EX-99.1 2 a20220801ex991earningsrele.htm EX-99.1

Document

Exhibit 99.1

NEWS RELEASE

For Immediate Release:

August 1, 2022

Sterling Reports Record Second Quarter 2022 Results

Earnings Continue to Outpace Expectations

Increases 2022 Full Year Guidance

THE WOODLANDS, TX – August 1, 2022 – 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

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.

(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.

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.

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

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.