STERLING INFRASTRUCTURE, INC.

Previous wording

Under GAAP, this contractual change required Sterling to no longer consolidate RHB’s results with its own and to use equity method accounting with respect to Sterling’s interest in the entity. Beginning January 1, 2025, the Company reports its portion of RHB’s income as a single line item (“Other operating income (expense), net”) in the Consolidated Statements of Operations and reports its interest in RHB at March 31, 2025, and thereafter, as a single line item (“Investment in unconsolidated subsidiary”) in the Consolidated Balance Sheets. RHB’s revenue is no longer included in Sterling’s consolidated revenue in 2025 and Sterling’s consolidated backlog figures as of December 31, 2024, and thereafter, do not include RHB’s backlog.

Current wording

Under GAAP, this contractual change required Sterling to no longer consolidate RHB’s results with its own and to use equity method accounting with respect to Sterling’s interest in the entity. Beginning January 1, 2025, the Company reports its portion of RHB’s income as a single line item (“Other operating income (expense), net”) in the Condensed Consolidated Statements of Operations and reports its interest in RHB at December 31, 2024, and thereafter, as a single line item (“Investment in unconsolidated subsidiary”) in the Consolidated Balance Sheets. RHB’s revenue is no longer included in Sterling’s consolidated revenue in 2025 and Sterling’s consolidated backlog figures as of December 31, 2024, and thereafter, do not include RHB’s backlog.

Previous wording

E-Infrastructure Solutions—Our E-Infrastructure Solutions business is driven by our customers’ investments in the development of data centers, advanced manufacturing centers, e-commerce distribution centers and warehouses. We foresee significant growth opportunities tied to the implementation of multi-year capital deployment plans by data center customers, including hyperscalers, colocation providers and others. These investments are driven by the need to support the increasing use of cloud computing applications, increasing adoption and complexity of artificial intelligence applications and digital transformation across industries. Additionally, we continue to see significant opportunity related to the construction of manufacturing capacity in the U.S., including semiconductor fabrication. Following a decline in activity that began in 2023, awards in the e-commerce distribution sector began to strengthen in late 2024 and early 2025. Small warehouse activity, which began to decline in 2023 and remained soft in 2024, is beginning to exhibit signs of recovery.

Current wording

E-Infrastructure Solutions—Our E-Infrastructure Solutions business is driven by our customers’ investments in the development of data centers, advanced manufacturing centers, e-commerce distribution centers and warehouses. We foresee significant growth opportunities tied to the implementation of multi-year capital deployment plans by data center customers, including hyperscalers, colocation providers and others. These investments are driven by the need to support the increasing use of cloud computing applications, increasing adoption and complexity of artificial intelligence applications and digital transformation across industries. Additionally, we continue to see significant opportunity related to the construction of manufacturing capacity in the U.S., including semiconductor fabrication. Following a decline in activity that began in 2023, awards in the e-commerce distribution sector began to strengthen in late 2024 and early 2025. Small warehouse activity, which began to decline in 2023 and remained soft in 2024, is slowly recovering.

Previous wording

Building Solutions—Our Building Solutions segment is comprised of our residential and commercial businesses. The segment is driven by new home starts in Dallas-Fort Worth, the segment’s largest market, and continued expansion in the Houston and Phoenix markets. Building Solutions' core customer base includes top national, regional and custom home builders in our areas. In 2022, the residential market experienced significant price volatility and availability for key materials, including concrete, steel and lumber, as well as increases in subcontractor labor costs and decreased labor availability. The Company negotiated with customers to successfully recoup the increases in material and labor costs through price increases. We saw strong, consistent recovery in residential activity through 2023 and experienced volume growth across each geography. While this strength continued into early 2024, in the second quarter of 2024 the combined impact of interest rate uncertainty and affordability challenges drove a decline in the market which continued through the remainder of the year and into early 2025. While we anticipate that demand will remain muted in the near-term, we believe the dynamics in our markets, including population growth and structural housing shortages, support a return to growth over a multi-year time period.

Current wording

Building Solutions—Our Building Solutions segment is comprised of our residential and commercial businesses. The segment is driven by new home starts in Dallas-Fort Worth, the segment’s largest market, and continued expansion in the Houston and Phoenix markets. Building Solutions' core customer base includes top national, regional and custom home builders in our areas. Beginning in the second half of 2024, demand from residential home builder customers began to decline, as prospective homebuyers struggled with affordability challenges. We anticipate that demand will remain muted in the near-term, but believe the dynamics in our markets, including population growth and structural housing shortages, support a return to growth over a multi-year time period.

Previous wording

At March 31, 2025, our Backlog was $2.13 billion, as compared to $1.69 billion at December 31, 2024, with a book-to-burn ratio of 2.2X for the three months ended March 31, 2025. The Company’s margin in Backlog has increased to 17.7% at March 31, 2025 from 16.7% at December 31, 2024, driven by a greater mix of E-Infrastructure Solutions backlog and an improved backlog margin mix within Transportation Solutions.

Current wording

At June 30, 2025, our Backlog was $2.01 billion, as compared to $1.69 billion at December 31, 2024, with a book-to-burn ratio of 1.4X for the six months ended June 30, 2025. The Company’s margin in Backlog has increased to 17.8% at June 30, 2025 from 16.7% at December 31, 2024, driven by a greater mix of E-Infrastructure Solutions backlog and an improved backlog margin mix within Transportation Solutions.

Previous wording

Unsigned Awards were $103.2 million at March 31, 2025 and $137.9 million at December 31, 2024. Combined Backlog totaled $2.23 billion and $1.83 billion at March 31, 2025 and December 31, 2024, respectively, with a book-to-burn ratio of 2.1X for the three months ended March 31, 2025.

Current wording

Unsigned Awards were $237.3 million at June 30, 2025 and $137.9 million at December 31, 2024. Combined Backlog totaled $2.25 billion and $1.83 billion at June 30, 2025 and December 31, 2024, respectively, with a book-to-burn ratio of 1.5X for the six months ended June 30, 2025.

Previous wording

Revenues—Revenues were $430.9 million for the first quarter of 2025, compared to $440.4 million in the first quarter of 2024. Excluding $38.5 million of RHB revenue from the first quarter of 2024, revenues increased $29.1 million, which was driven by a $33.8 million increase in E-Infrastructure Solutions and a $10.2 million increase in Transportation Solutions, partly offset by a $14.9 million decrease in Building Solutions.

Current wording

Revenues—Revenues were $614.5 million for the second quarter of 2025, compared to $582.8 million in the second quarter of 2024. Excluding $73.9 million of RHB revenue from the second quarter of 2024, revenues increased $105.6 million, which was driven by a $69.1 million increase in E-Infrastructure Solutions and a $38.0 million increase in Transportation Solutions, partly offset by a $1.5 million decrease in Building Solutions.

Previous wording

Gross profit and margin—Gross profit was $94.8 million for the first quarter of 2025, an increase of $17.9 million, or 23.3%, compared to the first quarter of 2024. The Company’s gross margin as a percentage of revenue increased to 22.0% in the first quarter of 2025, as compared to 17.5% in the first quarter of 2024.

Current wording

Gross profit and margin—Gross profit was $143.1 million for the second quarter of 2025, an increase of $30.4 million, or 27.0%, compared to the second quarter of 2024. The Company’s gross margin as a percentage of revenue increased to 23.3% in the second quarter of 2025, as compared to 19.3% in the second quarter of 2024. Gross profit was $238.0 million for the six months ended June 30, 2025, an increase of $48.3 million, or 25.5%, compared to the six months ended June 30, 2024. The Company’s gross margin as a percentage of revenue increased to 22.8% for the six months ended June 30, 2025, as compared to 18.5% for the six months ended June 30, 2024. The increases were driven by the aforementioned higher revenue volume and an improved project margin mix across our E-Infrastructure and Transportation Solutions segments.

Previous wording

Contracts in progress that were not substantially complete totaled approximately 210 and 230 at March 31, 2025 and 2024, respectively. These contracts are of various sizes, of different expected profitability and in various stages of completion. The nearer a contract progresses toward completion, the more visibility the Company has in refining its estimate of total revenues (including incentives, delay penalties and change orders), costs and gross profit. Thus, gross profit as a percentage of revenues can increase or decrease from comparable and subsequent quarters due to variations among contracts and the stage of completion of contracts.

Current wording

Contracts in progress that were not substantially complete totaled approximately 190 and 220 at June 30, 2025 and 2024, respectively. These contracts are of various sizes, of different expected profitability and in various stages of completion. The nearer a contract progresses toward completion, the more visibility the Company has in refining its estimate of total revenues (including incentives, delay penalties and change orders), costs and gross profit. Thus, gross profit as a percentage of revenues can increase or decrease from comparable and subsequent quarters due to variations among contracts and the stage of completion of contracts.

Previous wording

General and administrative expense—General and administrative expenses were $34.6 million, or 8.0% of revenue, for the first quarter of 2025, compared to $27.3 million, or 6.2% of revenue, for the first quarter of 2024. The increase in expense reflects higher performance based compensation, one-time severance costs, increased headcount to support growth, and inflation in the first quarter of 2025. The Company anticipates that general and administrative expense will be approximately 6.3% of revenue for the full year 2025.

Current wording

General and administrative expense—General and administrative expenses were $34.0 million, or 5.5% of revenue, for the second quarter of 2025, compared to $27.9 million, or 4.8% of revenue, for the second quarter of 2024. General and administrative expenses were $68.6 million, or 6.6% of revenue, for the six months ended June 30, 2025, compared to $55.2 million, or 5.4% of revenue, for the six months ended June 30, 2024. The increases in expense reflects higher performance based compensation, one-time severance costs, increased headcount to support growth, and inflation in 2025. The Company anticipates that general and administrative expense will be approximately 6.3% of revenue for the full year 2025.

Previous wording

Other operating income (expense), net—Other operating income (expense), net, includes the 50% portion of earnings related to our 50% owned subsidiary and occasionally other miscellaneous operating income or expense. In 2025, Sterling’s 50% portion of interest earnings are treated as income and increase the investment in unconsolidated subsidiary account. In 2024, the Members’ 50% portion of earnings was treated as an expense and an increase to the liability account. During the first quarter of 2025, Sterling’s 50% portion of interest earnings was $1.9 million, compared to $2.1 million of expense for the Members’ 50% interest portion of earnings in the first quarter of 2024.

Current wording

Other operating income (expense), net—Other operating income (expense), net, includes the 50% portion of earnings related to our 50% owned subsidiary and occasionally other miscellaneous operating income or expense. In 2025, Sterling’s 50% portion of interest earnings are treated as income and increase the investment in unconsolidated subsidiary account. In 2024, the Members’ 50% portion of earnings was treated as an expense and an increase to the liability account. During the second quarter of 2025, Sterling’s 50% portion of interest earnings was $3.8 million (including step-up depreciation and amortization of $2.1 million), compared to $6.8 million of expense for the Members’ 50% interest portion of earnings in the second quarter of 2024. During the six months ended June 30, 2025, Sterling’s 50% portion of interest earnings was $5.7 million (including step-up depreciation and amortization of $4.3 million), compared to $8.9 million of expense for the Members’ 50% interest portion of earnings in the six months ended June 30, 2024.

Previous wording

Interest, net—Combined interest expense and income was net income of $1.6 million for the first quarter of 2025, compared to net expense of $0.8 million for the first quarter of 2024. The higher interest income was due to increased interest rates on our growing cash balance.

Current wording

Interest, net—Combined interest expense and income was net interest income of $1.9 million for the second quarter of 2025, compared to net interest expense of $0.2 million for the second quarter of 2024, and net interest income of $3.5 million for the six months ended June 30, 2025, compared to net interest expense of $1.0 million for the six months ended June 30, 2024. The higher interest income was due to increased interest rates on our growing cash balance.

Previous wording

Income taxes—The effective income tax rate was 26.1% for the first quarter of 2025. The rate varied from the statutory rate primarily as a result of non-deductible compensation, state income taxes and other permanent differences. The Company incurred a $0.3 million tax rate benefit for the first quarter of 2025 for increased tax deductions related to stock compensation. The Company anticipates an effective income tax rate for the full year 2025 of approximately 26%. See Note 11 - Income Taxes for more information.

Current wording

Income taxes—The effective income tax rate was 25.7% for the second quarter of 2025 and 25.9% for the six months ended June 30, 2025. The rate varied from the statutory rate primarily as a result of non-deductible compensation, state income taxes and other permanent differences. On July 4, 2025, the One Big Beautiful Bill Act was enacted into law, introducing changes to the U.S. tax code. The Company is currently evaluating the various provisions, but does not expect this to have a material impact on our effective tax rate. The Company anticipates an effective income tax rate for the full year 2025 of approximately 26%. See Note 11 - Income Taxes for more information.

Previous wording

Revenues—Revenues were $218.3 million for the first quarter of 2025, an increase of $33.8 million, or 18.3%, compared to the first quarter of 2024. The increase was primarily driven by higher volume from data centers, partly offset by lower volume from warehouses and distribution centers.

Current wording

Revenues—Revenues were $310.4 million for the second quarter of 2025, an increase of $69.1 million, or 28.6%, compared to the second quarter of 2024. Revenues were $528.7 million for the six months ended June 30, 2025, an increase of $102.9 million, or 24.2%, compared to the six months ended June 30, 2024. The increases were primarily driven by higher volume from data centers, partly offset by lower volume from warehouses and distribution centers and the timing of advanced manufacturing projects.

Previous wording

Operating income—Operating income was $46.6 million, or 21.4% of revenue, for the first quarter of 2025, an increase of $19.5 million, compared to $27.2 million, or 14.7% of revenue, for the first quarter of 2024. The increases in operating income and margin were driven by a project mix shift toward large mission-critical projects, partly offset by lower volume from warehouses and distribution centers.

Current wording

Operating income—Operating income was $83.8 million, or 27.0% of revenue, for the second quarter of 2025, an increase of $32.1 million, compared to $51.7 million, or 21.4% of revenue, for the second quarter of 2024. Operating income was $130.4 million, or 24.7% of revenue, for the six months ended June 30, 2025, an increase of $51.6 million, compared to $78.8 million, or 18.5% of revenue, for the six months ended June 30, 2024. The increases in operating income and margin were driven by a project mix shift toward large mission-critical projects, partly offset by lower volume from warehouses and distribution centers and the timing of advanced manufacturing projects.

Previous wording

Operating Income—Operating income was $11.3 million, or 9.3% of revenue, for the first quarter of 2025, an increase of $3.1 million, compared to $8.1 million, or 5.5% of revenue, for the first quarter of 2024. The increases in operating income and margin were driven by an improved project margin mix.

Current wording

Operating Income—Operating income was $26.0 million, or 13.2% of revenue, for the second quarter of 2025, an increase of $10.5 million, compared to $15.4 million, or 6.6% of revenue, for the second quarter of 2024. Operating income was $37.2 million, or 11.7% of revenue, for the six months ended June 30, 2025, an increase of $13.6 million, compared to $23.6 million, or 6.2% of revenue, for the six months ended June 30, 2024. The increases in operating income and margin were driven by an improved project margin mix.

Previous wording

Revenues—Revenues were $92.0 million for the first quarter of 2025, a decrease of $14.9 million, or 13.9%, compared to the first quarter of 2024. The decrease was primarily driven by lower commercial volume and fewer residential slabs completed compared to the first quarter of 2024. Our residential concrete slab and plumbing businesses were impacted by a slowdown in all markets in the quarter, driven by unusually severe weather and prospective homebuyers struggling with affordability challenges.

Current wording

Revenues—Revenues were $107.3 million for the second quarter of 2025, a decrease of $1.5 million, or 1.4%, compared to the second quarter of 2024. Revenues were $199.3 million for the six months ended June 30, 2025, a decrease of $16.4 million, or 7.6%, compared to the six months ended June 30, 2024. The decreases were driven by lower commercial volume and fewer residential slabs completed compared to 2024. Our residential concrete slab and plumbing businesses have been impacted by a slowdown in all markets in 2025, driven by prospective homebuyers struggling with affordability challenges.

Previous wording

Operating income—Operating income was $12.4 million, or 13.4% of revenue, for the first quarter of 2025, a decrease of $3.4 million, compared to $15.8 million, or 14.8% of revenue, for the first quarter of 2024. The decreases in operating income and margin were driven by the aforementioned lower volume.

Current wording

Operating income—Operating income was $9.9 million, or 9.2% of revenue, for the second quarter of 2025, a decrease of $5.0 million, compared to $14.8 million, or 13.6% of revenue, for the second quarter of 2024. Operating income was $22.2 million, or 11.1% of revenue, for the six months ended June 30, 2025, a decrease of $8.4 million, compared to $30.6 million, or 14.2% of revenue, for the six months ended June 30, 2024. The decreases in operating income and margin were driven by the aforementioned lower volume.

Previous wording

Operating Activities—During the three months ended March 31, 2025, net cash provided by operating activities was $84.9 million, compared to net cash provided by operating activities of $49.6 million for the three months ended March 31, 2024. Cash flows provided by operating activities were primarily driven by higher operating income, the collection of the receivable from affiliate, and changes in our accounts receivable, net contracts in progress and accounts payable balances (collectively, “Contract Capital”), as discussed below.

Current wording

Operating Activities—During the six months ended June 30, 2025, net cash provided by operating activities was $170.3 million, compared to net cash provided by operating activities of $170.6 million for the six months ended June 30, 2024. Cash flows provided by operating activities were primarily driven by higher operating income, the collection of receivables from affiliate, distributions of earnings from our unconsolidated subsidiary, and changes in our accounts receivable, net contracts in progress and accounts payable balances (collectively, “Contract Capital”), as discussed below.

Previous wording

Changes in Contract Capital—The change in operating assets and liabilities varies due to fluctuations in operating activities and investments in Contract Capital. The changes in components of Contract Capital during the three months ended March 31, 2025 and 2024 were as follows:

Current wording

Changes in Contract Capital—The change in operating assets and liabilities varies due to fluctuations in operating activities and investments in Contract Capital. The changes in components of Contract Capital during the six months ended June 30, 2025 and 2024 were as follows:

Previous wording

During the three months ended March 31, 2025, the change in Contract Capital was $7.3 million, which was primarily driven by the E-Infrastructure Solutions segment due to the increased size and duration of its projects in progress. The Company’s Contract Capital fluctuations are impacted by the mix of projects in Backlog, seasonality, the timing of new awards and related payments for work performed and the contract billings to the customer as projects are completed. Contract Capital is also impacted at period-end by the timing of accounts receivable collections and accounts payable payments for projects.

Current wording

During the six months ended June 30, 2025, the change in Contract Capital was $24.6 million, which was primarily driven by the E-Infrastructure Solutions segment due to the increased size and duration of its projects in progress. The Company’s Contract Capital fluctuations are impacted by the mix of projects in Backlog, seasonality, the timing of new awards and related payments for work performed and the contract billings to the customer as projects are completed. Contract Capital is also impacted at period-end by the timing of accounts receivable collections and accounts payable payments for projects.

Previous wording

Investing Activities—During the three months ended March 31, 2025, net cash used in investing activities was $54.2 million, compared to net cash used of $21.0 million in the three months ended March 31, 2024. The net cash used during the period was primarily driven by $37.9 million for acquisitions (including $25 million for the Drake Acquisition) and $17.9 million for purchases of capital equipment, partly offset by $1.6 million of cash proceeds from the sale of property and equipment. Capital equipment is acquired as needed to support changing levels of production activities and to replace retiring equipment.

Current wording

Investing Activities—During the six months ended June 30, 2025, net cash used in investing activities was $66.5 million, compared to net cash used of $45.4 million in the six months ended June 30, 2024. The net cash used during the period was primarily driven by $37.9 million for acquisitions (including $25 million for the Drake Acquisition) and $31.3 million for purchases of capital equipment, partly offset by $2.6 million of cash proceeds from the sale of property and equipment. Capital equipment is acquired as needed to support changing levels of production activities and to replace retiring equipment.

Previous wording

Financing Activities—During the three months ended March 31, 2025, net cash used in financing activities was $56.2 million, compared to net cash used of $19.7 million for the three months ended March 31, 2024. The financing cash outflow during the period was primarily driven by $43.8 million for the repurchase of common stock, $6.6 million of repayments on the Term Loan Facility, and $5.8 million for withholding taxes paid on the net share settlement of vested equity awards.

Current wording

Financing Activities—During the six months ended June 30, 2025, net cash used in financing activities was $68.7 million, compared to net cash used of $56.8 million for the six months ended June 30, 2024. The financing cash outflow during the period was primarily driven by $43.8 million for the repurchase of common stock, $17.2 million of repayments on the Term Loan Facility, and $6.1 million for withholding taxes paid on the net share settlement of vested equity awards.

Previous wording

At March 31, 2025, there was approximately $38 million of construction work to be completed on unconsolidated construction joint venture contracts, of which approximately $15 million represented our proportionate share. Due to the joint and several liability under our joint venture arrangements, if one of our joint venture partners fails to perform, we and the remaining joint venture partners would be responsible for completion of the outstanding work. As of March 31, 2025, we are not aware of any situation that would require us to fulfill responsibilities of our joint venture partners pursuant to the joint and several liability under our contracts.

Current wording

At June 30, 2025, there was approximately $23 million of construction work to be completed on unconsolidated construction joint venture contracts, of which approximately $9 million represented our proportionate share. Due to the joint and several liability under our joint venture arrangements, if one of our joint venture partners fails to perform, we and the remaining joint venture partners would be responsible for completion of the outstanding work. As of June 30, 2025, we are not aware of any situation that would require us to fulfill responsibilities of our joint venture partners pursuant to the joint and several liability under our contracts.