Business Wire | Aug 3, 2020 04:29PM EDT

Sterling Reports 2020 Second Quarter Results

Aug. 03, 2020

THE WOODLANDS, Texas--(BUSINESS WIRE)--Aug. 03, 2020--Sterling Construction Company, Inc. (NasdaqGS: STRL) ("Sterling" or "the Company") today announced financial results for the second quarter 2020.

Consolidated Second Quarter 2020 Financial Results Compared to Second Quarter 2019:

* Revenues were $400.0 million compared to $264.1 million; * Gross margin was 14.9% of revenues compared to 9.7%; * Net Income was $18.3 million compared to $7.8 million; * EPS was $0.65 compared to $0.29; and, * EBITDA was $41.2 million compared to $15.3 million.

Consolidated Financial Position and Liquidity:

* Cash and Cash Equivalents were $70.6 million at June 30, 2020 compared to $45.7 million at December 31, 2019; * Cash flows from operations were $52.3 million for the six months ended June 30, 2020 compared to $(4.3) million for the comparable prior year period; * Payments of scheduled Term Loan Facility debt and the seller notes totaled $22.5 million for the six months ended June 30, 2020; * Debt, net of cash totaled $351.4 million at June 30, 2020 compared to $387.4 million at December 31, 2019; and, * Our $75 million Revolving Credit Facility has $55 million of availability, reflecting a $30 million repayment in the quarter.

Heavy Civil and Specialty Services Backlog Highlights

* Combined Backlog at June 30, 2020 was $1.57 billion, up from $1.34 billion at December 31, 2019. Combined Backlog consists of $1.13 billion of Backlog and $437 million of unsigned contracts as of June 30, 2020 compared to $1.07 billion and $273 million at December 31, 2019, respectively. No residential construction contracts are included in Backlog. * Total margin in Backlog has increased approximately 140 basis points, from 11.5% at December 31, 2019 to 12.9% at June 30, 2020. Combined Backlog gross margin improved from 11.0% at December 31, 2019 to 11.7% at June 30, 2020.

Full Year Revenue and Income Guidance

* Revenue: $1.415 billion to $1.430 billion. * Net Income: $41 million to $44 million, excluding acquisition related costs of $1 million to $2 million.

CEO Remarks and Outlook

"I am extremely proud of what our employees were able to accomplish in one of the most challenging times in our Company's history," stated Joe Cutillo, Sterling's Chief Executive Officer. "Our bottom-line results were the best ever achieved by the Company, which reflects the benefits of our strategy to transform our business portfolio and our overall project mix towards higher value add, lower risk, and more profitable work. Most importantly, we delivered this performance while maintaining the health and safety of our team across all of our operating geographies, which is a testament to the attentiveness, discipline and professionalism of our nearly 3,000 employees in the face of our nation's ongoing battle against the COVID-19 pandemic."

"Our Specialty Services segment, which includes our recent acquisition of Plateau, more than doubled its operating profit relative to the first quarter of 2020. Plateau entered the quarter with record backlog and executed flawlessly for its blue chip customer base. Our Residential segment rebounded from the pandemic-related headwinds of the first quarter, and also solidly outperformed the prior year quarter driven by a faster than anticipated recovery of the Texas housing market and our expansion into the Houston market. Our Heavy Civil business has remained stable as we executed on substantial heavy highway work during the quarter while maintaining our backlog at near record levels. We are yet to see significant project delays or cancellations in the geographies in which we perform heavy civil work and have no reason to anticipate that this will be the case for the foreseeable future. Additionally, as yet, no states in the geographies in which we operate have stopped or reduced project lettings due to funding challenges. In fact, despite the uncertainty and general social and economic disruption caused by the pandemic crisis, we remain optimistic about the outlook for all of our businesses for the balance of the year given our Combined Backlog, the pending new awards we expect to realize in the coming months, and the sizeable quantity of new project opportunities that we've identified."

Mr. Cutillo continued, "In addition to record earnings, we further enhanced our liquidity position in the second quarter. We are comfortable with our capital structure which provides us with the financial flexibility to continue to generate profitable growth. For the first six months of 2020 we generated $52.3 million of operating cash flow, an increase of $56.6 million compared to last year. In addition, we reduced our net debt by $36.0 million during the year. We expect to continue paying down debt over the remainder of 2020, putting us in an increasingly strong financial position going into 2021."

Mr. Cutillo concluded, "Based on our year-to-date performance, the anticipated contribution from Plateau and our record high Combined Backlog and associated margin, along with our view on market strength and diversification of our business, we are providing updated guidance for 2020. We now expect to generate full year 2020 revenues of between $1.415 billion and $1.430 billion. Our expectation for 2020 net income attributable to Sterling common stockholders is between $41 million to $44 million, excluding acquisition related costs of $1 million to $2 million, representing a 73% increase from adjusted net income in 2019. We expect our full year 2020 diluted average common shares outstanding to be approximately 28.0 million. This guidance assumes no significant increase in COVID-19 pandemic impacts on our operations during the remainder of the year. However, with the continuing volatility of the COVID-19 pandemic, significant incremental pandemic impacts could keep us from achieving our 2020 guidance."

Conference Call

Sterling's management will hold a conference call to discuss these results and recent corporate developments on Tuesday, August 4, 2020 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, which includes additional 2020 financial modeling considerations. 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., ("Sterling" or "the Company"), a Delaware corporation, is a construction company that has been involved in the construction industry since its founding in 1955. The Company operates through a variety of subsidiaries within three operating groups 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 construction 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 contains "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, 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.

Reconciliations of these Non-GAAP financial measures to the most comparable GAAP measures are provided in the tables included 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 scope and duration of the COVID-19 pandemic and its continuing impact on national and global economic conditions; and our business strategy; financial strategy; and 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 June Six Months Ended June 30, 30,

2020 2019 2020 2019

Revenues $ 400,038 $ 264,086 $ 696,726 $ 488,035

Cost of revenues (340,439 ) (238,590 ) (601,882 ) (443,036 )

Gross profit 59,599 25,496 94,844 44,999

General and (18,451 ) (10,174 ) (36,055 ) (22,063 )administrative expense

Intangible asset (2,866 ) (600 ) (5,703 ) (1,200 )amortization

Acquisition related costs (139 ) (262 ) (612 ) (262 )

Other operating expense, (5,097 ) (3,276 ) (7,325 ) (5,570 )net

Operating income 33,046 11,184 45,149 15,904

Interest income 24 291 123 655

Interest expense (7,557 ) (2,904 ) (15,360 ) (5,964 )

Income before income 25,513 8,571 29,912 10,595 taxes

Income tax expense (7,248 ) (706 ) (8,432 ) (869 )

Net income 18,265 7,865 21,480 9,726

Less: Net incomeattributable to (55 ) (37 ) (155 ) (83 )noncontrolling interests

Net income attributableto Sterling common $ 18,210 $ 7,828 $ 21,325 $ 9,643 stockholders



Net income per shareattributable to Sterling common stockholders:

Basic $ 0.65 $ 0.30 $ 0.77 $ 0.37

Diluted $ 0.65 $ 0.29 $ 0.76 $ 0.36



Weighted average common shares outstanding:

Basic 27,941 26,338 27,794 26,357

Diluted 27,957 26,623 27,887 26,657

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2020 % of 2019 % of 2020 % of 2019 % of Revenue Revenue Revenue Revenue

Revenue

Heavy Civil $ 220,448 55 % $ 200,236 75 % $ 376,063 53 % $ 350,741 72 %

Specialty Services 135,703 34 % 27,894 11 % 240,426 35 % 58,573 12 %

Residential 43,887 11 % 35,956 14 % 80,237 12 % 78,721 16 %

Total Revenue $ 400,038 $ 264,086 $ 696,726 $ 488,035



Operating Income

Heavy Civil $ 3,896 1.8 % $ 5,747 2.9 % $ 274 0.1 % $ 3,600 1.0 %

Specialty Services 23,246 17.1 % 865 3.1 % 34,360 14.3 % 1,913 3.3 %

Residential 6,043 13.8 % 4,834 13.4 % 11,127 13.9 % 10,653 13.5 %

Subtotal 33,185 8.3 % 11,446 4.3 % 45,761 6.6 % 16,166 3.3 %

Acquisition (139 ) (262 ) (612 ) (262 ) related costs

Total Operating $ 33,046 8.3 % $ 11,184 4.2 % $ 45,149 6.5 % $ 15,904 3.3 %Income

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

June 30, December 2020 31, 2019

Assets

Current assets:

Cash and cash equivalents $ 70,612 $ 45,733

Accounts receivable, including retainage 269,406 248,247

Costs and estimated earnings in excess of 52,068 42,555 billings

Receivables from and equity in construction joint 12,396 9,196 ventures

Other current assets 11,965 11,790

Total current assets 416,447 357,521

Property and equipment, net 119,596 116,030

Operating lease right-of-use assets 17,076 13,979

Goodwill 192,014 191,892

Other intangibles, net 250,620 256,323

Deferred tax asset, net 21,604 26,012

Other non-current assets, net 153 183

Total assets $ 1,017,510 $ 961,940

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 131,098 $ 137,593

Billings in excess of costs and estimated 110,934 85,011 earnings

Current maturities of long-term debt 54,979 42,473

Current portion of long-term lease obligations 7,423 7,095

Income taxes payable 3,594 1,212

Accrued compensation 19,075 13,727

Other current liabilities 10,589 6,393

Total current liabilities 337,692 293,504

Long-term debt 367,028 390,627

Long-term lease obligations 9,733 6,976

Members' interest subject to mandatory redemption 53,751 49,003 and undistributed earnings

Other long-term liabilities 8,221 619

Total liabilities 776,425 740,729

Stockholders' equity:

Common stock, par value $0.01 per share; 38,000shares authorized, 28,280 and 28,290 shares 283 283 issued, 28,034 and 27,772 shares outstanding

Additional paid in capital 253,820 251,019

Treasury Stock, at cost: 246 and 518 shares (3,435 ) (6,142 )

Retained deficit (3,708 ) (25,033 )

Accumulated other comprehensive loss (7,323 ) (209 )

Total Sterling stockholders' equity 239,637 219,918

Noncontrolling interests 1,448 1,293

Total stockholders' equity 241,085 221,211

Total liabilities and stockholders' equity $ 1,017,510 $ 961,940

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2020 2019

Cash flows from operating activities:

Net income $ 21,480 $ 9,726

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 16,541 8,473

Amortization of debt issuance costs and non-cash 1,762 1,602 interest

Gain on disposal of property and equipment (598 ) (441 )

Deferred taxes 6,223 761

Stock-based compensation expense 6,196 1,670

Loss on interest rate hedge 272 -

Changes in operating assets and liabilities 385 (26,116 )

Net cash provided by (used in) operating activities 52,261 (4,325 )

Cash flows from investing activities:

Capital expenditures (14,574 ) (4,854 )

Proceeds from sale of property and equipment 769 802

Net cash used in investing activities (13,805 ) (4,052 )

Cash flows from financing activities:

Repayments of debt (22,644 ) (5,763 )

Distributions to noncontrolling interest owners - (5,100 )

Purchase of treasury stock - (3,201 )

Other 9,067 76

Net cash used in financing activities (13,577 ) (13,988 )

Net change in cash and cash equivalents 24,879 (22,365 )

Cash and cash equivalents at beginning of period 45,733 94,095

Cash and cash equivalents at end of period $ 70,612 $ 71,730

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Reconciliation of Non-GAAP Supplemental Adjusted Financial Data^ (1)

(In thousands, except per share data)

(Unaudited)

The Company reports its financial results in accordance with GAAP. This press release also includes several Non-GAAP financial measures as defined under the SEC's Regulation G. The following tables reconcile certain Non-GAAP financial measures used in this press release to comparable GAAP financial measures.



Three Months Ended June 30, 2020

As Reported Adjustment Adjusted (GAAP) (Non-GAAP)

Revenues $ 400,038 $ - $ 400,038

Cost of revenues (340,439 ) - (340,439 )

Gross profit 59,599 - 59,599

General and administrative expense (18,451 ) - (18,451 )

Intangible asset amortization (2,866 ) (2,866 )

Acquisition related costs (139 ) 139 -

Other operating expense, net (5,097 ) - (5,097 )

Operating income 33,046 139 33,185

Interest income 24 - 24

Interest expense (7,557 ) - (7,557 )

Income before income taxes 25,513 139 25,652

Income tax expense ^(2) (7,248 ) (39 ) (7,287 )

Net income 18,265 100 18,365

Less: Net income attributable to (55 ) - (55 ) noncontrolling interests

Net income attributable to Sterling $ 18,210 $ 100 $ 18,310 common stockholders



Net income per share attributable to Sterling common stockholders:

Basic $ 0.65 $ 0.01 $ 0.66

Diluted $ 0.65 $ - $ 0.65



Weighted average common shares outstanding:

Basic 27,941 27,941

Diluted 27,957 27,957





^ The summary unaudited adjusted financial data is presented excluding the(1) costs of acquiring Plateau, net of tax. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.

^ Adjusted Non-GAAP income tax expense of $7,287 includes non-cash federal(2) income tax expense of $5,349.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Reconciliation of Non-GAAP Supplemental Adjusted Financial Data^ (1)

(In thousands, except per share data)

(Unaudited)

The Company reports its financial results in accordance with GAAP. This pressrelease also includes several Non-GAAP financial measures as defined under theSEC's Regulation G. The following tables reconcile certain Non-GAAP financialmeasures used in this press release to comparable GAAP financial measures.



Three Months Ended June 30, 2019

As Reported Adjustment Adjusted (GAAP) (Non-GAAP)

Revenues $ 264,086 $ - $ 264,086

Cost of revenues (238,590 ) - (238,590 )

Gross profit 25,496 - 25,496

General and administrative expense (10,174 ) - (10,174 )

Intangible asset amortization (600 ) (600 )

Acquisition related costs (262 ) 262 -

Other operating expense, net (3,276 ) - (3,276 )

Operating income 11,184 262 11,446

Interest income 291 - 291

Interest expense (2,904 ) - (2,904 )

Income before income taxes 8,571 262 8,833

Income tax expense (706 ) - (706 )

Net income 7,865 262 8,127

Less: Net income attributable to (37 ) - (37 )noncontrolling interests

Net income attributable to Sterling $ 7,828 $ 262 $ 8,090 common stockholders



Net income per share attributable to Sterling common stockholders:

Basic $ 0.30 $ 0.01 $ 0.31

Diluted $ 0.29 $ 0.01 $ 0.30



Weighted average common shares outstanding:

Basic 26,338 26,338

Diluted 26,623 26,623



The summary unaudited adjusted financial data is presented excluding the^ costs of acquiring Plateau, net of tax. This presentation is considered a(1) non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Reconciliation of Non-GAAP Supplemental Adjusted Financial Data^ (1)

(In thousands, except per share data)

(Unaudited)

The Company reports its financial results in accordance with GAAP. This pressrelease also includes several Non-GAAP financial measures as defined under theSEC's Regulation G. The following tables reconcile certain Non-GAAP financialmeasures used in this press release to comparable GAAP financial measures.



Six Months Ended June 30, 2020

As Reported Adjustment Adjusted (GAAP) (Non-GAAP)

Revenues $ 696,726 $ - $ 696,726

Cost of revenues (601,882 ) - (601,882 )

Gross profit 94,844 - 94,844

General and administrative expense (36,055 ) - (36,055 )

Intangible asset amortization (5,703 ) (5,703 )

Acquisition related costs (612 ) 612 -

Other operating expense, net (7,325 ) - (7,325 )

Operating income 45,149 612 45,761

Interest income 123 - 123

Interest expense (15,360 ) - (15,360 )

Income before income taxes 29,912 612 30,524

Income tax expense^ (2) (8,432 ) (173 ) (8,605 )

Net income 21,480 439 21,919

Less: Net income attributable to (155 ) - (155 )noncontrolling interests

Net income attributable to Sterling $ 21,325 $ 439 $ 21,764 common stockholders



Net income per share attributable to Sterling common stockholders:

Basic $ 0.77 $ 0.01 $ 0.78

Diluted $ 0.76 $ 0.02 $ 0.78



Weighted average common shares outstanding:

Basic 27,794 27,794

Diluted 27,887 27,887



The summary unaudited adjusted financial data is presented excluding the^ costs of acquiring Plateau, net of tax. This presentation is considered a(1) non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.

^ Adjusted Non-GAAP income tax expense of $8,605 includes non-cash federal(2) income tax expense of $6,396.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Reconciliation of Non-GAAP Supplemental Adjusted Financial Data^ (1)

(In thousands, except per share data)

(Unaudited)

The Company reports its financial results in accordance with GAAP. This pressrelease also includes several Non-GAAP financial measures as defined under theSEC's Regulation G. The following tables reconcile certain Non-GAAP financialmeasures used in this press release to comparable GAAP financial measures.



Six Months Ended June 30, 2019

As Reported Adjustment Adjusted (GAAP) (Non-GAAP)

Revenues $ 488,035 $ - $ 488,035

Cost of revenues (443,036 ) - (443,036 )

Gross profit 44,999 - 44,999

General and administrative expense (22,063 ) - (22,063 )

Intangible asset amortization (1,200 ) (1,200 )

Acquisition related costs (262 ) 262 -

Other operating expense, net (5,570 ) - (5,570 )

Operating income 15,904 262 16,166

Interest income 655 - 655

Interest expense (5,964 ) - (5,964 )

Income before income taxes 10,595 262 10,857

Income tax expense (869 ) - (869 )

Net income 9,726 262 9,988

Less: Net income attributable to (83 ) - (83 )noncontrolling interests

Net income attributable to Sterling $ 9,643 $ 262 $ 9,905 common stockholders



Net income per share attributable to Sterling common stockholders:

Basic $ 0.37 $ 0.01 $ 0.38

Diluted $ 0.36 $ 0.01 $ 0.37



Weighted average common shares outstanding:

Basic 26,357 26,357

Diluted 26,657 26,657



The summary unaudited adjusted financial data is presented excluding the^ costs of acquiring Plateau, net of tax. This presentation is considered a(1) non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Reconciliation of Non-GAAP Supplemental Adjusted Financial Data^ (1)

(In thousands, except per share data)

(Unaudited)

The Company reports its financial results in accordance with GAAP. This pressrelease also includes several Non-GAAP financial measures as defined under theSEC's Regulation G. The following tables reconcile certain Non-GAAP financialmeasures used in this press release to comparable GAAP financial measures.



Year Ended December 31, 2019

As Reported Adjustment Adjusted (GAAP) ^(2) (Non-GAAP)

Revenues $ 1,126,278 $ - $ 1,126,278

Cost of revenues (1,018,484 ) - (1,018,484 )

Gross profit 107,794 - 107,794

General and administrative expense (49,200 ) - (49,200 )

Intangible asset amortization (4,695 ) (4,695 )

Acquisition related costs (4,311 ) 4,311 -

Other operating expense, net (11,837 ) - (11,837 )

Operating income 37,751 4,311 42,062

Interest income 1,142 - 1,142

Interest expense (16,686 ) - (16,686 )

Loss on extinguishment of debt (7,728 ) 7,728 -

Income before income taxes 14,479 12,039 26,518

Income tax expense 26,216 (27,398 ) (1,182 )

Net income 40,695 (15,359 ) 25,336

Less: Net income attributable to (794 ) - (794 )noncontrolling interests

Net income attributable to Sterling $ 39,901 $ (15,359 ) $ 24,542 common stockholders



Net income per share attributable to Sterling common stockholders:

Basic $ 1.50 $ (0.58 ) $ 0.92

Diluted $ 1.47 $ (0.57 ) $ 0.90



Weighted average common shares outstanding:

Basic 26,671 26,671

Diluted 27,119 27,119



The summary unaudited adjusted financial data is presented excluding the^ costs of acquiring Plateau (including related refinancing) and non-cash(1) taxes. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.

^ Includes a fourth quarter charge for a legacy project of $10.2 million or(2) $0.36 per diluted share based on 28,201 weighted average common shares outstanding in the quarter.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

EBITDA Reconciliation

(In thousands)

(Unaudited)

Three Months Ended June Six Months Ended June 30, 30,

2020 2019 2020 2019

Net income attributable to $ 18,210 $ 7,828 $ 21,325 $ 9,643 Sterling common stockholders

Depreciation and amortization 8,256 4,171 16,541 8,473

Interest expense, net of 7,533 2,613 15,237 5,309 interest income

Income tax (benefit) expense 7,248 706 8,432 869

EBITDA ^(1) 41,247 15,318 61,535 24,294

Acquisition related costs 139 262 612 262

Adjusted EBITDA^ (2) $ 41,386 $ 15,580 $ 62,147 $ 24,556





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

^ Adjusted EBITDA excludes the impact of acquisition related costs.(2)

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CONTACT: Sterling Construction Company, Inc. Ron Ballschmiede, Chief Financial Officer 281-214-0800

CONTACT: Investor Relations Counsel: The Equity Group Inc. Fred Buonocore, CFA 212-836-9607