Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sterling Infrastructure Inc (STRL, Financial) reported a 29% increase in adjusted earnings per share to $1.63 and a 31% rise in adjusted EBITDA to $80 million for the first quarter.
- Revenue grew by 7% on a pro forma basis, with significant contributions from the E-Infrastructure Solutions segment, which saw an 18% increase, and Transportation Solutions, which grew by 9%.
- The company's gross profit margins expanded by over 400 basis points to reach 22%, indicating improved operational efficiency.
- Sterling Infrastructure Inc (STRL) closed the acquisition of Drake Concrete, enhancing its geographic footprint in the Dallas-Fort Worth area and expanding its customer base.
- The company's backlog increased by 17% year-over-year to $2.1 billion, with a book-to-burn ratio above 2 times, providing strong visibility into future revenue streams.
Negative Points
- Building Solutions segment experienced a 14% decline in revenue and an 18% drop in adjusted operating income due to softness in the housing market and severe weather conditions.
- General and administrative expenses increased by $7.3 million, partly due to one-time separation expenses and performance-based compensation.
- The residential business faced a 19% revenue decline, impacted by affordability challenges for potential home buyers.
- The company is exposed to potential risks from tariffs and material cost fluctuations, although measures are in place to mitigate these impacts.
- The market for residential construction remains soft, with potential headwinds expected to continue affecting the segment's performance.
Q & A Highlights
Q: Can you discuss the 35% of the E-Infrastructure backlog that is not related to data centers and your visibility on manufacturing and warehouse activity?
A: Joseph Cutillo, CEO: We feel good about it. Manufacturing is expected to remain steady, e-commerce is picking up faster than anticipated, and small industrial and warehousing activities are increasing. We are optimistic about the 35% and see potential upside opportunities in the second half of the year.
Q: How are tariffs impacting your business, and what is your exposure to them?
A: Joseph Cutillo, CEO: Our exposure is minimal due to lessons learned from COVID. In Transportation, major items like steel are made in America and locked in at contract start. In E-Infrastructure, we have indexing for fuel prices and buy materials phase by phase. Building Solutions sees concrete prices decreasing, and we can pass on price increases to customers within 60-90 days.
Q: What are the drivers behind the strong margin performance in Transportation Solutions, and how will margins trend for the rest of the year?
A: Joseph Cutillo, CEO: The margin improvement is mainly due to a shift towards higher-margin products like alternative delivery in highways and aviation. The impact from moving away from low-bid projects will be more noticeable towards the end of this year and early next year.
Q: Can you elaborate on your M&A priorities in E-Infrastructure and whether it involves geographic expansion?
A: Joseph Cutillo, CEO: We are looking at geographic expansion, particularly in Texas, and adding services like electrical and mechanical. We see opportunities to offer these services to our existing customer base and potentially enter new markets.
Q: With the IIJA bill nearing its end, what are your expectations for the next infrastructure bill?
A: Joseph Cutillo, CEO: There is significant bipartisan activity in DC for the next infrastructure bill, more than in previous cycles. The Head of Transportation has been tasked with creating a bigger and better bill, and discussions include long-term funding solutions. We are optimistic about the future infrastructure spending landscape.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
