Sterling Reports Record Third Quarter 2024 Results
THE WOODLANDS, TX
November 6, 2024
Sterling Reports Record Third Quarter 2024 Results and Raises Full Year Profitability Guidance
The financial comparisons herein are to the prior year quarter, unless otherwise noted.
- Revenues of $593.7 million, an increase of 6%
- Gross margin of 21.9%, up from 16.4%
- Net Income of $61.3 million, or $1.97 per diluted share, an increase of 56% for both metrics
- EBITDA(1) of $100.8 million, an increase of 42%
- Cash flows from operations totaled $322.8 million for the nine months ended September 30, 2024
- Cash and Cash Equivalents totaled $648.1 million at September 30, 2024
- Backlog at September 30, 2024 was $2.06 billion
- Combined backlog(2) at September 30, 2024 was $2.37 billion
(1) See the “Non-GAAP Measures” and “EBITDA Reconciliation” sections below for more information.
(2) Combined Backlog includes Unsigned Awards of $319.6 million at September 30, 2024.
“In the third quarter we delivered 6% revenue growth and a remarkable 56% increase in diluted EPS. Our focus on margin expansion continues to drive profitability growth well in excess of revenue growth. Gross profit margins of 21.9% marked a new record, and we continue to look for opportunities to drive further expansion,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “We closed the third quarter with combined backlog of $2.37 billion, which was in line with prior year levels. What the backlog metrics do not capture is that our business has moved toward large, multi-phase projects. As a result, we have built a pipeline of high probability future phase work that now totals over half a billion dollars. Our operating cash flow generation in the quarter was again excellent at $152 million, driving our net cash position to $326 million, and supporting share repurchases of $20 million in the quarter. Our business is performing very well and we feel great about the opportunities ahead.”
Mr. Cutillo continued, “In E-Infrastructure Solutions, we achieved 89% operating income growth as operating margins expanded over 1,100 basis points to reach 25.8%. This excellent margin profile reflects our shift toward large mission-critical projects, including data centers and manufacturing. E-Infrastructure revenue increased 4% in the quarter, driven by strength in data center work, which more than offset a tough revenue comparison in the manufacturing market and some continued softness in the small project market. Notably, data center-related revenue increased approximately 90% in the quarter and now represents over 50% of segment backlog.
Transportation Solutions had another excellent quarter, delivering 18% revenue growth and 28% operating profit growth. The transportation markets are the strongest that they have been in our company’s history, and we still have two and a half years remaining under the Infrastructure Investment and Jobs Act (IIJA) authorization.
In Building Solutions, revenue declined 10% and operating profit declined 12%. Our residential concrete slab and plumbing businesses were impacted by a slowdown in the Dallas market in the quarter, as prospective homebuyers appear to be waiting on the sidelines in expectation of future interest rate reductions. We remain very bullish on the multi-year demand trends in our key geographies and anticipate a rebound in 2025.”
“We believe 2024 will be another excellent year for Sterling. Given our strong results through the third quarter and backlog position, we are raising our full year profitability guidance. The midpoint of our 2024 guidance would represent 10% revenue growth, 32% net income growth and 21% EBITDA growth,” Mr. Cutillo concluded.
- Revenue of $2.150 billion to $2.175 billion
- Net Income of $180 million to $185 million
- Diluted EPS of $5.85 to $6.00
- EBITDA(1) of $310 million to $315 million
Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Thursday, November 7, 2024 at 10:00 a.m. ET/9:00 a.m. CT. Interested parties may participate in the call by dialing (800) 836-8184. 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.
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 the Pacific Islands. E-Infrastructure Solutions provides advanced, large-scale site development services for manufacturing, data centers, e-commerce distribution centers, warehousing, power generation and more. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail and storm drainage systems. Building Solutions includes residential and commercial concrete foundations for single-family and multi- family homes, parking structures, elevated slabs, other concrete work and plumbing services for new single-family residential builds. 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) See the “Non-GAAP Measures” and “EBITDA Guidance Reconciliation” sections below for more information.
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 for determining 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.
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; 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 press release, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “guidance,” “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.
Noelle Dilts, VP Investor Relations and Corporate Strategy
281-214-0795
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Revenues | $593,741 | $560,347 | $1,616,923 | $1,486,251 |
| Cost of revenues | (463,942) | (468,480) | (1,297,477) | (1,240,368) |
| Gross profit | 129,799 | 91,867 | 319,446 | 245,883 |
| General and administrative expense | (30,672) | (25,237) | (85,826) | (72,592) |
| Intangible asset amortization | (4,280) | (3,736) | (12,857) | (11,209) |
| Acquisition related costs | (72) | (103) | (209) | (352) |
| Other operating expense, net | (7,283) | (5,654) | (18,203) | (11,703) |
| Operating income | 87,492 | 57,137 | 202,351 | 150,027 |
| Interest income | 7,591 | 4,150 | 19,798 | 8,327 |
| Interest expense | (6,286) | (7,257) | (19,463) | (22,516) |
| Income before income taxes | 88,797 | 54,030 | 202,686 | 135,838 |
| Income tax expense | (23,404) | (13,891) | (48,960) | (35,429) |
| Net income, including noncontrolling interests | 65,393 | 40,139 | 153,726 | 100,409 |
| Less: Net income attributable to noncontrolling interests | (4,072) | (786) | (9,478) | (1,927) |
| Net income attributable to Sterling common stockholders | $61,321 | $39,353 | $144,248 | $98,482 |
| Net income per share attributable to Sterling common stockholders: | ||||
| Basic | $2.00 | $1.28 | $4.67 | $3.20 |
| Diluted | $1.97 | $1.26 | $4.63 | $3.17 |
| Weighted average common shares outstanding: | ||||
| Basic | 30,735 | 30,800 | 30,875 | 30,733 |
| Diluted | 31,070 | 31,217 | 31,184 | 31,048 |
SEGMENT INFORMATION
(In thousands)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | % of Revenue | 2023 | % of Revenue | 2024 | % of Revenue | 2023 | % of Revenue | |
| Revenues | ||||||||
| E-Infrastructure Solutions | $263,899 | 45% | $253,948 | 45% | $689,687 | 43% | $719,936 | 48% |
| Transportation Solutions | 227,251 | 38% | 192,996 | 35% | 608,995 | 37% | 455,223 | 31% |
| Building Solutions | 102,591 | 17% | 113,403 | 20% | 318,241 | 20% | 311,092 | 21% |
| Total Revenues | $593,741 | $560,347 | $1,616,923 | $1,486,251 | ||||
| Operating Income | ||||||||
| E-Infrastructure Solutions | $68,076 | 25.8% | $35,945 | 14.2% | $146,922 | 21.3% | $103,381 | 14.4% |
| Transportation Solutions | 18,573 | 8.2% | 14,487 | 7.5% | 42,154 | 6.9% | 29,649 | 6.5% |
| Building Solutions | 11,249 | 11.0% | 12,848 | 11.3% | 39,837 | 12.5% | 35,029 | 11.3% |
| Segment Operating Income | 97,898 | 16.5% | 63,280 | 11.3% | 228,913 | 14.2% | 168,059 | 11.3% |
| Corporate G&A Expense | (10,334) | (6,040) | (26,353) | (17,680) | ||||
| Acquisition Related Costs | (72) | (103) | (209) | (352) | ||||
| Total Operating Income | $87,492 | 14.7% | $57,137 | 10.2% | $202,351 | 12.5% | $150,027 | 10.1% |
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $648,127 | $471,563 |
| Accounts receivable | 329,882 | 252,435 |
| Contract assets | 79,736 | 88,600 |
| Receivables from and equity in construction joint ventures | 7,814 | 17,506 |
| Other current assets | 18,086 | 17,875 |
| Total current assets | 1,083,645 | 847,979 |
| Property and equipment, net | 270,532 | 243,648 |
| Operating lease right-of-use assets, net | 54,748 | 57,235 |
| Goodwill | 281,363 | 281,117 |
| Other intangibles, net | 315,540 | 328,397 |
| Other non-current assets, net | 17,757 | 18,808 |
| Total assets | $2,023,585 | $1,777,184 |
| Liabilities and Stockholders’ Equity | ||
| Current liabilities: | ||
| Accounts payable | $160,199 | $145,968 |
| Contract liabilities | 563,531 | 444,160 |
| Current maturities of long-term debt | 26,425 | 26,520 |
| Current portion of long-term lease obligations | 19,531 | 19,641 |
| Accrued compensation | 43,198 | 27,758 |
| Other current liabilities | 26,152 | 14,121 |
| Total current liabilities | 839,036 | 678,168 |
| Long-term debt | 296,185 | 314,996 |
| Long-term lease obligations | 35,445 | 37,722 |
| Members’ interest subject to mandatory redemption and undistributed earnings | 23,417 | 29,108 |
| Deferred tax liability, net | 82,894 | 76,764 |
| Other long-term liabilities | 15,666 | 16,573 |
| Total liabilities | 1,292,643 | 1,153,331 |
| Stockholders’ Equity | ||
| Common stock | 312 | 309 |
| Additional paid in capital | 295,831 | 293,570 |
| Treasury stock, at cost | (48,901) | — |
| Retained earnings | 469,282 | 325,034 |
| Total Sterling stockholders’ equity | 716,524 | 618,913 |
| Noncontrolling interests | 14,418 | 4,940 |
| Total stockholders’ equity | 730,942 | 623,853 |
| Total liabilities and stockholders’ equity | $2,023,585 | $1,777,184 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended September 30, | ||
|---|---|---|
| 2024 | 2023 | |
| Cash flows from operating activities: | ||
| Net income | $153,726 | $100,409 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 50,546 | 42,529 |
| Amortization of debt issuance costs and non-cash interest | 877 | 1,334 |
| Gain on disposal of property and equipment | (3,280) | (4,102) |
| Deferred taxes | 6,107 | 10,188 |
| Stock-based compensation | 13,753 | 10,975 |
| Changes in operating assets and liabilities | 101,106 | 169,882 |
| Net cash provided by operating activities | 322,835 | 331,215 |
| Cash flows from investing activities: | ||
| Acquisitions, net of cash acquired | (4,827) | — |
| Disposition proceeds | — | 14,000 |
| Capital expenditures | (65,309) | (49,244) |
| Proceeds from sale of property and equipment | 7,834 | 9,607 |
| Net cash used in investing activities | (62,302) | (25,637) |
| Cash flows from financing activities: | ||
| Repayments of debt | (19,931) | (76,850) |
| Repurchase of common stock | (50,596) | — |
| Withholding taxes paid on net share settlement of equity awards | (13,408) | (4,579) |
| Other | (34) | (16) |
| Net cash used in financing activities | (83,969) | (81,445) |
| Net change in cash, cash equivalents, and restricted cash | 176,564 | 224,133 |
| Cash, cash equivalents and restricted cash at beginning of period | 471,563 | 185,265 |
| Cash, cash equivalents and restricted cash at end of period | 648,127 | 409,398 |
| Less: restricted cash | — | — |
| Cash and cash equivalents at end of period | $648,127 | $409,398 |
EBITDA RECONCILIATION
(In thousands)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Net income attributable to Sterling common stockholders | $61,321 | $39,353 | $144,248 | $98,482 |
| Depreciation and amortization | 17,363 | 14,857 | 50,546 | 42,529 |
| Interest expense, net of interest income | (1,305) | 3,107 | (335) | 14,189 |
| Income tax expense | 23,404 | 13,891 | 48,960 | 35,429 |
| EBITDA(1) | 100,783 | 71,208 | 243,419 | 190,629 |
| Acquisition related costs | 72 | 103 | 209 | 352 |
| Adjusted EBITDA(2) | $100,855 | $71,311 | $243,628 | $190,981 |
(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 income attributable to noncontrolling interests.
(2) The Company defines Adjusted EBITDA as EBITDA excluding the impact of acquisition related costs and other non-recurring or non-cash items.
EBITDA GUIDANCE RECONCILIATION
(In millions)
(Unaudited)
| Full Year 2024 Guidance | ||
|---|---|---|
| Low | High | |
| Net income attributable to Sterling common stockholders | $180 | $185 |
| Depreciation and amortization | 67 | 67 |
| Interest expense, net of interest income | — | — |
| Income tax expense | 63 | 63 |
| EBITDA(1) | $310 | $315 |
(1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, and taxes.