 2023
• Cash and Cash Equivalents totaled $278.1 million at June 30, 2023
• Backlog at June 30, 2023 was $1.74 billion, an increase of 23% over December 31, 2022
• Combined backlog(2) at June 30, 2023 was $2.39 billion, an increase of 42% over December 31, 2022

(1) The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes. The Company defines Adjusted EBITDA as EBITDA excluding acquisition related costs. See the “Non-GAAP Measures” and “EBITDA Reconciliation” sections below for more information.

(2) Combined Backlog includes Unsigned Awards of $657.2 million and $275.0 million at June 30, 2023 and December 31, 2022, respectively.

CEO Remarks and Outlook

“Our outstanding results in the second quarter reflect a combination of strong customer demand and excellent execution by our teams. While we are very pleased with our 13% revenue growth in the quarter, it is the 230 basis points of gross margin expansion and nearly 30% growth in EBITDA that reflect our successful strategic shift toward higher-margin, lower-risk opportunities. In addition to our record earnings, our generation of cash flow from operations of $181 million year to date is fantastic,” stated Joe Cutillo, Sterling’s Chief Executive Officer.

“Each of our segments saw revenue growth and operating margin expansion in the second quarter. E-Infrastructure Solutions grew revenue by 11% and operating margins increased 250 basis points as we executed on large, multi-phase next-generation manufacturing and data center projects. Demand for E-Infrastructure Solutions remains strong, reflected in record bookings of $424 million in the quarter. Our Transportation Solutions segment grew revenue by 6% and increased operating margin by 130 basis points, reflecting solid demand trends across our key geographies and a continued mix shift toward higher margin work. Building Solutions revenue increased nearly 30%, driven by a record number of residential slabs poured in the quarter and higher levels of commercial work. Operating income for the segment increased 38%, driven by margin expansion across both residential and commercial,” continued Mr. Cutillo.

“Our relentless focus on strategic execution is driving earnings growth and cash generation, which in turn strengthens our ability to pursue new opportunities for profitable, long-term growth. Our strong second quarter results, record backlog and favorable opportunities across our markets give us confidence in our ability to deliver revenue and profitability growth for the year. In light of our results to date, we are increasing our full year guidance. The mid-point of our guidance ranges would offer an improvement in revenue by 13% and net income by 32% over 2022,” Mr. Cutillo concluded.

Full Year 2023 Guidance

• Revenue of $1.95 billion to $2.05 billion
• Net Income of $125 million to $131 million
• EPS of $4.00 to $4.20
• EBITDA(1) of $250 million to $260 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, August 8, 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 manufacturing, data centers, e-commerce distribution centers, warehousing, energy and more. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail and storm drainage systems. Building Solutions includes 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,” “would,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “guidance,” “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 June 30,

 

Six Months Ended June 30,

 

2023

 

2022

 

2023

 

2022

Continuing Operations:

 

 

 

 

 

 

 

Revenues

$

522,325

 

 

$

461,827

 

 

$

925,904

 

 

$

827,789

 

Cost of revenues

 

(430,051

)

 

 

(390,819

)

 

 

(771,888

)

 

 

(701,632

)

Gross profit

 

92,274

 

 

 

71,008

 

 

 

154,016

 

 

 

126,157

 

General and administrative expense

 

(24,034

)

 

 

(20,844

)

 

 

(47,355

)

 

 

(41,141

)

Intangible asset amortization

 

(3,737

)

 

 

(3,514

)

 

 

(7,473

)

 

 

(7,082

)

Acquisition related costs

 

(59

)

 

 

(230

)

 

 

(249

)

 

 

(485

)

Other operating expense, net

 

(4,181

)

 

 

(2,431

)

 

 

(6,049

)

 

 

(4,097

)

Operating income

 

60,263

 

 

 

43,989

 

 

 

92,890

 

 

 

73,352

 

Interest income

 

2,203

 

 

 

28

 

 

 

4,177

 

 

 

36

 

Interest expense

 

(7,731

)

 

 

(4,477

)

 

 

(15,259

)

 

 

(9,127

)

Income before income taxes

 

54,735

 

 

 

39,540

 

 

 

81,808

 

 

 

64,261

 

Income tax expense

 

(14,505

)

 

 

(11,015

)

 

 

(21,538

)

 

 

(17,793

)

Net income, including noncontrolling interests

 

40,230

 

 

 

28,525

 

 

 

60,270

 

 

 

46,468

 

Less: Net income attributable to noncontrolling interests

 

(750

)

 

 

(411

)

 

 

(1,141

)

 

 

(682

)

Net income from Continuing Operations

$

39,480

 

 

$

28,114

 

 

$

59,129

 

 

$

45,786

 

 

 

 

 

 

 

 

 

Discontinued Operations:

 

 

 

 

 

 

 

Pretax loss

 

—

 

 

 

(2,900

)

 

$

—

 

 

$

(1,501

)

Income tax benefit

 

—

 

 

 

747

 

 

 

—

 

 

 

928

 

Net loss from Discontinued Operations

$

—

 

 

$

(2,153

)

 

$

—

 

 

$

(573

)

 

 

 

 

 

 

 

 

Net income attributable to Sterling common stockholders

$

39,480

 

 

$

25,961

 

 

$

59,129

 

 

$

45,213

 

 

 

 

 

 

 

 

 

Net income per share from Continuing Operations:

 

 

 

 

 

 

 

Basic

$

1.28

 

 

$

0.93

 

 

$

1.93

 

 

$

1.52

 

Diluted

$

1.27

 

 

$

0.93

 

 

$

1.91

 

 

$

1.52

 

 

 

 

 

 

 

 

 

Net loss per share from Discontinued Operations:

 

 

 

 

 

 

 

Basic

$

—

 

 

$

(0.07

)

 

$

—

 

 

$

(0.02

)

Diluted

$

—

 

 

$

(0.07

)

 

$

—

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

Net income per share attributable to Sterling common stockholders:

 

 

 

 

 

 

 

Basic

$

1.28

 

 

$

0.86

 

 

$

1.93

 

 

$

1.50

 

Diluted

$

1.27

 

 

$

0.86

 

 

$

1.91

 

 

$

1.50

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

30,780

 

 

 

30,225

 

 

 

30,699

 

 

 

30,094

 

Diluted

 

31,000

 

 

 

30,362

 

 

 

30,886

 

 

 

30,229

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

Revenues

2023

 

% of

Revenue

 

2022

 

% of

Revenue

 

2023

 

% of

Revenue

 

2022

 

% of

Revenue

E-Infrastructure Solutions

$

260,148

 

 

50%

 

$

233,548

 

 

51%

 

$

465,988

 

 

50%

 

$

402,475

 

 

49%

Transportation Solutions

 

151,088

 

 

29%

 

 

142,640

 

 

30%

 

 

262,227

 

 

29%

 

 

258,781

 

 

31%

Building Solutions

 

111,089

 

 

21%

 

 

85,639

 

 

19%

 

 

197,689

 

 

21%

 

 

166,533

 

 

20%

Total Revenues

$

522,325

 

 

 

 

$

461,827

 

 

 

 

$

925,904

 

 

 

 

$

827,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-Infrastructure Solutions

$

43,167

 

 

16.6%

 

$

32,824

 

 

14.1%

 

$

67,436

 

 

14.5%

 

$

54,109

 

 

13.4%

Transportation Solutions

 

9,856

 

 

6.5%

 

 

7,410

 

 

5.2%

 

 

15,162

 

 

5.8%

 

 

11,853

 

 

4.6%

Building Solutions

 

13,480

 

 

12.1%

 

 

9,751

 

 

11.4%

 

 

22,181

 

 

11.2%

 

 

19,109

 

 

11.5%

Segment Operating Income

 

66,503

 

 

12.7%

 

 

49,985

 

 

10.8%

 

 

104,779

 

 

11.3%

 

 

85,071

 

 

10.3%

Corporate General and Administrative Expense

 

(6,181

)

 

 

 

 

(5,766

)

 

 

 

 

(11,640

)

 

 

 

 

(11,234

)

 

 

Acquisition Related Costs

 

(59

)

 

 

 

 

(230

)

 

 

 

 

(249

)

 

 

 

 

(485

)

 

 

Total Operating Income

$

60,263

 

 

11.5%

 

$

43,989

 

 

9.5%

 

$

92,890

 

 

10.0%

 

$

73,352

 

 

8.9%

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

June 30,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

278,121

 

$

181,544

Accounts receivable

 

296,496

 

 

262,646

Contract assets

 

115,011

 

 

109,803

Receivables from and equity in construction joint ventures

 

11,407

 

 

14,122

Other current assets

 

14,765

 

 

29,139

Total current assets

 

715,800

 

 

597,254

Property and equipment, net

 

228,461

 

 

215,482

Operating lease right-of-use assets, net

 

61,106

 

 

59,415

Goodwill

 

262,692

 

 

262,692

Other intangibles, net

 

291,650

 

 

299,123

Other non-current assets, net

 

7,649

 

 

7,654

Total assets

$

1,567,358

 

$

1,441,620

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

140,620

 

$

121,887

Contract liabilities

 

335,877

 

 

239,297

Current maturities of long-term debt

 

35,062

 

 

32,610

Current portion of long-term lease obligations

 

18,129

 

 

19,715

Accrued compensation

 

25,335

 

 

24,136

Other current liabilities

 

12,742

 

 

8,966

Total current liabilities

 

567,765

 

 

446,611

Long-term debt

 

329,284

 

 

398,735

Long-term lease obligations

 

43,087

 

 

40,103

Members’ interest subject to mandatory redemption and undistributed earnings

 

21,296

 

 

21,597

Deferred tax liability, net

 

58,449

 

 

51,659

Other long-term liabilities

 

5,563

 

 

5,116

Total liabilities

 

1,025,444

 

 

963,821

Stockholders’ equity:

 

 

 

Common stock

 

308

 

 

306

Additional paid in capital

 

291,757

 

 

287,914

Retained earnings

 

245,508

 

 

186,379

Total Sterling stockholders’ equity

 

537,573

 

 

474,599

Noncontrolling interests

 

4,341

 

 

3,200

Total stockholders’ equity

 

541,914

 

 

477,799

Total liabilities and stockholders’ equity

$

1,567,358

 

$

1,441,620

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net income

$

60,270

 

 

$

45,895

 

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

 

 

 

Depreciation and amortization

 

27,672

 

 

 

25,412

 

Amortization of debt issuance costs and non-cash interest

 

877

 

 

 

1,102

 

Gain on disposal of property and equipment

 

(2,631

)

 

 

(716

)

Gain on debt extinguishment, net

 

—

 

 

 

(2,428

)

Deferred taxes

 

6,790

 

 

 

14,505

 

Stock-based compensation

 

7,003

 

 

 

5,238

 

Change in fair value of interest rate swap

 

—

 

 

 

(173

)

Changes in operating assets and liabilities

 

81,126

 

 

 

(46,861

)

Net cash provided by operating activities

 

181,107

 

 

 

41,974

 

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

 

—

 

 

 

(3,033

)

Disposition proceeds

 

14,000

 

 

 

—

 

Capital expenditures

 

(38,859

)

 

 

(28,945

)

Proceeds from sale of property and equipment

 

8,525

 

 

 

951

 

Net cash used in investing activities

 

(16,334

)

 

 

(31,027

)

Cash flows from financing activities:

 

 

 

Repayments of debt

 

(67,589

)

 

 

(11,770

)

Withholding taxes paid on net share settlement of equity awards

 

(4,328

)

 

 

(7,385

)

Net cash used in financing activities

 

(71,917

)

 

 

(19,155

)

Net change in cash, cash equivalents, and restricted cash

 

92,856

 

 

 

(8,208

)

Cash, cash equivalents and restricted cash at beginning of period

 

185,265

 

 

 

88,693

 

Cash, cash equivalents and restricted cash at end of period

 

278,121

 

 

 

80,485

 

Less: restricted cash - Continuing Operations

 

—

 

 

 

(3,721

)

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

 

—

 

 

 

(14,687

)

Cash and cash equivalents at end of period - Continuing Operations

$

278,121

 

 

$

62,077

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

EBITDA FROM CONTINUING OPERATIONS RECONCILIATION

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2023

 

2022

 

2023

 

2022

Net income from Continuing Operations

$

39,480

 

$

28,114

 

$

59,129

 

$

45,786

Depreciation and amortization

 

13,980

 

 

13,231

 

 

27,672

 

 

24,594

Interest expense, net of interest income

 

5,528

 

 

4,449

 

 

11,082

 

 

9,091

Income tax expense

 

14,505

 

 

11,015

 

 

21,538

 

 

17,793

EBITDA from Continuing Operations (1)

 

73,493

 

 

56,809

 

 

119,421

 

 

97,264

Acquisition related costs

 

59

 

 

230

 

 

249

 

 

485

Adjusted EBITDA from Continuing Operations (2)

$

73,552

 

$

57,039

 

$

119,670

 

$

97,749

(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

$

125

 

$

131

Depreciation and amortization

 

56

 

 

57

Interest expense, net of interest income

 

22

 

 

23

Income tax expense

 

47

 

 

49

EBITDA (1)

$

250

 

$

260

(1)

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230807535233/en/

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