EPS Continues to Outpace Expectations
Increases 2021 Full Year Revenue and Net Income Guidance
Delivered Record YTD Operating Cash Flow
Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the third quarter 2021.
Consolidated Third Quarter 2021 Financial Results Compared to Third Quarter 2020:
- Revenues were $463.4 million compared to $383.5 million.
- Net Income was $21.1 million compared to $15.2 million.
- Diluted EPS was $0.72 compared to $0.54.
Consolidated Financial Position and Liquidity:
- Cash and Cash Equivalents were $117.7 million at September 30, 2021.
- Cash provided by operating cash flow was a record $135.7 million for the nine months ended September 30, 2021.
- Repayments of debt totaled $44.2 million for the nine months ended September 30, 2021.
Heavy Civil and Specialty Services Backlog Highlights:
- Backlog at September 30, 2021 was $1.41 billion, up from $1.18 billion at December 31, 2020, while Backlog gross margin improved from 12.0% to 12.3%, over the respective periods.
- Combined Backlog(1) was $1.53 billion at both September 30, 2021 and December 31, 2020, while Combined Backlog gross margin improved from 11.8% to 12.1%, over the respective periods.
The Company Increases 2021 Full Year Revenue and Net Income Guidance:
- Revenue of $1.510 billion to $1.520 billion
-
Net Income of $61 million to $64 million
CEO Remarks and Outlook
“The third quarter was a strong quarter, exceeding our Net Income and EPS expectations,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “We were able to deliver another outstanding quarter despite the headwinds from inflation and the supply chain. Our diverse portfolio of end customers and geographies, coupled with the strength of our end markets, were the drivers that enabled us to offset these headwinds. In our Heavy Civil sector, operating income almost tripled that of Q3 2020, driven by revenue growth in aviation and alternative delivery heavy highway projects. Our Specialty Services sector saw year-over-year revenue growth but a decline in operating income driven by inflation and supply chain delays. Our Residential sector delivered both record revenue and income driven by continued strong demand in the Texas market and the recent expansion into Phoenix.”
“In addition to the great earnings results from our operating units, the third quarter also benefited from reduced interest expense and a lower income tax expense.”
Mr. Cutillo continued, “Our year-to-date cash flow continues to generate record cash flow from operations of $135.7 million, of which $44.2 million was deployed to pay down debt while we invested $37.2 million in net capital expenditures.”
Mr. Cutillo concluded, “The strategic steps we have taken to align our business with long-term growth markets such as e-infrastructure, residential, and the continuing shift within our Heavy Civil sector towards higher-margin lower risk projects have continued to pay off and have us well-positioned to continue this momentum going forward. As a result, we are raising our full-year 2021 revenue guidance to be between $1.510 billion to $1.520 billion and 2021 net income attributable to Sterling common stockholders to be between $61 million to $64 million.”
Conference Call
Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Wednesday, November 3, 2021 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 ten minutes before the conference call is scheduled to begin and ask for the Sterling Construction call. To coincide with the conference call, Sterling will post a slide presentation at www.strlco.com on the Investor Presentations & Webcast 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 atwww.strlco.com at least fifteen 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 thirty days.
About Sterling
Sterling Construction Company, Inc. operates through a variety of subsidiaries within three segments specializing in Heavy Civil, Specialty Services and Residential projects in the United States (the “U.S.”), primarily across the southern U.S., the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. Heavy Civil includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail, water, wastewater and storm drainage systems. Specialty Services projects include site development activities, foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes. 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, our investors, our customers and our communities – that is The Sterling Way. This is why we use recycled materials, reclaim water and stockpile the aggregate from our projects. Moreover, from water delivery systems and transportation systems to community service initiatives, like facilitating the construction of homes for disabled veterans, Sterling always puts people first.
Important Information for Investors and Stockholders
Non-GAAP Measures
This press release may contain “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.
If applicable, reconciliations of Non-GAAP financial measures to the most comparable GAAP measures will be provided in 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: potential risks and uncertainties relating to the ongoing COVID-19 pandemic; our business strategy; our financial strategy; our industry outlook; 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 CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Revenues |
$ |
463,449 |
|
|
$ |
383,458 |
|
|
$ |
1,180,431 |
|
|
$ |
1,080,184 |
|
Cost of revenues |
(405,645) |
|
|
(333,542) |
|
|
(1,021,348) |
|
|
(935,424) |
|
||||
Gross profit |
57,804 |
|
|
49,916 |
|
|
159,083 |
|
|
144,760 |
|
||||
General and administrative expense |
(19,637) |
|
|
(15,154) |
|
|
(52,565) |
|
|
(51,209) |
|
||||
Intangible asset amortization |
(2,866) |
|
|
(2,866) |
|
|
(8,598) |
|
|
(8,569) |
|
||||
Acquisition related costs |
— |
|
|
(401) |
|
|
— |
|
|
(1,013) |
|
||||
Other operating expense, net |
(3,270) |
|
|
(2,664) |
|
|
(10,414) |
|
|
(9,989) |
|
||||
Operating income |
32,031 |
|
|
28,831 |
|
|
87,506 |
|
|
73,980 |
|
||||
Interest income |
13 |
|
|
23 |
|
|
39 |
|
|
146 |
|
||||
Interest expense |
(3,919) |
|
|
(7,177) |
|
|
(15,660) |
|
|
(22,537) |
|
||||
Gain on extinguishment of debt, net |
968 |
|
|
— |
|
|
2,032 |
|
|
— |
|
||||
Income before income taxes |
29,093 |
|
|
21,677 |
|
|
73,917 |
|
|
51,589 |
|
||||
Income tax expense |
(7,336) |
|
|
(6,280) |
|
|
(20,275) |
|
|
(14,712) |
|
||||
Net income |
21,757 |
|
|
15,397 |
|
|
53,642 |
|
|
36,877 |
|
||||
Less: Net income attributable to noncontrolling interests |
(631) |
|
|
(240) |
|
|
(1,905) |
|
|
(395) |
|
||||
Net income attributable to Sterling common stockholders |
$ |
21,126 |
|
|
$ |
15,157 |
|
|
$ |
51,737 |
|
|
$ |
36,482 |
|
|
|
|
|
|
|
|
|
||||||||
Net income per share attributable to Sterling common stockholders: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
0.74 |
|
|
$ |
0.54 |
|
|
$ |
1.81 |
|
|
$ |
1.31 |
|
Diluted |
$ |
0.72 |
|
|
$ |
0.54 |
|
|
$ |
1.79 |
|
|
$ |
1.30 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
28,710 |
|
|
28,003 |
|
|
28,527 |
|
|
27,832 |
|
||||
Diluted |
29,213 |
|
|
28,233 |
|
|
28,927 |
|
|
27,986 |
|
||||
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||||||||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||||||
|
2021 |
|
% of
|
|
2020 |
|
% of
|
|
2021 |
|
% of
|
|
2020 |
|
% of
|
||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Heavy Civil |
$ |
249,898 |
|
|
54% |
|
$ |
201,078 |
|
|
52% |
|
$ |
600,105 |
|
|
51% |
|
$ |
577,141 |
|
|
54% |
Specialty Services |
148,256 |
|
|
32% |
|
139,971 |
|
|
37% |
|
424,248 |
|
|
36% |
|
380,397 |
|
|
35% |
||||
Residential |
65,295 |
|
|
14% |
|
42,409 |
|
|
11% |
|
156,078 |
|
|
13% |
|
122,646 |
|
|
11% |
||||
Total Revenues |
$ |
463,449 |
|
|
|
|
$ |
383,458 |
|
|
|
|
$ |
1,180,431 |
|
|
|
|
$ |
1,080,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Heavy Civil |
$ |
7,174 |
|
|
2.9% |
|
$ |
2,405 |
|
|
1.2% |
|
$ |
12,668 |
|
|
2.1% |
|
$ |
2,679 |
|
|
0.5% |
Specialty Services |
17,932 |
|
|
12.1% |
|
21,474 |
|
|
15.3% |
|
57,016 |
|
|
13.4% |
|
55,834 |
|
|
14.7% |
||||
Residential |
6,925 |
|
|
10.6% |
|
5,353 |
|
|
12.6% |
|
17,822 |
|
|
11.4% |
|
16,480 |
|
|
13.4% |
||||
Subtotal |
32,031 |
|
|
6.9% |
|
29,232 |
|
|
7.6% |
|
87,506 |
|
|
7.4% |
|
74,993 |
|
|
6.9% |
||||
Acquisition related costs |
— |
|
|
|
|
(401) |
|
|
|
|
— |
|
|
|
|
(1,013) |
|
|
|
||||
Total Operating Income |
$ |
32,031 |
|
|
6.9% |
|
$ |
28,831 |
|
|
7.5% |
|
$ |
87,506 |
|
|
7.4% |
|
$ |
73,980 |
|
|
6.8% |
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||
|
September 30,
|
|
December 31,
|
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
117,702 |
|
|
$ |
66,185 |
|
Accounts receivable |
218,683 |
|
|
177,424 |
|
||
Contract assets |
85,498 |
|
|
84,975 |
|
||
Receivables from and equity in construction joint ventures |
21,656 |
|
|
16,653 |
|
||
Other current assets |
22,483 |
|
|
16,306 |
|
||
Total current assets |
466,022 |
|
|
361,543 |
|
||
Property and equipment, net |
148,444 |
|
|
126,668 |
|
||
Operating lease right-of-use assets, net |
17,470 |
|
|
16,515 |
|
||
Goodwill |
192,014 |
|
|
192,014 |
|
||
Other intangibles, net |
236,289 |
|
|
244,887 |
|
||
Deferred tax asset, net |
— |
|
|
7,817 |
|
||
Other non-current assets, net |
4,078 |
|
|
3,250 |
|
||
Total assets |
$ |
1,064,317 |
|
|
$ |
952,694 |
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
142,740 |
|
|
$ |
95,201 |
|
Contract liabilities |
141,236 |
|
|
114,019 |
|
||
Current maturities of long-term debt |
21,239 |
|
|
77,434 |
|
||
Current portion of long-term lease obligations |
8,314 |
|
|
7,588 |
|
||
Income taxes payable |
306 |
|
|
— |
|
||
Accrued compensation |
34,801 |
|
|
18,013 |
|
||
Other current liabilities |
9,088 |
|
|
9,629 |
|
||
Total current liabilities |
357,724 |
|
|
321,884 |
|
||
Long-term debt |
299,923 |
|
|
291,249 |
|
||
Long-term lease obligations |
9,306 |
|
|
8,958 |
|
||
Members’ interest subject to mandatory redemption and undistributed earnings |
54,766 |
|
|
51,290 |
|
||
Deferred tax liability, net |
10,287 |
|
|
— |
|
||
Other long-term liabilities |
9,218 |
|
|
10,584 |
|
||
Total liabilities |
741,224 |
|
|
683,965 |
|
||
Stockholders’ equity: |
|
|
|
||||
Common stock |
288 |
|
|
283 |
|
||
Additional paid in capital |
255,313 |
|
|
256,423 |
|
||
Treasury stock, at cost |
— |
|
|
(1,445) |
|
||
Retained earnings |
69,010 |
|
|
17,273 |
|
||
Accumulated other comprehensive loss |
(2,923) |
|
|
(5,264) |
|
||
Total Sterling stockholders’ equity |
321,688 |
|
|
267,270 |
|
||
Noncontrolling interests |
1,405 |
|
|
1,459 |
|
||
Total stockholders’ equity |
323,093 |
|
|
268,729 |
|
||
Total liabilities and stockholders’ equity |
$ |
1,064,317 |
|
|
$ |
952,694 |
|
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||
|
Nine Months Ended
|
||||||
|
2021 |
|
2020 |
||||
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
53,642 |
|
|
$ |
36,877 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
25,336 |
|
|
24,639 |
|
||
Amortization of debt issuance costs and non-cash interest |
1,756 |
|
|
2,489 |
|
||
Gain on disposal of property and equipment |
(1,176) |
|
|
(1,042) |
|
||
Gain on debt extinguishment, net |
(2,032) |
|
|
— |
|
||
Deferred taxes |
17,413 |
|
|
10,946 |
|
||
Stock-based compensation expense |
5,690 |
|
|
7,961 |
|
||
Change in fair value of interest rate swap |
(41) |
|
|
251 |
|
||
Changes in operating assets and liabilities |
35,154 |
|
|
10,134 |
|
||
Net cash provided by operating activities |
135,742 |
|
|
92,255 |
|
||
Cash flows from investing activities: |
|
|
|
||||
Capital expenditures |
(39,315) |
|
|
(22,088) |
|
||
Proceeds from sale of property and equipment |
2,093 |
|
|
1,557 |
|
||
Net cash used in investing activities |
(37,222) |
|
|
(20,531) |
|
||
Cash flows from financing activities: |
|
|
|
||||
Repayments of debt |
(44,184) |
|
|
(52,695) |
|
||
Distributions to noncontrolling interest owners |
(1,959) |
|
|
— |
|
||
Other |
(603) |
|
|
9,137 |
|
||
Net cash used in financing activities |
(46,746) |
|
|
(43,558) |
|
||
Net change in cash, cash equivalents, and restricted cash |
51,774 |
|
|
28,166 |
|
||
Cash, cash equivalents, and restricted cash at beginning of period |
72,642 |
|
|
50,562 |
|
||
Cash, cash equivalents, and restricted cash at end of period |
124,416 |
|
|
78,728 |
|
||
Less: restricted cash (Other current assets) |
(6,714) |
|
|
(6,135) |
|
||
Cash and cash equivalents at end of period |
$ |
117,702 |
|
|
$ |
72,593 |
|
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
(Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Net income attributable to Sterling common stockholders |
$ |
21,126 |
|
|
$ |
15,157 |
|
|
$ |
51,737 |
|
|
$ |
36,482 |
|
Depreciation and amortization |
8,629 |
|
|
8,098 |
|
|
25,336 |
|
|
24,639 |
|
||||
Interest expense, net of interest income |
3,906 |
|
|
7,154 |
|
|
15,621 |
|
|
22,391 |
|
||||
Income tax expense |
7,336 |
|
|
6,280 |
|
|
20,275 |
|
|
14,712 |
|
||||
Gain on extinguishment of debt, net |
(968) |
|
|
— |
|
|
(2,032) |
|
|
— |
|
||||
EBITDA (1) |
$ |
40,029 |
|
|
$ |
36,689 |
|
|
$ |
110,937 |
|
|
$ |
98,224 |
|
|
|
|
|
|
|
|
|
||||||||
(1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation
|
|||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20211102006298/en/
Contacts
Sterling Construction Company, Inc.
Ron Ballschmiede, Chief Financial Officer
281-214-0777
Investor Relations Counsel:
The Equity Group Inc.
Jeremy Hellman, CFA
212-836-9626
