Business Wire | May 3, 2021 04:06PM EDT

Sterling Reports Record First Quarter 2021 Results

May 03, 2021

THE WOODLANDS, Texas--(BUSINESS WIRE)--May 03, 2021--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 Sterlingcommon stockholders, adjusted for depreciation and amortization, net interestexpense, taxes, and loss on extinguishment of debt. See the "EBITDAReconciliation" 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 (1,113 ) (100 )interests

Net income attributable to Sterling common $ 10,555 $ 3,115 stockholders



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

SEGMENT INFORMATION

(In thousands)

(Unaudited)

Three Months Ended March 31,

% of % of 2021 2020 Revenues 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 BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

March 31, December 2021 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 18,166 16,653 ventures

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 51,615 51,290 undistributed earnings

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

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 660 1,022 interest

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

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

EBITDA RECONCILIATION

(In thousands)

(Unaudited)

Three Months Ended March 31,

2021 2020

Net income attributable to Sterling common $ 10,555 $ 3,115stockholders

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210503005711/en/

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 Mike Gaudreau 212-836-9620