Sterling Reports Record Third Quarter 2022 Results

Results Continue to Outpace Expectations

Increases 2022 Full Year Guidance

Sterling Infrastructure, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the third quarter 2022.

Third Quarter 2022 Results

  • Total Revenue of $556.9 million, an increase of 20% compared to the third quarter of 2021
  • Net Income was $29.5 million, or $0.97 per diluted share, an increase of 40% and 35%, respectively, compared to the third quarter of 2021
  • EBITDA(1) of $60.2 million, an increase of 50% compared to the third quarter of 2021
  • Cash flows from operations was $96.1 million and $130.6 million for the third quarter and nine months ended September 30, 2022, respectively
  • Cash and Cash Equivalents totaled $146.5 million at September 30, 2022
  • Backlog at September 30, 2022 was $1.67 billion, an increase of 12% over December 31, 2021
  • Combined backlog(2) at September 30, 2022 was $1.90 billion, an increase of 25% over December 31, 2021

(1) The Company defines EBITDA as GAAP net income attributable to Sterling’s common stockholders, adjusted for depreciation and amortization, net interest expense, taxes and net gain or loss on extinguishment of debt.

(2) Combined Backlog includes Unsigned Low-bid Awards of $235.3 million and $22.5 million at September 30, 2022 and December 31, 2021, respectively.

CEO Remarks and Outlook

“The diversity and strength of our portfolio, our commitment to our strategy and the outstanding execution by our teams enabled us to deliver record revenue, net income and EBITDA in the third quarter,” stated Joe Cutillo, Sterling’s Chief Executive Officer.

“Our company’s gross profit increased $24.2 million to $82.0 million, with gross margin increasing 220 basis points to 14.7% from the prior year period. Our strong results were driven by revenue growth from E-Infrastructure Solutions which benefited from organic growth and the acquisition of Petillo in late 2021, and improved margins from Transportation and Building Solutions. Building Solutions’ revenue decreased quarter over quarter, as home ownership became less affordable due to increasing interest rates and inflation. Despite the Building Solutions revenue headwinds, our continued focus on execution of our strategic objectives once again enabled us to generate our record results,” continued Mr. Cutillo.

“Our backlog and combined backlog levels were at all-time highs, primarily as a result of the new large site development projects in E-Infrastructure Solutions and increased bid activity in Transportation Solutions. As a result of our strong third quarter, we are adjusting our full year 2022 guidance. The mid-point of this adjusted guidance improves our net income by 53%, our revenue by 21% and our EPS by 47% over 2021,” Mr. Cutillo concluded.

Full Year 2022 Guidance:

  • Revenue of $1.90 billion to $1.92 billion
  • Net Income of $94 million to $98 million
  • EPS of $3.08 to $3.21
  • EBITDA of $197 million to $205 million

Conference Call

Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, November 1, 2022 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 ten 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 fifteen 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 thirty 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 (the “U.S.”), primarily across the Southern, Northeastern, Mid-Atlantic and the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. E-Infrastructure Solutions projects develop advanced, large-scale site development systems and services for data centers, e-commerce distribution centers, warehousing, transportation, energy and more. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail, water, wastewater 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

September 30,

 

Nine Months Ended

September 30,

 

 

2022

 

2021

 

2022

 

2021

Revenues

 

$

556,942

 

 

$

463,449

 

 

$

1,477,830

 

 

$

1,180,431

 

Cost of revenues

 

 

(474,919

)

 

 

(405,645

)

 

 

(1,271,284

)

 

 

(1,021,348

)

Gross profit

 

 

82,023

 

 

 

57,804

 

 

 

206,546

 

 

 

159,083

 

General and administrative expense

 

 

(26,466

)

 

 

(19,637

)

 

 

(72,962

)

 

 

(52,565

)

Intangible asset amortization

 

 

(3,509

)

 

 

(2,866

)

 

 

(10,591

)

 

 

(8,598

)

Acquisition related costs

 

 

(277

)

 

 

 

 

 

(762

)

 

 

 

Other operating expense, net

 

 

(4,085

)

 

 

(3,270

)

 

 

(5,186

)

 

 

(10,414

)

Operating income

 

 

47,686

 

 

 

32,031

 

 

 

117,045

 

 

 

87,506

 

Interest income

 

 

167

 

 

 

13

 

 

 

207

 

 

 

39

 

Interest expense

 

 

(5,134

)

 

 

(3,919

)

 

 

(14,201

)

 

 

(15,660

)

Gain on extinguishment of debt, net

 

 

 

 

 

968

 

 

 

2,428

 

 

 

2,032

 

Income before income taxes

 

 

42,719

 

 

 

29,093

 

 

 

105,479

 

 

 

73,917

 

Income tax expense

 

 

(12,562

)

 

 

(7,336

)

 

 

(29,427

)

 

 

(20,275

)

Net income

 

 

30,157

 

 

 

21,757

 

 

 

76,052

 

 

 

53,642

 

Less: Net income attributable to noncontrolling interests

 

 

(634

)

 

 

(631

)

 

 

(1,316

)

 

 

(1,905

)

Net income attributable to Sterling common stockholders

 

$

29,523

 

 

$

21,126

 

 

$

74,736

 

 

$

51,737

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to Sterling common stockholders:

 

 

 

 

 

 

 

 

Basic

 

$

0.98

 

 

$

0.74

 

 

$

2.48

 

 

$

1.81

 

Diluted

 

$

0.97

 

 

$

0.72

 

 

$

2.46

 

 

$

1.79

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

30,278

 

 

 

28,710

 

 

 

30,156

 

 

 

28,527

 

Diluted

 

 

30,540

 

 

 

29,213

 

 

 

30,364

 

 

 

28,927

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

   

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

Revenues

 

2022

 

% of

Revenue

 

2021

 

% of

Revenue

 

2022

 

% of

Revenue

 

2021

 

% of

Revenue

E-Infrastructure Solutions

 

$

255,530

 

 

46

%

 

$

121,286

 

 

26

%

 

$

658,005

 

 

45

%

 

$

341,601

 

 

29

%

Transportation Solutions

 

 

221,126

 

 

40

%

 

 

249,898

 

 

54

%

 

 

573,006

 

 

38

%

 

 

600,105

 

 

51

%

Building Solutions

 

 

80,286

 

 

14

%

 

 

92,265

 

 

20

%

 

 

246,819

 

 

17

%

 

 

238,725

 

 

20

%

Total Revenues

 

$

556,942

 

 

 

 

$

463,449

 

 

 

 

$

1,477,830

 

 

 

 

$

1,180,431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-Infrastructure Solutions

 

$

37,533

 

 

14.7

%

 

$

19,218

 

 

15.8

%

 

$

91,642

 

 

13.9

%

 

$

61,744

 

 

18.1

%

Transportation Solutions

 

 

9,635

 

 

4.4

%

 

 

9,334

 

 

3.7

%

 

 

18,428

 

 

3.2

%

 

 

16,796

 

 

2.8

%

Building Solutions

 

 

9,324

 

 

11.6

%

 

 

9,238

 

 

10.0

%

 

 

28,433

 

 

11.5

%

 

 

23,389

 

 

9.8

%

Segment Operating Income

 

 

56,492

 

 

10.1

%

 

 

37,790

 

 

8.2

%

 

 

138,503

 

 

9.4

%

 

 

101,929

 

 

8.6

%

Corporate

 

 

(8,529

)

 

 

 

 

(5,759

)

 

 

 

 

(20,696

)

 

 

 

 

(14,423

)

 

 

Acquisition Related Costs

 

 

(277

)

 

 

 

 

 

 

 

 

 

(762

)

 

 

 

 

 

 

 

Total Operating Income

 

$

47,686

 

 

8.6

%

 

$

32,031

 

 

6.9

%

 

$

117,045

 

 

7.9

%

 

$

87,506

 

 

7.4

%

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

September 30,

2022

 

December 31,

2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

146,479

 

$

81,840

 

Accounts receivable

 

 

329,548

 

 

232,153

 

Contract assets

 

 

153,666

 

 

83,310

 

Receivables from and equity in construction joint ventures

 

 

16,316

 

 

16,896

 

Other current assets

 

 

23,549

 

 

20,492

 

Total current assets

 

 

669,558

 

 

434,691

 

Property and equipment, net

 

 

222,647

 

 

204,316

 

Operating lease right-of-use assets, net

 

 

60,384

 

 

24,520

 

Goodwill

 

 

252,887

 

 

259,791

 

Other intangibles, net

 

 

293,532

 

 

303,223

 

Other non-current assets, net

 

 

4,325

 

 

4,455

 

Total assets

 

$

1,503,333

 

$

1,230,996

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

192,902

 

$

144,982

 

Contract liabilities

 

 

224,739

 

 

127,932

 

Current maturities of long-term debt

 

 

29,705

 

 

28,230

 

Current portion of long-term lease obligations

 

 

17,418

 

 

8,841

 

Accrued compensation

 

 

37,448

 

 

22,803

 

Other current liabilities

 

 

10,096

 

 

18,972

 

Total current liabilities

 

 

512,308

 

 

351,760

 

Long-term debt

 

 

407,090

 

 

428,588

 

Long-term lease obligations

 

 

43,121

 

 

15,831

 

Members’ interest subject to mandatory redemption and undistributed earnings

 

 

55,862

 

 

55,115

 

Deferred tax liability, net

 

 

40,311

 

 

14,656

 

Other long-term liabilities

 

 

4,754

 

 

4,819

 

Total liabilities

 

 

1,063,446

 

 

870,769

 

Stockholders’ equity:

 

 

 

 

Common stock

 

 

303

 

 

298

 

Additional paid in capital

 

 

281,576

 

 

280,274

 

Retained earnings

 

 

154,654

 

 

79,918

 

Accumulated other comprehensive gain (loss)

 

 

578

 

 

(1,723

)

Total Sterling stockholders’ equity

 

 

437,111

 

 

358,767

 

Noncontrolling interests

 

 

2,776

 

 

1,460

 

Total stockholders’ equity

 

 

439,887

 

 

360,227

 

Total liabilities and stockholders’ equity

 

$

1,503,333

 

$

1,230,996

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

Net income

 

$

76,052

 

 

$

53,642

 

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

 

 

 

 

Depreciation and amortization

 

 

38,550

 

 

 

25,336

 

Amortization of debt issuance costs and non-cash interest

 

 

1,636

 

 

 

1,756

 

Gain on disposal of property and equipment

 

 

(1,926

)

 

 

(1,176

)

Gain on debt extinguishment, net

 

 

(2,428

)

 

 

(2,032

)

Deferred taxes

 

 

24,975

 

 

 

17,413

 

Stock-based compensation

 

 

9,195

 

 

 

5,690

 

Change in fair value of interest rate swap

 

 

(320

)

 

 

(41

)

Changes in operating assets and liabilities

 

 

(15,087

)

 

 

35,154

 

Net cash provided by operating activities

 

 

130,647

 

 

 

135,742

 

Cash flows from investing activities:

 

 

 

 

Acquisitions, net of cash acquired

 

 

(3,033

)

 

 

 

Capital expenditures

 

 

(47,832

)

 

 

(39,315

)

Proceeds from sale of property and equipment

 

 

3,043

 

 

 

2,093

 

Net cash used in investing activities

 

 

(47,822

)

 

 

(37,222

)

Cash flows from financing activities:

 

 

 

 

Repayments of debt

 

 

(17,612

)

 

 

(44,184

)

Distributions to noncontrolling interest owners

 

 

 

 

 

(1,959

)

Other

 

 

 

 

 

(603

)

Net cash used in financing activities

 

 

(17,612

)

 

 

(46,746

)

Net change in cash, cash equivalents, and restricted cash

 

 

65,213

 

 

 

51,774

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

88,693

 

 

 

72,642

 

Cash, cash equivalents, and restricted cash at end of period

 

 

153,906

 

 

 

124,416

 

Less: restricted cash (other current assets)

 

 

(7,427

)

 

 

(6,714

)

Cash and cash equivalents at end of period

 

$

146,479

 

 

$

117,702

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

EBITDA RECONCILIATION

(In thousands)

(Unaudited)

   

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2022

 

2021

 

2022

 

2021

Net income attributable to Sterling common stockholders

 

$

29,523

 

$

21,126

 

 

$

74,736

 

 

$

51,737

 

Depreciation and amortization

 

 

13,138

 

 

8,629

 

 

 

38,550

 

 

 

25,336

 

Interest expense, net of interest income

 

 

4,967

 

 

3,906

 

 

 

13,994

 

 

 

15,621

 

Income tax expense

 

 

12,562

 

 

7,336

 

 

 

29,427

 

 

 

20,275

 

Gain on extinguishment of debt, net

 

 

 

 

(968

)

 

 

(2,428

)

 

 

(2,032

)

EBITDA (1)

 

$

60,190

 

$

40,029

 

 

$

154,279

 

 

$

110,937

 

(1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, taxes, and net gain on extinguishment of debt.

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

EBITDA GUIDANCE RECONCILIATION

(In millions)

(Unaudited)

   

 

 

Full Year 2022 Guidance

 

 

Low

 

High

Net income attributable to Sterling common stockholders

 

$

94

 

 

$

98

 

Depreciation and amortization

 

 

50

 

 

 

51

 

Interest expense, net of interest income

 

 

19

 

 

 

20

 

Income tax expense

 

 

36

 

 

 

38

 

Gain on extinguishment of debt, net

 

 

(2

)

 

 

(2

)

EBITDA (1)

 

$

197

 

 

$

205

 

(1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, taxes, and net gain on extinguishment of debt.

 

Contacts

Company:

Sterling Infrastructure, Inc.

Ron Ballschmiede, Chief Financial Officer

281-214-0777

Investor Relations:

The Equity Group Inc.

Jeremy Hellman, CFA

212-836-9626

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