Sterling Infrastructure - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered strong profitability and cash generation: adjusted EPS $1.63 and adjusted EBITDA $80.3M, with gross margin expanding to 22.0%; revenue was $430.9M, up 7% YoY on an RHB-excluded basis, though down 2% on GAAP due to the RHB deconsolidation.
• Key beats/misses vs S&P Global consensus: revenue and EPS beat; EBITDA was modestly below consensus. EPS $1.63 vs $1.45*, revenue $430.9M vs $409.1M*, EBITDA $72.1M vs $75.4M*; management cited mix shift to higher-margin E‑Infrastructure and one-time G&A separation costs partly impacting EBITDA. Values retrieved from S&P Global.*
• Guidance raised across the board: FY25 revenue $2.05–$2.15B (prior $2.00–$2.15B), diluted EPS $7.15–$7.65 (prior $6.75–$7.25), adjusted EPS $8.40–$8.90 (prior $7.90–$8.40), adjusted EBITDA $410–$432M (prior $395–$420M).
• Catalysts: E‑Infrastructure backlog strength (over $1.2B, ~65% data centers), book‑to‑burn >2x in Q1, robust operating cash flow ($84.9M) and net cash of ~$329M alongside share repurchases ($44M) support capital deployment and M&A into electrical/mechanical capabilities.

What Went Well and What Went Wrong

What Went Well

• E‑Infrastructure performance: revenues +18% and adjusted operating income +61%; adjusted operating margin expanded ~618 bps to 23.2%, driven by large mission‑critical projects (data centers/manufacturing); data centers now >65% of E‑Infrastructure backlog. “The data center market remains very active”.
• Transportation margins: revenue +9% and adjusted operating income +60%, with mix shift toward higher‑margin offerings (alternative delivery, aviation, rail) driving improvement; “as we continue to shift our mix towards higher‑margin end products... we'll continue to see margin increases”.
• Cash and backlog quality: operating cash flow $84.9M; backlog $2.13B with 17.7% margin; book‑to‑burn 2.23x (backlog) and 2.13x (combined); net cash ~$328.6M; share repurchases $43.8M.

What Went Wrong

• Building Solutions softness: revenue −14% and adjusted operating income −18% on residential affordability headwinds and unusually severe weather (Dallas down ~14 days in Jan and ~16–18 in Feb), with management expecting a slower first half.
• GAAP revenue optics: headline GAAP revenue declined YoY (−$9.4M) due to the deconsolidation of RHB JV; management provided pro forma comparatives excluding RHB to reflect underlying growth (+7%).
• EBITDA below consensus: EBITDA of $72.1M was modestly under S&P Global consensus $75.4M*, with management noting ~$1.6M one‑time separation expenses in G&A and higher performance‑based compensation as growth investments. Values retrieved from S&P Global.*

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure First Quarter webcast and conference call. At this time, all 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 0 for the operator. This call is being recorded on Tuesday, May 6, 2025. I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Noelle Dilts (VP of Investor Relations)

Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2025 First Quarter earnings conference call and webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer, and Ron Ballschmiede, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Ron 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.

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 note that management may reference EBITDA, adjusted EBITDA, adjusted net income, or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. 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 results today will refer to pro forma figures that adjust prior period results to conform to the current accounting of our RHB JV.

As a reminder, at year-end 2024, there was a change in the accounting treatment for this JB such that we no longer consolidate revenue and backlog, but it does not change our share of EBITDA that we recognize from the JB. Additionally, we may refer to adjusted operating income, EBITDA, and EPS figures that adjust for certain non-cash and non-recurring items. Please see our press release for a description and reconciliation of these adjustments. All comparisons are to the prior year quarter unless otherwise noted. I'll now turn the call over to our CEO, Joe Cutillo.

Joseph Cutillo (CEO)

Good morning, everyone, and thank you for joining today's call. Sterling is off to a great start for the year. In the first quarter, we grew adjusted earnings per share by 29% to $1.63 and delivered adjusted EBITDA of $80 million, a 31% increase. Revenue grew 7% in the quarter on a pro forma basis, fueled by growth of over 18% in our E-Infrastructure Solutions segment and 9% in our Transportation Solutions. Our gross profit margins expanded more than 400 basis points from the prior year to reach 22%. We remain focused on pursuing the most attractive and highest return opportunities. Additionally, operating cash flow generation in the quarter was strong at $85 million. We are pleased to announce that during the quarter, we closed on the acquisition of Drake Concrete, a provider of residential concrete slabs in the Dallas-Fort Worth area, for $25 million.

This acquisition strengthens our geographic footprint within DFW and expands our customer depth as Drake has limited customer overlap with Telelstone. We anticipate Drake will contribute $55 million of revenue and $6.5 million of EBITDA in 2025. Looking to the future, we remain extremely positive on our outlook. While we are certainly cognizant of the high levels of uncertainty surrounding trade policies and the economy, we believe we are in markets and geographies that have strong, sustainable growth. Additionally, we have limited exposure to foreign-sourced materials. We will continue to build upon the strong base we have established, drive margins, and pursue opportunities to enhance our long-term value. We will stay focused on the things that we can control and adapt and react to changing conditions as necessary. Our backlog position and visibility anchor our confidence in the future.

Backlog at the end of the quarter totaled $2.1 billion, a 17% year-over-year increase on a pro forma basis, and our book-to-burn ratio was above two times. E-Infrastructure Solutions' backlog of $1.2 billion was up 27% in the first quarter. Our customers are not showing any signs of slowing down. Our multi-year visibility is further supported by continued growth in our pipeline of future phase opportunities tied to our current projects. At the end of last year, we raised our expectations for future phase work at the end of the first quarter from $500,000,000 to $750,000,000, and we hit the high end of that goal. When you take both our signed backlog and future phase work, we have visibility into a pool of E-Infrastructure work approaching $2 billion, which for us is unprecedented.

We are extremely excited about the future and believe we will continue to drive strong earnings growth over the next few years. 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. Now, I'd like to discuss our segment results in a little more detail. In E-Infrastructure, first-quarter revenue grew 18% over prior year. The data center market was again the primary growth driver in the quarter, increasing approximately 60% over the prior year period. Adjusted segment operating income grew 61%, and adjusted operating margins reached 23%, a 618 basis point increase.

This was driven by our 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 work continues to represent the vast majority of our E-Infrastructure backlog, including data center work at over 65%. Moving to Transportation Solutions, first-quarter revenue grew 9% on a pro forma basis, and adjusted operating profit grew 60%, driven by strong market demand and the benefits of mixed shift towards higher margin services. We ended the quarter with Transportation Solutions' backlog of $861 million, an 11% year-over-year increase on a pro forma basis. Shifting to Building Solutions, in the first quarter, segment revenue declined 14% and adjusted operating income declined 18%. Overall demand for homes has been impacted as potential home buyers struggle with affordability challenges.

Revenue from our legacy residential business declined 19%, driven by softness in the overall housing market, unusually severe weather, and a challenging comparison to the first quarter of 2024. With that, I'd like to turn it over to Ron to give you more details on some of our financial metrics and full-year guidance. Ron?

Ronald Ballschmiede (CFO)

Thanks, Joe, and good morning. I am pleased to discuss our very strong and record first-quarter performance. Let's start with some financial highlights, starting with our consolidated backlog metrics. Our first-quarter backlog totaled $2,128 million, a 26% increase from the year-end 2024. The gross margin of our backlog was 17.7%, a 100 basis point increase from the year-end 2024 levels of 16.7%. An increase of both the amount of E-Infrastructure backlog and its margin drove this improvement.

We closed the quarter with a combined backlog of $2.23 billion, which was up 21% from the year-end 2024. First-quarter 2025 book-to-burn ratios were 2.23 times for backlog and 2.13 times for combined backlog. Turning to our first-quarter income statement, revenue was $430.9 million, a 7% increase excluding RHB from the prior year period. Consistent with our past seasonal characteristics, our first quarter is expected to be our lowest revenue quarter for the year. Current quarter consolidated gross profit was $94.8 million, or 22% of revenues, a 400 basis points increase over the 2024 first quarter. General and administrative expense increased in the quarter by $7.3 million. Approximately $1.6 million of this increase related to one-time separation expenses. Additional drivers of the increase include performance-based compensation, investments in personnel, and systems to support our growth.

We expect our full-year G&A expense to be approximately 6.3% of revenues, which compares to 6.1% excluding RHB from 2024. Our effective income tax rate for the first quarter was 26.1%. We expect our full-year effective income tax rate to be approximately 26%. The net of all these items resulted in a record first quarter with adjusted net income of $50.2 million, or $1.63 per diluted share, an improvement of 29% compared to the first quarter of 2024. On a GAAP basis, diluted earnings per share were $1.28 as compared to $1.00 even in the first quarter of 2024. Shifting to our cash flow metrics, cash flow from operating activities for the first quarter of 2025 was a strong $84.9 million compared to $49.6 million in the first quarter of 2024.

Cash flow used in investing activities for 2025 included $16.4 million of net CapEx and $37.9 million for acquisitions, including Drake Concrete. Cash flow from financing activities was an outflow of $56.2 million, primarily driven by share repurchases of $43.8 million at an average price of $128.98 per share. Remaining availability under the existing repurchase authorization is $85.6 million. We ended the quarter with a very strong liquidity position consisting of $638.6 million of cash and debt of $310 million, for a cash net of debt balance of $328.6 million. In addition, our $75 million revolving credit facility remains unused during the period. Now, I'd like to discuss our guidance. As we look ahead to 2025, the ongoing strength of our business positions us for another record year at Sterling. Our full-year 2025 guidance ranges are as follows: Revenue of $2.05 billion-$2.15 billion.

Net income of $222 million-$239 million. Diluted EPS of $7.15-$7.65. Adjusted diluted EPS of $8.40-$8.90. EBITDA of $381 million-$403 million. Finally, adjusted EBITDA of $410 million-$432 million. Considering the diversity and strength of our portfolio of businesses, our strong liquidity position, and our comfortable EBITDA leverage, we are well-positioned to take advantage of additional opportunities to generate significant shareholder value in 2025 and beyond. Now, I'll turn the call back to Joe.

Joseph Cutillo (CEO)

Thanks, Ron. 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 discussions with our customers contribute to our confidence. In E-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 are focused on how to align with the right partners to support these plans. On the manufacturing front, we believe that in 2025, we'll see a fairly steady pace of mid to large-sized onshoring project activity. As we look out to 2026 and 2027, there remains a big pool of mega projects on the horizon. This would include planned semiconductor facilities. 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 in 2025, and we anticipate that we will see additional awards throughout the year. The small-warehouse and commercial market, which began to soften back in 2023, is showing signs of strengthening. Together, these dynamics support strong growth opportunities over a multi-year period. For 2025, we expect to deliver strong E-Infrastructure revenue growth in the mid to high-teens and adjusted operating profit margins in the mid 20% range. In Transportation Solutions, we are now in the second half of the federal funding cycle. 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.

The downsizing of our low-bid heavy highway business in Texas is progressing according to plan, which is resulting in some moderation of Transportation Solutions' top line and backlog in 2025, which should drive meaningful margin improvements as we move through the rest of the year. We now expect Transportation Solutions' revenue growth in the mid-single digits on a pro forma basis in 2025. We anticipate operating profit growth in the mid-teens on an adjusted basis. 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 all expected to see continued population growth, driving demand for new homes. Additionally, there is a significant opportunity for share gains in Houston and Phoenix. The Drake acquisition positions us well for when the market does begin to recover.

For 2025, we continue to anticipate slight revenue growth overall in Building Solutions, driven by acquisition contributions. We are forecasting an organic decline in the legacy residential business. In addition, we anticipate our commercial work will continue to decline at previously mentioned rates. We're working hard to find the right acquisition to grow the company and enhance our service offerings. The E-Infrastructure market remains our top priority for M&A. Additionally, we are seeing some interesting opportunities in Building Solutions. We will remain patient and disciplined in our inorganic growth strategy. The midpoint of our 2025 guidance would represent 12% revenue growth as adjusted for RHB, 22% adjusted EPS growth, and 23% adjusted EBITDA growth. With that, I'd like to turn it over for questions.

Operator (participant)

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 touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Brent Thielman at Davidson. Please go ahead.

Brent Thielman (Senior Research Analyst)

Hey, thank you. Good morning. Great order.

Joseph Cutillo (CEO)

Thanks.

Brent Thielman (Senior Research Analyst)

Joe, maybe just on the E-Infrastructure business group, could you talk around the 35% of the backlog that's not data center? It sounds like you still have pretty good visibility in manufacturing, and that continues, and maybe warehouse activity is starting to pick up and contribute to you more. Maybe just how firm you feel like that backlog is and whether or not you can continue to build on that side of the business.

Joseph Cutillo (CEO)

Yeah, we feel good about it. There is really kind of three parts of that. Manufacturing is going to stay pretty steady through the year. We have seen the e-commerce coming back and picking up, actually even faster and a little more than we anticipated. That is exciting for us. We are starting to see more activity around what we call the small-industrial and warehousing stuff. We think that trend is going to continue through the back half of the year. We feel very good about that 35%, and I think we still have some potential upside opportunities on projects that look like they are going to bid in the second half of the year, kind of across all pieces of E-Infrastructure.

Brent Thielman (Senior Research Analyst)

Okay, great. Joe, when you think about just tariffs from a high level, maybe just where you're most exposed and least exposed from a direct sort of cost perspective and what's embedded in the outlook relative to that.

Joseph Cutillo (CEO)

Yeah, I think the good news is if we did not go through COVID and see the, I'll call it, rapid-fire increases that we saw a couple of years ago, I'd probably be a little more cautious and more concerned about the tariffs. People have to remember, we saw 200%-300% price increases in less than six months, and the impact on the business was minimal at the end of the day. When we look at the tariffs, I'll just kind of go through each segment just so people understand them. In our transportation segment, we'll start there. First, the major items, the steel and those components, all have to be made in America for the most part on our contracts. We lock those in at the beginning of the contract.

Our upfront pricing may appear higher than what market pricing is, but it's guaranteed for that. In addition, on some of the other items, if we see increases above a certain %, there's actually some indexing that takes place. Throughout COVID, we saw virtually no impact through Transportation Solutions. We think we'll see minimal there. Obviously, in both Building Solutions, there's risk of concrete powder going up and concrete prices. Again, there's some indexing that offsets and protects that. In E-Infrastructure, we really have a couple of major components, all the piping and underground components that go into the contracts or into the builds and fuel. Those are our two biggest items. We have learned from COVID, and in our major contracts, we have indexing in our fuel pricing. If it exceeds, I believe it's 5%, we then pass that on.

Similarly, if it goes down more than a certain amount, we give money back to the customer. We are not trying to make money off of fuel. We just do not want to lose money on fuel. For the underground stuff, the bigger issue during COVID was availability. That cost us a lot more money than the price increases. Because our projects are phased, this is what we love about them. We only price one phase at a time. We are generally buying the material for that phase while we are pricing it so we can build that in. I will not say there is zero exposure, but worst-case scenario would be kind of two to three months of exposure on a project if we got locked into something and did not have the material pre-bought.

I will tell you, our guys are probably pre-buying material more than they have in the past just to ensure that does not happen. In Building Solutions, concrete is our biggest material. As of two weeks ago, I did not check on it last week, prices were still coming down on concrete across the board for us. We have seen the opposite take place there. That would be our biggest risk. Again, those are very quick-turn projects we are pricing as increases come out. In COVID, we saw about a 60-90 day lag because we saw the rapid-fire. If we get a 60-90 day price increase notice, we are usually able to pass that on to the customer in that time frame.

Brent Thielman (Senior Research Analyst)

Very good. I'll pass it on. Thank you.

Operator (participant)

Thank you. The next question comes from Julio Romero at Sidoti. Please go ahead.

Julio Romero (Equity Research Analyst)

Thanks. Hi, good morning, Joe, Ron and Noelle.

Joseph Cutillo (CEO)

Good morning.

Julio Romero (Equity Research Analyst)

Good morning.

Really nice margin performance here in Transportation Solutions in the quarter. Can you maybe talk a little bit about the drivers of that margin? How much of that margin strength is from the shift away from low-bid versus other kind of drivers there, and how should the cadence of margins in transportation flow for the remainder of the year?

Joseph Cutillo (CEO)

Yeah, I would say we're seeing very little from the shift away from low-bid. We're still finishing out projects and that sort of stuff. The vast majority of that margin improvement is around as we continue to shift our mix towards higher margin end products, whether that's alternative delivery in the highway space, more and more aviation, and the mix of rail. Those all have much higher margins. We continue to push our efforts to blend that mix more towards that portfolio. As we do that, we'll continue to see margin increases. We should start seeing more of an impact from the low-bid as we get towards the end of this year into early next year.

Julio Romero (Equity Research Analyst)

Great. Really helpful there. Great color you gave on going around the portfolio and talking about kind of your tariff exposure across all three segments. Maybe if you can talk about your level of comfort in bidding for new projects going forward and accepting new work and just kind of execution in this broader operating environment.

Joseph Cutillo (CEO)

Yeah, I would tell you part of our margins in the quarter for Transportation and E-Infrastructure, frankly, is our teams continue to execute extremely well. All the things we're doing to continue to drive, whether it's technology or other things to improve project performance, continue to pay off. I'm excited about some of the stuff we're working on that will start paying off next year and the year after as well. If you look at the performance side, all good. When we look at the bid activity side, we've still got a little over a year left on IIJA. That spend continues to increase. They approved the budget for 2025. That was up, I forget the number, Noelle, was it up 8%, I think, is what it was for total spend approximately. Bid activity remains good in Transportation.

In E-Infrastructure, I would tell you our front-end guys wish it would slow down. These four guys are working seven days a week, 12 hours a day right now with bid activity that's coming in. We are very optimistic on what's going on there. If you take a look at our backlog in E-Infrastructure, we are really looking at how do we finish filling 2026 and filling 2027. It is not that we cannot take more in 2025. We will take more. We are really starting to focus much further out on making sure we are solid on a long-term basis. The area of weakness for us, the headwinds we are seeing, is certainly in the residential side. That market has been soft, probably a little softer than we even anticipated in the quarter. The difference there is there is tremendous pent-up demand.

Somebody's going to figure out this affordability piece in some way, shape, or form, whether that's interest rates coming down or some pricing coming down on the builder side to get people in. We are bullish long-term on that market over a multi-year period. We may go through a little bit of a slow period. We see it as an opportunity to build our capabilities and potentially expand during this time. We will come out of it even stronger on the back end.

Julio Romero (Equity Research Analyst)

Makes a lot of sense. Thank you for the color. I'll pass it on.

Joseph Cutillo (CEO)

Thank you.

Operator (participant)

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

Adam Thalhimer (Director of Research)

Hey, good morning, guys. Nice quarter.

Joseph Cutillo (CEO)

Thank you.

Adam Thalhimer (Director of Research)

Ron, I wanted to follow up on you mentioned that E-Infrastructure was your top priority for M&A. Would that be for geographic expansion?

Joseph Cutillo (CEO)

I think we look at it in multiple facets. First of all, there's a couple of geographies we really would like to get into and are working hard to find a potential acquisition or come up with an organic growth plan for those. One of those, frankly, is Texas. We sit in Texas, and the amount of activity that's going on, whether it's data centers or chip plants or anything else, is astronomical. For the most part, we've gone that. Now, I'll talk about how we're actually conquering some of that organically with some jobs. Doing site development with geographical extensions, looking at acquisitions for that, I should say, is something we are definitely looking at. In addition, we believe there is high value and high opportunity in us adding electrical and mechanical and potentially specialty piping along with some other skill sets to the portfolio.

We have experimented with a small little dry utility business. We'll triple that business or maybe even quadruple it in the next 12 months just by bringing it to the customers and contracts we have and getting that built into those contracts. We think that there's an opportunity if we can provide an entire electrical and mechanical package that we could bring those solutions to our core customers as well. That's not something that would happen overnight. The next round of projects that we do, we would obviously work hard to try to get those built in. The answer is we're doing both. We're looking at geographic expansion and additional services.

Adam Thalhimer (Director of Research)

With those additional services, would you start offering those potentially on a standalone basis, or would it only be for existing infrastructure projects as an add-on?

Joseph Cutillo (CEO)

No. What we see is we certainly could use them with our customer base. We would use them outside of our customer base. We look at it as potentially an opportunity if the right acquisition came along with the right end customer mix, may pull us into different end markets on the site solution side down the road.

Adam Thalhimer (Director of Research)

All right. And then just last one for me. It just kind of confused me because you put up a 22% gross margin in Q1. That is also the guidance for the year. I was just curious why you would not see maybe a seasonal uptick in gross margins during the summer and fall.

Joseph Cutillo (CEO)

Yeah. We will see an uptick in summer and fall. We see the dip in the fourth quarter. It kind of comes out pretty close to that.

Adam Thalhimer (Director of Research)

Got it. Okay.

Joseph Cutillo (CEO)

It's a little higher for a while than.

Adam Thalhimer (Director of Research)

Understood. I'll turn it over. Thank you.

Operator (participant)

Thank you. The next question comes from Noelle Dilts at William Blair. Please go ahead.

Joe, Ron, and Noelle, good morning. Congrats on strong numbers.

Joseph Cutillo (CEO)

Thank you.

To start off, yeah, so the IIJA bill, you have two years left in backlog. It's coming to an end probably in the next year. Some other peers have talked about IIJA part two, the next bill. Can you talk a little bit if you're seeing anything in Congress and what you would hope to see or expect in the next bill?

Yeah. I think people worry that the bill ends and everything stops. The next bill comes out, right? In the worst-case scenario, if there is a gap, they usually do a transition year or a bridge. Generally, they've taken the prior year's number, adjusted for inflation, and continue on until the next bill goes. Here's what I will tell you. I was supposed to be in D.C. this week, but with the earnings call and board meeting, it's not working out. There is more activity further in advance on the next infrastructure bill going on right now, bipartisan activity in D.C. than I've seen in the last two bills by a whole lot. I would tell you that the head of Transportation was told to make a bigger, more beautiful infrastructure bill than's ever been done before.

There are a lot of people in D.C. running around trying to figure that out right now, including for the first time talking about some longer-term ways to pay this with federal fees for registrations of electric vehicles, hybrid vehicles, and even gas vehicles at different rates. So far, so good. Again, they're much further ahead. They seem to be much more rational in their thought process. I think they've been given an edict to do something bigger and better. It is still a year away, a year and a half, probably. I would tell you it looks better than it has historically. Normally, at this point in time, everybody is trying to get Congress to think about it because it is coming up. They say, "We still have over a year. Why would we think about it now?" That all looks positive.

Great. That makes sense. Then shifting back over to E-Infrastructure, you mentioned in your prepared remarks about the semiconductor opportunity and onshoring. I think over the past few months, in particular, there has been a lot of capital investment plans, very sizable ones, from pharmaceutical companies bringing back manufacturing to the U.S., expanding their existing capabilities. Last quarter, you mentioned that you had a project going on in that biopharma space. I was wondering, could you provide some color about conversations related to these particular builds, the biopharma ones, potential size of these projects, and whether or not you have capacity constraints that could potentially inhibit your ability on these projects just because of how exposed you are to data centers and how well that has been ramping? Thank you.

Yeah. I'll start with the end. We'll do every one that comes our way that we think is a good project. The great thing is the business is growing well. The margins continue to expand. I would tell you if the right projects came and we had to grow our capacity 25-30% right now, we could do it. I think that's a good thing. As we go into next year, we'll have more capacity. We're not worried about that. What I will tell you, whether it's pharma or it's auto or it's electronics or pick your poison of manufacturing and reshoring or onshoring, what we haven't seen is a wave of an industry. What I mean by that is we haven't seen 10 pharma plants coming back. All of a sudden, there's this big pharma build. We haven't seen 10 auto plants.

We're seeing kind of onesies, twosies. We'll see one here. We'll see one there. They're all different. We're waiting for this wave that says we're going to bring back 20 pharma plants, right, and watch them get ready to break ground. We think it's coming, but it's still early. It takes a while. I think people underestimate that from the time you say you want to build a factory in the U.S., how much time it takes to get land, get it permitted, get everything ready before you can actually break ground. Candidly, if the administration wanted to do something to speed up manufacturing or onshoring or reshoring faster than anything else, it would be get rid of the political process and the permitting. It is taking much longer to get permits through than ever before. Ever since COVID happened, the agencies have never come back to work.

They're working from home, which is very complicated to get. A permit that took weeks now takes months. Permits that took months now take a year. If they could clean up that process, we would see plants built at a much faster rate and a much greater rate, I think. To answer the question, again, we've seen kind of onesies, twosies. We're talking to the big engineering firms that are working on the front end of this stuff. Food is another one. Food and pharma, we keep hearing about all the designs taking place. We're just waiting for that wave to come to shore.

Great. Thank you very much.

Operator (participant)

Thank you. There are no further questions. I will turn the call back over to Joe Cutillo for closing comments.

Joseph Cutillo (CEO)

Thanks, Joanna. I'd like to thank everybody again for joining today's call. If you have any follow-up questions or wish to schedule a call with us, please feel free to contact Noelle. Her contact information can be found in our press release. Again, I want to thank everybody and hope you have a great day.

Operator (participant)

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