Sterling Infrastructure, Inc.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure second quarter webcast and conference call. At this time, all 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 require immediate assistance, please press star zero for the operator. As a reminder, this call is being recorded on Tuesday, August 4, 2026. I would now like to turn the conference call over to Noelle Dilts, Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Good morning to everyone joining us and welcome to Sterling Infrastructure's second quarter 2026 earnings conference call and webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer, Nick Grindstaff, Sterling's Chief Financial Officer, and Dan Govin, Sterling's Chief Operating Officer. As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full-year 2026 financial guidance. Before turning the call over to Joe, I will read the State 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 obligation 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 operating income, 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 on our earnings release issued yesterday afternoon. I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining Sterling's second quarter 2026 earnings call. Sterling delivered another outstanding quarter with revenue growth of 90% and adjusted diluted EPS growth of 116%, from $2.69 to $5.00 and 80 Cents. These results reflect the strength of our strategy, accelerating demand across our markets, and the exceptional execution by our teams. Adjusted EBITDA more than doubled in the quarter, with margins expanding 150 basis points year over year to reach 22%. The current market demand allows us to be selective. Rather than chasing every opportunity, We are concentrating on the projects that strengthen our customer relationships, position us for future growth, and enhance our margins. Signed backlog at quarter end totaled $4.3 billion, up 116% year-over-year. And combined backlog increased 150% to reach $5.6 billion. In addition, We have visibility into high-probability future phase opportunities that exceed $1.4 billion. Together, our signed backlog, unsigned awards, and future phase opportunities provide visibility into a total addressable pool of work of more than $7 billion, an increase of more than $2.5 billion since year end. The growth in our backlog and future phase work in the quarter, together with our visibility into customers' multi-year capital plans, further strengthens our confidence in our multi-year outlook.

Now, I'd like to discuss our segment results for the quarter in more detail.

In E-Infrastructure, second quarter revenue grew 192%. Mission-critical activity, including work on data centers and semiconductor campuses was the primary growth driver in the quarter. E-Infrastructure adjusted operating income increased 148%, and adjusted operating margins remained strong at 24%. Margins continued to benefit from our strong execution on large, time-sensitive, mission-critical projects. Revenue for our site development operations more than doubled on an organic basis, and adjusted operating margins expanded both year-over-year and sequentially. We saw robust growth across each of our geographies, with particular strength in our Rocky Mountain division, where revenue increased nearly 700%. We also saw strong increases in our Northeast business as work on our large semiconductor campus ramped up. CEC delivered 140% revenue growth compared to its prior year's second quarter, with margins strengthening both year-over-year and sequentially. The Texas market remains exceptionally strong. During the quarter, CEC secured several additional project wins contributing to a $1.7 billion increase in its combined backlog since year-end 2025. Additionally, we are seeing continued success on winning projects where we are performing electrical and site work in an integrated manner. We continue to see tremendous opportunities ahead in both electrical and site development. In aggregate, Our e-infrastructure signed backlog, unsigned electrical awards, and future phase site development opportunities now exceed $6 billion, representing an increase of $2.7 billion since year end. Mission-critical work, including data centers, large manufacturing projects, and Semiconductor represented more than 92% of e-infrastructure signed backlog at the end of the quarter. Future phase work is predominantly related to mission-critical projects. Moving to transportation solutions, second quarter revenue declined 20%, reflecting our ongoing reallocation of resources from transportation projects to higher margin e-infrastructure projects. This shift is now taking place at an accelerated pace as activity on our e-infrastructure projects in the Rocky Mountain and Texas regions has increased. This was the first quarter that our Rocky Mountain operation generated more e-infrastructure revenue than transportation revenue. In addition, we are continuing to wind down our low-bid heavy highway work in Texas which is nearing completion. Transportation Solutions adjusted operating margins reached 19.5% in the quarter, up more than 500 basis points from the prior year period, and adjusted operating income grew 8%. The strength in margins and profitability was driven by our focus on pursuing the most attractive opportunities within the transportation market. We ended the quarter with Transportation Solutions backlog at $969 million, a 35% year-over-year increase. This primarily reflects the conversion of unsigned backlog to signed backlog. On a combined backlog basis, Transportation Solutions is up 8% from second quarter 2025 and is down 11% from year-end 2025. Shifting to building solutions, segment revenue declined 1% in the quarter, driven by relatively flat home builder activity, and adjusted operating margins were 9.9%. We continue to anticipate that the residential market will face strong headwinds throughout 2026. The strength of Sterling's diversified portfolio and strategy to focus on growth in high-margin end markets enabled us to deliver another fantastic quarter. With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and 2026 guidance.

Nick? Thanks, Joe, and good morning. I'll begin with our consolidated backlog metrics. Our second quarter backlog totaled $4.3 billion, a 116% year-over-year increase. Backlog increased 50% year-over-year on an organic basis despite the strong revenue burn in the quarter. Combined backlog of $5.6 billion increased 150%, or 36%, on an organic basis. Second quarter 2026 book-to-burn ratios were 1.4 times for backlog and 1.3 times for combined backlog, exclusive of the impact of the Stone Ridge acquisition. Turning to cash flow, cash flow from operating activities for the first half of 2026 was $328 million. We expect continued strength in operating cash flow for the full year. Cash flow used in investing activities included $70 million of CapEx. Given the significant increase in our full-year 2026 revenue expectation over the past six months and our visibility into future demand, we are increasing our CapEx guidance to $130 to $140 million, which is a $30 million increase from prior guidance. These incremental investments in our fleet will drive productivity and expand capacity. First half 2026 cash flow from financing activities was a $48 million outflow, including share repurchases of $35 million at an average price of $511.18 per share. Remaining availability under the existing repurchase authorization was $339 million at the end of the quarter. We will remain opportunistic in our approach to share repurchases. Moving to our balance sheet, we ended the quarter with $464 million of cash and debt of $284 million for a cash net of debt balance of $181 million. On July 2nd, we closed on the extension and expansion of our revolving facilities to $1.5 billion and extended the maturity to July 2031. We use this facility to pay off our existing term loan. The amended facility provides additional flexibility as we look to grow the business both organically and through M&A. Our current backlog, visibility, and strong market tailwinds position us for an even better year than we originally anticipated. We are increasing our guidance ranges for 2026 to reflect both the improved outlook for the core business as well as the addition of Stone Ridge. Our guidance ranges are revenue of $4 billion to $4.15 billion, diluted EPS of $17.25 to $17.85, adjusted diluted EPS of $19.70 to $20.30, EBITDA of $829 million to $854 million, adjusted EBITDA of $891 million to $916 million. Now, I will turn the call back to Joe.

Thanks, Nick. Positive trends we've been talking about over the past several quarters have continued to accelerate. We're seeing projects become larger, more complex, and longer in duration, which reflects both the scale of what's being built and the importance of these assets to our customers. Our customers are asking us to do more. We are continuing to get pulled into new geographies because they know Sterling can deliver complex projects faster and safer than anyone else. Our customers' recognition of our critical contribution to their success has allowed us to participate in their long-term planning process. What we're seeing ahead is going to be far greater than we originally anticipated. Our focus today is making sure we stay ahead of what's coming. Internally, we're working to ensure that we have the right people, resources, and capacity in place to support sustained, strong growth in the years ahead. I'm going to hand the call over to Dan Govin, our Chief Operating Officer, to discuss some of these key areas of focus. Dan?

Thanks, Joe. Planning for the future is a core part of our strategy. We aren't just focused on meeting today's demand. We're making the investments now in our people, equipment, and capabilities that will support sustained growth for years to come. Our people remain our greatest competitive advantage. As our customers undertake larger, time sensitive, mission critical projects across the country, our experienced project managers and operating teams are setting us apart through exceptional operational execution. That's why we are increasing our investments in developing, attracting, and retaining the industry's best talent. Through expanded recruiting efforts and training programs like Sterling Academy and CEC University, we're building the workforce skill sets that will support our accelerated growth. Combined with our strong reputation for safety, quality, and execution, these investments position Sterling as the employer of choice Helping us to attract talent as we enter into new markets. We're also investing strategically in our equipment fleet. As we grow and upsize our fleet, we're increasing our capacity and improving productivity and operational efficiency in new geographies. This creates benefits that support margin expansion over time. At CEC, we are making great progress in ramping up production at our prefabrication facilities, which will drive productivity with our field electricians and provide cost savings. And finally, we're complementing these organic investments with tuck-in acquisitions. These acquisitions bring a strong local leadership while expanding our presence in attractive markets. The recent Stone Ridge acquisition is a great example of this strategy in action, as it positions us well for coming activity in the Pacific Northwest. Together, these strategic investments ensure we're well positioned to capitalize on significant opportunities ahead. Now, I will hand the call back to Joe.

Thanks, Dan. Turning to our segment expectations for 2026. and E-Infrastructure Solutions, we continue to see exceptionally strong demand for large mission-critical infrastructure and we believe this will support meaningful growth for many years to come. In the data center market, customer activity is stronger than ever. Projects are becoming larger, lasting longer and expanding into more markets across the country. Not only are we seeing more new projects, we're seeing many of our existing projects grow well beyond their original scope. Much of this incremental opportunity is not yet reflected in our backlog or future phase opportunities, giving us additional confidence in the runway ahead. With the CEC acquisition, we have broadened our capabilities and are even better positioned to serve our data center customers. In the semiconductor market, we're making very good progress on our Northeast project and are running ahead of schedule. We expect to generate significant revenue on this project in the third quarter with a weather-related slowdown in the fourth quarter. We believe our exceptional performance on this project will position us in the semiconductor market as the go-to solution for large, complex projects, just like we have done in the data center market. In addition to the data centers and semiconductors, we are seeing some momentum in the broader manufacturing market. During the second quarter, we were awarded the initial scope of work on an electric vehicle plant in Atlanta. In addition, There are still several opportunities we believe could be awarded in 2026 or early 2027. For full year 2026, we now expect to deliver e-infrastructure segment revenue growth of over 100%, including the contribution from CEC and Stone Ridge. We anticipate that the legacy site development business will grow at rates approaching 70% or higher is several of our large projects accelerate. Adjusted operating profit margins for e-infrastructure are expected to be in the mid-20% range. In transportation solutions, we are in the final year of the current federal funding cycle, which concludes September 2026. We have built over two years of backlog and are continuing to pursue select attractive opportunities. For 2026, we are now anticipating a decline in transportation solutions revenue in the 7% to 10% range as we are shifting resources towards e-infrastructure work at a faster pace. We expect significant year-over-year adjusted operating margin expansion roughly in the range of 150 to 200 basis points. In building solutions, we anticipate that revenue will decline modestly in 2026 and that adjusted operating margin will be in the high single to low double digits. We continue to see opportunities for share gain coming out of the down cycle. Shifting gears as we look forward to the second half of the year and early 2027, we believe that the strong levels of bid activity we're seeing today will translate into strong awards. However, given the lumpiness in timing, we could see softer third quarter awards with higher levels in the fourth quarter in early 2027. This coupled with our forecast for strong revenue burn in the third quarter could result in a sequential backlog decline in the third quarter. This would reflect award timing, not a change in demand. On the acquisition front, we are continuing to look for acquisitions that are the right strategic fit to enhance our service offering, expand our geographic footprint, and add capacity. We are seeing more high-quality acquisition targets in the market today than a year ago. Moving to our full-year 2026 guidance, the midpoints of our ranges versus prior year would represent a 64% revenue growth, an 84% adjusted EPS growth, and a 79% adjusted EBITDA growth.

With that, I'd like to turn it over to questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, you may press star 1 on your telephone keypad. Should you wish to cancel your request, you may press star 2. Once again, that is star 1 should you wish to ask a question. Our first question is from Brent Philman from Open Online. Your line is now open.

Hey, thanks. Good morning.

Congrats on a great quarter.

Thanks, Brent.

Joe, my first question, if I look at the backlog, you're up 2x where you were a year ago. You have Stone Ridge also contributing here in the back half. Maybe a little surprised you wouldn't see a bigger step up in revenue in the second half. And I guess I'm wondering, are there longer than usual lead times associated with some of the backlog, or is more work start later in the year or 2027? Maybe you could just flesh that out.

Yeah, no, we feel very confident in the backlog that's there, Brent, and the projects are happening on schedule and taking place. I will tell you, we're being very conservative in the fourth quarter right now. We never know what the weather is going to be in the fourth quarter. If we have weather like last year, I think we'll have a much stronger fourth quarter than we have in our forecast. But frankly, we're just being conservative on the outlook. We got plenty of work ahead of us. in plenty of opportunities coming, especially as we get into the fourth and first quarter. We see some really strong bid activity that's going to take place there. So, no, nothing of a slowdown, more of a cautious behavior on us. You know, we've raised guidance a couple times. We've come up significantly in all the areas. We would have never expected CEC. We've had them, you know, about a year now, and we've doubled that business already. So we're seeing great, great progress. Just the conservative nature we have.

Yeah.

Understood. Okay. And then, yeah, on that point on CEC, Joe, maybe just the profile of the new work awarded or pending. It seems like you've seen a huge step up in award activity at the electrical business. Just talk about maybe how the size and scope has changed of some of the pursuits, maybe the profile of margins you're starting to see come through and kind of your thought process on how margins evolve for the business going forward.

Yeah, we're tickled to death with CEC and what they're doing. If we step back and think when we made the acquisition, we thought it would take us a year to fill their capacity. We actually had talked about shifting some resources to the southeast. We filled their capacity up in about 90 days. And as a result, they've grown nicely. I think what you don't see in the numbers is kind of what's happening and what's coming from CEC. One of the strategic things we said we were going to do is they're in some end markets with some services that we said we were going to get out of. We're in the process of getting out of those. It takes a little time. So when we look at the business, we look at it from the old pieces that we're getting out of and then the remaining business as it goes forward. And when we look at that piece, the margins are going up very, very nicely in that area. But also the job size is going up significantly more. and I think one of the really rewarding things for us in the quarter, again, that doesn't show up is CEC is now getting the second buildings on data centers that they're at, which says they're performing at or above customer expectations and they're giving up the next phases and the next levels of work. So everything is coming together exactly as we had hoped. They're doing a great job. They're growing very, very rapidly. and adding capacity. And we see, candidly, if we had 1,000 or 2,000 more electricians, we'd be growing it even faster. So we've got a lot of programs in place on not only developing the electricians, but we've got a full recruiting team that's recruiting every week to bring those electricians in. So it's been great. The only downside, which is the only reason I could see that our stock's not up exponentially today and looks like it's down, is the mix makes our margin look like it's lower. And if you look at every element of e-infrastructure, margins were up in every single piece of it. The only thing this drove the difference in margin is mix. When we have CEC grow 140%, we love that. We'll take that all day long. When we have our Rocky Mountain business and we convert it from transportation to e-infrastructure and they grow 700%, in a year. We'll take that.

Yeah, understood, Joe. Appreciate the clarification there. Just the last one, maybe an update on the cross-selling opportunities between through CEC and the legacy site development business and how that's progressing.

Yeah, so we're on more sites today than we were on in the second quarter. And as we look forward, a lot of the data centers that will be coming out. Let me step back. Let me just say this. We've had more opportunities to have joint efforts than we have capacity in the electrical side. So as we're building up that capacity, Brent, that number will grow. The reason it's not growing even faster than it is, it's growing faster than we thought. We thought it would take us until this time to be on our first one. We're on three or four now. It's just pure capacity. Our customers are asking us for it. If we had a union operation, I would tell you we'd be on a semiconductor plant up in New York right now with the electrical side. So we're getting asked. They see the value proposition. Frankly, it's even stronger than we anticipated. We're pretty bullish on it. So we're very happy with that. The faster we can ramp up additional capacity. or as you know, we're looking at continue to look at acquisitions in and around this space. We can add some capacity there. The more joint projects we'll be on.

Excellent. Thanks, Joe. I'll pass it on. Thanks, Ben.

Thank you. And our next question is from Louis De Palma from William Blair. Your line is now open.

Joe, Nick, Dan and Noelle, good morning. Hey, Louis.

Joe, you mentioned how the CEC has lower margins relative to site development and how the CEC margins should grow very nicely. From a high level, can you discuss where CEC margins could grow to in the long term and just in general explain and why is there such a significant variation between the margins for site development versus electrical services and could those margins converge over time?

Yeah, so let me make sure people don't get too delusional. We don't ever expect electrical margins to be up at the peak of our site development. There are so many more complexities and differences with the site development and things we can do to truly change the scope and drive productivity in those projects versus an electrical project that's pretty laid out, right? I mean, the design is there, the amount of wire, et cetera, et cetera. I'm overly simplifying it, but it's laid out. So there's only so much you can get there. However, we're not happy with the margins nor CEC with where they are today. And as we move to a better mix of projects, We see 300 to 500 basis points on top of some things we're doing internally of margin improvement, and we've said over 12 to 18 months. I think we'll see some of that sooner. The faster we get out of some of this other stuff, the faster that's going to come through. We're watching that very closely. We watch it every month, Louie, and we have seen great progress. The team's doing a fantastic job there. If I step back and think three to five years, I don't know why today the electrical world is kind of low double-digit margins, call it 10% to 12% EBITDA margins. I don't know why we can't get that close to 20%. I really don't. Based on the project size, scopes, and the quality of the projects, that's our goal is over a long period of time to get there. And we've been pretty successful at driving margins in our businesses much higher than anybody else, and we feel like we can do the same here.

Excellent color. And I was also wondering, could you provide more detail in terms of why the future phase work metric doesn't always capture the full visibility that you have in terms of your pipeline?

Yeah. Great question. One of the things is You spend enough time with us, and most people on this phone spend enough time with us. We're pretty conservative, and if anything, we want to overperform and make people happy. But one of the things we do not include, and we're thinking about how we should be communicating this better, is we're on a lot of projects today that have a defined scope. to build out a piece of property. So let's just say we have 600 acres of land, and they say we're gonna build five buildings on the first 300 acres, and then we're gonna build five buildings on the next 300 acres. We only talk about the first 300 acres, okay? We know that when they're finished with that, we're gonna move the equipment to the next one, but that project hasn't been perfectly defined and articulated. But we know that on other projects we've been on, that happens. But the other thing that's happening, Louis, that is a relatively new dynamic is we are seeing them purchase incremental property on projects that we're on. So let's just say we're on a 300-acre project today. There happens to be one that's close to that. They have now purchased another 600 acres touching that property that they're going to expand and grow that off. That's not in any of our numbers. Now, we're there. We're working with the customers. We're working with them on plans. We're working with that on the future. These projects, we've historically have said, have been three years. We just got out of our executive leadership team meeting, and we're looking at projects with our team. And a number of projects we're going to be on for five to eight to 12 years if they continue to expand on this property is unbelievable. So we don't put any of that into right now our future phase work. And we're trying to figure out a way to still remain extremely conservative, but I don't feel like we're painting adequate picture for the outside community to understand when our guys say they're going to be on a job for five to eight years, we don't talk about that a lot. We talk about the three years because that's the project scope we're doing. People just don't understand the size and scope of these jobs and the duration. It is getting significantly bigger, which is perfect for us. Now remember, not only do we have the site side, now we have the electrical side that stays there after the site is done for another couple years. So our visibility keeps getting better and better. Project size keeps growing. So we feel very confident the opportunity is much bigger than we've been talking about. But what it's also done strategically for us is we had a very, very aggressive organic growth strategy put in place, we think, and a strategy to build that capacity. When we stepped back and we started looking at these projects and the size of the ones we're just on, in addition to the ones that are coming, we said, my goodness, we've got to really accelerate the rate in which we're adding capacity just to keep up with this. So that's all exciting stuff. It's a challenge for us, obviously. We've always felt comfortable with 20% to 30% organic growth. This year, we're growing a hell of a lot more than that.

And we've got to figure out how to keep up with that pace. Great. Thanks, Joe.

Thank you. Your next question is from Brian Brophy from Stifel. Your line is open.

Yeah, thanks. Good morning. Nice quarter. Can you give us a sense for how pricing in terms of conditions are trending within your EN for backlog today versus a year ago?

Thanks. We're not seeing anything fundamentally shift. You know, we've seen a few attempts on the electrical side to add some terms and conditions into some things that we have not accepted, frankly. But we haven't really seen a fundamental shift in any of that, Brian.

Nick, are you aware of anything else? No. No.

Yeah.

Appreciate it.

And then just touching on the capacity comments, Maybe a little bit more color on spare capacity that you have at the moment. Where are things tightest for you? How are you thinking about your ability to add project managers and equipment if we remain in this healthy demand environment that you're seeing? Thanks.

Yeah, so, you know, definitely the tightest is around electricians. I'll start there. That's always the tightest part of the market. Our teams have done a really good job at making sure we have an adequate supply or adequate number of electricians to do the jobs we have. It certainly has curtailed us from taking on more jobs than we could, frankly. There's more opportunities out there, some of the joint opportunities we talked about earlier. So we're working hard on that. As you get into the site side, we've done a really good job, but I will tell you, for the first time, we're getting really tight on the capacity piece. We've been able to flex up proactively. We've done some stuff proactively several years ago to make sure we're preparing for some of this. And as we're stretching further and further geographically, and let me remind everybody, geographic expansion for us historically when we had Plateau and Petillo was kind of one state further from where they were to maybe two states. Now we're serving the east part of Texas out of Atlanta and the west part of Texas out of Utah. That's a much further stretch than moving one or two states. So as a result, it requires a few more resources. You can't lever local resources as much if you can bounce around. So we're getting tight on the capacity there. So we're doing, as Dan talked about, we're doing stuff on the equipment side. We're doing stuff on the people side. But another big part of this is we are going to have to make more acquisitions in and around the geographic expansions that we are that we can add that pure human capital resource to to execute these jobs. So I think as we go forward, we're starting to look at a little bit smaller players where we would like to have really large players, but unfortunately there's really not that many out there, and augmenting them with some of our resources. So we don't have to put a full team in Texas. We can put a partial team with an acquisition in Texas or in New Mexico or Oklahoma, wherever that may be, and that helps us build that capacity quicker and faster. It's a little bit of what we're doing with Stone Ridge, frankly, and why we made that acquisition.

Appreciate it. I'll pass it on.

Thank you. And your next question is from Alex Rigel from Texas Capital. Your line is now open.

Thank you. A very nice quarter, gentlemen. When additional phases of work come out, are these being competitively bid or do you find Sterling just basically directly negotiating on these additional phases and It's kind of the same question, but are you seeing an increase in competition for additional phases of work?

Yeah, so if we perform, which we have on everyone, we're not aware of anything where we've lost future phases, we generally are negotiating those prices with the customer on the future phase work, unless it's an extreme change of scope. let's just say it's not part of our project and they want something else added to that project that's outside our normal scope, that would be a normal bid. We'd give them a number. Would not be atypical for them to maybe get another number. A perfect example of that is they need to put a road through to get to a new phase and they need paving and curbs and a bunch of stuff like that. They may ask us to give them a bid on that. We may subcontract that or they may bid it out to somebody else. But for the most part, Once we're on the job, and this is really important, and I'll talk strategically on what we're doing and why we're advancing so quickly in Texas and some of the other markets, is the way our teams would tell you is once we plant our flag, we are there. We're not leaving. And that gives us an opportunity to drive project productivity along the way. As you've seen, our future phase work margins tend to get better. and our early phase work, right? So we're gonna be incredibly competitive to plant that flag. And then we're gonna use productivity and technology to drive margins up through the rest of that project and get better margins for each of the phases as we go on.

And secondly, can you speak to some of the other end markets that are seeing green shoots like Pharma and Semi and other factories?

Yeah, and just back, the one thing I didn't answer is on the competition side. You know, we always see local competition, especially when we go to a new market. There's a lot of small players. But generally after we do one job, that gets a lot smaller. The first one's always the hardest one for us to get, frankly. But we have not seen an influx of major new players or anything along those lines, especially on these large jobs. Somebody went a $20 or $30 million data center in one of our markets. Probably, we don't even generally look at those unless a customer forces us to. So those sort of things are going to continue to happen. But we haven't seen any major influx of large competitors in our markets. I'm sorry, what was the next question?

Other end markets like Pharma, Semi, and other factories. Any progress there?

Yeah, so... We still see all of that progressing. We think pharma's 28, semis are around 20, 30. I will tell you the team up in New York is doing an outstanding job. I mean, they've made, not by name, but they've made all the local and some of the national news up there on how far ahead of schedule they are on this project. I will tell you that the general contractors on the job and the end customer on this job is extremely happy and frankly has never seen progress like these guys are making. I think that's going to be the entry point to a lot more semiconductor plants for us coming around 2030. But I think there might be some intermediate opportunities on some facilities that are being built today in regions and geographies we have historically not been in. that we may get pulled into. In addition, we saw the start of the EV plant in Atlanta, just outside Atlanta this quarter. So we're seeing some mixed activities in the manufacturing space, one-off, two-offs, those sort of things. But we haven't seen any delays in the pharma or the next generation of semiconductors so far.

Great. Thank you.

Thank you, and your next question is from Manish Somalia from Kantor. Your line is now open.

Good morning, everybody. Can you hear me okay?

Yeah.

Okay, wonderful. Congrats on the quarter, Joe. A couple of questions. One, from a big-picture standpoint, obviously we're seeing a lot of news about data centers being banned and a lot of new markets, I guess, There was an article yesterday on Texas on Greg Abbott banning new data center approvals. Maybe if you could just help us understand the dynamics of what's going on on the ground because obviously you're closer to what's happening. Are things really getting delayed or is it just politics as usual? That's my first question.

Yeah, we haven't, we certainly, we haven't seen anything that's impacted any of our schedules this time. You know, there's going to be states, I think people have to realize, there's going to be states and geographies that will never have data centers or will have very few. New York seems to be against everything that brings revenue to the state when they ban the data centers is one of those. In Texas, They're moving forward very quickly. I think we'll continue to see anything new and anything big, there's always the political side that's raising ruckus, I guess is the best way to put it. But so far, we have not seen any issues or delays with the projects we're on, nor are the projects coming. Do I think realistically down the road, Could there be other supply chain delays once the build starts out on some of these projects? I think some of the upstream or downstream, however you want to look at it, supply chain elements or the companies are getting pressured on capacity and stuff. You certainly could see some of that stuff. But on the site side, they want to get that done as soon as possible. It's the only place they can pick up time and be prepared. So we have not seen any of the delays there. And candidly, on the electrical side, Our teams have not seen any, you know, they may see a week delay or a couple days, but have not seen anything of significance that's concerned us.

That's helpful, Joe. And then just on the e-infrastructure margins, obviously in the second quarter we had about 24.1. I think you addressed some of the factors there. Mix was a big factor. But how should we think about normalized margins, at least for this year and you know possibly into 27 and perhaps if you can just kind of help us understand where the margin improvement for CEC is coming from I think you mentioned 12 to 18 months but if you can just kind of help us understand the different buckets of margin improvement and then finally on storage I guess the margins there are mid-teens if you can also kind of frame that same pathway for us.

Yeah so Let me step back a little bit in time when we bought Plateau, who has fantastic margins today. Their margins were in that 15% to 18% range, and it's taken us a few years, and we've moved those margins up significantly. If you take a look at the Plateau business, they're getting close to peak margins. They'll still have some small incremental gains, but we're not going to see the monumental gains in that business that we've seen the last projects change to a further degree. But in the rest of our e-infrastructure pieces, the Petillo business has always been a lower margin business. As they're getting into bigger and bigger jobs, data centers, chip plants, those margins will come up. Margins on bigger jobs are better. Our Rocky Mountain Transportation business that we've shifted, grown 700% into e-infrastructure, The infrastructure margins there, even with their small equipment suite, even with what they're doing from not being vertically integrated, as an example, are still significantly better than transportation. But it's going to take us a little time to do some vertical integrations. We've got to have enough critical mass in the market to make vertical integration worth its while. So as we build enough critical mass, as we build up their equipment suite, and the really simple way to think of it is, if I have a bucket that's three times the size of an existing bucket, For every scoop, I scoop three times as much dirt. It's really that simple, right? So it takes me one-third the time to move the dirt. So we'll continue to improve and grow their equipment suites. Their margins will come up. On CEC, there's really two big drivers here. One is we're getting out of some legacy business segments that have relatively low margin. That will improve their margin, right? It's just portfolio management. The second piece is they're getting more and more engaged on these data centers, and the data centers are getting bigger. We're watching their margins go up as job sizes go up. So it's a combination of things. So we'll continue to see those go up. Where people are going to get confused every single quarter because it's not perfect math is the mix of that's going to change. And when CEC grows at a much greater rate than e-infrastructure, it's going to appear our margins are going down. Even though their margins are going up, and site developments, the margins are going up. That's just mixed. There's nothing we can do. But if you look at the returns we're getting on the dollars and the growth, I think most people would take that any day of the week.

Just quickly then, Joe, if you can just help us frame what the legacy infrastructure margins are versus what the CEC margins are, and I'll get back in queue. Thank you so much.

You have the exact numbers, Nick.

I don't know what that is.

In the second quarter on the majestic basis, we're high 20s for the infrastructure site.

Yeah, so you're looking at, if you take the site side, you're in upper 20s, and the CDC side's roughly 12%. So there's a big difference. It's over 2x, the margin profile. So it doesn't take a lot of mix shift or incremental growth in CEC to dilute the overall margin. Yeah, that's just really cool.

Thank you, Joe. Thank you. And your next question is from Samita Jain from KBank Capital Markets. Your line is now open.

Thank you. Good morning. Can I follow up on the margin question? I kind of just want to understand the go-forward guidance and whether it's a function of CEC growing a lot faster than you had anticipated, let's say, a few months ago when you gave us this guidance.

Yeah. So the easy way to think of margins is if you take the infrastructure, you break it down into site development, and Electrical, right? We'll keep it that simple. In the quarter, we saw improved margins in site and electrical, but the revenue mix of the electrical being growing at a much faster rate brings down that overall margin. As we go through the rest of the year, the margin is diluted by the accelerated growth rate of CEC, okay? So it's really, this is purely Mix. We're not losing margin in our businesses. I want to make sure everybody understands that. This is purely a mix of revenue that drives that. And then the other piece you have on the site side, where we saw the trajectory of growth and margins slow down, is we have one, new projects, where the beginning phases of new projects are lower. But two, we also have that 700% growth in the Rocky Mountains Transportation business, which has that smaller equipment suite, isn't vertically integrated, grow at a faster rate than our Southeast business. So when that happens, their margins are lower. I will tell you that. Their margins are improving, but they're still lower than our Southeast margins. So that blend makes it appear that the total margin is down, but the individual elements are all going in the right direction.

So relative to our previous expectations, yes, the growth at CDC has been higher, and the ramp on some of those newer projects has been faster.

Understood. Thank you. That's all for me. Thanks.

Thank you.

Thank you. Your next question is from Adam Collimer from Thompson Davis. Your line is now open.

Hey, good morning, guys. Great quarter.

Thanks.

Joe, the e-infrastructure orders came in at a record level, and I couldn't believe it. They were even up sequentially. Can you give more color about what was in there and maybe how much Stone Ridge added?

Yeah, so what makes it even more impressive is that we're able to do that on a really strong revenue quarter, which is always tough to do. Nick, do you want to go through some of the backlog numbers? Stone Ridge certainly added some of that. CDC had a great quarter with their bookings on that. I don't know, Nick, if you have the detailed numbers there.

Yes, so CDC was at about $2.4 billion combined backlog for the quarter, June. Stone Ridge was at about $140 million for a committed backlog. And I think it's $140 million for a signed backlog.

Yeah, the biggest driver, though, for the Florida species. The species had some great bookings. and Adam, what they are, that's the next phases and next sets of buildings of projects that they're currently on. So for us, everybody likes to look at just the pure raw number, but what's really encouraging for us is the fact that they are winning those next phases and winning those next level of projects, which is just proof in the pudding that they're executing well, they're delivering to the customer, they're doing what they need. and as part of the portfolio, we see the same thing happening with them as we have with Plateau or RLW or Petilum.

Got it. Okay. And then, Joe, your comment about the potential for softer Q3 awards, I think you talked about the stock being down. That's probably the biggest reason. Can you provide additional color on what you meant by that and maybe more color on what you're seeing in the bidding?

It's just timing. I wish we could get our customers to bid equal amounts every quarter through the year and make our lives a lot easier, but the reality is they don't. We can have a quarter where they bid three or four new projects and we look like the greatest thing since sliced bread, and the next quarter they bid one or none. It's just the timing of their cycle when it comes out. The important thing for us, and I get if you're not kind of in the mix of things, people are looking for indicators. But for us, we're in conversations with them all the time. We know what's coming. As long as we know what's coming, we feel good. When it hits, less of a concern for us, right, whether it's third quarter or fourth quarter. But we see really strong activity that's going to take place in the fourth quarter and first quarter of next year. and there's just a little bit of a lull in the third quarter. So we're trying to give people a heads up that we see that coming. We know it's coming. Don't panic. It's not a problem. But instead of telling people after the fact, well, we know that's just going to probably happen. Could something slip in the third quarter and we look like idiots and it comes in early? Possibly, but I wouldn't plan that.

Perfect. Thank you, Jeff.

Thank you, and your next question is from Julio Romero from Sidoti & Company. Your line is now open.

Thanks. Hey, good morning, Joe, Nick, Noelle, and Dan. You know, maybe starting off here, you recently upsized the revolver to $1.5 billion. You're carrying a net cash position. You know, how should we think about that? Should we read that larger facility as kind of the M&A acquisition candidate size moving up? Is it purely optionality? Help us think about that here.

Yeah, Nick, you want to answer that?

Yeah, sure. I mean, we upsize the facility certainly to take advantage of opportunities for acquisitions and to have that drive powder to be able to execute on those. Also, you know, we paid off our existing term loan and moved to an all revolver structure. And so, you know, we've enhanced pricing. We added some key relationship banks to the mix. And so, overall feel really good about our revolver and how it positions us going forward.

But the use is there's no question. We've always been acquisitive. Our acquisitions turned out pretty good. If we could double every acquisition like CEC in a year, I think we'd get the acquisition prize of the year. I don't know what that is. So we've been very good. We're going to need to add more acquisitions for capacity. With what we're seeing, the part that everybody is missing, put down the newspapers, quit reading the craziness that's out there. What we are seeing just from our top hyperscalers, the amount of work that is coming, we have to add capacity significantly faster just to keep up with them. That's not including all the other players that are entering the market building stuff. It is unbelievable what is coming down the tracks. And so we are going to have to make more acquisitions, not only just from a strategic geographic standpoint, but from a pure capacity ad standpoint to keep up with that demand that's coming.

Excellent. And kind of relates to my follow-up here is just, you know, CEC is running well ahead of the revenue expectations you said at the announcement. Obviously, it's making up more of the infrastructure mix, as we've talked about today. And I'm curious how that and your comments about more capacity needed relate to your M&A priorities. You know, kind of ranking them today, where do your priorities kind of sit at with regards to geographical, electrical versus specialty mechanical, you know, more site development? just help us think about those priorities here.

Yeah, the answer is a little bit all of the above. But if you would ask me kind of in the third quarter last year after we purchased CEC, would you look for more electrical capacity in the Texas market? I would have said no, probably going to focus more on the southeast. Today, if the right opportunities came up, I would add two or three more CECs to the Texas market. That's how big We believe that market's going to be. We certainly would like to add the electrical capabilities in the southeast. We think that's obviously a large market for us and the value proposition is the same. So we continue to look hard for the right acquisition in that market. And then on the site side, especially as we're moving further and further from the west-east and from the east-west to Texas, and some of the surrounding markets. The Texas market is going to be bigger in the next three years than any other market related to data centers, everything else. It is coming. And I guess there's always something that could stop it, but I don't know what that is right now. And so we're working really, really hard on what do we need to do to add that incremental capacity today to start getting ahead of that curve, just like we did with Stone Ridge. because we believe in 20, late 27, 28, some of the upper Pacific Northwest areas are going to start taking off as well. I sound like a broken record, but we have great visibility to multi-year projects that are coming and we are continuing to position ourselves to be there. So we look really smart when they come out, but it's just our customers telling us where they're going.

Helpful. Thanks very much. Thank you.

Thank you. That concludes our question and answer session for today. I would now like to turn to Carmen's call back over to Joe Cutillo for the closing remarks.

Great. I want to thank everybody again for joining our call today. If you have any follow-up questions, please feel free to contact Noelle Dilts. Her contact information can be found in the press release. Thanks, everybody. and have a great day.

Thank you, ladies and gentlemen. The conference call has now ended. Thank you all for joining. You may now disconnect your lines.