Q2 2020 Sterling Construction Company Inc Earnings Call
Oh now turn the call over to mister, Joe Costello. Thank you, sir, please go ahead. Thanks, Good morning everyone and thank you for joining Sterling second quarter 2026
Words cannot express how proud I am of what our team was able to accomplish in one of our most challenging times in our company's history with our primary focus on the health and safety of our people our customers and their families during the quarter. It's hard to imagine we would be reporting another all-time record quarter and raising our pull. This is truly a tribute to the culture of our people the power of our strategy in the transformation of our company without the nipple Des creativity and dedication of our employees and the diversity of our portfolio. We would have never been able to navigate the challenges put before us and deliver these results.
I'll be starting off on slide three in the slide deck put on our website during the quarter our back office employees transitioned overnight from operating and person operating virtually our field teams rapidly develop and deploy do procedures and protocols to safeguard their colleagues a covid-19 task force was assembled to share best practices develop response plans and ensure new processes and procedures were rolled out consistently.
these teams
And had daily and weekly calls to identify and fill any potential gaps for provide additional resources as needed.
During this time Sterling truly became one focused on the good of all.
In the quarter, all three sectors were deemed essential and performed at or above expectations is a hard work of our people and the power of our strategy played out perfectly with our heavy civil sector performed right on expectations while a residential and Specialty service sector which includes a recent acquisition of a plateau both significantly exceeded our expectations for the quarter.
I'd like to take a minute to give a little color around each sector starting with our heavy civil sector. We now have far less than 40% of our total Sterling busy coming from low bid heavy Highway work and continue to see strong bid activity in aviation and alternative delivery projects early in the quarter, We had a few bids and awards that were delayed. But by the end of the quarter all of our markets were back to normal and were running as planned.
We saw some productivity impact related to new procedures and temporary job shutdowns, but were able to offset most of that impact with reduced fuel costs and higher throughput do to lower traffic conditions.
Our specialty service sector which includes Plateau came into the quarter with record wins record backlog and rollover demand from a very wet web, February 9th, March.
This coupled with near Flawless execution and great weather in the second quarter enabled them to double their operating profit versus the first quarter of 2028 and greatly exceeded our expectations.
In the quarter, we did see a forty-five to sixty day delay and do bids coming out. However, by the end of the quarter activity had picked up significantly enabled us to enter the third quarter with our second highest all-time backlog of over a hundred and sixty million dollars.
In a residential sector, we anticipated a significant slowdown in the quarter as Texas implemented their stay home orders based on early analysis and took action provided by our major Builders. We anticipated residential would slow down approximately 30 to 50% in the back half of the second quarter and remain at these levels for approximately 90 days before making a gradual recovery for the remainder of the year.
Fortunately, we were all wrong the Texas markets a ten to fifteen percent dipped in May and wrapped up quickly in June in addition to the smaller and quicker recovery. We were helped by the heavy rains in March to push incremental business into April.
also
In the quarter, we saw a significant increase in value coming from our Houston Market expansion.
Versus Q2 2019 residential Revenue was up approximately 22% and operating income was up $24 25% So now let's go to slide for
our continued focus on growing the bottom line reducing risk and building a diverse platform for future growth has shown its value in both good times and in bad versus the second quarter 2019 combined backlog grew 17% our Revenue increased 51% to just over four hundred million dollars off gross margin was up over five hundred basis points to 14.9% our adjusted ebitda increased 166% to forty one point four billion dollars, and we saw a net gain in cash generated of fifty six point five million dollars a year to date.
With all these Great accomplishments. I record high margins and backlog is a rapid Rebound in a residential and Specialty Service markets. We are reinstating guidance and raised our full-year out for 2020. A revised revenues will be between 1415000000 and 1430000000. And fifty income will be between 41 and 44 million dollars with an EPS midpoint of a dollar fifty two with that. I'll turn it over to Ron to give you more details on the quarter and the full-year Outlook run. Thanks Joe and good morning everyone and please provide a summary of our 20 20 second quarter Financial results.
Would this thing the third quarter of including a big black toe acquisition in our Consolidated results most of the acquisition and new financing noise-related and related one-time costs are now behind us thus provide the a clearer picture of our financial performance.
The progress we have been making on our multi-year strategy including the transformational acquisition of plateau continues to be a parent and substantially all of our financial measures wage.
Today's conference call together with our earnings release form 10-q and the investor deck posted to our website should provide insight into our strategic process progress in delivering strong earnings and and strong cash flows with improving liquidity not to be overlooked this storm strong performance came during the most challenging. Across the country in many decades.
Now, let me take you through the financial highlights starting with our backdrop backlog metrics on slide number five.
Yeah, June 13th, 2020 our backlog total of 1134000000 dollars a 6% increase over the prior.
Approximately 62% of the backlog increase is related to growth from heavy from the heavy civil segment with a balance of 38% driven by Specialty Services which includes Plateau off in our commercial businesses.
The gross margin in our second quarter point backlog was 12.9% a record high end up 140 basis points from the beginning of the year.
Well the heavy civil and Specialty Services gross margin in backlog or higher at June 30th 2020 than at the beginning of the year.
unsigned low bids total $437 at the end of June 2020
things are second quarter with an all-time high combined backlog of 1571000000 dollars a 17% increase over the beginning of the year.
Our gross margin of our combined backlog increase to 11.7% at June 13th, 2020 up 11% from the beginning of the year.
Our book to burn factors for the combined heavy syllable and Specialty Services segments were a hundred and 11% and 137% for birth log in Combined backlog respectively.
Note that the book The Bird computations include only heavy civil and Specialty Services revenues residential which accounted for 11% of our Consolidated revenues does not report backlog. Is it recognized as Revenue as individual concrete slabs are completed.
We slipped a slight 6 for a summary of our Consolidated results.
No, just slide includes quarterly results for three periods the sequential first and second quarters of 2020 and the comparable period of 2019.
Given the magnitude of the plateau acquisition and the related financing and changes in tax and all accounting which occurred in late 2019. The first quarter of 2020 was included to highlight them a quote. So you stores close quote sequential quarter comparisons.
The first quarter for both the Legacy Sterling businesses and Plateau tend to be our lowest Revenue quarter primarily driven by seasonality across our Geographic footprint consequently off our second quarter of 2020 revenues increased by over 34%
Second-quarter revenues total of four hundred million dollars an increase of $103 over the first quarter of 2020.
Increase reflects Revenue growth for heavy civil specialty services and residential of 42% 30% and 21% respectively.
Any comparative quarter basis revenues increased $137 driven by the inclusion of $106 from the October 3rd 2019 acquisition of plateau.
Second quarter gross profit and gross margin for all three segments improved over the first quarter of 2020 driven by improved absorption of fixed costs from higher revenues and an improved margin mix of our work.
The second quarter twenty twenty degrees and gross profit from our 50% owned Consolidated subsidiaries resulted in a greater percentage of our of our heavy civil gross profit off consequently the other operating expense increased by one point eight million dollars as a result of the higher amount of income sharing expense.
Beginning in 2020 our income tax expense includes a non non cash tax provision of approximately 21% of our taxable income or approximately six point four billion dollars for the first month for the first six months of 2020.
Our second-quarter net income total 18.2 million dollars or $0.65 a share both the second quarter of 2019 where we reported net income of 7.8 million dollars or $0.29 per diluted share.
Second quarter 2020 ebitda also increased more than two times to forty one point two million dollars from 15.3 million dollars over the comparable 2019.
It's like seven highlights the second quarter segments results.
Heavy heavy civil revenues grew 10% in the second quarter reflecting the increasing backlog over the prior-year.
All of our gross profit and margin increased during the 2020. Operating margins declined by 1% or by 1.8 million dollars reflecting the additional members interests just earlier.
Additionally, the heavy signal the heavy civil segment was burned by hire additional cost associated with the covid-19 virus
The increase in Specialty Services revenue and operating primarily reflects the inclusion of plateau in the 2020 quarterly results.
Additionally Plateau entered the second quarter with record backlog and experience a poor poor weather in the first quarter, which pushed work in the second quarter of 2020.
Both of these factors enhance our second quarter 2020 Revenue bird.
Second-quarter 2020 residential revenues exceeded our expectation as a covid-19 revenue regulated impact was not as severe as our major residential customers expected at the beginning of the month and quarter.
Additionally our Houston Market expansion continues to pick up steam Houston economy for 14% of the residential second quarter, 20, 20 completed slabs compared to 6% in a second quarter of 2019.
The Houston ramp up in increasing scale has had a favorable impact on our operating income returns.
Now, let's move to slide eight which summarizes our cash flow generation and deleveraging strategy.
Okay, the graph presents are deleveraging expectations.
Beginning with the October 2019 Plateau Plateau acquisition and the 5-year credit facility are September 30th, 2019 pro forma. Ebitda covered ratio was approximately 6.5 times.
Based on our continued progress and executing the Strategic actions to improve our base business results in our confidence in the quality of the future flash Plateau cash flows. We were comfortable with the initial leverage ratio.
We set the objective to bring that coverage ratio down to two point five times by the end of 2021.
The graph reflects Warrior up-to-date enter targets through the end of 2021.
Importantly only the scheduled funded debt payments are included in the computations for the. Presented.
The $75 revolver which had availability of $55 million at the end of June 30th 2020 provides us with additional Term Loan prepayment flexibility.
Are conferencing in our confidence in our deleveraging strategy has been reinforced by the experience of three-quarters of a plateau results together with Sterling space business performance package Center Consolidated expectations.
example supporting our confidence include
record backlog levels with increasing backlog margins
Secondly our first six months of 2020 performance exceeded our expectations supporting an increase to our revenue and net income guidance for the year.
Importantly the first two quarters of the Year our seasonally slowest supporters, even without the challenges of managing through covid-19 shoes next. Are you took six months of 2020 total 61.5 billion dollars an increase of $37 over the 2019. In addition our cash flow from operating activities for the month or two quarters of twenty-twenty total 52.3 million dollars and Improvement of fifty six point six billion dollars over the comparable 2019.
Additionally for the full year twenty-twenty we expect additional non-cash expenses to Total 25 to $29 which consists of the utilization of our LOL stock based compensation and non-cash expense.
And finally moving to our balance sheet are June 30th, 2020 cash and cash equivalents total of 71.6 million dollars compared to forty five point seven million dollars at the beginning of 20.
Also, please note we have added a modeling consideration slide to our second quarter 2020 investor deck to assist our stakeholders and understanding the key components of our cash flow.
Now, I'll turn it back to Joe. Thanks, Ryan. I'll pick up on slide guy.
Again, I want to reiterate what a great quarter this was and how well the company is positioned for the future. Sometimes the most challenging times bring the best out of teams and our second quarter was a perfect example of that with our record backlog and record margins. We believe the heavy civil sector will remain consistent and on track for the remainder of the year with the rapid recovery of the Texas residential Market have a growth of our Houston expansion. We anticipate the residential sector will remain strong throughout the week. It's a 2020 and could even exceed or pull your expectations barring any significant changes in covid-19 strict ends.
With the recent increase in e-commerce activity along with the caliber of projects were seeing in the design phase. We are confident. The specialty service sector will be any backlog gaps. They have in the fourth quarter and finish the Year Strong.
The Tailwinds from our first-half performance coupled with the current market conditions if enabled us to increase our full-year guidance on slide 10 for the full year. We expect revenues to be between 1415000000 and 1430000000. We anticipate our net income to increase 73% over 2019 to a midpoint a 42.5 million and the midpoint of our adjusted diluted EPS to be a dollar fifty two.
This guidance demonstrates truly amazing performance and some very challenging times. And once again is a tribute to the caliber of our people in the strength of our strategies with that. I'd like to turn it over for questions.
Questions if you would like to ask a question, please.
What time a confirmation total indicate your line is in the question queue? You may press star to if you would like to remove your question from the Q4 participants using speaker equipment and maybe necessary to pick up your handset before pressing starkey's. Once again, that is star one to register questions at this time. Our first question is coming from Siemens of d a Davidson, please go ahead.
Hey, thanks.
And congratulations on a great quarter. Thanks.
Or Ron, you know just kind of looking at the Outlook the remaining quarters of the Year. I'll just get right to I mean it seems like it's at the pretty well bar relative to what you just did second quarter, you know heading into your seasonally stronger third-quarter, you know, I guess outside of residential. I know you have less visibility. What are the sort of variables we need to consider in that in that Outlook page. Yeah. What we've what we've done is we've got the heavy civil is is is you know, the backlogs there. It's it's locked and loaded and it's going to be pretty consistent. The only thing that's going a swing that anyway, is it maybe a project or two starts a little earlier than we anticipate but you're not going to see a lot of fluctuation in that anything we win for the rest of the year long is going to hit twenty Twenty-One. When you when you talk about the specialty service sector of what I mean. They just they had an amazing second quarter. Yep.
And they they will have a very good third-quarter, but they had a little bit of Tailwind from some work that was pushed out of the first quarter with rain that they were able to make that up plus do what they participated in the second quarter. So we think they're going to have a very strong finish that we built them into kind of hit their their original plan for the back half of the year. I will tell you if there are some nice projects out there and they've got much quick return than the heavy civil side. They will still book and build projects in this year. If they're to hit one or two of those towards the bath we could see upside to that business. But right now we've got a little bit of a gap in the fourth quarter. We feel very confident in and what we've got for backlog to get us to where we need to be in in a finished finishing your real strong on the residential front. We're letting them run out if it kind of the current days for the rest of the year, and we're not home.
Participating and we're certainly hoping that we don't see any further coded restrictions and that that market remains like it is so uh, second quarter was was a barnburner. I'd like to tell you we could do two more of those but the reality is that would be pretty challenging for us. So we'll have a very very strong back after the year and if residential picks up a little more we win a one-off jobs in the Specialty Service side, then we may even have the high end or some upside. Yeah. It's interesting when you think about the strengths of the Strategic moves and you have a a backpack full pedal down at the metal at at capacity. If you will pretty darn close for Plateau, you're really moves the needle what you got to remember ten million dollars to sit exam million dollars less Plateau Revenue these thirty-some million dollars with heavy civil Revenue to make up for it. So yeah it we we got some Revenue ramp, but it takes off.
A fair amount to to make up for such a powerful second quarter. So hopefully we got all cylinders going again, but we got some work to do get there.
Okay, and yeah, I guess to follow on that.
These are the best margins and Specialty or Plateau, you know, since you've owned it, I'm just wondering how you how this sort of compares to the expectations. You have going forward for the business office at the margins are where we anticipated and where we anticipate them to stay. The revenue side was a little higher than we anticipated in the quarter, but we feel good about the margins where they were and Thursday that would be our general expectation as we go forward and I think you see the same seasonal trends that we expected with the slowest quarter generally being the first similar to our civil business followed by the 4th, and then the second and third being the strongest just because of the the weather the weather patterns the summer and and things like that so so far no money, no surprise and hitting the hit the mark we thought we would that we brought him in.
Okay, and then on residential look like the Houston business is really ramping up. Just wondering, you know, whether the in terms of profitability whether that's nearing the DFW business kind of where those margins fit today relative to, you know, the print we have a couple of things and then run give you some more details on the margins, but we took we we're really pleasantly surprised not only with our internal ramp up but the Houston Market actually recovered a little quicker than the Dallas Market. He didn't didn't dip quite as far as the Dallas Market in May. So that's been very nice. The Houston Market now is number two in his catching Dallas and we think could very quickly past the Dallas Market. So our timing is perfect with the increased value. We saw a significant Improvement in margins in the Houston Market in the quarter. We're still not up to the the Dallas margins birth.
I think more critical volume and and more resources and and those sort of things will ultimately get us closer to those margins, but we're very happy with the margins that we got out of out of Houston are relatively before anything for them. Yeah, and I think we've reached equilibrium on the average price of a slab if you recall last couple of years. We saw a pretty significant move to first home buyers, which of course equates to smaller home smaller footprint less Concrete in the slab that pretty much has leveled off. We hope to have some better comparability prospectively. So the average Priceless revenue from a slab was you know, within one per-cent in both per second quarter off and your total slob count was up close to 8% So the volumes there we just gotta do 8% more more work to get the the bigger footprint rather than side but dead.
I think the that growth is really as planned if you think about it. So without that we would not have had without the expansion into to Houston to diversify our Revenue. We would not have an order in that in that businesses.
Okay, and just last week guys, I guess for the rest of the year. We still expect you. You can at least free cash flow your net income like you have in the first half. There's no cool for anything like that in the quarter know I think quarter was pretty normal. I would expect kind of that pretty darn close to operating income as easy as they can. Look at and Thursday. We're still in the same range. They've got a larger range in the even decide. So nothing nothing too crazy in their seasonality wives.
Okay, great. Thank you. Great job.
Thank you our next question.
A gentleman compliments to the team nice nice work this quarter.
Thank you. So you talked about this a little bit Joe but last quarter you had talked about this Dynamic and Specialty where you know, there is a book and burn work in the second half, you know, some sort of capacity in the second half that you know would need to get filled up sounds like a ward activity really picked up exiting the second quarter off, but I just wanted to touch on you know, how that Dynamic is shaping up relative to you know, maybe some of the concerns around some of the more secular or hostility of projects that Plateau was kind of pursuing there any update around that Dynamic could be great. Yeah. Yeah. So the the great news is well, we were talking kind of early and mid quarter. We still have gaps in the third and fourth quarter of three quarters of booked. It's. We've got, you know a small game.
After the fourth quarter, but we're reflecting that in our numbers, but we have see the activity picked back up. We had a we had a lot of folks that were raised what I'll call the the two-yard line and the 5 yard-line and stuff just went to a stop right but as we got the end of June certainly as we're in we're in July. We saw that activity pick back up. It looks like it's back on normal Pace. Only are we seeing a lot of project activity? We're seeing some very very good projects out there that we're actively working on and if it goes back to normal, which we think it is, uh, we should see some some of those hit in the third and fourth quarter and not only position us for for Thursday for the year, but that team is very bullish on 20 21 in the Outlook is we go into it, you know, the the one soft area we see this little bit of recovery and Thursday.
Multi-family housing which is not a large part of business but remains.
Less active that certainly residential home side of it. Yeah. I'm on the multi-family peace in the commercial side of the business. I would say up until about two to three weeks ago. We had really seen very little activity in are just starting to see that picked up the kids.
Got it, that's helpful. And then you know residential, you know clearly, you know Market trough and Recovery shaped up better than expected. I just wanted to check back in on the pricing discussions, you know, you know, how are those you know Dynamics running with sort of the recovery, you know you starting to you know, recover some concessions you might have been so we actually shows, you know, the is we talked about shipping the business and growing and adjacent markets going to customers where we can add value in value the services and and value proposition would provide I think this is yet another very good example of the difference between the residential world where we are very very close with our top four or five customers, which are the top four or five biggest builders in the country.
It also in the plateau side with the Red Markets put if if we gave price concessions in the heavy Highway Market, we would have about zero chance of ever recovering about in the residential world. It was really interesting experience. We went through and is a you know, really a tribute to the the quality of our our customer forget us for a per minute, you know, they came to us and said hey look this is going to be a challenging time or not. Sure how bad it's going to get we need some price concessions. We need to lower wage pricing to get inventory through Etc et cetera. And if the market comes back, we'll come back to you almost like clockwork when we saw the starts pick back up off one after another Builders came back to us all over about a two week period and said we're taking you back to your historical pricing, which is really really nice to have customer.
The honor their word and and we help them through the tough times and and they're there to help us get back to where we need. So, uh, I would say is we go into the when we got into the middle of July or so we started see pricing come back and we'll see that uh in the third quarter to some degree and and in the fourth quarter for a while.
Okay, got it. That's helpful on the heavy civil margin sides. You know, we're a little lighter than we're modeling in the quarter. You know, there is this members interests Dynamic that may talk us through over the balance of the year and you know how to think about you know Mars in the long term and this is Colby cost dynamic as well would be helpful to touch on in terms of the go forward sure what Ron get into the details in a high level are actually are on the gross margin level. Our margins are better off. This is one of the complications of our fifty-fifty adventures. The good news is they uh perform better than they have historically have unfortunately. We have took half of that. So it comes out of the bottom line run you want to explain that a little more shirts SAR
With some nice projects going on.
Nevada slash Hawaii another Island business. So they they've had a great first half. Uh, so the the good news is we have more more expensive believe it or not. Sure. What that means is you do the math one point eight million dollars incremental sharing. They're both about 50. Well, they're both 50/50 out of these which meant that gross profit from the collective two entities increased off by by three point six million dollars half of that would give back. So that's just a mix item in the second quarter. Obviously, there's a pretty good-sized ramp coming up in the 3rd second and third quarters just because that's our big business big business for our other heavy civil businesses. So while that the fifty fifties will continue to have a strong year that it'll be diluted a little bit from the how how was noticeable in the first quarter.
So as part of our slide on modeling considerations, we actually have increased original estimate for the fifty-fifty sharing for both that and the in total was eleven to twelve dollars for the full year that sort of what that would be the other operating expense total. We now provide some Outlook. It says to be 14 to 16 as you can tell most of that increase wage worker in the first half year. So I think the point is the balance of the year will be, you know, relatively consistent with the past.
Got it. Okay, great and just lastly from you guys. Just want to make sure I understand, you know good disclosures on the kind of free cash flow modeling, but maybe just to make sure you know, I'm reading the ebit to operating Cash Flow Bridge correctly. I think I think the non-cash items are clear. But you know the one piece that kind of confusing us is the is the tax part. So just trying to understand just you know, that even operating cash flow make sure we got that that kind of understood correctly sure. So you'll call at the end of the year, you know, I care about this every now and then that our core competence for many years with generating animals.
I see businesses. We started using those animals. So the counting requirements after you have a sustained profit profitable past requires you to put that acetone looks we brought it off probably five or seven years ago. So in the fourth quarter, we had a bunch of non-cash income coming from putting an asset on a book. It's basically a receivable for the month. So we we will be providing and had to drive in the first half just over a effective tax rate of 28% and 21% is of that number is federal income taxes. We will pay no federal income taxes in 2020. So that's the the number I mentioned in the script A little over six million dollars of tax provision that will not be cash the cash portion of it which is give or take for it's close to five plus or minus five million dollars for the full year is all state income taxes off.
which which
Shall we paid almost nothing in the first half in cash primarily because of the the the the US government and the federal government the states followed the US government should suck at the delaying the payment of Prior year's taxes due and the first two quarters of estimates. So we paid a fair amount of cash out about half that 5 million dollars beginning in third quarter, but they always cash is that that is that 5 million dollars give or take for the for the year of which probably three of it plus will be in in chemistry and the balance that you for dead.
Before that we had less than two hundred thousand dollars of cash payments in the first half. So that's probably about the largest of those strange one. And then the other one that is dead. Non-cash side is stock-based compensation. That is pretty much pro-rata with income. So that shouldn't shouldn't have any whipping in fact in it by by a pluses and minuses and and that number is expected to be I think the range that we have in the back is 10 to $12 for the full year about half as in the first half.
Okay, great. Okay, great all super helpful responses and you know congrats again on a good job this quarter. Thanks guys.
Thank you are next question is coming from Jerry Heffernan of Walton Houston, please go ahead.
Good morning, and thank you very much for and I guess all your employees for for such a grade reports here. Thanks.
Supposed to do a couple of things here just for the purpose of clarity on on slide eight. You show the forward-looking, but God debt coverage ratio you show up the current month leverage point, but I think to get that you need to use some different numbers for the third quarter and fourth quarter and 9:15 to to get the proper trailing-twelve-month because you use them they use them numbers with with plateau in there and it could just give us those numbers. So everybody's thoughts are as to how you're coming to the 3.2.
Sure, these are all forward-looking ratios. So at the beginning of the year even range and which hasn't changed by the way, but range for 20 28 was 100 to 125 to 135. So we use the midpoint in all those calculations. So what we've done so be in the air is pretty easy total funded debt off and thirty million dollars is your rounds to that 3.5 just a little under it has started the year and what we've done going forward is m a modest increase as as we look forward. We use the continue to use the 125-130 average. I'll call it for the for the full year and we have a modest home 3% increase in our estimated even in the out years in L quarters. So basically it's still in that 1:30, 125-135 rage and our total funded debt wage.
total total of long-term and
Current data, what were using so that matches where I get that. I just I was honing in on the 630-2020 actual to get home. But the last 12 months either. Number for the actual number there.
Yeah, I can give you that. It's not with the calculations based of its forward-looking, but I'd have to dig that. Okay, I can that's that's fine. When when I saw actual I thought it would be using the actual either death always forward-looking.
Okay, in the first quarter we talked about, you know, we're certain a lot of concerns and they were told it was going to bring and they said you spoke to capex coming down to a 1525 million range from a twenty-five Thirty million stated at the end of nineteen. I think we're at 14.6 million so far. Do you have a new number for where you foresee capex for the year?
We do we went back to the twenty-five to Thirty million Thirty million dollar net number. So that's really the two biggest components. Are there about half each month is about half little over half of that is Plateau their volume is is requiring some more capex or pretty much going back to our original expectations with just with the support of their quarter and this the volume will work happening the the
They need to they need the work. So as we as we went into a huddle for going forward and uncertainty we put in measures to control capex. It wasn't critical frankly expected some downside Revenue side in the back half of the year with the performance of the second quarter and looking at the third now in the visibility. We have typically have the plateau South and having suicide we're back at what we originally started the Year. We're looking at so it's back to the 25 to 30 million dollar NetSpend on on capex 80% of that equipment refreshing if you will.
Okay, great again going back to the fourth quarter or your end. We we talked about two large design build projects that product projects. They were being having a delayed start are those projects that are cranking out the news now that we're we're talking about with the additional, uhh, the way the operating margin looks lower because of the member payments to the JV partners.
Yeah, they'll that the JV work or the big contract work. There's four of them will start being noticeable in Q3. We had some Revenue in there, but I'm not a huge number so going we have one, you know included in our record backlog combined backlog or unsigned is one project about two hundred million dollars of that for May plus almost $500 above signed that project we've gotten some releases on about somewhere to twenty-five forty billion dollars. So we're doing some early work wage, but not at a pace that we had thought. So that is pushing towards the the end of the year, which is fine. Cuz the other three projects one is going full speed. It has been going full speed off the other two are ramping up as we as we speak second second quarter of started third quarter will will almost get to a Runway by the by the beginning of the fourth quarter.
the plan for those other two
Okay, great. And just the last question here just do some backup checking here in the
Jerry you there and hey Jerry, could you repeat that? We lost we lost her for a minute. Sure. I'm sorry. I'm hearing some crack in my side two fourth-quarter. We talked about a bridge project in Texas where you were happy that you had finally gotten to some agreements on how to handle future design changes and buildings and things like that. Just want to do here how that was going. If all the efforts to come to agreement is playing out the way you had hoped it would
Yeah, we came to we came to all the agreements and and everything year and and and I got the cash ever forget. It was late in the year early early this year. So we're still continuing to build those. Uh, one of the the first bridge will be done kind of early. Well actually two of them would be done in early as January and a third one will be done in June of next year of the first bridge is pretty much right on schedule II two are running a little ahead of schedule at this point in time. So we continue to point through that project.
Great, great. Everything else looks great here. Thank you for all the work you did and thank you for the attendance. It's some real good information.
Thank you. Hopefully helpful. There's a lot of moving pieces and it's Joe mentioned. We're not the simplest organization you ever want to run into so we try to help.
Thank you at this time. I'd like to turn the floor back over to mr. Costello for closing comments. Thanks, Donna and thank everyone else. I like to thank everyone again for joining cost at today's call. If you have any follow-up questions or wish your schedule a call. Please refer to the information provided in the press release associated with our investor relations group in Sterling or our partners at the Equity Group.
I hope everybody has a great day and thank you again for participating.
Off the webcast at this time and have a wonderful day.
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