Greetings, and welcome to the Sterling Construction Company's Fourth Quarter and Year-End 2021 Earnings Conference Call and Webcast. As a reminder, this conference call is being recorded. There are company slides on the Investor Relations section of the company's website. Before turning the call over to Joe Cutillo, Sterling's Chief Executive Officer, I will read the safe harbor statement. Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Sterling's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. I'll now turn the call over to Mr. Joe Cutillo. Thank you, sir. Please go ahead.

Thanks, Kyle. Good morning, everyone, and welcome to Sterling's Fourth Quarter and Full Year 2021 Earnings Call. Sterling reported another record fourth quarter and another record year, exceeding our expectations. Our people and our strategy continue to deliver exceptional performance time and time again, even during a year with significant challenges. This morning, I will cover the highlights for our fourth quarter and full year, then turn the call over to Ron for his financial commentary. Before I discuss our highlights, I will speak briefly about our journey and reflect on the strategic elements that transformed Sterling from a heavy highway construction company to a leading specialty infrastructure provider with expertise in e-infrastructure, building, and transportation solutions. Since 2016, Sterling has been on a transformational journey, borne of a strategy and vision that leverages our entrepreneurial spirit in our customer-centric culture. This blueprint for reducing our risk, improving our margins, building a platform for future growth, and consistently outperforming our peers is made up of three fundamental elements: solidifying our base; growing high-margin products; and expanding into higher-margin, higher-growth adjacent markets. This vision and strategy have not changed and will remain the same in 2022 and beyond. In 2021, we continued to make significant progress toward our vision. Our e-infrastructure solutions segment generated 60% of our profits in 2021 and remains our highest margin, fastest-growing segment as it grew 18%. With the acquisition of Kimes & Petillo, both closing in December, we now have an even broader portfolio of capabilities and geographic coverage for 2022. The Petillo acquisition now expands our e-infrastructure footprint to cover all the major markets on the East Coast and brings several new large e-infrastructure customers to our portfolio. Our Building Solutions segment generated over 24% of our profits in 2021 and is our second-highest margin and second fastest-growing segment as it grew 15%. In 2021, we continued our expansion in the Houston market and began an additional expansion effort into Phoenix. With the addition of Phoenix, we are now currently in three of the top four housing markets in the U.S. In our Transportation Solutions segment, we continued our shift away from hard-bid highway projects to alternative delivery, transportation, and aviation projects. Now less than 20% of Sterling's total revenue is from hard-bid heavy highway. This shift, along with continued improvements in execution and productivity, enabled us to improve our operating income as a percentage of revenue by 500 basis points. This improvement would be impressive in any year but is even more impressive in a year of hyperinflation. Turning to the fourth quarter and full year results, we continue to be an industry leader in safety with our incident rates at approximately one-fifth of the industry average. Last year, we once again received recognition and accolades for numerous safety awards. We finished second for the Associated General Contractors of America National Safety Award and had one of our employees named the AGC's 2021 Construction Safety Champion of the Year. Turning to the financial front, we closed the year with a record fourth quarter despite the ongoing supply chain and inflation challenges. Versus the prior year, our revenue increased 11%. Our gross margin increased to 13.6%. Our operating income increased 13%. Our earnings per share increased 43% to $2.15 per share. Our backlog increased to $1.49 billion, with $211 million attributed to the Petillo acquisition. Our strong cash generation continued, resulting in $152 million of cash flow from operations. We used this cash to pay down debt and funded a portion of the Petillo & Kimes acquisitions, enabling us to reduce our leverage to 2.4x EBITDA. As we look forward to 2022, our e-Infrastructure Solutions segment enters 2022 with robust markets throughout the East Coast. The recent pandemic has accelerated demand and increased the size and scope of projects for e-commerce distribution and data centers. This aligns well with our strategy and competitive advantages. During the quarter, we booked new business, including Plateau and Petillo, bringing our total e-infrastructure solution backlog to $433 million. In addition to the strong markets, we believe we will begin recovering some of the lost margin related to inflation back in 2022. For our Building Solutions segment, we expect the demand in our markets from our top customers to grow at double-digit rates in 2022. In addition, we believe we have the opportunity to double our growth in Phoenix in 2022 versus 2021. Our Transportation Solutions segment will remain disciplined and focused on margin growth and the continued shift of our portfolio towards alternative delivery, highway, and aviation projects. Our diverse portfolio continues to position Sterling in the right markets with the right solutions for our customers at the right time. Our strategic actions in 2021, along with the strong end markets in our e-Infrastructure and Building Solutions segments, have positioned us for yet another record year in 2022. In 2022, our revenues will be between $1,000,825,000 and $1,000,875,000. And our net income will be between $83 million and $89 million. With that, I'd like to turn it over to Ron to give you more details on the quarter and the full year. Ron?

Thanks, Joe, and good morning. I am pleased to discuss our record fourth quarter and full year performance. Our updated Investor Relations presentation ended December 31, 2021, earnings release has been posted to our website and includes additional financial details to help further understand our 2021 financial results. The presentation also provides additional modeling considerations which underpin our 2022 revenue and earnings guidance. Additionally, as you may recall, we closed on Petillo & Kimes acquisitions on December 30 and December 28, respectively. Given the proximity to the year-end, these acquisitions had minimal impact on our 2021 income statement. With these acquisitions, we realigned our operating groups into three reportable segments: Transportation, e-Infrastructure, and Building Solutions. Our new segment presentation also breaks out corporate-related costs. For a better understanding of our realigned segment reporting, we have included the historical quarterly segment information for both 2020 and 2021 in the updated Investor Relations presentation and in our 2021 earnings release, both of which are available on our website. Let me take you through our financial highlights, starting with our backlog metrics. At December 31, 2021, our backlog totaled a year-end record high of $1.493 billion, up $318 million over the beginning of the year. The end of the year 2020 backlog includes $211 million relating to the December 2021 acquisitions. The gross margin of our December 2021 backlog was 12.2%, a 20 basis point increase over 2020. Unsigned low-bid awards at the end of 2021 were $23 million, and our book-to-burn factor for backlog for the full year 2021 was 123%. Residential slab revenue is not included in this calculation as it is not driven by backlog. Revenues for the quarter were $401 million, an increase of $54 million or 16% compared to the same quarter in 2020. All three of our reporting segments saw increased revenues and segment operating income for both the current year and the full year. Consolidated segment operating income rose by 21% in the current quarter, reflecting ongoing improvements in our revenue mix due to higher growth rates from our most profitable segments. Our total revenues for 2021 reached $1.582 billion, an increase of $154 million or 11% from 2020. Transportation Solutions revenues increased $19 million in the current quarter and $42 million or 5.5% for the year. The increases were primarily due to the ramp-up of large design-build contracts and offset by an $80 million strategic reduction of our low-bid heavy highway revenues in 2021. This revenue shift was a principal driver of the improved current year operating margins. e-Infrastructure Solutions revenues increased $27 million in the current quarter and $72 million or 18% for the year. The increases were driven by the continued high demand for large-scale site development opportunities within the Southeast and Mid-Atlantic region. Both e-Infrastructure Solutions current quarter and full year operating margins declined by 210 basis points. These reductions were driven by continued headwinds from supply chain issues and related impacts on productivity and efficiencies as well as a lower product mix in the periods. Building Solution revenues increased $19 million in the current quarter and $42 million or 14.9% for the year. Residential revenues increased 27%, while commercial revenues declined by 3%. The number of residential slabs completed during 2021 increased 24% over 2020. The increase in slabs was primarily attributable to the continued market strength in the Dallas-Fort Worth area and continued expansion into the Houston and Arizona markets. Building Solutions operating margins increased in the fourth quarter by 260 basis points, reflecting progress in recouping the 2021 cost increases experienced in the first three quarters of 2021. Full year operating margins declined by 70 basis points to 10.3%. The full year operating margin decrease was driven by temporary price concessions due to COVID and an increase in lumber, concrete, and steel costs earlier in the year. General and administrative expenses for 2021 and '22 were 5% of revenues, consistent with our expectations. The dollar increase over the prior year was attributable to higher employee and insurance-related costs. We also incurred acquisition-related costs of $3.9 million or $0.10 per share relating to the Petillo & Kimes transactions. For comparative purposes, we have added back the expense in our "as-adjusted results." Our current quarter operating income was $19.8 million, down slightly from 2020 operating income of $20.9 million. As adjusted, operating income was $23.7 million compared to $28.9 million in the prior year. For the year ended December 31, 2021, operating income was $107 million compared to $95 million in the prior year. Adjusted operating income was $111 million or an increase of 16% for the year ended December 31, 2021, compared to $96 million in 2020. Interest expense for 2021 was $19.3 million compared to $29.4 million in 2020. The 2021, $10 million decline in interest expense reflects lower average debt balances during 2021 and the reduced interest provided by the June 2021 debt amendment. We expect our full year 2022 interest expense to be in the $19 million to $21 million range. Our effective income tax rate for 2021 and 2020 were 27.7% and 34.4%, respectively. The net decline was driven by more favorable 2021 permanent tax differences. Of our full year 2021 income tax expense of $24.9 million, $21.5 million was noncash as taxable income was absorbed by our net operating loss carryforwards. Cash income tax expense totaled $3.4 million in the current quarter, principally for state income tax payments. We expect to have approximately the same noncash-cash income tax expense relationship in 2022. The net effect of all these items resulted in current year net income of $62.6 million or an EPS of $2.15 and a fourth quarter net income of $10.9 million with earnings per share of $0.37. Adjusted net income and adjusted EPS in the current year were $65.6 million and $2.25 per share. Moving to our balance sheet and liquidity, our year-end cash totaled $82 million compared to $66 million at the beginning of the year. Our debt at the end of 2021 totaled $462 million compared to $375 million at the end of 2020 or an increase of $87 million. During 2021, we repaid $48 million of debt and borrowed $140 million through a new term loan to fund part of our December 2021 acquisitions. At the end of 2021, our forward-looking coverage ratio was 2.7 at the end of 2020, compared to 2.4 at the beginning of 2022. We remain comfortable with a target ratio range of plus or minus 2.5. At the end of 2021, we had no borrowings on our revolver credit facility, and thus, we have full availability of the $75 million line. Our current year adjusted EBITDA was $143 million, which is a 12% increase over 2020’s adjusted EBITDA of $128 million. Additionally, our 2021 cash flow from operating activities reached a record $157 million, an improvement of $31 million or 25% for the current year. This strong operating cash flow allowed us to make debt repayments of $48 million, invest $43 million in net capital expenditures, spend $45 million in cash for acquisitions, and grow our cash balance by $16 million. With that, I'll turn it back over to Joe.

Thanks, Ron. It's always nice to finish with a record quarter and a record year. But what is even better is being positioned to have an even stronger year ahead. I'm proud to say we will enter 2022 in the strongest position ever, with record backlog, better margins, and our highest growth coming from our lowest-risk, highest-margin businesses. Our strong markets, our diverse workforce, and proven strategy continue to pay off. We remain committed to the safety and well-being of our people to increasing customer and shareholder value while also protecting our communities and the environment. We enter 2022 a completely different business than we were just a few years ago. As our strategy and vision drive us forward, we are just at the beginning of what we will become. To reiterate our 2022 guidance, our revenue will be between $1,000,825,000 and $1,000,875,000, and our net income will be between $83 million and $89 million. With that, I'd like to turn it over for questions.

Our first question is from Brent Thielman with D.A. Davidson.

Maybe for Ron, just wondering what margins you've embedded into the guidance for the three business segments now that they are realigned here?

Sure. One of the things we did is add eight quarters of history to align with our future direction, which greatly aids in understanding the operating income characteristics of the units by separating out the corporate expense. Please take a look at those. Regarding specific segments, I’ll start with the Transportation Solutions group. We will continue to see margin leverage from the ongoing shift toward higher-margin projects, and we likely have one more...

We're continuing to reduce the low-bid side of that world.

We are seeing a slight increase, with a 20 basis point margin improvement in backlog. However, we anticipate more than that for the entire year. On the Building Solutions front, it's important to highlight the fourth quarter margins. We largely recovered what we would have achieved without the challenges posed by supply chain issues and inflation over the year. While one quarter doesn’t define a year, we experienced a significant recovery in that period. For the second consecutive quarter, our revenue per slab has been growing faster than the number of slabs completed, indicating an increase in price per slab. We expect the positive fourth quarter results to carry over into 2022, although there may be some fluctuations. The last, e-Solutions, obviously, we'll pick up Petillo in that segment. Margin characteristics are very similar to those of Plateau. So I think the challenge will be how fast can we continue to recover from the supply chain and inflation side of it. So as time goes by, that tends to run through backlog and improve, but we expect that to get better in 2022.

The biggest shift in going from prior segments to the new one is our Commercial business comes out of what used to be the Specialty segment, which is now the e-Infrastructure and that goes into Building Solutions. So that margin is a little lower than our historical residential business, so you'll see that impact to a small degree.

Yes. This lowers operating margins for the e-Infrastructure group and reduces margins for the stand-alone residential segment, at least for now.

Okay. Appreciate that. Maybe just on the outlook, a question around the cash from operations expectation. Just wondering why, it couldn't be significantly higher this year just given the addition of Petillo.

We begin the year with the consistent belief that our cash flow from operating activities will be close to our operating income. There may be some fluctuations each quarter due to the seasonality of our work, but that's our starting point annually. Our aim is to maintain and enhance this relationship, as it's not realistic to exceed this figure consistently over the years.

Okay. That's helpful, Ron. Perhaps one last question from me. You seem to have a rather optimistic view on the residential sector. Do you have any additional insights from your homebuilder customers regarding their plans for this year? This area might be a concern for some, but it doesn't appear to be slowing down for you. Any information you could share would be appreciated.

Yes. The feedback indicates that we haven't seen anything slowing down. Any concerns about potential risks mainly relate to land availability and the need to develop land at a faster pace. They have already surpassed their 2021 expectations for builds, which consumes land more quickly than their three-year plan predicts in many cases. I understand they are actively working on developing the next wave of land. But as we step back and we just think of it objectively, we certainly are cognizant of the rates increase and potential rate increase on inflation. But the builders still have a lot of levers they can pull. They're making very high margins on the properties we're selling today, and they don't want that to slow down any time soon. So we think through 2022, barring something catastrophic, everything they're telling us is we're going to see, what I'll call, low double-digit growth going into this year in the three markets we're in, which are really the top three markets in the U.S. right now, Phoenix bounces back and forth, but we're number one, number two, and number three.

And of course, we would expect market share improvement for both our expansions in Houston and in Phoenix.

Our final question comes from Sean Eastman with KeyBanc.

It would be helpful to just get a bit more of a flavor of the kind of operating conditions you've contemplated in the initial 2022 outlook here. It seems like the residential business is sort of out of the woods in a sense based on the fourth quarter results here. And then I guess the other element is sort of that equipment lead time in the e-commerce solutions business. So just sort of what did you guys see around those dynamics through kind of exiting the fourth quarter? And how have you contemplated those potential risk factors in the guidance?

Yes. As Ron mentioned, we accounted for some of the returning inflation. The positive aspect is that throughout 2021, we indicated that if there were a slowdown in rate increases, we could begin to recover some of the price increases we’ve been implementing. We observed that happening in the fourth quarter. Now we're going to continue to see some increases throughout 2022. They've already announced some concrete increases, etc. But we've done a much better job. So we've got some visibility into recouping that in 2022. And we also hope to start recouping on the settled specialty services or now e-infrastructure solutions, some of that, as we get into 2022 and the new bid projects begin. So we've done that. On the equipment side and capacity side, we have factored in the equipment capacity we have with the equipment capacity that we know we're going to get or added in the quarter. But I'll be honest, for the first time, we're actually turning away work in the e-infrastructure segment just because we're making sure we take care of our core customers, we're making sure we've got capacity for the projects they've got on the books for the year, and we're not getting over our skis. But frankly, if we had more equipment, we would be taking up more work now than we have. But we factored that into the 2022 forecast.

I would add that for the combined backlog of the e-infrastructure group, it's over $470 million. That's a backlog of about two-thirds of our revenue expectations. There are run rates that we have, including Petillo. That's pretty strong compared to history, that relationship. What that means is we have the backlog. And of course, as we roll through that backlog, we did roll through it in 2021 into 2022. We've learned a lot about contingency planning around pricing and productivity and things like that. So it's pretty simple that, as we've rolled off the old backlog, we have better insights over what we think it will be in 2022. So that's going to help us. And certainly, the backlog is going to provide us two-thirds of the year, give or take. So I think we're looking forward to that performance.

Got it. Okay. Good stuff. And then how much revenue growth and EPS accretion is in this outlook from Petillo?

I don't have that number exactly in front of me. I want to say it's between $0.15 and $0.20.

$0.15 to $0.20. Got it.

I'll have a better understanding when I bring my pro formas and have better ones available.

We can give you more detail information on that, Sean.

I wanted to discuss the organic growth, particularly the underlying organic growth. If I examine the backlog for the fourth quarter, excluding Petillo, it appears that the book-to-bill ratio was below 1x. However, the demand outlook commentary from your team seems quite strong. I'm interested in how we should expect the backlog to develop over the next few quarters, whether there are some items that are about to be loaded in, including potential significant awards in transportation or some e-infrastructure projects. I'd like to understand this better.

We could continue to see a decline in backlog. This prediction aligns with what we mentioned last year and at the start of this year, and it appears to be accurate.

Yes, and make sure you break out backlog.

Yes. And backlog for transportation is declining, backlog for e-infrastructure is improving. But if you remember, Sean, at the beginning of last year, we booked several really large design-build jobs in the quarter. They had been sitting in won but not signed for a long period of time. So that skews the spike up to some degree, and we're burning that off. And there's not those mega-projects to replace that. So we're still hitting singles and doubles and making sure we're focusing on the small quick-turn projects and higher margin. So I think on the transportation side, we'll see that continue to decline as we get through the first half of this year. We have not seen a significant increase in bid activity following the new infrastructure bill. Additionally, we've secured around six jobs in the past couple of months, but they aren’t being awarded yet because our engineers' estimates were created before inflation and haven't been updated. Consequently, the new job costs are coming in 30% to 60% higher than those original estimates. As a result, these projects will go back for reestimation before they are relisted for bids, instead of simply adjusting for material price fluctuations, which is where the main issues lie. So we think that will continue to decline. On the e-infrastructure space, again, one of the nice things that's happening as a result of COVID and some of the inflation. Where we have seen, if you remember us talking about some of the big data centers and some of the big e-commerce distribution build outs, a lot of the times, they would buy 100, 200, 300 acres and develop that over phases. So we come do the rough cut of the entire thing. We finish Phase I, they build a data center. A year or two later, we come back, we finish Phase II, they build a data center, year three. What we're seeing them do is ask us, on the projects we've recently won, to do all phases at one time. So they're bigger, they're more complex, which is great for us. It reduces the playing field out there on the competition, but also keeps us there on location longer and bigger. So those are beneficial. And that's why, candidly, we're turning away some of the mid-range and smaller work to make sure we got the capacity for the line of sight of the jobs we see coming out in 2022. That helped?

Interesting. Yes, definitely, it helps massively. And then last one for me. I think you guys are exiting the year here around 2.4x leverage. Not crazy there. So I'm just curious, what's next here? Do we just focus on organic, funding organic growth and delever? Or do you stay on the offensive? What's the message there?

Yes. I believe it's a combination of both. Currently, we will continue to pay down our debt. I won't say we're not exploring small acquisitions that would strategically enhance our three segments. However, we haven't yet identified the right opportunity to expand further. So for now, as we focus on paying down debt, I want to emphasize that we are actively searching for potential additions.

Yes. In my comments, I intended to convey that we are very comfortable with a future EBITDA calculation of around 2.5x, give or take. One of the reasons for this confidence is the consistent and strong cash flow we have experienced since transforming the business.

The Petillo acquisition is interesting because it was funded partially with $20 million of our stock, but the majority came from debt and nearly $50 million in cash from our balance sheet. This move is immediately beneficial and has lowered our leverage ratio. We are looking for more opportunities like this and won't hesitate to take advantage of favorable market conditions. I think one thing, Sean, that we have focused on is the cash flow generated from this business. The ability to allocate one-third for debt, one-third for capital, and one-third for acquisitions last year, while also reducing our total debt leverage, is truly impressive. We plan to continue this approach in our acquisition strategy, seeking businesses that maintain or enhance this trend.

Okay. Again, very helpful. I'm going to sneak one more in here. Just in the spirit of kind of setting up appropriate numbers early in the year. Is there anything you'd point out from an EPS cadence perspective within this full year outlook? I mean, particularly, I don't know, maybe first half, back half weighting or any strange comp nuances early in the year, you'd point out here?

Not really. Our first quarter is always our slowest quarter. Historically, our fourth quarters have become stronger as we've transformed the company. We don't see any significant changes in seasonality. As we look to the second half of the year, if we continue to increase pricing and see a normalization of inflation, there could be some potential upside. However, there is nothing significant expected in terms of quarter or second-half loading; it's aligned with our other plans.

Yes. I think the shift that we saw in 2021 becomes a new norm by quarter of how that lays out because it's changed pretty significantly from the risk of the Transportation Solutions business being lumpy and weather and things like that. I think with the mix of operating earnings, it will probably look similar to what we had in 2021. Shouldn't theoretically improve a little bit smoother because Petillo and Plateau, we expect the same kind of more or less seasonality in the business, but still feel some in that first quarter.

We have reached the end of the question-and-answer session, and I will now turn the call over to Mr. Joe Cutillo for closing remarks.

Thanks, Kyle. I'd like to thank everyone again for joining today's call. If you have any follow-up questions, please refer to the information provided in the press release related to our Investor Relations group at Sterling or our partners at The Equity Group. I hope everyone has a great day and thanks again for joining the call.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.