8-K
Sterling Infrastructure, Inc. (STRL)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| FORM 8-K |
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CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2022
| STERLING CONSTRUCTION COMPANY, 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. | ☐ | |||
| --- | --- | |||||
| Item 2.02 | Results of Operations and Financial Condition. | |||||
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| On May 2, 2022, Sterling Construction Company, Inc. (the “Company”) issued a press release announcing financial results for the three months ended March 31, 2022. 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 May 3, 2022, the Company will host a conference call to discuss the first 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 May 2, 2022 | ||||
| 99.2 | Presentation slides, dated May 3, 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 CONSTRUCTION COMPANY, INC. | ||||
| --- | --- | --- | --- | ||
| Date: | May 2, 2022 | By: | /s/ Ronald A. Ballschmiede | ||
| Ronald A. Ballschmiede | |||||
| Chief Financial Officer |
Document
Exhibit 99.1
NEWS RELEASE
For Immediate Release:
May 2, 2022
Sterling Reports Record First Quarter 2022 Results
Earnings Continue to Outpace Expectations
Petillo Delivers Immediately Accretive Earnings
THE WOODLANDS, TX – May 2, 2022 – Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the first quarter 2022.
First Quarter 2022 Results (as compared to First Quarter 2021)
•Total Revenue of $410.3 million, an increase of 30%
•Net Income was $19.3 million, or $0.64 per diluted share, an increase of 82% and 73%, respectively
•EBITDA(1) of $39.8 million, an increase of 33%
•Cash and Cash Equivalents totaled $80.4 million at March 31, 2022
•Total backlog at March 31, 2022 was $1.53 billion, an increase of 2%
For the three months ended March 31, 2022, the Company reported net income of $19.3 million, or $0.64 per diluted share, versus $10.6 million, or $0.37 per diluted share, in the first quarter 2021. Revenue increased by 30% over the prior year quarter, with half coming from organic growth within all three segments and half generated from the acquired Petillo business. EBITDA increased 33% to $39.8 million in the first quarter of 2022, versus $29.9 million in the prior-year period. First quarter EBITDA benefited from strong revenue growth from each segment, partially offset by ongoing supply chain and inflation challenges.
Backlog at March 31, 2022 increased to $1.53 billion, versus $1.49 billion at the prior year-end period.
CEO Remarks and Outlook
“We are pleased with our strong start to the year, especially given the inflation and supply chain challenges that our entire industry is experiencing,” stated Joe Cutillo, Sterling’s Chief Executive Officer.
“The transformation we made over the last several years continues to pay off as our E-Infrastructure Solutions segment became our largest segment this quarter. Our two highest margin and fastest growing segments, E-Infrastructure and Building Solutions, represented 89% of our total earnings in the quarter. In addition to year over year improvements in all of our segments, our first quarter results included a full quarter with Petillo, which we acquired in late 2021. We are seeing impressive strategic synergies between Petillo and Plateau and are excited to offer even broader services to blue-chip customers across all major markets in the Southern, Northeastern and Mid-Atlantic regions.
We understand that volatility remains uncertain for the remainder of the year, with inflationary and supply chain pressures continuing to be a major challenge; however, with the strong start to the year, our current backlog levels and the strength in our markets, we feel confident in reaffirming our full year 2022 guidance. The mid-point of our guidance would improve our net income by 37%, our revenue by 17% and our EPS by 30% over 2021,” Mr. Cutillo concluded.
Full Year 2022 Guidance:
•Revenue of $1.825 billion to $1.875 billion
•Net Income of $83 million to $89 million
•EPS of $2.69 to $2.88
•EBITDA of $185 million to $200 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.
Conference Call
Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, May 3, 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 Construction 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 may contain “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; 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 Construction Company, 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 |
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STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Revenues | $ | 410,320 | $ | 315,316 |
| Cost of revenues | (354,181) | (270,284) | ||
| Gross profit | 56,139 | 45,032 | ||
| General and administrative expense | (23,072) | (17,099) | ||
| Intangible asset amortization | (3,568) | (2,866) | ||
| Acquisition related costs | (255) | — | ||
| Other operating expense, net | (975) | (2,312) | ||
| Operating income | 28,269 | 22,755 | ||
| Interest income | 10 | 14 | ||
| Interest expense | (4,587) | (6,004) | ||
| Gain (loss) on extinguishment of debt, net | 2,428 | (337) | ||
| Income before income taxes | 26,120 | 16,428 | ||
| Income tax expense | (6,597) | (4,760) | ||
| Net income | 19,523 | 11,668 | ||
| Less: Net income attributable to noncontrolling interests | (271) | (1,113) | ||
| Net income attributable to Sterling common stockholders | $ | 19,252 | $ | 10,555 |
| Net income per share attributable to Sterling common stockholders: | ||||
| Basic | $ | 0.64 | $ | 0.37 |
| Diluted | $ | 0.64 | $ | 0.37 |
| Weighted average common shares outstanding: | ||||
| Basic | 29,964 | 28,279 | ||
| Diluted | 30,112 | 28,763 |
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | % of<br>Revenues | 2021 | % of<br>Revenues | |||
| Revenues | ||||||
| E-Infrastructure Solutions | $ | 168,927 | 41% | $ | 96,572 | 31% |
| Transportation Solutions | 160,499 | 39% | 147,054 | 46% | ||
| Building Solutions | 80,894 | 20% | 71,690 | 23% | ||
| Total Revenues | $ | 410,320 | $ | 315,316 | ||
| Operating Income | ||||||
| E-Infrastructure Solutions | $ | 21,285 | 12.6% | $ | 17,812 | 18.4% |
| Transportation Solutions | 3,686 | 2.3% | 2,666 | 1.8% | ||
| Building Solutions | 9,358 | 11.6% | 7,361 | 10.3% | ||
| Segment Operating Income | 34,329 | 8.4% | 27,839 | 8.8% | ||
| Corporate | (5,805) | (5,084) | ||||
| Acquisition Related Costs | (255) | — | ||||
| Total Operating Income | $ | 28,269 | 6.9% | $ | 22,755 | 7.2% |
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| March 31,<br>2022 | December 31,<br>2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 80,395 | $ | 81,840 |
| Accounts receivable | 226,397 | 232,153 | ||
| Contract assets | 87,865 | 83,310 | ||
| Receivables from and equity in construction joint ventures | 19,292 | 16,896 | ||
| Other current assets | 21,941 | 20,492 | ||
| Total current assets | 435,890 | 434,691 | ||
| Property and equipment, net | 212,603 | 204,316 | ||
| Operating lease right-of-use assets, net | 37,344 | 24,520 | ||
| Goodwill | 252,353 | 259,791 | ||
| Other intangibles, net | 300,055 | 303,223 | ||
| Other non-current assets, net | 4,488 | 4,455 | ||
| Total assets | $ | 1,242,733 | $ | 1,230,996 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 143,400 | $ | 144,982 |
| Contract liabilities | 116,182 | 127,932 | ||
| Current maturities of long-term debt | 30,368 | 28,230 | ||
| Current portion of long-term lease obligations | 10,117 | 8,841 | ||
| Accrued compensation | 25,815 | 22,803 | ||
| Other current liabilities | 13,632 | 18,972 | ||
| Total current liabilities | 339,514 | 351,760 | ||
| Long-term debt | 417,331 | 428,588 | ||
| Long-term lease obligations | 27,326 | 15,831 | ||
| Members’ interest subject to mandatory redemption and undistributed earnings | 55,754 | 55,115 | ||
| Deferred tax liability, net | 20,758 | 14,656 | ||
| Other long-term liabilities | 4,410 | 4,819 | ||
| Total liabilities | 865,093 | 870,769 | ||
| Stockholders’ equity: | ||||
| Common stock | 302 | 298 | ||
| Additional paid in capital | 276,597 | 280,274 | ||
| Retained earnings | 99,170 | 79,918 | ||
| Accumulated other comprehensive loss | (160) | (1,723) | ||
| Total Sterling stockholders’ equity | 375,909 | 358,767 | ||
| Noncontrolling interests | 1,731 | 1,460 | ||
| Total stockholders’ equity | 377,640 | 360,227 | ||
| Total liabilities and stockholders’ equity | $ | 1,242,733 | $ | 1,230,996 |
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 19,523 | $ | 11,668 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 11,767 | 8,305 | ||
| Amortization of debt issuance costs and non-cash interest | 556 | 660 | ||
| Gain on disposal of property and equipment | (228) | (68) | ||
| (Gain) loss on debt extinguishment, net | (2,428) | 337 | ||
| Deferred taxes | 5,640 | 4,142 | ||
| Stock-based compensation | 3,836 | 1,835 | ||
| Change in fair value of interest rate swap | (90) | (22) | ||
| Changes in operating assets and liabilities | (19,393) | 11,233 | ||
| Net cash provided by operating activities | 19,183 | 38,090 | ||
| Cash flows from investing activities: | ||||
| Capital expenditures | (14,969) | (11,209) | ||
| Proceeds from sale of property and equipment | 406 | 208 | ||
| Net cash used in investing activities | (14,563) | (11,001) | ||
| Cash flows from financing activities: | ||||
| Repayments of debt | (5,928) | (30,543) | ||
| Distributions to noncontrolling interest owners | — | (1,959) | ||
| Net cash used in financing activities | (5,928) | (32,502) | ||
| Net change in cash, cash equivalents, and restricted cash | (1,308) | (5,413) | ||
| Cash, cash equivalents, and restricted cash at beginning of period | 88,693 | 72,642 | ||
| Cash, cash equivalents, and restricted cash at end of period | 87,385 | 67,229 | ||
| Less: restricted cash (Other current assets) | (6,990) | (5,827) | ||
| Cash and cash equivalents at end of period | $ | 80,395 | $ | 61,402 |
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
EBITDA RECONCILIATION
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Net income attributable to Sterling common stockholders | $ | 19,252 | $ | 10,555 |
| Depreciation and amortization | 11,767 | 8,305 | ||
| Interest expense, net of interest income | 4,577 | 5,990 | ||
| Income tax expense | 6,597 | 4,760 | ||
| (Gain) loss on extinguishment of debt, net | (2,428) | 337 | ||
| EBITDA (1) | $ | 39,765 | $ | 29,947 |
| (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. |
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
EBITDA GUIDANCE RECONCILIATION
(In millions)
(Unaudited)
| Full Year 2022 Guidance | ||||
|---|---|---|---|---|
| Low | High | |||
| Net income attributable to Sterling common stockholders | $ | 83 | $ | 89 |
| Depreciation and amortization | 50 | 54 | ||
| Interest expense, net of interest income | 19 | 23 | ||
| Income tax expense | 35 | 36 | ||
| Gain on extinguishment of debt, net | (2) | (2) | ||
| EBITDA (1) | $ | 185 | $ | 200 |
| (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. |
strl_q12022xearningscall
We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow. 1ST QUARTER EARNINGS CALL May 3, 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; 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. 2S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2
WHO is Sterling? + E-Infrastructure Solutions + Highest margins in portfolio + Fastest growing segment in revenue growth + Expanded geographic footprint to cover 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 + 2nd fastest growing segment in revenue growth + Expanded footprint in Texas and 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 Sterling, a market-leading infrastructure service provider of e-infrastructure, building and transportation solutions. We offer a customer-centric, market- focused portfolio of goods and services geographically positioned in the right markets. 3S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Strategic Elements: Solidify the Base | Grow High-Margin Products | Expansion into Adjacent Markets Key Objectives: Bottom-line Growth | Risk Reduction | Exceed Peer Performance NASDAQ STRL Shares outstanding (1) 30.3M HQ The Woodlands, TX Market cap(2) $697.7M Employees ~3,000+ Revenue(3) $1,850M Segments E-Infrastructure Solutions Building Solutions Transportation Solutions EBITDA(3) $192.5M Projects underway ~250 Total Backlog(4) $1.53B (1) Shares outstanding at 03/31/2022 (2) Market Cap as of 05/02/22 (3) Full Year 2022 Revenue and EBITDA Mid-Point Guidance. See EBITDA recon on page 17. (4) Total Backlog at 03/31/2022
WHY Sterling? + Our strategic elements, our blueprint for bottom-line growth, reducing risk and consistently outperforming peers: + Solidify the Base + Grow High-Margin Products + Expansion into Adjacent Markets + We build value for investors seeking high margins, healthy cash flow, proven performance and strong operational execution + Executing growth strategy results in 6-year revenue CAGR of 18% + Executing growth strategy results in 6-year EBITDA CAGR of 61% + Levering the foundation we built to take Sterling to a whole new level + Platforms in higher-margin, specialty-end markets with a broadened portfolio of products, services & customers + Recent Petillo acquisition positions Sterling to be an industry leader of e-infrastructure specialty site development services 4S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 A story of successful execution of multi-year strategic business transformation since 2016; born of a strategy and vision that levers our entrepreneurial spirit and our customer-centric culture. Five Year Stock Price Performance Sterling vs S&P 500 Sterling exceeded S&P 500 by 69.28%
Strategic Execution | Proven Results | Strong Growth 5S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Strategic Elements: Solidify the Base | Grow High-Margin Products | Expansion into Adjacent Markets Key Objectives: Bottom-line Growth | Risk Reduction | Exceed Peer Performance 2015 Margins Transformational Evolution Continues Creating a Leading Infrastructure Service Provider Heavy Civil Business Margins 9.3% 0 2 4 6 8 10 12 14 16 18 20 + Margins 6.1% Strategic Vision Introduced Next 5 years2015 2016 2017 2018 2019 - 2021 1. Solidify the Base 7-8% 2. Grow High- Margin Product 50/50 Split at 12% margins Heavy Civil + Residential = 2 Service Offerings Tealstone Acquisition Margins 10.6% 3. Expansion into Adjacent Markets 15% margins Continue Strategic Vision Objectives 1, 2 & 3 Plateau Acquisition Heavy Civil + Residential + Specialty = Diversified Service Offerings Margins 20% Current organic growth rate 16% with remainder from organic and strategic acquisitions Executing to the Next Level of Growth E-Infrastructure Solutions Building Solutions Transportation Solutions Petillo & Kimes 2021 Acquisitions 2021 Blended MarginMargins 13.6% 2024 - 2026 Blended Margin Threefold margin improvement in 6 years
ESG at Sterling: The Sterling Way At Sterling, we understand that what we do has an immediate and significant positive impact on improving human conditions + We build our businesses around meeting the needs of the people we serve providing infrastructure solutions and services for the betterment of our ever-growing society today and tomorrow + Taking care of our employees, customers, the environment and our communities is what we do every day, that’s The Sterling Way Governance & Ethics + Our commitment to an ethical culture starts at the highest level with oversight from our Board of Directors & Executive Leadership Team + Our Chief Compliance Officer leads the ethics and compliance activities 6S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Our Core Values: Safety, Respect and Trust, Excellence, Integrity Building a Better Tomorrow. The Sterling Way - 2022 Sustainability Report published March 23, 2022. The report can be accessed via the Sterling Way (ESG) section of the Company’s website at https://www.strlco.com/sustainability
- First Quarter 2022 Results S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 7
First Quarter 2022 Results 8S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Revenues: $410.3 million Net Income: $19.3 million Diluted EPS: $0.64 cents + Backlog: $1.53 billion with 12.8% margin(1) + Combined Backlog: $1.67 billion with 12.6%(1) + Cash & Cash Equivalents: $80.4 million(1) + Cash from operations: $19.2 million(2) Strong revenue growth from all segments (as compared to first quarter 2021) E-Infrastructure Solutions + Up 25.9%, excluding our recently acquired Petillo business + Market remains strong with significant activity in e- commerce, warehousing and data centers Transportation Solutions + Up 9.1% + Strong results from continued shift away from low-bid to alternative delivery Building Solutions + Up 12.8% + Continued expansion into Phoenix Sterling Reports Record First Quarter 2022 Results Earnings Continue to Outpace Expectations Petillo Delivers Immediately Accretive Earnings (1) Backlog, Combined Backlog, and Cash & Cash Equivalents at March 31, 2022. (2) Cash from operations for the three months ended March 31, 2022.
9S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Quarterly Consolidated and Segment Results ( 1 ) S e e E B I T D A R e c o n c i l i a t i o n o n p a g e 1 6 . ($ in millions) Q1 2022 Q1 2021 Revenues $ 410.3 $ 315.3 Gross Profit 56.1 45.0 G&A Expense (23.1) (17.1) Intangible Amortization (3.6) (2.9) Acquisition Related Costs (0.3) — Other Operating Expense, Net (1.0) (2.3) Operating Income 28.3 22.8 Interest, Net (4.6) (6.0) Gain (Loss) on Ext. of Debt, Net 2.4 (0.3) Income Tax Expense (6.6) (4.8) Less: Net Income Attributable to NCI (0.3) (1.1) Net Income to STRL $ 19.3 $ 10.6 Diluted EPS $0.64 $0.37 EBITDA (1) $ 39.8 $ 29.9 ($ in millions) Q1 2022 Q1 2021 E-Infrastructure Solutions Revenue $ 168.9 $ 96.6 Operating Income $ 21.3 $ 17.8 Operating Margin 12.6 % 18.4 % Transportation Solutions Revenue $ 160.5 $ 147.1 Operating Income $ 3.7 $ 2.7 Operating Margin 2.3 % 1.8 % Building Solutions Revenue $ 80.9 $ 71.7 Operating Income $ 9.4 $ 7.4 Operating Margin 11.6 % 10.3 %
10S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Increased EBITDA and Cash Flow Drives Liquidity Strategy 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 Forward Looking EBITDA Debt Coverage Ratio Sterling is comfortable with a forward looking debt/EBITDA coverage ratio of +/-2.5X. 5-Year Credit Facility $441M Term Loan Borrowings $75M Revolving Credit Facility (Undrawn) Key Cash Flow Considerations FY 2022 Est. FY 2021 Cash flows from Operations $140M to $150M $151.6M Net CAPEX $50M to $55M $42.5M • Cash at March 31, 2022 was $80.4 million • 2022 EBITDA guidance: $185M to $200M • Expected additional 2022 noncash expenses: $38M to $41M (NOL utilization, stock-based compensation, noncash interest expense, etc.) • 2022 – 2023 scheduled term loan debt payments total $55.1M
- Contact Us Sterling Ron Ballschmiede, Chief Financial Officer Mary Morley, Investor Relations Sterling Construction Company, Inc. Tel: (281) 214-0777 The Equity Group Inc. Jeremy Hellman Tel: (212) 836-9626 jhellman@equityny.com S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 11
- Appendix S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 12
13S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 Strategy Driving Profitable Growth
14S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 2022 Modeling Considerations(1) ( 1 ) I n m i l l i o n s e x c e p t f o r E P S a n d p e r c e n t a g e s . ( 2 ) E x c l u d e s g r o w t h r e l a t e d t o t h e a c q u i r e d P e t i l l o b u s i n e s s o f a p p r o x . $ 2 2 5 M f o r 2 0 2 2 . Revenue $1,825 to $1,875 Gross Margin ~14.5% G&A Expense as % of Revenue ~5.0% Three Year Revenue Growth Expectations:Other Operating Expense Net $12 to $14 JV Non-Controlling Interest Expense $2 to $3 E-Infrastructure Solutions(2) 7% to 9% Effective Income Tax Rate 28% to 29% Transportation Solutions 3% to 5% Net Income $83 to $89 Building Solutions 7% to 9% Diluted EPS $2.69 to $2.88 Expected Dilutive Shares Outstanding 30.9 EBITDA $185 to $200
15S t e r l i n g : F i r s t Q u a r t e r 2 0 2 2 2022 Modeling Considerations Continued* * I n M i l l i o n s e x c e p t f o r p e r c e n t a g e s . NON-CASH ITEMS FY 2022 Expectations FY 2021 Depreciation & Amortization $50 to $54 $34.2 Debt Issuance Cost Amortization $2 to $3 $2.2 Stock-based Compensation $5 to $7 $11.8 Income Tax Expense (Federal) 25% of Pretax Income $19.4 OTHER ITEMS FY 2022 Expectations FY 2021 Interest Expense $19 to $23 $19.3 CAPEX, net of disposals $50 to $55 $42.5
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