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STERLING INFRASTRUCTURE, INC. (STRL)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3: Revenue $689.0M and adjusted EPS $3.48 set new third‑quarter highs; gross margin expanded to 24.7% from 21.9% YoY as mix shifted to higher‑margin E‑Infrastructure projects . Adjusted EBITDA rose 47% to $155.8M .
  • Broad beats vs S&P Global consensus: Revenue $689.0M vs $618.8M*, adjusted EPS $3.48 vs $2.84*, and adjusted EBITDA $155.8M vs $137.6M* (see table) .
  • Guidance raised materially: FY25 revenue to $2.375–$2.390B (from $2.10–$2.15B), adjusted EPS to $10.35–$10.52 (from $9.21–$9.47), and adjusted EBITDA to $486–$491M (from $438–$453M) .
  • Backlog/visibility surged: Signed backlog $2.58B (+34% YoY same‑store) and combined backlog $3.44B; with unsigned awards/future phases, visibility to >$4B of work; Q3 book‑to‑burn ex‑CEC: 1.23x backlog and 1.76x combined .
  • Near‑term catalysts: Strong data center demand (data center revenue +125% YoY in E‑Infrastructure), CEC integration and synergy, continued margin expansion in Transportation, and a new $400M buyback authorization announced 11/12 as incremental support .

What Went Well and What Went Wrong

What Went Well

  • E‑Infrastructure outperformance and structural mix shift: Segment revenue +58% YoY (42% ex‑CEC) with adjusted operating income +57%; management cited large, mission‑critical projects (data centers, manufacturing) driving higher margins and execution certainty . Data center revenue within E‑Infrastructure grew >125% YoY; backlog and future phases in E‑Infrastructure total ~$3B .
  • Transportation margin inflection: Despite RHB JV deconsolidation, Transportation operating margin rose to 14.3% from 8.2% YoY on favorable mix and execution; adjusted margin +335 bps to 15.6% .
  • Cash flow and balance sheet strength: Q3 operating cash flow was $84M; YTD CFO $253.9M with cash of $306.4M and ~$12M net cash; ample undrawn $150M revolver for growth and repurchases .

Quotes:

  • “Gross profit margins in the quarter of 25% marked a new high for the Company… The combination of strong revenue growth and gross margin expansion contributed to adjusted EBITDA growth of 47%.” — CEO Joe Cutillo .
  • “With the addition of CEC, the aggregate of our combined backlog and high‑probability future phase work gives us visibility into a pool of work totaling more than $4 billion.” — CEO Joe Cutillo .

What Went Wrong

  • Building Solutions softness: Revenue ‑1% YoY; GAAP operating income ‑12% as housing affordability pressures persist; adjusted margin 12.4% (‑116 bps) .
  • RHB deconsolidation complicates YoY optics: Prior periods require adjustment to exclude ~$72.2M of Q3’24 RHB revenue; management provides adjusted comparative tables, but headline GAAP YoY comparisons are distorted .
  • Permitting/timing frictions: Management flagged extended permitting timelines post‑COVID (what took ~6 weeks can now take 3–5 months), affecting award timing for mega projects (especially semis) .

Financial Results

Headline Metrics (Actuals across periods)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$593.7 $614.5 $689.0
Gross Margin %21.9% 23.3% 24.7%
GAAP Diluted EPS ($)$1.97 $2.31 $2.97
Adjusted Diluted EPS ($)$2.20 $2.69 $3.48
EBITDA ($M)$100.8 $116.2 $143.1
Adjusted EBITDA ($M)$106.2 $125.6 $155.8

Actuals vs S&P Global Consensus (Q3 2025)

MetricActualConsensus*Surprise
Revenue ($M)$689.0 $618.8*+$70.2M
EPS (Adjusted, $)$3.48 $2.84*+$0.64
Adjusted EBITDA ($M)$155.8 $137.6*+$18.2M

Values with asterisks are retrieved from S&P Global.*

Segment Performance (GAAP)

SegmentRevenue Q3 2024 ($000s)Revenue Q3 2025 ($000s)Op Inc Q3 2024 ($000s, % margin)Op Inc Q3 2025 ($000s, % margin)
E‑Infrastructure$263,899 $417,106 $68,076 (25.8%) $106,614 (25.6%)
Transportation$227,251 $170,490 $18,573 (8.2%) $24,377 (14.3%)
Building$102,591 $101,423 $12,249 (11.9%) $10,752 (10.6%)

Notes: CEC contributed $41.4M revenue in September to E‑Infrastructure ; Transportation revenue decline reflects RHB deconsolidation .

KPIs and Other Items

KPIQ3 2025Reference
Signed Backlog$2.58B; E‑Infrastructure RPO $1.81B
Combined Backlog$3.44B (incl. $868.8M unsigned; CEC added $810.5M unsigned+signed)
Book‑to‑Burn (ex‑CEC)1.23x backlog; 1.76x combined (Q3)
Operating Cash Flow$84M in Q3; $253.9M YTD
Net Cash~$12M (cash $306M, debt ~$295M)
Share Repurchases$4.7M in Q3 at avg $274.37

Guidance Changes

MetricPeriodPrevious Guidance (8/4)Current Guidance (11/3)Change
RevenueFY 2025$2.10–$2.15B $2.375–$2.390B Raised
Diluted EPSFY 2025$7.87–$8.13 $8.73–$8.87 Raised
Adjusted Diluted EPSFY 2025$9.21–$9.47 $10.35–$10.52 Raised
EBITDAFY 2025$406–$421M $448–$453M Raised
Adjusted EBITDAFY 2025$438–$453M $486–$491M Raised

Management’s FY25 modeling also contemplates ~23% gross margin, ~6.3% G&A as % of revenue (ex‑amort), ~25% tax rate, and CAPEX $70–$80M .

Earnings Call Themes & Trends

TopicQ1 2025 (prior two quarters)Q2 2025 (prior quarter)Q3 2025 (current)Trend
Data centers / AI infrastructureE‑Infrastructure backlog >65% data centers; strong activity Data center revenue more than doubled YoY; E‑commerce backlog up ~700% QoQ commentary Data center revenue +125% YoY; E‑Infrastructure revenue +58% (42% ex‑CEC) Strengthening demand and mix quality
CEC integration & synergiesPending; viewed as accelerant to TX and end‑to‑end solutions Closing expected; expanded services and footprint Closed; $41.4M Sept revenue; early customer reception strong; margin expansion opportunity; dry‑utility synergy example (+40% profitability) Positive; synergy realization underway
Transportation funding/mixSteady demand Rocky Mtn/Arizona; TX low‑bid downsizing to aid margins Adj. revenue growth low‑mid teens expected; margin expansion to low teens Q3 GAAP margin 14.3% (8.2%); no impact from gov’t shutdown; successor bill timing tracking; backlog $733M Margin expansion, pipeline solid
Regulatory/Permitting——Permitting timelines elongated (3–5 months); impacts award timing for mega projects Persistent headwind, manageable
Building Solutions (Housing)Residential softness, weather impact; bullish LT Organic revenue down; maintain double‑digit OI via variable labor, material relief Demand soft; expect mid‑high single‑digit FY decline, margins low‑double‑digits; recovery not before 2026 Near‑term headwind continues
Geographic expansionPlanning to expand TX and Northwest Active pre‑planning; TX wins expected by YE25 Entered TX for site development; broader footprint expansion in discussion Accelerating

Management Commentary

  • “Adjusted diluted earnings per share [reached] $3.48, a 58% increase… Gross profit margins in the quarter of 25% marked a new high for the Company.” — CEO, prepared remarks .
  • “Third quarter book to burn ratios excluding the impact of CEC, were 1.23x for backlog and 1.76x for combined backlog.” — CEO .
  • “We believe 2025 will be another record year… The midpoints of our revised 2025 guidance would represent 27% revenue growth as adjusted for RHB, 47% adjusted diluted earnings per share growth and 42% adjusted EBITDA growth.” — CEO .
  • “We are pleased to have closed the CEC acquisition… adjusted operating income [in line] in September… the combination… will allow us to accelerate project timelines and drive even more value.” — CEO .

Q&A Highlights

  • CEC momentum and synergy: Strong bookings, largely data center‑related; early evidence of margin uplift from integrating dry utilities with site development (+40% profitability) suggests similar opportunities with CEC .
  • Transportation trajectory: Margin expansion driven by project selection (alternative delivery, aviation, rail); Texas low‑bid wind‑down benefits expected to be more visible in 2026; backlog $733M with demand steady .
  • Permitting & mega projects: Permits now take 3–5 months; primary timing risk occurs pre‑contract start; mega semiconductor projects have long lead due to permitting/utilities .
  • Housing outlook: Building Solutions near‑term remains soft; management does not expect improvement before 2026; focus on protecting margins via variable labor and material tailwinds .
  • Funding backdrop: No Q3 impact from government shutdown; successor highway bill timeline tracking better than prior cycles; extensions historically maintain spend if needed .

Estimates Context

  • Q3 2025 results beat S&P Global consensus across key metrics: revenue $689.0M vs $618.8M*, adjusted EPS $3.48 vs $2.84*, and adjusted EBITDA $155.8M vs $137.6M* .
  • The company raised FY25 guidance materially (see table), implying sell‑side models will need to move higher on revenue, adjusted EPS, and adjusted EBITDA for FY25 to align with midpoints .

Values with asterisks are retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat‑and‑raise quarter with significant upside vs Street and a step‑up in FY25 guidance driven by data center strength and mix shift (stock‑positive setup) .
  • E‑Infrastructure is the growth and margin engine; data center revenue +125% YoY with expanding multi‑year visibility and larger, multi‑phase projects supporting sustained margin expansion .
  • Transportation margins inflecting as mix shifts away from low‑bid Texas into higher‑value work; benefits should build into 2026 as legacy backlog burns off .
  • Housing remains a drag (flat/down) into 2026; risk contained by variable labor model and pricing discipline .
  • Capital deployment optionality is high: positive net cash, undrawn revolver, and a new $400M buyback authorization provide a supportive backdrop while pursuing M&A and organic growth .
  • CEC integration is an incremental catalyst: early customer reception strong; management expects schedule compression and margin lift from bundling electrical and site development scope .
  • Watch for permitting/regulatory timing on mega projects; management indicates visibility and planning should mitigate but can shift start dates quarter‑to‑quarter .