Greetings, and welcome to the Sterling Infrastructure's Third Quarter 2022 Earnings Conference Call and Webcast. As a reminder, this conference is being recorded and all participants are on a listen-only mode. There are accompanying 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 will now turn the call over to Mr. Joe Cutillo. Thank you, sir. Please go ahead.

Thanks, Doug. Good morning, everyone, and thank you for joining Sterling's third quarter 2022 earnings call. The third quarter marked the 19th quarter with period-over-period improvements since 2017 and the eighth time we have raised our guidance during that timeframe. This world-class level of performance is attributed to our people, our culture, and our strategy, or what we refer to as the Sterling Way. It is an honor to be part of a team of over 3,000 colleagues that consistently deliver best-in-class results while making sure we're always taking care of our fellow employees, our customers, and our communities. The Sterling Way has not only created an exciting culture for employees to be part of but has delivered great results for our shareholders. Before we talk about the results of another outstanding quarter, I'd like to spend some time talking about our end markets and what is going on in each of our segments. E-Infrastructure, which remains our largest segment and represented 46% of our revenue and 66% of our segment operating income in the quarter, saw record bookings as data center, distribution center, and warehouse demand remained high. In addition, we began seeing the first wave of onshoring of new manufacturing facility activity take place. A recent win of the new 500-acre plus Rivian Electric Vehicle plant in Georgia is yet another example of our ability to do large, complex jobs in almost any end market. This new manufacturing activity, along with the continued strong demand for data centers and e-commerce warehouses, continues to give us a positive outlook for 2023. Our Transportation Solutions segment, which represented 40% of our revenue and 17% of our segment operating income in the quarter, remains extremely strong as we saw bid activity pick up and margins improve. Our current backlog has a record margin of over 11%. Federal funding from the infrastructure bill continues to flow to the states, and the state matching funds remain extremely strong. The combination of our multiyear backlog, along with improved margins and increased bid activity, positions us well to finish 2022 strongly and go into 2023 on solid footing. We continue to be disciplined on the jobs we select and will continue to focus on driving margin improvements through 2023. Our Building Solutions segment, which represented 14% of our revenue and 17% of our segment operating income in the quarter, saw significant softening in the quarter of new housing structure. The combination of material inflation and interest rate increases has caused the market to become less affordable for buyers. We believe this trend will continue through the fourth quarter. We have begun seeing builders become more aggressive with incentive programs to help buyers overcome the affordability issue, but do not believe we'll see any significant impact of these efforts until 2023. Despite the revenue decrease in the quarter, our operating income remained flat year-over-year as the revenue drop was offset by price increases. Overall, we're still facing challenges with the supply chain as we continue to see price increases and availability issues with concrete. We believe the concrete availability issue will change significantly in the fourth quarter for the better, but are uncertain as to how long and how significant the descent challenges will be. Now let's talk about the great results for the quarter. Revenue versus prior year was up 20%. This strong growth was driven by our E-Infrastructure segment whose revenue was up 111%. Our gross margin increased 220 basis points to 14.7%, with strong contributions from both Transportation and Building Solutions. Our net income increased 40%. Our earnings per share increased 35%, and our EBITDA increased 50%. We generated over $96 million of cash from operations and finished the quarter with $146 million of cash and cash equivalents. Our combined backlog grew to an all-time high of $1.9 billion. This is a 25% increase over year-end 2021, and positions us very well for the future. Our record results in the third quarter, coupled with our stronger-than-expected outlook for the fourth quarter, has enabled us to raise our full-year guidance for the second time this year. The midpoint of our adjusted guidance improves net income by 53%, our revenue by 21%, and our EPS by 47% over the prior year. The new revenue guidance is $1.9 billion to $1.92 billion, with a net income range of $94 million to $98 million, and an EPS range of $30.8 to $3.21. Now I'd like to turn it over to Ron to give you more details on the quarter and our results. Ron?

Thanks, Joe. Good morning. I'm pleased to discuss our strong third quarter results and another record quarterly performance. Our updated investor relations slide presentation has been posted to our website and includes additional financial details to further understand our third quarter results. The presentation also provides additional modeling considerations, which underpin our 2022 revenue and earnings guidance. As you may recall, we closed the Petillo acquisition on December 30, 2021, resulting in the inclusion of Petillo's financial results for all of 2022. Let me take you through our financial highlights, starting with our record backlog metrics. At September 30, 2022, our backlog totaled $1,665 million, up $172 million over the beginning of the year. The gross margin of this backlog was 13.1%, a 90 basis point increase over the beginning of the year. A higher proportion of E-Infrastructure backlog and improved Transportation backlog drove this margin improvement. Unsigned low bid awards at the end of the third quarter totaled $235 million, an increase from $23 million at the end of 2021. We finished the current quarter with a record combined backlog of $1,900 million, a 25% increase over the end of 2021. Our gross profit and combined backlog was 12.9% compared to 12.2% at the beginning of the year. Our current quarter book-to-burn ratios were 1.24 times and 1.29 times for backlog and combined backlog, respectively. Our year-to-date book-to-burn ratios were 1.13 times for backlog and 1.29 times for combined backlog. Revenues for the current quarter were $557 million, up $93 million or 20% over the prior year quarter. The current quarter revenues were $256 million, an increase over the prior year quarter of $84 million. The current quarter increase includes revenues of $84 million from the late 2021 acquisition of Petillo and organic growth coming from Plateau of $50 million. Including the Plateau acquisition on a pro forma basis, E-Infrastructure organic revenue growth was 40% and 36% for the three and nine months ended September 30, 2022, respectively. The E-Infrastructure organic growth reflects strong demand for distribution centers, data centers, and warehouses across our expanding footprint. Building Solutions revenues declined by $12 million compared to the prior year period. This was primarily driven by a decline in housing demand as ownership became less affordable due to increasing interest rates and inflation. Transportation revenues were $221 million in the current quarter, a decrease of $28.8 million or 12% from the prior year comparable quarter. This decrease was primarily driven by lower heavy highway and aviation revenues due to the timing of backlog execution, partially offset by increases in water-related projects. Consistent with our strategic intent, low bid heavy highway work declined by approximately $10 million in the quarter compared to the prior year. As a result of these third quarter results, we have increased our 2022 revenue guidance to a range of $1.9 billion to $1.9 billion. Current quarter gross profit was $82 million, an increase of $24 million over the 2021 quarter. Gross margin increased to a record 14.7% or 220 basis points over the comparable 2021 quarter. This margin increase resulted from an increased mix of revenues from our higher margin E-Infrastructure segment, and increased margins from both our Transportation and Building Solutions segments. Our gross margin improvements were negatively impacted by the continuing supply challenges and inflationary pressures, which primarily impact our E-Infrastructure and Building Solutions segments. These challenges began in the second quarter of 2021 and have continued to date. General and administrative expenses increased by $6.8 million in the current quarter to $26.5 million. Over a third of this increase is attributable to the Petillo acquisition, with the balance driven by inflation and higher revenue-related incremental costs. We continue to expect our full-year G&A guidance to be approximately 5% of revenues. Operating income for the quarter was $47.7 million, an increase from $32 million for the 2021 quarter. Our current quarter operating margin increased to 8.6% compared to 6.9% in the prior year. Our current quarter effective income tax rate was 29%. We expect our full-year effective income tax rate to approximate 28%. The net effect of all these items resulted in a record third quarter net income of $29.5 million or $0.97 per share. The prior year net income and EPS were $21.1 million and $0.72 per share, respectively. Our increased 2022 net income guidance is now $94 million to $98 million, and our earnings per share guidance is $30.8 to $3.21. Our third quarter EBITDA totaled $60.2 million, an increase of 50% over the prior year quarter of $40 million. As a percent of revenues, EBITDA improved to 10.8% for the quarter, up from 8.6% in the prior year quarter. We've increased our 2022 EBITDA guidance to a range of $197 million to $205 million. Cash flow from operating activities in the first nine months of 2022 was $130.6 million compared to $135.7 million in the comparable 2021 period. Our current quarter 2022 cash flow from operations was $96.1 million. This strong third quarter cash flow recovered significantly from the slow cash generation in the early part of 2022. The 2022 cash flow fluctuations were primarily driven by the ramp-up of several new large alternative delivery projects ordered in the first half of 2021 and the significant 2022 organic revenue growth of our E-Infrastructure segment. Cash flows from investing activities included $44.8 million of net debt CapEx, with a $3 million final acquisition-related payment relating to the final working capital adjustment. The CapEx increase reflects the increased E-Infrastructure Solution activities, including the impact of the Petillo acquisition. Our cash flow from financing activity was a $17.7 million outflow, reflecting our scheduled debt payments for the first three quarters of 2022. Finally, the strength of our portfolio businesses and our strong liquidity consisting of a record cash balance of $146 million and comfortable debt levels at approximately two times forward-looking EBITDA. Although we have not seen a significant economic downturn across our segments, we are prepared if conditions worsen to deal with these uncertainties and to take advantage of additional opportunities for the balance of 2022 and into 2023 and beyond. Now, I'll turn it back over to Joe.

Thanks, Ron. Our strategy to transform the company from a hard bid heavy highway business to an infrastructure solution provider for customers, end markets, and product solutions has and will continue to prove its ability to deliver exceptional results even with adverse conditions in one of our segments. There remains tremendous uncertainty in what the 2023 U.S. economy will bring, but I feel confident that Sterling is positioned better than ever to weather any storm ahead, and I expect us to continue our positive growth trends. To reiterate, our increased year-end guidance range for revenue is $1.9 billion to $1.92 billion, with a net income range of $94 million to $98 million, and an EPS range of $3.08 to $3.21. With that, I'd like to turn it over for any questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Our first question comes from Sean Eastman with KeyBanc. Please go ahead with your question.

Good morning, gents. Thanks for taking my questions. I wanted to start on Building Solutions. Obviously, seeing the top-line pressure in the third quarter, it sounds like the message is that the underlying run rate kind of continued to decline through the quarter. I guess, two things: first, any kind of preliminary thoughts on where revenues trend in 2023 from here? And second, I'm curious what's going on under the hood. I know there was a thought that perhaps Houston and Phoenix could help cushion this offering in Dallas. So, any update on kind of the underlying moving pieces there would be helpful as well.

We still believe that Houston and Phoenix will provide some support; in fact, Houston showed an increase during the quarter, and Phoenix may have as well. However, we anticipate a dip. We're starting to see builders implement incentives and adjust their plans for upcoming homes to make them more affordable. They are actively trying to attract buyers. The situation isn't just a steady decline; it's somewhat unpredictable with good and bad weeks. We believe it'll take some time for these incentives to engage buyers and help them realize they can afford homes. Therefore, we expect to see a decline through the fourth quarter. As we move into 2023, we think things will stabilize, and we’ll likely start to see an upward trend emerge, probably by late first quarter or second quarter of 2023.

Okay. That's helpful, Joe. And then, on the E-Infrastructure margins, can you just refresh us on where we should be running with Petillo in the mix kind of ex the supply chain noise? I mean, is the operating environment stabilizing, should we expect some margin expansion in this segment in 2023?

Sure. Let me provide a high-level overview before Ron goes into the details. We are facing two key dynamics in our infrastructure. The first and most significant is the difference in margins between Petillo and Plateau. While their margins are nearly the same, Petillo is compelled by its customer base to engage in additional lower-margin activities, such as sidewalk work and sound walls. Additionally, we are experiencing some overall margin decline due to inflation and supply chain challenges. We are navigating both of these dynamics. For context, we use about 700,000 gallons of diesel each month, and we noticed a $2 increase; it started lower but rose by $2 by the end of the quarter compared to earlier in the year. Now, Ron, would you like to discuss the normalized numbers and our outlook moving forward?

Yeah. So, to the first point of just the different scopes of work that each of our infrastructure folks work on, it's overall. It reduces our operating income from the old days where we only had one to the inclusion of Petillo. It's about somewhere between 150 and 200 basis points. And that'll bounce around a little bit because of mix, but that's sort of a going forward run rate. It's still great margins and great opportunities, but it just is a lower margin mix of work. And I think it's hard to measure the inflation and supply chain out, but it's probably about an equal number. That's the one that will recover if we see an improvement in the supply chain side, and obviously inflation, particularly in this year, diesel more than anything else bouncing around and then back up again of late. So, those are the kind of two things. One, sort of a permanent perspective with the current mix of businesses; the other one is the opportunity to claw that back in the next several quarters as we hopefully see some improvement.

Okay. Got it. And then last one for me on the cash flows. I recall you guys took down the guidance in the second quarter. Now it looks like we're trending to the top end of the original guidance. So, just curious what happened between those two updates?

I was wrong about my predictions. The first six months showed significant organic growth and the inclusion of Petillo, but I may have underestimated the recovery we would see later in the year, especially in E-Infrastructure and Transportation with those major projects starting up. Last year, we began five key projects in the first half, which typically yield strong front-end cash flow, balancing out throughout the year, but this year it balanced out faster than expected. This undoubtedly influenced our changes in revenue guidance and earnings. The E-Infrastructure sector had an outstanding quarter, and its profitability is our strongest growth area, contributing to our profits. We adjusted our guidance to around $150 million, similar to last year. To be honest, I didn't expect us to exceed that this year, but we're in a good position to be right on target. Last year's figure was approximately $150 million, which is positive news and sets us up well for the future, whether in management or other aspects.

I think the other thing not to underplay in the quarter is we saw very nice margin improvements and continued margin improvement in Transportation. And the fact that we're able to hold our operating income in our Building Solutions with 13% or so less revenue was very nice. And more than beat our thesis back.

Sorry. Lost you guys for a second there. I appreciate it, and I'll turn it over there. Thanks, guys.

Thanks, Sean.

Our next question comes from the line of Brent Thielman from D.A. Davidson. Please proceed with your question.

Yeah. Thanks. Hey, Joe, how far does that E-Infrastructure backlog provide visibility for you at this point? Are you still filling in for the first half or are you starting to look more into the second half of 2023 at this point?

Yeah. Generally, we have in the difference between Transportation and E-Infrastructure. Transportation, we have multiyear backlog. In E-Infrastructure, we look at it as we generally have six months or so, six or seven months of backlog there. So, we're starting to feel pretty full for the first half. We still have some capacity in the first half that we can bring in. And we're assuming all the projects start on time and all that stuff, obviously. So, we're starting to fill up that first half in the stuff we're hunting for now is stuff that would start late in the first half or going into the second part of next year.

Okay. Great. And then, continuing uptick in Transportation margins is great to see, just wanted to get your thoughts as we move into 2023, if that's still your expectation that you can continue to improve off levels?

We remain optimistic and see plenty of opportunity for growth. Each percentage of margin improvement translates to about $7 million or $8 million for us. Our goal is to be selective in the projects we choose and aim to increase our margin by about one percentage point over the next 18 to 24 months. If the market becomes very competitive and margins exceed 12% or 13%, we may take on additional work at those margins. However, we will not accept lower margins and will focus on increasing them further.

But Sean, or Brent, you have a long history in this field. Our margins in this business are currently among the best globally. The fact that we believe we can improve them by another point or two is quite remarkable.

Yeah. Okay. That's all I have today. Thanks, guys.

Thanks.

Our next question comes from the line of Brian Russo with Sidoti & Company. Please proceed with your question.

Hi, good morning.

Hey, Brian.

So just to follow up on the Transportation segment. You announced that large $34 million contract. You mentioned better-than-peer average margins. What gives you the competitive advantage in the bidding process to not only win these contracts, but at higher margins than what your peers are realizing?

Well, I think the first most important thing is, we believe one of our first jobs and responsibilities in job selection, and there's billions of dollars being bid. Not all that billions of dollars is a good job. So, one of the things we spend a lot of time on is understanding what our core competencies are, what we're really good at, and let's find those jobs and bid them appropriately. We also continue to move towards more alternative delivery and continue to shrink our low bid heavy highway to where we have much more control and much more line of sight of our destiny, which brings down our risk profile on these jobs. So, the other thing that people tend not to understand is not only are we selective on the jobs, not only is our initial margin that we're winning these at better, but one of the next most important things is that, in general and on average, we finish slightly above our bid margins on these jobs. So that says that we have both mitigated risk and we also are executing at or better than our anticipated activities.

Okay. Great. And just another follow on, the IIJ funding, are you actually seeing those funds being deployed by Department of Transportation customers in your footprint? Or is your sense that there's going to be a ramp up later in 2023?

It'll continue to ramp up, but we started to see the activity kick off towards the end of the second quarter, continue to ramp up in the third quarter, will stay very strong. Our crystal ball of looking at what jobs are coming out in the first half and next year right now, is even stronger. So, as the money flows to the states, the states then determine the projects. And so, we think it will continue to grow in and through 2023.

Okay. Great. And then just on the infrastructure, obviously the Rivian award was very positive. The way to look at that is that kind of the first phase of what could be multiyear, kind of recurring work for Sterling infrastructure?

Yeah. Both the Rivian facility and the vast majority of the data centers, when we announce those jobs, that's generally just the first phase of multiple phases. The Rivian plant will be a multiyear, multi-phase activity. Now, we still have to win those next phases, but we have a very high percentage of win rates. When we get in there, we do the first phase.

Right. And the follow-on phases obviously would be upside to your combined backlog?

That is correct. And just make sure I'm right on this run. The Rivian job is not in the third quarter backlog or in the third quarter announcements for E-Infrastructure of that $300 million.

Right. That contract was ultimately signed in early October. So, that'll be a fourth-quarter renewal.

Okay. Got it. And then, also you mentioned reshoring, and obviously we're seeing a lot of high-tech industrial expansion maybe accelerated by the CHIPS Act and specifically Micron up at Syracuse, New York. And I'm just wondering, is that within Petillo's footprint? And if you're not directly involved with Micron, are you planning to be involved in what's going to be quite a bit of regional expansion to support that new facility complex?

Yeah. That one's in the very early stages, I have no idea who will ultimately get that or where it's going. It's still very, very early. But certainly, that is within our footprint. We are watching the CHIPS Act and all of that manufacturing. There are several projects through that region that they're looking at very closely. Where we have seen activities and in a lot of cases we're not allowed to announce, and in some cases we don't even know who the end customer is, but it is around the battery activity associated with electric vehicles. So, we have our second project that we're doing on that in the East Coast, and we're seeing a tremendous amount of activity around that area as well.

Okay. Great. And then, one more, if I can. Strong operating cash flow year-to-date, growing cash balance, and you mentioned positioning yourselves for opportunities in 2023. Maybe you could just elaborate on how you prioritize capital allocation?

We have built a solid reserve in case of challenges in 2023. However, given our backlog and current observations, we remain very optimistic about the year. We will seek the right small acquisitions, particularly to increase capacity and enhance capabilities in our Building Solutions segment. In our E-Infrastructure segment, we will also look for add-on acquisitions that can provide additional services or products to our existing operations. Most of our attention as we move into 2023 will be on small tuck-in acquisitions. Although we're still considering larger opportunities, we are being cautious at this moment. We appreciate our low debt ratio and strong cash position, and we will continue to seek the right tuck-ins, which could range from $5 million to $50 million, that we can quickly integrate to gain a competitive edge or enhance our offerings to our customers.

Okay. Great. Thank you very much.

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Thanks Doug. I'd like to thank everyone again for joining today's call. If after this call you have any follow-up questions or wish to set up a follow-up call with us, please feel free to contact Mary and our Investor Relations group or our partners at the equity group. Their contact information can be found in the earnings release posted earlier this week. With that, thanks again, everybody, and hope you have a great day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.