Good morning ladies and gentlemen and welcome to the Sterling Infrastructure First 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. [Operator Instructions] This call is being recorded on Tuesday, May 6, 2025. I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2025 first quarter earnings conference call and webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer and Ron Ballschmiede, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Ron 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 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 results today will refer to pro forma figures that adjust prior period results to conform to the current accounting of our RHB JV. As a reminder, at year end 2024 there was a change in the accounting treatment for this JV for such that we no longer consolidate revenue and backlog, but it does not change our share of EBITDA that we recognize from the JV. Additionally, we may refer to Adjusted Operating Income, EBITDA and EPS figures that adjust for certain non-cash and non-recurring items. Please see our press release for a description and reconciliation of these adjustments. All comparisons are to the prior year quarter unless otherwise noted. I'll now turn the call over to our CEO, Joe Cutillo.

Thanks Noelle. Good morning everyone and thank you for joining today’s call. Sterling is off to a great start for the year. In the first quarter, we grew adjusted earnings per share by 29% to $1.63 and delivered adjusted EBITDA of $80 million, a 31% increase. Revenue grew 7% in the quarter on a pro forma basis, fueled by growth of over 18% in our E-Infrastructure Solutions segment and 9% in our Transportation Solutions. Our gross profit margins expanded more than 400 basis points from the prior year to reach 22%. We remain focused on pursuing the most attractive and highest return opportunities. Additionally, operating cash flow generation in the quarter was strong at $85 million. We are pleased to announce that during the quarter we closed on the acquisition of Drake Concrete, a provider of residential concrete slabs in the Dallas Fort Worth area for $25 million. This acquisition strengthens our geographic footprint within DFW and expands our customer depth as Drake has limited customer overlap with Tealstone. We anticipate Drake will contribute $55 million of revenue and $6.5 million of EBITDA in 2025. Looking to the future we remain extremely positive on our outlook. While we are certainly cognizant of the high levels of uncertainty surrounding trade policies and the economy, we believe we are in markets and geographies that have strong sustainable growth. Additionally, we have limited exposure to foreign sourced materials. We will continue to build upon the strong base we have established, drive margins and pursue opportunities that enhance our long-term value. We will stay focused on the things that we can control and adapt and react to changing conditions as necessary. Our backlog position and visibility anchor our confidence in the future. Backlog at the end of the quarter totaled $2.1 billion, a 17%…

Thanks Joe and good morning. I am pleased to discuss our very strong and record first quarter performance. Let's start with some financial highlights starting with our consolidated backlog metrics. Our first quarter backlog totaled $2.128 billion, a 26% increase from the year end 2024. The gross margin of our backlog was 17.7%, a 100 base basis point increase from the year end 2024 levels of 16.7%. An increase of both the amount of E-Infrastructure backlog and its margin drove this improvement. We closed the quarter with combined backlog of $2.23 billion, which was up 21% from the year end 2024. First quarter 2025 book-to-burn ratios were 2.23 times for backlog and 2.13 times for combined backlog. Turning to our first quarter income statement, revenue was $430.9 million, a 7% increase excluding RHB from the prior year period. Consistent with our past seasonal characteristics, our first quarter is expected to be our lowest revenue quarter for the year. Current quarter consolidated gross profit was $94.8 million or 22% of revenues, a 400 basis points increase over the 2024 first quarter. General and administrative expense increased in the quarter by $7.3 million. Approximately $1.6 million of this increase related to one-time separation expenses. Additional drivers of the increase include performance based compensation, investments in personnel and systems to support our growth. We expect our full year G&A expense to be approximately 6.3% of revenues, which compares to 6.1% excluding RHB from 2024. Our effective income tax rate for the first quarter was 26.1%. We expect our full year effective income tax rate to be approximately 26%. The net of all these items resulted in a record first quarter with adjusted net income of $50.2 million, or $1.63 per diluted share, an improvement of 29% compared to the first quarter of 2024.…

Thanks Ron. As we look to the future, we remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities and discussions with our customers contribute to our confidence. In the E-Infrastructure Solutions. We anticipate that the current strength in data center demand will continue for the foreseeable future. Our customers are discussing multiyear capital deployment plans and are focused on how to align with the right partners to support these plans. On the manufacturing front, we believe that in 2025 we'll see a fairly steady pace of mid-to-large sized onshoring project activity. As we look out to 2026 and 2027, there remains a big pool of megaprojects on the horizon. This would include planned semiconductor facilities. Given the complexity involved with their development, we believe it will take some time before awards start to flow. The e-commerce market has strengthened in 2025 and we anticipate that we will see additional awards throughout the year. The small warehouse and commercial market, which began to soften back in 2023 is showing signs of strengthening. Together, these dynamics support strong growth opportunities over a multiyear period. For 2025, we expect to deliver strong E-Infrastructure revenue growth in the mid-to-high teens and adjusted operating profit margins in the mid 20% range. In Transportation Solutions, we are now in the second half of the federal funding cycle. We have built over two years of backlog and continue to see good levels of bid activity. For 2025 we anticipate continued growth in our core Rocky Mountain and Arizona markets. The downsizing of our low bid heavy highway business in Texas is progressing according to plan which is resulting in some moderation of Transportation Solutions top line and backlog in 2025, which should drive meaningful margin improvements as we…

Thank you. [Operator Instructions] The first question comes from Brent Thielman at Davidson. Please go ahead.

Hey, thank you. Good morning. Great quarter.

Thanks Brent.

Joe, maybe just on the E-Infrastructure business group, could you talk around the 35% of the backlog that's not data center? It sounds like you still have pretty good visibility in manufacturing and that continues and maybe warehouse activity is starting to pick up and contribute to you more. But maybe just how firm you feel like that backlog is and whether or not you can continue to build on that side of the business?

Yes, we feel good about it. There's really kind of three parts of that. We got -- manufacturing is going to stay pretty steady through the year. We've seen the e-commerce coming back and picking up actually even faster and a little more than we anticipated, so that's exciting for us. And we are starting to see more activity around what we call the small industrial and warehousing stuff. We think that trend is going to continue through the back half of the year. So we feel very good about that 35% and I think we still have some potential upside opportunities on projects that look like they're going to bid in the second half of the year kind of across all pieces of E-Infrastructure.

Okay, great. And then Joe, when you think about just tariffs from a high level, maybe just where you're most exposed and least exposed from a direct sort of cost perspective and what's embedded in the outlook relative to that?

Yes, I think the good news is, if we didn't go through COVID and see the, I'll call it rapid fire increases that we saw a couple years ago, I'd probably be a little more cautious and more concerned about the tariffs. But we -- people have to remember we saw 200% to 300% price increases in less than six months and the impact on the business was minimal at the end of the day. So when we look at the tariffs, I'll just kind of go through each segment just so people understand them. In our, in our Transportation segment, we'll start there and first the major items are steel and those components all have to be made in America for the most part on our contracts, and we lock those in at the beginning of the contract. So our upfront pricing may appear higher than what market pricing is, but it's guaranteed for that. In addition, on some of the other items, if we see increases above a certain percent, there's actually some indexing that takes place. And throughout COVID, we saw virtually no impact through Transportation Solutions. So we think we'll see minimal there. Obviously there in both Building Solutions, there's risk of concrete powder going up and concrete prices, but again, there's some indexing that offsets and protects that. In E-Infrastructure, we really have a couple major components. All the piping and underground components that go into the contracts or into the builds in fuel. Those are two biggest items. We have learned from COVID and in our major contracts we have indexing in our fuel pricing. If it exceeds, I believe it's 5%. We then pass that on. But similarly, if it goes down more than a certain amount, we give money back to the…

Very good. I'll pass it on. Thank you.

Thank you. The next question comes from Julio Romero at Sidoti. Please go ahead.

Thanks. Hi, good morning Joe, Ron and Noelle.

Good morning.

Good morning.

Really -- good morning. Really nice margin performance here in Transportation Solutions in the quarter. Can you maybe talk a little bit about the drivers of that margin? How much of that margin strength is from the shift away from low bid versus other kind of drivers there and how should the cadence of margins in transportation flow for the remainder of the year?

Yes, we're -- I would say, we're seeing very little from the shift away from a little bit. We're still finishing up projects and that sort of stuff. The vast majority of that margin improvement is around is, we continue to shift our mix towards higher margin end products. Whether that's alternative delivery in the highway space, more and more aviation and the mix of rail. Those all have much higher margins. So we continue to push our efforts to blend that mix more towards that portfolio. And as we do that, we'll continue to see margin increases. We should start seeing more of an impact from the low bid as we get towards the end of this year into early next year.

Great, really helpful there. And then you know, great color you gave on going around the portfolio and talking about kind of your tariff exposure across all three segments. Maybe if you can talk about your level of comfort in bidding for new projects going forward and accepting new work and just kind of execution this broader operating environment.

Yes, I would tell you, part of our margins in the quarter for transportation and infrastructure, frankly is our teams continue to execute extremely well and all the things we're doing to continue to drive, whether it's technology or other things to improve project performance, continue to pay off. And I'm excited about some of the stuff we're working on that will start paying off next year and the year after as well. So if you look at the performance side, all good. When we look at the bid activity side, we still got a little over a year left on IIJA. There's that spend continues to increase. They approve the budget for 2025. That was up. I forget the number. Noelle, was it up 8%? I think is what it was for total spend approximately. And so bid activity remains good in Transportation, in E-Infrastructure, I would tell you our front end guys wish it would slow down. These four guys are working seven days a week, 12 hours a day right now with bid activity that's coming in. So we're very optimistic on what's going on there. If you take a look at our backlog in E-Infrastructure, we're really looking at how do we finish filling 2026 and filling 2027. It's not that we can't take more in 2025. We will take more, but we're really starting to focus much further out making sure we're solid on a long-term basis. The area of weakness for us, the headwinds we're seeing is certainly in the residential side. That market has been soft, probably a little softer than we even anticipated in the quarter. But the difference there is there's tremendous pent up demand. Somebody's going to figure out this affordability piece in some way, shape or form, whether that's interest rates coming down or some pricing coming down on the builder side to get people in. So we're bullish long term on that market over a multi-year period we may go through a little bit of a slow period. We see it as an opportunity to build our capabilities and potentially expand during this time and we'll come out of it even stronger on the back end.

Makes a lot of sense. Thank you for the color. I'll pass it on.

Thank you.

Thank you. The next question comes from Adam Thalhimer at Thompson Davis. Please go ahead.

Hey, good morning guys. Nice quarter.

Thank you.

Ron, I wanted to follow-up on, you mentioned that E-Infrastructure was your top priority for M&A. Would that be for geographic expansion?

Well, I think we look at it in multiple facets. First of all, there's a couple geographies we really would like to get into and are working hard to find a potential acquisition or come up with an organic growth plan for those. One of those, frankly, is Texas. We sit in Texas and the amount of activity that's going on, whether it's data centers or chip plants or anything else, is astronomical. And for the most part, we've foregone that. Now I'll talk about how we're actually conquering some of that organically with some jobs. So doing site development with geographical extensions, looking at acquisitions for that, I should say, is something we are definitely looking at. In addition, we believe there is high value and high opportunity in us adding electrical and mechanical and potentially specialty piping, along with some other skill sets to the portfolio. We have experimented with a small little dry utility business. We'll triple that business or maybe even quadruple it in the next 12 months just by bringing it to the customers and contracts we have and getting that built in to those contracts. So we think that there's an opportunity, if we can provide an entire electrical and mechanical package, that we could bring those solutions to our core customers as well. That's not something that would happen overnight, but the next round of projects that we do, we would obviously work hard to try to get those built in. So the answer is we're doing both. We're looking geographic expansion and additional services.

And then with that, those additional services, would you start offering those potentially on a standalone basis, or would it only be for your existing infrastructure projects as an add on?

No. So what we see is we certainly could use them with our customer base. We would use them outside of our customer base. And we look at it as potentially an opportunity if the right acquisition came along with the right end customer mix, may pull us into different end markets on the site solutions side down the road.

All right, and then just last one for me, it just kind of confused me because you put up a 22% gross margin in Q1. That's also the guidance for the year. I was just curious why you wouldn't see maybe a seasonal uptick in gross margins during the summer and fall.

Yes, we will see an uptick in summer and fall and then we see the dip in the fourth quarter. So it kind of comes out pretty close to that. It's a little higher for a while.

Understood. I'll turn it over. Thank you.

Thank you. The next question comes from Noah Levitz at William Blair. Please go ahead.

Joe, Ron and Noel, good morning and congrats on strong numbers.

Thank you.

Start off. Yes. So the IIJA bill, you have two years left in backlog. It's coming to an end probably in the next year. Some other peers have talked about IIJA Part 2, the next bill. Can you talk a little bit if you're seeing anything in Congress what you and what you would hope to see or expect in the next bill?

Yes. So I think people worry that the bill ends and everything stops. It just it's the next bill comes out. Right. And the worst case scenario, if there is a gap, they usually do a transition year or a bridge. Generally, they've taken the prior year's number adjusted for inflation and continue on until the next bill goes. But here's what I will tell you and I was supposed to be in D.C. this week, but with the earnings call and board meeting, it's not working out. There is more activity further in advance on the next infrastructure bill going on right now, bipartisan activity in D.C. than I've seen in the last two bills by a lot. So I would tell you that the Head of Transportation was told to make a bigger, more beautiful infrastructure bill than has ever been done before. And there are a lot of people in D.C. running around trying to figure that out right now, including for the first time talking about some longer term ways to pay this with fees, federal fees for registrations of electric vehicles, hybrid vehicles and even gas vehicles at different rates. So far so good. Again, they're much further ahead. They seem to be much more rational in their thought process. And I think they've been given an edict to do something bigger and better. So I, it's still a year away, a little year and a half probably. But I would tell you it looks better than it has historically. Normally at this point in time, everybody is trying to get Congress to think about it because it's coming up and they say we still have over a year. Why would we think about it now? So that all looks positive.

Great, that makes sense. And then shifting back over to e-infrastructure you mentioned in your prepared remarks about the semiconductor opportunity and onshoring, I think over the past few months in particular, there's been a lot of capital investment plans, very sizable ones from pharmaceutical companies bringing back manufacturing to the U.S. expanding their existing capabilities. And last quarter you mentioned that you had a project going on in that biopharma space. So I was wondering could you provide some color about conversations related to these particular builds, the biopharma ones, potential size of these projects and whether or not you have capacity constraints that could potentially inhibit your ability on these projects just because of how exposed you are to data centers and how well that's been ramping? Thank you.

Yes, I'll start with the end. We'll do everyone that comes our way that we think is a good project. So we, the great thing is the business is growing well, the margins continue to expand. I would tell you if the right projects came and we had to grow our capacity 25% to 30% right now, we could do it. poison: We're seeing kind of onesie, twosies. We'll see one here, we'll see one there, and they're all different. We're waiting for this wave that says we're going to bring back 20 pharma plants right in and watch them get ready to break ground. We think it's coming, but it's still early. It takes a while. I think people underestimate that. From the time you say you want to build a factory in the U.S. how much time it takes to get land, get it permitted, get everything ready before you can actually break ground. Candidly, if the administration wanted to do something to speed up manufacturing or onshoring or reshoring faster than anything else, it would be get rid of the political process and the permitting. It is taking much longer to get permits through than ever before. onesie, twosies: We're talking to the big engineering firms that are working on the front end of the stuff. Food is another one. Food and pharma. We keep hearing about all the designs taking place. We're just waiting for that wave to come to shore.

Great. Thank you very much.

Thank you. There are no further questions. I will turn the call back over to Joe Cutillo for closing comments.

Thanks, Joanna. I'd like to thank everybody again for joining today's call. If you have any follow-up questions or wish to schedule a call with us, please feel free to contact Noelle. Her contact information can be found in our press release. Again, I want to thank everybody and hope you have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.