STRL - Earnings call transcript Q4 2020 | Sterling Infrastructure, Inc.

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Operator

Greetings and welcome to the Sterling Construction Company's Fourth Quarter and Full-Year 2020 Earnings Conference Call and Webcast.

As a reminder, this conference is being recorded and all participants are in a listen-only mode. There are accompanying slides on the Investor Relations section of the company's website.

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

may statements. today made discussions include forward-looking Some Actual today. differ materially statements made from the results could to most Factors refer more these Please Sterling's and complete for XX-Q projections description a filings of Risk assumptions. that affect recent could XX-K and forward-looking no new result events otherwise. update future as a The company to statements assumes or obligations of information, under all income earnings per recognized share also management refer GAAP. may measures adjusted Please US are EBITDA, adjusted financial this or call, of note that EBITDA, which all adjusted net on not

As the financial these issued reconciled our required Cutillo. turn and financial non-GAAP Joe you, regulations, release Mr. now Thank by SEC ahead. most rules sir. the measures are to go call yesterday earnings measures to afternoon. I'll GAAP over comparable in Please

Joe Cutillo

morning. by soon not and to call. like today's joining Donna thanking for forgotten. XXXX you, is but start Well Thank good over, everyone be will I'd

and in stores. overnight. entertainment. took shelves, the of our our our to on lives schools, toilet no blink wildest everyday and assessments their customers. were well pandemic their got safe, paper unchartered All of the completely new us above were care leaders with keep our things and to a as operational a react their well these beyond and have of imagine find those would an impacts care for our fellow of planning, our to of strength thought-out and we out saw and we restaurants travel, to everyday employees how to homes. out closed unknown. they as their to as and sports, they and In business Never No times executing how of a studies, We of abnormal global the in and We our something watch change how plan it granted our no eye, banished were, like grocery them dealing our in risk The we all need offices, nimble stock gone. firsthand did We of and We we would went were the ship window. continue would conditions, that navigating see all people. waters all in true market thrown It our dreams take is our teams from go take communities.

I'm XXXX a back to away was leaders, record from walking proud hoping you keep away away I'm our X,XXX Sterling year. say, and ever, all safe, walked and the prouder to walked XXXX care For their day. ability other band or customers, of either deliver happy year to communities, employees, fight of together, give you to another than take another our each

on So like faced, focus instead of any time we to challenges victories talking had. I'd we the spending about more the

most with the environment start work of one, in In our the have Let's our safest safety people. the important XXXX, history. we

Safety ranked Top ENR's the Number on XX and Road we XX America's National Domestic industry Contractors, were We the won XX Transportation Award. We List. than making our Number of and implementing In incident addition by COVID-related time over over our XX% lost protocols, risk new over incident time recordable lost incident to XX% by rate prevent minimize we transmittal, the reduced or XX% to our rate Forbes and better Companies Small the XXXX rate all Builders average. Heavy Best on American

We genders new added thought driving backgrounds, diversity continue our various all members levels. and team of build by out race with at strengthen to and and

workforce, directors total our and result, XX% independent gender ethnically of our or are over diverse. As a

In the more on our exceeded office XX% XX%. poured integration XXXX Plateau, be its would let's to XX%. and our most the work. revenues of our great now market Residential revenue In our total even about year, of employees while our were doing you Civil a This sector, of our into amazing from less most highway acquisition Houston Now expansion up from of take in normally we're and our now most able some business low operational consolidated our the into over were it's our account working year sector, integrate when that talk of slabs than heavy coming home virtually. Heavy coming we're highest accomplishment slabs In the its successes. from is by XX% are bid own. fully But recent

front, shareholders, of bottom the value our reducing and on a our our was line great employees financial focused growth year while for strategy to we it the risk. On as demonstrate both continue

XXXX with me revenues start prior-year. Let our flat. quarter fourth the first versus the of were fourth In the quarter, quarter

over increased points. margins basis XXX gross Our

Our operating EBITDA our XX%. and grew income improved XXX%

For our were year, revenues up the XX%.

year improved and operating $XXX truly gross margin stock basis points over generated in and from operations, our grew income and Our difficult very increased cash some amazing We XXX our times. million over XX%. was XXX%. an This price

revenues XXXX accomplishments, just proud what another we've ourselves over to XXXX. our of in I'm as I'm to grow In billion. proud $X.XX As as will year XXXX, done for position of record

Our XXXX Ron and net I'd more $XX details $XXX to over it outlook. With will income and give between million. will Ron? turn the and million be our to like EBITDA be the that, on to full-year million between and $XXX $XX million you

Ronald Ballschmiede

discuss to almost results and by pleased fourth our and measures I'm performance. Joe all good our quarter morning. record strong Thanks, full-year

adjustments. recall, which several you financial XXXX considerations, help which Our quarter accounting tax financial includes to the additional slide items significant Also, XXXX presentation and to revenue our details our modeling significant provides one-time also one-time included income underpin related earnings website fourth understand acquisition XXXX has presentation, our our the and posted to The as results. likely of been guidance.

full-year includes Our several our better a earnings help provide year-over-year release presentations results. financial non-GAAP and of to fourth quarter understanding

a XX% beginning of XXXX, of a of take increase our Unsigned with the Slide December awards record me billion, XX, XX%, $XXX XX% of end backlog $XXX metrics you XXXX. the year-end highlights, low-bid starting year. X. the $X.XXX Let gross our at of to beginning At our XX, backlog increase through at compared a number on The our financial over XXXX, year. totaled totaled high XXXX million million over the margin backlog was December the

an the We the of of increase margin of beginning expect the first XXXX awards XX% quarter basis with at beginning backlog from a gross our billion, year finished XX.X%, of increase combined XXXX. in XX% be majority combined unsigned The of contract and we the a point of over the was to under year. the Importantly, $X.XXX the XX year. record backlog

for book Note to excluded Services and Civil backlog Our burn for burn backlog it our quarter. is the a Please of and results. that were slightly as include XXXX slip Revenues Heavy for Slide Specialty to only. summary $XXX to computations business. Residential backlog-driven the from quarter computations X our comparable full-year fourth the up of over book revenue combined XXX% revenue XXXX and consolidated factors XXX% not XXXX respectively. is a million, were

primarily up X% with increase the aviation million reflects XXXX Consistent and Our lower XXXX. revenues Heavy revenues Civil down revenues revenues primarily of approximately XXXX. and Plateau's quarter inclusion quarter compared in to expectations, just This over $XXX totaled full-year decline only the XXXX reflects of billion, our for full-year fourth XXXX respectively. XXXX. fourth in The $X.XXX X% all were of

full-year This XX% backlog aviation revenues. XXXX. reflects entering We XXXX. for delivery-related were heavy up expect quarter our highway approximately our and fourth our higher Heavy to bid intent highway our strategic while significantly of multi-year the revenues aviation reducing rebound to revenues increase alternative increase reflecting revenues, low

the driven passing – in Houston and heavy quarter The fourth increase price Heavy concessions Residential the accounted generally in of concrete into lumber, heavy The XXXX primarily quarter XXXX This in by margins XX% of XXXX. highway revenues to portion strength quarter, expansion Civil steel XXXX. million declined number the significant our sorry our slab in concessions fourth I'm civil of during X% XXXX increase temporary Our for decrease an the for $XX progress full-year, comparable XXXX. improvement increase Specialty by reducing were Consolidated XXXX and the XXXX XX.X% in able make the the The $XX the to half recent reflecting for and in of our million comparable increased both market. on $XXX.X was quarter. over of we periods to revenues the $XX.X XXXX and the residential total fourth the full-year. cost was XX% Dallas price in of and gross to the and XXXX metric attributable XX% fourth respectively. Worth Approximately XX% XXXX We XX% million in continued fourth area of and completed reflects highway the and in from and increases XX% and driven Fort in in project of progress XXXX the this operating in revenues was Heavy margin XXXX increased gross compared continue million costs. due in an Civil activities. was material revenues Revenue of XXXX. The over to of were late X.X% Services recoup by strategic XX% charge in quarter. slabs to profit market and COVID increases quarter

dollar acquisition. expense revenues to as inclusion compared with the million margin of million amortization as Plateau For XXXX, four to consistent the X% million was and attributable for of over was expense. were $XX.X the quarters. stock-based the a the The to from Intangible for our compensation asset to inclusion million increased prior-year of quarter. in the improved all the operating XXXX full-year $X.X XX.X% Plateau increase of higher income result periods of $XX.X result quarter Fourth for $X.X administrative gross and in full-year, expectations. X.X% a General prior XXXX in

the The place totaled in in XXXX. full-year acquisition the put $XX increase of For financing fourth million. expense quarter million, income related $XX.X the reflects of full-year, an interest in to operating costs increase

tax tax Federal full-year XX% and quarter tax the expected permanent taxes non-deductible increased related fourth reflect income effective an approximately differences million driven state approximately $X was in rate higher The to quarter. than in of and periods taxes. income fourth respectively. rate income both The by tax for and and compensation incremental other XX% was XXXX expense income increase Our increased

primarily Cash expense our of for tax million, $XX.X was Importantly, income $XX.X as our expense absorbed non-cash totaled state by payments. XXXX full-year was tax carryforwards. income million million, it $X.X operating loss interest of

have relationship to expect non-cash, cash same in approximately We tax XXXX. income the

to The net $X.X We of $X.XX fourth net or items full-year these or in quarter an tax rate also XX%. of income $XX.X EPS effective approximately all $X.XX. of of of income resulted XXXX net in and expect our million EPS XXXX effect be million,

our X, our expectations and deleveraging Plateau Slide our to move new presents graph five-year The credit generation cash let's facility. acquisition beginning strategy. which summarizes XXXX deleveraging flow Now with and October the

times. X.X down set approximately that was coverage EBITDA the bringing time, objective XXXX. forward-looking forma coverage we times At to ratio of pro by XXXX, XX, X.X September Our an end the

X.X million see you consolidated declined sorry December to coverage As XXXX. can -- $X.X times XX, at EBITDA our ratio I'm

than than will be at our to X.X the plan, we since our ratio Given improve expected the XXXX XXXX throughout leverage and beginning our year. financial more cash positive and the flow will acquisition, of continue believe target less our

During $XX credit payments of under of borrowings. the facility, a we fourth have we $XX the million accordingly, payment revolving term million included availability early quarter, The full of borrowings loan we XXXX, debt $XX no the end voluntary $XX line. million million. repayments of At and of and repaid had scheduled

$XX million. more of EBITDA double adjusted $XXX.X adjusted than million totaled XXXX our Our EBITDA XXXX

totaled threefold debt flow from $XX.X opportunity addition, cash investing us XXXX. in $XX.X while from make million, almost prepayments cash of strong This million, $XX.X cash million million an operating in In the to activities operating provided the net operations our improvement expenditures. of flow capital over flow $XXX.X of

Moving balance sheet. our to

compared million XXXX, Our cash December $XX.X beginning million equivalents XX, to of totaled at the and cash XXXX. $XX.X

$XXX million year-end million, year. of $XXX the of the at total XXXX net our beginning debt was cash from Additionally, down

Now to Joe. the back I'll turn call

Joe Cutillo

Thanks, Ron.

results, As much to our as time talk it's to I'd continue to to XXXX. about like on XXXX move

company now we our and culture. of sixth in year XXXX, our transforming As we're our enter

continue our Tealstone margin growth, to focus Our growth. the of our and further overall we port. the shift continue for rail logical bottom remain line as core base from expansion delivery, price while alternative the bid grow through exploring a to heavy accretive three through solidify building highway while on in platform work the reducing same and begin continue risk and exactly low the elements strategy We'll and Houston sector and Civil we future aviation, market. Heavy away next expansion high into We'll to products to productivity

or strong acquisitions. of slowdown and of we'll We in bid We end-markets sector, Heavy see XXXX, activity in entered strategic with our specialty Lastly, growth the into sectors. believe in at billion. adjacent through we in exploration the await We continue our $X.XX all-time with year first $X.XX wins, first the a expansion half transportation sizable Civil we'll but markets very the next year-end, of will and our our be as low Plateau the even residential revenues high and that quarter bill, early activity. us with the get along are sufficiently record confident billion infrastructure XXXX some through will believe combined backlog between in bid XXXX,

Our it to to net earnings many and have and growth right $XX to the be to With and for questions. I'd between between the the the million turn our right follow. like right $XX income record solid customers, end-markets years will million end and XXXX another end, in the over year have and that, will we right be million In strategy, $XXX people, $XXX million. EBITDA

Operator

and [Operator is for the Ladies floor Instructions]. gentlemen, questions. open now

is coming Karimi D.A. of ahead. from go question Davidson. first Zane Please Our

Zane Karimi

the Texas XQ just first-off, through that of been how guess I that how particular? disruptive you is able in impact looking? weather to any Were guys has or in in work

Joe Cutillo

Yes.

rain, So beautiful In in we is it's of couple honest. relatively XXs and XXs, the March, March a be days, to start. of January normal. great back disaster to little was off a was February a had bit but

we'll think because businesses Tealstone weather in our our February; of I Southeast. in Plateau the important the both thing hit continues the is month February and

more them and because makeup temporary for of time. more schedule a are back get is importantly, require have to of areas base get those going on to weather on But the However, combination to issues, customer hit best capacity. two them us with their both back

should them April, as we into majority of there up be scenario. hiccups So And worst March, they get we certainly make will if of run and a all good full-out. any the February, if have in really we will case not

and was you, when the hour, the But guys weather's I'll they'll that's February tough. are running tell good So an miles these XXX catch-up.

Zane Karimi

I at And those are and Specialty How distribution when What's this in there sort then there. XXXX. growth really centers? data Great, then expectations how the about work out thinking not stage? like we're looking we're visibility like and much guess Services, developing is centers of

Joe Cutillo

market I'll data Yes. Market the distribution local three is larger continues today centers. Frankly, all to it on be can very take bigger rates. smaller levels, the e-commerce strong and than warehousing and call distribution, growth the and and warehouse the we up

we the project we and we top-line They XX% the years news year of great Plateau year kind ate up as the human a is said, When and a look that we As over exiting capacity barnburner grew versus X% had anticipated XXXX, growth XXXX. had we're three the of over in took bought about the year rates X% next of their capital at lot ever business. they growth to best in management. last business, a

business the this to how Managers. they in put to as Project grow faster best rapidly Project but of market very They're a bring we to and Plateau mid-single-digit year, that place execute Project Project come recruit, those So in think firsthand going fair new us increase. learn going number under And to of way. be of train we're Managers to Managers would not that. XXXX. program it that think so adding in growth as be able they'll capacity program on, of in see But allow they only to continues that work Managers a somewhat we to to to them a Is kind increase; the than a

of after ramp-up that Our to we market. how capital human is biggest challenge more fast go can

I'll on on capability we're call and the resource market of an no, that. now, more internal, diligently issue working So what right concerns

Zane Karimi

flow, for as thank guess strong Great, level? me or one in then, be think near XXXX about I you. last cash it same can as the

Joe Cutillo

flow very the of going it, we're you for more it different this one from have could trucks. speak be to wouldn't prior-years. some Ron, any about to -- year. significantly We're have strong no Well, is but capital you a use to think to cash that going we year problems can reason Brinks have this

Ronald Ballschmiede

Yes.

bottom that's line. think I the

I EBITDA the think cash almost EBITDA operations higher certainly than about mid-single-digits, up that. with certainly in flow starting and bit from up are little the

So increased our continually -- as our activities will that land always need business obviously help we've fleet. development comes of the to refresh we

our land ever it's is we backlog in of longer $XX that by over just development been. that, thing projects over have backlog. north still So which our at that probably we least nice also duration $XX million, good And is Specialty spent but driven not of would our it's nicely plan, with fine. million $XXX And we'll for we have only of of XXXX; sets million revenues achieving that It's Services that what through plan, the all in out of the half roughly us shape than for our cut up that. -- think Group. means side XXXX, entering that be certainly half in with well closer either to also is to up But is probably each range, so in is the while over we five puts expectations us a of

in of start-up of EBITDA. bit $XX to a our so these so the million have or meet projects, about of We demand capital

Zane Karimi

much. Great. And into very I'll back Thank you queue. jump

Operator

Thank you. [Operator Instructions].

Sean Eastman Please Our of ahead. next question from is coming KeyBanc. go

Alexander Dwyer

Congrats guys. on is Hi, great year. on This Alex the for Sean.

Joe Cutillo

Thanks.

Alexander Dwyer

potential within -- XXXX stands the may just overall margins we back a ago. how this is get Civil a maybe I you years wanted then segment of to expansion So up compared And the shaping today? the it saw be to as the a couple segment margin levels nice the in Heavy what sense relative surprise in these see in to on as came our model. margins

Joe Cutillo

that alternative diligently we of will delivery. of and in more margins And bid working reasons. continues projects only give low we've our we the Ron the shift; high-level; higher Yes, three to for the been multitude but into of Civil our LION's I'll not those points go But general. backlog, start on at continue Sean as details. share One in our margins usually to to is a combination anticipate Heavy four shrink get that better the some you let on a a are multi-year, tick-up XXXX

product the, grow you the that? I'll those low start Ron, give and we'll see you XXXX. to will bid to So that kick-in. continue continue want the more We'll into on it impact as we go shrink detail get any call to to and to mix

Ronald Ballschmiede

$XX of lower low and our [indiscernible] expected in Yes, I revenues, movement XXXX. think I mix, continuing revenues the consistent our off and is type so X% what Obviously, it's think take work. to do. margin or questions to shrink these all low ramp-up then reduces to million like continue pretty of bid alternative that side in projects. bid much lowest delivery some And hit type Joe returns, jobs on growth in delivery said, we to large And and about start-up as with give we're that which XXXX trying are

So itself continue will that by mix to help that improve.

Joe Cutillo

the in the much into we've board. is better back picking-up XXXX. the some some as I is that year that's And highway margin think of than saw we projects got the the of other And the we heavy low go And And half of I'll bit little across won. aviation. last last thing we've thing; nice say that obviously one a on

tailwinds good XXXX, areas to Sean. some multiple got we've that trend continue in So into

Alexander Dwyer

levels challenges years And ask you operating Great. around that sustainable trending just would margins Services to over next Specialty and what the where how wanted you posted And the couple are biggest are this XXXX. guys income then be? in this of the then XX% see I about

Joe Cutillo

stay that more to it's it we've in spike-up go-up what form. we're Yes. I think projects I But it's in where challenging bid your from margin always at. whether -- Obviously, or to seen going any see hold or executing relatively don't consistent lose we're they're think activities way, shape to in both going them than to them right. challenging,

to would don't we're see say would So think don't see say status I a kind I big right. I a think of, increase. we're quo, big to going decrease. going I

Alexander Dwyer

the range, And ranges. to me, a to EBITDA understanding at just for EPS one and one results point helpful swing swing is low end last taking factors anything And the of be guidance the from the out range high-end of could I'm major discussion? that would there the a the look

Joe Cutillo

we have couple come don't together a put of think drive of the is into we range our that things I guidance year, Well, year-locked that would loaded. and XXX% the the we

couple us And for really thing days we're Now If major pushes working the us into three any is big ago. if don't swing and that I'll couple diligently that any as the sectors. some risk we very year us to of nice could or we announced the down half don't then the hit, see really, get we those -- nice a in year just got two up back the parts multiple towards of tell swings or we parts job, bottom. in jobs that you top-end. of back weather half nice projects other that on hit those we of if of

Ronald Ballschmiede

mentioned meaning than is our of that already, under we're month to thought up -- into be And already we or process. we planning finished going ago contract turning well faster a Yes. and curve, over I great XX% and when that's in that unsigned work is XXXX that entering a I'd

our we'll the of have be out that backlog then backlog Heavy are business there because wait to everything So over economy, that and almost XXXX. think from we everything see the that. what to have there of the continues But and And, does in of the Joe as or Plateau coming good the balance side for builds Civil as just I it helps this, the about both the mentioned, infrastructure you're of probably at mid-XXs, the is well feel what revenues strong. XX% in downsides else upside ranges us

Joe Cutillo

pandemic, which thought feel heard never I in year. year time I even bit say a you're cautious. for knew a abilities and that But of of best ever would in of, would by being after this, I've felt the our I since this of, year little on entire at here far the Sean, outlook or point have a a

Operator

Thank you.

question coming of Karimi follow-up go Our a Zane D.A. next Davidson. is from Please ahead.

Zane Karimi

time. about bit opportunity Hey, how you M&A into focused acquisitions talk your you more Could pursuing little territories? and see a are right existing Joe, new more organically expanding one you do now Ron, more businesses and

Joe Cutillo

We're Couple to -- into business, Unfortunately, you mean I reality been the I M&A back We're the picky. for mean right. of very I love to word. And picky. even getting what and go may And point would we to we're deals guys where couple. at hundreds looking this. the deals. tremendous we actively right We going by books level. the the that before and remain look is we've at of hopefully here's amount understand next get really

add-on. great it's us; to looking. be either it you working ready positioned got It's not always strategic we're actively accretive but about nice or than it's seems tuck-ins we in timing, would us. a deal. we're we're be it's finding be to that debt to very a sheet interested routes okay. have want. And about take nice But it, do to to a It's longer got to from to and got people, ourselves perspective several have balance But a We and

of to kind continues call what the I'll look one On Plateau we state. incremental move as expansion side

in Baltimore; Tennessee. They're going they started Virginia of looking projects they're there. now at the into at North looking So some in

on But we betting and some to it's some person, also have two Texas in They'll the other miles we're state the are that are XXXX. a to they're start But an look do we're in into expand would us and looking take us we from tons State then at is But Dallas Austin geographically. those right the think and The Houston. the now XXX and market at which still strong really because discussing expand move looking do that legwork had at trying a So really If tell is markets this year, markets. move. on of Tealstone, the continue XXX those we've easier it within a evaluating and couple of exercise. when XXXX customers one it's Houston couple still homework markets runway probably and markets. really, market. I'm I a that's entering that And miles we're from state growing, what rapidly to them ask other key for to

Operator

At to you. the to time, back this Thank over turn floor like for I'd comments. closing Cutillo Mr.

Joe Cutillo

Donna. you, again call our Thank everyone for today. joining Thanks

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

Operator

Construction. thank gentlemen, and Sterling Ladies in you for your interest and participation

wonderful a lines may log-off day. webcast the have now You and your and disconnect

Sterling Infrastructure (STRL) 3 Mar 212020 Q4 Earnings call transcript