Sterling Infrastructure, Inc. · NASDAQ:STRL
Sterling Infrastructure — Investor Presentation (May 2023)
40 slides from Sterling Infrastructure's investor presentation, May 2023
Slide 1: Investor Presentation May 2023
INVESTOR PRESENTATION MAY 2 0 2 3 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: Why Invest in Sterling?
Why Invest in Sterling? + What was once a low-margin, heavy-civil business is now a diversified business with Successful strategic transformation strong growth, profitability and cash flow. + E-Infrastructure Solutions is benefiting from onshoring, and federal incentives supporting EV, solar, and ba
Slide 4: Strategic Transformation
Strategic Sterling has successfully transformed over the past six years, and we continue to evolve. Transformation Diversified portfolio Secular, multi-year growth drivers Significant margin expansion Strengthened FCF profile Sterling Infrastructure Inc. IR Presentation 4
Slide 5: Sterling's Business Strategy
Sterling’s Business Strategy +Through our strategic elements: + Solidify the base + Grow high-margin products and services + Expansion into adjacent markets +We achieve our strategic objectives: + Risk reduction + Bottom-line growth + Exceed peer performance + Build a platform for future accretive g
Slide 6: Strategic Transformation at a Glance
Strategic Transformation at a Glance Sterling Infrastructure Inc. IR Presentation 6
Slide 7: Strategic Execution
Strategic Execution 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 Expand into adjace
Slide 8: Sterling's Business Segments
Sterling’s Leaders in their fields geographically positioned in the right markets, forging Business a new path for success with proven performance and solid returns through Segments a customer-centric culture. Sterling Infrastructure Inc. IR Presentation 8
Slide 9: Segments
Segments E-Infrastructure Solutions + Fastest-growing, highest-margin segment + Successfully engineering and executing large, complex, schedule-intensive projects Transportation Solutions + Driving margin expansion through focus on high-return opportunities + Infrastructure Bill beneficiary Building
Slide 10: E-Infrastructure
E-Infrastructure What We Do: We are a leading provider of large-scale specialty site infrastructure improvement contracting services, including site selection and preparation, in the Southeastern, Northeastern Highest-growth, highest-margin segment. and Mid-Atlantic United States. We operate through
Slide 11: E-Infrastructure Solutions
E-Infrastructure Solutions Strong Multi-Year Organic Revenue Growth, Highest Segment Margins with Opportunity Poised to Continue for Expansion $300 45% Petillo = 200 bps of unfavorable 40.0 25.0% Pro forma organic revenue mix-related margin impact. growth of 25%+ since 2020 40% Opportunity to recapt
Slide 12: E-Infrastructure Solutions
E-Infrastructure Solutions Backlog Growth Supported by Recent Large Key Projects Project Wins + Hyundai Engineering, Inc. Site development project in Georgia encompassing over 600 acres $800 $731 + Rivian $45 million design-bid-build project awarded by +21.1% The Joint Development Authority (JDA) of
Slide 13: Transportation
Transportation What We Do: Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail and storm drainage systems in the Rocky Mountain Improved bid discipline and reduced risk states and Texas. Markets Primary Geographies Ot
Slide 14: Transportation Solutions
Transportation Solutions Focus is on maximizing profitability rather Consistent, multi-year margin improvement than revenue and expect more to come 30.0 Continue to target ~200 bps 6.0% of segment margin improvement driven by bid 25.0 4.9% 5.0% discipline and mix shift. Operating Profit Margin 20.0
Slide 15: Transportation Solutions
Transportation Solutions 1Q23 Transportation Solutions Backlog Outlook Considerations increased 11.8% y/y + Gross margin in backlog continues to trend upward $900 + Seeing awards and activities driven by the Infrastructure Bill $798 -10.6% +11.8% $797 $800 + Aviation, which is historically high-marg
Slide 16: Building Solutions
Building Solutions What We Do: Residential and Commercial concrete slabs in the Dallas/ Fort Worth, Houston, and Phoenix markets. Low Risk, Low CAPEX, Fast cash cycles Primary Markets Customers + Dallas/ Fort Worth Leading National Home Builders, + Houston including but not limited to + Phoenix + Pu
Slide 17: Building Solutions
Building Solutions 1Q23 growth of 7%, including flat residential 1Q23 margins impacted by mix and concrete revenue, significantly outperforming the cost escalation. As residential picks up and national market supply chains ease, margins should improve 100.0 40.0% 12.0 14.0% 90.0 30.0% 12.0% 80.0 10.
Slide 18: Building Solutions
Building Solutions Residential 1Q23 Sterling’s Building Solutions Geographic Footprint Revenue Trends: Mid-single digit volume decline offset by price Dallas/ Fort Worth Phoenix Slab volume started the quarter slow, picked up Slab volume started the in early March quarter slow, picked up in late Mar
Slide 19: Financial Performance
Financial Through tremendous dedication and exceptional execution by our teams, Sterling Performance delivered another outstanding year of record results and, for the 1st time, exceeded a market capitalization of $1 billion. Sterling Infrastructure Inc. IR Presentation 19
Slide 20: Sterling's 2022 Results at a Glance
Sterling’s 2022 Results at a Glance Financial highlights are from continuing operations, and comparisons are to the prior year, unless otherwise noted. Revenue grew Net Income increased Gross Margin 25% to 57% to increased to $1.77 Billion $96.7 Million 15.5% Operating Income Delivered EBITDA of $3
Slide 21: Sterling's 1Q 2023 Results at a Glance
Sterling’s 1Q 2023 Results at a Glance Financial highlights are from continuing operations, and comparisons are to the prior year quarter, unless otherwise noted. Revenue grew Net Income increased Gross Margin 10% to 11% to increased to $403.6 Million $19.6 Million 15.3% Operating Income Diluted EP
Slide 22: Balance Sheet
Balance Sterling ended 1Q23 with cash of $202.6 million and a forward-looking debt-to-EBITDA coverage Sheet ratio of 1.7x. Sterling Infrastructure Inc. IR Presentation 22
Slide 23: Balance Sheet
Balance Sheet We expect to pursue strategic uses of our liquidity, such as, strategic acquisitions, investing in capital equipment and managing leverage. Capital allocation focus Sterling is comfortable with a forward-looking debt/EBITDA coverage + Long-term shareholder value ratio of +/-2.5X. + Com
Slide 24: Outlook
Outlook “The strong demand for infrastructure services across the country has helped us get off to a great start and gives us high confidence in our full-year outlook. More importantly, we believe this demand is going to continue over the next three years to five years and will provide us with even
Slide 25: Strong and Significant Market Opportunities
E-Infrastructure Solutions + Government investment initiatives and incentives Strong and Significant + End-user multi-year capital deployment plan implementation Market Opportunities + US manufacturing, electric vehicles, solar Continue in Our + Multiphase hyper-scale data center development Markets
Slide 26: Sterling markets spending >50B
Sterling markets spending >50B + Transportation + Manufacturing + Highway and street + Commercial Source: Second Quarter 2023 North American Engineering and Construction Outlook Sterling Infrastructure Inc. IR Presentation 26
Slide 27: US Construction Spending Forecast
Market Dynamics US Construction Spending Forecast US 2023 Segment Performance 2023 vs. 2022 Comparison Up 5%+ Stable Down Multifamily Lodging 0-4% Under 0% Commercial Office Educational Single-family Health Care Religious Improvements Amusement and Recreation Public Safety Transportation Communicati
Slide 28: Market Positioning and Secular Investment Trends
Market Positioning E-Infrastructure Solutions and Secular + $65B Infrastructure Bill (IIJA) investment further contributes to growth and demand for data centers, Investment Trends manufacturing, logistics and distribution centers Drive Opportunities + Continued growth in warehouse, distribution, lar
Slide 29: Full Year 2023 Guidance
Full Year 2023 Guidance 2023 started strong Revenue of $1.9 to $2.0 billion + Solid first quarter results + Record backlog + New high-value E-Infrastructure project awards Net Income of $104 to $110 million + Increased transportation funding + Emerging improvement in housing starts EPS of $3.33 to $
Slide 30: Taking care of our people, customers, investors, community
Taking care of our people, our customers, our investors, our community and the environment, that’s The Sterling Way. In 2022, we published Building a Better Tomorrow, The Sterling Way – 2022 Sustainability Report to share our sustainability practices, goals and initiatives. This year, we published L
Slide 31: Sustainability
Protecting Our Environment Sustainability + Sound governance + Environmentally responsible construction services From strategy to operations, we are and solutions for today and tomorrow committed to sustainability by operating responsibly to safeguard and improve society’s quality of life. Taking Ca
Slide 32: Appendix
Appendix Sterling Infrastructure Inc. IR Presentation 32
Slide 33: 2023 Modeling Considerations
2023 Modeling Considerations(1) Revenue $1,900 to $2,000 Gross Margin 15% to 16% G&A Expense as % of Revenue (Excluding ~5% Intangible Amortization) Intangible Amortization $15 Other Operating Expense Net $12 to $13 JV Non-Controlling Interest Expense $2 to $3 Effective Income Tax Rate 28% to 29% Ne
Slide 34: 2023 Modeling Considerations Continued
2023 Modeling Considerations Continued* Non-Cash Items FY 2023 Expectations FY 2022 Depreciation $40 to $44 $38.0 Intangible Amortization $15 $14.1 Debt Issuance Cost Amortization $2 to $3 $2.2 Stock-based Compensation $12 to $14 $10.3 Deferred Taxes $17 to $18 $36.5 Other Cash Flow Items FY 2023 Ex
Slide 35: Quarterly Consolidated Results
Quarterly Consolidated Results Continuing Operations ($ in millions) 1Q 2023 1Q 2022 Revenues $ 403.6 $ 366.0 Gross Profit 61.7 55.1 G&A Expense (23.3) (20.3) Intangible Amortization (3.7) (3.6) Acquisition Related Costs (0.2) (0.3) Other Operating Expense, Net (1.9) (1.7) Operating Income 32.6 29.4
Slide 36: Quarterly Consolidated Results
Quarterly Consolidated Results Continuing Operations ($ in millions) 1Q 2023 1Q 2022 E-Infrastructure Solutions Revenue $ 205.8 $ 168.9 Operating Income $ 24.3 $ 21.3 Operating Margin 11.8 % 12.6 % Transportation Solutions Revenue $ 111.1 $ 116.1 Operating Income $ 5.3 $ 4.4 Operating Margin 4.8 % 3
Slide 37: EBITDA Reconciliation
EBITDA Reconciliation 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,
Slide 38: EBITDA Guidance Reconciliation
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 $ 104 $ 110 Depreciation and amortization 55 59 Interest expense, net of inter
Slide 39: STRL 5-Year Stock Price Performance
STRL 5-Year Stock Price Performance Closing Price 25-May-2018 to 25-May-2023 (Daily) Price (Local Currency) Sterling Infrastructure, Inc. 45 40 35 30 25 20 15 10 5 '18 '19 '20 '21 '22 Source: FactSet Sterling Infrastructure Inc. IR Presentation 39
Slide 40: Thank You
THANK YOU We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow.
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