8-K
Sterling Infrastructure, Inc. (STRL)
View as plain text
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): May 1, 2023
| 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. | ☐ | |||
| --- | --- | |||||
| Item 2.02 | Results of Operations and Financial Condition. | |||||
| --- | --- | |||||
| On May 1, 2023, Sterling Infrastructure, Inc. (the “Company”) issued a press release announcing financial results for the three months ended March 31, 2023 and reaffirmed the full year 2023 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. | ||||
| --- | --- | |||||
| On May 2, 2023, the Company will host a conference call to discuss the first quarter 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 1, 2023 | ||||
| 99.2 | Presentation slides, dated May 2, 2023 | ||||
| 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: | May 1, 2023 | By: | /s/ Ronald A. Ballschmiede | ||
| Ronald A. Ballschmiede | |||||
| Chief Financial Officer |
Document
Exhibit 99.1
NEWS RELEASE
For Immediate Release:
May 1, 2023
Sterling Reports Record First Quarter 2023 Results
THE WOODLANDS, TX – May 1, 2023 – Sterling Infrastructure, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the first quarter 2023.
The financial information herein is from continuing operations and comparisons are to the prior year quarter, unless otherwise noted.
First Quarter 2023 Results
•Revenues of $403.6 million, an increase of 10%
•Gross margin of 15.3%, an increase from 15.1%
•Net Income of $19.6 million, or $0.64 per diluted share, an increase of 11% and 8%, respectively
•EBITDA(1) of $45.9 million, an increase of 14%; Adjusted EBITDA(1) of $46.1 million, an increase of 13%
•Cash flows from operations of $49.1 million for the first quarter
•Cash and Cash Equivalents totaled $202.6 million at March 31, 2023
•Backlog at March 31, 2023 was $1.62 billion, an increase of 15% over December 31, 2022
•Combined backlog(2) at March 31, 2023 was $1.75 billion, an increase of 4% over December 31, 2022
CEO Remarks and Outlook
“Our first quarter results reflect excellent execution from our teams despite the ongoing economic challenges. Our performance drove strong revenue growth of 10% and gross margin expansion of 20 basis points, yielding first quarter EPS of $0.64,” stated Joe Cutillo, Sterling’s Chief Executive Officer.
“E-Infrastructure Solutions, our largest, fastest-growing and highest-margin segment, grew 22%. This reflects high levels of demand from data center and advanced manufacturing customers. Our Transportation Solutions segment saw a 4% decline in revenue due to the reallocation of resources into higher-margin E-Infrastructure work and the timing of project execution. Our continued efforts to improve mix drove an increase in Transportation Solutions operating income of 19%. Our Building Solutions segment grew revenue by 7%, reflecting higher levels of commercial revenue. Our residential revenues were essentially flat despite a mid-single digit decline in slab volumes. Buildings Solutions margins were lower relative to the prior year quarter due to mix impacts, as we anticipated,” continued Mr. Cutillo.
“Our year is off to a strong start with record backlog, new high-value E-Infrastructure project awards, increased transportation funding, and emerging improvement in housing starts. Our solid first quarter results and the favorable growth opportunities across our markets give us confidence that we are trending toward the higher end of our guidance range. The high end of our guidance ranges would offer an improvement in revenue by 13.0% and net income by 13.7% over 2022,” Mr. Cutillo concluded.
(1) The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes. The Company defines Adjusted EBITDA as EBITDA excluding acquisition related costs. See the “Non-GAAP Measures” and “EBITDA Reconciliation” sections below for more information.
(2) Combined Backlog includes Unsigned Awards of $130.5 million and $275.0 million at March 31, 2023 and December 31, 2022, respectively.
Full Year 2023 Guidance
•Revenue of $1.9 billion to $2.0 billion
•Net Income of $104 million to $110 million
•EPS of $3.33 to $3.53
•EBITDA(1) of $220 million to $235 million
Conference Call
Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, May 2, 2023 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 10 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 15 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 30 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, primarily across the Southern, Northeastern, Mid-Atlantic and Rocky Mountain regions and Hawaii. E-Infrastructure Solutions provides advanced, large-scale site development services for data centers, e-commerce distribution centers, manufacturing, warehousing, energy and more. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail 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.”
(1) The Company defines EBITDA as GAAP net income attributable to Sterling’s common stockholders, adjusted for depreciation and amortization, net interest expense and taxes. See the “Non-GAAP Measures” and “EBITDA Reconciliation” sections below for more information.
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>Noelle Dilts, VP IR and Corporate Strategy<br><br>281-214-0795 | 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 March 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Continuing Operations: | ||||
| Revenues | $ | 403,579 | $ | 365,962 |
| Cost of revenues | (341,837) | (310,813) | ||
| Gross profit | 61,742 | 55,149 | ||
| General and administrative expense | (23,321) | (20,297) | ||
| Intangible asset amortization | (3,736) | (3,568) | ||
| Acquisition related costs | (190) | (255) | ||
| Other operating expense, net | (1,868) | (1,666) | ||
| Operating income | 32,627 | 29,363 | ||
| Interest income | 1,974 | 8 | ||
| Interest expense | (7,528) | (4,650) | ||
| Income before income taxes | 27,073 | 24,721 | ||
| Income tax expense | (7,033) | (6,778) | ||
| Net income, including noncontrolling interests | 20,040 | 17,943 | ||
| Less: Net income attributable to noncontrolling interests | (391) | (271) | ||
| Net income from Continuing Operations | $ | 19,649 | $ | 17,672 |
| Discontinued Operations: | ||||
| Pretax income | $ | — | $ | 1,399 |
| Income tax expense | — | 181 | ||
| Net income from Discontinued Operations | $ | — | $ | 1,580 |
| Net income attributable to Sterling common stockholders | $ | 19,649 | $ | 19,252 |
| Net income per share from Continuing Operations: | ||||
| Basic | $ | 0.64 | $ | 0.59 |
| Diluted | $ | 0.64 | $ | 0.59 |
| Net income per share from Discontinued Operations: | ||||
| Basic | $ | — | $ | 0.05 |
| Diluted | $ | — | $ | 0.05 |
| Net income per share attributable to Sterling common stockholders: | ||||
| Basic | $ | 0.64 | $ | 0.64 |
| Diluted | $ | 0.64 | $ | 0.64 |
| Weighted average common shares outstanding: | ||||
| Basic | 30,618 | 29,964 | ||
| Diluted | 30,789 | 30,112 |
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| Revenues | 2023 | % of Revenue | 2022 | % of Revenue | ||
| E-Infrastructure Solutions | $ | 205,840 | 51% | $ | 168,927 | 46% |
| Transportation Solutions | 111,139 | 28% | 116,141 | 32% | ||
| Building Solutions | 86,600 | 21% | 80,894 | 22% | ||
| Total Revenues | $ | 403,579 | $ | 365,962 | ||
| Operating Income (Loss) | ||||||
| E-Infrastructure Solutions | $ | 24,269 | 11.8% | $ | 21,285 | 12.6% |
| Transportation Solutions | 5,306 | 4.8% | 4,443 | 3.8% | ||
| Building Solutions | 8,701 | 10.0% | 9,358 | 11.6% | ||
| Segment Operating Income | 38,276 | 9.5% | 35,086 | 9.6% | ||
| Corporate | (5,459) | (5,468) | ||||
| Acquisition Related Costs | (190) | (255) | ||||
| Total Operating Income | $ | 32,627 | 8.1% | $ | 29,363 | 8.0% |
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| March 31,<br>2023 | December 31,<br>2022 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 202,576 | $ | 181,544 |
| Accounts receivable | 230,148 | 262,646 | ||
| Contract assets | 125,494 | 109,803 | ||
| Receivables from and equity in construction joint ventures | 13,648 | 14,122 | ||
| Other current assets | 16,094 | 29,139 | ||
| Total current assets | 587,960 | 597,254 | ||
| Property and equipment, net | 215,217 | 215,482 | ||
| Operating lease right-of-use assets, net | 62,278 | 59,415 | ||
| Goodwill | 262,671 | 262,692 | ||
| Other intangibles, net | 295,387 | 299,123 | ||
| Other non-current assets, net | 7,615 | 7,654 | ||
| Total assets | $ | 1,431,128 | $ | 1,441,620 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 119,450 | $ | 121,887 |
| Contract liabilities | 242,326 | 239,297 | ||
| Current maturities of long-term debt | 35,059 | 32,610 | ||
| Current portion of long-term lease obligations | 17,376 | 19,715 | ||
| Accrued compensation | 16,904 | 24,136 | ||
| Other current liabilities | 13,574 | 8,966 | ||
| Total current liabilities | 444,689 | 446,611 | ||
| Long-term debt | 365,548 | 398,735 | ||
| Long-term lease obligations | 45,164 | 40,103 | ||
| Members’ interest subject to mandatory redemption and undistributed earnings | 18,419 | 21,597 | ||
| Deferred tax liability, net | 54,387 | 51,659 | ||
| Other long-term liabilities | 4,666 | 5,116 | ||
| Total liabilities | 932,873 | 963,821 | ||
| Stockholders’ equity: | ||||
| Common stock | 308 | 306 | ||
| Additional paid in capital | 288,328 | 287,914 | ||
| Retained earnings | 206,028 | 186,379 | ||
| Total Sterling stockholders’ equity | 494,664 | 474,599 | ||
| Noncontrolling interests | 3,591 | 3,200 | ||
| Total stockholders’ equity | 498,255 | 477,799 | ||
| Total liabilities and stockholders’ equity | $ | 1,431,128 | $ | 1,441,620 |
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 20,040 | $ | 19,523 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 13,692 | 11,767 | ||
| Amortization of debt issuance costs and non-cash interest | 422 | 556 | ||
| Gain on disposal of property and equipment | (1,672) | (228) | ||
| Gain on debt extinguishment, net | — | (2,428) | ||
| Deferred taxes | 2,728 | 5,640 | ||
| Stock-based compensation | 3,240 | 2,611 | ||
| Change in fair value of interest rate swap | — | (90) | ||
| Changes in operating assets and liabilities | 10,608 | (10,783) | ||
| Net cash provided by operating activities | 49,058 | 26,568 | ||
| Cash flows from investing activities: | ||||
| Disposition proceeds | 14,000 | — | ||
| Capital expenditures | (14,221) | (14,969) | ||
| Proceeds from sale of property and equipment | 6,726 | 406 | ||
| Net cash provided by (used in) investing activities | 6,505 | (14,563) | ||
| Cash flows from financing activities: | ||||
| Repayments of debt | (30,843) | (5,928) | ||
| Withholding taxes paid on net share settlement of equity awards | (4,288) | (7,385) | ||
| Net cash used in financing activities | (35,131) | (13,313) | ||
| Net change in cash, cash equivalents, and restricted cash | 20,432 | (1,308) | ||
| Cash, cash equivalents and restricted cash at beginning of period | 185,265 | 88,693 | ||
| Cash, cash equivalents and restricted cash at end of period | 205,697 | 87,385 | ||
| Less: restricted cash - Continuing Operations | (3,121) | (3,721) | ||
| Less: cash, cash equivalents and restricted cash - Discontinued Operations | — | (14,264) | ||
| Cash and cash equivalents at end of period - Continuing Operations | $ | 202,576 | $ | 69,400 |
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES
EBITDA FROM CONTINUING OPERATIONS RECONCILIATION
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Net income from Continuing Operations | $ | 19,649 | $ | 17,672 |
| Depreciation and amortization | 13,692 | 11,363 | ||
| Interest expense, net of interest income | 5,554 | 4,642 | ||
| Income tax expense | 7,033 | 6,778 | ||
| EBITDA from Continuing Operations (1) | 45,928 | 40,455 | ||
| Acquisition related costs | 190 | 255 | ||
| Adjusted EBITDA from Continuing Operations (2) | $ | 46,118 | $ | 40,710 |
| (1) The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes. | ||||
| (2) The Company defines Adjusted EBITDA as EBITDA excluding the impact of acquisition related costs. |
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES
EBITDA GUIDANCE RECONCILIATION
(In millions)
(Unaudited)
| Full Year 2023 Guidance | ||||
|---|---|---|---|---|
| Low | High | |||
| Net income attributable to Sterling common stockholders | $ | 104 | $ | 110 |
| Depreciation and amortization | 55 | 59 | ||
| Interest expense, net of interest income | 21 | 24 | ||
| Income tax expense | 40 | 42 | ||
| EBITDA (1) | $ | 220 | $ | 235 |
| (1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, and taxes. |
q12023earningsreleaseppp
We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow. Q1 2023 Earnings Call May 2, 2023
2Sterling | STRL: First Quarter 2023 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 + 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 services for data centers, e-commerce distribution centers, manufacturing, warehousing, energy and more Building Solutions + 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 + Enhanced business mix + Providing infrastructure solutions in the Rocky Mountain States and Texas + Infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail and storm drainage systems and more Sterling | STRL: First Quarter 2023 3 WHO is Sterling? NASDAQ STRL Shares outstanding(3) 30.8M HQ The Woodlands, TX Market cap(3) $1,137M Employees ~3,200(1) Revenue(4) $1.95B Segments E-Infrastructure Solutions Building Solutions Transportation Solutions EBITDA(4) $227.5M Projects underway ~210(2) Total Backlog(2) $1.62B A market-leading infrastructure service provider of e-infrastructure, building and transportation solutions. A story of successful execution of multi-year strategic business transformation; 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) At December 31, 2022. (2) At March 31, 2023. (3) Shares outstanding and Market Cap as of April 28, 2023. (4) Full Year 2023 Revenue and EBITDA Mid-Point Guidance. *See EBITDA Reconciliation in the Appendix page 14.
Sterling | STRL: First Quarter 2023 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
- First Quarter 2023 Results Sterling | STRL: First Quarter 2023 5
First Quarter 2023 Results Highlights Continuing Operations + Revenues: $403.6 million + Net Income: $19.6 million + Diluted EPS: $0.64 + EBITDA(1): $45.9 million + Cash Flow from Operations: $49.1 million + Cash & Cash Equivalents(2): $202.6 million + Backlog(2): $1.62 billion with 14.8% margin + Combined Backlog(3): $1.75 billion with 14.6% margin Sterling | STRL: First Quarter 2023 6 (1) The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes. See EBITDA reconciliation on page 13. (2) Cash & Cash Equivalents and Backlog at March 31, 2023. (3) Combined Backlog includes Unsigned Awards of $130.5 million at March 31, 2023.
Sterling | STRL: First Quarter 2023 7 Quarterly Consolidated and Segment Results Continuing Operations ($ in millions) Q1 2023 Q1 2022 Revenues $ 403.6 $ 366.0 Gross Profit 61.7 55.1 G&A Expense (23.3) (20.3) Intangible Amortization (3.7) (3.6) Acquisition Related Costs (0.2) (0.3) Other Operating Expense, Net (1.9) (1.7) Operating Income 32.6 29.4 Interest, Net (5.6) (4.6) Income Tax Expense (7.0) (6.8) Less: Net Income Attributable to NCI (0.4) (0.3) Net income from Continuing Operations $ 19.6 $ 17.7 Diluted EPS $ 0.64 $ 0.59 EBITDA (1) $ 45.9 $ 40.5 ($ in millions) Q1 2023 Q1 2022 E-Infrastructure Solutions Revenue $ 205.8 $ 168.9 Operating Income $ 24.3 $ 21.3 Operating Margin 11.8 % 12.6 % Transportation Solutions Revenue $ 111.1 $ 116.1 Operating Income $ 5.3 $ 4.4 Operating Margin 4.8 % 3.8 % Building Solutions Revenue $ 86.6 $ 80.9 Operating Income $ 8.7 $ 9.4 Operating Margin 10.0 % 11.6 % (1) The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes. See EBITDA reconciliation on page 13.
Sterling | STRL: First Quarter 2023 8 Increased EBITDA and Cash Flow Drives Liquidity Strategy Foward Looking EBITDA Debt Coverage Ratio 1.9 1.7 12/31/22 3/31/23 0 0.5 1 1.5 2 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 $393M Term Loan Borrowings $75M Revolving Credit Facility (Undrawn) Key Cash Flow Considerations Q1 2023 Q1 2022 Cash flows from Operations $49.1M $26.6M Net CAPEX $7.5M $14.6M • Cash & Cash Equivalents at March 31, 2023 was $202.6 million • 2023 EBITDA guidance(1): $220M to $235M • Expected additional 2023 noncash expenses: $31M to $35M (Stock-based compensation, noncash interest expense, deferred taxes, etc.) • Scheduled term loan debt payments total $31.9M and $26.1M for 2023 and 2024, respectively (1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense and taxes. See EBITDA guidance reconciliation on page 14.
Sterling | STRL: First Quarter 2023 9 Contact Us Sterling Infrastructure, Inc. Noelle Dilts, VP IR and Corporate Strategy Tel: (281) 214-0795 noelle.dilts@strlco.com The Equity Group Inc. Jeremy Hellman Tel: (212) 836-9626 jhellman@equityny.com
- Appendix Sterling | STRL: First Quarter 2023 10
Sterling | STRL: First Quarter 2023 11 2023 Modeling Considerations(1) (1) In millions except for EPS and percentages. (2) See EBITDA guidance reconciliation on page 14. Revenue $1,900 to $2,000 Gross Margin 15% to 16% G&A Expense as % of Revenue (Excluding Intangible Amortization) ~5% Intangible Amortization $15 Other Operating Expense Net $12 to $13 JV Non-Controlling Interest Expense $2 to $3 Effective Income Tax Rate 28% to 29% Net Income $104 to $110 Diluted EPS $3.33 to $3.53 Expected Dilutive Shares Outstanding 31.2 EBITDA(2) $220 to $235
2023 Modeling Considerations Continued* Sterling | STRL: First Quarter 2023 12 * In Millions. Non-Cash Items FY 2023 Expectations FY 2022 Depreciation $40 to $44 $38.0 Intangible Amortization $15 $14.1 Debt Issuance Cost Amortization $2 to $3 $2.2 Stock-based Compensation $12 to $14 $10.3 Deferred Taxes $17 to $18 $36.5 Other Cash Flow Items FY 2023 Expectations FY 2022 Interest expense, net of interest income $21 to $24 $19.7 CAPEX, net of disposals $55 to $60 $56.0
Sterling | STRL: First Quarter 2023 13 (1) The Company defines EBITDA as GAAP net income from Continuing Operations, adjusted for depreciation and amortization, net interest expense and taxes. (2) The Company defines Adjusted EBITDA as EBITDA excluding the impact of acquisition related costs. Three Months Ended March 31, 2023 2022 Net income from Continuing Operations $ 19,649 $ 17,672 Depreciation and amortization 13,692 11,363 Interest expense, net of interest income 5,554 4,642 Income tax expense 7,033 6,778 EBITDA from Continuing Operations(1) 45,928 40,455 Acquisition related costs 190 255 Adjusted EBITDA from Continuing Operations(2) $ 46,118 $ 40,710 STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES EBITDA FROM CONTINUING OPERATIONS RECONCILIATION (In thousands) (Unaudited)
Sterling | STRL: First Quarter 2023 14 (1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense and taxes. Full Year 2023 Guidance Low High Net income attributable to Sterling common stockholders $ 104 $ 110 Depreciation and amortization 55 59 Interest expense, net of interest income 21 24 Income tax expense 40 42 EBITDA (1) $ 220 $ 235 STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES EBITDA GUIDANCE RECONCILIATION (In millions) (Unaudited)
THANK YOU We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow.