Sterling Infrastructure, Inc.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure third quarter webcast and conference call. At this time, our lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. As a reminder, this call is being recorded on Tuesday, November 4th, 2025. I would now like to turn the conference over to Noelle Diltz, Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Good morning to everyone joining us and welcome to Sterling Infrastructure's 2025 Third Quarter Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joe Cotillo, Sterling's Chief Executive Officer, and Nick Greinstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and guidance. after which Joe will provide a market and full year outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the investor relations section of our website. These slides include details on our full year 2025 financial guidance. Before turning the call over to Joe, I will read the safe harbor statement. The discussion today may include forward-looking statements. Actual results could differ materially from the statements made today. please refer to Sterling's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events, or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income, or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting for RHB-JV, unless otherwise noted. Additionally, all comparisons are to the prior year quarter, unless otherwise noted. I'll now turn the call over to our CEO, Joe Cotillo. Thanks, Noelle.

Good morning, everyone, and thank you for joining today's call. Sterling delivered another outstanding quarter as we achieved strong revenue growth, expanded margins, grew backlog, and generated excellent cash flow. We are pleased to discuss these results today with you, but even more excited about the opportunities ahead of us. Beginning with the third quarter results, revenue grew 32% fueled by 58% growth in our e-infrastructure solution segment, including 42% organic growth. In addition, our transportation segment grew 10% in the quarter. We grew adjusted earnings per share by 58% to $3.48. and delivered adjusted EBITDA of $156 million, an increase of 47%. Our gross profit margins expanded 280 basis points from the prior year to reach 24.7%. Additionally, operating cash flow generation in the quarter was again very strong at $84 million. Our backlog position and strong visibility drive our confidence in the future. Backlog at the end of the quarter totaled $2.6 billion, a 64% year-over-year increase. Excluding the contribution from the recent acquisition of CDC, backlog increased a strong 34% year-over-year. E-infrastructure solutions backlog of $1.8 billion was up 97% in total, and 45% excluding the contributions from CDC. When you layer in our unsigned awards and pipeline of future phase opportunities, we have visibility into a pool of work in excess of $4 billion for Sterling. The Sterling way, which is our commitment to take care of our people, our environment, our investors, and our communities, While we work to build America's infrastructure remains our guiding principle as we execute our strategy and grow the company. Now, I'd like to discuss our segment results in more detail. In e-infrastructure, third quarter revenue grew 58% over prior year and over 34% sequentially. Excluding CEC, revenue grew grew more than 42% over prior year and 21% sequentially. The data center market again was a primary growth driver in the quarter as revenue from this market grew more than 125% year over year. Adjusted segment operating income grew 57% or 48% excluding CBC. Adjusted operating margins for the legacy e-infrastructure site development business were 28.4% and increased over 140 basis points from prior year levels and 10 basis points sequentially. This was driven by our continued shift towards large mission-critical projects, including data centers, where our superior project management and ability to finish jobs on or ahead of schedule are extremely valuable to our customers. We are pleased to have closed the CEC acquisition during the quarter. We see tremendous opportunities ahead to leverage our expanded service portfolio and are seeing early positive reception from our customers. CEC contributed $41.4 million of revenue in September and adjusted operating margins that were in line with our expectations. We continue to have very good visibility in the e-infrastructure business. With the recent CEC acquisition, the aggregate of our e-infrastructure signed backlog, unsigned electrical awards, and future phase site development opportunities total approximately $3 billion. Moving to transportation solutions, third quarter revenue grew 10% and adjusted operating profit grew 40%, driven by strong market demand and the benefits of the mixed shift towards higher margin services. We ended the quarter with transportation solutions backlog of $733 million, a 23% year over year increase. Sequentially, Segment backlog was roughly flat with awards-keeping pace with burn. As a reminder, the wind-down of our Texas low-bid heavy highway operation is impacting backlog to some extent this year, but will ultimately benefit segment margins.