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STERLING INFRASTRUCTURE, INC. (STRL)·Q1 2025 Earnings Summary

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.*

Financial Results

Consolidated trend (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$593.7 $498.8 $430.9
Operating Income ($USD Millions)$87.5 $62.3 $56.1
Diluted EPS ($USD)N/A$1.46 $1.28
Gross Margin (%)N/A21.4% 22.0%

Estimates vs Actuals

MetricPeriodConsensus*Actual
Primary EPS ($)Q4 20241.3275*1.46
Revenue ($)Q4 2024531,250,000*498,833,000
EBITDA ($)Q4 202472,437,500*80,347,000
Primary EPS ($)Q1 20251.4475*1.63
Revenue ($)Q1 2025409,050,000*430,949,000
EBITDA ($)Q1 202575,387,500*72,099,000
Primary EPS ($)Q2 20252.2525*2.31 GAAP; 2.69 adjusted
Revenue ($)Q2 2025554,350,000*614,468,000
EBITDA ($)Q2 2025110,475,000*116,216,000
Values retrieved from S&P Global.*

Segment breakdown (Q1 2025)

SegmentRevenue ($USD Millions)Operating Income ($USD Millions)Operating Margin (%)
E‑Infrastructure Solutions$218.3 $46.6 21.4%
Transportation Solutions$120.7 $11.3 9.3%
Building Solutions$92.0 $12.4 13.4%
Total$430.9 $56.1 13.0%

KPIs and Balance/Liquidity (Q1)

KPIQ1 2025Prior Quarter
Operating Cash Flow ($USD Millions)$84.9 $174.0 (Q4 2024)
Cash & Cash Equivalents ($USD Millions)$638.6 $664.2 (YE 2024)
Net Cash (Cash minus Debt) ($USD Millions)$328.6 $347.9 (YE 2024)
Backlog ($USD Billions)$2.13 $1.69 (YE 2024)
Backlog Margin (%)17.7% 16.7% (YE 2024)
Book‑to‑Burn (Backlog / Combined)2.23x / 2.13x 1.32x / 0.99x (Q4 2024)
Combined Backlog ($USD Billions)$2.23 $1.83 (YE 2024)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 25, 2025)Current Guidance (May 5, 2025)Change
RevenueFY 2025$2.00–$2.15B $2.05–$2.15B Raised (low end)
Net IncomeFY 2025$215–$230M $222–$239M Raised
Diluted EPSFY 2025$6.75–$7.25 $7.15–$7.65 Raised
EBITDAFY 2025$370–$395M $381–$403M Raised
Adjusted Net IncomeFY 2025$252–$267M $262–$278M Raised
Adjusted Diluted EPSFY 2025$7.90–$8.40 $8.40–$8.90 Raised
Adjusted EBITDAFY 2025$395–$420M $410–$432M Raised
Notes: Non‑GAAP methodology expanded in 2025 to include stock‑based comp and intangible amortization; earn‑outs included in acquisition‑related costs .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2025)Trend
AI/Data Center demandBack half ‘24 showed exceptional E‑Infrastructure margins with data center revenue +50% YoY; backlog >$1B, mission‑critical majority Data centers >65% of E‑Infra backlog; awards strong; multiyear pipelines growing Strengthening; larger, multi‑phase projects expanding
IIJA/Transportation cycleEntering second half of IIJA; expect flat revenue ex‑RHB with margin improvement; no meaningful funding/tariff impact; backlog timing effects Mid‑single digit revenue growth; mix shift to higher margin work; strong bid activity; backlog $861M Consistent; margin trajectory improving
Tariffs/supply chainN/AMinimal exposure: domestic content, price indexation, fuel indexing; proactive material buying; concrete prices easing; COVID playbook mitigates risks Managed risk; limited P&L sensitivity
Residential housingExpect slower 1H25 with potential 2H rebound; share gains and plumbing bundle strategy in Phoenix; capacity additions in DFW Q1 impacted by affordability and severe weather; Building Solutions revenue −14%; remain bullish multi‑year Near‑term soft; positioning for recovery
M&A/Capabilities expansionTargeting electrical/mechanical to extend scope; geographic expansion (Texas) to capture semiconductor/data center work Closed Drake Concrete ($25M purchase; ’25 $55M revenue/$6.5M adj. EBITDA); pursuing CEC Facilities Group acquisition to add electrical, accelerate Texas expansion (not in guidance) Active pipeline; tuck‑ins and capability buildouts

Management Commentary

  • “We grew our first quarter adjusted net income by 28% to deliver adjusted diluted EPS of $1.63... Gross profit margins... of 22% remained extremely strong as we have shifted the business toward higher‑margin service offerings” — CEO Joe Cutillo .
  • “Backlog reached over $1.2 billion and grew 27%... operating cash flow... was again excellent at $85 million, driving our net cash position to $329 million, and supporting share repurchases of $44 million” — CEO Joe Cutillo .
  • “Our first quarter backlog totaled $2.128 billion... backlog gross margin was 17.7%... book‑to‑burn ratios were 2.23x for backlog and 2.13x for combined backlog” — CFO Ron Ballschmiede .
  • “Transportation margin improvement is around mix shift... alternative delivery... aviation... rail... we should start seeing more impact from low bid exit later this year” — CEO Joe Cutillo .

Q&A Highlights

  • E‑Infrastructure backlog composition: management affirmed strong non‑data center visibility (manufacturing steady; e‑commerce/warehousing picking up), with data centers at >65% of segment backlog .
  • Tariff/macro exposure: limited direct impact due to domestic content requirements, indexation mechanisms, and fuel pass‑throughs; proactive material sourcing reduces exposure windows .
  • Transportation margins: improvement driven mainly by mix into higher‑margin offerings; low‑bid exit benefits to accrue more in late ’25/early ’26 .
  • Capacity and M&A: ability to scale 25–30% to meet demand; targeting electrical/mechanical capabilities and Texas geographic expansion to deepen scope, including stand‑alone offerings .
  • IIJA “Part 2”: bipartisan work underway; expectation for a “bigger, more beautiful” next infrastructure bill with potential new funding mechanisms; supportive backdrop beyond current cycle .

Estimates Context

  • Q1 2025 beat on EPS and revenue; slight EBITDA miss: EPS $1.63 vs $1.45*, revenue $430.9M vs $409.1M*, EBITDA $72.1M vs $75.4M*; management pointed to mix‑driven margin expansion and ~$1.6M one‑time separation costs as G&A drivers . Values retrieved from S&P Global.*
  • Sequentially, Q2 2025 exceeded consensus across revenue and EBITDA, and reported adjusted EPS of $2.69 vs consensus $2.25*, reflecting continued E‑Infrastructure margin expansion . Values retrieved from S&P Global.*
  • FY 2025 consensus as of Q1 included EPS 10.26*, revenue $2.381B*, and EBITDA $488.5M*, all above company’s raised guidance midpoints, implying potential street recalibration post Q1 and Q2 prints. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix shift to mission‑critical E‑Infrastructure (data centers/manufacturing) is structurally expanding margins; expect mid‑20% segment margins and sustained backlog growth to underpin EPS outperformance .
  • Transportation is a margin story in 2025: alternative delivery/aviation/rail mix offsets Texas low‑bid exit; margin gains should continue even with modest top‑line growth .
  • Near‑term residential softness is offset by acquisition (Drake) and targeted capacity additions; multi‑year demand in DFW/Houston/Phoenix remains intact .
  • Raised FY25 guidance and >2x book‑to‑burn point to high conversion and earnings visibility; strong cash generation and net cash balance support accretive M&A (electrical/mechanical) and opportunistic buybacks .
  • Estimate dynamics: with Q1 beats and Q2 outperformance, consensus likely revises upward for EPS and EBITDA; monitor street adjustments and potential multiple expansion tied to AI/data center narratives .
  • Policy backdrop: low sensitivity to tariffs and positive IIJA successor bill prospects provide supportive multi‑year infrastructure funding environment .
  • Watch list: execution on CEC acquisition (scope expansion), sustained E‑Infrastructure award pace, and residential order trends into 2H25 (weather/affordability normalization) .

Additional Q1 2025 Press Releases of Note

  • Extension and expansion of credit facility (June 9, 2025), bolstering liquidity for strategic uses (acquisitions/capex) .
  • CFO appointment (March 14, 2025), strengthening leadership bench .
  • 2025 Sustainability Report published (March 20, 2025) .