STRL - Earnings call transcript Q3 2017 | Sterling Infrastructure, Inc.

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Operator

Greetings and welcome to Sterling Construction's Third Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Maxwell, Director of Investor Relations. ahead. go Please

Jennifer Maxwell

Officer we'll Good on quarter Kevin. to and to will Chief welcome here Chief our Thank Officer. performance Financial earnings for morning results walk detailed discussion conference third the We Joe Executive Sterling's the Cutillo, and XXXX with some for quarter pleased Ron call. to Sterling's call of Ballschmiede, the through begin today company call Sterling's Safe market of commentary you, with provide Joe everyone us and trends. the language. open I and like be am would an then the questions. the Ron financial the Harbor will this of Company's overview

projections results statements to over materially Please a now, obligation factors of like made The today. most these statements Sterling's more could otherwise. risk And turn Company differ I XX-Q Some affect result assumptions. today future or complete statements. discussion Joe. no the information, call filings refer the a from new as that XX-K to assumes and events could may recent and include forward-looking to would of update for description to Actual of forward-looking

Joe Cutillo

what deliver and employees quarter times. everyone great by of effort neighbors the Jennifer. is third Good made And joining in care the the I during us amount job what today. like people of the you most Thanks, aware morning was they very the results ensure team taken these adverse to were in to but to conditions. and time by how are Everyone a hurricane thank devastating entire some our proud Texas that team. the Texas, of Sterling for and saying hit would is of did call off unaware that start amazing I'm of

quick acquisition our earning quarter on of cover was in Sterling Texas the recovery business record was Tealstone getting potential units shortfall. the us our team remaining and the of have third to outstanding year, combined to performance to performance remaining XX%. recent up years. back up The any Sterling team, the enabled over Compared teams the the six stepped quarter prior the While revenue of the feet, Texas the the best

gross Our XX%. profit up was

was grew Our workplace net and our million. job. over safer made recordable's overall income amazing pretty cash by by incidents, our reducing XXX% having up and our balance We XX% walk to time a zero $XX

jobs quarter, higher the remains though total on bid Our more won robust. we the overall Even and percentage our a third market drops than backlog in year. prior

our mix addition, was quarter. the XX% of main to In jobs drop the in revenue grew backlogs of backlog in driver bid The compare mix non-heavy to highway the the to XX%. heavy highway

currently is a our rates, on the quarter. billion backlog. quarter, which the nice the over to win ahead believe bid historical Based quarter, in bid the Looking in projects end of $X increase fourth scheduled working fourth we're and we'll busiest our bids that year year-over-year I with on we'll

raising result outlook, to billion to year a quarter billion strong as of quarter to results XX.X XX year, on Moving the billion. to and billion XX our guidance full income fourth we're X from the third range net full

in it full turn results Now, I'd the to detail. and like more to over Ron discuss our year to

Ron Ballschmiede

results, over pleased in quarterly to discuss and the of performance six strong Joe Thanks, good I'm operating years. strongest another quarter morning everybody.

April its discussing specific financials our results I'll As include Tealstone date financial acquisition Tealstone the be of XXXX. a X, performance shortly. close reminder, for the financial XXXX since

million, segment business segment segment Residential Civil our reporting of plus Heavy XX, XXXX residential $XXX finished to the historical was the were $XXX of compared of for X.X% Construction backlog the quarter an commercial presentation Construction where Civil compared we the but concrete Civil gross X.X%, single At includes the XX, we bidder, including XXXX. backlog margin signed, homes. totaling historical Additionally, to segment of from X.X%. beginning was at with September September and total segments, Heavy Construction Residential to our Construction our million beginning beginning margin slab yet The XXXX single the Tealstone's our acquisition, Heavy construction with low on million, projects reporting backlog, move year. Construction. not contains gross at overall Tealstone. foundations We family apparent with were the two contracts The single $XXX

Civil term backlog performance that Construction Heavy are projects. two residential weeks. typically cycle than less figures entirely backlog, does a reflecting of is Construction report slabs, of Just Residential our not comprised remainder short the which

Our was and months for the and XXXX ended three nine XX, September book-to-burn factor XX% XX% respectively. months

late from low resulting by which book-to-burn coupled contract, awarded construction bidding in Rocky projects third Our reflects XXXX factor quarter were significant late revenues the hurricane the area Mountain generated XXXX Texas and on XXXX, several early Harvey. with in

backlog on mentioned, Joe bidding in which the fourth would As if numerous an opportunities in at result end significant position improved successful the of the we're quarter, we're year.

Dallas residential in in increase segment million the third $XX over third $XXX from quarter as last due in as million, compared to XX% the Heavy Our increased of in quarter several Constructions projects. quarter XX.X residential Civil low or in see Construction for the third The third coming quarter of The starts than Residential steady acquisition. same or higher total growth Civil digit Heavy XXXX This $XX primarily revenue the the market XXXX strong increased XXXX. resulted reflects in million an continues XX%, the uptick of revenue increase to was year. revenues the for the the well growth Tealstone XX% from market. quarter market million range. the housing double

from million The Construction Tealstone Civil perform a $XX of $X $XX.X Residential G&A or pre-bid million million from And we're segment. the Heavy gross fourth quarter period, for projects, expense of $XX.X revenue increase while in acquisition acquisition remaining G&A Residential quarter the result revenues. large primarily year project provided added rates. of $X.X expense, XXX The bidding XXXX the derived Construction, third contract several the margins cost. basis margin aforementioned basis points. million XXXX. over of percentage approximately quarter, market prior balance quarter. to an recruiting the and XXXX that increase. relates which profit which excess the comparable of basis expense grew from million pre-bid points operating Gross Gross business decreased Construction growth X.X% to by third increased of XX principal XXX was points the to XX.X%, the market as G&A the of of increased cost resulted of Our continues higher in increase was in The

was subsidiaries. related of the two Third from $X.X quarter versus XXXX, Interest $X.X million The for XX% compared $X.X in million due prior operating to million reflecting expense year. for the increase owned financing. same was expense quarter million, increased the earnings to acquisition $X.X primarily was quarter the in

third activity of non-controlling per of million and our joint income $X.XX results $X.X Tealstone reflection attributed the $XXX,XXX increase net million increased for to share. the third measures to of many has venture additional quarter a net a to third to Mountain owners' of third all Sterling's stockholders quarter XXXX the or of of interest additional of measure business was $X.XX. third $X.X net approximately of share quick projects. diluted diluted Finally, the for income construction $X.XX, per per income million the been over perspective By success. common acquisition from in quarter that quarter net by quarter a effect compared totaled income is the The a accretive items financial One X.X related the is 'XX resulted Rocky share our these Tealstone XXXX. The of

Importantly, the an our improved legacy produced business million, comparable period. $X.X XX% of Civil increase income Heavy XXXX over of significantly net also

the and majority XX.X remaining joint sheet, amount $XX.X with the balance cash than to for million wholly cash our XXXX. cash the million, compared million, $XX.X corporate includes This of owned less a to Moving balance our of two balance attributable of of $XX.X million at our construction venture to our quarter quarter of ended XX million balance owned subsidiaries. second projects we accumulated

the Shifting end totaled year are guidance quarter, debt our revenue increasing $XX million guidance our loan. $XXX the range year, Our our primarily to five million of a term $XXX to third consisting of million. of at for to we $XX.X the full million

our of $X increasing net previous to $XX attributable also million. to are $XX million We $XX.X range to common from stockholders million, million guidance income our to

December expect We year the fourth in be to and full diluted for outstanding shares XX.X XX, million million average XXXX. the quarter shares ended XX.X our weighted

Joe. Now, I'll to call turn the back

Joe Cutillo

the in financial the we we the Thanks, progress results third business transforming and Ron. with made the quarter. Overall towards are pleased

our As and we XXXX. quarter, on we prepare further go three remain strategy the into focused phase will for fourth executing

remain we base business table phase For the our of will our cost focused lines. disappointed base, asset first solidifying at the the and optimize strategy, to in and reduce efforts continue the

We recent the recruit, will as General to new develop talent and all and best programs increase on industry, retain focus Chandler our capital Rich our have in our Counsel. at levels human in the announcement seen of

we of of expansion track continue of XX% are into Tealstone phase work. the during integration on we non-heavy and focused our expansion come have the first non-heavy The revenues that business mix in highway XX% strategy, of phase, of XXXX. into improved backlog final to half XXXX, on highway high margin adjacent market growing Houston markets, the second have the products, the The to and are the of from

markets within to our questions. for we adjacent that addition, your incremental in be to opportunities look would fits continue strategy. that take adds In these With or happy we

Operator

from your today We'll your from is question-and-answer question you. Thank D.A. be with coming first Instructions] Davidson. conducting question. [Operator Please Brent session. Our Thielman now proceed

Brent Thielman

great in in quarter. the months the of quarter. a heard the terrible morning, good Joe, first weather lot Dallas, about couple Thanks, in

curious were Tealstone. contributions have Your that great, impacted just to

Joe Cutillo

back a the the strong, the the off we on the to track, the rock hats more one started business months many through it and in them, team, really Tealstone of of picked team for really worst month, back up track, than the years. off and quarter in really rains to quarter. worked recovered well a get months But, and couple weekends customers through on Yeah,

overcome the this multiple adverse it's in in I said but to all some markets. kind business conditions up of the by elements in quarter the overview, Brent, really ladder of So, got

Brent Thielman

Sure, some other of in guess markets XQ like of or okay. it missed year you kind in part in, Texas, schedule is a combination busy a end? terms be in bidding predominantly sounds recent opportunities, activity, to here how I it Joe, markets mentioned, TxDOT body about of

Joe Cutillo

a have pick the designed and Yeah, in seem up we mountain we stage the through we've to combination but of that first have joint build fourth build nicely Texas quarter, very designed seen the projects hit and ventures all bid that fourth market, will quarter nice Brent, very, activity the XXXX. quarter the several some

on we best that So, in or Colorado and in pretty six activity the and seen bid Utah optimistic probably those are years. five we've markets seen

Brent Thielman

I One careful to great. financial want you are rollout more rolling Houston about that's or this, to how Okay, I of ahead mean the targets execute share? I any know could, or you going if the looking Tealstone, you

Joe Cutillo

you the the We as high imagine. first best We've seen receptive the for our as XXXX, Houston of of out Dallas cordial of are our the market, to the customers in in hired history and the from and team them are by reception from what we've the accordance team hopefully the so located XXXX. one outside for the the us in market. building in taken makers process individual internally of ground are Houston coming speak Houston They have the market. key we very of which start on added, into four potentials But, one put far, laying and work piece been finalizing the the for plans world, is the slabs, first and quarter the end can

Brent Thielman

you. Okay, thank

Operator

Bobby is Thank you, next with our your question from Canaccord from proceed Burleson coming question. Genuity. Please

Bobby Burleson

morning. Yeah, good

that the having to guys and you whether you're prepare a kind for Houston tried market, you I or your earlier labor little how in am not are serious; any expansion advantage were particularly addressing wondering have guys of talking answers construction. Tealstone you on? shortages I'm So,

Joe Cutillo

different piece. the took normally that. skill market days very we the to us to the see us we've certainly that it of Civil Yeah, for way been market open the an do that for an it's our is operator measure tightening, position operator, if now to five say taking date fine, ten is, little fill with a Heavy the labor piece more labor market through the things, Couple on Tealstone to we side from days eight

So, strategy we as for XXXX are call it lot a together, through are upon go But, operator, I operations. spending of is, we capital time, human not of certainly putting that's that the seeing we and the in parallel, are into goes one tightening. we but touched market a the what the only things

We we've developing in with schools back early place colleges a in of are operators putting were start to the the working, on. we next and are working got program Texas, that community of some the generation we high

to fine a But, for going bigger cross challenge and it's now this certainly it country, continue if line tougher tighten those we tightening. it's going comes jobs, two some certainly build pool thing So, of populating to and to but the but infrastructure be tight, the a years, later the are we be through, or with over into us. right see if frankly, the another next

Bobby Burleson

switching to give of kind heavy us civil in you And Okay great, to if the there your that's relative you the of could maybe any efforts, terms opportunity, scale experienced? past the helpful. wondering rebuilding say that guys just hurricanes of metrics rebuild,

Joe Cutillo

Ron, handle to do want it. you

Ron Ballschmiede

far and small projects teams those example and a the if move and to work, of tend are so field with expand XXX the to as number will the forward. pretty we've task emergency by in $XXX, received what you Sure, tend we they type some, call start

Coast out we that part really of the recover And, end and year. range the So, and cost our was a in rest the million up to suffered which of probably good probably by we market, somewhere Texas the quarter the made in Houston the third before of in Gulf driven dollar of expect hurricane side. the

come out and If some perhaps beat know I'm bridges but We told power that enough there's to the could - or a to but got power on big haven't got long places, scope out, larger with. So, there, those engineer a Texas get we long pretty prepare bridge, haven't have aren't at chunks and on, inspections still. execute we The sure going in be. easy undefined how other huge lot jobs, they are for time. in this point pretty small projects we've not and enough we and has much on

Joe Cutillo

days, look the to do, in sleeves news they Bobby. types starting, they fits needed in big what they at underground calling up just that to is, been brought and that they happened week if But, prevent what years, and several down I talking flooding, a this are lot to to don't of until, 'XX had they Yeah, see storm rate a those term of are prevent you well Last forerun. so. to they've together were water everything the for or lot the where longer probably been really if bigger mid Houston, areas are a from with has a our they you get not would and conference event talking multiple going Houston the we'll but entities, I XX-inches be flooding. coming two can really in and projects, the are Obviously, projects from about there are realistically, about of in the projects market. projects, good think related out think certainly

Bobby Burleson

the allocating think more jobs process, in yeah. of a standard of and Great kind terms some you of just which it of more and sneak to assets bit I or the yourselves little in process, and will you environmental more the be expressively, have thank kind do bid think, re-construction if be that'll in do is there, one you like area, expediting could folks

Joe Cutillo

what's stuff is quickly, they done they need in lot scope happened, emergency stand Yeah, I to design of not bidding. your a do what to put in, get term work, think ladder to for allowed exactly and is the example short

the design. in to of So, system and standard a the we'll they if do a re-size they what to out water to have We those because out that's Houston, and out currently jobs process. started to that, are start $X have there. and through and jobs come that Of larger Ron little XXX talked more part saying, going of storm who going bid they about, come standard to million $XXX, those a longer sort and is back million The about grow more here's $X were take category. of from get bid

Bobby Burleson

Okay, the thank and results. strong on congratulations you

Operator

our you, Thank next Markets. today coming Sean question from KeyBanc Please is your Eastman proceed Capital with from question.

Sean Eastman

Hi in wanted get 'XX so, great team release, press congrats the you just I gave on some color guys on on more a maybe little to quarter, color that. bit the

the if single just going a is on how start an have Tealstone we mid-high I'm more And, price organic to moving legacy wondering go Just that could little 'XX, that comments is business relativity for in verses digit provide the the we'll color, about your formed? to you grow there, outlook.

Joe Cutillo

sure in some let the across I'll cover X%. said that X% overall but act, talk it's kind what if see continuation seeing of let your of for me Ron Sean, past having the we side, Yes, country And let we're XXXX. to you more detail, give the of you

loaded we'll get looks like the market will from into better pickup grow, of of seeing that a extremely bit than XXXX core we XXXX, are growth well. continues receiving in XXXX some market bit that to just are strong, market that digit callback the We up market. little forecasts into that. certainly mid expansion and growth rates Houston in a of The to customers little continue as in are party we the And double for our dollars all all and markets be

Sean Eastman

you some the in of on elements to give more that, detail Ron numbers? want the

Ron Ballschmiede

cautious reasons think I important the the the way opportunity customers over be one so successful here, that serve key think so, and head-risk move thing they Tealstone is as I that most we we'll and into territory. that's the one that is Sure, the of

So, them market. that be the and customer give delivered Dallas large sing Houston demand to very in service on we'll they our growing giving we that

So, we'll more better giving up. feel for is to you a give data that how we going once ramp business start

continued and pretty planning - Rocky geographies, certainly you the it's really Those around projects, in opportunities we the the in now, mode some about shortly. right much, the projects, mountains. we'll so multi-year if slabs the go talked So of rest the customer nice pouring that with are the have by other of The here a on we be in one drive but, year, in there, year. broke projects will pretty continue the drive end and several of that's up, partner the to be some large much of broke finishing them, the and some dressed next one market, could

got a pretty phase we've of that. slow to work So,

believe to talking point see the in bidding that now, activity probably slow, in that Rhino was little think around the Moving anything people continue would already, so there, the we've into is particularly don't or pickup kind percentage can to and and about a of some crazy But, pretty at California coming phase. that but work regular back, or bit I some Joe extraordinary good in I Texas talking a is we'll seen be of and of getting we all one companies a in getting projects about. right we that distance. the that do Nevada. pretty good outside, markets world, every be that that The outside side time. of a is little slower moving or influence area single continues part the new is to And, equates of say job area

Sean Eastman

interesting going and you hoping of sounds quarter bigger the will I partnership region think Rocky a of outlook that is role, lot are stuffs it up, of just how to guys type is the arrangements. like play part a one revenue JVs be next the that's to Okay, book Mountains

should of meaningful impact and line? be bigger So, if which what non-controlling on year, mix top next terms lines a in income contribution we is those have thinking other interest lines, can that that about for depending in the pretty

Joe Cutillo

the it's Sure the if about big, is totally expense didn't you some get bottom-line math to the [indiscernible] basically million, statement, of man our do you number, number a income Sean, well we if a talked lot in that forth larger. XXXX if it. controlling Because we will $X large join take

really awarded to that so of get bit that are up all is them but part some have, those the say, be total, know projects. world, at the get little strong I'm without yet and it partners, XXXX authority projects, capable but, They should very are don't in to very well. very I sure range, do these be projects. that in doing yeah takes we entity we five, until three trying they get got answered the it So, numbers, on it's three great we wouldn't And, it from broad of join our this, different, that more fits still market what large RLW they not to of these to care

really double it's So, swap.

Ron Ballschmiede

they other and well, to in for next business Yeah projects Sean, three years not more. these I mind two the our opportunity of and paid these but think RLW very great are are thing some keep projects only year,

they So, simplify really of years. over next that business couple the

Sean Eastman

the and margins, expansion you'll get shifting just over like year. Okay, margin that's then guys good great some also that indicated it's you next maybe

You're to moving next obviously full mentioned the markets that labor business, some is bit more margin Texas for of in is tightening, like guys it's there? business in the pull of now. to have Tealstone X.X% do wondering year that be just could and for performance, executing the that tailwind cost legacy what going projects been of the squeeze And, year Tealstone of a big in a you risk kind a there. some right growth maybe on how But, left potentially margin and that strong backlog folding about the margin teams leverage

Joe Cutillo

materials through rates, the jobs Especially better, think altogether. labor are what both go putting today factoring covering inflation get fuel, factors you estimate, we But, our put the best trend on into bit potentially are we in trend risk things, labor all that. bids tight in, of are The we to couple and gets full on are we that them help raw feel we raw those could trend factoring be. materials, bigger and for we amount a we trying fair out are you that Well, that of labor actively that if little the a time, will have is the it. we so,

anticipate and we've will higher bid up to the pick execution and margin margins that a will of So, the better continue to into as to we benefits had XXXX of with date go continue as we we forward. result see

Ron Ballschmiede

interesting of It's we about, close the average with year an X%. with entered backlog margin

by expectation that the Our year of slightly the we number, end time get this it, better. we'll at be right

So, have we'll in be entering right and backlog if statistical total X.X our remains we now.

number, to relates equal about being it you You year. to expect to we which to and expect seasonality expect close have to Obviously, for would we'll that as else are average best don't tell the change XXXX. interesting, don't everything to slots. quarters the the full the significantly We seasonality continue

our season being make s the start numbers business in and to, months. to the of We the by followed now be alternatives whole slowest first quarter able you the we mix we continue think snow money quarter, in have followed expect busiest which the the that do have tend bounce fourth, in, and I followed each the something as quarters, the four third by some backlog a hope second, to by to do of opposed don't of are if to

Joe Cutillo

in we leverage cost there, to willing cost, piece can the get in would we of market, still we is, Yeah, as as Texas structure million refine the some into of believe we other $Xmillion we've add continue well. together to some so saw incremental Sean the base asset I got $X

Sean Eastman

very today much congrats this on and guys, helpful the really quarter, Okay, much. again thanks big

Operator

follow-up proceed question Thielman our from a Davidson, your please with question. D.A. from Thanks, Brent is next

Brent Thielman

kind more absorption, obviously continues process, going but backlog wending One kind better look is if get as how of on you Hey, thanks, that on an Sterling to work, margin gross the industry capacity can emphasis this gentlemen. much of today, know, self-improvement ongoing of about at anyone verses you're right I to and the job talk I margin? better, that, be

Joe Cutillo

to other markets I'd little Ron, tell Texas toppers Yeah, move a now of the as of market pricing. it's each the the quickly In a the like above. you is of all some still combination as it's than different, on the markets

So, the it's tell jobs. discipline the market more picking in we'll you around in right Texas

many to go as talk seeing measure past, go we times the of we other what when we some up As, those so dips, base or for every called price, the on the quarter buy. that we of markets, for the leave are line that, us. every we losing we to point continue money quarter it out get refine much table, if the stream, how and is point of we lose can every And, we are we quarter

seen that Texas. continue some a to the that's we'll believe own. market markets the but some to west other patiently we drive of that, Texas move we're for This like we've we waiting So, rise to respond of seems be lagging little bit,

Brent Thielman

thanks guys. Okay,

Operator

We've I'd the floor over Joe to Thank question-answer-session. to like any further or for back our comments. of reached end you. turn closing

Joe Cutillo

call everyone again joining our for thanks today. Great,

found Jennifer If of at the call Director release. everyone you please the the our be and thanks Maxwell, to Relations, Again feel Their day. information free Equity group. great call, a wish of to schedule a Press of bottom can or Investor contact partners have

Operator

conclude today's does That you. teleconference. Thank

and You may your this a disconnect you participation thank line at have wonderful for your time We today. day.

Sterling Infrastructure (STRL) 31 Oct 172017 Q3 Earnings call transcript