Sterling Infrastructure, Inc. (NasdaqGS: STRL) (“Sterling” or
the “Company”) today announced financial results for the first
quarter 2023.
The financial information herein is from continuing operations
and comparisons are to the prior year quarter, unless otherwise
noted.
First Quarter 2023 Results
- Revenues of $403.6 million, an increase of 10%
- Gross margin of 15.3%, an increase from 15.1%
- Net Income of $19.6 million, or $0.64 per diluted share, an
increase of 11% and 8%, respectively
- EBITDA(1) of $45.9 million, an increase of 14%; Adjusted
EBITDA(1) of $46.1 million, an increase of 13%
- Cash flows from operations of $49.1 million for the first
quarter
- Cash and Cash Equivalents totaled $202.6 million at March 31,
2023
- Backlog at March 31, 2023 was $1.62 billion, an increase of 15%
over December 31, 2022
- Combined backlog(2) at March 31, 2023 was $1.75 billion, an
increase of 4% over December 31, 2022
(1) The Company defines EBITDA as GAAP net income attributable
to Sterling’s common stockholders, adjusted for depreciation and
amortization, net interest expense and taxes. See the “Non-GAAP
Measures” and “EBITDA Reconciliation” sections below for more
information.
(2) Combined Backlog includes Unsigned Awards of $130.5 million
and $275.0 million at March 31, 2023 and December 31, 2022,
respectively.
CEO Remarks and Outlook
“Our first quarter results reflect excellent execution from our
teams despite the ongoing economic challenges. Our performance
drove strong revenue growth of 10% and gross margin expansion of 20
basis points, yielding first quarter EPS of $0.64,” stated Joe
Cutillo, Sterling’s Chief Executive Officer.
“E-Infrastructure Solutions, our largest, fastest-growing and
highest-margin segment, grew 22%. This reflects high levels of
demand from data center and advanced manufacturing customers. Our
Transportation Solutions segment saw a 4% decline in revenue due to
the reallocation of resources into higher-margin E-Infrastructure
work and the timing of project execution. Our continued efforts to
improve mix drove an increase in Transportation Solutions operating
income of 19%. Our Building Solutions segment grew revenue by 7%,
reflecting higher levels of commercial revenue. Our residential
revenues were essentially flat despite a mid-single digit decline
in slab volumes. Buildings Solutions margins were lower relative to
the prior year quarter due to mix impacts, as we anticipated,”
continued Mr. Cutillo.
“Our year is off to a strong start with record backlog, new
high-value E-Infrastructure project awards, increased
transportation funding, and emerging improvement in housing starts.
Our solid first quarter results and the favorable growth
opportunities across our markets give us confidence that we are
trending toward the higher end of our guidance range. The high end
of our guidance ranges would offer an improvement in revenue by
13.0% and net income by 13.7% over 2022,” Mr. Cutillo
concluded.
Full Year 2023 Guidance
- Revenue of $1.9 billion to $2.0 billion
- Net Income of $104 million to $110 million
- EPS of $3.33 to $3.53
- EBITDA(1) of $220 million to $235 million
(1) The Company defines EBITDA as GAAP net income attributable
to Sterling’s common stockholders, adjusted for depreciation and
amortization, net interest expense and taxes. See the “Non-GAAP
Measures” and “EBITDA Reconciliation” sections below for more
information.
Conference Call
Sterling’s management will hold a conference call to discuss
these results and recent corporate developments on Tuesday, May 2,
2023 at 9:00 a.m. ET/8:00 a.m. CT. Interested parties may
participate in the call by dialing (201) 493-6744 or (877)
445-9755. Please call in 10 minutes before the conference call is
scheduled to begin and ask for the Sterling Infrastructure call. To
coincide with the conference call, Sterling will post a slide
presentation at www.strlco.com on the Events & Presentations
section of the Investor Relations tab. Following management’s
opening remarks, there will be a question and answer session.
To listen to a simultaneous webcast of the call, please go to
the Company’s website at www.strlco.com at least 15 minutes early
to download and install any necessary audio software. If you are
unable to listen live, the conference call webcast will be archived
on the Company’s website for 30 days.
About Sterling
Sterling operates through a variety of subsidiaries within three
segments specializing in E-Infrastructure, Transportation and
Building Solutions in the United States, primarily across the
Southern, Northeastern, Mid-Atlantic and Rocky Mountain regions and
Hawaii. E-Infrastructure Solutions provides advanced, large-scale
site development services for data centers, e-commerce distribution
centers, manufacturing, warehousing, energy and more.
Transportation Solutions includes infrastructure and rehabilitation
projects for highways, roads, bridges, airports, ports, rail and
storm drainage systems. Building Solutions projects include
residential and commercial concrete foundations for single-family
and multi-family homes, parking structures, elevated slabs and
other concrete work. From strategy to operations, we are committed
to sustainability by operating responsibly to safeguard and improve
society’s quality of life. Caring for our people and our
communities, our customers and our investors – that is The Sterling
Way.
Joe Cutillo, CEO, “We build and service the
infrastructure that enables our economy to run, our people to move
and our country to grow.”
Important Information for Investors and Stockholders
Non-GAAP Measures
This press release contains “Non-GAAP” financial measures as
defined under Regulation G of the amended U.S. Securities Exchange
Act of 1934. The Company reports financial results in accordance
with U.S. generally accepted accounting principles (“GAAP”), but
the Company believes that certain Non-GAAP financial measures
provide useful supplemental information to investors regarding the
underlying business trends and performance of the Company’s ongoing
operations and are useful for period-over-period comparisons of
those operations.
Non-GAAP measures may include adjusted net income, adjusted EPS,
EBITDA and adjusted EBITDA, in each case excluding the impacts of
certain identified items. The excluded items represent items that
the Company does not consider to be representative of its normal
operations. The Company believes that these measures are useful for
investors to review, because they provide a consistent measure of
the underlying financial results of the Company’s ongoing business
and, in the Company’s view, allow for a supplemental comparison
against historical results and expectations for future performance.
Furthermore, the Company uses each of these to measure the
performance of the Company’s operations for budgeting and
forecasting, as well as employee incentive compensation. However,
Non-GAAP measures should not be considered as substitutes for net
income, EPS, or other data prepared and reported in accordance with
GAAP and should be viewed in addition to the Company’s reported
results prepared in accordance with GAAP.
Reconciliations of Non-GAAP financial measures to the most
comparable GAAP measures are provided in the tables included within
this press release.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains statements that are considered
forward-looking statements within the meaning of the federal
securities laws. These forward-looking statements are subject to a
number of risks and uncertainties, many of which are beyond our
control, which may include statements about: our business strategy;
our financial strategy; our industry outlook; our guidance; and our
plans, objectives, expectations, forecasts, outlook and intentions.
All of these types of statements, other than statements of
historical fact included in this press release, are forward-looking
statements. In some cases, forward-looking statements can be
identified by terminology such as “may,” “will,” “could,” “should,”
“expect,” “plan,” “project,” “intend,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” “pursue,” “target,” “continue,”
the negative of such terms or other comparable terminology. The
forward-looking statements contained in this press release are
largely based on our expectations, which reflect estimates and
assumptions made by our management. These estimates and assumptions
reflect our best judgment based on currently known market
conditions and other factors. Although we believe such estimates
and assumptions to be reasonable, they are inherently uncertain and
involve a number of risks and uncertainties that are beyond our
control. In addition, management’s assumptions about future events
may prove to be inaccurate. Management cautions all readers that
the forward-looking statements contained in this press release are
not guarantees of future performance, and we cannot assure any
reader that such statements will be realized or the forward-looking
events and circumstances will occur. Actual results may differ
materially from those anticipated or implied in the forward-looking
statements due to factors listed in the “Risk Factors” section in
our filings with the U.S. Securities and Exchange Commission and
elsewhere in those filings. Additional factors or risks that we
currently deem immaterial, that are not presently known to us or
that arise in the future could also cause our actual results to
differ materially from our expected results. Given these
uncertainties, investors are cautioned that many of the assumptions
upon which our forward-looking statements are based are likely to
change after the date the forward-looking statements are made. The
forward-looking statements speak only as of the date made, and we
undertake no obligation to publicly update or revise any
forward-looking statements for any reason, whether as a result of
new information, future events or developments, changed
circumstances, or otherwise, notwithstanding any changes in our
assumptions, changes in business plans, actual experience or other
changes. These cautionary statements qualify all forward-looking
statements attributable to us or persons acting on our behalf.
STERLING INFRASTRUCTURE, INC.
& SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited)
Three Months Ended March
31,
2023
2022
Continuing Operations:
Revenues
$
403,579
$
365,962
Cost of revenues
(341,837
)
(310,813
)
Gross profit
61,742
55,149
General and administrative expense
(23,321
)
(20,297
)
Intangible asset amortization
(3,736
)
(3,568
)
Acquisition related costs
(190
)
(255
)
Other operating expense, net
(1,868
)
(1,666
)
Operating income
32,627
29,363
Interest income
1,974
8
Interest expense
(7,528
)
(4,650
)
Income before income taxes
27,073
24,721
Income tax expense
(7,033
)
(6,778
)
Net income, including noncontrolling
interests
20,040
17,943
Less: Net income attributable to
noncontrolling interests
(391
)
(271
)
Net income from Continuing
Operations
$
19,649
$
17,672
Discontinued Operations:
Pretax income
$
—
$
1,399
Income tax expense
—
181
Net income from Discontinued
Operations
$
—
$
1,580
Net income attributable to Sterling
common stockholders
$
19,649
$
19,252
Net income per share from Continuing
Operations:
Basic
$
0.64
$
0.59
Diluted
$
0.64
$
0.59
Net income per share from Discontinued
Operations:
Basic
$
—
$
0.05
Diluted
$
—
$
0.05
Net income per share attributable to
Sterling common stockholders:
Basic
$
0.64
$
0.64
Diluted
$
0.64
$
0.64
Weighted average common shares
outstanding:
Basic
30,618
29,964
Diluted
30,789
30,112
STERLING INFRASTRUCTURE, INC.
& SUBSIDIARIES SEGMENT INFORMATION (In
thousands) (Unaudited)
Three Months Ended March
31,
Revenues
2023
% of Revenue
2022
% of Revenue
E-Infrastructure Solutions
$
205,840
51
%
$
168,927
46
%
Transportation Solutions
111,139
28
%
116,141
32
%
Building Solutions
86,600
21
%
80,894
22
%
Total Revenues
$
403,579
$
365,962
Operating Income (Loss)
E-Infrastructure Solutions
$
24,269
11.8
%
$
21,285
12.6
%
Transportation Solutions
5,306
4.8
%
4,443
3.8
%
Building Solutions
8,701
10.0
%
9,358
11.6
%
Segment Operating Income
38,276
9.5
%
35,086
9.6
%
Corporate
(5,459
)
(5,468
)
Acquisition Related Costs
(190
)
(255
)
Total Operating Income
$
32,627
8.1
%
$
29,363
8.0
%
STERLING INFRASTRUCTURE, INC.
& SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data) (Unaudited)
March 31, 2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
202,576
$
181,544
Accounts receivable
230,148
262,646
Contract assets
125,494
109,803
Receivables from and equity in
construction joint ventures
13,648
14,122
Other current assets
16,094
29,139
Total current assets
587,960
597,254
Property and equipment, net
215,217
215,482
Operating lease right-of-use assets,
net
62,278
59,415
Goodwill
262,671
262,692
Other intangibles, net
295,387
299,123
Other non-current assets, net
7,615
7,654
Total assets
$
1,431,128
$
1,441,620
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
119,450
$
121,887
Contract liabilities
242,326
239,297
Current maturities of long-term debt
35,059
32,610
Current portion of long-term lease
obligations
17,376
19,715
Accrued compensation
16,904
24,136
Other current liabilities
13,574
8,966
Total current liabilities
444,689
446,611
Long-term debt
365,548
398,735
Long-term lease obligations
45,164
40,103
Members’ interest subject to mandatory
redemption and undistributed earnings
18,419
21,597
Deferred tax liability, net
54,387
51,659
Other long-term liabilities
4,666
5,116
Total liabilities
932,873
963,821
Stockholders’ equity:
Common stock
308
306
Additional paid in capital
288,328
287,914
Retained earnings
206,028
186,379
Total Sterling stockholders’ equity
494,664
474,599
Noncontrolling interests
3,591
3,200
Total stockholders’ equity
498,255
477,799
Total liabilities and stockholders’
equity
$
1,431,128
$
1,441,620
STERLING INFRASTRUCTURE, INC.
& SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In thousands) (Unaudited)
Three Months Ended March
31,
2023
2022
Cash flows from operating
activities:
Net income
$
20,040
$
19,523
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
13,692
11,767
Amortization of debt issuance costs and
non-cash interest
422
556
Gain on disposal of property and
equipment
(1,672
)
(228
)
Gain on debt extinguishment, net
—
(2,428
)
Deferred taxes
2,728
5,640
Stock-based compensation
3,240
2,611
Change in fair value of interest rate
swap
—
(90
)
Changes in operating assets and
liabilities
10,608
(10,783
)
Net cash provided by operating
activities
49,058
26,568
Cash flows from investing
activities:
Disposition proceeds
14,000
—
Capital expenditures
(14,221
)
(14,969
)
Proceeds from sale of property and
equipment
6,726
406
Net cash provided by (used in) investing
activities
6,505
(14,563
)
Cash flows from financing
activities:
Repayments of debt
(30,843
)
(5,928
)
Withholding taxes paid on net share
settlement of equity awards
(4,288
)
(7,385
)
Net cash used in financing activities
(35,131
)
(13,313
)
Net change in cash, cash equivalents, and
restricted cash
20,432
(1,308
)
Cash, cash equivalents and restricted cash
at beginning of period
185,265
88,693
Cash, cash equivalents and restricted cash
at end of period
205,697
87,385
Less: restricted cash - Continuing
Operations
(3,121
)
(3,721
)
Less: cash, cash equivalents and
restricted cash - Discontinued Operations
—
(14,264
)
Cash and cash equivalents at end of period
- Continuing Operations
$
202,576
$
69,400
STERLING INFRASTRUCTURE, INC.
& SUBSIDIARIES EBITDA FROM CONTINUING OPERATIONS
RECONCILIATION (In thousands) (Unaudited)
Three Months Ended March
31,
2023
2022
Net income from Continuing Operations
$
19,649
$
17,672
Depreciation and amortization
13,692
11,363
Interest expense, net of interest
income
5,554
4,642
Income tax expense
7,033
6,778
EBITDA from Continuing Operations (1)
45,928
40,455
Acquisition related costs
190
255
Adjusted EBITDA from Continuing Operations
(2)
$
46,118
$
40,710
(1)
The Company defines EBITDA as GAAP net
income from Continuing Operations, adjusted for depreciation and
amortization, net interest expense and taxes.
(2)
The Company defines Adjusted EBITDA as
EBITDA excluding the impact of acquisition related costs.
STERLING INFRASTRUCTURE, INC.
& SUBSIDIARIES EBITDA GUIDANCE RECONCILIATION (In
millions) (Unaudited)
Full Year 2023
Guidance
Low
High
Net income attributable to Sterling common
stockholders
$
104
$
110
Depreciation and amortization
55
59
Interest expense, net of interest
income
21
24
Income tax expense
40
42
EBITDA (1)
$
220
$
235
(1)
The Company defines EBITDA as GAAP net
income attributable to Sterling common stockholders, adjusted for
depreciation and amortization, net interest expense, and taxes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230501005617/en/
Company Contact: Sterling Infrastructure, Inc. Noelle
Dilts, VP IR and Corporate Strategy 281-214-0795
Investor Relations Contact: The Equity Group Inc. Jeremy
Hellman, CFA 212-836-9626
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