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Sterling Reports Record Second Quarter 2022 Results

Earnings Continue to Outpace Expectations

Increases 2022 Full Year Guidance

Sterling Infrastructure, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the second quarter 2022.

Second Quarter 2022 Results

  • Total Revenue of $510.6 million, an increase of 27% compared to the second quarter of 2021
  • Net Income was $26.0 million, or $0.86 per diluted share, an increase of 29% and 25%, respectively, compared to the second quarter of 2021
  • EBITDA(1) of $54.3 million, an increase of 33% compared to the second quarter of 2021
  • Cash and Cash Equivalents totaled $72.9 million at June 30, 2022
  • Backlog at June 30, 2022 was $1.54 billion, an increase of 3% over December 31, 2021
  • Combined backlog(2) at June 30, 2022 was $1.73 billion, an increase of 14% over December 31, 2021

(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 $184.0 million and $22.5 million at June 30, 2022 and December 31, 2021, respectively.

For the three months ended June 30, 2022, the Company reported net income of $26.0 million, or $0.86 per diluted share, versus $20.1 million, or $0.69 per diluted share, in the second quarter 2021. Revenue increased by 27% over the prior year quarter, with 8% from organic growth and 19% growth generated from the acquired Petillo business. EBITDA increased 33% to $54.3 million in the second quarter of 2022, versus $41.0 million in the prior-year period. Second quarter EBITDA benefited from solid operating income growth from each segment, partially offset by ongoing supply chain and inflation challenges.

CEO Remarks and Outlook

“We are pleased with our strong second quarter performance and continue to feel positive about our position in all of our markets. Our teams have done an amazing job across the organization and continue executing remarkably well in this challenging economic environment,” stated Joe Cutillo, Sterling’s Chief Executive Officer.

“The growth in our E-Infrastructure Solutions once again made it our largest segment, and E-Infrastructure and Building Solutions continue representing 89% of our total segment operating income. Our disciplined approach coupled with our continued focus on execution of our strategic objectives resulted in an increase in gross profit of $12.1 million; however, we experienced a decrease in gross margin of sixty basis points to 13.4% from the prior year period driven predominately by inflation and material availability,” continued Mr. Cutillo.

“With the continued demand for complex site development, we broadened our customer base with industrial and manufacturing opportunities in E-Infrastructure Solutions, we continued experiencing growth in the Phoenix and Houston markets for Building Solutions and we began seeing an increase in infrastructure bill activity in Transportation Solutions.

Material availability and inflation remain a concern in all of our markets; however, we are closely monitoring these developments and we will continue to work with customers to recover the additional material and labor cost. In light of our performance to date, our increased backlog levels and our disciplined culture, we are adjusting our full year 2022 guidance. The mid-point of our guidance would improve our net income by 48%, our revenue by 19% and our EPS by 42% over 2021,” Mr. Cutillo concluded.

Full Year 2022 Guidance:

  • Revenue of $1.865 billion to $1.885 billion
  • Net Income of $90 million to $96 million
  • EPS of $2.95 to $3.15
  • EBITDA of $192 million to $202 million

Conference Call

Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, August 2, 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 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.

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(
Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues

$

510,568

 

 

$

401,666

 

 

$

920,888

 

 

$

716,982

 

Cost of revenues

 

(442,184

)

 

 

(345,419

)

 

 

(796,365

)

 

 

(615,703

)

Gross profit

 

68,384

 

 

 

56,247

 

 

 

124,523

 

 

 

101,279

 

General and administrative expense

 

(23,424

)

 

 

(15,829

)

 

 

(46,496

)

 

 

(32,928

)

Intangible asset amortization

 

(3,514

)

 

 

(2,866

)

 

 

(7,082

)

 

 

(5,732

)

Acquisition related costs

 

(230

)

 

 

 

 

 

(485

)

 

 

 

Other operating expense, net

 

(126

)

 

 

(4,832

)

 

 

(1,101

)

 

 

(7,144

)

Operating income

 

41,090

 

 

 

32,720

 

 

 

69,359

 

 

 

55,475

 

Interest income

 

30

 

 

 

12

 

 

 

40

 

 

 

26

 

Interest expense

 

(4,480

)

 

 

(5,737

)

 

 

(9,067

)

 

 

(11,741

)

Gain on extinguishment of debt, net

 

 

 

 

1,401

 

 

 

2,428

 

 

 

1,064

 

Income before income taxes

 

36,640

 

 

 

28,396

 

 

 

62,760

 

 

 

44,824

 

Income tax expense

 

(10,268

)

 

 

(8,179

)

 

 

(16,865

)

 

 

(12,939

)

Net income

 

26,372

 

 

 

20,217

 

 

 

45,895

 

 

 

31,885

 

Less: Net income attributable to noncontrolling interests

 

(411

)

 

 

(161

)

 

 

(682

)

 

 

(1,274

)

Net income attributable to Sterling common stockholders

$

25,961

 

 

$

20,056

 

 

$

45,213

 

 

$

30,611

 

 

 

 

 

 

 

 

 

Net income per share attributable to Sterling common stockholders:

 

 

 

 

 

 

 

Basic

$

0.86

 

 

$

0.70

 

 

$

1.50

 

 

$

1.08

 

Diluted

$

0.86

 

 

$

0.69

 

 

$

1.50

 

 

$

1.06

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

30,225

 

 

 

28,582

 

 

 

30,094

 

 

 

28,433

 

Diluted

 

30,362

 

 

 

29,054

 

 

 

30,229

 

 

 

28,878

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

Revenues

 

2022

 

 

% of

Revenue

 

 

2021

 

 

% of

Revenue

 

 

2022

 

 

% of

Revenue

 

 

2021

 

 

% of

Revenue

E-Infrastructure Solutions

$

233,548

 

 

46

%

 

$

123,743

 

 

31

%

 

$

402,475

 

 

44

%

 

$

220,315

 

 

31

%

Transportation Solutions

 

191,381

 

 

37

%

 

 

203,153

 

 

50

%

 

 

351,880

 

 

38

%

 

 

350,207

 

 

49

%

Building Solutions

 

85,639

 

 

17

%

 

 

74,770

 

 

19

%

 

 

166,533

 

 

18

%

 

 

146,460

 

 

20

%

Total Revenues

$

510,568

 

 

 

 

$

401,666

 

 

 

 

$

920,888

 

 

 

 

$

716,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-Infrastructure Solutions

$

32,824

 

 

14.1

%

 

$

24,714

 

 

20.0

%

 

$

54,109

 

 

13.4

%

 

$

42,526

 

 

19.3

%

Transportation Solutions

 

5,107

 

 

2.7

%

 

 

4,796

 

 

2.4

%

 

 

8,793

 

 

2.5

%

 

 

7,462

 

 

2.1

%

Building Solutions

 

9,751

 

 

11.4

%

 

 

6,790

 

 

9.1

%

 

 

19,109

 

 

11.5

%

 

 

14,151

 

 

9.7

%

Segment Operating Income

 

47,682

 

 

9.3

%

 

 

36,300

 

 

9.0

%

 

 

82,011

 

 

8.9

%

 

 

64,139

 

 

8.9

%

Corporate

 

(6,362

)

 

 

 

 

(3,580

)

 

 

 

 

(12,167

)

 

 

 

 

(8,664

)

 

 

Acquisition Related Costs

 

(230

)

 

 

 

 

 

 

 

 

 

(485

)

 

 

 

 

 

 

 

Total Operating Income

$

41,090

 

 

8.0

%

 

$

32,720

 

 

8.1

%

 

$

69,359

 

 

7.5

%

 

$

55,475

 

 

7.7

%

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

June 30,

2022

 

December 31,

2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

72,905

 

$

81,840

 

Accounts receivable

 

302,844

 

 

232,153

 

Contract assets

 

121,667

 

 

83,310

 

Receivables from and equity in construction joint ventures

 

16,910

 

 

16,896

 

Other current assets

 

23,170

 

 

20,492

 

Total current assets

 

537,496

 

 

434,691

 

Property and equipment, net

 

214,976

 

 

204,316

 

Operating lease right-of-use assets, net

 

46,628

 

 

24,520

 

Goodwill

 

252,887

 

 

259,791

 

Other intangibles, net

 

297,041

 

 

303,223

 

Other non-current assets, net

 

4,502

 

 

4,455

 

Total assets

$

1,353,530

 

$

1,230,996

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

164,506

 

$

144,982

 

Contract liabilities

 

161,961

 

 

127,932

 

Current maturities of long-term debt

 

26,273

 

 

28,230

 

Current portion of long-term lease obligations

 

12,582

 

 

8,841

 

Accrued compensation

 

33,044

 

 

22,803

 

Other current liabilities

 

9,023

 

 

18,972

 

Total current liabilities

 

407,389

 

 

351,760

 

Long-term debt

 

415,998

 

 

428,588

 

Long-term lease obligations

 

34,103

 

 

15,831

 

Members’ interest subject to mandatory redemption and undistributed earnings

 

54,214

 

 

55,115

 

Deferred tax liability, net

 

29,871

 

 

14,656

 

Other long-term liabilities

 

4,580

 

 

4,819

 

Total liabilities

 

946,155

 

 

870,769

 

Stockholders’ equity:

 

 

 

Common stock

 

303

 

 

298

 

Additional paid in capital

 

279,120

 

 

280,274

 

Retained earnings

 

125,131

 

 

79,918

 

Accumulated other comprehensive gain (loss)

 

679

 

 

(1,723

)

Total Sterling stockholders’ equity

 

405,233

 

 

358,767

 

Noncontrolling interests

 

2,142

 

 

1,460

 

Total stockholders’ equity

 

407,375

 

 

360,227

 

Total liabilities and stockholders’ equity

$

1,353,530

 

$

1,230,996

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net income

$

45,895

 

 

$

31,885

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

25,412

 

 

 

16,707

 

Amortization of debt issuance costs and non-cash interest

 

1,102

 

 

 

1,264

 

Gain on disposal of property and equipment

 

(716

)

 

 

(437

)

Gain on debt extinguishment, net

 

(2,428

)

 

 

(1,064

)

Deferred taxes

 

14,505

 

 

 

11,294

 

Stock-based compensation

 

6,463

 

 

 

3,850

 

Change in fair value of interest rate swap

 

(173

)

 

 

(51

)

Changes in operating assets and liabilities

 

(55,471

)

 

 

28,044

 

Net cash provided by operating activities

 

34,589

 

 

 

91,492

 

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

 

(3,033

)

 

 

 

Capital expenditures

 

(28,945

)

 

 

(22,150

)

Proceeds from sale of property and equipment

 

951

 

 

 

690

 

Net cash used in investing activities

 

(31,027

)

 

 

(21,460

)

Cash flows from financing activities:

 

 

 

Repayments of debt

 

(11,770

)

 

 

(40,072

)

Distributions to noncontrolling interest owners

 

 

 

 

(1,959

)

Other

 

 

 

 

(602

)

Net cash used in financing activities

 

(11,770

)

 

 

(42,633

)

Net change in cash, cash equivalents, and restricted cash

 

(8,208

)

 

 

27,399

 

Cash, cash equivalents, and restricted cash at beginning of period

 

88,693

 

 

 

72,642

 

Cash, cash equivalents, and restricted cash at end of period

 

80,485

 

 

 

100,041

 

Less: restricted cash (other current assets)

 

(7,580

)

 

 

(6,411

)

Cash and cash equivalents at end of period

$

72,905

 

 

$

93,630

 

 

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

EBITDA RECONCILIATION

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Net income attributable to Sterling common stockholders

$

25,961

 

$

20,056

 

 

$

45,213

 

 

$

30,611

 

Depreciation and amortization

 

13,645

 

 

8,402

 

 

 

25,412

 

 

 

16,707

 

Interest expense, net of interest income

 

4,450

 

 

5,725

 

 

 

9,027

 

 

 

11,715

 

Income tax expense

 

10,268

 

 

8,179

 

 

 

16,865

 

 

 

12,939

 

Gain on extinguishment of debt, net

 

 

 

(1,401

)

 

 

(2,428

)

 

 

(1,064

)

EBITDA (1)

$

54,324

 

$

40,961

 

 

$

94,089

 

 

$

70,908

 

(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

$

90

 

 

$

96

 

Depreciation and amortization

 

50

 

 

 

51

 

Interest expense, net of interest income

 

19

 

 

 

20

 

Income tax expense

 

35

 

 

 

37

 

Gain on extinguishment of debt, net

 

(2

)

 

 

(2

)

EBITDA (1)

$

192

 

 

$

202

 

(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.

Contacts

Company Contact:

Sterling Infrastructure, Inc.

Ron Ballschmiede, Chief Financial Officer

281-214-0777



Investor Relations Contact:

The Equity Group Inc.

Jeremy Hellman, CFA

212-836-9626

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