E-Infrastructure Solutions Q4 2024 Earnings Call February 26, 2025 We build and service the infrastructure that enables our economy to run, our people to move, and our country to grow. 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 forward-looking statements are ...

Core Viewpoint - Sterling Infrastructure (STRL) reported quarterly earnings of $1.46 per share, exceeding the Zacks Consensus Estimate of $1.34 per share, and showing an increase from $1.30 per share a year ago, representing an earnings surprise of 8.96% [1][2] Financial Performance - The company posted revenues of $498.83 million for the quarter ended December 2024, which was 6.54% below the Zacks Consensus Estimate, compared to $485.98 million in the same quarter last year [2] - Over the last four quarters, Sterling Infrastructure has surpassed consensus EPS estimates four times but has only topped consensus revenue estimates once [2] Stock Performance - Sterling Infrastructure shares have declined approximately 35.5% since the beginning of the year, while the S&P 500 has gained 1.7% [3] - The current consensus EPS estimate for the upcoming quarter is $1.01 on revenues of $419.4 million, and for the current fiscal year, it is $6.46 on revenues of $2.07 billion [7] Industry Outlook - The Engineering - R and D Services industry, to which Sterling Infrastructure belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Sterling Infrastructure's stock performance [5][6]

Core Insights - Sterling Infrastructure, Inc. has been awarded two significant transportation projects, highlighting the attractive opportunities in the Rocky Mountain and Arizona regions [1][6] - The CEO emphasized the technical capabilities and execution quality of the Ralph L. Wadsworth subsidiary, reinforcing its reputation as a trusted partner for highway and bridge work [1][3] Company Overview - Sterling operates through various subsidiaries across three segments: E-Infrastructure, Transportation, and Building Solutions, primarily in the Southern, Northeastern, Mid-Atlantic, Rocky Mountain regions, and the Pacific Islands [2] - E-Infrastructure Solutions focus on large-scale site development for manufacturing, data centers, and power generation [2] - Transportation Solutions encompass infrastructure projects for highways, roads, bridges, and airports [2] - Building Solutions include concrete foundations for residential and commercial projects, plumbing services, and surveys for new builds [2] - The company is committed to sustainability and improving society's quality of life through responsible operations [2] Project Details - The I-15 1800 North Interchange project in Utah has a total value of $195 million, with RLW holding a 60% interest, expected to begin in spring 2025 and continue through late 2027 [6] - The I-25 North Corridor project in Colorado is valued at $86 million, with RLW's share at 51%, marking the next phase of a multi-year project that started pre-construction activities in 2018 [6]

Financial Performance - For the full year 2024, revenue increased by 7% to $2.00 billion, with net income of $257.5 million, or $8.27 per diluted share, compared to $138.7 million, or $4.44 per diluted share, in 2023[4] - Adjusted net income for 2024 rose by 36.3% to $189.9 million, or $6.10 per diluted share, while EBITDA increased by 59% to $410.9 million[4] - In Q4 2024, revenues were $498.8 million, a 3% increase, with net income of $113.2 million, representing a 182% increase[6] - Gross profit for the year ended December 31, 2024, was $426.1 million, up 26.2% from $337.6 million in 2023[24] - Net income attributable to Sterling common stockholders for the year was $257.5 million, a 85.5% increase compared to $138.7 million in 2023[24] - Operating income for 2024 was $264.62 million, up 28.6% from $205.80 million in 2023[32] - Adjusted net income attributable to Sterling common stockholders for Q4 2024 was $45.49 million, compared to $40.58 million in Q4 2023, reflecting a 2.2% increase[36] - Basic net income per share for Q4 2024 was $3.69, significantly higher than $1.30 in Q4 2023[36] Revenue Segments - E-Infrastructure revenue increased by 8% year-over-year, driven by a more than 50% increase in data center-related revenue[9] - Transportation Solutions revenue increased by 24% for the full year, with operating margins at 6.5%[10] - E-Infrastructure Solutions segment revenues increased to $234.0 million in Q4 2024, accounting for 47% of total revenues, up from 45% in Q4 2023[26] - E-Infrastructure Solutions segment generated $923.73 million in revenue for 2024, accounting for 49.2% of total revenues[32] - Transportation Solutions segment revenue for 2024 was $547.78 million, up 25.1% from $437.85 million in 2023[32] Guidance and Projections - For 2025, the company expects revenue guidance of $2.00 billion to $2.15 billion, with adjusted net income guidance of $252 million to $267 million[13] - The midpoint of 2025 guidance indicates a projected 10% revenue growth and 18% growth in adjusted net income and adjusted EBITDA[11] - Full year 2025 guidance for net income attributable to Sterling common stockholders is projected between $215 million and $230 million, compared to $257.461 million in 2024[40] - Adjusted net income per share for 2025 is expected to be between $7.90 and $8.40, compared to $7.09 in 2024[40] Cash Flow and Assets - Cash flows from operations totaled $497.1 million for the twelve months ended December 31, 2024, with cash and cash equivalents at $664.2 million[6] - Cash and cash equivalents at the end of Q4 2024 were $664.2 million, a 40.7% increase from $471.6 million at the end of Q4 2023[28] - Total assets grew to $2.02 billion in Q4 2024, up from $1.78 billion in Q4 2023, reflecting a 13.6% increase[28] Backlog and Future Work - The combined backlog at December 31, 2024, was $1.83 billion, with E-Infrastructure Solutions backlog growing by 27% to over $1 billion[8] - The backlog excluding RHB for Q4 2024 was $1,693.22 million, a 4.5% increase from $1,661.22 million in Q4 2023[34] - The combined backlog excluding RHB for Q4 2024 was $1,831.14 million, showing stability compared to $1,808.89 million in Q4 2023[34] Costs and Expenses - The company reported acquisition-related costs of $421,000 for the twelve months ended December 2024, down from $873,000 in the previous year[36] - Non-cash stock-based compensation for 2024 was $19.003 million, with a consistent guidance of $20 million for 2025[40] - Acquisition related costs for 2024 were $5.177 million, with guidance remaining at $5 million for 2025[40] Other Financial Metrics - Operating income for Q4 2024 was $62.3 million, representing a 12.5% margin, compared to $55.8 million and an 11.5% margin in Q4 2023[26] - Total liabilities increased to $1.19 billion in Q4 2024, compared to $1.15 billion in Q4 2023, indicating a 3.0% rise[28] - The company reported a gain on deconsolidation of subsidiary of $91.3 million for the year, contributing significantly to net income[24] - The company incurred a gain on deconsolidation of subsidiary of $91.289 million in 2024, which will not be included in the adjusted net income for 2025[40] - Depreciation and amortization for the full year 2024 was $68 million, with guidance for 2025 set between $76 million and $81 million[42] - The weighted average diluted shares outstanding increased from 31,146 in 2024 to a projected 32,000 in 2025[40]

Core Viewpoint - Sterling Infrastructure, Inc. reported strong financial results for the full year 2024, with significant increases in revenue, net income, and EBITDA, while providing optimistic guidance for 2025. Financial Performance - For the full year 2024, revenue increased by 7% to $2.12 billion compared to 2023 [4] - Net income for 2024 was $257.5 million, or $8.27 per diluted share, up from $138.7 million, or $4.44 per diluted share in 2023, representing an increase of 86% [4] - Adjusted net income rose by 36.3% to $189.9 million, or $6.10 per diluted share in 2024, compared to $139.3 million, or $4.46 per diluted share in 2023 [4] - EBITDA increased by 59% to $410.9 million in 2024, compared to $259.0 million in 2023 [4] - Adjusted EBITDA grew by 23% to $320.0 million in 2024, compared to $259.9 million in 2023 [4] Segment Performance - E-Infrastructure Solutions revenue increased by 8% year-over-year, with data center-related revenue rising over 50% [8] - Transportation Solutions revenue increased by 24% for the full year, although it faced a decline in the fourth quarter due to challenging comparisons [9] - Building Solutions saw a modest revenue increase of 1.1% for the full year, but a decline of 3% in the fourth quarter [10] Backlog and Guidance - The combined backlog at year-end 2024 was $1.83 billion, slightly up from the previous year [7] - E-Infrastructure Solutions backlog grew by 27% year-over-year, exceeding $1 billion [7] - For 2025, the company expects revenue growth of 10%, adjusted net income growth of 18%, and adjusted EBITDA growth of 18% [10] Cash Flow and Financial Position - Operating cash flow for the full year 2024 was nearly $500 million, with a net cash position of $348 million [6] - Cash and cash equivalents at the end of 2024 totaled $664.2 million, up from $471.6 million at the end of 2023 [28] CEO Remarks - The CEO highlighted the record performance in 2024, with a focus on margin expansion and profitability growth exceeding revenue growth [6] - The company is optimistic about continued growth in 2025, driven by strategic shifts towards higher-margin service offerings [6]

Core Viewpoint - Sterling Infrastructure, Inc. (STRL) is positioned for strong growth driven by its focus on e-infrastructure and transportation markets, despite recent stock performance challenges [7][21]. Financial Performance - STRL reported Q3 2024 EPS of $1.97, a 56% increase year-over-year, exceeding the Zacks Consensus Estimate by 17.3% [1][2]. - Revenues for Q3 2024 were $593.7 million, slightly missing expectations by 1% [1]. - The company's backlog reached $2.1 billion, with a combined backlog of $2.37 billion, indicating strong future growth potential [1]. Segment Performance - E-Infrastructure Solutions accounted for 45% of Q3 2024 revenues, with data center projects making up over 50% of its backlog [8]. - The Transportation Solutions segment represented 38% of total revenues, benefiting from robust state and local funding and the Infrastructure Bill's allocation of $643 billion [9]. - The Building Solutions segment, which accounted for 17% of revenues, faces challenges in the residential construction market due to affordability concerns and high interest rates [10]. Market Position and Strategy - STRL has consistently surpassed earnings expectations, with an average surprise of 21.5% over the last four quarters [2][3]. - The company is strategically focused on high-margin projects and has established itself as a major player in the e-infrastructure market [7]. Valuation and Stock Performance - STRL stock has underperformed, losing 20% since the AI-related market selloff on January 27, 2025, and 39.7% from its 52-week high [12][15]. - The stock is currently trading at a forward P/E ratio of 18.98, above the industry average of 18.33 and its three-year median of 15.24, indicating a stretched valuation [15][16]. Future Outlook - The company is expected to benefit from increased capital expenditures in AI-related infrastructure, with major clients like Amazon and Meta planning significant investments [21]. - Despite the promising outlook, the heavy reliance on big tech contracts poses risks if there is a slowdown in AI-related spending [22].

Company Performance - Sterling Infrastructure (STRL) closed at $124.27, down 1.93% from the previous trading day, underperforming the S&P 500, which fell 0.43% [1] - Over the past month, STRL shares have decreased by 36.82%, significantly lagging behind the Construction sector's loss of 5.29% and the S&P 500's gain of 2.6% [2] Upcoming Earnings - The company is set to release its earnings report on February 25, 2025, with an expected EPS of $1.34, reflecting a 3.08% increase from the same quarter last year [3] - Revenue is forecasted to be $533.75 million, indicating a 9.83% increase compared to the same quarter last year [3] Analyst Sentiment - Recent revisions to analyst forecasts for Sterling Infrastructure are crucial as they indicate changing business trends, with positive revisions suggesting analyst optimism about the company's profitability [4] - The Zacks Rank system, which evaluates estimate changes, currently ranks Sterling Infrastructure at 3 (Hold), with the consensus EPS estimate remaining unchanged over the last 30 days [6] Valuation Metrics - Sterling Infrastructure has a Forward P/E ratio of 19.62, which is slightly higher than its industry's Forward P/E of 19.46 [7] - The company holds a PEG ratio of 1.31, comparable to the industry average PEG ratio of 1.32 [8] Industry Context - The Engineering - R and D Services industry, part of the Construction sector, has a Zacks Industry Rank of 163, placing it in the bottom 36% of over 250 industries [9]

Core Viewpoint - Sterling Infrastructure, Inc. (STRL) has experienced a significant decline of 18% in the past month, contrasting with the broader market trends and underperforming compared to its industry peers [1][2]. Performance Overview - STRL's stock performance has sharply declined, while the Zacks Construction sector increased by 0.2% and the Zacks S&P 500 Composite gained 3.8% during the same period [1]. - The company has underperformed within its industry, lagging behind competitors like Dycom Industries, Inc. (DY), which gained 4.7% [2]. Technical Indicators - STRL is trading below its 50-day and 200-day simple moving averages (SMAs), indicating potential bearish momentum [5]. Revenue and Income Challenges - The building solutions segment saw a 10% drop in revenue and a 12% decline in operating income in Q3 2024, primarily due to a slowdown in the Dallas residential market [8]. - Prolonged higher interest rates, with the Fed holding rates at 4.25%-4.50%, could suppress residential construction activity, negatively impacting the company's growth and margins [9]. Sector Dependency Risks - STRL's over-reliance on data centers, which constitute over half of its e-infrastructure backlog, poses risks if there is a slowdown in AI-related infrastructure projects [10]. Valuation Concerns - STRL's forward 12-month P/E ratio is 21.49, higher than the industry average of 19.1 and above its three-year median of 15.1 [11]. - Despite a higher valuation reflecting growth potential, recent price declines may deter investors from buying at current levels [12]. Growth Catalysts - The E-Infrastructure segment accounted for 45% of total revenues in Q3 2024, surging 90% year over year due to demand from AI and cloud computing [13]. - The transportation segment, making up 38% of total revenues, reported a 33.8% increase in revenues in the first nine months of 2024, supported by federal infrastructure funding [14]. Backlog and Financial Position - STRL's backlog stands at $2.37 billion, with over half tied to data center developments, indicating strong future revenue visibility [15]. - The transportation backlog is $1.4 billion, reflecting ongoing demand for highway expansion and public infrastructure projects [17]. - The company generated $322.8 million in operating cash flow in the first nine months of 2024, with a conservative leverage profile and strong financial flexibility [18][19]. Analyst Sentiment - Analysts have revised earnings per share estimates for 2025 upward, reflecting expected 8.1% year-over-year growth [20]. - The average price target set by analysts is $191.50 per share, suggesting a 32.2% upside from the recent closing price [21]. Conclusion - Despite recent challenges, STRL remains fundamentally strong with a solid backlog and growth potential in e-infrastructure [23]. - The stock's recent decline and valuation concerns suggest caution, with a Zacks Rank 3 (Hold) indicating a potential wait for a better entry point [24].

Core Viewpoint - Sterling Infrastructure, Inc. is set to release its financial results for Q4 and the full year of 2024 on February 25, 2025, after market close [1] Financial Results Announcement - The company will host a conference call on February 26, 2025, at 9:00 am ET to discuss the financial results and the outlook for 2025 [2] - Interested participants can join the call by dialing (800) 836-8184 and are advised to call in ten minutes early [2] Webcast Information - A simultaneous webcast of the conference call will be available on the company's website, with an archived version accessible for thirty days [3] Company Overview - Sterling operates through subsidiaries in three segments: E-Infrastructure, Transportation, and Building Solutions, primarily in the U.S. [4] - E-Infrastructure Solutions focus on large-scale site development for various sectors including manufacturing and data centers [4] - Transportation Solutions encompass infrastructure projects for highways, bridges, and airports [4] - Building Solutions provide concrete foundations and plumbing services for residential and commercial projects [4] - The company emphasizes sustainability and community care as part of its operational strategy [4] Leadership Statement - CEO Joe Cutillo stated that the company builds and services infrastructure essential for economic functioning and growth [5]

Group 1 - Sterling Infrastructure (NASDAQ: STRL) experienced moderated topline growth in the second half of the year due to a significant decline in the building solution segment [1] - The building solution segment is expected to remain under pressure moving forward [1] Group 2 - The analysis reflects a focus on understanding and explaining the financial details of companies, particularly in the technology, industrial, and conglomerate sectors [1]