Q3 2023 Sterling Infrastructure Inc Earnings Call

Speaker 1: year outlook. Then we will open the call up for questions. As a reminder, there are accompanying slides on the Investor Relations section of our website.

And we will open the call up for questions. As a reminder, there are accompanying slides on the Investor Relations section of our website.

Speaker 1: Before turning the call over to Joe, I will read these safe harbor statements. 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 filing for a more complete description of risk factors that could affect these projections and assumptions.

Before turning the call over to Joe I will 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 description of risk factors that could affect these projections and assumptions.

Speaker 1: The company assumes no obligation to update forward-looking statements as a result of new information, future events, or otherwise.

Company assumes no obligation to update forward looking statements as a result of new information future events or otherwise the financial information herein and discussions are related to the company's continuing operations. Please also note that management may reference EBITDA adjusted EBITDA adjusted net income or adjusted earnings per share on the call.

Speaker 1: The financial information herein and discussions are related to the company's continuing operations. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted earnings per share on the call, all which all are financial measures not recognized under US GAP. As required by SEC rules and regulations, these non- GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issue yesterday afternoon. I'll now turn the call over to our CEO .

<unk> all of which all are financial measures not recognized under U S. GAAP as 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 afternoon.

I will now turn the call over to our CEO Joe Cutillo.

Speaker 2: Thanks, Noel.

Thanks Noel.

Speaker 3: Good morning, everyone, and thank you for joining Sterling's third quarter 2023 earnings.

Good morning, everyone and thank you for joining <unk> third quarter 2023 earnings call.

I'd like to thank our Sterling team for another record quarter.

Speaker 3: I'd like to thank our Sterling team for another record quarter.

Speaker 3: Their hard work and dedication has allowed us to deliver 11 quarters of consecutive year-over-year net income growth.

Hard work and dedication.

This allowed us to deliver 11 quarters of consecutive year over year net income growth.

Our diluted earnings per share for the third quarter were $1 in 2006.

Speaker 3: Our diluted earnings per share for the third quarter were $1.26. This represents a substantial 25% increase compared to our same period in 2022 and surpassed our internal projection.

This represents a substantial 25% increase compared to same period in 2022 and surpassed our internal projections.

Speaker 3: Revenue growth in the quarter was 13.7% or 11.7% on an organic basis. Demand trends across our

Revenue growth in the quarter was 13, 7%.

For 11, 7% on an organic basis.

Demand trends across our key markets remained strong.

Speaker 3: The best reflection of this is our backlog, which is up 42% from the beginning of the year and total over $2 billion.

The best reflection of this is our backlog, which is up 42% from the beginning of the year and totaled over $2 billion.

Speaker 3: Our cash flow generation remains excellent. Operating cash flow in the quarter was $150 million, bringing our total cash position to $409 million at the end of the quarter.

Our cash flow generation remains excellent operating cash flow in the quarter was $150 million, bringing our total cash position to $409 million at the end of the quarter.

Speaker 3: Our focus remains on deploying our cash into acquisitions that complement our current offerings and enhance our competitive position.

Our focus remains on deploying our cash into acquisitions that complement our current offerings and enhance our competitive position.

We have intensified our targeting efforts and remain extremely active on this front.

Speaker 3: We have intensified our targeting efforts and remain extremely active on this front.

As we continue to expand our business, both organically and through strategic acquisitions.

Speaker 3: As we continue to expand our business both organically and through strategic acquisition.

Speaker 3: We remain unwavering in our adherence to our guiding principles, the Sterling Way.

We remain unwavering in our adherence to our guiding principles the Sterling way these.

Speaker 3: These principles underscore our commitment to take care of our people, our environment, our investors, and our communities while we work to build America's infrastructure. With a strong third.

These principles underscore our commitment to take care of our people our environment, our investors and our communities, while we work to build America's infrastructure.

With our strong third quarter performance year.

Year to date results.

Speaker 3: backlog position and visibility into the fourth quarter. We are raising

Backlog position and visibility into the fourth quarter.

We are raising our full year guidance.

Speaker 3: The midpoint of our increased earnings per share guidance would represent a 32% growth over 2022.

The midpoint of our increased earnings per share guidance would represent a 32% growth over 2022.

Moving to our segments.

Speaker 3: The EFF Structure Solutions backlog grew 48% from the beginning of the year to a new record of $891 million.

Key infrastructure solutions backlog grew 48% from the beginning of the year to a new record of $891 million.

Speaker 3: We continue to see a strong pipeline of work related to data centers and onshoring of manufacturing.

We continue to see strong a strong pipeline of work related to data centers and onshoring of manufacturing.

Speaker 3: We currently have line of sight in the several large projects slated to bid in 2024 and 2025 in both of these markets.

We currently have line of sight into several large projects slated to bid in 2024 and 2025 and both of these markets.

Speaker 3: In the quarter, we did see a slight decline in e-infastructure solutions revenue in margins relative to prior year.

In the quarter, we did see a slight decline in the infrastructure solutions revenue and margins relative to prior year.

Speaker 3: This was driven by timing of several new project starts and the continued softness in e-commerce distribution centers in small warehouses in the Northeast.

This was driven by timing of several new project starts and the continued softness in ecommerce distribution centers and small warehouses in the northeast.

Speaker 3: Our Southeastern operations continue to show strong growth in margin expansion, as we execute on large manufacturing and data center projects.

Our southeastern operation continued to show strong growth and margin expansion as we execute on large manufacturing and data center projects.

Speaker 3: The early start of large manufacturing projects in the Southeast has allowed the region to more than offset the softness in e-commerce distribution.

The early start of large manufacturing projects in the southeast has allowed the region to more than offset the softness in e-commerce distribution and.

And small warehouses.

Speaker 3: This has not yet been the case in the Northeast, where we are just seeing the first large manufacturing opportunities emerge.

This has not yet been the case in the northeast, where we are just seeing the first large manufacturing opportunities emerge.

Speaker 3: In transportation solutions, revenue increased nearly 23% year-over-year and 28% sequentially.

In transportation solutions revenue increased nearly 23% year over year and 28% sequentially.

Speaker 3: We are seeing very strong demand in margin growth, atarost our entire geographic foot.

We are seeing very strong demand and margin growth across our entire geographic footprint.

Speaker 3: Awards in the quarter of $472 million drove backlog growth of 43% from the beginning of the year.

Awards in the quarter of $472 million.

Drove backlog growth of 43% from the beginning of the year.

Speaker 3: Though the majority of backlog growth year-to-date is attributable to the highway market, aviation bid activity has picked up significant weight. And we expect to hear final decisions on several projects in the fourth quarter.

So the majority of backlog growth year to date is attributable to the highway market.

Asian bid activity has picked up significantly and we expect to hear a final decisions on several projects in the fourth quarter.

Transportation solutions margin expanded 130 basis points, driving a 49% growth in operating income.

Speaker 3: Transportation solutions margin expanded 130 basis.

Speaker 3: driving a 49% growth in operating income.

Operating margins reached a new high of seven 5%.

Speaker 3: Operating margins reach the new high of 7.5%.

Speaker 3: We believe we have an opportunity to continue to increase margins as long as the market remains robust.

We believe we have an opportunity to continue to increase margins as long as the market remains robust.

Speaker 3: This is supported by the Improving Margin Profile in our backlog.

This is supported by the improving margin profile in our backlog.

In building solutions, we grew revenue, 41% or 29% on an organic basis.

Speaker 3: in building solutions, we grew revenue 41% or 29% on an organic basis.

Speaker 3: On the residential side, we continued to significantly outperform the National Marks.

On the residential side, we continued to significantly outperform the national market.

Speaker 3: Our revenue growth was 52% compared to an averaging increase of 7% for single family home starts nationally in the third quarter.

Our revenue growth was 52% compared to an average increase of 7% for single family home starts nationally in the third quarter.

Speaker 3: We remain confident that the dynamics in our markets and our strong customer relationships will drive sustained outperformance.

We remain confident that the dynamics in our markets and our strong customer relationships will drive sustained outperformance.

Speaker 3: continued strong demand in multi-family and attractive margin opportunities enabled us to grow our commercial revenues by nearly 23%.

Continued strong demand in multifamily and attractive margin opportunities enabled us to grow our commercial revenues by nearly 23%.

Speaker 3: Building solutions operating profit margins remain strong at 11.3%, driving income growth of 38%.

Building solutions operating profit margins remained strong at 11, 3% driving income growth of 38%.

Speaker 3: With that, I'd like to turn it over to Rod to give you more details on the court. Rod.

With that I'd like to turn it over to Rob give you more details on the quarter Rod.

Speaker 4: Thanks Joe and good morning. I am pleased to discuss our third quarter performance.

Thanks, Joe and good morning, I am pleased to discuss our third quarter performance.

Speaker 4: Let me take you through our financial highlights starting with our backlog.

Let me take you through our financial highlights starting with our backlog metrics.

Speaker 4: At the end of the quarter, our backlog totally referred to billion, $10 million. It increased to $596 million for the beginning of the year.

At the end of the quarter, our backlog totaled a record $2 billion $10 million, an increase of $596 million from the beginning of the year.

Speaker 4: The back, the gross margin of this backlog was 15.2%, a 90 basis point improvement from the beginning of the year.

The back the gross margin of this backlog was 15, 2% a 90 basis point improvement from the beginning of the year.

Speaker 4: Higher transportation and e-infrastructure backlog. Margins drove this improvement.

Higher transportation and infrastructure backlog margins drove this improvement.

Unsigned awards at the end of the third quarter totaled $375 million.

Speaker 4: Unsigned awards at the end of third quarter totaled $375 million.

Speaker 4: So potentially all of our outside awards relate to our transportation solutions sector.

Substantially all of our upside awards relate to our transportation solutions segment.

Speaker 4: We expect to have the majority of unsigned awards to move into Batwong by the end of the-

We expect to have the majority of unsigned awards to move into backlog by the end of the year.

We finished the quarter with combined backlog of $2 billion $386 million.

Speaker 4: We finished the quarter with combined backlog of $2,386,000,000, a $696,000,000 increase from the beginning of the year.

A $696 million increase from the beginning of the year.

Speaker 4: Our gross margin and combined backlog was 14.9% and increases 70 basis points from the beginning of the year.

Our gross margin in the combined backlog was 14, 9% an increase of 70 basis points from the beginning of the year.

The 14, 9% gross margin at the highest level in Sterling history.

Speaker 4: 14.9% gross margin at the highest level in sterling systems.

Speaker 4: Are you today's backlog? Book the burn ratio was very strong 1.5 times or both.

Our year to date backlog.

Book to burn ratio was very strong one five times.

Both backlog and combined backlog.

Speaker 4: Revenue for the current quarter was $560 million, up to $67 million or the 2022 quarter.

Revenue for the current quarter was $560 million up $67 million over the 2022 quarter.

Speaker 4: As a result of our strong backlog and our opportunities across each of our markets, our updated increased full-year revenue guidance is now between $1.99 billion and $2.05 billion.

As a result of our strong backlog and our opportunities across each of our markets. Our updated increased full year revenue guidance is now between $1 99 billion and $2.05 billion.

Speaker 4: Consolidated gross profit was $92 million in the quarter, an increase of $12 million over the prior year period.

Consolidated gross profit was $92 million in the quarter, an increase of $12 million over the prior year period.

Speaker 4: Gross margins increased to 16.4%, or 30 basis points, over the prior year quarter.

Gross margins increased to 16, 4% or 30 basis points over the prior year quarter.

Speaker 4: General administrative expense was $25 million for the quarter, an increase of $3 million when compared to the same quarter of the prior year.

General and administrative expense was $25 million for the quarter, an increase of $3 million when compared to the same quarter of the prior year.

The increase was driven by general inflation.

Speaker 4: The increase was driven by general inflation, increased revenue-related incremental costs, and GNA related to the late 2022 Arizona Slab Act was.

Increased revenue related incremental cost and G&A related to the late 2022, Arizona slab acquisition.

Speaker 4: We continue to expect our full-year G&A expense to be approximately 5% of revenue.

We continue to expect our full year G&A expense to be approximately 5% of revenues.

Speaker 4: Operating income for the quarter was $57 million, an increase from $49 million or 15% over the prior year of court.

Operating income for the quarter was $57 million, an increase from $49 million or 15% over the prior year quarter.

Our current quarter operating margin increased to 10, 2% from 10% in the third quarter of 2022.

Speaker 4: Our current quarter operating margin increased to 10.2% from 10% in the third quarter of 2022.

Speaker 4: Our effective income tax rate for the third quarter was 25.7 percent.

Our effective income tax rate for the third quarter was 25, 7%.

Speaker 4: Our tax road rate benefited from increased tax deductions related to stock based compensation.

Our 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 approximately 27.

We continue to expect our full year 2023 effective income tax rate to be approximately 27%.

Speaker 4: The net effect of all these items resulted in record third quarter net income of $39.4 million or $1.26 per diluted share.

The net effect of all these items resulted in record third quarter net income of $39 4 million or $1 26 per diluted share.

Speaker 4: compared to $30.7 million, or $1.01 per diluted share in the third quarter of 2022.

Compared to $37 million or $1 <unk>.

Per diluted share in the third quarter of 2022.

Speaker 4: With our year-to-date 2023 strong performance and the strength of each of our key markets, we have increased our full year 2023 net income guidance to $128 million to $130 million.

With our year to date 2023 strong performance and the strength of each of our key markets. We have increased our full year 2023, net income guidance to $128 million to $130 million.

<unk> hundred $32 million.

Yes.

Speaker 4: Our EPS guide is now $4.10 to $4.23 per diluted share from our prior EPS range of $4 to $4.20 per diluted.

Our EPS guide is now $4 10 to $4 23 per diluted share from our prior EPS range of $4 to $4 20 per diluted share.

EBITDA for the quarter totaled $71 $2 million, an increase of 16% over the prior year quarter.

Speaker 4: Keep It Tough for the quarter totals $71.2 million and increases 16% over the prior year quarter.

EBITDA margins improved to 12, 7% up from 12, 5% in the prior year quarter.

Speaker 4: even though margins improved to 12.7% up from 12.5% in the prior year quarter.

Speaker 4: Our updated 2023 guidance for EBITDA is now $252 to $260 million for the year.

Our updated 2023 guidance for EBITDA is now 252% to $260 million for the year.

Speaker 4: Our consolidated cash balance increased by $228 million from the beginning of the year to $409 million at the end of the third quarter.

Our consolidated.

Alidade cash balance increased by $228 million from the beginning of the year to $409 million at the end of the third quarter.

Speaker 4: Our cash balance exceeds our total debt of $358 million by $51 million.

Our cash balance exceeds our total debt of $358 million by $51 million.

Cash flow from operating activities for the nine months ended September 32003 was a very strong $331 million compared to $138 million in the prior year period.

Speaker 4: Cash flow from operating activities for the nine months ended September 30th, 23, was a very strong $331 million compared to $138 million in the prior year period.

The operating cash flow improvement was driven by the significant organic growth of each of our segments as well as favorable improvements in our working capital.

Speaker 4: The operating cash flow improvement was driven by the significant organic growth of each of our segments, as well as favorable improvements in our working cash flow.

Cash used in investing activities was $25 $6 million for the nine months ended September 32003.

Speaker 4: Cash used in investing activities was $25.60 for the nine months ended in September 30 of 23. Compared to $47.8 million for the-

Compared to $47 8 million for the 2022 period.

The decrease was driven by the timing of net capital expenditures offset by first quarter receipt of $14 million from our late 2022 Myers divestiture.

Speaker 4: The decrease was driven by the timing of net capital expenditures offset by the first quarter receipt of $14 million from the late 2022 Myers divestment.

Speaker 4: We expect full-year capital expenditures to be $50 to $55 million, reflecting the strong, organic growth of our e-infrastructure solutions.

We expect full year capital expenditures to be 50% to $55 million, reflecting the strong organic growth of our E infrastructure solutions segment.

Speaker 4: Cash flow from financing activities was an $81 billion cash outflow for the nine months ended September 30th, 2023, primarily from debt repayments of $77 million.

Cash flow from financing activities was at $81 million cash outflow for the nine months ended September 32023, primarily from debt repayments of $77 million.

The debt reductions include voluntary early debt payments totaling $53 million.

Speaker 4: The debt reductions include voluntary early debt payments totaling $53 million.

Considering the diversity and strength of our portfolio of businesses, our strong liquidity position and are very comfortable EBITDA leverage we are well prepared to take advantage of additional opportunities in 2023 and beyond.

Speaker 4: our strong liquidity position, and our very comfortable EBITDA leverage, we are well prepared to take advantage of additional opportunities in 2023 and beyond. Now, I'll turn the call over to Joe.

Now I'll turn the call over to Joe.

Thanks Rod.

Yes.

Speaker 3: As we sit here today, there appears to be no end in sight to the growing need to build and revitalize America's infrastructure.

As we sit here today, there appears to be no end in sight to the growing <unk>.

<unk> America's infrastructure.

We play a critical role in building the manufacturing plants that are reassuring production to the U S.

Speaker 3: We play a critical role in building the manufacturing plants that are reshoring production to the U.S.

Speaker 3: the data infrastructure that enables today's way of life, the highways, the bridges, and the airports that connect us, and the homes we live in.

The data infrastructure that enables today's wavellite.

The bridges and the airports the connectors.

And the homes, we live in.

And the infrastructure solutions, we continue to see a robust pipeline of large manufacturing projects tied to electric vehicles.

Speaker 3: In e-Infrastructure Solutions, we continue to see a robust pipeline of large manufacturing projects tied to electric vehicles.

Speaker 3: batteries, semiconductors, and pharma.

Batteries semi conductors and pharma.

Speaker 3: both in our current footprint and other potential geographies.

Both in our current footprint and other potential geographies.

We anticipate continued strength in data centers is current capacity represents only a fraction of what will be needed to support artificial intelligence and other emerging technologies.

Speaker 3: We anticipate continued strength in data centers as current capacity represents only a fraction of what will be needed to support artificial intelligence and other emerging technologies.

Speaker 3: We believe that the e-commerce and small warehouse markets will remain soft through 2024, but pick back up in 2025.

We believe that the e-commerce and small warehouse markets will remain soft through 2024, but pick back up in 2025.

Speaker 3: These dynamics support strong growth opportunities over a multi-year period for e-infrastructure solution.

These dynamics support strong growth opportunities over a multiyear period for infrastructure solutions.

Speaker 3: In transportation solutions, we think we're now in a market environment where we can accelerate growth relative to historical levels, as long as margins remain at current levels or higher.

In transportation solutions, we think we're now in a market environment, where we can accelerate growth relative to historical levels as long as margin op margins remain at current levels or higher.

Speaker 3: In building solutions, we continue to see strong residential activity in our markets, and our customers remain bullish as we enter into 2024.

In building solutions, we continue to see strong residential activity in our markets and our customers remain bullish as we enter into 2024.

Speaker 3: In addition, multifamily starts remain robust and margin opportunities strong.

In addition, multi.

Multifamily starts remained robust and margin opportunity is strong.

With our very healthy cash flow and balance sheet, we continue to look hard at acquisitions, it infrastructure and building solutions.

Speaker 3: With our very healthy cash flow and balance sheet, we continue to look hard at acquisitions, at e-infrastructure, and building solutions. We're proud of how far we've come.

We're proud of how far we've come.

But even more excited about the opportunities ahead of us.

Speaker 3: We believe that the build-out of the U.S. infrastructure will remain strong over the next three to five years.

We believe that the build out of the U S infrastructure will remain strong over the next three to five years.

With our visibility into the fourth quarter.

Speaker 3: into a record backlog, we are confident in our increased guidance and are positioned for an even better 2024. With that, I'd like to turn it over for questions.

And our record backlog.

We are confident in our increased guidance and are positioned for an even better 2024 with that I'd like to turn it over for questions.

Thank you.

Speaker 5: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any key.

Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.

We'll hear with me Tom perhaps acknowledging your request if you are using a speaker phone. Please lift the handset before pressing any keys.

Speaker 5: The first question comes from Brent Thielman at D.A. Davidson. Please go ahead.

Our next question comes from Brent Thielman at D. A Davidson. Please go ahead.

Speaker 6: Hey, thanks. Good morning, Joe, Ron, Noel. Morning, Brent.

Hey, Thanks, Good morning, Joe Ron.

Good morning, Brent.

Speaker 6: I guess first question, Joe, you talked about it a bit in the closing comments there, but this sort of drag from the e-commerce projects, some of the stuff in the Northeast.

I guess first question, Joe you talked about it a bit in the closing comments there.

Sort of a drag from an e-commerce projects some of the steps in the northeast.

Speaker 6: You mentioned it will carry through 2024. How should we think about that impacting your ability to get the e-infrastructure business still to those kind of long-term compound growth rates you've talked about for the business, I guess, the 9 to 12.

You mentioned that will carry through 2024, how should we think about that impacting your ability to get the infrastructure business still to those kind of long term compound growth rates, you've talked about the business I guess, the 9% to 12% yes.

Speaker 3: Yeah, we're still, Brant, we're still confident in those numbers. Let me, let me explain in a little more detail what happened in the second quarter because there's really a couple, couple parts of that. On the positive side, we had, you know, great weather in the second quarter. Teams were running hard and we actually finished some projects that would have been anticipated to finish in the third quarter a little early in the second quarter. So our second quarter numbers were fantastic.

Yes, we're still brand we're still confident in those numbers, let me, let me explain a little more detail what happened in the second quarter, because theres really a couple a couple of parts of that.

On the positive side.

Great weather in the second quarter teams are running hard and we actually finished some projects. It would have been anticipated that finished in the third quarter a little early in the second quarter. So our second quarter numbers were fantastic.

Speaker 3: What we tried to do is get other jobs kicked off earlier in the third quarter.

What we tried to do is get other jobs kicked off earlier in the third quarter and we had a combination of one that not happening in two jobs that have actually pushed out to start later, so you've got a little bit of a double whammy just in the northeast.

Speaker 3: And we had a combination of one, that not happening, and two, jobs that had actually pushed out to start later. So you got a little bit of a double whammy just in the Northeast that that happened. So that's where the lion's share of the revenue drop was.

So that's where the lion's share of the revenue drop was they actually all of the revenue drop was there and as a result, we got a little bit of an impact on indirect absorption in those sort of things relative to our normal normal run rates as we look forward, it's not that.

Speaker 3: Actually, all of the revenue drop was there, and as a result, we got a little bit of an impact on indirect absorption and those sort of things relative to our normal runways. As we look forward...

Speaker 7: It's not that the speed.

E.

Speaker 3: commerce distribution centers. I mean, definitely Amazon has slowed down. We normally have five Amazons going at any given time, we've got one right now. And we continue to we think that's not going to pick up according to Amazon till 2025.

Commerce distribution centers.

Definitely Amazon has slowed that we normally have five amazon's growing at any given time, we've got one right now and we continue to we think thats not going to pick up according to Amazon until 2025, the small warehouse activity as really the private side.

Speaker 3: The small warehouse activity is really the private side, which is a little bigger piece of the market up in the northeast and the southeast, and that's often with some of the financing. However,

Which is a little bigger piece of the market.

Northeast and the southeast and that softened with some of the financing. However, what we've seen the big the biggest difference is when you look at the southeast we originally.

Speaker 3: What we've seen, the biggest difference is when you look at the southeast.

Speaker 3: We originally anticipated manufacturing jobs not kicking off till 24-25. The good news is in the southeast, those jobs have kicked off quicker. In the northeast, those jobs are in the early stages of being launched and released.

We anticipated manufacturing jobs, not kicking off till 'twenty four 'twenty five the good news is in the southeast those jobs have kicked off quicker and the northeast those jobs are in the early stages of being being launched and release.

Speaker 3: The difference between us growing in high single digits to what I've called strong double digits is really literally landing water to those jobs.

The difference between us growing at high single digits to what I'll call strong double digits is really literally landing one or two of those jobs and I will tell you that we've got line of sight to three or three to five of those jobs as we sit here today going into $2004 25, and we feel confident will land are our fair share of that.

Speaker 3: I will tell you that we've got line of sight to three of three to five of those jobs as we sit here today going into twenty four and twenty five and we feel confident we'll land our our fair share of those and we'll be in good shape once those big projects kick in to the northeast. The southeast continues to grow. It kind of strong, strong rates and it's really a lag of the big projects in.

Rose.

And we'll be in good shape once those big projects kicked in to the northeast.

The southeast continues to grow at kind of strong strong rates.

And it's really a lag of the big projects in the northeast.

Okay, that's helpful, Joe. And yeah, I guess the large project that you mentioned, plan to bid $24,000, $25,000.

Okay, that's helpful Joe and.

I guess the large project that you mentioned plan to bid 'twenty four 'twenty five.

Are these as big as the record booking you recently announced, just looking maybe for a little more context relative to that, or just yeah, these are looking, you know, here today, Joe. Yeah, these are, you know, these projects.

Are these as big as the record booking you recently announced just looking maybe for a little more context relative to that or just <unk> seen already year to date Joe.

Yes. These are these projects.

are in total multi-billion dollar projects, just like the ones we're doing now. Obviously, they vary in size to some degree on our scope, but these are large projects, Brent. The other thing to keep in mind is our backlog position right now is up.

Our in total multibillion dollar projects just like the ones we're doing now.

Obviously, they vary in size to some degree on our scope, but these are these are large projects Brad the other thing to keep in mind is our backlog position right now is up 47% over over beginning of the year. We're in a very good very strong.

40-something percent over beginning of the year. We're in a very good, very strong backlog position. So I would tell you, don't let a quarter or two of dip kind of take over the narrative of what the real growth and real opportunity is out there and where we're at with it.

Backlog position so.

I would tell you don't last a quarter or two of dip kind of.

Takeover that narrative of what the real growth and real opportunity is out there.

Where we're at with it.

Understood. And on building solutions, I mean, pretty solid growth here considering the environment. I, you know, you were more optimistic as the year sort of developed around that business, especially things that picked up. But I guess with mortgage rates continuing to climb.

Yes, understood and then.

On building solutions, I mean pretty solid growth year, considering the environment.

You were more optimistic as the year sort of developed around that business. That's certainly things have picked up.

Yes, with mortgage rates continuing to decline.

Is that having any impact on the KPIs that you sort of track internally, slab growth rates, et cetera? Just any measure you'd point to that.

Is that having any impact on the kpis that you sort of track internally slab growth rates et cetera, just any measure you'd point to that.

You know, no positivity there in light of that. Yeah, I mean, everything it's, you know, what I would I would reflect back and say the strategy we put together a couple years ago for the downturn is really paying off.

No positivity there in light of that yes, I mean everything.

What I would reflect back and say the strategy, we put together a couple of years ago for the downturn is really paying off.

As we're able to not only take advantage of growing markets, but we'll continue to grow market share in the Houston and Phoenix market to offset those declines in total, but we're seeing both of those markets remain, including Dallas, they all remain strong.

As we were able to not only take advantage of growing markets, but we will continue to grow market share in the Houston and Phoenix markets to offset those declines in total.

But we're seeing both of those markets remain including Dallas, They all remained strong.

It's working, you know, we're outperforming the general market by a factor of a lot, right? So that's been very good. The only thing we've seen that I think is encouraging to us is we have definitely seen the size of slabs decrease.

It's working we're outperforming the general market by a factor of a lot right.

So that's.

That's been very good the only thing we've seen.

That I think is encouraging to us is we have definitely seen the size of slabs decrease.

So what that means is we have to do more slabs to get the same revenue. The nice thing is, if we look at the margins on those slabs versus the older, larger slabs, we've been able to hang in there on the margin side.

What that means is we have to do more slabs to get the same revenue the nice thing is.

If we look at the margins on those slabs forces versus the older larger slabs, we have been able to hang in there on the margin side.

Okay, and the commercial commercial lab.

Okay, commercial. I mean, commercial. I mean, this is just, yeah, commercial, yeah, and the commercial, yeah, we forget to talk about commercial because it's normally such a small piece of our business. But we've seen very nice margin growth and very nice opportunities there. If you remember a couple of years ago, we shrunk that commercial business down to.

Commercial the commercial I always forget to talk about commercial because it's normally such a small piece of our business, but we've seen very nice margin growth.

And very nice opportunities there.

If you remember a couple of years ago, we shrunk the commercial business down too.

I'll call it a small skeleton of what it is today, but the margins remain strong and the activity on multi-family remains very strong in the markets we're at, and that was up 20-something percent.

Call. It a small skeleton of what it is today, but the margins remained strong in the activity on multifamily remains very strong and the markets were at.

And that was up 27%.

Got it. Just the last one that, I mean, the huge cash generation again this quarter and year to date looks like you're benefiting from pretty large advanced payments. Does that all reverse in the material way in 2024 where we see sort of cash flow more consistent with kind of your historical conversion rate?

Got it.

Just the last one I mean, the huge cash generation again, this quarter and year to date, it looks like you're benefiting from pretty large advance payments.

That all reversed in the material way in 2024.

Where we see sort of cash flow more consistent with.

Kind of your historical conversion rates.

Certainly, on a project-by-project, it will, although our largest project has still more than four quarters of work to do. What obviously we expect to happen are some of these large jobs starting up with the same characteristics, frankly, of cash flow in this work on just the timing of billings and collections. I don't see variability, which we have across the board in each of our large projects.

Certainly on a project by project it will although.

Our largest projects so.

More than four quarters work to do.

Well, obviously, we would expect to happen in some of these large jobs.

Starting up with the same characteristics frankly of cash flow and this work on just the timing of billings and collections. So I don't I don't see variability.

<unk> ability, which we have across the board in each of our largest.

contractor segments of transportation and the infrastructure, but I think it'll stay kind of on the favorable side for quite some time with these big projects out there.

Contractor segments transportation and the.

The infrastructure.

But I think it will say kind of on the favorable side for quite some time with these big projects out there.

But pretty much plateau, no pun intended, at this point in time. I don't see him coming down dramatically.

So pretty much plateau no pun intended.

At this point in time, I don't see them coming down dramatically.

Okay, Great appreciate that Ron I will pass it on.

Thank you. The next question comes from Brian Russo at Stodori. Please go ahead.

Thank you. The next question comes from Brian Russo at Sidoti. Please go ahead.

Yes, hi, good morning.

Hey, Brian it's Brian.

Hey, can you just remind us, I know there are some margin differences between Pacto and the Southeast and Patello in the Northeast. It could be Union versus Non-Union or Labor Force and or just scope of work, just trying to get a sense of, you know, as...

Hey could you just remind us I know there was some margin differences between plateau in the southeast.

Hello.

In the northeast it could be union versus nonunion or.

Labor Force.

<unk> scope of work, but just trying to get a sense of.

As.

uh, the activity ramps up in the northeast, you can still maintain, um, you know, the margin profile that you've gotten mostly, um, you know, on, on the hyperscale data center and, and reshoring down in the, in the southeast.

The activity ramps up in the northeast.

You can still maintain.

The margin profile that you have gotten mostly.

On the Hyperscale data center and re shoring down in the southeast.

Yeah, let me, I'll answer some of that, let Rod jump in. Brian , we will always have.

Yes, let me.

I'll answer some of that lift rod jump in.

Brian.

We will always have.

As long as the project scope mix remains like it is today.

As long as the <unk>.

<unk> scope mix remains like it is today.

We'll always have about a four-point lower margin in the northeast versus the southeast. And what that has to do with is

We'll always have about a four point margin.

Lower margin in the northeast versus South Eastern Wood that has to do with us.

Our customers up there because it's union want to deal with less contractors and deal with one. So on a site development, kind of apples, the margins are very close, but we do a lot of concrete work, curbing gutter will do actually paving a parking lot, sound walls. And in the southeast, we've stayed away.

Our customers up there because its union wanted to deal with less contractors and deal with one so on a site development kind of apples to apples the margins are very close but we do.

A lot of concrete work curb and gutter will do actually paving a parking lot sound walls and in the southeast we've stayed away from that because the margins are significantly lower in the northeast they require it I think as we look at.

because the margins are significantly lower. In the northeast they require

I think as we look at e-infrastructure, I think what we need to think about is kind of the out and out, I'll call it normalized blended average of the two businesses in that segment around 15 and a half percent is what the number should be there. So let's all run a little higher, until a little lower, and you kind of blend it out with revenue and mix, and that's about where it falls.

Infrastructure I think what we need to think about as kind of the I'll.

I'll call it normalized blended average of the two businesses in that segment are around 15, 5% is what.

With the number should be there so flat total runs a little higher but the low lower your kind of blended out.

Our revenue and mix and that's about where it falls.

Yeah, during the quarter, it was a bit exacerbated by the slower volume in the Northeast.

During the quarter with.

But exacerbated by.

The slower volume.

In the northeast give or take about a third of the revenues coming from the northeast and two thirds from the southeast so the.

give or take, about a third of the revenues come from the Northeast and two-thirds from the Southeast. So the Southeast continued to have nice margin growth. And any time you drop about

Southeast continued to have nice margin growth at anytime you dropped.

Bob.

almost 20% of revenues in the month, which was made up by Southeast, we probably have a million to three of unrecovered overhead basically.

20% of revenues in the month, which was made up by the southeast we.

We probably have a $1 billion to three of <unk>.

Unrecovered overhead basically now as we put every beat up that will come back.

As we beat up that'll come back, as we gear up for bigger projects and some of the timing of the issues that we talked about earlier, that'll come back a little bit. So the 4% is a little bit bigger in the third quarter, just because of the swing in the margins. The good news is our highest margins grew. Bad news is our lowest margins declined a bit. So the math was okay.

Europe for the bigger projects and some of the timing of the issues that we've talked about earlier that will come back a little bit so, but 4% is a little bit bigger.

In the third quarter, just because of the swinging.

And the margins.

The good news is our highest margins grew the bad news is our lowest margin declining a bit so the map was okay.

Okay, thank you very, very helpful. And then just to switch gears on transportation, if I recall in the second quarter, you were able to pivot some of your crews and equipment to support an e-infrastructure project in the Rocky Mountains. Just wondering, given all the activity that we're seeing in that region, are you positioned to continue to do that and just go where the margins are?

Okay. Thank you very helpful. And then just to switch gears on transportation, if I recall in the second quarter.

You were able to pivot some of your crews.

In equipment to support an <unk> infrastructure.

In the Rocky Mountains, just wondering given all the activity that we're seeing in that in that region or are you positioned to continue.

To do that and just go where the margins are.

Yeah, I think a couple things. One, that project has gone extremely well. It's gone so well that the general contractor that's on that job with BEDA has pulled us into a manufacturing facility in Idaho. It's around food products.

Yes, I think.

Couple of things.

That project has gone extremely well.

So well.

The general contractor Thats on that job.

It has pulled us into a manufacturing facility in Idaho, it's around food products.

and we're actively looking at some other projects with them. The big plan I'm doing a few more of that as well. So we will continue if the opportunities are available to reallocate those assets.

And we're actively looking at some other projects with them.

I plan on doing a few more of that as well. So we will continue.

If the opportunities are available to reallocate those assets.

to what I'll call the e-infrastructure space, whether that's data centers or manufacturing or any of those. And the team has done a great job. And I think just as importantly, they're as excited about expanding into that market as they could be. They're working diligently to do that. So we hope as we go into.

Two what I'll call the key infrastructure space, whether that's data centers or manufacturing or any of those.

The team has done a great job.

And I think just as importantly.

They're as excited about expanding into that market as they could be.

They are working diligently to do that so we hope as we go into 'twenty four 'twenty five not only do we see.

24, 25. Not only do we see the large footprint of projects in the southeast and starting in the northeast, this opens up the geography for us to go even broader with those core customers.

A large footprint of projects in the south eastern starting in the northeast. This opens up the geography for us to go even broader.

With those core customers.

Okay, great. And then just lastly, the unsigned awards, mostly in the transportation solution segment, are those still mostly comprised of high-wire work or is that where we're starting to see the aviation projects pick up in the unsigned?

Okay, Great and then just lastly, the unsigned awards.

Mostly in the transportation solutions segment are those.

Still mostly comprised of highway work or.

Or is that where we're starting to see the aviation projects pick up in the unsigned.

Yes.

Yeah, I think it's primarily road highway and bridges. There are some early smaller projects in the aviation side that are waiting for final signatures. So the larger opportunities on the aviation side are gonna fall into 20 media awards in them this year, but they've worked fall into 2024. And we expect that to happen. Nice projects out there. Yeah.

Yes, I think it's <unk>.

Primarily road highway and bridges and there are some early smaller projects in the aviation side that are waiting for final signatures. So.

Larger the larger opportunities on the aviation side.

Going to fall into 'twenty, maybe awards this year, but to work will fall into 2024, and we expect that to happen.

Nice projects out there being developed.

Great. Thank you very much.

Thank you. At this time, I will now turn the call back over to Joe Cutillo for closing comments.

Thank you at this time I will now turn the call back over to Joe Cutillo for closing comments.

Thank you. Thanks again, everyone, for joining our call today. If you have any follow-up questions or wish to schedule a call, please feel free to contact Noelle Biltz. Her contact information can be found in our press release. I want to thank everybody for participating. Have a great day.

Thank you. Thanks again, everyone for joining our call today, if you have any follow up questions or wish to schedule a call. Please feel free to contact Noel builds their contact information can be found in our press release and I. Thank everybody for participating have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.