Sterling Infrastructure 2026 Q3 Earnings Call

Please go ahead. Good morning and welcome to Sterling Infrastructure's third quarter 2026 earnings conference call and webcast.

I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer, Nick Grindstaff, Sterling's Chief Financial Officer, and Dan Govin, Sterling's Chief Operating Officer. As a reminder, accompanying slides are available in the investor relations section of our website and include additional information regarding our full year 2026 financial guidance. Our 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 obligation to update forward-looking statements as a result of new information, future events, or otherwise. Please note that management may reference certain historical forward-looking and non-GAAP financial measures.

Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are included in our earnings release and posted in the investor relations section of our website. Please refer to the press release for additional information regarding our forward-looking statements and non-GAAP financial measures. Throughout today's discussion, all third quarter 2026 comparisons are to the third quarter of 2025, unless otherwise noted. I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noel, and good morning, everyone. Sterling delivered another outstanding quarter as adjusted diluted EPS grew 118% to reach $7.58. Revenue increased 127% and adjusted EBITDA more than doubled. On top of this, our visibility continues to expand. Our total scoped work, which includes signed backlog, unsigned awards, and the next phases being designed on our current projects, now totals nearly $8 billion, up approximately 90% year over year. These results demonstrate the strength of our market, the great execution of our teams, and the continued success of our strategy. While the quarterly performance was exceptional, what's even more important is what these results tell us about the opportunity ahead.

Throughout 2026, it has become increasingly clear to us that we are in the early stages of significant multi-year investment in large scale mission critical infrastructure across the U.S. Data centers remain a powerful growth driver, but the opportunity is much broader, spanning semiconductors, advanced manufacturing, energy infrastructure, and the broader build-out supporting the next generation of U.S. industrial growth. The magnitude of this opportunity is driving us to think even bigger about how we position Sterling for long-term growth. We are focused on building the capacity, services, geographic reach, and customer relationships required to capture more share of this investment. Importantly, the $8 billion of scope work does not capture the full development potential of the campuses we are already working on today. Many of these projects span hundreds or even thousands of acres and are being developed in multiple phases over several years.

These are tangible opportunities backed by land, permits, and power commitments, and is on top of what we already have scoped. In total, these opportunities provide more than five years of additional work. Sterling has never been in a better position. We have significant visibility into future growth, deep relationships with our customers, and the financial and operational resources to capitalize on the opportunities ahead. We are excited about Sterling's future and confident in our ability to compound strong, profitable growth for years to come. Now, I'd like to hand the call over to Dan to discuss our segment results in more detail.

Dan? Thanks, Joe. I'll begin with E-Infrastructure Solutions, where mission-critical demand, accelerating project activity, and outstanding execution drove another excellent quarter.

Revenue increased 212% year-over-year, led by continued strength across data center and semiconductor campus projects. Within E-Infrastructure, site development operations more than doubled revenue organically, with strong growth across each of our geographies. In the Southeast, customer demand remains robust and projects continue to expand in acreage, number of phases, and complexity. This trend plays directly to our strengths, allowing us to leverage our broad self-perform capabilities and proven execution model. In the Northeast, we continue to make excellent progress on our large semiconductor campus and remain ahead of schedule. Our execution on this large-scale project is strengthening our position and reputation in the semiconductor market.

Momentum is building in the Rocky Mountain region, where accelerating activity on recently awarded large projects fueled another quarter of exceptional growth. Our teams are delivering strong execution and are successfully redeploying Transportation Solutions resources to capitalize on the expanding mission-critical opportunities. Key customers are increasingly engaging us to support their capital plans in Texas, driving significant demand for our site development capabilities. Based on the opportunities we see today, we expect Texas to be a meaningful driver of growth over the next several years. Turning to CEC, the electrical business delivered $426 million of revenue in the quarter, more than quadrupling its pro forma full quarter revenue in the third quarter of 2025. Accelerating work on major hyperscaler and large co-location projects drove growth. CEC is scaling rapidly and maintaining strong execution.

Year-to-date growth has significantly exceeded our initial expectations, and we now believe full-year revenue could exceed $1 billion. This momentum is extending beyond 2026 as CEC continues to build high-quality, longer-duration backlog with established customers, positioning the business for continued growth in 2027. The strong demand and execution across both CEC and site development are translating to significant profit growth for the segment. In the quarter, E-Infrastructure Solutions adjusted operating income increased 171%, with adjusted operating margins of 23%. Margins declined year-over-year, reflecting the significantly higher revenue contribution from CEC, as it represented a third of the segment revenue in the quarter versus 10% in the prior year period. Within the segment, site development operating margins remained strong at first half 2026 levels, even though several of our large mission-critical projects are still in the early stages of construction.

Margins typically expand as these multi-phase campuses move into later construction phases over the coming months and years. CEC operating margins improved both year-over-year and sequentially, and we are encouraged by the margin improvement we are seeing in the core business. As we have previously discussed, we are in the process of winding down some non-core business lines identified during diligence, a process we expect to complete by year-end 2027. We estimate that these non-core operations will be a drag of approximately 160 basis points on full year 2026 CEC margins, masking the roughly equivalent improvement in the core business. At the time of the CEC acquisition, we committed to achieving 300 to 500 basis points of run rate margin improvement at CEC over 18 to 24 months. Progress in the core business and our planned exit from non-core work gives us confidence that we can deliver on this commitment.

Looking ahead, the opportunity in front of E-Infrastructure continues to strengthen. In aggregate, our scoped work now approaches $7 billion, an increase of more than 130% year-over-year. The vast majority of these opportunities are tied to mission-critical work, providing substantial visibility into continued growth. Turning to Transportation Solutions. Revenue declined 3%, reflecting the redeployment of resources from transportation into higher margin E-Infrastructure work. This transition continues to accelerate as E-Infrastructure activity builds in the Rocky Mountain and Texas regions. This was the second consecutive quarter in which our Rocky Mountain operation generated more revenue from E-Infrastructure than transportation. Despite the lower revenue, Transportation Solutions adjusted operating income grew 22%, and adjusted operating margins reached 19.7%. This demonstrates the discipline we are applying to project selection. Transportation Solutions backlog ended the quarter at $964 million, up 31% year-over-year, largely driven by the conversion of unsigned backlog to signed.

On the combined backlog basis, the segment declined 22%, again reflecting the shift in resource allocation. In Building Solutions, segment revenue declined 5% as home builder activity slowed and adjusted operating margin was 8%. We expect residential market conditions to remain under pressure through the balance of 2026 and into 2027. We are managing the business carefully through the current environment while positioning the business to capture more market share when conditions improve. Stepping back, the quarter provides clear evidence of Sterling's strategy in action. We are benefiting from exceptional demand in our highest return markets, becoming more selective about where we are deploying our resources, and building the foundation for multi-year growth. With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and 2026 guidance.