Sterling Infrastructure, Inc. · NASDAQ:STRL
Sterling Infrastructure — Q3 2023 Earnings Presentation
31 slides from Sterling Infrastructure's earnings presentation, November 2023
Slide 1: Investor Presentation November 2023
INVESTOR PRESENTATION November 2023 We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow.
Slide 2: Disclosure: Forward-Looking Statements
DISCLOSURE: Forward-Looking Statements This presentation contains, and the officers and directors of the Company may from time to time make, statements that are considered forward- looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forw
Slide 3: Strategic Elements of Transformation
Strategic Elements of Transformation Solidify the base Prioritized risk reduction | Improved bid discipline | Significantly reduced the probability of project losses Grow high-margin products and services Project mix shift | Targeted higher-margin projects | Significantly reduced lower-margin work E
Slide 4: Strategic Transformation at a Glance
Strategic Transformation at a Glance Petillo, Kimes & Stone Sterling Infrastructure, Inc. | STRL: IR Presentation 4
Slide 5: Segments
Segments E-Infrastructure Solutions Transportation Solutions Building Solutions Sterling Infrastructure, Inc. | STRL: IR Presentation 5
Slide 6: E-Infrastructure Solutions
E-Infrastructure Solutions Largest, highest-margin segment What We Do: Leading provider of large-scale specialty site infrastructure improvement contracting services, including site selection and preparation, in the Southeastern, Northeastern and Mid-Atlantic U.S. We operate through two subsidiaries
Slide 7: E-Infrastructure Solutions
E-Infrastructure Solutions Strong multi-year organic revenue growth Highest segment margins with opportunity for expansion on an annual basis $1,000 $140 25.0% E-Infrastructure $900 Solutions revenue +9.4% YTD $120 $800 20.0% 19.3% $700 Revenue in $ millions $100 Operating Profit (in millions) 17.2%
Slide 8: Transportation Solutions
Transportation Solutions Improved bid discipline and reduced risk What We Do: Infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail and storm drainage systems in the Rocky Mountain states and Texas. Markets Other Primary Geographies 13% + Arizona Aviati
Slide 9: Transportation Solutions
Transportation Solutions Focus is on maximizing profitability Consistent, multi-year margin improvement $700 $35 Continue to target ~200 7.0% Transportation bps of segment margin 6.5% Solutions $30 improvement on an annual 6.0% $600 revenue +9.4% basis driven by bid YTD discipline and mix shift. Ope
Slide 10: Building Solutions
Building Solutions Low Risk, Low CAPEX, Fast cash cycles What We Do: Residential and Commercial concrete slabs in the Dallas/ Fort Worth, Houston, and Phoenix markets. Primary Markets Customers + Dallas/ Fort Worth Leading National Home Builders, + Houston including but not limited to + Phoenix + Pu
Slide 11: Building Solutions
Building Solutions Significantly outperforming the national market Margins at solid levels, some fluctuation due to mix $330 $40 11.6% Building Solutions revenue +26.0% 11.4% 11.4% $320 $35 YTD, +16.2% organic 11.3% 11.2% $310 $30 11.0% Revenue in $ millions 11.0% Operating Profit (in millions) Oper
Slide 12: Financial Overview
Financial “In the third quarter, we surpassed our internal projections by delivering diluted EPS of $1.26, a 25% increase from the corresponding period last year. As a result, we are raising our diluted EPS guidance to $4.10 to $4.23 from $4.00 to $4.20. Overview Our quarter-end backlog of over $2 b
Slide 13: Sterling's 3Q Results
Sterling’s 3Q Results The financial information is from continuing operations, and comparisons are to the prior year quarter, unless otherwise noted. Revenue Net Income Gross Margin $560.3 Million $39.4 Million 16.4% 13.7% 28% an increase from 16.1% Operating Income EBITDA Diluted EPS $57.1 Million
Slide 14: Remaining Performance Obligations (RPOs)
Remaining Performance Obligations (RPOs)(1) Continuing Operations ($ in millions) 9/30/2023 12/31/2022 9/30/2022 E-Infrastructure Solutions RPOs $ 891.4 $ 603.2 $ 584.3 Transportation Solutions RPOs 1,022.9 713.2 711.5 Building Solutions RPOs - Commercial 96.1 97.9 115.5 Total RPOs $ 2,010.4 $ 1,414
Slide 15: Free Cash Flow
Free Cash Flow Strong cash flow profile provides flexibility and supports growth investments $350 Key Cash Flow Considerations $300 $292 Q3 2023 Q3 2022 $250 CFO $331.2M $138.2M Net CAPEX $39.6M $44.8M FCF (in millions) $200 $163 $150 + Cash & Cash Equivalents at September 30, 2023 was $409.4M $116
Slide 16: Balance Sheet
Balance Sheet Forward Looking EBITDA Debt Coverage Ratio We expect to pursue strategic uses of our liquidity, including acquisitions, investing in capital equipment and managing 2.0 1.9X leverage. 1.5 1.3X Sterling is comfortable with a forward-looking debt/EBITDA 1.0 coverage ratio of +/-2.5X. 0.5
Slide 17: Outlook
Outlook ““We remain steadfast in our commitments to maintain operational excellence and drive consistent earnings and cash flow growth. Our record backlog position and visibility into the fourth quarter give us confidence in our ability to deliver on our increased guidance for the year.” - CEO Joe C
Slide 18: Market Positioning and Secular Investment Trends
E-Infrastructure Solutions Market Positioning + Continued megaprojects for EV, batteries, solar, semiconductors and Secular + Reshoring of manufacturing capacity continues + Ever-increasing data demand drives datacenter activity Investment Trends + E-Commerce distribution center and small warehouses
Slide 19: Capital Allocation Priorities
Capital Allocation Priorities Support organic growth in existing and new markets + Capital expenditures support multi-year growth, weighted toward E-Infrastructure Solutions Strategic M&A – “Bolt on” and/ or 4th Leg Opportunities + “Bolt-ons”: We continue to evaluate small-to-mid sized acquisition o
Slide 20: Full Year 2023 Guidance
Full Year 2023 Guidance Revenue of $1.99 to $2.05 billion 2023 remains strong + Solid second quarter results + Record backlog Net Income of $128 to $132 million + New high-value E-Infrastructure and Transportation project awards + Increased transportation funding EPS of $4.10 to $4.23 + Emerging imp
Slide 21: Summary
Summary Successful strategic transformation Secular growth drivers Significant opportunity for further margin expansion Robust balance sheet, FCF Strong stock performance, attractive valuation Sterling Infrastructure, Inc. | STRL: IR Presentation 21
Slide 22: Appendix
+ Appendix Sterling Infrastructure, Inc. | STRL: IR Presentation 22
Slide 23: Third Quarter 2023 Results Highlights
Third Quarter 2023 Results Highlights Continuing Operations + Revenues: $560.3 million + Net Income: $39.4 million + Diluted EPS: $1.26 + EBITDA(1): $71.2 million + Cash Flow from Operations(2): $331.2 million + Cash & Cash Equivalents(3): $409.4 million + Backlog(3): $2.01 billion with 15.2% margin
Slide 24: 2023 Modeling Considerations
2023 Modeling Considerations(1) Revenue $1,990 to $2,050 Gross Margin 16% to 17% G&A Expense as % of Revenue (Excluding ~5% Intangible Amortization) Intangible Amortization $15 Other Operating Expense Net $17 to $19 JV Non-Controlling Interest Expense $3 to $4 Effective Income Tax Rate ~27% Net Inco
Slide 25: 2023 Modeling Considerations Continued
2023 Modeling Considerations Continued* Non-Cash Items FY 2023 Expectations FY 2022 Depreciation $42 to $43 $38.0 Intangible Amortization $15 $14.1 Debt Issuance Cost Amortization $2 to $3 $2.2 Stock-based Compensation $14 to $16 $10.3 Deferred Taxes $15 to $17 $36.5 Other Cash Flow Items FY 2023 Ex
Slide 26: Quarterly Consolidated and Segment Results
Quarterly Consolidated and Segment Results Continuing Operations ($ in millions) Q3 2023 Q3 2022 ($ in millions) Q3 2023 Q3 2022 Revenues $ 560.3 $ 493.0 E-Infrastructure Solutions Gross Profit 91.9 79.4 Revenue $ 253.9 $ 255.5 G&A Expense (25.2) (22.2) Operating Income $ 35.9 $ 37.5 Intangible Amor
Slide 27: EBITDA from Continuing Operations Reconciliation
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES EBITDA FROM CONTINUING OPERATIONS RECONCILIATION (In thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Net income from Continuing Operations $ 39,353 $ 30,698 $ 98,482 $ 76,484 Depreciation and amo
Slide 28: EBITDA Guidance Reconciliation
STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES EBITDA GUIDANCE RECONCILIATION (In millions) (Unaudited) Full Year 2023 Guidance Low High Net income attributable to Sterling common stockholders $ 128 $ 132 Depreciation and amortization 57 58 Interest expense, net of interest income 18 19 Income tax exp
Slide 29: STRL 5-Year Stock Price Performance
STRL 5-Year Stock Price Performance Closing Price 13-Nov-2018 to 13-Nov-2023 (Daily) Price (Local Currency) 90 Sterling Infrastructure, Inc. 80 70 60 50 40 30 20 10 0 '19 '20 '21 '22 '23 Source: FactSet Prices Source: FactSet Sterling Infrastructure, Inc. | STRL: IR Presentation 29
Slide 30: Sustainability
Sustainability Protecting Our Environment + Sound governance From strategy to operations, we are + Environmentally responsible construction services and committed to sustainability by operating responsibly to safeguard and improve solutions for today and tomorrow society’s quality of life. Taking Ca
Slide 31: Contact Us
Contact Us Sterling Infrastructure, Inc. Noelle Dilts, VP IR and Corporate Strategy Tel: (281) 214-0795 noelle.dilts@strlco.com Sterling Infrastructure, Inc. | STRL: IR Presentation 31
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