Q2 2025 Sterling Infrastructure Inc Earnings Call

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Second Quarter Webcast and Conference Call. At this time, our lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Tuesday, August 5th, 2025. I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Noelle Dilts: Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2025 Second Quarter Earnings Conference Call and Webcast. I am pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer, and Nick Grindstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and guidance, after which Joe will provide a market and full-year outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full-year 2025 financial guidance. Before turning the call over to Joe, I will read the safe harbor statement. The discussion today may include forward-looking statements. Actual results could differ materially from the statements made today.

Good morning, ladies and gentlemen, and welcome to the Sterling infrastructure, second quarter webcast and conference call at this time, our lines are now listen, only mode following the presentation. We will conduct a question and answer session. If at any time during this call, you need assistance. Please press star zero for the operator. This call is being recorded on Tuesday, August 5th. 2025. I would now like to turn the conference over to Noel delts. Please go ahead.

Good morning to everyone joining us and welcome to Sterling infrastructures 2025 second quarter earnings conference call and webcast. I'm pleased to be here today to discuss our results with Joe catillo, Sterling's chief executive officer and Nick grind staff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter, Nick will then discuss our financial results and guidance after which Joe will provide a market and fully your outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the investor relations section of our website. These slides include

Quick details on our full year 2025 Financial guidance. Before turning the call over to Joe, I will read the Safe Harbor statement.

Noelle Dilts: 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. The company assumes no obligations to update forward-looking statements as a result of new information, future events, or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income, or adjusted EPS on this call, which are all 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. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting of our RHV JV unless otherwise noted.

The discussion 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. The company assumes, no obligations to update forward-looking statements as a result of new information, future events or otherwise.

Please also, note that management May reference EBA adjusted, IBA, adjusted, net income or adjusted EPS on this call, which are all Financial measures not recognized under us. Gaap

As required by FCC rules and regulations. These non-gaap Financial measures are reconciled to their most comparable gaap Financial measures in our earnings release issued yesterday afternoon.

Noelle Dilts: As a reminder, at year-end 2024, there was a change in the accounting treatment for this JV such that we no longer consolidate revenue and backlog, but it does not change our share of EBITDA that we recognize from the JV. Our press release and filings also include a reconciliation of these adjustments. All comparisons are to the prior year quarter unless otherwise noted. Please also note that our guidance does not include any contributions from the previously announced planned acquisition of CEC Facilities Group, which has not yet closed. I will now turn the call over to our CEO, Joe Cutillo.

Our discussion of all results today, including revenue and backlog refer to figures that adjust prior period, results to conform to the current accounting of our rhb JB. Unless otherwise noted as a reminder at year end 2024, there was a change in the accounting treatment for this JV such that we no longer consolidate revenue and backlog, but it does not change our share of EBA that we recognize from the JB, our press release and filings. Also include a Reconciliation of these adjustments.

all comparisons are to the prior year quarter, unless otherwise noted

Joseph Cutillo: Thanks, Noelle. Good morning, everyone, and thank you for joining today's call. I am excited to talk about another great performance by the Sterling team as we continue to drive bottom-line growth at a rate roughly double top-line growth. Revenue grew 21% in the quarter, fueled by growth of over 29% in our E-Infrastructure Solutions segment and 24% in our Transportation Solutions segment. We grew adjusted earnings per share by 41% to $2.69 and delivered adjusted EBITDA of $126 million, an increase of 35%. Our gross profit margin expanded 400 basis points from the prior year to reach 23.3%. Additionally, operating cash flow generation in the quarter was again very strong at $85 million. Looking to the future, we remain extremely positive on our outlook. We are in the markets that we believe have strong, sustainable growth that will continue over the next several years.

Please also note that our guidance does not include any contributions from the previously announced planned acquisition of CEC facilities Group, which has not yet closed. I'll now turn the call over to our CEO. Joe catello.

Thanks Noel.

Good morning everyone. And thank you for joining today's call.

I'm excited to talk about another great performance by the Sterling team as we continue to drive bottom-line growth at a rate roughly double top-line growth.

Revenue grew 21% in the quarter fueled by growth of over 29% in our e, infrastructure solution, segment in 24% and our transportation segment.

We grew adjusted earnings per share by 41% to $2.69 and delivered adjusted EBITDA of $126 million, an increase of 35%.

our gross profit margin expanded 400 basis points from the prior year to reach 23.3%

Additionally, operating cash flow generation in the quarter was again very strong at 85 million.

Looking to the future, we remain extremely positive on our outlook.

Joseph Cutillo: We will further build upon the strong base we have established and remain focused on pursuing the most attractive and highest return opportunities. Our backlog position and visibility support our confidence in the future. Backlog at the end of the quarter totaled $2 billion, a 24% year-over-year increase. The E-Infrastructure Solutions backlog of $1.2 billion was up a very strong 44%. Our multi-year visibility is further supported by our pipeline of future phase opportunities tied to our current projects, which remain at approximately three quarters of a billion dollars. When you take both our signed backlog and future phase work, we have visibility into a pool of E-Infrastructure revenue approaching $2 billion. Adding to our excitement is our previously announced agreement to acquire CEC Facilities Group. CEC will add mission-critical electrical and mechanical services to the Sterling portfolio.

We are in the markets and G that we believe have strong sustainable growth. That will continue over the next several years.

We will further build upon the strong base. We have established and remain focused on pursuing the most attractive and highest return opportunities.

Our backlog position and visibility support our confidence in the future.

backlog at the end of the quarter totaled, 2 billion dollars a 24% year-over-year, increase

Was up a very strong 44%.

Our multi-year visibility is further supported by our pipeline of future. Phase opportunities, tied to our current projects which remain at approximately 3/4 of a billion dollars.

When you take both our signed backlog and future phase work, we have visibility into a pool of key infrastructure, Revenue approaching 2 billion dollars,

Adding to our excitement is our previously announced agreement to acquire CEC facilities group.

Joseph Cutillo: Combined with our best-in-class site development capabilities, this addition will allow us to deliver higher value end-to-end E-Infrastructure solutions to our customers. We believe that this service combination will allow us to capture even more value across the full lifecycle of a facility, accelerate project timelines, create stickier customer relationships, and expand our geographic footprint. The Sterling way, which is our commitment to take care of our people, our environment, our investors, and our communities while we work to build America's infrastructure, remains our guiding principle as we execute our strategy and grow the company. Now, I would like to discuss our segment results in more details. In E-Infrastructure, second quarter revenue grew 29% over prior year and over 42% sequentially. The data center market was again the primary growth driver in the quarter as revenue from this market more than doubled year over year.

CEC will add Mission critical electrical and Mechanical Services to the Sterling portfolio.

Combined with our best-in-class site development capabilities, this addition will allow us to deliver higher value and to end e infrastructure solutions to our customers.

We believe that this service combination will allow us to capture even more value across the full life, cycle of a facility,

Accelerate project timelines.

Create stickier customer relationships and expand our geographic footprint.

The Sterling way, which is our commitment to take care of our people, our environment, our investors, and our communities. While we work to build America's infrastructure, remains our guiding principle as we execute our strategy and grow the company.

Now, I'd like to discuss our segment results in more details

Any infrastructure?

Second quarter Revenue grew 29% over prior year and over 42% sequentially.

Joseph Cutillo: Adjusted segment operating income grew 57% and adjusted operating margins reached 28%, an increase of over 500 basis points. This was driven by our continued shift towards large mission-critical projects, including data centers, where our superior project management and ability to finish jobs on or ahead of schedule are extremely valuable to our customers. Mission-critical data centers and manufacturing work continues to represent the vast majority of our E-Infrastructure backlog. However, we saw very strong growth in e-commerce distribution backlog in the quarter. Moving to Transportation Solutions, second quarter revenue grew 24% and adjusted operating profit grew 78%, driven by strong market demand and the benefit of makeshift towards higher margin services. We ended the quarter with Transportation Solutions backlog of $715 million, a 5% year-over-year increase.

The data center Market was again, the primary growth driver in the quarter as revenue from this Market more than doubled year-over-year.

And adjusted operating margins. Reached 28%, an increase of over 500 basis points. This was driven by our continued shift towards large Mission critical projects, including data centers, where our Superior project management and ability to finish jobs on or ahead of schedule are extremely valuable to our customers.

Mission critical data centers and Manufacturing work. Continues to represent the vast majority of our e infrastructure backlog. However,

We saw a very strong growth in e-commerce and a distribution backlog in the quarter.

Moving to Transportation Solutions.

Second quarter Revenue grew 24% and adjusted operating profit grew 78% driven by strong market demand and the benefit of mixed shift towards higher margin services.

We ended the quarter with Transportation Solutions. Backlog of 715 million.

Joseph Cutillo: Sequentially, segment backlog declined 17%, which reflects the strong revenue gain in the quarter combined with the seasonally slower awards in the second quarter, which has historically been a low point of the year. Additionally, the wind down of our Texas low-bid heavy highway operation will impact backlog but ultimately benefit segment margins. Shifting to Building Solutions, in the second quarter, segment revenue declined 1% and adjusted operating income declined 28%. Adjusted operating margins in the quarter were 11%. Overall demand for homes has been impacted as potential buyers struggle with affordability challenges. Revenue from our legacy residential business declined 11%, driven by softness in the overall housing market. Even with these headwinds in Building Solutions, the strength of Sterling's diversified portfolio and strategy to focus on growth in high margin and markets enabled us to deliver another record quarter.

The 5% year-over-year increase.

Sequentially segment. Backlog declined, 17%.

which reflects the strong Revenue burn in the quarter combined, with the seasonally slower Awards in the second quarter, which is historically been the low point of the year,

Additionally, the wind down of our Texas, low bid heavy Highway operation will impact backlog, but ultimately benefit segment margins.

Shifting to Building Solutions and the second quarter segment Revenue declined. 1%

And adjusted operating income declined. 28%

Adjusted operating margins in the quarter were 11%.

Overall demand for homes has been impacted as potential buyers, struggle with affordability, challenges revenue from our Legacy residential business declined, 11% driven by softness, and the overall housing market.

Joseph Cutillo: With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and full-year guidance. Nick.

Even with these headwinds in Building Solutions, the strength of Sterling's Diversified portfolio and strategy to focus on growth and high margin and markets, enabled us to deliver another record quarter.

Nick Grindstaff: Thanks, Joe, and good morning. First, I would like to say that I am excited about joining the Sterling team. This is a really great time for the company, and I am looking forward to helping guide our financial strategy as we continue to grow. Now, I will shift to our consolidated backlog metrics. Our second quarter backlog totaled $2.01 billion, a 23.8% increase from the prior year's second quarter. We closed the quarter with a combined backlog of $2.25 billion, which was up 17.6% from Q2 2024 and up slightly sequentially. Second quarter 2025 book-to-burn ratios were 0.77 times for backlog and 1.03 times for combined backlog. Year-to-date book-to-burn ratios were 1.36 times for backlog and 1.47 times for combined backlog.

With that. I'd like to turn it over to Nick, to give you more details. So our financial metrics and full year guidance, Nick

Thanks Joe and good morning. First, I would like to say that I'm excited about joining the Sterling team. This is a really great time for the company and I'm looking forward to helping guide our financial strategy as we continue to grow.

Now, I'll shift to our Consolidated backlog metrics.

Our second quarter backlog totaled 2.01 billion a 23.8% increase from the prior year. Second quarter.

25 billion.

Which was up 17.6% from 2 q24 and up slightly sequentially.

Second quarter 2025 booked to burn. Ratios were 77 times for backlog and 1.03 times for Combined backlog.

Nick Grindstaff: Moving to our cash flow metrics, cash flow from operating activities for the first six months of 2025 was a strong $170.3 million compared to $170.6 million in the prior year period. Cash flow used in investing activities for the first six months of 2025 included $28.6 million of net CapEx and $37.9 million for acquisitions, including Drake Concrete. Year-to-date cash flow from financing activities was a $68.7 million outflow, primarily driven by first quarter share repurchases of $43.8 million at an average price of $128.98 per share. We did not repurchase any additional shares in the second quarter. Remaining availability under the existing repurchase authorization is $85.6 million. We are in great shape from a balance sheet perspective.

Year to date, the book to burn ratios were 1.36 times for backlog and 1.47 times for combined backlog.

Moving to our cash flow metrics cash flow from operating activities for the first 6 months of 2025 was a strong 170.3 million compared to 170.6 million in Prior year period.

Cash flow using an investing activities for the first 6 months of 2025 included 28.6 million of net capex and 37.9 million for Acquisitions including Drake concrete.

Year-to-date cash flow from financing activities showed a $68.7 million outflow.

Primarily driven by first quarter share repurchases of 43.8 million and an average price of 128.98 per share.

We did not repurchase any additional shares in the second quarter?

Remaining availability under the existing repurchase authorization is 85.6 million.

Nick Grindstaff: During the quarter, we announced an amendment to our 2019 credit agreement that extended the maturity of the credit facility to June 2028, expanded the size of the facility, improved rates, and provided additional flexibility. We ended the quarter with a very strong liquidity position consisting of $699.4 million of cash and debt of $298.2 million for a cash net of debt balance of $401.2 million. At close, the CEC transaction is expected to utilize $450 million of cash on hand. Our $150 million revolving credit facility remained undrawn during the period. Now, I would like to discuss our guidance. As we look ahead to the remainder of 2025, the strong tailwinds behind our business position us for another record year at Sterling.

We are in great shape from a balance sheet perspective. During the quarter, we announced an amendment to our 2019 credit agreement. That extended the maturity of the credit facility to June 20128 expanded. The size of the facility, improved rates and provided additional flexibility.

We ended the quarter with a very strong liquidity position, consisting of 699.4 million of cash and debt of 298.2 million.

For a cash, net of debt balance of 401.2 million.

That close the CEC transaction is expected to utilize 450 million of cash on hand.

Our 150 million revolving credit facility remained undrawn During the period.

Now, I'd like to discuss our guidance.

Nick Grindstaff: We are increasing our guidance ranges to revenue of $2.1 billion to $2.15 billion, which is a slight increase at the midpoint relative to our previous guidance range, net income of $243 million to $252 million, diluted EPS of $7.87 to $8.13, adjusted diluted EPS of $9.21 to $9.47. This represents an 8% increase at the midpoint over our previous guidance range. EBITDA of $406 million to $421 million, adjusted EBITDA of $438 million to $453 million. This represents a 6% increase at the midpoint of our previous guidance range. Please note that our guidance does not include any contribution from CEC as we continue to work towards closing. Our expectations for CEC's full-year performance are unchanged. From a financial standpoint, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead.

As we look ahead to the remainder of 2025, the strong Tailwinds behind our business position us for another record year at Sterling.

We are increasing our guidance range to revenue of $2.1 billion to $2.15 billion, which is a slight increase at the midpoint relative to our previous guidance range.

Net income of $243 million to $252 million, diluted EPS of $7.87 to $8.13.

Adjusted diluted EPS of $9.21 to $947.

This represents an 8% increase at the midpoint of our previous guidance range.

Even to an adjusted EBITDA of $406 million to $421 million. Adjusted EBITDA of $438 million to $453 million.

This represents a 6% increase at the midpoint of our previous guidance range.

Please note that our guidance does not include any contribution from CEC as we continue to work towards closing.

Our expectations for cec's, 4-year performance are unchanged.

Nick Grindstaff: Now, I will turn the call back to Joe.

Joseph Cutillo: Thanks, Nick. As we look to the future, we remain very bullish on the multi-year opportunity in each of our markets. Our strong backlog, future phase opportunities, and discussion with our customers contribute to our confidence. In the E-Infrastructure Solutions, we anticipate that the current strength and data center demand will continue for the foreseeable future. Our customers are discussing multi-year capital deployment plans and are focused on how to align with the right partners to support these plans. We are getting pulled into new geographies by our customers, including Texas, and believe that the pending CEC acquisition will only accelerate our footprint expansion. In the manufacturing market, we are seeing a fairly steady pace of activity in 2025. As we look out to 2026 and 2027, there remains a very big pool of mega projects on the horizon. This would include planned semiconductor fabrication facilities.

From a financial standpoint, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead. Now, I will turn the call back to Joe

Thanks Nick.

As we look to the Future.

We remain very bullish on the multi-year opportunity in each of our markets.

Our strong backlog future phase opportunities and discussion with our customers contribute to our confidence.

Any infrastructure Solutions.

We anticipate that the current strength in data center, demand will continue for the foreseeable future.

Our customers are discussing multi-year, Capital deployment plans and our focused on how to align with the right Partners to support these plans.

We are getting pulled into new geographies by our customers including Texas and believe that the pending CEC acquisition will only accelerate our footprint expansion.

In the manufacturing Market, we're seeing a fairly steady pace of activity in 2025.

Of Mega projects on the horizon.

Joseph Cutillo: Given the complexity involved with their development, we believe it will take some time before awards start to flow. The e-commerce market has strengthened significantly in 2025. We have built a sizable level of backlog and believe we could see additional awards in the back half of the year. Together, these dynamics support strong growth opportunities over a multi-year period. For 2025, we expect to deliver E-Infrastructure revenue growth of 18% to 20% and adjusted operating profit margins in the mid to high 20% range as compared to 23.7% in 2024. In Transportation Solutions, we are approaching the final year of the current federal funding cycle, which concludes in September of 2026. We have built over two years of backlog and continue to see good levels of bid activity. For 2025, we anticipate continued growth in our core Rocky Mountain and Arizona markets.

This would include plans for semiconductor fabrication facilities.

Given the complexity involved with the development, we believe it will take some time before Awards start to flow.

The e-commerce Market is strengthened significantly in 2025.

We have built a sizable level of backlog and believed we could see additional Awards in the back half of the year.

Together these Dynamics support, strong growth opportunities over a multi-year period.

For 2025 we expect to deliver e infrastructure, Revenue growth of 18 to 20% and adjusted operating profit margins. In the mid to high 20% range as compared to 23.7% in 2024.

In transportation Solutions, we are approaching the final year of the current federal funding cycle which concludes in September of 2026. We have built over 2 years of backlog and continue to see good levels of bid activity.

Joseph Cutillo: The downsizing of our low bid heavy highway business in Texas is progressing according to plan, resulting in some moderation of Transportation Solutions top line and backlog, but should drive meaningful margin improvements as we move through the year. We now expect Transportation Solutions revenue growth to be in the low to mid teens on an adjusted basis for 2025. We forecast adjusted operating profit margins in the low teens compared to 9.6% in 2024. In Building Solutions, we continue to believe the business is well positioned for growth over a multi-year period. Our key geographies of Dallas-Fort Worth, Houston, and Phoenix are expected to see continued population growth driving new home demand. Additionally, there is a significant opportunity for share gain in Houston and Phoenix. In the near term, we are anticipating a continuation of soft market conditions driven by the affordability challenges.

For 2025, we anticipate continued growth in our core Rocky Mountain in Arizona markets.

The downsizing of our low bid heavy Highway business in Texas is progressing according to plan resulting in some moderation of Transportation Solutions, Topline and backlog.

but should drive meaningful margin improvements, as we move through the year,

We now expect Transportation Solutions, Revenue growth to be in the low to mid teams on adjusted basis for 2025.

We forecast adjusted operating profit margins, and the low teens compared to 9.6% in 2024.

And Building Solutions.

We continue to believe the business is well positioned for growth over a multi-year period. Our key geographies of Dallas Fort Worth Houston and Phoenix are expected to see continued population growth, driving new home demand.

Additionally.

There's a significant opportunity for share gains in Houston and Phoenix.

In the near term, we are anticipating a continuation of soft market conditions driven by the affordability challenges.

Joseph Cutillo: For full-year Building Solutions revenue, we forecast a mid to high single-digit decline. We anticipate adjusted operating margins in the low double digits as compared to 14.8% in 2024. On the acquisition front, closing the CEC transaction is the top priority, but we are continuing to look for small to mid-size acquisitions that are the right strategic fit to enhance our service offering and geographic footprint. The midpoints of our increased 2025 guidance ranges would represent 13% revenue growth as adjusted for RHV, 32% adjusted EPS growth, and 30% adjusted EBITDA growth. With that, I would like to turn it over for questions.

For full year Building Solutions Revenue. We forecast a mid to high single-digit decline.

We anticipate adjusted operating margins in the low double digits is compared to 14.8% in 2024.

On the acquisition front.

Closing, the CEC transaction is the top priority.

But we are continuing to look for small to mid-size Acquisitions. That are the right strategic fit to enhance our service offering and Geographic footprint.

The midpoint of our increase 2025 guidance ranges would represent.

13% revenue growth, as adjusted for RHB.

32% adjusted EPS growth.

Conference Operator: Thank you. 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. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please flip the handset before pressing any keys. The first question comes from Noelle Dilts at William Blair. Please go ahead.

And 30% adjusted either to growth with that, I'd like to turn it over for questions.

Thank you, 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 prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the 2 and if you are using a speaker-phone, please lift the handset, before pressing any keys.

The first question comes from Louie DePalma at William Blair, please go ahead.

Adam Thalhimer: Joe, Nick, and Noelle, good morning.

Nick Grindstaff: Good morning, Louis. How are you?

Joe, Nick and Noel good morning.

Adam Thalhimer: Excellent. One of the big trends coming out of earnings season thus far has been the major increases in CapEx from the data center hyperscalers. Investors are wondering, is a significant portion of these projects expected to land in your core markets? In the past, you've provided qualitative color on the data center book-to-burn. Is it fair to assume that the book-to-burn remained above the one-times level? Thanks.

Good morning, Louie. How are you?

Excellent. Um, 1 of the the big trends coming out of earnings season, thus far, has been the the major increases in capex from the data center hyperscalers. Um,

Joseph Cutillo: Yeah, so let me start with the first one. We think we are positioned extremely well for a large percentage of the data center capital that is coming out. As we talked about on the call, we are very actively looking at expanding into Texas. We see some very nice opportunities there. As we go into 2026 and 2027, we will start looking to expand up into the Northwest. We think there is going to be some sizable projects based on talking to our customers out in those future years up in the midwest or upper west, northwest market in my geography straight here this morning. So yeah, I think we are positioned extremely well today. I will tell you from a strategic planning standpoint and what we are working on, we are following those customers into some new markets.

Investors are wondering is a significant portion of of these projects expected to land in your core markets and um in the past you've provided um qualitative color on the the data center booked to burn, is it fair to assume that um the book to burn remained above the, the 1 times level. Thanks.

Joseph Cutillo: On the data center front, we saw very good bookings again in the quarter. Data centers are now 62% of our total backlog in E-Infrastructure. That is up a couple of points, but it is even more impressive when you look at the growth of our e-commerce distribution businesses in the quarter. We are up almost 700% in the quarter for backlog and e-commerce.

We see some very nice opportunities there. And as we go into 2026 and 2027, uh, we'll start looking to expand up into the Northwest. We think there's going to be some sizable projects based on talking to our customers out from those future years up in up in the mid mid um sorry Midwest or Upper West Northwest Market, get my uh my geography straight here this morning. Um so yeah, I think we're positioned extremely well today and I will tell you uh from a strategic planning standpoint and what we're working on. Uh we are we are following those customers uh, into some new markets.

On the data center Front. Um, we saw a very good bookings again, uh, in the, in the quarter, uh, data centers are now 62% of our total backlog and E infrastructure, and that's up a couple points, but it's even more impressive. When you look at the growth of our uh uh e-commerce distribution uh businesses in the in the quarter. Uh we're up almost 700% in the quarter, uh for backlog and e-commerce.

Adam Thalhimer: Great. Related to those comments in terms of expansion into Texas and the Northwest, do you need any additional acquisitions for that to happen, or is the general blueprint to expand organically?

Joseph Cutillo: Yeah, I think we'll do both. We've got very nice reach out of Utah. We almost touch some of the far northwest markets out of our Utah business today. So it's another few hundred miles for us to go. But we're also looking at potential acquisitions in those markets. Similarly, with Texas, believe it or not, West Texas is much closer to our Utah operation than people realize with the size of Texas. So we can strike and do work in West Texas. And we've been working and want to work all the way over to kind of the Dallas, Oklahoma region. So we have the ability to do that organically. But long term, we either need to establish a beachhead in Texas and up in the northwest so we're not traveling quite as far or make an acquisition. So the bottom line is we're looking at both.

Great and related to those comments. Um, in terms of expansion into Texas and the Northwest. Um, do you need any additional Acquisitions for that to happen? Or is the general, um, blueprint to? Um, expand organically?

Adam Thalhimer: Great. Are there any expectations in terms of the timing, in terms of how long will it take for Sterling Infrastructure to start winning large jobs in the Texas and Northwest markets? You already have the customer relationships, but how long will it take to hire the necessary workforce?

Yeah, I think we'll do both uh, you know, we've got very nice reach out of Utah. Uh, we we uh almost touch uh some of the far Northwest markets out of our Utah business today. So it's a, it's another few hundred miles for us to go. Uh, but we're also looking at uh, potential Acquisitions in those markets. Uh, similarly, with Texas, uh, Believe It or Not. Uh, West Texas is much closer to to our youth operation than than people realize some of the size of Texas. Uh, so we can strike in in uh, do work in West Texas. Uh, and we've did work in 1 work all the way over to, uh, get kind of the Dallas, Oklahoma, uh, region. Um, so we, we have the ability to do that organically, uh, but long term, we either need to establish a beach, head in Texas, and up in the Northwest. So we're not traveling quite as far, uh, or make an acquisition. So the bottom line is we're looking at both

Great. And are there any um, expectations?

Joseph Cutillo: I think the Northwest is further out. The projects haven't come there. They're future projects. So we're, I'll call, pre-planning 12 to 18 months before those projects start to get released. But in Texas, I'd be disappointed if we didn't have some wins for the end of this year with the bid activity that we're seeing and what we're being asked to put project plans together for. So we're excited about the Texas market. That will only accelerate with bringing on CEC once we can start talking to customers jointly. I think we're going to see some very nice, not only opportunities, but some very nice wins in Texas. Similarly, I don't think it's going to be very long before we start pulling them into the Southeast more and more with our existing customer base.

In terms of the timing um, in terms of how long will it take for um, Sterling to start winning like a large jobs in the Texas and Northwest markets as you already have the customer relationships, but how long will it take to hire the necessary Workforce? And yeah, I think the

The Northwest is further out the projects, haven't come their their future projects. So we're I'll call pre-planning uh 12 to 18 months before those projects start to start to get released. Um, but in Texas I'd be disappointed if we didn't have uh some wins for the end of this year with the bid activity that we're seeing and what we're being asked to uh uh put project plans together for. Um, so we're excited about the Texas Market that will only accelerate would bringing on CEC, uh, once we can start talking to customers jointly. Um, I think we're going to see some very nice, not only opportunities, uh, but some very nice wins in Texas. Similarly, I don't think it's going to be very long. Uh, before we start pulling them into the southeast more and more with our existing customer base.

Adam Thalhimer: Great. That is helpful. Thanks, everyone.

Great. That is helpful. Thanks everyone.

Conference Operator: Thank you. The next question comes from Brent Thielman at D.A. Davidson. Please go ahead.

Thank you. The next question.

Stillman at da Davidson please go ahead.

Brent Thielman: Thanks. Good morning. Great quarter. Hey, Joe, maybe just sticking on the E-Infrastructure, especially as these margins just continue to sort of surpass expectations here. Could you talk about how these mission-critical projects continue to evolve for you, maybe just comparing the work you are doing today relative to the work that you are adding to backlog now? Maybe how that or other factors give you a conviction just in sustaining or even expanding out these obviously really impressive margins?

Joseph Cutillo: To be clear, we believe very strongly with the backlog we have, the future phases we have, and the projects we have on the books, we will continue to expand margins. I can tell you that. The thing that we really like that is going on is we talk, let us not talk about what we have in backlog today, but projects that are coming out because, again, I am very confident that we will continue to expand the margins with what we have. As power becomes more and more of a limiting factor, we are continuing to see these sites become larger and larger with more phases. If you remember, we are able to drive productivity through those future phases. So the bigger it is, the more phases there are, the more upside we have for margin throughout the course of the project.

Thanks. Good morning, great quarter. Um, Hey Joe, um, maybe just sticking on EMF infrastructure. Um, especially these margins. Just continue to surpass expectations here. Could you could you talk about how these Mission critical projects continue to evolve for you? Maybe just comparing the work you're doing today relative to the work that you're adding to backlog. Now, maybe how that or or other factors give you a conviction just in sustaining or even expanding out these these obviously really impressive margins.

We have in in the projects we have on the books, we will continue to expand margins. I I can tell you that um

Joseph Cutillo: So the first, first site, and it is happening in Texas where they are putting self-contained power related to some mini nukes, is getting ready to become underway. As we look at some of the future sites, even up in the Northwest, our customers are talking about 1,000-plus acre sites, and that is driven by this power. So we really, we really like, obviously, the larger, the more phases, the more complex, and power is driving that. As soon as they start putting self-contained power on, it is just more economical for them to make the sites larger. If you are going to put self-contained, whether it is gas or nuclear or anything else, it does not matter. The incremental cost to grow that data campus 40% or 50% is not doubling the power cost or input. So that is what is really driving that.

The, the thing that we really like, that's going on as we talk, let's, let's not talk about what we have in backlog today, but projects that are coming out because because again, I'm very confident that we'll continue to expand the margins with with what we have but is power becomes more and more of a limiting factor. We are continuing to see these sites, become larger and larger with more phases. And if you remember, we are able to drive productivity through those future phases. So, the bigger it is, the more phases there are, the more upside we have for margin throughout the course of the project. So, um, the first, you know, first sight in in in, it's happening in Texas, where they're putting self-contained, uh, power related to some many nukes is, uh, is getting ready to to become underway. Um, as we look at some of the future sites, even up in the Northwest our customers are talking about thousand plus acres.

Sites, um, and that's driven by this power. So we really, you know, we really like, obviously, the larger the more phases, the more complex, and power is driving that. As soon as they start putting self-contained power on, it's just more economical for them to make the sites larger. If you're going to put self-contained, whether it's gas.

Joseph Cutillo: As we talk about some of the mega projects out there, even bigger than these, around the chip plants and those sort of things, again, the premise is the exact same. It does not matter the end customer. It is how complex and how many phases are on there, which gives us a great opportunity to drive that productivity from one phase to the other.

Or nuclear or any anything else, it doesn't matter. The incremental cost to grow that data campus, 40 or 50% isn't doubling the power cost uh, or input. So that's that's what's really driving that is, we talk about some of the mega projects out there, even bigger than these around, uh, the chip plants and those sort of things. Again, the premise is the exact same, it doesn't matter. The End customer. It's how complex, and how many phases are on there, which gives us a great opportunity to drive that productivity from 1 phase to the other.

Brent Thielman: Okay. That's great. I appreciate that. Maybe just the status of the e-commerce opportunities, which seem to be reemerging in this segment, when did those start to become more accretive to the bottom line to the segment, Joe? Do you start executing on those now, or is this really more of a 2026 event?

Okay, that's, that's a great College. I appreciate that. Um,

The, um, maybe just the status of the, where I guess the e-commerce opportunities, which seemed to be re-emerging in the segment. When did those start to become kind of more accretive?

Joseph Cutillo: Yeah, we're in some of the early phases on a couple of these. Several of them will start in the back half of this year and go into 2026. We think the bid activity will continue through 2026. We had told everybody, this is back in 2023, that Amazon, sitting down with some of their key executives at the time, had told us that their program would start back up in 2025. We saw our first bid in activity take place in Q4 of 2024, which was exciting. We anticipated two to three projects in total in 2025 that would fall into our footprint. I think we'll end up by the end of this year having seven, eight, maybe even nine of these projects. That's the good news. The better news is these projects, based on what they're building, they're building a bigger warehouse than they have historically done.

To the bottom line to the segment. Joe. Do you do you start executing on those now? Or is this really more of a 2026 event?

Yeah, we're in the we're in some of the early phases on a couple of these. Uh several of them will start in the back half of this year and go into 2026. And we think the bid activity will continue uh through 2026. You know, we we had told everybody, this is back in 2023 um that uh, Amazon sitting down with some of their, their key executives.

At the time, they had told us that their program would start back up in 2025. We saw our first bid in activity take place in the fourth quarter of 2024.

Joseph Cutillo: They're four stories, but it's 90-foot tall. The size and scope of these projects compared to our historicals are almost two times the amount of revenue per project. That makes it even better for us. You put all those together, we'll have very nice margins on those, and it's a nice additional tailwind on top of data centers and manufacturing and everything else that we're seeing.

Which was exciting. Uh we anticipated uh 2 to 3 projects in total in 2025 that would fall into our footprint. Um I think we'll end up by the end of this year having uh, 7 8, maybe even 9 of these projects. Uh, that's the good news. The the the better news is these projects um based on what they're building. They're building a a bigger warehouse and they have historically done, um, they're 4 stories but it's 90 foot tall, uh the the size and scope of these projects compared to our historicals are almost 2 times. Uh, the amount of Revenue per project, uh, so that makes it even better for us. So you put all those together. Um, we'll have very nice margins on those and, uh, it's a nice additional Tailwind on top of data centers and Manufacturing and everything else that we're seeing.

Brent Thielman: Understood. Maybe at least one on one of the tougher areas right now, just on Building Solutions. Obviously, you have got some more challenging end market dynamics there. Maybe also I am guessing some poor weather here in the quarter, which I know you did not call out, but I will. What is the kind of implied organic for the segment going into the second half? Joseph Cutillo, to the extent that you are getting any other feedback from customers or maybe good guys in that story, it would be interesting to hear as well.

Yep.

Understood.

Uh, well, maybe at least 1 on 1 of the tougher areas right now. Just on Building Solutions, obviously, um, you've got some more challenging in market dynamics there, maybe. Also I'm I'm guessing some poor weather here in the corner which I know you didn't call out. But I will um what you know, what is the kind of implied organic.

Joseph Cutillo: Yeah, that is certainly the headwind that we have. I think on a positive front, we are going to remain pretty focused on what can we do to maintain margins there. I think we will see for the year, we will see double-digit operating income in that, even being down double digits on a revenue front. Here is the bottom line. That market certainly is softer than we would like. The second quarter was slightly softer on what we saw than the first. We think we are close to bottom on it, and we will continue through the back half of the year. The biggest thing for us is how do we maintain pricing and margins on the work that we have. The good news is with the model that we have, we talked about our labor is highly varied. Our labor is all subcontracted.

For the segment going into the second half, you know, Joe's extent that you're getting any other feedback from customers or um, maybe maybe good guys and that story, that'd be interesting to hear as well.

May remain uh, uh, pretty focused on what can we do to maintain margins there? Uh, I think we we'll see for the year. We'll see double digit. Uh, operating income, uh, in that even being down, uh, double digits uh, on a revenue front. I

Joseph Cutillo: So if volume decreases, we eliminate labor. If it increases, we bring them back. We have continued to see price decreases on material, so that certainly has helped. We do not see any major increases coming forward on the material front, so that will continue to help us. On a positive front, we have not seen the developers or our big customers slow down on their land development, which tells us they are optimistic with the pent-up demand out there. Once interest rates start to drop, once the cost starts coming down for a customer in total, that this thing will take off very quickly. We are kind of fighting the battle. We think organically through the back half of the year, it will be down kind of low to mid-teens for the back half. But we get some interest rates drops and a couple of positive things.

Here's the, here's the bottom line, uh, that market certainly is softer than we would like, uh, the second quarter, uh, with slightly softer on what we saw than the first. We think we're close to bottom on it, and we'll continue through the back half of the year. Um, in in the biggest thing for us is, how do we, how do we maintain, uh, pricing and margins, uh, on on the work that we have now? The good news is with the model that we have. Uh, we talked about our labor is, highly very um, our labor is all subcontracted. Uh, so if I am decreases, we eliminate labor. If it increases, we bring them back. We've continued to see price decreases on material. So that certainly has helped. Uh, we don't see any major increase in coming forward on the material front so that will continue to help us um, on a positive front. Uh, we have not seen

Joseph Cutillo: Maybe we could see a strong fourth quarter. We are not betting on it, though. We do not have any of that in our numbers. If anything, I think we are probably very conservative in our forecast versus what we anticipate happening.

The developers or our big customers, slow down on their Land Development, which tells us they are optimistic with the, with the pent-up demand out there. Once interest rates start to drop once the cost starts coming down for for a customer in total, uh, that this thing will take off very quickly. So we're kind of fighting the battle. Um, we think organically, uh, through the back, half of the year, it'll be down. Kind of low to mid teens, uh, for the, for the back half. Um, but we get some interest rates drops and a couple couple positive things, maybe we could see a strong fourth quarter. We're not betting on it though. We don't have any of that in our numbers. If anything, I think we're probably very conservative, uh, in our forecast, uh, versus what we anticipate happening.

Brent Thielman: Yep. Okay. Understood. I will pass it on. Thanks, all.

Yep. Okay. Understood, I'll pass it on. Thanks all.

Joseph Cutillo: Thanks, Brent.

Conference Operator: Thank you. The next question comes from Julio Romero at Sidoti Company. Please go ahead.

Thanks.

Brent Thielman: Thanks. Morning, Joe, Nick, and Noelle. Maybe staying on E-Infrastructure for a little bit. As these E-Infrastructure projects that you talked about, Joe, down the pipe get larger and larger and become more complex, there is only, as far as I know, one Sterling out there. Is it fair to say that the value they place on your reliability to keep the project on time rises with that complexity? What is your level of confidence in securing better pricing that reflects that value premium?

Romero xoda. Please go ahead.

Thanks Morning, Joe Nick and Noel. Um maybe staying on E infrastructure for a little bit you know as these e infrastructure projects that you talked about Joe um down the pipe, get larger and larger and become more complex.

Joseph Cutillo: It is certainly, the more complex, the more risk they have, which helps us. Our certainty is a critical thing. On pricing, again, we get a slight premium. Maybe we should get more of a premium, but our goal is not to take advantage of the situation. It is really to be fair on pricing, loyal to our customers that are loyal to us, and make it up on the productivity side. As these projects get bigger, we will continue to make margins on the productivity side. Strategically, we feel like that enables us to limit people wanting to enter the market and take the risk. It limits the customers wanting to take the risk because our prices upfront are egregious. It puts the onus on us to do what we do best, and that is execute, integrate new technologies, and drive ways that improve our profitability.

Um, you know there's only, as far as I know, one Sterling out there. You know, is it fair to say that the value they place on your reliability to keep the project on time rises with that complexity? And then what's your level of confidence in securing better pricing that reflects that value premium?

Yeah, it it certainly, you know, the more complex, uh, the more risk they have, which, which helps us write that there are certainty, is is a critical thing. Um, and pricing again. We we get a slight premium uh in you know, maybe we should get more of a premium but our, our goal isn't to um take advantage of the situation. It's really to be fair on pricing, uh, loyal to our customers that are loyal to us and and make it up on the productivity side and as these projects get bigger, we will continue to make margins on the productivity side and strategically we feel like that uh, enables us to limit. Uh, people wanting to enter the market and take the risk. It limits, the customers wanting to take the risk, uh, because our prices up front are egregious, uh, and it puts the onus on us, uh, to do what we do.

Joseph Cutillo: Let us talk a little bit about CEC and about some of the upfront stuff. It was really interesting. We just had our management meeting, our quarterly management meeting last week. We were having our plateau team explain to our other businesses how valuable the small acquisition we made on dry utilities has been and how fast it is growing and where CEC will come into play. To put it in perspective, on a data center, we talk about time being critical. We talk about how we believe we can take out months of time. Interestingly enough, we are working on data centers now that we pulled our dry utility business into that we actually have all the dry utilities in, dug, put in, concrete poured, finished before the electrician is even selected for the project. You think about that. Think of how much time that can pick up.

Invest, and then that's execute, uh, integrate new technologies and, and driveways that, uh, improve our profitability. And, and it's, you know, let's talk a little bit about CEC and, and about some of the upfront stuff. It was really interesting. We just had our our management meeting our quarterly management meeting last week and we were having our uh Plateau team explain to other our other businesses. How valuable the small acquisition, we made on dry utilities, uh, has been, and how fast it's it's growing and where CEC will come into play and and to put it in perspective on a data center, we talk about time being critical and we talked about how we believe we can take out months of time.

Finished before the electrician is even selected for the project.

Joseph Cutillo: Think of how much productivity that can pick up. As I said, I think on the last call, we are seeing 40% improvement on profitability in that business because of the productivity we can drive and do things simultaneously. What is exciting in that meeting, we started talking about some other opportunities for us is our Building Solutions business is down. We have traveling crews from our commercial work side that can do concrete work. We are starting to look at using those crews in E-Infrastructure to do that concrete work of those duct banks. The margins on it are even better than our Building Solutions margins. It is another complement that we can add to the customer. It takes time out of the process. This is the thing that we are constantly looking at, and we are constantly kind of driving.

Joseph Cutillo: When you focus on margins, it is amazing how your different business units can come together and come up with ideas that we would not even have to drive margins higher, leverage capacity, and leverage what we do.

You think about that think of how much time that that can pick up and think of how much productivity that can pick up. As I said on, I think on the last call uh we're seeing 40% Improvement on profitability in that business because of the productivity we can drive and do things simultaneously. Now, what's exciting in in that meeting, we started talking about some other opportunities for us is our Building Solutions businesses down, we have traveling Crews from our commercial side that can do concrete work. We're starting to look at using those crews in E infrastructure, to do that concrete, work of those duct Banks. It the margins on it are even better than our Building Solutions margins and it's another compliment that we can add to the customer and it takes time out of the process, right? So this is the thing that we're we're constantly looking at and we're constantly kind of

Driving; when you focus on margins, it's amazing how your different business units can come together and come up with ideas that we wouldn't even have to drive. Margins higher, leverage capacity, and leverage what we do.

Brent Thielman: Great answer. Really helpful there. You touched on it a little bit as data center CapEx and manufacturing CapEx as that opportunity increases. Can you speak a little bit to the competitive environment? Are you seeing any new entrants trying to do what you do? Also, could you speak to your competitive positioning a little bit more relative to those potential new entrants and how the tokens like CEC help you stand out?

Joseph Cutillo: Yeah. Yeah. I mean, you know, we'll always see people pop up here and there. As I remind people that in the Southeast, there were two or three metas that were started by someone else. I will tell you, we finished all of those meta projects. Occasionally, someone comes in and tries to make a jump at it. Our biggest competitor, candidly, is local content. If we have a local entity, whether that's a county or a state, require it could be a local contractor that's licensed there. It could be a minimum amount of local labor on a particular job. That's where we run into the biggest challenge, right? That's where we have. That's kind of the dynamic today. As we look forward with CEC and continue to add electrical and mechanical capabilities, cost is always critical to customers, but speed is the most important thing.

Great answer really helpful there and then you know you touched on it a little bit as as data center capex and Manufacturing capex. As that opportunity increases, can you speak a little bit to the competitive environment are you seeing any new entrance um kind of trying to do what you do and then also could you speak to your competitive positioning a little bit more relative to those potential new entrance and how the tokens like CEC um kind of help you stand out? Yeah.

Yeah, so, I mean, you know, we we will always see people pop up here and there. And and as I remind people that, um, um, in the Southeast, uh, there were 2 or 3 metas that were started by someone else.

Um, I will tell you, we finished all of those meta projects. Occasionally, someone comes in and tries to make a jump at it. Our biggest competitor, candidly, ...

Is local content. Um, if we have a local entity, whether that's a county or a state uh require uh, it could be a local contractor that's licensed there. Um, it could be a minimum amount of local, uh, labor on a particular job. That's where we run into the biggest challenge, right? That's where we, we find out. But that's kind of the dynamic today as we look forward with CEC and, and continue.

You add electrical mechanical capabilities, again.

Joseph Cutillo: By integrating these businesses together, we really believe we could take months out of the development of this project and months out of the total cycle time to build these. That value to the customer and that certainty to that customer for the small premium that we charge is well worth that in return. Now, what does that do to the competition? If we're offering both of those and the time reduction, and you have one of those, you're kind of on the outside looking in. The only thing you can try to compete with is price. We don't compete with price. We don't gouge, but at the same time, we want a fair price. We feel we can add more value to that. We think the CEC add is just another barrier to entry on the site development side.

Cost is always critical to customers, but speed is the most important thing. By integrating these businesses together, we really believe we can take months out of the development of this project and months out of the total cycle time to build these, and that adds value to the customer.

In that certainty that the customer for the small premium that we charge is well worth that in return. Now, what does that do to the competition? If we're offering both of those and the time reduction.

And you have 1 of those.

Joseph Cutillo: We think ultimately we'll help on the electrical side, pull them into more projects.

You're you're, you're kind of on the outside, looking in, the only thing you can try to compete with is price and we we don't compete with price, we don't gouge. But at the same time we want a fair price. Uh, and and we've we feel we can add more value to that. So we think the, the CDC adds just as another barrier to entry, uh, on the site development side, and we think ultimately, we'll help on the electrical side, pull them into into more projects.

Brent Thielman: Makes sense. Last one for me, if I could, just what's your best guess of when CEC closes? If you could just touch on the pipeline to maybe add more tokens over the near to medium term. Thanks.

Joseph Cutillo: We are certainly building a list of potential candidates. I can tell you where we want to focus strategically. We certainly like geographic expansions into the Southeast further. We will look at, as we go up to the Northwest, how we continue to expand. They are currently in Utah with us right now. We are working on a job together in Wyoming. They have shown the capabilities to expand where we are. Geographically, Southeast and kind of moving towards that Northwest. From a skill set and capabilities, they have got a nice modular operation up in Dallas. I think there are other things from a modular capability that we can add. Again, taking out time and reducing the pressure on a lot of labor on these sites. Those are always great things.

Makes sense last 1 for me, if I could just, you know, what's your best guess of, when CEC closest. And, and if you could just touch on the pipeline, to maybe add more tuck, and over the near to medium term. Thanks.

Operation up in Dallas. I think there's other things from a modular capability that we can add.

Joseph Cutillo: The other piece that is really critical is we think long-term in controlling and having the total life cycle of these facilities that are being built is further service capabilities once the facilities are built. What can we add and keep people at those locations for a long period of time? On the closing front, making good progress. We are to the point now where we are really through all of the main things. We are waiting for states to bring back licenses and permits, fundamentally. We are through everything else. As you can imagine, we would like that to be done. We would like that to have been done before today so we could talk about it and all that stuff.

Again, taking out time and reducing the uh, the pressure on a lot of labor on these sites, right? Those are always great things. Uh, and then what the other piece that is really critical is, we think long term in in controlling and having the total life cycle of these facilities that are being built, is further Service, uh, capabilities. Once the facilities are built on, what can we add? Its keep people at those locations uh, for a long period of time.

Joseph Cutillo: Whenever you are dealing with state licensing and permit agencies, it never happens as fast as you want. We have got everything submitted, and some have progressed. We are through probably 65% to 70% of those right now and are waiting to get through the rest. Progressing well, never as fast as you want, but we do not see any major hang-ups. It is just really getting, I call it, through the process and the time of state and local agencies at this point.

Yeah. Uh, on the closing front making good progress. Uh, work to the point now where we're we're really through all of all of the main things, uh, we're waiting for states to bring back licenses and permits fundamentally. Uh, we're through everything else. So as you can imagine, uh, we'd like that to be done, we would like that have been done before today, so we could talk about it and all that stuff. Uh, but whenever you're dealing with State Licensing and permit agencies, uh, it never happens as fast as you want. Uh, we've got everything submitted and some have progressed we're through probably 6,570 of those right now in our, uh, waiting to get through the rest. So progressing, well, never as fast as you want. Uh, but

But we don't see any major hang-ups; it's just really getting through the process of the time of the state and local agencies at this point.

Brent Thielman: Great. Thanks very much.

Joseph Cutillo: Thank you.

Great. Thanks very much.

Conference Operator: Thank you. The next question comes from Adam Thalhimer at Thompson Davis. Please go ahead.

Thank you.

Adam Thalhimer: Good morning, guys. Congrats on the strong quarter. Nick, welcome to the call.

Thank you. The next question comes from Adam Thalheimer at Thompson Davis. Please go ahead.

Uh, good morning, guys. Congrats on the strong quarter and uh Nick, welcome to the call.

Joseph Cutillo: Thanks, Adam.

Adam Thalhimer: Joe, can you comment on the E-Infrastructure business? At one point last year, we were talking about small fill-in projects. The question is, are we at the point where you are able to better manage the mega projects, the finish dates, and the start dates on the next one?

Um, thanks Joe. Can you comment on so when the infrastructure business at 1 point last year we were talking about small fill-in projects.

and I guess the question is, are we at the point where you're able to just better manage

Joseph Cutillo: Yeah.

The mega projects, the finish dates and the start dates on the next one.

Adam Thalhimer: are just able to better manage that.

Joseph Cutillo: Yeah, we certainly are getting, we continue to get better at managing that. The other thing that is really, it is comical, we joke about it internally, it is fantastic for us. Historically, we have talked about fill-in projects being kind of $3 to $10 million projects. Right now, our guys call the e-commerce distribution projects, which are anywhere from $40 to $90 million. They are fill-in projects, right? That is kind of how the size and scope of the businesses change. So they have helped, and they will continue to help as they are coming on, be some of that fill-in.

Yeah, you're just a better manager at that time. Certainly

Yeah, we we certainly are getting. We continue to get better at managing that, um, the other thing that's, that's really, it's, it's comical. We we joke about it internally. It's it's fantastic for us. Um, you know, historically we've talked about fill-in projects being kind of 3 to 10 million dollar projects.

Joseph Cutillo: We still would like to see a higher amount of the, what I call the, you know, 5 to $10 million projects that are very quick for us that we can fill in and be more effective and more efficient. It is why in the fourth quarter last year, when we did get some of the fill-in projects, everybody expected our margins to go down and they went up, right? It is those underutilized assets and capabilities that we have. Now, the good news is in the Southeast, our assets are certainly more utilized than they were last year. I will not say they are full. We can always add more, but they are significantly fuller, and we are seeing some of the increased margin associated with that. In the Northeast, we have not seen the rebound nearly as much.

Um, right now, our guys called the e-commerce distribution projects, which are anywhere from 40 to 90 million dollars, they're fill-in projects, right? That's kind of how the size and scope of of the businesses change. Uh, so, uh, they, they've helped and they will continue to help as as they're coming on. Be some of that fill in. Uh, we're still. We still would like to see uh, a higher amount of the, what I call the, you know, 5 to 10 million dollar projects that are very quick for us that we can fill in and be more effective and more efficient. It's why in the fourth quarter last year? When we did get some of the fill-in projects, everybody expected our margins to go down. And they went up, right? That's those underutilized assets and capabilities, that we have now, the good news is in the Southeast. Um, our assets are certainly more utilized than they were last year. I won't say they're full. We can always add more. Uh, but they're, they're significantly.

Joseph Cutillo: However, what is very encouraging is several of these e-commerce distribution jobs that we are winning and are coming out in the back half of this year are in the Northeast, along with a couple of very nice sizable projects that should kick off towards the end of this year, first quarter of next year. Hopefully, we have those tied up in the next quarter. We feel very confident on winning those. So I think we are going to see a really nice rebound of the Northeast as we start fourth quarter and first quarter next, which is only going to help drive those margins up further.

Fuller, and we're seeing uh, some of the, some of the increased margin Associated that in the Northeast, we haven't seen the rebound nearly as much. However, what is very encouraging is, uh, several of these e-commerce distribution jobs that we're winning and are coming out in the back, half of this year, are in the Northeast, uh, along with a couple, very nice sizable projects, uh, that, uh, should kick off towards the end of this year.

First quarter of next year. Uh, hopefully we have those tied up in the uh, in the next quarter. Uh, we feel very confident on on winning those. Uh, so I think we're going to see a really nice rebound of the Northeast as we start fourth quarter and first quarter next, which is only going to help drive those margins up further.

Adam Thalhimer: Is it too early to say?

Joseph Cutillo: is really nice sitting, yes, really nice sitting at the margins we have, knowing they are going up. It is a very comfortable spot right now.

Adam Thalhimer: Is it too early to start talking about the infrastructure top line expectations in 2026?

Um and is it to its really nice sitting? Yeah it's really nice sitting at at the margins we have knowing they're going up, it's a it's a it's a very comfortable spot right now.

Expectations in 26.

Joseph Cutillo: a little bit. The reason is there's a lot of a lot of stuff in the back half of this year that will be coming, so I don't want to get over my skis one way or the other. It's going up, it's not coming down, so I'm confident on that. It's just how much.

Rachell Smith: Just a quick something I am actually just confused about in the transportation segment. As your transportation subsidiaries start to do more E-Infrastructure work, how does that impact the reported results in Transportation Solutions?

Yeah, a little bit. Um, and the reason is there's a lot of stuff in the back half of this year, uh, that will be coming. Uh, so I don't want to get over my skis one way or the other, but it's going up; it's not coming down. Uh, so I'm confident on that. It's just how much.

Joseph Cutillo: It's not, so none of that work goes into Transportation Solutions and all hits E-Infrastructure. So the margin improvement that we're seeing in Transportation Solutions is pure Transportation Solutions margin improvement. What it's going to do is, as we allocate more and more assets towards E-Infrastructure, it will slow down our revenue growth in Transportation Solutions, may slow down our backlog growth in Transportation Solutions. But that's a good thing. We're swapping $3 for $1 of earnings. So, we will continue to look at doing that. Now, if Transportation Solutions margins are good enough, we'll add capacity for that, and we'll do both. My first kind of desire is to get a higher return on the people and equipment that we have today. If that shifts from one segment to another, that's just okay.

And then uh, just a quick something. I'm actually just confused about and the transportation segment as you're Transportation, subsidiary starts to do more structure work. How does that impact? The reported results and transportation Solutions?

Yeah, so, uh, it's not, so none of that work goes into transportation; it all hits the infrastructure.

So the margin Improvement that we're seeing in transportation is pure Transportation margin Improvement. What it's going to do is as we allocate more and more assets towards the infrastructure, our it'll slow down our Revenue growth and transportation may slow down our backlog growth and transportation, but that's a good thing. You know, we're swapping 3 dollars for a dollar of of earnings. Um, so uh, we will continue to look at doing that. Now, if Transportation margins are are good enough, we'll add capacity for that, and we'll do both. Uh, but my first kind of Desire is get a higher return on the people and equipment that we have today.

Aiera Operator: Good color. Thanks, Joe.

Uh, and if that shifts from one segment to another, that’s just okay.

Good color. Thanks Joe.

Conference Operator: Thank you. We have no further questions at this time. I will turn the call back over to Joseph Cutillo for closing comments.

Thank you.

Joseph Cutillo: Great. I want to thank everybody again for joining today's call. If you have any follow-up questions, please reach out to Noelle Dilts. Her contact information is found in the press release. I hope everybody has a great day. Thank you.

We have no further questions at this time. I will turn the call back over to Joe for closing comments.

Great. I want to thank everybody again for joining today's call. If you have any follow-up questions, please reach out to Noel dilts. Her contact information found in the press release and I hope everybody has a great day. Thank you.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.