STRL - Earnings call transcript Q1 2022 | Sterling Infrastructure, Inc.

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Operator

Greetings, and welcome to the Sterling Construction Company’s First Quarter 2022 Earnings Conference Call and Webcast.

As a reminder, this conference call is being recorded [Operator Instructions] There are accompanying slides on the Investor Relations section of the company’s website.

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

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

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

Joe Cutillo

report Good to an and welcome during morning, and XXXX unprecedented Sterling’s time Maria. of earnings chain everyone, record proud another challenges. hyperinflation quarter quarter Thanks to supply first call. I’m

second to Our I these for to our of financial I and Then teams outlook. turn go highlights our overcome investors. to it their does them challenges not know and a thank than working like service harder progress we Ron cover continue efforts and over customers the to are we I’d quarter finish will I’ll let market first the and This morning, full them to the unnoticed. have for and And ever will made. ensure commentary. with our it strategic his take year

had is safe our with of lost the teams that family to quarter. we incidents zero home every their start in Let’s most highlight quarter went important time And evening. the and the

as much a leader about driven themselves. as culture cares be they to We about an by industry safety, do continue their fellow colleagues that in

understands results workforce enough. not alone diverse are financial that Our

history. to protect strategic call Sterling give Way. to segment, protect In into for strategic looking highest the margins, our improving pay-off. first communities. segment and added to environments, the Shifting continues our transformation our and people, we margin reducing E-Infrastructure quarter, Transportation on This The constantly value what surpassed focused revenue front, the services is We’re our risks, our our in better back to our for and ways diversification time

the acquisition, year end. at With which Petillo we addition the of completed

of E-Infrastructure our income Our quarter. operating and the in XX% of XX% segment total our revenue segment represented

We country. excited opportunities the now we the have the addition about very most continue development believe, to synergies we segment. largest, be we incremental Petillo with and site the in capable of the Plateau, with company E-Infrastructure Combined into have

operating segment organic segment versus Building three on income X%. contributed In the in Our quarter Solutions margin prior away now operating delivered our XX% our heavy-high Solutions of in In and our migration grown our up our market both XX% quarter. and Phoenix was up the E-Infrastructure of continues focused segment highest revenue versus our XX% our was Transportation prior combined second quarter bid income combined, all line the year from low-bid improvements Solutions expansion while improvements continued nine segments than line bottom in its months. Building to versus top over In When and quarter. These revenue increased income the outstanding Phoenix. segments segment, Houston and in pay-off. operating year, another projects less XX% to in has growth

For was the prior quarter versus revenue our XX%. up year,

XX%, details over at to to million. with and – cash I’d XX% grew Ron backlog to XX% just XXXX, our strategic versus improving Our and With it balance our operating up more platform direct was margins, financials. turn end that, centric, net sorry, on $X.X a up Ron? billion, power year I’m like our linking up risk on was tribute reducing great you income growth. per the net of customer to a results are $XX over culture building the future our These to ended income and focus, give our entrepreneurial income over was our combined

Ron Ballschmiede

record and of am performance. Joe, another start good quarter Thanks, morning. I first pleased strong our discuss and XXXX to financial

has help Relations our posted earnings The additional includes presentation presentation website updated XXXX our and Our to considerations, additional results. financial quarter understand modeling details further been also underpin financial provides and which Investor revenue slide guidance. XXXX first our to

quarter. on on may acquisition with the XXXX, of in you As full the recall, we financial the inclusion resulting XX, first Petillo December results Petillo’s closed

the year. Let margin a XX, Solutions [ph]a improvement. A of highlights, the beginning billion our me end backlog with with our low-bid backlog the this an from backlog E-Infrastructure pointing higher starting the over $XX the basis the take The of Unsigned of $XXX backlog of drove the XX $XX finished of our awards backlog end combined million million of XXXX, first quarter metrics. At the this quarter $X.XXX gross last the in proportion [ph] up financial you March XX.X%, increase XX% year. XXXX margin year. totaled increase beginning current We through billion was $X.XXX XXXX. of approximately at of at million increase from end over were

and backlog compared a quarter. was profit record the combined of to XX.X% beginning the gross XX.X% Our at

of X.XX times the quarter XX% Our $XX up the backlog. combined were for times XXXX. quarter ratios over million backlog book-to-burn of were for current for quarter X.X XXXX $XXX for Revenue first million current and

acquisition XX% was Sterling revenue. quarter and half this growth by organic its revenue XXXX late Importantly, from driven growth; half of and of of revenue the Petillo first the

E-Infrastructure revenues within on quarter. – increased demand data offset from and E-Infrastructure XX% and for Solutions Coast primarily in segments. first grew was The our projects. distribution design $XX gross revenue to quarter water supply were million financial the comparison million year-over-year revenue construction make containment $XX X% strong supply by Transportation inflationary Houston. year aviation and quarter and difficult acquisition. chain reported quarter, Consolidated large the from continued to an and and resulted increase our an revenue East accounted increase pressures, of partially build the prior Reflecting $XX.X inflationary Solutions growth highway a General $XX.X gross million current and driven Worth is our quarter of was of heavy XX% quarter. in Building to footprints Solutions, in the increased declined quarter $XXX quarter. these increased quarter million million profit compared the margin XXXX attributable market segments for margin growth revenues centers, strong from Our by quarter current the by residential first to footprint. of over These centers, continuing primarily work and current treatment XXXX The year quarter growth as organic of to Phoenix Dallas-Fort This to and growth higher over compared revenues. Building there was XXXX. In residential from heavy in growth activities decline expenses continuing current challenges lower XXXX prior our was prior to XX% prior our increase year current quarter. organic reflects organic E-Infrastructure, basis half Solutions. of X% primarily Houston expanding Consolidated of warehouse revenues the period. in Petillo points Transportation our X.X% Transportation change the of from the Solutions core our highway the administrative Phoenix and Building and comparable over in in $X over XX.X% due The the XX% XX compared challenges this minimal impacting million. impact Over

increase income revenues. year Operating We quarter quarter. to be for approximately $XX.X the from X% the full continue to million of in expense for an prior first the $XX.X million G&A expect third – our year was

debt one current supply primarily chain have results margin prior year quarter put entities of XX% and loan XX.X% in in forgiveness received the first loan. the included my of on forgiveness from effective million margins a of had rate and our our owns Sterling final the In current XX% aforementioned million the QX was Our in X.X% non-taxable quarter the to of income The forgiven. outstanding tax tax inflationary was principally X.X% was gain the is $X.X last gain quarter. $X.X challenges, in This of declined its year been operating reflects the PPP of current notice portion decline effective pressure our quarter, declines rate XXXX. this PPP from income as prior the the that quarter. benefit compared which this quarter,

XX% We be continue to rate expect our full year to XX%. effective tax to

income. Our net The will The million income year be $X.XX million record these $X.XX of EPS effective pretax quarter items a full first income and effective year $XX.X tax and respectively. our XX% quarter non-cash portion per prior all share. per net results continue of approximately in share net or rate were of $XX.X to

million quarter of $XX.X $XX.X prior totaled of an EBITDA million. first Our over the quarter XX% year increase

to our up prior compared in – in improved the the activity quarter. $XX.X of As from EBITDA percent Cash seasonality in our XXXX from mix changes the generation year our period. X.X% operating to of flow million in comparable quarter revenues $XX.X included revenues was for The principally mix fluctuation in backlog. contracts the and X.X% quarter million reflects the the first of in for quarter

approximately included of costs the in current to payment million the acquisition the outflows Additionally, Petillo $X cash of XXXX. related quarter relating

the expect flow to operations approximate our continue from year. income cash operations our for We full year from to

This totaled $XX.X million our of to Our strong the Solutions million reflects first quarter impact XXXX. including activities, net capital increase the proceeds compared acquisition. Petillo expenditures in of disposal $XX E-Infrastructure

CapEx in the range. to full $XX anticipated to continues net year XXXX million be million Our $XX

turn I’ll back Now, to Joe.

Joe Cutillo

Ron. Thanks,

our outlook. remains Starting few like and Demand take strong. minutes our East Now, about a the year I’d with full extremely to to markets E-Infrastructure. talk Coast throughout

be and continue projects very to can the our taking we’re service we core first. demand to to continue customers We on ensure their selective

Our At getting ability in to these XXXX. do of due time, and to availability. we this limited significantly still equipment not material see remains better either increase capacity

segment, nine the extremely U.S. for And As currently equipment in is months. our months the three now to averaging our new lead Solutions XX markets, an top markets example, are Building remain which strong. current three time

we is strength through put for second issue in of a remain the several on issues supply lack markets powder further this availability an to allocation leading the seeing driven However, projected companies These quarter. to inflation. by chain concrete. allocations In even and quarter, are and are began cement

passing from the those our we see than the income first addition, more basis materials increases points price In first We over on in quickly successful our of operating quarter. benefit in XXX this been that on saw year’s quarter past. that to increased last the of have all as continue

significant and any more made this or is piece Our the of outdated planned quarters it funding. several or funding XX surprise and infrastructure and Transportation the of build to to projects. from costs has new actual project labor our At cost. What customers only sometimes engineers is business. to impact time between material small the phase bid segment were through them. process months Historically estimates slight segment before has months is and new a call challenging seeing is months customer’s how not is market. costs us taken our of what the see headwinds Because for we only estimates, a we disconnect This they it this new amount from forecasted of of bid several bid our our developed estimate have into the XX

and material turn our year in for won, strong XX% EPS our the to but now These to of and we to $X.XXX estimates. year in XX% billion go revenue businesses the to almost confident rebid. of back of prices, each $X.XX. our to awarded be and revenue position engineer’s $XXX $X.XXX coupled guidance, of current will result, to range us with guidance facing, a maintain challenges, over was the ability first significant labor that were quarter Even over $X.XX jobs great like with that re-estimated a is million questions. As then I’d using to full start Year, our New enables the full an remain With backlog our billion to not it

Operator

Capital first with Markets. from question. KeyBanc Eastman Please Our Sean proceed [Operator your comes with question Instructions]

Sean Eastman

year wanted update the here. Joe, to Joe guys. chain my inflation Thanks Great expand taking for on supply Hi, I questions. to and the Ron. just start

I’m think type here sort Joe? overcome supply of in you’ve chain year. I that framework that to wondering, frame the the way. would been status some guidance How of contemplated has backdrop it, gotten original you over worse the able the quo of just course and

Joe Cutillo

Yes.

better quarter. So, into between supply chain first quarter to worse. at pricing. the But is, it fourth when third getting It’s and continues itself, if kind we at and I looked of good coming news quarter not look get trends availability quarter, fourth the

of that back we bit As confusion part There’s us, expected projects business, had we We’re erosion? some margin caught in the the seeing we a inflation, to up, we but we inflation. sort once because into where but are material not the we’ve clawed is, inflation first year. already of this of actually hitting amount some didn’t watching fact, last bid, nice go cycle a we of But what got is, a seeing any erosion. of didn’t have matter in saw we we been enough started further that that that, for year put never residential of increases further built always hedge of were little quarter we’ve of our some and last see

that corrected we’ve So, process.

things fuel In addition with in E-Infrastructure contract. our business, the, done with indexing in our we’ve

pays of we’ll it beginning back the to us. customer If we So, offset goes money the the try give those. price contract. to give the up, customer down, If it goes at a to

chain’s done going still up. we good see But of have job pace, it at little this the or no it incremental an guys erosion. off about, feel And still should supply if continues and very very outstanding offending our volatile, So margins.

Ron Ballschmiede

Yes.

a you couple apples. help with me and Let oranges

the on which The a far we that it from bit all snows, better the of were challenge performed words, see story the up first group Petillo two is Building But from our the decline of the Petillo it’s other further in Northeast thought, So return in with Solutions in in margins. our acquisition, quarter. is a segments, you to didn’t have the in things, the we In together weather quarter. got remember the flat operating little and nasty out gates. would fourth they there than the

revenue balance the back then XX% the the of side, and quarter in half the the of the in of a so the in from XX% pacing quarter, So falls revenue or approximately in second XX% year. the, first

one that’s margins. type And margin large of the just Petillo your to important impacts the they scope. is So that lower volume Plateau, refresh than pretty of other of different the are moving of course, memory dirt that some work, direct characteristics on their add because

I’m Plateau that financial full four full been XX but rate, difference percentage rate historically So points, public basis with already points statements audited run run helping between that’s performance. entity sorry, the Petillo, and

Joe Cutillo

all in plants. built we And the it that

first basically year because the in last comparisons. impact challenges we’re minimal there, doing I that’s think of So, one that’s those once we got the in quarter

– the of also it’s addition business, still inflation, very So Petillo the but we’re the which excited about.

Sean Eastman

Yes.

margin my So this XX.X% question. next is looks guidance starts It gross to the come into maintained. like

guys And so confident. still you are

You can that thing started down a it that’s, XQ the even points and you points basis XX basis comps largely in like. get year XX expansion, though of sounds

Joe Cutillo

little yes, two a think first are the there’s, had of in differential comp bit main I of a elements the quarter. Yes, that you

backlog come next between activity, we back and their activity Petillo You have over concerns. got And the But they improve their run margins really any the the don’t of the seasonality quarter. strong business three. first in and their

Ron Ballschmiede

forget quarter seasonally is always the same across slowest don’t quarter, store the Petillo, board. our first sales without Even

on So, we bandwidth. that XX.X% having that X.X% we’ll remain are clenching in confidence –

Sean Eastman

Yep.

is then room me, run last on my is it full some first are to to of the I’m on And revenue rate you there? from year unless fair range here ahead say Okay. something that for This leave guys in budget tracking missing quarter? the upside seems one sense,

Joe Cutillo

Yes.

say. would I what Here’s

moving everybody or can, I on delay wood that’s with thought their that card, The the sticking does a later so of way there about our wild up better get these did with wants to you guidance still materials. start imagine can’t feel is And availability that through, or parts worries still we but month if And we understand the got they is pretty we to still materials, the on of, availability in seem supply getting sticking quarter kind Sean, any good We’re projects frankly. the chain. there’s the there they early year margin piece, in a not do me, to erosion. that out be year, out raw them continue we’re kind and the today. with knock are guidance many as

the tailwinds we feel that the good side So, we supply we with one with We in the of the know variable this point feel just, backlog we of just that good at the on headwind have, have we chain markets. can’t and control we don’t time.

than getting the guidance, So, over we’d be further think. any we if skies went I our

Sean Eastman

Thanks insightful. fair lot, think that’s totally over. guys. Yes, I’ll I turn and a it

Joe Cutillo

Sure. Thanks, I Sean. appreciate it.

Operator

Our from D.A. your Thielman with question. comes with proceed question next Davidson. Please Brent

Brent Thielman

Hey, Joe, quarter. congrats, thanks. great Good morning. Ron

Joe Cutillo

Brent. Thanks,

Brent Thielman

Joe, question first Does line these Building of concrete. cause deceleration just segment? term this the for Solutions, guess top that talked issues some on some on near you allocation in I about the

Joe Cutillo

No, our bigger quarter, been them. in the team of news our we’ve it’s Phoenix or the If they good growth – than we’re, and been. We up, it them, even happy market saw the we the their now total XX% volume. than we’re really started fighting hitting anything, with through be is, so has and would think performance I in that’s

I would shortages see the material be and higher, we of on think allocations it if even some the side. didn’t

it’s all here we’ve a the of, see. as It’s rains little we it’s baked kind bit it on So, just got us – got in.

Brent Thielman

market the and a demand talk you things in Phoenix sounds And Okay. grow function business it environment, markets that now Maybe to the a Houston you like for bit Houston. could that’s maybe than but just little the bigger you. the about of

Joe Cutillo

Yes.

is, fairly the markets one in the players and market’s Houston It quarter one. Houston between So you do two market. market The is Dallas seems fundamental Houston’s next still, bouncing one sizable between two. one is the difference two obviously have a quarter great

builders in or couple, very one get labor. very small for limited and hard business or one two builders doing to we’re two a So,

Okay.

still we’re grow to limiting go players down Phoenix to combination for us market in the customers, customers but our So, in of not in as market. of potential labor be players, the we the a other well. of not get seems some of core our significant lot a factor of opportunity the are is But is in issue as able traction large Houston lot there to pricing an easier that market, more a with Houston faster market, small forward. labors the only

on time able market. Phoenix So and we, be we’re we the do from standpoint, strategic in a growth enhance to more the rates might more spending what even to

Ron Ballschmiede

increased Houston going But the – XXXX the that revenue Arizona steadily the pretty lot, certainly here. And something at nothing math. a pace in in and not obviously of to that part it’s from

Joe Cutillo

at fast I would par rapid look and we quickly. how that’s to way that’s probably greatly what with expectations Phoenix our is say on Houston’s the right on exceeding anticipated. how

Brent Thielman

quarter Okay. first first this side maybe flow cash quarter, these year, as Ron really chain that? this through in supply flow of And the Obviously in side on the last was just in then the maybe here some issues, quarter, functions the pieces, that moving first is just year cash not or really, talk good. strong the

Ron Ballschmiede

it’s would think what be. it we thought consistent I No,

for and so off. seeing payments. huge, getting but same getting, we’re that the money difference up They’re and So into year-over-year time, into ground good a and quarter of year. projects we’re mobilize first our the Generally, level build we’re that’s is ramping cash several, flow, not at there design of last we’re because spending off off, of large the money, lot a to in level’s getting not early

one that the there ops So give last which flow is we’ve million. a even thought best challenging metric from year, be take operations from the $XXX for bidding the our – income always it’s – or around approximately in cash cash year, with of would variables operating that because all through, would the sorry, our

stay that So, bandwidth side. we’re the kind of continuing expectation to in for

Brent Thielman

And just like I said sort I is to back recap margins. sounds E-Infrastructure first I point Okay. on to you It in of the the of then kind think coming just quarter guess, for Sean’s questions low a segment, that. wanted what

margins that some benefits leverage QX, of next couple get stronger that seen get that should segment kind You seasonally into QX the some in you such decent Is we over of quarters. here, improvement fair? should in as quarters

Joe Cutillo

a first like Yes. We there’s a issue – the or quarter that. margins margin the issue in not are eroded driven. It’s anything seasonality pricing or because

Brent Thielman

it. Got

Joe Cutillo

So they will…

Brent Thielman

thanks. Okay,

Ron Ballschmiede

chain. of, And challenges I and of hopefully a impact our with can pricing we’ll go but continue flat away, inflation supply

just in we recover have range we So, because see XXXX recovery our any not and to crystal short quickly, too in built ball. don’t

Joe Cutillo

you everybody’s and I think full Sean, the through in the is year both mix a is, with Sean gone we in Petillo one Brent Yes, both have to yet. challenges that of have you going that haven’t or

quarterly – And the apparent the And challenging, up it’ll everything. ramp become that’ll very So, as it’s year and consistent year we as we into know for of we get well. we rates and very kind I think go next the everybody. be rates as through

Brent Thielman

Okay. taking Very good. for questions. the Thanks

Joe Cutillo

Sure.

Operator

the closing end session, question-and-answer Ladies and for over gentlemen, of and we back reached to turn Mr. our Cutillo have like now call remarks. the I would

Joe Cutillo

on Thanks, the the minute have reflect Maria. you all back to challenging And to I’d with outstanding an times. very, and done some thank teams job, very take and like quarter everyone. a

the at I you this has And any hope the day, wish you our time follow-up Relations Investor schedule Sterling associated or for provided morning. everyone’s your Equity had at release a group If call, a to thank partners Group. or day. to again information I great please the have great in press a refer questions with

Ron Ballschmiede

Thanks everybody.

Operator

This conference. today’s concludes

You may your disconnect your participation. lines for you time. at Thank this

Sterling Infrastructure (STRL) 3 May 222022 Q1 Earnings call transcript