STRL - Earnings call transcript Q1 2019 | Sterling Infrastructure, Inc.

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Operator

Greetings, and welcome to Sterling Construction's First Quarter 2019 Earnings Conference Call. [Operator instructions] As a reminder, this conference is being recorded.

Before turning the call over to Mr. Joe Cutillo, Sterling Construction's Chief Executive Officer, I will read the safe harbor statement.

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

Joe Now Mr. over I call the will turn to Cutillo.

Joe Cutillo

quarter. Good like to by first off special thanks our to our very and employees Historically, giving quarter, you a year was joining for has slowest thank everyone, no quarter start morning, today's exception. I'd for X,XXX been call. first seasonal this a solid our and

would In with normal in business sector seasonal additional headwinds in for the to addition with our in the lose associated normally it extreme weather to Under face, quarter. be hit headwinds geographies. our a we were nonseasonal money we conditions, these

the year our to our streak our However, up prior the start people report business. quarter, the worst increase year in circumstances. residential first slightly us Versus were the and of of to in enabled I'm combination a continue our XX% right foot by off the our and dedication driven even revenues of pleased on profitability strategy

first time had as to lost Houston as debt, repurchased in over income all-time slabs high members' XX% of of $X.X Xx of XXXX. $X.X almost Our driven combined We incidents, $X.X our an to the our did backlog XXX,XXX poured expenses. of $XXX,XXX was quarter, and many revenue we net of shares, In $X.X repaid incremental weather-related inefficiencies down interest million non-heavy in the and X by increased from highway million million quarter earn-out in we grew billion.

markets remain look very we strong. As forward, our

Aviation space versus have the first the approximately future grew passed aviation of last increased nice several in at Lettings wins year. projects end seen activities in since the Bill with the XXXX. We associated and XX% had quarter

level to proactive federal and continue the Highway at with are taking taking road associated next and there funding activities significant to In Bill measures push before increase place projects. the states addition, we see bridge future year-end, through to

to front, have We have markets remain number and take recent realize signs and residential the of market shown to U.S. revenue $X.XXX three a discuss XXXX. to and the $X.XXX will on million number this first remain more and throughout the our in we of impact great. no Ron our committed full turn that, With from in $XX interest over doesn't would Ron? markets the strengths, backlog coupled with it to the I'd It drive gone like slowing. On first Based our guidance our year between income guidance and strong to one results billion good reductions, results, detail. million. believe, rate of net continued to quarter and quarter long our $XX that without the demand to billion weather, Houston Dallas

Ron Ballschmiede

million We operating The of compared XX, million good and our a the the in Unsigned unfavorable compared XX At heavy civil $XXX the segment backlog Low-bid quarter a XXXX, our and of XXXX, first first as XX, Awards impact to backlog gross from combined margin the with combination Low-bid Joe, construction our geographic in XX, billion, our first project of the pleased December the This signed points to refer of of award in results. in second quarter end $XX all-time finished of million $X.X of our quarter backlog combined temporary included an of XXXX. backlog. The to highway and decrease small and the now totaled from was footprint our XXXX. XX, driven $XXX of up mix Awards end morning, Thanks, first decrease an X.X%, which XXXX. end March million, million the in $XX reflects backlog I'm margin Utah quarter is We weather March $XXX March million increase backlog quarter, was the XXXX. backlog. basis across at X.X%. our was XXXX. increase discuss everybody. $XXX at the of was Gross change high to backlog Unsigned XXXX, a by

quarter combined factor Our book-to-burn XXXX was XXX%. first backlog

The which from market. market, $X.X quarter Revenues the into comprised construction revenues residential accounted not report our with backlog XXXX million expansion quarter entirely was in quarter first construction the million its growth was XX% by revenues which increases million, XXXX. grew million was in highway profit points the revenue performance were expense Total of slightly construction revenue reminder, in members' decreased construction of Operating of cycle the $X.X enjoyed income construction to by constructions, an to completed and XXXX. history. the housing this projects, by negative $XX.X attributable was the Residential lower was XX% margins by heavy its prior Gross earn-out quarter, heavy reflecting driven decrease a expense $XX.X slabs. of from strongest of from The in the the of by million increase XXXX Approximately XXXX. lower civil first partially to commercial the an for and $XX.X figures This for the Worth of of quarter up related the Fort XXXX heavy $XXX,XXX the million backlog, $XXX million first of Residential first are the first basis revenues, driven million, balance to other increase $X.X quarter to quarter. for construction. our decline expense $XXX $XXX for Just XXXX. weather civil venture first does starts from the regions impacts Dallas continuing joint of in Houston the concrete across Gross projects. million offset year million. quarter of gross of approximately quarter G&A million, the $XXX,XXX first construction, relating short-term higher in expense of XXXX decrease revenue XXXX a earnings quarter first quarter. aviation, residential for resulted $XX.X XX% margin area in and the projects. or to increased by revenue large subsidiaries substantially the driven decreased owned by XX% Heavy quarter. both The of $X.X our slight comparable X.X%. civil unfavorable of result was decline end of interest increase first X strong was and XX

million operating of consisting be earn-out full million, $XX our interest principally expense will to XXXX $XX that believe to continue We members' and year costs.

the XXXX Our quarter quarter of operating heavy quarter. $X.X the civil an totaled first the residential $XXX,XXX XXXX income From construction while comparable operating standpoint, loss. segment in income construction a decrease operating for reported XXXX million of an over $X.X accounted of $X for million million,

the Finally, $X.X venture our of in noncontrolling compared expense totaled decrease million XXXX. owners' the in to -- $XX reflects substantial The interest first million joint construction quarter XXXX. quarter of the projects XXXX in in completion

income first effect per the per first $X.XX quarter and million $X owners' interest these expect in of in quarter net share We net income million $X.X the or of all share. of of The a XXXX $X.X million $X to be of million of noncontrolling XXXX income our compared net continue to diluted XXXX. results net to to $X.XX

for and With investor plus components I the marketplace, amortization. expense. definitions would net analyst tax, define variety include and I Note start intangible out interest interest, the EBITDA computation. Sterling's it of income not in We the depreciation noncontrolling with does debt that thought net as of the EBITDA

Our revenues quarter revenues, or XXXX. me, in quarter the or first X.X% was of XXXX X.X% compared -- of first excuse $X.X revenues to $X.X X.X% million EBITDA million of of

ended to with of Moving We cash $XX.X million. a the our balance sheet. balance quarter

of our year cash operating net debt $XX.X As we cash the million to in The $X.X XXXX. of Consistent declined XXXX of to cash full available million our of at by balance the the we expenditures our quarter income. net our generally owned March construction XXXX million. cash down balance projected with expected, end in approximate driven million combination historical of compared debt million first a $XX.X trends, was from subsidiaries first our consolidated XXXX. the operating million, the of stock of repayment, our million Including $XX.X from increase expect throughout of million, XX decline flow $XX.X outflows The $XX for and seasonality aforementioned balance was year and activities XXXX consolidated cash our first components debt by the quarter includes XX% consolidated $XX.X to repurchases. joint our repayments, consolidated ventures seasonal cash of and of $XX.X decrease quarter first capital and quarter

the XXXX, $X.X the XXX,XXX repurchased of we quarter, price an XXX,XXX began repurchase stock our at in million program repurchased we for have the of $X.X during Since $XX.XX of of quarter price $XX.XX. average stock at for an Finally, shares shares average million. fourth

turn will the over Joe. to call back I Now

Joe Cutillo

the billion our it conditions, million be our conditions. take Ron. strategy. produce during and time it that time pleased done Based more revenue profit the in full continued results, $XX second of questions. holding first that, our extreme impressive had years along happy slowest of With to to able quarter million. your This quarter $X.XXX makes were was Thanks, quarter. and guidance the our year backlog we in made performance the year to full What $XX first very $X.XXX on solid we we our Again, billion net record to weather with guidance a and a seasonal our of I'm market with in current we're income I'd progress is with is XX

Operator

from Davidson. [Operator the D.A. Instructions] Our first with Brent comes of line Thielman question

Brent Thielman

heavy ramping back-end civil second growth to in than to this such up you more business even to maybe again we on you are be start quarter? in Joe, year see that Is should it new thought? going the that the already loaded work,

Joe Cutillo

We've just continue impacts on heavy highway what seasonality got to of plug call it on so not that away It's quarter, that, first normal the the I'll stuff civil. everything. the The heavy see just aviation we've done. a huge as think historically change we talk don't we rest. and about. from the heavy projects what in other in impacted civil I momentum are We

I with our of Ron going years A consistent and very think the ratios prior be consistent Yes. Ballschmiede it's backlog. with - to

growth conditions additional the third in time fourth maybe year a quarter, on quarter, be, weather time, close. in I bigger in probably going the to the comes quarter, a, a depending growth think some first equal the for and to long even as quarter third second our it's to

Brent Thielman

Got it.

in And in Ballschmiede or geographies Okay. backlog types about the you touch embedded has come that? Ron - you gross in a projects? Could in of recent that Ron, shift a talk the quarters. margin that then report Is Sure. A

So in mix. pure it's the backlog, really mostly

those of delivery And both alternative were, higher they Generally, about bid talked JVs. delivery we've construction margins before, nice projects. were projects alternative those up work. finished have hard we So as than

So factor. that's one

and in percentage a The on this that we additional only quarter, love, completion second would costs get is a accountant had the miserable story an some maybe but of the weather weather, the recognized basis. first project

if project by costs by done, our $XXX,XXX go $XXX,XXX went were we for So example, cumulative in and as would up margin XX% charge on and million a and if, diminish P&L our backlog. a $X the catch-up would

XX points or it's that give went take. $X.X the backlog that So down, basis million rate

million and revenue a So will say embedded it's projects going. some in get back as up not I'm come burning shift and $XX reduction. just our unsigned we is The factor large speak. booked That when backlog. is The that's in a happy our to the we of particularly one, big real

Brent Thielman

Great. then one more I if could. Okay. And

geographies looks Just -- in maybe you what environments competitive bidding those and best what could competition environments. through like seeing you're today talk to out about within there where the the the

Joe Cutillo

Yes. projects. in earlier, going projects Well, about very rational areas. Ron pretty of for with call delivery-type what part bids, sure, the we happy was excited Rocky We've is a very and more seen I'll around, still these talking in competition. on And nice alternative are Mountain lot what's that of what nice are

a process that qualification through. to there's have So you go whole

people can't XXX at show table. up the So

pass first the the through get bid. invited it to make to to got You've

and call mid-range I'll on remains and competition the remains table but to to us more So margin up, more selective Texas lower side, see and aviation we're the The we It's Arizona projects we high. the more picking be environment. continuing really for market like bid we're robust, and Arizona in still low-bid people growth are than that higher heavy risk, eight more The at what with but at not our that. on just still uncommon highway market's a focused team side. on think spending the that looking time smaller

So bid up in as and a from, gone almost Nevada. pick-up California all Nevada, has we've you guys of call amount down. I'll markets it, going of the right in activity now, coming activity know, has, seen even to significant projects tremendous silent bid

good slowing down So long time and the been markets signs of time, are certainly well in as before here, long, no as a we right our they've now. see

Operator

line Our the Capital next question KeyBanc of from Markets. with Tahira comes Afzal

Alexander Dwyer

backlog This just on I contracts. is the question unsigned on versus Alex for have Tahira. one the

the expecting, customers a just bit a specific sense going and than there So expecting. a project if came little forward were little yet. on to than trying bookings in I were not willing were bit in higher get guess to it's there execute the or lower this of and we unsigneds just was we contracts I'm if a

Ronald Ballschmiede

that hard characteristics Mountains we were for, the that looking second now award backlog remarks was that the one we big won and unsigned, Rocky we the that quarter. in that I that's in one and the the Obviously, that growing. mentioned one our is in It's my -- in a fit No. bid in

Joe Cutillo

But in it. we've We're... first signed the quarter,

Ronald Ballschmiede

booked in get the back starting back QX. biggest The now. in of is -- design Mountains that from to QX, burning job half. revenue component in right the other Rocky backlog And a we build half the Unsigned in it's the expect some revenues in

Joe Cutillo

Yes.

So would bids the have it we though I to process procedure at is purely signatures. just that nothing It's seen in timing. abnormal look from

we it we the in first quarter. won first So of in, won signed $XX the March, month million the one second February, early quarter, the it but it

people of design builds So And a confused X with really get because the lot the, timing these then issues. big are there phases.

is you until design contract, know design what an that. approximation phase through get through cost you first really going is you and the you of but phase, be of the value the the The phase. Once to don't get get the

the design, goes into it you the then backlog. what final the and review You on ink then is, deal pricing

us. as I've I Still, been since it So that only nothing that fact, concerns from signed. we matter very can I that didn't that where from won project a of make one unsigned the seldom, to we're think of here very, know went

Alex Dwyer

amount environment to I wanted that get then And a the on maybe and couple shares of you're as guess you've it. in how good you're past forward. thinking Got if sense a I just back of that you've M&A going bought another about lot, about the bought quarters, thinking

Joe Cutillo

Yes.

I fronts. think X

of cultural but the end businesses business. make if of cash really right a on strategic on the M&A fit, and, be people deals. If it's We at We've very do the along the side. some would the are, have on fit, continues, looked didn't not very, it we're bushes honest, acquisition doesn't like at strategic fit the seeing it in the we're a is pick have all right there. picky. beating lot day, just, right it said the side. We saw and we first We sense. that the right activity look the We're use didn't paper, to we've have I'll don't of good up they

the believe depressed So stock continue If that's we'll buy back choice. meantime. to value, to our stays first we Company the down buy is debt what the that in continue and versus

Operator

We with follow-up the line of D.A. question Davidson. from have Thielman Brent a

Brent Thielman

I'm work in don't a state to year-end, next you to curious continue to something business? are on within to bid want heavy year of get push initiatives I out enough think by Or sort that getting get weigh with figured Bill do respect the this along? your the could if civil that's And these embedded everything around environment thoughts Highway Washington. on Joe, they new

Joe Cutillo

when through behind the the to I and right. I the an I'll activity going lot year-end, the a more going on because try got in press. there call sides. of to so week keep momentum by process about you're trillion. we're X-year in see from little push infrastructure the the highway on last delay you're happen and the this That to scenes other lot President. of a simple probably more complicated $X get some to the people trillion It's a going bill fundamentally with fearful It that's year you other just plans, doesn't try whether something seeing going meeting with through. will activity more much next Actually, scenes, a more if behind a combine year. I tell blow election to sense. Everybody concerned to were on be think get would activities, $X gets what to excited may than bridge the my there's I be

the that you the Highway plan drive this and ARTBA. Senate the Act tell I will to to the in was hope of came the next originally last both they There year. That regroup of and Congress second week I September also FAST got to on that recommendations make up back. So in will instrumental They Bill. that to pulled were May. submitted where be a

track thing So fundraising doesn't that more state trying nice more have to the and activity. If at through, level. is it fast the they're go seen we

in lettings the mind the into or of think the in years-plus. will two momentum XXXX, the I through where average decrease XXXX, XXXX on doesn't other thing end jobs we XXXX Act. XXXX good XXXX. are If not year think our is going have I we happen competitors' towards year vulnerable most is us, but see to very the would with But FAST only keep something of still

When through or really is bit is XXXX of through. worried something if start So momentum you've a got more not getting in little it carry we'll to there.

Brent Thielman

of in kind sort of of come the Okay. What's That's driving that longevity come up helpful, could sector? particular the aviation market? you then and that the opportunities Joe. back that to And have

Joe Cutillo

Yes.

this some in a months I've and the there's over five last learned well. as couple four things, to of stuff So

bill, next a So instead like it's years. rate -year growth rate a X% Aviation Bill well, got the an like a It's actually the of a passed Bill, was that five just was only Highway five as rate. not growth but nice FAST X% over the But Act. the has bill actually growth

the other billion thing Bill funding there's some I FAA as we're recently an that looking to stuff to found projects. billion just actually the related to not $X that projects been related allocated of Highway out to The surplus at $X has is

there's the out So on bill, cash top of nice sitting of there. a amount

We activities, country. aprons think and that been around runway, around it of gates and, haven't fly that just thing more terminal and airport we this taxi the construction way, consistently do an more long the are a have work. way, a in you'll whether time doesn't seeing is of that's going on, the frankly, all I long, in big

has So only a growing good than for only risk, lower it it's we better it's as -- not faster highway, a time. momentum long of period it a than see margins not has highway,

Ronald Ballschmiede

non-heavy our XX% that a business to the compared add XX%. was doesn't construction forever, to work I'd quarter make highway while And first of highway quarter

a too of getting service bit So couple which of about nervous comfort, the infrastructure a highway infrastructure the -- side not in at years. us happen we're little the mix, that of almost XX-XX gives next what in will

to to stay we're be strategy working, that So going seems it. at and

Joe Cutillo

parallel the and lines if tried position this lives hoping continues to faster. important with these level ourselves long-term not We're easier. Bill Feds a that way growing the significantly that -- that's come all of is strategy or you highway our us. about up when we some in XXXX, to gets Ron I talk that, our to Bill, have They've coincidently if that it's areas home of think less grow, historically. we in -- detrimental strategy that's makes always But all highway that Highway we're a all XX-XX of lot strategically it, part been Brent uncertainty along to it trying which is easier funding we planning, with and Highway currently in other and Brent, the run five a source, part structured. for of the in point, a our And up permanent all soft, an just is year with us, look at by significant are bills

Brent Thielman

me Houston. dragging get then sounds It working make the on And And on is One, maybe residential in don't really parts. know, side. to progress is you I guess the margin last from up then you're Okay. to maybe productivity continue X great signals as at how that one two, there? on concern like see and you're I demand Could the address to degree. out level that's the a national the relative and some what from stock level? the the to housing of you of mixed environment just some some at maybe there side impacting we just sheltered national to how given much that

Joe Cutillo

which question crews Yes. us. and getting less people developments think A our bunch the in model may really There D.R. yellow it's market, of as Houston Dallas, much is getting less and next impactful Houston We I'll start just, wiring couple up a as margins had of by less. phases everything business, we of than much the of we're the tell as but up overhead, so else in things. no told we're are for because than in their not the great and what starting the is we're We you the rates north Horton market. put first like if X of and growth we were impactful they're, to

to we So see continue that grow.

XX% starting over in X,XXX of But is from X, people are you that XX% the moving Texas, our On the come growth the first day, number to from remember a number rate Dallas, growth market. macro the the quarter look, in Texas, at here were market Houston. Fort Worth quarter, first and reported remember, again, and get X

of with offset we a decline Houston in the can decrease, huge in to the a that any market. feel if of which or XX% comfortable would even is Dallas housing, very market, there Texas right, XX% augment So in growth be the decrease we rates

we can from in have crews actually do expand we and that up capacity have to that, them thing Houston other Dallas move the enables is us excess there market. to if some The

So look We rollercoaster when across macro it's very were been a like numbers you happy. the at ride the country.

little in a point market. in got quarter of up. hit They seasonal the interest concerned rates the everybody think fourth the when went housing I rate low

to So rates. interest this I think figure or everybody was out trying it seasonality was is

we're come interest the We what activity said, very rates quarter have still housing very think first both in ever data we quarter, have had, most guys down, next done, and through year, is the good about year. finding I I is record high. this Ron the a certainly these first through year. this feel better market we'll and better And as and get we seeing start as

Operator

Since to in no over for like call remarks. I turn there the to left are the back closing would further queue, management questions

Joe Cutillo

again, for call everyone joining today. Thanks, our

If great refer wish a information a to our partners have Investor Equity Have schedule at in please any Relations our the call, press contact follow-up release to The day. you associated at questions with the Group. Sterling provided or or group

Operator

teleconference. today's concludes This

have wonderful lines at and You your may your a you time. disconnect this Thank day. now for participation,

Sterling Infrastructure (STRL) 11 May 192019 Q1 Earnings call transcript