• Earnings Per Share (EPS): $1.67, up 31% year-over-year.
• Gross Profit Margin: Over 19%, with a 160 basis point improvement from the previous year.
• Revenue: $582.8 million, an increase of 11.6% year-over-year.
• Operating Income: $72.7 million, a 20.7% increase from the prior year.
• Net Income: $51.9 million, a 31.4% increase year-over-year.
• EBITDA: $87 million, an 18.3% increase from the previous year.
• Operating Cash Flow: $121 million for the quarter.
• Net Cash Position: $211 million.
• Backlog: $2.1 billion, a 20.9% increase year-over-year.
• Combined Backlog: $2.45 billion, a 2.2% increase from the prior year.
• e-Infrastructure Revenue: Increased by 7% in the second quarter.
• Transportation Solutions Revenue: Increased by 54% year-over-year.
• Building Solutions Revenue: Declined by 2% in the quarter.
• Data Center Revenue: Grew more than 100% in the quarter.
• Cash Flow from Operating Activities (First Half 2024): $170.6 million.
• Net CapEx (First Half 2024): $44.4 million.
• Share Repurchases: $30.1 million at an average price of $100.70 per share.
• Updated Full Year Revenue Guidance: $2.15 billion to $2.225 billion.
• Updated Full Year Net Income Guidance: $175 million to $180 million.
• Updated Full Year EBITDA Guidance: $300 million to $310 million.

• Warning! GuruFocus has detected 5 Warning Sign with STRL.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sterling Infrastructure Inc (NASDAQ:STRL) reported a record second-quarter EPS of $1.67, marking a 31% increase over the prior year.
• The company's gross profit margins expanded to over 19%, driven by a strategic shift towards higher-margin services.
• Backlog at the end of the quarter increased by 21% year-over-year, totaling $2.1 billion, indicating strong future demand.
• Operating cash flow was robust at $121 million, contributing to a strong net cash position of $211 million.
• The e-infrastructure segment, the largest and highest-margin segment, saw operating profit grow by 20% with margins expanding to 21.4%.

Negative Points

• Revenue from the small commercial and warehouse markets declined by over $30 million compared to the second quarter of 2023.
• The manufacturing market faced challenging revenue comparisons due to the start-up of a large project in early 2023.
• Building solutions segment revenue declined by 2% in the quarter, impacted by heavy rainfall in Texas and land availability challenges.
• General and administrative expenses increased by $3.8 million due to the PPG acquisition, general inflation, and growth.
• The company anticipates that the e-commerce and small warehouse markets will remain soft throughout 2024.

Q & A Highlights

Q: Joe, I understand the shift you're making in e-infrastructure, obviously driving significant margins here. At what point do those projects in commercial, kind of warehouse start to make sense for you to pursue again, even if they are potentially dilutive to the margins you're putting up today? A: The shift is somewhat temporary as margins have declined on commercial and warehouse projects. When margins return to historical levels, we'll pursue them again. We're encouraged by recent economic news and interest rate discussions, suggesting a potential return to these projects by the first quarter of next year.

Q: This $500 million pipeline framework associated with multi-phase projects, how quickly does that convert into a signed contract? A: The timing is hard to specify, but the backlog becomes more stable as we execute phases. We have more visibility into future work than ever before, and the pipeline has grown significantly over the past 18 months.

Q: Are there good opportunities for additions to the transportation backlog in the second half? A: Yes, there are many good jobs coming out, and we've approved more work bids in the last 30 days than in the previous six months. We can grow the business quickly when margins are right, and we plan to take full advantage of the current market.

Q: Do you see any recovery possible in the Northeast next year? A: Yes, we expect projects to come out as interest rates fall. We've also expanded into the Mid-Atlantic, winning some significant jobs that will offset the smaller business, which should return next year.

Q: Can you talk about the drivers of the e-infrastructure margins surpassing 20% in the quarter and their sustainability? A: The mix shift towards larger projects like data centers and manufacturing is the biggest driver. We expect to maintain or even improve these margins as capacity tightens in these markets over the next couple of years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.