STRL - Earnings call transcript Q3 2024 | Sterling Infrastructure, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Sterling Infrastructure 3Q '24 Webcast and Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 7, 2024. I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Noelle Dilts

Thank you. Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2024 Third Quarter Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer; and Sharon Villaverde, Sterling's Chief Financial Officer. call in overview the the and the open performance its quarter. will with of an company Joe Sharon will full then after which discuss our financial will a results provide market and year Joe outlook. and guidance,

open the for We will call then questions. up

on As section Investor include on of a guidance. financial slides Relations our These the updated accompanying website. reminder, are details there slides our

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

As required financial most are our non-GAAP GAAP regulations, by and their in yesterday to earnings rules financial measures issued afternoon. these comparable release reconciled measures SEC

Now call Cutillo. I'll Joe over turn the to CEO, our

Joseph Cutillo

shareholders. thank our Thanks, thanking to our by start for Noelle. delivering XXXX joining record morning, I'd everyone, quarter like to you Earnings teams Good and Sterling's Call. Third Quarter another for

over For year. the quarter, we earnings up $X.XX delivered prior share, of per XX%

income billion, relatively the of with does the over of capture increase not alone year. billion, prior as Combined services. Backlog magnitude mix to the XX% quarter revenue higher-margin X% our our $X.X ahead us. of backlog at the flat Our year grew highest on opportunities. the over gross focus towards most end Backlog on continued operating and reflecting $X.XX was period. X% return of shift totaled we profit of reached attractive We the prior growth continue XX%, margin an by opportunity

greater As future both multiphase of towards have work. projects into visibility our we E-Infrastructure, shifts phases in work large Transportation and

award rate near phases is historical Our additional for these XXX%.

pipeline billion. Our over high at remains work of $X.X probability

in the fourth makes line both and bottom The visibility $XXX markets for future sight are operating of quarter being we our of us tailwinds segment, years and cash with quarter flow sheet. our our the have great grow quarter ahead. Shifting awarded multiple jobs phase line strong We our addition, had in across first backlog significantly In cash is seeing balance another confident in will E-Infrastructure pipeline into XXXX. our and to the generation million. excellent

Our position cash will as growth. our our The people, is our great communities expand and we to This and we net infrastructure. strong America's that commitment we build while Sterling to take our care and million, our acquisitions guide environment, build shape platform in and upon now company. grow is to our continues pursue investors our us accelerate are Way $XXX of

X% than centers and reflects this expansion data XXXX. Data and year the market projects E-Infrastructure, increased This profit our in primary E-Infrastructure of work execution. The prior now The XX%. backlog. as data continued expanded strong very over margin comparison in XX% revenue period. XX% revenue I'd the the challenging quarter excellent operating in more Now discuss market growth the the center our E-Infrastructure strength over our XX.X%. X,XXX quarter focus for of large center over driver manufacturing offset was represents increased from market. exceptional to In revenue segment, to results margins our reach basis mission-critical third grew on margin Operating largest highest points of a revenue like and

and backlog to the quarter. E-infrastructure While technology as needed did driver center levels, see prior improvement again market an the was AI. the build of The million, beginning up nice the from some million, advancements, in awards we data awards including from the capacity year $XXX XX% sequential driving customers of prior X% for below the small project year are were market largest year. the remained of increase period racing $XXX to

continue across business into Mountain We center segments E-Infrastructure have where the to resources expand to Rocky projects. lever our region, data now we the multiple

pipeline visibility large As multiphase to our into providing has strong XXXX continues high probability work and shift of expanded, towards projects, work future XXXX. our

and to XX% operating year expanded the to Solutions. points Transportation X.X%. Moving XX%. basis XX Margins profit Revenue prior increased grew reach from

very Our quarter markets $X.X ended are with history Transportation margin approximately company's period. are the billion, combined and opportunities we our year Solutions flat of the the in with We seen attractive. prior have strongest backlog

were million $XXX Third $XXX quarter Unsigned Solutions for awards million. totaled and Transportation awards

we of to and work phase addition, through In highway the value of represents work anticipated a multiple fraction the design progressive design-build design only projects. of the large continue projects. initial backlog The total

in across geographies. softness declined quarter believe be varied operating potential the keeping for slab the the Results homebuilders Moving concrete cuts income XX%, markets by declined from segment residential primarily sidelines. to XX% declined the driven that Affordability on Dallas and market. and our Total and challenging XX%. our Solutions. business additional Building buyers in our rate may Revenue revenue remains

slowdown. Building levels. the builders to XXXX. the also quarter year regarding the continues strong in in prior operating to of slightly some are but generate revenue softness saw PPG a related below XX% Solutions was Dallas bullish margin However, margins rebound significant

residential anticipate reminder, XXXX. the able cost match to markets dynamics structure bullish quickly As the very to adjust as We remain this in and into our demand strengthening move demand. are business long-term on we a we in key

you over details like and Sharon full more it the quarter our give I'd year guidance. turn Sharon? to to on to that, With

Sharon Villaverde

I'd like take of beginning to details metrics. and some through financial good backlog Joe, morning. the our with Thanks, of you results, our

quarter of margin of from of quarter year. in $X.XX its drove improvement. Unsigned increase period. year of backlog and point which both third same last combined XX.X%, year backlog higher $X.XX the basis a billion, totaled with X.X% the gross of levels. the this prior Our was margin line level quarter. margin this backlog backlog the million totaled closed XXX and The quarter ago increase over billion, A backlog awards a improvement was backlog We $XXX.X transportation in the with an amount E-Infrastructure

for Year-to-date X.Xx and and and XXXX were book-to-burn Award combined viewed lumpy X.XXx for combined business over quarter timing ratios best backlog for X.XXx backlog. period. is our X.XXx backlog. Third is were a inherently multi-quarter backlog book-to-burn for ratios in

XXXX quarter of income in XX.X%, million, Revenue Transportation. General increase the was quarter. third an XXX to consistent Turning the improvements XXXX. Gross quarter, a increased margin $XXX.X million, $XXX.X of an gross X% was quarter the prior point to XX.X% of expense over the a of expectations. basis reflects $XX.X year was revenue third profit year in This our quarter increase our consolidated with million, prior over E-Infrastructure increase statement. Operating administrative was was improvement for Current XX.X% period. which quarter. X.X% the income the over margin quarter and increase third over and

margin increased XXX operating XX.X%. points to basis Our

tax XX.X%. the income effective Our rate was for third quarter

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

XX.X% $X.XX of income third resulted in share, of of improvement and compared net quarter of diluted XX.X%, million XXXX. third quarter net with record the per items respectively, to these effect $XX.X an or a The

prior improved Third flow activities EBITDA $XX.X XX.X% first increase of was up the months in to months in totaled operating million million to $XXX.X the of quarter. million, X of first $XXX.X for from from year an quarter of million over activities in XX%, XX.X% prior included Cash a EBITDA period. XXXX year net strong used Cash XXXX margin the the compared year X quarter. investing $XXX.X flow the prior CapEx. for

was debt used authorization. $XXX.X quarter strong of the a repurchase $XXX.X in to a million an cash a share. remains of in million million available of shares was liquidity $XX.X $XXX.X million. from As an outflow, driven the $XX CapEx of million. by balance Year-to-date to $XX.X purchase of we price cash of quarter average to position million Transportation under share flow price $XXX.XX debt financing the existing result our activities million ended our very net are of net and $XX million significant We of repurchases $XXX.X roughly consisting expected segment, year $XX $XXX.XX. the an for average for at cash at XXX,XXX million per growth primarily the raising of with

our In million revolver $XX year-to-date our of addition, results period. With revolving each significant for in our financial updating strong year. and -- opportunities we the our the credit are remained unused guidance segments, during facility operating

generate $X.XXX Our of million; billion billion; gross ratio, as follows: leverage $X.XX XXXX income businesses, of to of position advantage and of opportunities to to profit Xx of of to shareholder liquidity diversity million EBITDA positioned $XXX we beyond. EBITDA of comfortable strength $XXX of portfolio the and value margin million. Considering significant are XX%; ranges $X; in $X.XX $XXX additional to our to take $XXX million diluted our net XX% updated EPS strong well guidance to are Revenue our and

call Now I'll turn Joe. to back the

Joseph Cutillo

Sharon. capacity see that life, the coming in. In role intelligence will infrastructure what and current that playing of America's the needed the connect represents the of enables the other production airports a is and foreseeable to emerging critical we continue building back the Thanks, in Sterling homes opportunity highways, the support demand way is infrastructure. years the revitalization us artificial fraction associated We E-Infrastructure a and bridges U.S., for ahead data live of Solutions, current center as we with the that the to strength data of in anticipate today's only manufacturing technologies. future

discussing partners on them targets. help and right Our multiyear with achieve are to to capital focused are plans align customers the deployment how their

trusted customers to on Our for speed looking and proven are focused are market highly partners.

fairly front, mid- will the onshoring-related steady projects. of XXXX we anticipate in see a of and XXXX, the manufacturing remainder we large-sized pace that to On

include projects fabrication As The duration of and look very to and staggering. semiconductor big XXXX on size a pool there's would is of This these mega planned the XXXX, we horizon. projects facilities.

will involved the some to complexity it flow. take before their with start we awards time believe Given development,

remain warehouse We profitability and support encouraged multiyear soft These expect opportunities the will XXXX, period over for E-Infrastructure. are growth preliminary a seeing small by strong through activity for are XXXX. but the e-commerce dynamics markets we

in expect positioned and profitability XXXX, believe operating and we For to strong profit well deliver XXXX. both for we growth are revenue

we half In federal second cycle. the in are now the Transportation funding of Solutions,

activity current of We a level and now so higher. where to remain We have at levels of in as market are to X built see historical elevated we margins over a growth believe sustain or we ahead. can backlog long levels years relative robust environment continue

multiyear very We in growth are will over well for Building confident Transportation business positioned deliver business growth a is profitability XXXX. In Solutions, strong revenue and period. that our the

of homes. driving demand Houston growth, geographies Our population continued new see expected and for to Dallas, key Phoenix are

the and Additionally, of both Houston demand timing challenges share to in Phoenix. We there is near continue gain cuts that a significant the anticipate impact opportunity in term. for interest rate and affordability will

Our in to customers conversations remains enhance work and with our for activity find indicate our the E-Infrastructure grow right XXXX. We're to significant the hard in company step-up market M&A. priority service acquisitions The offering. top our to a continuing

remain patient disciplined in and growth strategy. inorganic our We will

relates will to share be it we As repurchases, to continue opportunistic.

result would XX% represent XX% performance backlog guidance. we of raising over like our it and that, growth. With profitability a and growth our turn The for year-to-date midpoint revenue year to growth, questions. position, EPS our guidance As full diluted of XX% strong EBITDA I'd are new

Operator

question Davidson. comes D.A. first Thielman from your And Instructions] from Brent [Operator

Brent Thielman

XX% with E-Infrastructure, that context here about you towards of as guess, you me this some Yes, like finish out carry centers. do trying into don't sort margins, come things. the quarter on I just Joe, these for profitability looks e-commerce, high kind How of to XXXX? in think and of think in increasingly profitability other sustaining year, make skewing that data back I'm might I of some about this to backlog somewhere maybe of it the in level you that the in of tremendous markets excess manufacturing. mean, E-Infrastructure

Joseph Cutillo

call I perspective, a I to did the these the a can can Yes, today, And I you by for be in some quarter. give projects, a us projects, you of on deals. things. negotiate with Monday would was call and that we a couple industrial e-commerce see these thing today. the last starting a small a tell week yes, guys. tomorrow hard is our nice the example a -- happened of get contract kind of small We you get when real-life give projects in We can rebound

comes quickly. diluted stuff continues We just to mission-critical as move we going of think back, the would So to in even jobs E-Infrastructure up they in that quick, And we rebound margin The pop large thought into a people have get I as our but nice most XXXX. these on the better. go they see would believe margin saw that still margins didn't. quarter growth have we're improvement

basis on really been to X,XXX% improvement at we've best what I've the And points good. ever quarter, look But first the able shape we're on never the unbelievable. now. in the And we're we're seeing or in Infrastructure in. horizon Brent, fourth not X,XXX right been very second quarter It's year-over-year. optimistic say and improvement growth to very, margin in We're and even the when I quarter feel I projects. both

Brent Thielman

can Yes. what Yes. areas need get new that your organic like of expansion to Or in that out point, I the well you're in working I at you E-Infrastructure. this to order seems of that there other at looking in really you acquisitions mean, regions? Is do Mountain sort to into it sort segment. point, is you mean, Are for market organically? do

Joseph Cutillo

Yes.

put a fill can to think room expand done So we've still the some We reach -- those take we assets. to highest looking we where we growth can of some we've organically another, diminishing around But we rate state. some equipment then opportunities call where all have there's the at through on country. growth state our and nice At the in how it, what are, we return to gaps. It's time, to map a at half the Mountains. halfway of together kind Rocky with seen the acquisitions is far footprints look point a

Brent Thielman

seeing Building couple also, just markets? just those Are on But a builders. sounds that, last your -- in Solutions, in just then in Phoenix? what what's one what maybe that you're feedback quarters in maybe here. like persists still of Dallas, slowness it Houston for and Interested Joe, hearing going given you some from And on growth on

Joseph Cutillo

Yes.

with saw they down one builders the right in October, could from for where Dallas, That's tell that us will on X very availability. leading some each The a going September, great indicator to starts what's We've land on is quickly. which is markets. the in in sign So little in us the side, double X the though, affordability. different down, a finished we a plumbing heard that, direction October the of I a rumblings you, of dynamics quarter, definitely on be happening. in in combination market overall or candidly.

good. that's So

population going buyers But have all that's residential or to multifamily be we'll a more growth right Phoenix and up markets only and homes We less be I continue saw business is biggest little a is than quarter, market going that it. Remember, the is a in volatile in home the working side. are with if the They're tend apartments little happy growth People bit first-time to up usually consistent buying to to where the between to in goes are one Houston, market. nice right. the but you, the growth. concerns or share these see very the would quarter-to-quarter Phoenix directionally, on have we're year-over-year. is either off on and how renting growing apartment Not commercial market what growth to more of on the Dallas the -- aggressive and certainly with long-term market to X more growing. in Phoenix spike tell we are. Houston markets back and the the Phoenix, bounce takes even a a but we're of don't little a still the little next world U.S., and growing quarter. see

bit a of I So think a lull. little

there's it people looks of sidelines like the feedback getting lot a to interest from we're other for waiting on builders again. rates drop is The

and do get by I it, looking could there out probably So of or they're a point them trying I'm thing. another at all going figure that the couple I interest and X.X I to same months, rates are hear these rates waiting buzz to how X.XX a are get the drop. fast how far going and was to out and I And house I point the drop think if I'd

So negative we're at not all.

in X XXXX the numbers builders is actually saw growth us numbers gave you us little the we X but they will the the given last the and are slowdown weeks higher think tell on I in talking outlook projections. just what ago, quarter that for a I than historical the to they've growth years

be. more much were So thought they they're than going we're bullish correct. to hoping They're we

And about so more and they do. we that know dynamics market obviously than

Operator

Thompson, And Adam your from comes next from Thalhimer question Davis.

Adam Thalhimer

is start good going recovery? Or projections a to I mid-'XX on XXXX, your it's that If you you that. growth they in would that keep -- wanted Actually, kind for tell 'XX? just experience does early of give

Joseph Cutillo

will we -- Adam, really Yes. in January. we'll know

that number, One them come builders get to sale. They've and blocks -- in out house. is sales And XXX seasons after there the of the they've got biggest it, pretty that to the the selling to hit to slabs for for in the days operation heavy sale spring spring of XX slabs. the we're call they're with get first the January to got that,

So but we're Again, that. kick off that the usually in late plumbing pretty starts would with world sometimes holidays, not we until the saw see very January. happy we'll have it expected in October. -- it with We we're December doesn't

that's So year. the through as this the then And of encouraging. watch slab rest we'll get side we

Adam Thalhimer

having Okay. guidance. talk trouble revenue segment top to Can That's little about the you a by line QX? I'm good. in getting

Joseph Cutillo

the broken think don't have in it down I I by segment quarter.

just fill the exact right, blank. on more to the have you math, of -- Sharon, we'll numbers, kind in that? Do think the detail I and

Sharon Villaverde

guidance. specific provide can't I

And E-Infrastructure a for pretty in strong well, Transportation, last as comp. look to likewise continue strong prior we had compared -- that year. think year I to

QX Building flat, then 'XX And were as probably in remains we 'XX. won't QX we Solutions little. in be as up a So as strong relatively

Adam Thalhimer

QX? Which

Sharon Villaverde

to year. Comparing prior

Adam Thalhimer

Okay. second, just data you with level on then, And talk could you you're Got centers? the first, it. And if just are what expand you with, Joe, high seeing can centers? e-commerce seeing distribution what

Joseph Cutillo

Yes. Yes.

-- started pricing had -- Amazon, was Monday. started last you week literally, tell prepared got to everybody final it did -- start we But backwards. this X. Monday. in we we're job is of last 'XX, as we week, we a was We I going 'XX, and said, remember I'll negotiated on I'll Wednesday, 'XX, Tuesday, did on We if So to back go we discussing X. this

up the that We're off another program. For kick at center, Amazon's starting this they're late in distribution next or looking either year. first one will early year

we're looks encouraged it the had bit early So that. back told They by were start a like on that. 'XX, track program us going they're certainly they than maybe and and up, little to

we that couple So see the start if of we the they we rebound think interest year, happening Today, than them the with drop said quarter that second on again that's small We industrial. anticipated. comes sooner that little going rates a before year. back drop next the and coming back. to end Hopefully,

becoming tell more So -- anticipated. falling on day, more bullish X centers, think areas. When that of much There you. ever the opportunities. quarters. we the of we everybody it pipeline are and have here's coming And that piece, grows of centers how sky. missing our over They that what those this work to and comes The damp pipeline are I'm Adam, data these next way going are things I is than out is we're every more we to data both are more getting

through starting hit 'XX. this I have or that halfway the sometime top into think to second quarter quarter, of backlog will in 'XX, and of $X first incremental or the at that 'XX, we're it's on stuff in billion highly pipeline put more end will our of we work the probable

misled now perfect on I contract backlog a by our million are our Amazon center of the backlog. is example. So grossly $XX think out. This have that how we I'll in based distribution roughly laid people is right structure $XXX,XXX a And what job. in you give is

to going what know get. we're we So

to is backlog and how it because the in. -- deceiving put Our written that's how we don't very have is we contract

person, as my I play when to if going others' to know cards are I'd are. say, was So a what always I and be what like cards I betting cards

is exceed out. we the unlike We very, are be we good seeing nothing to what but are continues shape only our expectations very the and we've past activity not on thought seen coming in in would

Adam Thalhimer

only E-Infrastructure. that covers Well,

construction. think amount have projects, certain you said low only in the design because backlog that also I a remarks reflects not prepared and you in it actual Transportation really the

my questions backlog? you much of that included the construction, One if would to add how was, actual

Joseph Cutillo

We million of design Infrastructure. we as of But know the it's backlog in of Most multi-hundred these builds, through $X.X total Transportation. today some of we phase combined. get have future and billion over the large we'll will design that's of have, phased in dollars

We today, look at we backlog. years stuff we we'll between somewhere in end on goes X We're The bill, out. Transportation have X transportation of at X or roughly the So of the than transportation backlog that's further X another that IIJA of working anticipated point have for time. maybe when years more even years. bill the

are it's we we're looking have we're but to we here coming explain very, what what's -- to and what people and at So very sitting and good. into, feel locked we hard

Operator

from comes Romero And question & Company. the next from Sidoti Julio

Julio Romero

your on talked way work side. pipeline coming this guys the E-Infrastructure about of You

capacity in 'XX for 'XX. 'XX, horizon much I guess projects pace larger onshoring projects open how you and for versus bids those projects? 'XX near-term kind some of also balancing mentioned mega You on 'XX keeping 'XX the your your of are but the now and the

Joseph Cutillo

we if is can as now. Well, board do do time the we of build plenty would good need extra to think projects have excess we that, we coming, I or capacity and that. those see And we thing to full go

and pulling we'll jobs about can And with jobs. much good on very when We're out, we're we're very up come not expanding as boat not of We're we that. fine. these mission-critical the at mega these loading them. rapidly, any be back up concerned So as

Julio Romero

fact... then I And That's Okay. this guess, is helpful.

Joseph Cutillo

thing please. one -- one let the pipeline, thing me clarify Let clarify on just me

Julio Romero

Go ahead. Sure.

Joseph Cutillo

about looking multiphase there talk have. work isn't out this bid. to pipeline. we're with This we work we associated at that This is that's subsequent jobs When

a big to will a billion, at the tag contract on contracts we that lot the project. existing that's of This is there. $X either orders than complete incremental billion looking is more $X So difference. have we're work that I'm out to or looking change not work

able stuff So the structure us that tell might to on do stuff this to of contractual that you we're hopeful at doesn't they more backlog isn't know well This that to one that happen. is has keep that the we enable complete backlog up if would people project. to and of were way today work." that, do It's it's happen really just that a look book all our is we of all time. I God, "Oh saying, everybody over would that, be our because okay? this true. I relatively want Instead, getting would at staying that, and to growing, make sure $X.X backlog billion flat, So my confused be that's

Julio Romero

you things some very kind helpful gives context forward. and see of that how sequencing to that's going No, the of

of also bit You in anything contract bid bit? terms mentioned different third of ahead. industrial you didn't Can return are maybe earlier, expand Are of the terms or that in a back these that said small some -- in quarter of on terms smaller margins you projects in deals the the that dilute a came doing margins. quick E-Infrastructure kind you go

Joseph Cutillo

put drive bigger value margins, we're we're projects. better carry of than efficiencies lower is in better mission-critical and we to able out will bring past. priced rate and are changing. have pace which to That's the think the is realizing growing these projects, not smaller we I'll What there I even projects much then And we the the changing execution. the be on customers maybe is the okay? honest, is the And reality

bore technology our So we the we work to are the trees on project efficiency are. we see to these with picking the end can with that done. It's what where And down of through on up have in down do I'll accurately than drones with depth areas you ever couldn't back doing but through now in and some things team what projects the call past. we've they've you this monitoring, that great see more that's -- introduced we're measuring, in drones management, past. we now also the can get of to points takeoffs and kudos

have of If XXX dirt the to you that's numbers move, amount productivity. it's miscalculate dial that by being incremental it to By inches we're money. to able X it over real you the acres dial in, able into

So things to that, that that do we like looking we are continue and forward. we go to as do there's better drive XXX how at even continue do,

Julio Romero

Very helpful there.

just of and for had kind quarter one forward? going to be Just flow. speak last me you would trend Can should on, how of another drivers great just you cash of the that that

Joseph Cutillo

we structure bids contracts believe should do that. going. it's way of philosophically, our job going Yes, money. We and our do the gate. early to keep We've done great The that help a of out working us customers' off we

With amount larger get is nice. front, these higher projects, to which of a tend cash we up

our the forward. going forward And of that we you or and flow if look that see think changing kind at of should better. income anything would cash dynamics change always conservative, I be cash be want level operating to don't the flow

terms contract are Our same. the

the customer That's Our with are yes, same. that to We're cash. on end markets all do pretty much working hard -- so all what positive.

us. key So that's the for

Operator

no we other have Please [Operator proceed. this Instructions] questions. time, At

Joseph Cutillo

I want for another to exciting for quarter Sterling again call, thank the today's team. joining everyone

information Dilts, press the us, directly or contact any questions Noelle you If to with release. have her call schedule a wish please in follow-up

everybody Thanks. and has I great So we day, it. hope appreciate a

Operator

Ladies and gentlemen, this concludes the conference.

You may now your disconnect lines.

Sterling Infrastructure (STRL) 7 Nov 242024 Q3 Earnings call transcript