Q2 2023 Sterling Infrastructure Inc Earnings Call
Greetings and welcome to the Sterling infrastructure second quarter 2023 conference call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this call.
Is being recorded it is all my pleasure to introduce your host Noel adult Vice President of Investor Relations and corporate strategy. Thank you you may begin.
Thank you Jessie and good morning to everyone joining us and welcome to Sterling infrastructure as 2023 second quarter earnings conference call and webcast I'm pleased to be here today to discuss our second quarter results with Joe Cutillo, Sterling's, Chief Executive Officer, and Ron Basmati Sterling Chief Financial Officer, Joe We will open the call with an overview.
Of the company and its performance in the quarter, Ron will follow that up with a detailed discussion of our financial results after which Joe will provide a market and for your outlook. Then we will open the call up for questions.
Reminder, there are accompanying slides on the Investor Relations section of our website before turning the call over to Joe I'll read the Safe Harbor statement.
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 10-K and 10-Q filings for a more complete discussion 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.
New information future events or otherwise. Please also note that management may reference EBITDA adjusted EBITDA adjusted net income or adjusted earnings per share on this call, which are all financial measures not recognized under U S. GAAP.
Required by SEC rules and regulations. These non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon, I'll now turn the call over to our CEO Joe Cutillo. Thanks.
Thanks Noel.
Good morning, everyone and thank you for joining Sterling second quarter 2023 earnings call.
It's a fantastic time to be part of the Sterling team.
Well, we started this journey to transform our company seven years ago.
We sought to build a diversified infrastructure solutions business. They consistently delivered bottom line growth and strong cash flow.
Our results in the second quarter reflects how far we've come.
Put simply we had a great quarter.
We delivered revenue growth across each of our segments that drive a 13% year over year increase in total revenue.
Which reflects 11% organic growth and 2% acquired growth.
More important each of our segments generated significant operating profit improvement.
And operating income growth of 37%.
Cash flow was exceptionally strong in the quarter and our balance sheet is in great shape.
Finally, our combined backlog grew 42% from year end 2022 to reach a new record level.
These results would not have been possible without the hard work and dedication of our Sterling team.
Their drive and entrepreneurial spirit enables us to consistently outperform and serve the customer better than our competition.
We're pleased with our progress there is there is still a lot more opportunity ahead of us.
As we continue to grow the business, both organically and through M&A.
We remain committed to our guiding principles the Sterling way.
Which remind us of our duty to continuously improve how we protect our people our environment and get back to our communities.
All we're working to build America's infrastructure.
Moving to our financials.
And he infrastructure, which is our largest segment and represents half of our sales. We delivered just over 11% topline growth and 250 basis points of operating margin expansion to drive 32% operating income growth.
Our revenue growth in the quarter was driven by continued strength in activity related to high value advanced manufacturing projects in Datacenters.
On the profitability front.
The supply chain to the east we have been able to recapture the inefficiencies that impacted our margins during COVID-19.
Additionally, we are seeing a mixed benefit as our large project work picks up.
Looking at our E infrastructure verticals in more detail.
Okay.
On the advanced manufacturing fraud.
We ramped up activity on our previously announced Hyundai and roofing and projects in the quarter.
These projects are progressing very well.
Additionally, two weeks ago, we announced that we had been awarded the next phase of the Hyundai project, which contributed to a record infrastructure bookings in the quarter of four.
$424 million.
Data center activity remains strong as our customers push the manage increasing data demand and the evolving needs.
Hi.
Bookings in this market also contributed to our strong backlog growth in the quarter.
Activity in ecommerce distribution centers has stabilized at lower levels relative to last year.
We expect activity to remain roughly at current levels through 2024 and rebounding in 2025.
And transportation solutions, we delivered a five 9% revenue growth and operating margin expansion of 130 basis points, which drove a 33% growth in operating income.
Operating margins reached a new high of six 5%.
Okay.
Our laser focus on improving margins, coupled with the strong activity associated with the infrastructure Bill.
Are enabling us to meet our margin thresholds and grow the business.
We believe we will continue to see growth in both margins and revenue in this segment as we go forward.
Notably aviation bid activity.
Which had been slow to release picked up significantly in the quarter.
As a result, we had some nice awards in the quarter and anticipate more to come in the second half of the year.
In building solutions, we grew revenue nearly 30% in total.
And over 16% on an organic basis.
We expanded operating margin by 70 basis points to drive operating income growth up 38%.
Our residential revenue increased over 21% in the quarter as we set new records in each of our geographies for both the number of slabs poured and revenue generated.
Our commercial revenue increased nearly 50%, reflecting strong market demand and more attractive margins.
The increase in our second quarter building solutions operating profit was driven by the recovery in residential volume.
Improved mix within commercial and.
And better margins across both.
Okay.
And our in view of our strong first half results.
<unk> backlog position.
And excellent execution.
We are raising our full year guidance.
The midpoint of our increased guidance would represent a 13% increase in revenue.
32% increase in net income relative to 2022 levels.
With that I'd like to turn it over to Rod give you more details on the quarter.
Thanks, Joe and good morning.
I am pleased to discuss our outstanding and record second quarter performance.
Let me take you through our financial highlights starting with our backlog metrics.
At the end of the quarter, our backlog totally record $1.769 billion up $321 million from the beginning of the year.
The gross margin of this backlog was 15, 5% a 120 basis point improvement over the beginning of the year.
The 55% backlog margin represents the highest in our history.
The higher proportion of <unk> infrastructure backlog and increased transportation backlog margins improved this improvement.
Drove this improvement.
Unsigned awards at June 30 of 2023 totaled $657 million.
As you may recall substantially all of our unsigned awards relate to transportation solutions.
We expect to have these multiyear projects move into backlog by the end of the year.
Yes.
We finished the quarter with record combined backlog of $2 billion $393 million, a $704 million increase from the beginning of the year.
Our gross profit in combined backlog was 14, 7% an increase of 50 basis points from the beginning of the year another historical high watermark.
Our current book to burn ratios were one two times for backlog and 2.4 for combined backlog.
Revenue for the quarter was 400 $522 million up $61 million over the 2022.
As a result of a strong backlog and opportunities across our markets. Our updated and increased full year revenue guidance is now $1 95 billion to $2.05 billion.
Moving to our second quarter income statement, our current quarter infrastructure revenues were $260 million a.
A $27 million increase over the prior year period.
The infrastructure revenue growth of 11% reflects the continuing strong market demands.
The aforementioned revenue growth were partially offset by lower volume from our large e-commerce distribution centers.
Yeah.
Transportation revenues were $151 million in the quarter, an increase of $8 million or 6% over the comparable 2022 quarters.
The revenue in the transportation backlog growth were attributable to a number of federal state and local infrastructure investment programs.
Billing solution revenues were $111 million in the quarter compared to $86 million in the prior year period.
The 30% growth was driven by both residential and commercial activities with revenue growth of 21% and 50% respectively.
Yeah.
Approximately $11 million of our current quarter residential growth.
Was attributable to the Arizona concrete foundation business, which we acquired in late 2022.
Consolidated gross profit was $92 million in the quarter, an increase of $21 million over the 'twenty two period.
Gross margins increased to an all time high of 17, 7% or a 230 basis points over the 2022 quarter.
The consolidated margin reflects margin improvements at each of our three segments.
The key driver of the increased margins include the progress on the recovery from previously experienced supply chain challenges and operating Leverages from increased demands for each of our segments.
General administrative expense was $24 million for the quarter, an increase of $3 million when compared to the same quarter of last year.
The increase was driven by general inflation.
Increased revenue related costs and G&A related to the late 2022, Arizona slab business.
Okay.
Okay.
The continued we continue to expect our full year G&A expense to be approximately 5% of revenues.
Operating income for the quarter was $60 million, an increase from $44 million in the prior year quarter.
Our current your operating margins increased 11, 5% the highest in Sterling history.
Operating margin in the prior year quarter were nine 5%.
Our effective income tax rate for the second quarter was 26, 5%.
And our tax rate benefit from increased tax deductions related to our stock based compensation.
We expect our full year 2023 effective income tax rate to be approximately 27%.
The net effect of all these items resulted in a record second quarter net income of $39 $5 million or $1.27 per share.
With our strong performance in the first half of 2023 and the strength of each of our key markets. We have increased our full year 2023, net income guidance to $125 million to $131 million.
Our EPS guidance is now $4 to $4 20 per share from our prior EPS range of $3 33 to $3 53 per share.
Both midpoint net income and EPS guidance reflect a increase of 20% over our prior guidance.
EBITDA for the quarter totaled $73 $5 million, an increase of 29% for the prior year quarter.
As a percent of revenues EBITDA improved to 14, 1% up from 12, 3% in the prior year quarter.
Our 2023, EBITDA guidance is now $250 million to $261 million to $260 million from our initial 2023 range of $2 $20 million to $235 million.
Our cash balance increased by $97 million from the beginning of 2000 $23 million to $278 million at June 32023.
Okay.
Cash flow from operations operating activities for the first six months of 'twenty three.
It was a very strong $181 million compared to $42 million in the prior year period.
The operating cash flow improvement was driven by significant organic growth growth of each segment as well as favorable improvements in our working capital.
Cash used in investing activities was $16 3 million for the first six months of 2023 compared to $31 million for the 2022 period.
The decrease was driven by the timing of net capital expenditures offset by the first quarter receipt of $14 million from our late 2022 Myers divestiture.
We continue to expect our full year net capital expenditures to be $55 million to $60 million, reflecting the strong organic growth of our infrastructure solutions segment.
Cash flow from financing activities was a.
Ill.
$72 million outflow for the six months of 2023, primarily from debt repayments of $68 million.
Debt reduction, including voluntary early debt repayments of $53 million.
Considering the divestiture.
Diversity diversity, and our strength of our portfolio of businesses, our strong liquidity position and are very comfortable EBITDA leverage we are well prepared.
Vantage public additional opportunities in 2023 and beyond.
Now I'll turn the call back to John .
Thanks Rod.
As we look forward, we are confident in our ability to drive sustained profitable growth.
Create value for our shareholders.
We see years of opportunity ahead of us as we work to build America's infrastructure.
We are a key partner in building the manufacturing plants that are bringing production back to the U S.
The data infrastructure that enables today's way of life.
The highways bridges in the airports that connect us.
And the homes, we live in.
We expect infrastructure solutions will remain our fastest growing highest margin segment for the next several years.
We continue to see a robust pipeline of large manufacturing projects tied to renewable battery and other next gen manufacturing.
These onshoring related opportunities are emerging faster than we anticipated and are larger than we've ever imagined.
Data center activity is poised to accelerate even further as data demand continues to surge.
We believe current market trends, coupled with our proven capabilities, we will continue to deliver strong double digit organic growth over a multiyear period.
And transportation solutions.
We think we're now in a market environment that will continue to provide opportunities for bolt both growth and margin expansion.
As margin opportunities improve we will accelerate our growth.
In building solutions, the lack of secondary market homes is helping us on both the residential and commercial fronts.
We continue to see strong residential activity in all three of our markets and our core customers remain very bullish on the remainder of the year.
On the commercial front multifamily starts continue to grow.
And we are encouraged by the improved margin opportunities that we are seeing.
We are proud of how far we've come but even more excited about the opportunity ahead of us associated with the build out of U S infrastructure over the next three to five years.
Given the current trends in our markets and the excellent execution.
We anticipate a strong finish to the year and are confident in our ability to deliver within the guidance ranges we have provided.
With our backlog and visibility we have.
We're well positioned for 2024.
Already thinking about 2025.
With that I'd like to turn it over for questions.
Thank you ladies and gentlemen at this time, we will be conducting our question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment it may be necessary.
Up your handset before pressing the star keys, one moment, please poll for questions.
Yeah.
Thank you. Our first question is coming from the line of Jean Ramirez with D. A Davidson. Please proceed with your question.
Hi, This is Jonathan mirrors for Brent Thielman.
Congrats on the quarter by the way.
Thank you very much we had a great quarter nice okay.
I'll start with a two part question.
Looking at building solutions can the business sustained higher margins with potentially in completion costs come in in the second half.
Are there any thoughts on expanding building solutions beyond its current market.
Yes, we think we can.
To maintain the margins as we go forward.
We will continue to see some price increases on the concrete side in the back half of the year, we leased we anticipate that.
But we believe we can we can continue to maintain those margins on.
On the expansion front, we're really looking at two different opportunities the nice thing before we before we expand.
Between the low market share we have in both Houston and Phoenix.
Candidly, we can double that business with those two markets alone. So we've got some really nice runway within the existing markets. We're in.
If we look at where we go next really two different potentials, one is adding more vertical.
Kind of capabilities within the portfolio that we have we continue to look at plumbing and framing in electrical and some other areas like that within the footprint of their geographies that we're in.
Down the road.
The next logical market for us would be somewhere in Florida, probably central Florida would be a logical logical place for us to expand but right now we've got so much opportunity ahead of us within the markets that we're in candidly, we haven't even began going beyond kind of just the market data for the for the Florida.
Okay.
Thank you.
Pivoting to infrastructure, how much more if the company has seen on data centers now.
In the segment and <unk>.
You talked a little bit about.
E. Commerce are you seeing any distribution slash warehouse activity picking up or is that being impacted by this.
Ed market.
Well, let's start with that one we see good activity.
It's still in an e-commerce distribution the big difference between last year this year.
<unk>, we would have four to six Amazon Big Amazon projects going at any given time right now we have one and it's one in the northeast and it's the only one on the east coast and I know it's happening.
But the rest of the market stays has remained very stable and very consistent so we've seen a transition from Amazon to some other customers.
Based on our conversations with Amazon and their strategic planning, we believe that that picks back up significantly in 2025.
So that market hasn't gone away, it's just you've got one big behemoths.
Not producing like it used to and they are a major customer of ours.
On the data center activity, we still see data exit center activity extremely strong if anything picking up more.
As we see more speculative warehouses coming on line.
Data centers, yes, I am sorry, yes, I said, whereas a speculative data centers coming online.
To offset.
What we believe is happening.
Is the demand is outpacing the big guys capital budgets and planning budgets. So what theyre doing is speculative warehouses are coming online they're leasing those spaces.
It has kind of a lease buy program in place. So we're seeing strong activity from from the majors, but also from the speculative piece, which are a little bit smaller warehouses in general, but still very good work.
Data centers, I keep saying warehouse.
And even more coffee this morning.
No problem.
And then if you don't mind.
Sticking with the infrastructure.
Do you need to make more significant investments in equipment.
When youre tackling this growth in data centers, we just wanted to understand the revenue potential for the business considering this market backdrop, along with what you've actually been able to perform with the people and it could have been you have today.
Yes, I think the great thing is.
12 months to 18 months ago I would've told you your equipment was an issue.
Because of the availability it's readily available now in the market. So we can buy it we can lease it we can even read some of the big stuff.
So equipment is not not a concern we're going to stay within our guidance on capital looks at $55 million to $60 million in total for the year.
And we can we can support the growth that we have in front of us.
And feel very good about where we're positioned.
Perfect. Thank you. Thank you so much for yes.
Thanks.
Thank you. Our next question is coming from the line of Sean Eastman with Keybanc capital markets. Please proceed with your question.
Hi, guys. This is Alex on for Sean. This morning, Thanks for taking my question and congrats on the quarter.
Thank you.
So I wanted to start on the guidance raise.
Kind of implies a much higher second half outlook than than the street was modeling can you just talk about what the biggest changes were in the second half outlook relative to the last guide.
It sounds like the margins are coming through stronger and then secondly, if there's any like major swing factors you had pointed out in the range like what could drive you to the high end versus the low end.
All right.
Okay I'll start at 50000 feet, let Rob get into the into the details I think.
Thank you right at a couple of things we've talked about.
The margin impact of the supply chain really across.
All of our businesses with the exception of less some transportation, but he got on both residential and infrastructure.
We've talked all along we thought that would come back in the second half of this year and into next year. The good news is it's coming back a little quicker than we anticipated.
So we have that tailwind on top of the great market tailwind that.
We picked up in the first quarter, especially in the infrastructure, we never anticipated the amount of advanced manufacturing projects and the size to go through the year. So they have kicked off they're running well, we've got better line of sight to the impact of that for the rest of the year and we have better line of sight of what our margin club.
Back rate is.
And then on top of that the residential market.
It has rebounded very quickly.
Both margins and volume.
We've seen nice margin improvements in the commercial business that we haven't seen historically that was kind of a pleasant.
And two to what we're doing and then.
We've said all along we thought we had 200 basis points of margin to continue to pick up in transportation and we thought that would take 12 to 18 months. The good news is we're picking that up faster than we anticipated and we still think we've got plenty of runway. There. So it's it's the tailwind of the market plus the more rapid.
It picked up of margin improvement clawing back some of the inefficiencies and supply chain issues that we had talked about more detail sure a couple of things. So I neglected to mention in my opening comments that we have updated.
Highlighting considerations that will excite package. So in there youll see that our gross margin expectations for the year, 16%, 17% and really that's the key number towards towards the bottom line.
<unk> talked about earlier today.
The reality is.
In our project businesses, specifically the transportation group in the large projects within the infrastructure.
The second half is pretty much locked it frankly.
What we're selling today and what's in our combined.
Backlog, that's really 2024 and beyond which is great, but we haven't said, it's been probably two years or three years since we've had.
Many large in excess of $50 million and up to $200 million projects and as you saw the huge growth in the unsigned that we expect that to really help us in 2020.
Orient forward. So I think when you go through that and you say, Okay. You got those two kind of segments pretty much locked in with <unk>.
Growth consistent with the first six months another back six months looks as healthy is that maybe a little bit better in the margin side as you said in the second quarter, but I think thats.
That leaves the residential and commercial business and <unk>.
Back on wood, it's been highly volatile in the last 12 months following but certainly what we've seen.
Thus far in May through July is a very healthy.
Runway for us for not only residential but.
Probably the best commercial.
We've had since we acquired them in 2017.
Pretty pretty much locked in on 2023 I think at this point in time.
The World doesn't go crazy on us, which it has in the past but.
We believe our scope looks like today.
Very helpful. And then my next question.
The cash flow in the first half has been a lot stronger than we expected.
Well above that operating income proxy you guys always provide how do we think about cash flow into the back half of the year.
Was there some pull forward into the first half should we expect some reversion to the mean over the coming quarters, just any color there would be helpful.
Sure.
As I've talked about before so it's one of the more difficult things to predict.
But youre right sitting here.
And I tried to explain why our front half was so slow and really kind of backed off the full year only a crusher in the back half.
You watch large projects across all of our entities.
With the exception of <unk>.
Residential.
Which doesn't have large projects.
<unk>.
<unk> is very cash positive to us so we're seeing a little bit of added bolt our transportation and our infrastructure group. That's certainly helped our working capital numbers.
We will have.
Lower year comparison wise slower six months than we did last year in the future the back half of the year, that's just timing and everything else. So I'm not backing off at all from we will generate some more cash flow and cash flow from ops, but.
I will just say third second quarter was incredibly good and we expect it to be good for the balance of the year, but.
It's hard to beat that one.
Multiple times over operating income.
That's a good thing that's a good problem there.
Got it and then just one more question if I can if I can transportation, 6% growth in the quarter.
It looks like the comps get a lot easier for the remainder of the year you have these design build projects ramping in IAG is still strong.
You guys have always said this is a low single digit growth business, but am I wrong to assume that gross over the next 12 months can outpace this pretty easily.
Well, here's what I would say the market right now I just got the numbers yesterday for the 2024 budgets up about 14% total federal spend.
So, we're obviously not growing anywhere near that but what we've said is focus on margins and what margins get to a certain point of strong double digits that we will grow revenue.
I would tell you our margins are in those strong double digits.
We will grow revenue a little more than we have historically, but I don't see it going we're not going to go from 5% to 10% I think we're going to stay at or around that 5% growth rate.
But we're opportunistic if the right projects come along and we think we can have those very strong margins and what drives it up more we will take advantage of it I think the great thing to keep in mind is and Rod touch. Upon this we really need to hit this home, we're locked and loaded for 2023 everything we're working on right now is two.
Four in 'twenty five and we're in a very good position on the transportation side in 'twenty four already with the backlog and the projects that we have in place will still take more 24 don't get me wrong, but we're in the best position with that at this time of year already looking at the next year and going forward.
I'll tell you there are several very nice projects on the horizon of which we would hope to win something out of those not all of them.
We enter the back in the back half of the year for transportation.
To add one more thing I think.
For both infrastructure and for transportation.
<unk>.
Length of our backlog is probably at an all time high we used to say that the infrastructure was probably eight or nine months.
Forward looking item and.
Transportation was around the year in the quarter those numbers are going to be significant law.
I am just because of the.
The size of the projects is growing quickly both in E Commerce and <unk>.
Expectation. So that's one of the reasons that we Joseph.
Going into 2000.
Thank you very helpful.
Thank you. Our next question is coming from the line of Brian Russo with Sidoti. Please proceed with your question.
Hi, good morning.
Hey, Brian .
If you could just elaborate on the mix of projects within your <unk>.
The infrastructure segment.
That allowed you to report such high margins.
And kind of.
When we look at the backlog or even into 2024.
Is the mix.
Just getting better so that these margins are sustainable if not there is potentially upside there.
Yes, I think there's two pieces to the margin that we need to.
First is that we lost.
We believe 200 basis points during the Covid due to supply chain inefficiencies as a combination of pricing and the inefficiencies that that would cause the jobs.
In the quarter, we clawed back pretty much all of that right. So that's a big big movement for us.
And then we pick up a little bit.
Mix, however, as we look forward.
The bigger the projects in this segment. Unlike other segments of the bigger the projects here generally the better the margins for us.
And to better leverage we get out of assets.
So as we see these large onshore.
Onshoring of manufacturing jobs, and these multiyear campuses for data centers that keep getting bigger and bigger.
They certainly help us on the long term trajectory of the <unk>.
Margin.
But I would tell you you know what are the biggest pieces in the quarter was really getting back getting into the next level of contracts with new pricing.
And getting some of the supply chain issues out of the way to pick up some of the efficiencies on the jobs.
Yes, I would add I think when you look at our backlog in a.
Footnote, which compared to the beginning of the year or two obviously June 30.
The big increases in the infrastructure side, and I would say.
While there has been lots of ups and downs the majority of that.
That 50% increase in backlog the.
The majority of that is the onshoring.
Manufacturing site and of course those projects are large and can have a similar to datacenters, a long duration, which helps a slot.
Transportation in that same period is up a little bit pretty flat, but I don't believe we've ever had almost $700.
$460 million of unsigned work.
So that work is.
By their very nature are very lumpy.
So the good news is we have those works even better news is where they're going to be started filling in.
Driving numbers in 2020 for 2025.
Okay, Great and then just a follow up on transportation. It seems like this is the first.
Year over year that you've actually had positive.
Top line growth in this segment probably since.
Before 2021 and I'm just curious.
Yes.
The.
So higher risk or lower margin projects that you were looking to complete are we past that and so.
Five 9%.
Year over year increase in June it could be even better than that just just curious what we might expect going forward.
Yes.
We're out of historical stuff.
We really are.
The fundamental difference.
Transportation was driving margin growth right, we had way too low margin is way too high a risk profile, that's taken us several years to do.
That focus coupled with the market dynamics that are taking place pricing is going up capacity is full with a lot of places is enabling us to we have a very solid threshold of what we are allowed to take jobs that if they go over that threshold will take on more jobs.
We're at that point, where it's over the threshold. We think we can still get more margin don't get me wrong with a combination of what we're driving for productivity, but also keep in mind that the first half of this year was very slow.
Bid activity, we saw that pick up significantly in the second quarter and we think there are some very nice jobs in the back half of the year that we have opportunities, which will move that margin again. So we think we have margin expansion and growth expansion DAU, which is market is delivering projects above that threshold that we're willing to go after.
And I would add I think youre never done.
So shifting the mix to higher margin work, but I think from a <unk>.
Good side, we have that to the point, where we're doing hard bid work that we wanted at this point in time in other words, there is some strategic benefit in it from a either a gross margin standpoint.
Follow on work and that's really what it's made up of today. So we're not we don't have any.
Our badness is almost empty never empty totaled.
Theres nothing in there that.
Is resonating from chasing we're chasing.
Low margin work, because we need it.
We just don't have those projects anymore. That's the major reason why.
That mix change has happened when moving to design build and other alternative delivery work, particularly.
In the Rocky Mountain and <unk>.
West side of our territories.
Okay, great. Thank you very much.
Thank you we have reached the end of our question and answer session I would like to turn the floor back over to Mr. Cataldo for any additional concluding remarks.
Thank you Jessie and thanks again, everyone for joining our call today.
Do you have any follow up questions or wish to schedule a call.
These feel free to contact Noel builds or contact info can be found on our press release.
I want to thank everybody for taking the time this morning, and all of our employees around the world.
Have a great day.
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect at this time.