Slide 1: Sterling to Acquire Plateau Excavation
Sterling Construction Company, Inc. Sterling to Acquire Plateau Excavation AUGUST 14, 2019
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 forwa
Slide 3: Sterling 3-Year Strategic Vision - Introduced in 2016
Sterling 3-Year Strategic Vision - Introduced in 2016 12% + 10%- 8% 5 6% = 4% - 7-8% Solidifythe Base Grow High Margin Products 50/50 Split at 12%+ margin Adjacent Markets 2021 Blended Margin Expansion into 15%+ margins Threefold margin improvement in 6 years 2015 Margins 2015 - Focused on Solidifyi
Slide 4: Expansion into Adjacent Markets...Plateau
Expansion into Adjacent Markets...Plateau 12% -- Expansion into Adjacent Markets 15%+ margins 10%—— Announced Plateau Excavation Acquisition — 9 S/ 1hotides access to the rapidly growing Southwest US, 8% —— a region where Sterling currently has no presence. = Will enhance overall margin and cash flo
Slide 5: How the Strategy has Driven Higher Margins
How the Strategy has Driven Higher Margins Gross Margin 12.0% —T — — 10.0% Combined gross margin with 8.0% Plateau expected to exceed 12% 6.0% 4.0% 2.0% 0.0% 2015 2016 2017 2018 2019e Continued Focus on Bottom Line to Triple Gross Margin 5 See ‘ompany, Inc.
Slide 6: Plateau Excavation Overview
Plateau Excavation Overview ] Plateau is the leading provider of infrastructure improvement services in the Southeastern U.S. serving blue-chip customers in the data center, distribution center/warehousing (e-commerce and traditional retail), energy and other growing end markets. Headquarters: Auste
Slide 7: Strong Relationships with High Profile Customers
Strong Relationships with High Profile Customers = 86% of 2017 revenue was from returning customers = 14-year average tenure with top 10 customers = Provides Sterling with a whole new (and quickly growing) customer base including: BB yy; amazon ga Microsoft Google sla Watrent 7ix ~ ©” B ‘i TARGET Fe
Slide 8: Key Benefits to Sterling
Key Benefits to Sterling = Higher value service with lower execution risk and better margins = Strong earnings potential and cash generation. > Canadd ~$72 mm and ~$77 mm of EBITDA and free cash flow, respectively, annually. = Introduction to new markets. > Plateau operates in attractive markets fro
Slide 9: Meets Sterling Acquisition Criteria
Meets Sterling Acquisition Criteria Kj} SSNS Higher value add in adjacent end markets with higher margins and lower execution risk End Market Diversification Great management team that stays with the business Strong performing business with significant growth potential Performs “like activities” to
Slide 10: Transformative Characteristics
Transformative Characteristics Attractive Margins Growth Potential Diversification Lower Risk High Free Cash Flow Margins - ~26% GM and ~24% EBITDA Margin- significantly above Sterling core business. Plateau revenues expected to grow mid-to-high single digits annually for the foreseeable future. Mai
Slide 11: Transaction Structure
Transaction Structure = Total purchase price of $400 million; approximately 5.5x EBITDA = Financing the acquisition and repaying existing higher interest rate term loan through a new $400 million term loan and $75 million revolver = Expect to close near the end of Q3’19 = Key members of Plateau mana
Slide 12: Combined Company Analysis
Combined Company Analysis Estimated Combined Annual Financials Revenues by End Market simmons) [Sern [Plateou [Combined | Plateau Revenue 1,000 290 1,290 Excavation EBITDA ~58 “72 ~130 22% 7 Heavy Highway # of ~2,000 ~800 ~2,800 Construction Employees Residential 39% Construction 11% Other Heavy Civ
Slide 13: Focused on Bottom-Line Growth as Opposed to Top-Line Growth
Focused on Bottom-Line Growth as Opposed to Top-Line Growth 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 2015 2016 2017 2018 2019e —Revenue Growth —Gross Profit Growth Construction Company, Inc. Margin growth outpaces revenue growth by approximately 4x 43 SI Sterling
Slide 14: Questions?
Questions? Sterling 14 3S Construction Company, Inc.