Q1 2023 Sterling Infrastructure Inc. Earnings Call
Speaker 1: C.
Speaker 2: this conference is being recorded. It is now my pleasure to introduce your host, Noel Bilts, Vice President of Investor Relations and Corporate Strategy. Thank you, you may begin.
Speaker 3: Thank you, Paul. Good morning to everyone joining us. I'm pleased to be here today to discuss our first quarter results with Joe Cattillo, Sterling's Chief Executive Officer, and Ron Valshmitty, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter.
Speaker 3: Ron will follow that up with a detailed discussion of the financial results, after which Joe will provide a market and full year outlook. Then we'll open the call up for questions.
Speaker 3: Unless otherwise stated, all numbers discussed today will be for continued operations which have proved our late 2022 to the vestiture of Myers. As a reminder, there are accompanying slides on the Investor Relations section of our website. Before turning the call over to Jill, I'll read the State Proper Statement. Thank you for your time.
Speaker 3: Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Sterling's most recent 10K and 10Q filings for more complete description of risk factors that could affect these projections and assumptions.
Speaker 3: The company assumes no obligations to update forward looking statements as a result of new information, future events, or otherwise. Please note that we may discuss EBITDA, adjusted EBITDA, adjusted net income, or adjusted earnings per share on this call, which are all financial measures not recognized under US Gap.
Speaker 3: As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings relief issued yesterday afternoon. I'll now turn the call over to our CEO , Joe Cotillo.
Speaker 2: Thanks, Noel. Good morning, everyone. Thank you for joining Sterling's first quarter 2023 earnings call.
Speaker 2: It's always great to be able to discuss strong results, but what I'm really proud of is what our Sterling team is doing to achieve these results.
Speaker 2: Our people are out in the field every day using their entrepreneurial spirit to win projects, execute flawlessly, and push sterling to the next level. This is even more impressive when you consider the unprecedented supply chain and macroeconomic challenges.
Speaker 2: we are facing. This team is delivered quarter after quarter and is doing a great job.
Speaker 2: In these dynamic times, it is important we stay committed to our guiding principles the Sterling way.
Speaker 2: environment and get back to our communities while working to build America's infrastructure.
Speaker 2: These values have again helped us to deliver another record quarter.
Speaker 2: Safety is a cornerstone of how we operate.
Speaker 2: This week kicks off National Safety Week, which we believe is a great time to reflect on both our success and achieving one of the best safety records in the industry.
Speaker 2: on what we can do to further these efforts.
Speaker 2: can do to further these efforts. This is a particular report.
Speaker 2: as we head into the busy construction season. Moving to our financials, our first quarter results capture the resilience of our business model. In the infrastructure, which is now over half of our revenues and is our fastest growing highest margin segment, we delivered 22% organic top-line growth.
Speaker 2: This reflects a rapid increase in activity related to high value advanced manufacturing projects. We have announced some of the largest projects in the company's history over the past few months.
Speaker 2: This reflects a rapid increase in activity related to high value advanced manufacturing projects. We have announced some of the largest projects in the company's history over the past few months, and we see more of these opportunities on the horizon.
Speaker 2: Data center activity also remains strong as our customers push to manage continuously increasing data demands. EFS structures operating margins declined 80 basis points from the prior year, driven by seasonal weather impacts, supply chain disruptions, and mix.
Speaker 2: We expect to see improvements in the segment margins as we move through the year.
Speaker 2: Results and transportation solutions reflect our strategic progress in shifting the business away from low bid at the highway work.
Speaker 2: was offset by price. This compares to a 29% decline in single-family home starts nationally in the first quarter. Looking at our residential slab volume trends in more detail, Houston was extremely strong in the quarter as we nearly doubled our slab count and saw sequential increases each month. Our strategy to capture share is working. Dallas and Phoenix started the quarter off slow.
Speaker 2: were picked up in March with Dallas picking up early in the month and Phoenix later.
Speaker 2: Solid volume trends have continued across each of our geographies into April . First quarter building solutions operating margin declined 150 pieces points from prior year driven by a mixed shift towards inherently lower margin commercial work and continued escalation of concrete prices.
Speaker 2: Shifting over to consolidated results, revenue was up 10% relative to last year, and our adjusted EBITDA grew 13%. We grew our combined backlog to 1.75 billion, up 4% versus year end 2022, and delivered 64% per share to our shareholder list. As we look to the remainder of the year, we expect a continuation of strong demand, and the infrastructure and transportation solutions, and a gradual recovery in building solutions.
Speaker 2: Our strong backlog position gives us confidence in our previously issued guidance ranges, which we are reiterating today.
Speaker 2: Based on our first quarter results, we believe we are tracking towards the high end of our 2023 guidance, which suggests a 13% increase in revenue and a 14% growth in net income. With that, I'd like to turn it over to Rod, give you more details on the quarter. Rod?
Speaker 2: Thanks Joe, good morning. I am pleased to discuss our record first quarter performance.
Speaker 2: Let me take you through our financial highlights starting with our backlog metrics.
Speaker 2: At the end of the quarter, our backlog total $1,624 million, up to $210 million of the year.
Speaker 2: The gross margin of this backlog was 14.8%, a 50 basis point improvement over the beginning of the period.
Speaker 2: The 14.8 percent backlog margin represents the highest backlog margin in our history.
Speaker 2: A higher proportion of e-infrastructure backlog and increased transportation backlog margin drove this improvement.
Speaker 2: Unsigned awards at the end of the first quarter totaled $131 million.
Speaker 2: We finished the first quarter with a combined backlog of $1,755,000,000, a $65,000,000 increase from the beginning of the year.
Speaker 2: Our growth profit in combined backlog was 14.6%, an increase of 40 basis points.
Speaker 2: from the beginning of the year. Another historically high watermark.
Speaker 2: Our first quarter, 2023, booked the burn ratios for 1.6 times the backlog and 1.2 times for combined backlog.
Speaker 2: Revenue for the first quarter was $404 million, up $38 million over the 2022 comparable period.
Speaker 2: As a result of our strong backlog and opportunities across each of our markets,
Speaker 2: we are confident that we will be well within our full year revenue guidance rate.
Speaker 2: well within our full year revenue guidance range. 1.9 billion.
Speaker 4: $122 billion.
Speaker 4: Our current quarter e-Infrastructure revenues were $206 million, a $37 million increase over the prior year period.
Speaker 4: The e-commerce, I'm sorry, the e-hip structure.
Speaker 4: Organic revenue growth of 22%. Reflects a continuing strong demand for data centers, distribution centers, warehouses.
Speaker 4: and more recently the new manufacturing opportunities across our expanding footprint.
Speaker 4: Transitation marked revenues were $111 million in the current quarter, a decrease of 5 million, or 4% from the 2020 period.
Speaker 4: The revenue decline was driven by a shift of transportation resources to perform additional higher margin e-infrastructure work.
Speaker 4: The first quarter building solutions revenue were $87 million.
Speaker 4: compared to 81 million dollars in the prior year period.
Speaker 4: This increase was driven by commercial activities, primarily in the multi-family market.
Speaker 4: Residential revenues of $54 million in the quarter, essentially flat with the 2022 comparable period.
Speaker 4: Current quarter consolidated gross profit was $62 million and increases $7 million over the 2022 period.
Speaker 4: Gross margin increased to 15.3%, a 20% point increase over P22.
Speaker 4: This consolidated margin increase reflects an increased mix of revenues from our high-margin E infrastructure segment and increased margins from transportation solutions.
Speaker 4: Building solutions roast margins were down slightly due to a higher mix of commercial revenues which carried a lower margin percentage.
Speaker 4: Consistent with our financial expectations for 2023, our gross margin improvements were negatively impacted by our continuing supply chain challenges in our infrastructure segment and inflationary pressures which were primarily impacted by our economic conditions.
Speaker 4: in our business solutions segment, specifically the cost of concrete. General and administrative expense in the quarter increased $3 million to $23.3 million.
Speaker 4: The increase was driven by general inflation and increased revenue-related incremental costs. We continue to expect our full year G&A expense to approximate 5% of our revenues.
Speaker 4: Operating income for the quarter was $32.6 million, an increase of $29.4 million over the prior year quarter.
Speaker 4: Our current quarter operating margin to increase to 8.1%, compared to 8% in the prior year quarter.
Speaker 4: current quarter operating margins increased 8.1% compared to 8% in the prior year quarter.
Speaker 4: our effective income tax rate for the first quarter was approximately 26%. our first quarter tax rate benefited from increased tax deductions related to stock based compensation.
Speaker 4: We continue to expect our full year 2023 Effective Income Tax rate to be 28 to 29 percent.
Speaker 4: The net effect of all these resulted in a first quarter net income of $19.6 million or 64 cents per share.
Speaker 4: We reaffirmed our full year 2023 Ed income guidance of $104 million to $110 million.
Speaker 4: and our EPS guidance of $3.33 per share to $3.53 per share.
Speaker 4: Keep it tough for the quarter, a total of $45.9 million, an increase of 14% over the prior year quarter.
Speaker 4: As a percent revenues, the betide proves 11.4 percent.
Speaker 4: up from 11.1% in the prior year quarter. We expect our 2023 EBITDA to be in the range of $220 million to $235 million.
Speaker 4: A cash balance increased by $21 billion to $202.6 million at March 31, 2021. Cash growth operating activities for the quarter was very strong, $49.1 million compared to $26.6 million in the prior year quarter.
Speaker 4: The 2020 re-operating cash flow improvement was driven by the significant organic growth of our E-Infrastructure segment.
Speaker 4: as well as favorable improvements in a consolidated working capital.
Speaker 4: Cash flow from investing activities was a positive $6.5 million in the quarter.
Speaker 4: The increase was driven by the receipt of $14 million from our late 2022 Myers-Daviester.
Speaker 4: This was offset by 7.5 million dollars of net capital expenditures.
Speaker 4: We continue to expect our full year capital expenditures to be in the $55 to $60 range.
Speaker 4: reflecting a strong organic growth of e-Infrastructure solutions. Our cash flow for financing activities was a $35 million cash outflow in the quarter, primarily from debt repayments of $31 million.
Speaker 4: Considering the diversity and the strength of our portfolio businesses.
Speaker 4: Our strong liquidity business and our comfortable unit to leverage.
Speaker 4: We are well prepared to take advantage of the additional opportunities in 2023 and beyond.
Speaker 4: Finally, as you may have seen this morning, we filed a Form S-3 shelf registration statement with the FCC.
Speaker 4: The new shelf allows us to choose securities periodically over the next three years to expand our liquidity options within our capital structure.
Speaker 4: The spiling will replace our 2020 shelf with two fires next week.
Speaker 4: We believe having a refreshed shelf on file and available to use is a best practice.
Speaker 4: We have no current intentions to issue any securities at the current time.
Speaker 4: Now, I'll turn it back over to Joe. Thanks, Rod.
Speaker 4: Now, I'll turn it back over to Joe. Thanks, Ron. As we look forward,
Speaker 2: We believe Sterling has a critical role in the build-out of our nation's infrastructure. Whether this is the data infrastructure that enables our increasingly connected way of life.
Speaker 2: Next generation manufacturing facilities that are bringing production back to the US. The highways, bridges and airports.
Speaker 2: that connect us or the homes we live in, sterling, is leading the way.
Speaker 2: We expect the e-Invastructure will remain our fastest growing, highest margin segment for the next several years.
Speaker 2: The reemergence of US manufacturing through ensuring is happening faster than we anticipated.
Speaker 2: The reemergence of US manufacturing through onshoring is happening faster than we anticipated and the projects are very large.
Speaker 2: Our recently announced awards for Hyundai and Rivian exemplify the types of opportunities we are seeing.
Speaker 2: We believe that we are one of the few companies in the US that can take on projects of this size and scale.
Speaker 2: This, coupled with our proven ability to deliver projects on time, makes us a key, trusted partner for our customers.
Speaker 2: Data center activity remains strong and the need for data management continues to grow. Every day, more technology is integrated into our homes, businesses, and infrastructure. Our customers are racing to build the capacity they need to stay ahead of the demand curve.
Speaker 2: While e-commerce distribution center activity with Amazon has slowed, other big name retailers continue to build out their networks.
Speaker 2: We expect Amazon Distribution Center activity to remain muted in 2024 with a rebound in 2025.
Speaker 2: We will continue to look for acquisitions in this segment to add further capabilities for geographic coverage.
Speaker 2: In our transportation solution segment, we continue to improve our margins by focusing on alternative delivery highway, aviation, and rail. In addition, we're taking advantage of...
Speaker 2: and looking for more opportunities to support the building solutions and e-infastructure segments outside their geographic footprint.
Speaker 2: We're now seeing awards and project activities driven by the new infrastructure bill.
Speaker 2: One key benefit of the higher levels of bid activity is that we can be even more selected and pursue what we believe to be the most attractive projects.
Speaker 2: Notably, aviation, which has traditionally been some of our highest margin work, has taken longer to release new projects associated with the infrastructure bill. However, we are seeing nice activity in the design phase and believe we will see strong bid activity later in the year. Overall state and federal funding.
Speaker 2: for transportation initiatives is very strong and should allow for strong, steady opportunities and large expansion over the next several years.
Speaker 2: In Building Solutions, we continue to see good growth in multifamily as first-time homes have become less affordable.
Speaker 2: On the residential front, we are encouraged by our significant acceleration and slab volume in March and April .
Speaker 2: and by the public comments from our top customers. We continue to believe that Dallas, Houston, and Phoenix markets should outperform the national average.
Speaker 2: But more importantly, there is an immediate opportunity to pick up additional resources to support long-term gains and share.
Speaker 2: We continue to look at adding additional services and capacity in 2023 if the right opportunity presents itself.
Speaker 2: The strong demand for infrastructure services across the country has helped us get off to a great start and gives us high confidence in our full year outlook.
Speaker 2: More importantly, we believe this demand is going to continue over the next three to five years, and will provide us with even more opportunities.
Speaker 2: With that, I'd like to turn it over for questions.
Speaker 5: We will now be conducting a question and answer session.
Speaker 5: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. May press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hand step up for President Starkees.
Speaker 5: If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star two. One moment please while we poll for questions.
Speaker 5: Thank you. Our first question is from Sean Eastman with KeyBank. Please proceed with your question. Are you there, Sean?
Speaker 6: Hi guys, can you hear me? Yep, we can now. How are you? Hi, nice start here guys and Noel congratulations on the new job.
Speaker 6: Can you hear me? Yep, we can now. How are you? Hi. Nice start here, guys. And Noelle, congratulations on the new job. Thank you.
Speaker 6: I think it's great you guys got a real ringer here and at the same time relieve Brent and I have some competition so really fantastic development there.
Speaker 6: So maybe starting on the e-infrastructure margins, just a little more color on the lower year-on-year performance in the first quarter. I'm just wondering what's in that bridge and how do we think about the trajectory from here.
Speaker 2: or have short durations work on. So if we look at southeast less impacted, more so in the northeast, winter through the winter, we tend to see a little dip. In addition, what we do during that period of time is we take advantage of the slow period.
Speaker 2: And we ramp up or revamp and rebuild and do all of our stuff to our equipment so that we're ready to hit the busy season running. So that adds some cost and takes out some productivity as we have less equipment out there working and getting that ready. We see those margins coming back. That doesn't concern us. We can do your tie-up rate.
in the customer base we're seeing here where perhaps that traditional distribution warehousing customer base is going to be outpaced by maybe some of the manufacturing you know larger manufacturing jobs on a go forward
Is there any difference in the approach to project execution for those customers relative to that traditional customer base that you guys are having to adapt to?
No, it's all about speed. It doesn't matter if it's an Amazon distribution center, a Facebook data center, or a Hyundai battery plant. We're winning on our horsepower and our capabilities to get projects done faster.
We were just at the Hyundai job two weeks ago. I think it was now and we have got 200 of the biggest piece of equipment you've ever seen on the first 200 acres. We have to have traffic control. That's how many pieces of equipment and how fast they're moving. So it's fundamentally the same stuff. That's the beauty of it. We.
whether it's a data center, distribution center, manufacturing facility, it doesn't matter. We just like bigger, more dirt that has to be moved. That's our specialty.
Okay, very helpful. The comment about transportation solutions reallocating some resources to e-infrastructure, that's kind of interesting. I wonder if there's some sort of deeper integration happening that could improve the
your visibility into the overhead leverage in the model over time? Or maybe I'm overthinking that comment. Yeah, I don't know if it's as much in the overhead. The way I looked at it, and this is also a little bit of our margin erosion of the first quarter, what we've done is we've had an opportunity to leverage some blue chip customers that are doing projects out in the Rocky Mountain areas.
And we certainly would plateau and patilla don't have capabilities, but our RLW business does all of the Rocky Mountains continuously. So we've leveraged those resources to do data center up there in a manufacturing facility. And it's worked out really well. Now, their margins are not quite as high.
is we would get out of plateau and patello just because of the efficiency those guys have and the horsepower they have they have a little bit smaller equipment out on the Rocky Mountains. But we'll continue to look at that and the way we think of it is a yellow, a PC yellow iron, a PC yellow iron. What's the best return on tap that we can get out of that piece of equipment?
And the private sector is traditionally always been higher margins than the public sector. So ideally if we could continue to shift a little more of those resources over there, our total margin goes up as a company and our retirement on capital continues to go up.
Okay, interesting. And just one last one for me, a little higher level. I mean, how would you frame the operating environment or operating conditions as we head into this year's busy construction season versus last year just...
relative to supply chain, equipment, material deliveries, pricing being commensurate with the cost environment. Maybe just help us contrast where we're at this year versus last year on that perspective.
I think on a positive front, availability has become better is a general statement. Fuel is somewhat stabilized though. There's talks that they're going up this summer again. Pipe lead times are still extremely long.
We're still seeing increases, but the one dichotomy or challenge we have is concrete prices are still going up as the builders are putting more and more pressure on price concessions to the supply chain on it. So that's a little bit of a disconnect on what you would normally think.
Wood is stabilized and has come down, but we don't use a ton of wood. Agregate in general is still up, but we're at least able to get materials right now. Equipment of allability is out there again. We've seen that over the last quarter. The downside of that is about 30% for expensive to buy the same piece of equipment this year, as it was 18 months ago.
So we'll still have what I'll call the productivity challenges in e-Infrastructure until we can get the material sequencing right. There's some redundant work that has to take place there.
A little bit of challenge with concrete on the residential side. The rest of the stuff I would say that is stabilized and is on track to not cause significant problems for the year.
Thanks a lot, Joe. I'll turn it over there. Thank you. Thank you. Our next question is from Brent Thaleman with DA Davidson. Please proceed with your question.
Hey, thanks. Good morning everybody. Joe, maybe just it sounds like March-April activity just with respect to slabs is getting better. What's the view you're getting from your home builder customers at this point?
I mean, does this effectively kind of call the bottom, or maybe just more color around that? Yeah, I would say our customers continue to eat, we're bullish, much more bullish than we are. We've done pretty conservative on our forecast numbers and outlooks, they remain.
the digital's a normal run rate, we'll call it, and they went up to 30% on the cancellation rates, and they're backed out under double digits again, which is a good sign that people are buying houses and they're sticking with the contract. They're seeing a pickup in demand, and frankly,
But again, they're much more bullish than we've been. We saw that happen. January and February were very slow with the accepted use in this continue to grow. Not stop. March kicked on in Dallas. In late March, we saw Phoenix come on in April and the outlook for May look like that trends continuing forward. So these guys are back to building homes.
Well it certainly depends on the rate of increases. Multifamily still is strong, but theoretically you're absolutely correct. Is the mix shift goes back to a higher percentage of residential versus a higher percentage of commercial. Commercial business is always bad.
much lower margins than the residential side. So yes, that's correct. We will pick up some of that margin as we continue through the year.
And if we can prevent the June concrete increases, which I say we can't do anything, we're the tail and the dog, but if they don't go through because the market is softening overall for raw materials, that would help us tremendously.
Okay, okay. Joe, maybe a little higher level, I mean, look at the e-infrastructure business, obviously no flowing and momentum there. I guess thinking across building solutions and e-infrastructure, there's obviously estate handymen and Je? Rich Those are cool kids right there with blind ink on and Aur tabs
Yeah, some concerns about out there about the non-residential environment, taking Wendy. I just like to get your perspective on it. How does that point into your business? Where do you see exposures or?
potential risks that you know You know a lot of see a lot of the stuff that I think is going to get hit the most are what I'll call those one to three million dollar type projects that we use fill in work or will only do for Specific customers when they ask us
I think as you're talking about some of the commercial stuff, what everybody's saying is going to slow down. Those tend to be very small projects. I got to tell you, we are not seeing.
a slowdown across the board and Put it in perspective, you know one manufacturing plant It could be you know, 30 or 40 of these small projects and equivalent value in size So we're continuing to stay focused on that
We think that there's going to be a lot more coming on the manufacturing front, not only from further battery plants, obviously the EV plants, but we have yet to see in our footprint at least, the release of the first chip plant, and there's several of those stated up through the Northeast. So we're staying close to that stuff. And again, we think there's more.
upside opportunity out there than potential risk for us over the next, and that's not just this year, that's over the next three plus years.
Yeah, and Joe just heard a lot about manufacturing across other companies too. You guys are obviously tied pretty close to this stuff. Any context in terms of that?
the prospect pipeline for the next 12 plus months around manufacturing in particular. Maybe relative to what you've seen over the last few years in that business? Well, I think it's kind of interesting, our customer for the battery plant.
has already asked us to go to Mexico and Canada, which we've said no. We don't speak Spanish and we don't have passports to get over the Canadian border. But they certainly have a lot of activities going on. And it's early.
in some of the big projects because they're working on state fundings and those sort of things, but the Southeast seems to be
the hot spot right now for this stuff to go into. There seems to be much more incentives from the states to pull in these manufacturing plants. The Northeast is a little bit behind but we think they'll eventually figure this out and pick up.
Okay, just last one, I mean really strong showing on cash flow again. Ron, great work. I got any pull forward here this quarter or this is just true blue cash flow, what we should expect in sterling.
Yeah, I think certainly cash flow is always lumpy. We've done a nice job at integrating our acquisitions, including TixenWild, to get cash flow working, but we think it'll be strong throughout the year. Certainly, we use $25 million to pay down some debt. We're tempting.
to.
and fund that if necessary, and otherwise we'll continue to look at tucking acquisitions or something better if it were to come along. So kind of same story with a little bit of great cash flow to help us, we like to keep it around.
get more than 200 million, probably too much, less than two million, I don't like. But I'll never like, I always like more cash. But anyway, that'll be kind of our measuring point.
And, Brad, just to follow up a little bit more on the residential, on the trending and that sort of stuff, I think, which is important to think about is for the quarter we ended up fundamentally flat with prior year. And if you would have looked at the start of January and the first of February .
And we're seeing exactly what we told people would happen, which is we weren't sure if we could grow in a down market. We never thought the market would go down 30%. We were hoping to go down 10 to 15. But we're staying relatively flat, might even show some slight growth.
But we will continue to grossly outperform the US $1,000. And we're picking up shares as well, which is nice for long term kind of thoughts. Yep. Okay. Thanks all. Congrats again. Great quarter. Thank you.
Thank you. Thank you. Our next question is from Brian Rousa with Sidoti & Company. Please pursue with your question.
Thank you. Our next question is from Brian Russo with Sidoti & Company. Please proceed with your question. Hi, good morning.
Hey, Brian . Just to follow up on e-infrastructure, as Sterling kind of migrates and focuses more on the more complex, larger projects, I suppose you have even more.
competitive advantages and thus you should see overall project margins improve relative to maybe what we saw with the smaller projects a year ago? What I would say is that there is a correlation to project size and margin. Certainly the larger the project.
The better opportunity we have to get it, but the more productive we can be out of a large project because again the horsepower and capabilities we have. So there is a correlation. So the thing that we always say is most important is it's less about whether it's a data center.
distribution center or manufacturing site. It's more about the number of yards, cubic yards that have to be moved, and the amount of rock that needs to be blasted. Those are the two things we really like and we have what I'll call a specialty pitching capability that 99% of people out there don't have.
And I would add, you know, the pace of getting it done to the customers, the whole critical value being delivered. Okay. And, you know, I thought you're the commentary and the press release and on the call regarding reallocating the transportation solution resources to higher margin infrastructure work in the Rocky Mountains. And I guess this kind of plays into it.
your whole kind of strategic focus. You know, clearly you've got the East Coast covered, and there's a lot of activity to keep you busy, but there's quite a lot of manufacturing in the chip space and even in the auto industry occurring elsewhere in the country.
And I'm curious, you know, how or do you want to expand your e-infrastructure footprint there rather than just reallocating transportation solutions resources? I mean, is there a balance or is there a kind of a growth strategy there that you're going to be able to? Yeah.
I think if we found the right player in a large enough market, we certainly would go after and look at making another acquisition. I think what's really nice that we were able to do is these projects we're talking about are in Idaho. Not a huge market. Not going to have a plateau or pettillo up there.
very high growth over a lot of period of time, probably not California, but some other areas. We would certainly entertain and look at potentially making an acquisition or buying someone that could use it.
Brian , one thing I would add that I think is also interesting about this is it's not like Transportation Solutions is doing this in isolation. You're seeing some nice collaboration across the group with Plateau sharing best practices and really helping to get these projects off and on solid footing. I think it's a good point. Also the data center team from Plateau and the ROW team both...
met and worked with the client on the project up front. They helped put together the bid package in the project schedules, and they even will come out once a month from a project management standpoint and just oversee the job to make sure everything's on track. And we're delivering the same level of quality and service.
that we deliver on the East Coast. And so far it's gone really, really well. And it's very encouraging for us. But yeah, they're not on an island. Yeah, good point.
Okay, great. And then just on backlog, obviously, strong expanding margins there. Is there any more color you can provide with the understanding that the infrastructure projects are much quicker burn than transportation, but it seems as if the mix of the infrastructure continues to grow relative to the old.
of our patient margins is the infrastructure bill funding continues to come out. We're seeing very nice projects that fit our expertise and scope and more on the alternative delivery, which enables us to be even more selective in the transportation space. We think we're in the...
In the second quarter and third quarter, we're gonna see a nice barrage of aviation work that comes out for bed, that I think we're positioned well on several of those jobs that would be our alternative delivery for us. And then obviously you have what I call the portfolio shift. The E infrastructure margins will be higher than transportation. So the faster we build that backlog or the higher percentage.
of our total backlog ratio that is, that moves the margin as well. We still think we have a couple hundred basis points in transportation to eke out, but we are now nicely positioned in double-digit margins with that and continue to make great progress there. I would add our average project size with some of these large jobs rolling in on the
the infrastructure side are obviously going up, which means duration goes up. So if you ask that question, we acquired both businesses with the kind of average backlog duration was well less than six months, probably somewhere between four and six, depending on which one we're talking about. Today they're probably between six and eight months.
So some of that is duration also. It's driving these 100 million plus projects are really, you know, it's good work. They last longer and have greater margins. So it's a great combination.
Okay, great. Thank you very much. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Joe Cotillo for any closing comments.
Okay, great. Thank you very much. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Joe Cotillo for any closing comments. Thank you, Paul.
Thanks again everyone for joining our call today. If you have any follow-up questions or wish to schedule a call, please call the number
Please feel free to contact Noel Dills. Her contact information can be found on our press release. Thanks everybody and have a great day.
please feel free to contact Noelle Dills or contact information can be found on our press humans. Thanks everybody and have a great day. Thank you.
This concludes today's conference. You may now disconnect your lines. Thank you for your participation.
today's conference. You may now disconnect your lines. Thank you for your participation.