Sterling Reports Record First Quarter 2021 Results | Financial Buzz

Sterling Reports Record First Quarter 2021 Results

Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or the “Company”) today announced financial results for the first quarter 2021.

Consolidated First Quarter 2021 Financial Results Compared to First Quarter 2020:

  • Revenues were $315.3 million compared to $296.7 million;
  • Gross margin was 14.3% of revenues compared to 11.9%;
  • Operating income was $22.8 million compared to $12.1 million;
  • Net Income was $10.6 million compared to $3.1 million;
  • EPS was $0.37 compared to $0.11; and,
  • EBITDA(1) was $29.9 million compared to $20.3 million.

Consolidated Financial Position and Liquidity:

  • Cash and Cash Equivalents were $61.4 million at March 31, 2021 compared to $66.2 million at December 31, 2020;
  • Cash provided by operating activities were $38.7 million for the three months ended March 31, 2021 compared to $10.8 million for the comparable prior year period;
  • Repayments of debt totaled $30.5 million for the three months ended March 31, 2021;
  • Forward looking EBITDA coverage ratio of 2.4X at March 31, 2021.

Heavy Civil and Specialty Services Backlog Highlights:

  • Backlog at March 31, 2021 was $1.64 billion, up from $1.18 billion at December 31, 2020.
  • Combined Backlog at March 31, 2021 was $1.71 billion, up from $1.53 billion at December 31, 2020, and includes Unsigned Low-bid Awards of $75.7 million and $356.9 million at March 31, 2021 and December 31, 2020, respectively.

The Company Reaffirms 2021 Full Year Revenue and Income Guidance:

  • Revenues: $1.46 billion to $1.49 billion.
  • Net Income: $52 million to $55 million.

1 The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, taxes, and loss on extinguishment of debt. See the “EBITDA Reconciliation” section below for more information.

CEO Remarks and Outlook

“Our first quarter was an excellent start to the year, even in the face of the weather challenges we encountered across much of our geographic footprint in February,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “We attribute our strong top and bottom line performance to our great team of people and the strategy that we have been implementing over the past several years to diversify our revenue streams and focus on higher margin lower risk opportunities where we can bring our experience and unique skill set to bear in order to bring value to our customers.”

“Once again, our Specialty Services segment was a major contributor to our strong first quarter results. We continued to execute well on our robust pipeline of projects for large, high-profile customers as they develop new distribution centers, data centers and warehouses. Backlog and bidding activity for Specialty Services remains robust, giving us good visibility for the balance of 2021.”

“Our Residential segment turned in an impressively strong performance in the face of the weather-related disruption in Dallas-Fort Worth and Houston. Our Residential operations lost workdays for a substantial portion of February due to historically freezing conditions and still managed to complete a record number of slabs for the quarter, and we’re seeing a similar rate of demand and productivity continuing thus far in the second quarter. First quarter segment margins reflected the impact of supply chain pressures, specifically relating to the cost of concrete, lumber and steel. We are watching these trends closely and have already implemented price increases in the first quarter.”

Mr. Cutillo continued, “Our Heavy Civil revenues are down $8.6 million from the prior year quarter while our operating profit was up $4.7 million in the quarter, reflecting the continued mix shift away from low-bid heavy highway to alternative delivery work, particularly in our Rocky Mountain region. We have been extremely pleased to see the results of our multi-year effort to shift the revenue composition of this segment towards jobs where we can use our extensive experience, assets and skill set to bring more value to our customers and earn higher margins.”

“We continued to strengthen our balance sheet in the first quarter, with cash flow from operations of $38.7 million, which we deployed to pay down $30.5 million of debt and invest $11.2 million in capital expenditures. We expect to further enhance our liquidity position as the year progresses, enabling us to continue to execute on our organic growth strategy while evaluating accretive acquisition opportunities. We are considering acquisition opportunities that could add scale to our existing operations or provide us with a new business segment that would give us access to adjacent markets to our core business. With respect to the sizeable infrastructure bill that has been introduced by the new administration, we are optimistic that increased funding could flow to the states in which we operate at some point over the next 12 to 24 months. Based on the uncertain timing of the infrastructure bill, our 2021 outlook does not assume any major positive changes in government investment in infrastructure. Given our strong start to the year, our robust backlog, our solid execution across all three of our segments, and our very healthy financial position we are increasingly enthusiastic about our prospects for generating additional shareholder value during the full year of 2021.”

Mr. Cutillo concluded, “Due to the strong results of our first quarter, we reaffirm our full-year 2021 guidance and believe that we will be on the higher end of the guidance range.”

Conference Call

Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, May 4, 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 at www.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, airfields, ports, light rail, water, wastewater and storm drainage systems. Specialty Services projects include land development activities (including site excavation and drainage, drilling and blasting for excavation), foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes.

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 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, 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: the duration of the COVID-19 pandemic, additional actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to address its impact, including the distribution, effectiveness and acceptance of vaccines, and the potential ongoing or further negative impact of the COVID-19 pandemic on the global economy and financial markets; our business strategy; our financial strategy; 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 (“SEC”) and elsewhere in those filings. The forward-looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

 

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended March 31,

 

2021

 

2020

Revenues

$

315,316

 

 

$

296,688

 

Cost of revenues

(270,284

)

 

(261,443

)

Gross profit

45,032

 

 

35,245

 

General and administrative expense

(17,099

)

 

(17,604

)

Intangible asset amortization

(2,866

)

 

(2,837

)

Acquisition related costs

 

 

(473

)

Other operating expense, net

(2,312

)

 

(2,228

)

Operating income

22,755

 

 

12,103

 

Interest income

14

 

 

99

 

Interest expense

(6,004

)

 

(7,803

)

Loss on extinguishment of debt

(337

)

 

 

Income before income taxes

16,428

 

 

4,399

 

Income tax expense

(4,760

)

 

(1,184

)

Net income

11,668

 

 

3,215

 

Less: Net income attributable to noncontrolling interests

(1,113

)

 

(100

)

Net income attributable to Sterling common stockholders

$

10,555

 

 

$

3,115

 

 

 

 

 

Net income per share attributable to Sterling common stockholders:

 

 

 

Basic

$

0.37

 

 

$

0.11

 

Diluted

$

0.37

 

 

$

0.11

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

Basic

28,279

 

 

27,736

 

Diluted

28,763

 

 

27,992

 

 

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2021

 

% of

Revenues

 

2020

 

% of

Revenues

Revenues

 

 

 

 

 

 

 

Heavy Civil

$

147,054

 

47%

 

$

155,615

 

 

53%

Specialty Services

124,088

 

39%

 

104,723

 

 

35%

Residential

44,174

 

14%

 

36,350

 

 

12%

Total Revenues

$

315,316

 

 

 

$

296,688

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

Heavy Civil

$

1,090

 

0.7%

 

$

(3,622

)

 

(2.3)%

Specialty Services

16,177

 

13.0%

 

11,114

 

 

10.6%

Residential

5,488

 

12.4%

 

5,084

 

 

14.0%

Subtotal

22,755

 

7.2%

 

12,576

 

 

4.2%

Acquisition related costs

 

 

 

(473

)

 

 

Total Operating Income

$

22,755

 

7.2%

 

$

12,103

 

 

4.1%

 

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

March 31,

2021

 

December 31,

2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

61,402

 

 

$

66,185

 

Accounts receivable

170,186

 

 

177,424

 

Contract assets

90,109

 

 

84,975

 

Receivables from and equity in construction joint ventures

18,166

 

 

16,653

 

Other current assets

15,366

 

 

16,306

 

Total current assets

355,229

 

 

361,543

 

Property and equipment, net

135,428

 

 

126,668

 

Operating lease right-of-use assets, net

15,804

 

 

16,515

 

Goodwill

192,014

 

 

192,014

 

Other intangibles, net

242,021

 

 

244,887

 

Deferred tax asset, net

3,410

 

 

7,817

 

Other non-current assets, net

3,310

 

 

3,250

 

Total assets

$

947,216

 

 

$

952,694

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

111,131

 

 

$

95,201

 

Contract liabilities

111,232

 

 

114,019

 

Current maturities of long-term debt

59,962

 

 

77,434

 

Current portion of long-term lease obligations

7,627

 

 

7,588

 

Income taxes payable

260

 

 

 

Accrued compensation

22,124

 

 

18,013

 

Other current liabilities

9,910

 

 

9,629

 

Total current liabilities

322,246

 

 

321,884

 

Long-term debt

279,175

 

 

291,249

 

Long-term lease obligations

8,202

 

 

8,958

 

Members’ interest subject to mandatory redemption and undistributed earnings

51,615

 

 

51,290

 

Other long-term liabilities

10,285

 

 

10,584

 

Total liabilities

671,523

 

 

683,965

 

Stockholders’ equity:

 

 

 

Common stock

286

 

 

283

 

Additional paid in capital

251,335

 

 

256,423

 

Treasury stock, at cost

 

 

(1,445

)

Retained earnings

27,828

 

 

17,273

 

Accumulated other comprehensive loss

(4,369

)

 

(5,264

)

Total Sterling stockholders’ equity

275,080

 

 

267,270

 

Noncontrolling interests

613

 

 

1,459

 

Total stockholders’ equity

275,693

 

 

268,729

 

Total liabilities and stockholders’ equity

$

947,216

 

 

$

952,694

 

 

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2021

 

2020

Cash flows from operating activities:

 

 

 

Net income

$

11,668

 

 

$

3,215

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

8,305

 

 

8,285

 

Amortization of debt issuance costs and non-cash interest

660

 

 

1,022

 

Gain on disposal of property and equipment

(68

)

 

(393

)

Loss on debt extinguishment

337

 

 

 

Deferred taxes

4,142

 

 

913

 

Stock-based compensation expense

1,835

 

 

2,234

 

Change in interest rate swap

(22

)

 

171

 

Changes in operating assets and liabilities

11,863

 

 

(4,676

)

Net cash provided by operating activities

38,720

 

 

10,771

 

Cash flows from investing activities:

 

 

 

Capital expenditures

(11,209

)

 

(7,354

)

Proceeds from sale of property and equipment

208

 

 

512

 

Net cash used in investing activities

(11,001

)

 

(6,842

)

Cash flows from financing activities:

 

 

 

Cash received from credit facility

 

 

30,000

 

Repayments of debt

(30,543

)

 

(5,082

)

Distributions to noncontrolling interest owners

(1,959

)

 

 

Other

 

 

(675

)

Net cash (used in) provided by financing activities

(32,502

)

 

24,243

 

Net change in cash and cash equivalents

(4,783

)

 

28,172

 

Cash and cash equivalents at beginning of period

66,185

 

 

45,733

 

Cash and cash equivalents at end of period

$

61,402

 

 

$

73,905

 

 

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

EBITDA RECONCILIATION

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2021

 

2020

Net income attributable to Sterling common stockholders

$

10,555

 

$

3,115

Depreciation and amortization

8,305

 

8,285

Interest expense, net of interest income

5,990

 

7,704

Income tax expense

4,760

 

1,184

Loss on extinguishment of debt

337

 

EBITDA (1)

$

29,947

 

$

20,288

(1) The Company defines EBITDA as GAAP net income attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, taxes, and loss on extinguishment of debt.

 

Contacts

Sterling Construction Company, Inc.

Ron Ballschmiede, Chief Financial Officer

281-214-0800

Investor Relations Counsel:

The Equity Group Inc.

Fred Buonocore, CFA 212-836-9607

Mike Gaudreau 212-836-9620