Q3 2019 Earnings Call
Greetings and welcome to Sterling construction companies third quarter 2019 earnings conference call and webcast.
Time, all participants are any listen only mode. A question answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
Before turning the call over to Joe Catello Sterling construction, Chief Executive Officer, I would read the Safe Harbor statement. Some discussions today may include forward looking statements actual results could differ materially from statements made today.
Please refer to Sterling's most recent 10-K in 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 no I like to turn the call over to Joe Catello.
Thanks Oliver.
Good morning, everyone and thank you for joining our third quarter call.
This morning, we are pleased this got another strong quarter double digit year over year adjusted net income at group it.
As well as be transformational acquisition, which we announced wins a third quarter and close the first week at the fourth quarter.
In the quarter, we continued to be disciplined and stayed the course of course strategy as we focus on bottom line growth, while reducing our overall risk.
This quarter is yet another example of our commitment to that strategy and the success it continues to deliver.
For the quarter versus prior year.
<unk> revenues were relatively flat get $292 million consistent with our second quarter call.
Our gross margin execute it dipped slightly due to project mix yet our adjusted net income excluding onetime acquisition charges was up approximately 11%.
Our revenue from our residential business grew 9%.
And our gross margin and our combined backlog increased 20 basis points to hit an all time recent high <unk> point.
Our core markets continue to be robust and our combined total backlog remained near all time highs it just under $1.2 billion.
Overall.
The quarter finished right, where we expect.
In the quarter without the acquisition to plateau.
Why tow is a leading provider of large site development services and is truly a transformational acquisition for us in many ways.
First we pick up and outstanding management team along with a next generation of leaders for plateau and other parts of Sterling.
It enables us to diversify or end markets and I touched conversion by expanding into the southeast and bring a fast growing blue chip customers like Google Facebook home depot and your P.S.
It helps us continue to reduce our overall project risk because the average size and duration of their projects are generally much smaller and much faster than our traditional heavy highway jobs.
Well I told wants combined with Sterling will increase our blended gross margins to over 12%.
Double our EBITDA.
And create a business portfolio were less than 40% of our revenues will come from heavy highway.
In addition to all this we believe there is an opportunity to expand plateau service offerings within its existing footprint as well as the existing Sterling <unk>.
Now, let's move on to the full year [noise].
Despite the significant weather headwinds we saw in the first two quarters in.
And the delayed stock starch up several major projects.
The combined results of the third quarter, along with the inclusion of our recent plateau acquisition in the fourth quarter has enabled us to increase our full year adjusted guidance it's buyouts.
Our revenue will be between 1.065 billion and 1.085 billion.
And our adjusted net income will be between 20 died and 30 million.
A truly outstanding finish to a year that started off very tough.
With that I'd like to turn it over to Rod give you more details on the quarter into full year Rob.
Thanks, Joe and good morning.
I am pleased it looks to us.
Other solid quarter of operating results and provide an update on the plateau acquisition and our prospective expectations.
The company incurred plateau.
Position related costs of $1.9 billion during the third quarter of 2019.
Please see the reconciliation of non-GAAP supplemental adjusted financial data and related disclosures, including that our November four 2019 third quarter earnings press release.
At September Thirtyth, 2019, or heavy civil construction segment backlog was $881 million compared to $851 million at December 31st 2018.
Gross margin in backlog was 9.3% at September Thirtyth, 2019 up 80 basis points from the beginning of 2019 and up 50 basis points from the beginning of the third quarter.
Combined backlog, which includes our backlog and unsigned low bid awards totaled $1.154 billion with an overall combined backlog gross margin of 9.3% as of September Thirtyth 2019.
An increase from 8.9% at the beginning of 2019.
The September combined backlog gross margin was the highest recent history.
Our heavy civil construction backlog book to burn factor was 91% for the third quarter of 2019 and 104% for the first nine months so 2019.
Just a reminder, our backlog figures are comprised entirely of heavy heavy civil construction projects.
Residential construction, which account for 14% of our third quarter revenue does not report backlog, reflecting the short term performance cycle of residential concrete slabs.
[laughter] consolidated revenue for the third quarter of 2019 was $292 million.
And was consistent with our expectations for Ed and our and our annual guidance and essentially flat comparable 2018 quarter.
We expect.
Fourth quarter 2019 based business revenues could be comparable to the 2018 fourth quarter revenues.
Reflecting the same project missed mix pattern as a third quarter.
We expect heavy civil revenues to increase in 2020 through the ramp up of construction on new design build joint venture projects.
From an operating segments standpoint, or heavy civil construction revenue declined by $2.8 million for 1.1% from the prior year quarter.
The decline was primarily attributable to $18 billion of lower revenues from two large design build construction joint venture projects, which were substantially complete at the under 2018.
This decline was largely offset by higher revenues a fully controlled heavy highway projects and increased aviation work.
The residential construction third quarter 2019 revenues were $40 million, an increase of 8.8% <unk> third quarter of 2018.
Approximately half of the revenue increase in residential construction reflects the continued expansion into Houston into the Houston market.
The other half of the growth attributable to the legacy Dallas Fort worth market.
The number of residential slabs completed during 2019 third quarter increased by 19% over the comparable 2018 quarter.
The increase in completed slabs was primarily attributable to the market shift to smaller homes, which generates less revenue per slab.
Consolidated gross profit was $29.2 billion in the third quarter of 2019 compared to $31.3 million in the prior year quarter.
Quarter over quarter gross margin declined 70 basis points to 10%.
The decline reflects a lower margin revenue mix, primarily driven by the completion of several large construction projects at the end of 2018.
Additionally, the ramp up of our expansion into the Houston market has generated lower margins than are well established Dallas Fort worth operations as we build scale and if it in efficiencies in Houston.
Prospectively as we grow and build scale, we expect the Houston margins to improve.
Do you think expense for the third quarter, 2019, with $10.8 million compared to $11.5 billion and in the prior year quarter.
The decline in DNA was primarily due to lower pre did activities for design build projects.
As a percentage of revenues Gionee expense decreased 22 basis points to 3.7% in the third quarter 2019.
Other operating expense for 2000 for the 2019 third quarter was $4.4 million a decrease of $1.1 billion from the comparable 2018 quarter.
The decrease was primarily the result of lower member's interest expense driven by lower revenues and project margin mix.
We believe that our full year 2019, other operating expense will be approximately $13 million.
We incurred plateau acquisition related costs of $1.9 billion or seven cents per share during the three months ended September Thirtyth 2019.
Our operating income for the third quarter of 2019 totaled $12.2 million compared to $14.4 million in the prior year quarter.
As a percentage of revenue third quarter revenue third quarter operating income was 4.1% and 4.9% for 2019 at 18, respectively.
2000 operating income excluding acquisition related costs was $14 million were 4.8% of revenues.
Net interest.
Interest expense for the quarter third quarter of 2019 with $2.7 million down from $2.8 million into 2018 third quarter.
The decline was due to lower year over year or borrowings offset somewhat by higher interest rates.
Income tax expense was $900000 for the third quarter 2019, compared to 1.4 million in the 2018 period.
The decrease was primarily due to a lower noncash tax provision in the third quarter 2019.
Finally, non controlling ownership interest expense totaled $552000 for the third quarter 2000, 19000, 700000 from a comparable 2018 core.
We expect our non controlling ownership interest to total approximately $900000 for the full year.
NT 19.
[noise] the net effect of all these items resulted in third quarter 2019, net income of $8 million or net income per diluted share 30 cents compared to third quarter 2018, net income of 8.9 or 33 cents per diluted share.
Third quarter 2019, net income excluding acquisition related costs was $9.9 billion compared to net income in the 2008 quarter 18 quarter of $8.9 billion.
Similarly, third quarter $2000 net income per diluted share excluding acquisition related costs was 37 cents per share compared to 22018 quarter 33 cents per share.
[noise] EBITDA for the four quarters ended September Thirtyth, 2019 totaled $52.4 billion or 54.6 million excluding acquisition related cost in the period.
EBITDA was $52.3 million for the four quarters ended September 32018.
Moving to our balance sheet. We ended the third quarter 2019, with the cash balance of $76.5 million compared to $71.7 million at the end of the second quarter of 2019.
The components of our third quarter 2019 cash balance include generally available cash $51.8 million consolidated 50% on subsidiary cash of $19.8 million and construction joint venture cash of $4.9 billion.
Our net cash provided by operating to activities for the nine months ended September Thirtyth 2019 totaled $8.5 billion compared to $26.2 million.
For the 2018 period.
Subsequent to the ended the quarter, we resolve the heavy highway civil project dispute for which we expect to collect $15 billion to $17 billion in the fourth quarter.
Our net capex totaled $6.6 billion for the first three quarters of 2019 compared to $8 million for the comparable 2018 period.
In the third quarter of 2019, we made additional term loan prepayments and other debt payments of $4.7 million, bringing our total debt repayments to port $10.4 billion for the first nine months of 2019.
Consistent with our historical seasonal trends, we expect our consolidated free cash flow.
Our consolidated cash flow from operating activities to approximate to be approximate lead the same as our full year operating income.
Obviously with the closing a plateau.
In October two 2019.
The new Sterling operations, and our consolidated capital structure changes significantly.
In order to enhance your understanding of the Plateaued transit transaction I would refer you to the form 8-K, which Sterling filed on October 21 2019.
The form 8-K includes detailed description of the transaction.
Funds flow broken our balance sheet and income statements and the required annual and interim plateau historical statements.
Now I'll turn call over back over to John .
Thanks, Rob.
We're coming out of the third quarter very optimistic about our full year 2019 and are extremely excited about the outlook for 2020.
Our backlog is near record high with record high margins.
The Houston residential market growth is about to outpace Dallas and is a lighting perfectly with our expansion efforts and plateau will bring us further growth opportunities with highly accretive margins in a rapidly growing geography.
What do you put it all together.
2020 will be a transformational year for Sterling that provide a platform for many more great years to file.
We will provide more detailed 2020 guidance during our full year earnings call in March.
And with that I'd like to turn it back over to the moderator for any questions.
At this time will be conducting a question answer session if you'd like to ask your question. Please press star one on your telephone keypad, a confirmation tunlan, Kate and let US into question Q you May press Star too if you would like to remove a question from the Q4 participants using speaker equipment. It maybe that's your to pick up brands have before pressing the star Keith one moment, please while we pull for questions.
Our first question is from Sean Eastman Keybanc capital markets. Please proceed with your question.
Hi, gentlemen, thanks for taking my questions first one is starting on plateau I'm, just curious to get an update on plateaus outlook relative to when you guys.
During the deal.
Where revenues and margins trending for a plateau and kind of 1920 relative to those 2018 financials you guys disclosed.
Well I think where we feel very confident in a couple of things that margin should remain very consistent as we go into.
In the 20.
I'll tell you the few weeks that we have all of that.
Well brought on some nice bookings and see a really nice pipeline.
Objects point, even 20, so feel very good about 20.
We've said all along we expected growth trajectory in that business to be around 5% on a go forward basis, if they perform like they have historically over the last five years.
Number is higher but we feel comfortable with a 5% projection going into next year with what I'll call comparable margins to where the route. So we haven't seen any erosion on the margins or anything that would concerns for that show.
The other element is I think some out there and miss the magnitude of what purchase accounting.
Will require us to do.
Obviously, we have to write all the assets liabilities, so fair value, which will create a pretty sizeable.
Amortization.
Some of which is for property plant equipment under but the bulk of which is where intangibles.
We are really just in the forefront of trying to quantify those with our appraiser.
For the phrase or help.
But we continue to believe that incremental amortization between 12 and $15 million, so pretty substantial of of course.
That's factored into our.
Our quarterly and our future results from the date of acquisition. In addition, I'll remind people that some of those efforts and intangibles quick turn quickly for instance relate to backlog they will turn as the backlog turns and of course.
The backlog Bill Burns on average for plateau in less than.
About six months.
Total average longer than that but pretty close that that'll have a negative non cash impact on the early quarters of plateau ownership. So that's sort of.
Hi, Hi, Hi, Hi.
Highlights of what we're seeing so park.
Okay, that's helpful and maybe just.
Expanding on that a little bit as we look at sort of acquisition integration costs, just sort of incremental SGN a.
That we should be considering into next year as well just to get to kind of an accurate.
Pinned down on the GAAP accretion for next year.
Sure. So let me start we've got lots folks usually start asking about all the synergies.
There are essentially no synergies from out from an operational standpoint, it's quite the opposite little bit we in our early announcements and.
Work so far continue to believe that we will have an incremental.
5 million dollar spend over overtime embedded putting infrastructure inside the business for bringing up too.
Public company requirements for Sox, and walk reporting et cetera, et cetera. So that's our 5 million still our best estimate of what the incremental.
Annual expense will be coming out of there.
Okay, Great and then the other kind of area of focus around the deal has just been the leverage progression could you maybe just update us on the pro forma leverage at the deal close and what kind of progression we're targeting over the next 12 months in terms of leverage reduction.
Sure so at closing EBITDA multiple and so just over three.
From a secured debt standpoint, so we borrowed.
400 million dollar term loan at about $30 million under revolver, which is sort of what it's consistent systems.
The scheduled payments of all of our debt in 2000 and.
20, or approximately $30 million.
Spread out through the up throughout the year and we expect to make more more pay more payments and then just that but.
I think the goal is over a two year period to get that leverage down to around two which is sort of non acquisition run rate that we target.
Okay very helpful. And then just shifting gears a little bit I was just curious on the residential margin progression relative to some of the expansion plan. So so clearly the Houston expansion as drag in the near term and you guys are kind of growing into that footprint.
Just wonder if there any future expansion plans into other cities on the table.
And weather.
Maybe we should kind of keep our margin assumptions subdued based on.
Just continued sort of.
Geographic expansion in that segment.
Yeah, Shaun I would say that.
We we don't have the capacity to go beyond I'll call. It the Houston expansion today. So we'll continue to grow out of Houston as we go into 2020.
I do think its.
Two.
Be that over exuberant about the margins right now the Dallas margins would help very very steady, even though we've seen a shift too.
What's really interesting is the housing demand has stayed very high but the shift is gone to what I'll call 250000 dollar Paulson below at right now we're seeing all the builders and we said communications with the builders and some of the board members are trying to figure out how to convert landed developments as they had slated for I'll call for.
Hundred thousand dollar houses and above.
Just 200000 dollar houses of $250000 thousand below.
The good news is the slaps you got smaller as you saw were up 9% revenue, 18% slap count.
This was able to maintain its margins.
Houston will be a little drag in the growth rates in Houston next year will be higher than the growth rates in Dallas. So you will get a.
Slight tick downward on the blended when did March.
And I think just.
To help.
If you a few studs.
Margins in the third quarter with the same is Dallas were taught at $400000 incremental margin. These are not big numbers.
I think that's a good perspective.
And we have we have made some really nice improvements the team has done a static great job in Houston with some of the supply base and getting some of the costing.
Much closer to where we are in Dallas as you can imagine when you're when you're doing a market.
Even though the customers are the say the supply basis do and.
Starting from scratch would that whole thing to get enough critical mass in the relationships built there.
Okay, Great and then last one for me just to wrap it up you guys mentioned mid single digit growth outlook and residential is that kind of how we should think about 2020 and just in light of some of these markets shifts and expansion plans, how would you characterize the visibility around residential growth.
As Brian as we look into 2020.
I think that's a that's a good way to look at 2020.
What we're trying to figure out is how fast they can convert this land or when they decide to do up in Dallas, we seem to growth rates. There we haven't seen a decline we've seen it plateau.
So last year. It was as many slabs, we could build we could go do it seems to be more constant and more steady back in the Dallas market right. Now is they go through I'll call. It this transition to figure out how to build for.
On the on the sector is housing starts you felt from that 80% increase in slabs forward in the quarter that's both.
For mental Houston in incremental Dallas.
I still pretty strong theyre, just starting to be a little bit lower price per slab at this point in time, whether that whether and when that turns were not sure, but I think thats why we got to give you that mid single digit kind of.
Yes, yes.
I'll really helpful. Thanks for the time guys.
Sure.
Our next question is from Brent Thielman D.A. Davidson. Please proceed with your question.
Great. Thanks, good morning.
Right.
Hey, Brian I think you said 12 to 15 million an incremental.
Amortization related the transaction and that that would be somewhat frontloaded over the next six months. So presumably for Q1 Q can you flush that out anymore for us.
Not a whole lot I think that 10 to 12 is a longer that's our annual for some period of time.
Some smaller amounts of step up if you will that will crack off faster and it's too early for us to give you exact numbers on that but no. That's one of the reasons that.
The accretion in the.
In the fourth quarter is what it is.
The other factor now I Should've mentioned it earlier is why they don't mild plateau doesn't have the.
I.
Seasonal severity by quarter that the heavy highway heavy civil business does it does have sop and.
Same say map kind of from my standpoint of cues for is probably the slowest followed by Q1 and then.
Burn heavy and three and four so I think that's probably also.
Yes.
Similar but not quite a severe two or three express the hyper yes.
Okay.
And then maybe on civil is there any chance you'll be able to starting these large several jobs in fourq here that you wait and the construction season.
Yeah, it's highly likely even if we do Brad it's not going to move the needle I'd, rather do anything there in the Rocky Mountain States were real closer than some of the areas already had snow season right. So.
We have basically said, let's plan on virtually nothing or nothing in the fourth quarter and hopefully they'll ramp up late first quarter and help us the first half of next year.
Okay, and what did what are the for near term bookings prospects look like in that business community.
Given the fact, you may have a slower burn here in Fourq here do you think you'll be able to.
Go the backlog into year end.
Yes.
Always hard because its timing of bids and timing of projects in what you win right I'll just say overall bid activity still is very strong.
Said actually increased spend for next year higher than the 3% they've added 8%.
Across the country. So we'll see the trickle down effect to that in our markets.
We have not seen.
Seen or have really no concerns.
About the heavy civil side.
Amount of activity that's out there and the amount of projects that are out there will continue to be selective pick the right once.
We saw a great pick up and in the wins in margins in those wins in the quarter. Our goal right now is to keep tweaking that up and if we can pick up.
2030 basis points, a quarter, we'd be tickled to death.
Okay.
That's all have thank you.
Our next question is from Noelle Dilts Stifel. Please proceed with your question.
Hi, guys good morning.
No no up.
I was hoping that you kind of commented that on what you're seeing in terms of labor availability.
Yeah, I guess, particularly on the residential side any.
Challenges that you're seeing in terms of finding and retaining labor.
I'd be curious to hear how you're thinking about that.
Yes, we're we're pretty solid in in Dallas, we're kind of the.
Ill call it the premier property, where people want to go work. So we have a better opportunity to pull in labor is needed up. There is then R.R.R. nemesis in the Houston market on the rate of expansion.
Now what is happening is we're finally getting to a enough critical mass that we can keep crews busy consistently and we're starting to see better and better talent and picking up some some good labor in the into Houston market.
We're real close to landing a large development with one of the major builders here in Houston and that will give us enough critical mass going into 2022 to keep a I'll call. It eight based set a crews busy all the time and then it's easier to augment that I'll call. It the ebbs and flows with.
A couple of crews and.
We'll build that oil fee that we built in Dallas. So we're very close to that I think our guys you start feeling much better that they've got a couple stable crews. Thanks, a couple lessen that doesn't.
Stable crews are consistent with but the labor market is certainly a little either in the Houston market for us in Dallas.
Okay. Thanks, that's helpful and then any thoughts on that the potential highway bill and when we might have some clarity around.
How that's going to play out.
Yes, so everything's in front of the Senate past the first the first set of votes.
The seems like the pitchman issues have slowed down some of those activities.
We were really hoping by the end of October that that would have been back for the next round in front of the Senate Theres still trying to get something in front of them in November was the last that I heard.
But it seems like it slowed it down about a month.
But still out there and still active so it hasn't it hasn't gone away and then we're starting to hear on the campaign trail, a little bit more and more of the need for the infrastructure spend so.
Great. Thanks, and then last question just on Patel a couple of.
Areas I'd like to explore a little bit more so first.
Could you just remind us what kind of remind us of the visibility that you have with patents revenue streams.
How early Youre brought into the process on some of these projects.
And second could you speak to any opportunities that you might see to expand plateau geographically.
Sure. So as you can imagine.
I think a customer whether thats, Google or Facebook or home depot home depot, It's got a five year plan.
And these distribution centers that they put out it is out there.
They've got a plan to stop several years it's ads.
So they have what I've called a light look it multi years of whats coming from these key customers and then as they get into the budgetary sessions.
Our our portion, but it's just step back and think of the timeline to build the distribution center.
So our portion is relatively quick six months to nine months when we're completely out of there.
The length of time between you by the property start the project and finish it is probably closer to 18 to 24 months. When you put it all together so they've got to plan out multi years in advance as part of the planning session, where they want the expansion and growth our guys are getting visibility that.
We are seeing that and then as they get to that I'll call. It that 18, the two year window, they've got very strong visibility of of whats coming in are involved in the process generally at that point in time.
And then it goes from there to to execution. So as we look at 2020, we've got fairly good visibility of what's going to come out and be executed from the core customers and 2020.
The bigger variability that they have is is with someone like.
Google.
Were they change or an Amazon, rather where they change.
The design of the warehouses, so they're constantly refining their model, which will throw off the projects.
To some degree generally that helps us because there are still trying to hit their overall completion cycle, but that does but design phase takes longer and so very good visibility on it.
From I'll call it two years and Ken as you get out begets grayer at that point in time.
Okay, great, Thanks, and any comments on on potential geographic expansion.
Yes. So we we think that Theres a couple couple of different opportunities for those that we've spent a lot of time talking about plateau.
The growth strategy is that very simple in the past staying with what I'll call, but key customers that we have today and if we have margins that are high enough.
We will expand with them.
We think that within their own.
There is a fair number of other opportunities that are in I'll call it low to mid 20% margin.
Type.
Which.
Relative to us that they have historically not gone after and we're going to evaluate what does it cost and do we have the capacity to go after those in their existing market. In addition.
In our current footprint.
Our till stone business as a commercial side to it which does foundation slabs for parking structures.
Small condos office buildings.
But what fits into that footprint as well our data centers Dallas is one of the fastest growing datacenter markets in the us.
If it were figuring out how to leverage the relationships plateau has with their datacenter customers and is there an opportunity to expand them into the Dallas market they've done one job in Texas, They did very well on it they like the Texas market up in East, Texas.
In Dallas fits that kind of footprint and.
Soil conditions and soil types that they have done work in the past.
Thanks very much.
As a reminder, we're now conducting a question answer session if you'd like to ask a question. Please press star one on your telephone keypad for participants using speaker equipment, it maybe necessary to pick up your handset before pressing the star.
One other piece, while we pull for questions.
Our next question is from Gerry Heffernan Walthausen. Please proceed with your question.
Good morning, everybody and thank you and congratulations on a similar strong performance here.
Thanks Jay.
Yes, I know, we've talked about the resin business and the expansion into Houston here, a little bit just for purposes.
My I guess my own personal clarity here.
What is the ramp that you foresee.
For the Houston market to be working on margin par with the Dallas market.
Well two things are happening and the Houston market the Houston market is.
As we said the past Dallas has been the number one market us Houston spend number three.
Everything we're seeing everybody I thought you all the builders are predicting that Houston is going to overtake Dallas and it could happen in 2020.
Growth rates are wrapping up very nicely.
So we have a great opportunity to grow from up from what I'll call market demand standpoint.
I think it so we get up to.
Yes.
Over a dozen active crews working full time in the Houston market.
Before we get what I'll call, the consistent productivity out of that and the throughput in the subcontractor relationships, but we've seen some nice movement in the margins in Houston.
But at the end of the day. The question is the Houston built pads are a little bit different than the Dallas ones. We may always be a couple of points less in Houston, we may get on par, but it's not going to be half or anything like that so I think it's it's a it's it.
A small amount not a significant amount gerry.
We'll get there.
Okay. So maybe like I don't know what at 200 basis point difference in the markets.
Yes, you can see something like that in the end.
Hey.
Yeah, I think Thats probably fair.
Okay. Good in regards to the recovery of 15 million that was.
I'll, let Ron mentioned that was brought in in the fourth quarter.
Could you just give us.
We might is there anything more you can tell us about that in and approximately.
What dollar amount is out there that's currently under arbitration.
Yes, I think thats the vast majority of it so were resolved skewed on.
The argument was around.
It's going to be.
Basically design.
And we believe that we were owed money for sign them and we're still working on that project. So we resolve that.
Right right of what we thought we would do in the money is coming in.
And hopefully we can.
Jerry This is actually a project that was bid and started back in 2014 is the last of of anything before we put into new bid processes.
Knock on wood.
I always hate to say this gives you.
Makes me nervous, but since we have read on the bid process and put the controls in place we have not had any projects out there that have any major magnitudes of.
Claims against them in.
In relative terms and as we've said multiple times, we're still operating are executing at or slightly above par on those so this was a legacy project. It had major design flaws in it we've been working with the duty and with the end customer for about a year and a half on this one and finally came to re.
Resolution on it which was a great outcome for us and for that frankly.
And we should see that cash come in in the fourth quarter and.
It that's behind us so.
Well, that's certainly a nice event right. After you announce a large acquisition some extra cash coming in doesn't hurt.
That's exactly what we said we like.
Yeah.
And lastly, Joe could you. Please expand on the commentary that you made in regards to plateau.
The management team there.
Commentary of management team.
That is there too to run the show for quite a time looking forward.
And you also through an understatement of perhaps management that could be seen elsewhere throughout sterling.
I found that could be very interesting.
Yes, they've got.
Hats off to the to Greg and Brad Greg the owner of plateau, and breadth and the Chief operating officer.
They have got so really really talented people, starting with Greg and Brad Brad Young right reps get a lot of runway ahead of them.
It is really an outstanding guy as going to run the business.
Before but also underneath that underneath Brad they've got for relatively young guys that.
Yes.
The businesses get predominantly a large number of there.
People are degreed engineers and a lot of them have advanced degrees beyond engineering, so they're routed from a technical standpoint, probably from a business standpoint, and has just done a fantastic job with them. So as we looked at this acquisition and every other one one of the biggest things we look at as what is the population that.
Talents and is there a future talent opportunities.
And we've already thought on some of the initial meetings with kind of the key guys that though limit yourself to plateau as we grow the business down the road theres opportunities and rest of Sterling, they grow and help us and flat. So we're happy with that but there are of the talent level that as we go forward and continue to grow the rest of the enterprise, it's another pool and.
Other population of really good people, we can we can work moves through the company.
Well, that's great news sounds a sounds very exciting thank you very much.
Thank you thanks Gerry.
This concludes the question answer session and that will now turn the floor back over to Joe Catello for closing remarks.
Thanks again, everyone for joining our call today, if you have any follow up questions for wishes schedule. The call. Please refer to the contact information provided in the press release associated with our Investor Relations group at Sterling or partners at the equity group.
Appreciate everybody joining us today, everybody have a great day, and we'll talk soon thanks.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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