8-K
Sterling Infrastructure, Inc. (STRL)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| FORM 8-K |
|---|
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2022
| STERLING INFRASTRUCTURE, INC. | ||||||
|---|---|---|---|---|---|---|
| (Exact name of registrant as specified in its charter) | ||||||
| Delaware | 001-31993 | 25-1655321 | ||||
| (State or other jurisdiction of incorporation<br>or organization) | (Commission File Number) | (I.R.S. Employer<br>Identification No.) | ||||
| 1800 Hughes Landing Blvd.<br><br>The Woodlands, Texas | 77380 | |||||
| (Address of principal executive offices) | (Zip Code) | |||||
| Registrant’s telephone number, including area code: (281) 214-0777 | Securities registered pursuant to Section 12(b) of the Act: | |||||
| --- | --- | --- | ||||
| Common Stock, $0.01 par value per share | STRL | The NASDAQ Stock Market LLC | ||||
| (Title of Class) | (Trading Symbol) | (Name of each exchange on which registered) | Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||
| --- | --- | |||||
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR § 240.12b-2 of this chapter). | ||||
| --- | --- | |||||
| Emerging growth company | ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||
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| Item 2.02 | Results of Operations and Financial Condition. | |||||
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| On October 31, 2022, Sterling Infrastructure, Inc. (the “Company”) issued a press release announcing financial results for the three and nine months ended September 30, 2022 and an update on full year 2022 guidance. The copy of the press release is being furnished with this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.<br><br><br><br>The information provided in this Item 2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless the registrant specifically states that the information is to be considered “filed” under the Exchange Act, nor shall it be incorporated by reference in any filing made by the Company pursuant to the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto. | Item 7.01 | Regulation FD Disclosure. | ||||
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| On November 1, 2022, the Company will host a conference call to discuss the third quarter 2022 results as well as corporate developments. The slides to be used during the conference call are being furnished with this Current Report on Form 8-K as Exhibit 99.2 and are incorporated herein by reference.<br><br><br><br>The information provided in this Item 7.01 shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, unless the registrant specifically states that the information is to be considered “filed” under the Exchange Act, nor shall it be incorporated by reference in any filing made by the Company pursuant to the Exchange Act or the Securities Act, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto. |
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description | ||||
|---|---|---|---|---|---|
| 99.1 | Press release, dated October 31, 2022 | ||||
| 99.2 | Presentation slides, dated November 1, 2022 | ||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
| SIGNATURES | |||||
| --- | |||||
| Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | STERLING INFRASTRUCTURE, INC. | ||||
| --- | --- | --- | --- | ||
| Date: | October 31, 2022 | By: | /s/ Ronald A. Ballschmiede | ||
| Ronald A. Ballschmiede | |||||
| Chief Financial Officer |
Document
Exhibit 99.1
NEWS RELEASE
For Immediate Release:
October 31, 2022
Sterling Reports Record Third Quarter 2022 Results
Results Continue to Outpace Expectations
Increases 2022 Full Year Guidance
THE WOODLANDS, TX – October 31, 2022 – 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
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
(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.
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.
| Company Contact:<br><br>Sterling Infrastructure, Inc.<br><br>Ron Ballschmiede, Chief Financial Officer<br><br>281-214-0777 | Investor Relations Contact:<br><br>The Equity Group Inc.<br><br>Jeremy Hellman, CFA<br><br>212-836-9626 |
|---|
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,<br>2022 | December 31,<br>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. |
a20221031ex992presentati
We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow. Q3 2022 Earnings Call November 1, 2022
2Sterling | STRL: Third Quarter 2022 DISCLOSURE: Forward-Looking Statements This presentation contains, and the officers and directors of the Company may from time to time make, statements that are considered forward- looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. 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; our expected margin growth; and our plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this presentation, 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 presentation 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 presentation 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. This presentation may contain the financial measures: adjusted net income, EBITDA, adjusted EBITDA, and adjusted EPS, which are not calculated in accordance with U.S. GAAP. If presented, a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure will be provided in the Appendix to this presentation.
E-Infrastructure Solutions + Highest margins in portfolio + Fastest growing segment in revenue growth + Provide value-added solutions to blue-chip customers in all major East Coast markets + Develop advanced, large-scale site development systems & services for data centers, e-commerce distribution centers, commercial, warehousing, transportation, energy and more Building Solutions + 2nd highest margins in our portfolio + Serve the Nation's Top Builders in the Nation's Top Housing Markets: Texas & Arizona + Residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs and other concrete work Transportation Solutions + Consistent margins & disciplined revenue growth + Enhanced business mix + Infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail, water, wastewater and storm drainage systems and more + Providing infrastructure solutions in the Pacific & Rocky Mountain States and Texas Sterling | STRL: Third Quarter 2022 3 WHO is Sterling? NASDAQ STRL Shares outstanding(1) 30.3M HQ The Woodlands, TX Market cap(1) $826M Employees ~3,500(4) Revenue(2) $1,910M Segments E-Infrastructure Solutions Building Solutions Transportation Solutions EBITDA(2) $201M Projects underway ~290 Total Backlog(3) $1.67B A market-leading infrastructure service provider of e-infrastructure, building and transportation solutions. A story of successful execution of multi-year strategic business transformation since 2016; born of a vision that levers our entrepreneurial spirit. We offer a customer-centric, market-focused portfolio of goods and services geographically positioned in the right markets. (1) Shares outstanding and Market Cap as of October 28, 2022 (2) Full Year 2022 Revenue and EBITDA Mid-Point Guidance. *See EBITDA Reconciliation in the Appendix page 16 (3) Total Backlog at September 30, 2022 (4) Employee count as of October 1, 2022
Sterling | STRL: Third Quarter 2022 4 Strategic Execution | Proven Results | Strong Growth Strategic Elements: Solidify the Base | Grow High-Margin Products | Expansion into Adjacent Markets Key Objectives: Bottom-line Growth | Risk Reduction | Exceed Peer Performance
The Sterling Way in Action(3) + Community engagement and volunteerism is supported at the highest levels of our organization. + Support educational partnerships from K-12 to Higher-Ed + Projects at adult care centers, food banks, community centers + Safety barriers around project sites to protect workers, neighboring communities, vegetation and habitats. + Our Rolled Ankle Protection Program crushes tons of rock to create safe walking paths for all workers. + Fencing nesting trees of the federally protected burrowing owl during entire project duration. + Accelerated Bridge Construction, an innovative construction method used to reduce onsite construction time for building/ replacing/ rehabilitating bridges and improve work-zone safety for traveling public and workers + Reducing our carbon footprint + Material recycling at project sites + Onsite equipment repair eliminates equipment hauled to be serviced outside of project area The Sterling Way Sterling | STRL: Third Quarter 2022 5 Recent Safety Awards: + 2022 ARTBA(1) National Contractor Safety Award for under 1,000,000 category + 2021 AGC(2) Construction Safety Champion of the Year + 2021 2nd place AGC Construction Safety Excellence Award in the Heavy Division for over 800,000 hours Examples of our Safe and Sound Safety Program: + Daily Safety Briefings + Daily Safety Observations program + Job Hazard Analysis completed on major task (1) American Road & Transportation Builders Association (ARTBA) (2) Associated General Contractors of America (AGC) (3) Building a Better Tomorrow. The Sterling Way - 2022 Sustainability Report published March 23, 2022. The report is included in the Sterling Way (ESG) section of the Company’s website at https://www.strlco.com/sustainability Our culture is based on our commitment for caring for our people, our customers, our investors and our communities, that's The Sterling Way.
- Third Quarter 2022 Results Sterling | STRL: Third Quarter 2022 6
Third Quarter 2022 Results Highlights + Revenues: $556.9 million + Net Income: $29.5 million + EBITDA(4): $60.2 million + Diluted EPS: $0.97 cents Sterling | STRL: Third Quarter 2022 7 (1) Backlog and Cash & Cash Equivalents at September 30, 2022 (2) Combined Backlog includes Unsigned Low-bid Awards of $235 million at September 30, 2022 (3) Cash from operations for the nine months ended September 30, 2022 (4) 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. See EBITDA reconciliation on page 15. + Backlog(1): $1.67 billion with 13.1% margin + Combined Backlog(2): $1.90 billion with 12.9% margin + Cash & Cash Equivalents(1): $146.5 million + Cash Flow from Operations(3): $130.6 million + Record Third Quarter 2022 + Results Continue to Outpace Expectations
Sterling | STRL: Third Quarter 2022 8 Quarterly Consolidated and Segment Results ($ in millions) Q3 2022 Q3 2021 Revenues $ 556.9 $ 463.4 Gross Profit 82.0 57.8 G&A Expense (26.5) (19.6) Intangible Amortization (3.5) (2.9) Acquisition Related Costs (0.3) — Other Operating Expense, Net (4.1) (3.3) Operating Income 47.7 32.0 Interest, Net (5.0) (3.9) Gain on Extinguishment of Debt, Net — 1.0 Income Tax Expense (12.6) (7.3) Less: Net Income Attributable to NCI (0.6) (0.6) Net Income to STRL $ 29.5 $ 21.1 Diluted EPS $ 0.97 $ 0.72 EBITDA (1) $ 60.2 $ 40.0 ($ in millions) Q3 2022 Q3 2021 E-Infrastructure Solutions Revenue $ 255.5 $ 121.3 Operating Income $ 37.5 $ 19.2 Operating Margin 14.7 % 15.8 % Transportation Solutions Revenue $ 221.1 $ 249.9 Operating Income $ 9.6 $ 9.3 Operating Margin 4.4 % 3.7 % Building Solutions Revenue $ 80.3 $ 92.3 Operating Income $ 9.3 $ 9.2 Operating Margin 11.6 % 10.0 % (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. See EBITDA reconciliation on page 15.
Sterling | STRL: Third Quarter 2022 9 Increased EBITDA and Cash Flow Drives Liquidity Strategy Foward Looking EBITDA Debt Coverage Ratio 2.4 2.1 12/31/21 9/30/22 0 0.5 1 1.5 2 2.5 We expect to pursue strategic uses of our liquidity, such as, strategic acquisitions, investing in capital equipment and managing leverage. Capital allocation focus • Long-term shareholder value • Complementing organic growth in existing and new markets • Strong cash flow profile provides flexibility and drives liquidity strategy Sterling is comfortable with a forward looking debt/ EBITDA coverage ratio of +/-2.5X. 5-Year Credit Facility $429M Term Loan Borrowings $75M Revolving Credit Facility (Undrawn) Key Cash Flow Considerations FY 2022 Est. FY 2021 Cash flows from Operations ~$150M $151.6M Net CAPEX $53M to $57M $42.5M • Cash at September 30, 2022 was $146.5 million • Updated 2022 EBITDA guidance(1): $197M to $205M • Expected additional 2022 noncash expenses: $45M to $47M (NOL utilization, stock-based compensation, noncash interest expense, etc.) • Scheduled term loan debt payments total $23.2M and $31.9M for 2022 and 2023, respectively (1) See EBITDA guidance reconciliation on page 16.
Sterling | STRL: Third Quarter 2022 10 Contact Us Sterling Ron Ballschmiede, Chief Financial Officer Mary Morley, Investor Relations Sterling Infrastructure, Inc. Tel: (281) 214-0777 The Equity Group Inc. Jeremy Hellman Tel: (212) 836-9626 jhellman@equityny.com
- Appendix Sterling | STRL: Third Quarter 2022 11
Sterling | STRL: Third Quarter 2022 12 Strategy Driving Profitable Growth *Combined Backlog includes Unsigned Low-bid Awards of $235 million at September 30, 2022 *See EBITDA Reconciliations in the Appendix pages 15 - 17
Sterling | STRL: Third Quarter 2022 13 2022 Modeling Considerations(1) (1) In millions except for EPS and percentages. (2) See EBITDA guidance reconciliation on page 16. Revenue $1,900 to $1,920 Gross Margin ~14.0% G&A Expense as % of Revenue ~5.0% Other Operating Expense Net $7 to $9 JV Non-Controlling Interest Expense $2 to $3 Effective Income Tax Rate ~28% Net Income $94 to $98 Diluted EPS $3.08 to $3.21 Expected Dilutive Shares Outstanding 30.5 EBITDA(2) $197 to $205
2022 Modeling Considerations Continued* Sterling | STRL: Third Quarter 2022 14 * In Millions except for percentages Non-Cash Items FY 2022 Expectations FY 2021 Depreciation $35 to $36 $22.7 Intangible Amortization $15 $11.5 Debt Issuance Cost Amortization $2 to $3 $2.2 Stock-based Compensation $10 to $11 $11.8 Income Tax Expense (Federal) 24% of Pretax Income $19.4 Other Cash Flow Items FY 2022 Expectations FY 2021 Interest Expense, including Debt Issuance $19 to $20 $19.3 CAPEX, net of disposals $53 to $57 $42.5
Sterling | STRL: Third Quarter 2022 15 (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. 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 STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES EBITDA RECONCILIATION (In thousands) (Unaudited)
Sterling | STRL: Third Quarter 2022 16 (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. 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 STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES EBITDA GUIDANCE RECONCILIATION (In millions) (Unaudited)
Sterling | STRL: Third Quarter 2022 17 (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 or loss on extinguishment of debt. 2016 2017 2018 2019 2020 2021 Net (loss) income attributable to Sterling common stockholders $ (9,238) $ 11,617 $ 25,187 $ 39,901 $ 42,306 $ 62,645 Depreciation and amortization 15,699 16,994 16,770 20,740 32,785 34,201 Interest expense, net of interest income 2,595 9,486 11,333 15,544 29,216 19,296 Income tax expense (benefit) 88 118 1,738 (26,216) 22,471 24,900 Loss (gain) on extinguishment of debt, net — 755 — 7,728 301 (2,032) EBITDA(1) $ 9,144 $ 38,970 $ 55,028 $ 57,697 $ 127,079 $ 139,010 STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES HISTORICAL EBITDA RECONCILIATION (In thousands) (Unaudited)
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