Latest News
«Back to News

Sterling Reports 2019 Fourth Quarter And Full Year Results


March 2, 2020





Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or “the Company”) today announced financial results for the fourth quarter and full year ended 2019.

• Revenues were $346.5 million compared to $255.2 million;
• Gross margin was 9.7% of revenues compared to 11.0%;
• Plateau acquisition related costs totaled $2.2 million or $0.08 per diluted share;
• Gross margin and Net Income were impacted by a $10.2 million charge or $0.36 per diluted share related to a claim resolution of a 2014 legacy project;
• Recognized a non-cash income tax benefit of $25.8 million or $0.92 per diluted share, primarily due to the reversal of our valuation allowance;
• Net income attributable to Sterling common stockholders was $22.3 million or $6.3 million on an adjusted basis(1) compared to $5.6 million;
• Net income per diluted share attributable to Sterling common stockholders was $0.79 or $0.22 on an adjusted basis(1) compared to $0.21; and,
• Adjusted EBITDA(1) was $20.2 million compared to $12.7 million.
• Revenues were $1.1 billion compared to $1.0 billion;
• Gross margin was 9.6% of revenues compared to 10.6%;
• Plateau acquisition related costs totaled $4.3 million or $0.16 per diluted share;
• Net income attributable to Sterling common stockholders was $39.9 million or $24.5 million on an adjusted basis(1) compared to $25.2 million;
• Net income per diluted share attributable to Sterling common stockholders was $1.47 or $0.90 on an adjusted basis(1) compared to $0.93; and,
• Adjusted EBITDA(1) was $62.0 million compared to $55.0 million.
• Cash and Cash Equivalents were $45.7 million; and,
• Debt totaled $433.1 million reflecting Sterling’s new debt facility utilized to fund the October 2, 2019 Plateau acquisition and retire its prior debt facility.
With the acquisition of Plateau, the Company has added a third diversified platform for growth and has realigned its operating segments to reflect management’s present oversight of operations. Sterling’s operations now consist of three reporting segments: Heavy Civil, Specialty Services and Residential. The Company’s commercial business has been reclassified from the Heavy Civil segment into our newly formed Specialty Services reporting segment along with the Plateau operations. The segment information for the prior periods presented has been recast to conform to the current presentation.
Fourth quarter 2019 revenues increased $91.4 million compared to the prior year quarter, primarily driven by $84.6 million generated from Plateau.
Gross profit was $33.6 million in the fourth quarter of 2019, an increase of $5.4 million from the prior year fourth quarter. Gross margin declined 135 basis points to 9.7%, partly offset by the inclusion of three months of gross profit from Plateau operations in 2019.
In the quarter, Sterling was able to come to an interim agreement related to a 2014 project involving the construction of three separate bridges in Texas that had suffered from significant schedule delays and cost overruns due to major owner design flaws. This agreement enabled Sterling to recover approximately $17 million in costs to date related to these delays and defined a better dispute resolution process along with agreed upon rates for potential future delays. As part of this agreement, Sterling agreed to work on all three bridges simultaneously (versus doing one at a time) to accelerate the final completion schedule. This revised schedule has significantly increased the amount of labor, equipment and infrastructure required to complete the project under the new terms of the agreement and resulted in a reduction of gross profit in the quarter of $10.2 million, or $0.36 per diluted share.
General and administrative expenses were $16.9 million in the fourth quarter of 2019, or 4.9% of revenues compared to $13.0 million or 5.1% of revenues in the fourth quarter of 2018, reflecting incremental general and administrative expenses attributable to the Plateau acquisition of $3.0 million.
• Combined Backlog at December 31, 2019 was $1.3 billion, up from $1.1 billion at December 31, 2018. Combined Backlog consists of $1.1 billion of Backlog and $273.5 million of unsigned contracts as of December 31, 2019 compared to $850.7 million and $292.7 million at December 31, 2018, respectively. At December 31, 2019, $164.5 million of our Backlog is attributable to Plateau. No residential construction contracts are included in Backlog.
• Total margin in Backlog has increased approximately 300 basis points, from 8.5% at December 31, 2018 to 11.5% at December 31, 2019. Approximately two-thirds of the gross margin improvement relates to the inclusion of Plateau’s Backlog with the other one-third improvement driven by the Sterling legacy businesses. Combined Backlog gross margin improved from 8.9% at December 31, 2018 to 11.0% at December 31, 2019.
“Our fourth quarter concluded another outstanding year for Sterling, including the transformative acquisition of Plateau, which we closed on October 2nd,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “As anticipated, Plateau was immediately accretive to our fourth quarter results and propelled our Backlog to a record level, positioning us for profitable growth in 2020. After only three months as part of our business portfolio, we are extremely pleased by the quality of Plateau’s management team, its high level of operational discipline and the attractiveness of its project pipeline.”
Mr. Cutillo continued, “With respect to our fourth quarter 2019 results, revenues increased slightly on an organic basis driven by commercial and aviation projects which were largely offset by the impact of continued delays in the start of two large design-build joint venture projects that we mentioned in the second quarter of 2019. We expect our second quarter 2020 results to begin to reflect our execution on these attractive projects and another recently announced design-build joint venture project in Utah.”
“Notably, during our fourth quarter, we reached an agreement and resolved numerous pending change orders on a bridge project in Texas that Sterling was awarded in 2014, that had encountered a multitude of delays over the years due to owner design issues. Additionally, we successfully negotiated the inclusion of prospective protocols to address future design changes, related schedule reliefs and accelerated resolution of change order requests and agreed to a new schedule to accelerate the project completion date. These components of the agreement enabled us to recoup $17 million of incurred cost to date and significantly reduce the risks of further unreimbursed cost increases through the completion of the project in early 2022.”
“Results for our Residential segment were essentially flat as compared to the fourth quarter of last year, as we’d anticipated. Revenue growth has continued to be pressured by a shift in demand towards smaller square footage slabs, although margin levels remain robust. We continue to make good progress with the ramp-up of our residential business in Houston and expect margins to improve for us in 2020 as we gain critical mass in this market. Overall, we continue to see low to mid-single digit revenue growth and continued attractive margins in our residential segment, as we are positioned in very attractive and rapidly growing geographies.”
Mr. Cutillo concluded, “Based on the anticipated contribution from Plateau and our record high Backlog, along with our view on current booking trends, market strength, continued mix shift and improved execution, we expect to generate full year 2020 revenues of between $1.375 billion and $1.4 billion. With the integration of Plateau into Sterling, we expect that our blended gross margin will rise to the 13% to 14% range. Therefore, our expectation for 2020 net income attributable to Sterling common stockholders is between $38 million to $41 million, excluding acquisition related costs of $2 million to $3 million. We expect our full year 2020 diluted average common shares outstanding to be approximately 28.5 million. Importantly, our 2020 net income guidance includes an effective income tax rate of approximately 26%. This rate includes non-cash income tax expense of approximately 21% of pretax income; or $11 million ($0.39 per diluted share) compared to a non-cash income tax benefit in 2019 of $27.4 million ($1.01 per diluted share). This change in non-cash tax expense reflects the reversal of our net operating tax loss reserve in the fourth quarter of 2019 driven by sustained taxable income over the past several years in accordance with the accounting requirements.”
“Our outlook does not assume any major positive changes in government investment in infrastructure, which would likely enhance our growth forecast beginning in 2021 and beyond as we are well-positioned to win further economically compelling heavy civil project opportunities across our geographies. We expect our 2020 EBITDA to be $125 million to $135 million. With the free cash flow we expect to generate in 2020, we are targeting a reduction in our debt to forward looking EBITDA leverage ratio from our current proforma basis of 3.5X, to approximately 3.0X by the end of the year. Considering all of these factors, we are highly encouraged about our prospects for generating additional value for our shareholders over the course of 2020.”


Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, March 3, 2020 at 9:00 a.m. ET/8:00 a.m. CT. Interested parties may participate in the call by dialing (201) 493-6744 or (877) 445-9755. Please call in ten minutes before the conference call is scheduled to begin and ask for the Sterling Construction call. Following management’s opening remarks, there will be a question and answer session. Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to
To listen to a simultaneous webcast of the call, please go to the Company’s website at at least fifteen minutes early to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company’s website for thirty days.
Sterling Construction Company, Inc., (“Sterling” or “the Company”), a Delaware corporation, is a construction company that has been involved in the construction industry since its founding in 1955. The Company operates through a variety of subsidiaries within three operating groups specializing in heavy civil, specialty services, and residential projects in the United States (the “U.S.”), primarily across the southern U.S., the Rocky Mountain states, California and Hawaii, as well as other areas with strategic construction opportunities. Heavy civil includes infrastructure and rehabilitation projects for highways, roads, bridges, airfields, ports, light rail, water, wastewater and storm drainage systems. Specialty services projects include construction site excavation and drainage, drilling and blasting for excavation, foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes.
Important Information for Investors and Stockholders
This press release contains “Non-GAAP” financial measures as defined under Regulation G of the amended U.S. Securities Exchange Act of 1934. The Company reports financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), but the Company believes that certain Non-GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and are useful for period-over-period comparisons of those operations.
Non-GAAP measures include adjusted net income, adjusted EPS, and adjusted EBITDA in each case excluding the impacts of certain identified items. The excluded items represent items that the Company does not consider to be representative of its normal operations. The Company believes that these measures are useful for investors to review, because they provide a consistent measure of the underlying financial results of the Company’s ongoing business and, in the Company’s view, allow for a supplemental comparison against historical results and expectations for future performance. Furthermore, the Company uses each of these to measure the performance of the Company’s operations for budgeting, forecasting, as well as employee incentive compensation. However, Non-GAAP measures should not be considered as substitutes for net income, EPS, or other data prepared and reported in accordance with GAAP and should be viewed in addition to the Company’s reported results prepared in accordance with GAAP.
Reconciliations of these Non-GAAP financial measures to the most comparable GAAP measures are provided in the tables included in this press release.
This press release contains statements that are considered forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our: business strategy; financial strategy; and plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this press release, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this press release are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this press release are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”) and elsewhere in those filings. The forward-looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Sterling Construction Company, Inc.
Ron Ballschmiede, Chief Financial Officer
Investor Relations Counsel:
The Equity Group Inc.
Fred Buonocore, CFA

Download Article PDF