Sterling Reports 2020 Third Quarter Results

Rhea-AI Summary

Sterling Construction Company reported robust third-quarter 2020 financial results, achieving revenues of $383.5 million, up from $291.7 million in Q3 2019. Gross margin increased to 13.0% while net income soared to $15.2 million, compared to $8.0 million a year prior. EBITDA rose to $36.7 million from $15.4 million. Cash and cash equivalents grew to $72.6 million, and total debt decreased to $392.7 million. The backlog reached a record $1.24 billion, reflecting strong demand across segments. The company maintains its full-year 2020 guidance, projecting revenues between $1.415 billion and $1.430 billion.

Positive

• Revenues increased to $383.5 million, up from $291.7 million in Q3 2019.
• Net income nearly doubled to $15.2 million compared to $8.0 million last year.
• Gross margin improved to 13.0%, an increase from 10.0% in Q3 2019.
• EBITDA rose significantly to $36.7 million from $15.4 million year-over-year.
• Record backlog of $1.24 billion, up from $1.07 billion at the end of 2019.

Negative

• Heavy Civil segment results were lower due to increased estimated costs for completing three bridges in Texas.

THE WOODLANDS, Texas--(BUSINESS WIRE)--Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or “the Company”) today announced financial results for the third quarter 2020.

Consolidated Third Quarter 2020 Financial Results Compared to Third Quarter 2019:

• Revenues were $383.5 million compared to $291.7 million;
• Gross margin was 13.0% of revenues compared to 10.0%;
• Net Income was $15.2 million compared to $8.0 million;
• EPS was $0.54 compared to $0.30; and,
• EBITDA was $36.7 million compared to $15.4 million.

Consolidated Financial Position and Liquidity:

• Cash and Cash Equivalents were $72.6 million at September 30, 2020 compared to $45.7 million at December 31, 2019;
• Cash flows from operations were $90.9 million for the nine months ended September 30, 2020 compared to $8.5 million for the comparable prior year period;
• Payments of debt totaled $52.7 million for the nine months ended September 30, 2020;
• Debt totaled $392.7 million (or $320.1 million, net of cash) at September 30, 2020 compared to $433.1 million (or $387.4 million, net of cash) at December 31, 2019; and,
• Zero drawn and full availability on the $75.0 million Revolving Credit Facility.

Heavy Civil and Specialty Services Backlog Highlights:

• Backlog at September 30, 2020 was a record $1.24 billion, up from $1.07 billion at December 31, 2019.
• Combined Backlog at September 30, 2020 was $1.51 billion, up from $1.34 billion at December 31, 2019. Combined Backlog includes the aforementioned Backlog and Unsigned Low-bid Awards of $270 million and $273 million at September 30, 2020 and December 31, 2019, respectively.
• Gross margin in Backlog increased approximately 90 basis points, from 11.5% at December 31, 2019 to 12.4% at September 30, 2020. Gross margin in Combined Backlog has increased approximately 60 basis points, from 11.0% at December 31, 2019 to 11.6% at September 30, 2020.

Maintains Full Year Revenue and Income Guidance:

• Revenue: $1.415 billion to $1.430 billion.
• Net Income: $41 million to $44 million, excluding acquisition related costs of $1 million to $2 million.
• Expected dilutive average shares outstanding: 28.1 million.

   

CEO Remarks and Outlook

“We had another great quarter, nearly doubling our net income year-over-year and further enhancing our financial position through strong free cash flow generation,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “The third quarter was yet another example of the effectiveness of our strategic focus on diversifying into higher margin, higher value add, lower risk work in terms of producing growth in bottom line results. I’d like to thank all of our nearly 3,000 employees for their hard work and dedication to the company throughout this unusual year. Their commitment to our shared vision has enabled us to achieve record results for the first nine months of the year, while at the same time upholding our COVID-19 protocols in order to keep our team safe and healthy.”

“Our Specialty Services segment, which is comprised primarily of our Plateau operations, once again delivered an outstanding bottom line performance reflecting its team’s consistent and highly effective project execution. Plateau continues to enjoy strong backlog given the market demand for their highly specialized capabilities for large distribution and data centers and warehousing customers. Our Residential segment capitalized on the recovery in the Texas home building market and continued its healthy growth, delivering year-over-year improvement in revenues and operating profit. The expansion of our Residential segment into the Houston market is progressing as scheduled and this large metropolitan area is well on its way to becoming a meaningful percentage of our overall slab count. Our Heavy Civil segment results were off modestly from last year’s third quarter due largely to a charge for increased estimated cost to complete the construction of three separate bridges in Texas and a shift in mix in the quarter. We expect to see an improved mix of revenues in the coming quarters as we ramp up on several of the attractive design-build and non-heavy highway projects we’ve booked in recent months,” continued Mr. Cutillo.

“We are very pleased with our liquidity position and cash generation. As of September 30, 2020, we have generated over $90 million of cash flow from operations and have reduced our total debt by $40.4 million (or $67.3 million, net of cash), while investing $20.5 million of capital expenditures, net of proceeds. We remain comfortable with our capital structure and believe that we have more than adequate financial flexibility to pursue new opportunities and continue our profitable growth. We expect to have a further reduction of debt over the balance of 2020, which will allow us to enter 2021 from a position of further improved financial strength,” added Mr. Cutillo.

Mr. Cutillo concluded, “Looking ahead, despite the pandemic-related uncertainty persisting in the U.S. economy, we are maintaining our full year 2020 guidance for revenues of between $1.415 billion and $1.430 billion and 2020 net income attributable to Sterling common stockholders of between $41 million and $44 million, excluding acquisition related costs of $1 million to $2 million, compared to $24.5 million of Adjusted Net Income in 2019. We expect our full year 2020 diluted average common shares outstanding to be approximately 28.1 million.”

Conference Call

Sterling’s management will hold a conference call to discuss these results and recent corporate developments on Tuesday, November 3, 2020 at 9:00 a.m. ET/8:00 a.m. CT. Interested parties may participate in the call by dialing (201) 493-6744 or (877) 445-9755. Please call in ten minutes before the conference call is scheduled to begin and ask for the Sterling Construction call. To coincide with the conference call, Sterling will post a slide presentation at www.strlco.com on the Investor Presentations & Webcast section of the Investor Relations tab. Following management’s opening remarks, there will be a question and answer session.

To listen to a simultaneous webcast of the call, please go to the Company’s website at www.strlco.com at least fifteen minutes early to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company’s website for thirty days.

About Sterling

Sterling Construction Company, Inc., (“Sterling” or “the Company”), a Delaware corporation, is a construction company that has been involved in the construction industry since its founding in 1955. The Company operates through a variety of subsidiaries within three segments specializing in Heavy Civil, Specialty Services and Residential projects in the United States (the “U.S.”), primarily across the southern U.S., the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. Heavy Civil includes infrastructure and rehabilitation projects for highways, roads, bridges, airfields, ports, light rail, water, wastewater and storm drainage systems. Specialty Services projects include construction site excavation and drainage, drilling and blasting for excavation, foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes.

Important Information for Investors and Stockholders

Non-GAAP Measures

This press release contains “Non-GAAP” financial measures as defined under Regulation G of the amended U.S. Securities Exchange Act of 1934. The Company reports financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), but the Company believes that certain Non-GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and are useful for period-over-period comparisons of those operations.

Non-GAAP measures include adjusted net income, adjusted EPS, and adjusted EBITDA, in each case excluding the impacts of certain identified items. The excluded items represent items that the Company does not consider to be representative of its normal operations. The Company believes that these measures are useful for investors to review, because they provide a consistent measure of the underlying financial results of the Company’s ongoing business and, in the Company’s view, allow for a supplemental comparison against historical results and expectations for future performance. Furthermore, the Company uses each of these to measure the performance of the Company’s operations for budgeting, forecasting, as well as employee incentive compensation. However, Non-GAAP measures should not be considered as substitutes for net income, EPS, or other data prepared and reported in accordance with GAAP and should be viewed in addition to the Company’s reported results prepared in accordance with GAAP.

Reconciliations of these Non-GAAP financial measures to the most comparable GAAP measures are provided in the tables included in this press release.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that are considered forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about: the duration of the COVID-19 pandemic and its ongoing or further negative impact on global economic conditions; our business strategy; our financial strategy; and our plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this press release, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this press release are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this press release are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”) and elsewhere in those filings. The forward-looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Revenues		$	383,458			$	291,699			$	1,080,184			$	779,734
Cost of revenues		(333,542)				(262,483)				(935,424)				(705,519)
Gross profit		49,916				29,216				144,760				74,215
General and administrative expense		(15,154)				(10,239)				(51,209)				(32,302)
Intangible asset amortization		(2,866)				(600)				(8,569)				(1,800)
Acquisition related costs		(401)				(1,896)				(1,013)				(2,158)
Other operating expense, net		(2,664)				(4,366)				(9,989)				(9,936)
Operating income		28,831				12,115				73,980				28,019
Interest income		23				331				146				986
Interest expense		(7,177)				(3,024)				(22,537)				(8,988)
Income before income taxes		21,677				9,422				51,589				20,017
Income tax expense		(6,280)				(913)				(14,712)				(1,782)
Net income		15,397				8,509				36,877				18,235
Less: Net income attributable to noncontrolling interests		(240)				(552)				(395)				(635)
Net income attributable to Sterling common stockholders		$	15,157			$	7,957			$	36,482			$	17,600
Net income per share attributable to Sterling common stockholders:
Basic		$	0.54			$	0.30			$	1.31			$	0.67
Diluted		$	0.54			$	0.30			$	1.30			$	0.66
Weighted average common shares outstanding:
Basic		28,003				26,365				27,832				26,359
Diluted		28,233				26,637				27,986				26,661

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES SEGMENT INFORMATION (In thousands) (Unaudited)
		Three Months Ended September 30,												Nine Months Ended September 30,
		2020				% of Revenue		2019				% of Revenue		2020				% of Revenue		2019				% of Revenue
Revenue
Heavy Civil		$	201,078			52%		$	218,894			75%		$	577,141			54%		$	569,635			73%
Specialty Services		139,971				37%		32,863				11%		380,397				35%		91,436				12%
Residential		42,409				11%		39,942				14%		122,646				11%		118,663				15%
Total Revenue		$	383,458					$	291,699					$	1,080,184					$	779,734
Operating Income
Heavy Civil		$	2,405			1.2%		$	7,420			3.4%		$	2,679			0.5%		$	11,020			1.9%
Specialty Services		21,474				15.3%		1,371				4.2%		55,834				14.7%		3,284				3.6%
Residential		5,353				12.6%		5,220				13.1%		16,480				13.4%		15,873				13.4%
Subtotal		29,232				7.6%		14,011				4.8%		74,993				6.9%		30,177				3.9%
Acquisition related costs		(401)						(1,896)						(1,013)						(2,158)
Total Operating Income		$	28,831			7.5%		$	12,115			4.2%		$	73,980			6.8%		$	28,019			3.6%

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited)
		September 30, 2020				December 31, 2019
Assets
Current assets:
Cash and cash equivalents		$	72,593			$	45,733
Accounts receivable, including retainage		271,342				248,247
Costs and estimated earnings in excess of billings		55,310				42,555
Receivables from and equity in construction joint ventures		13,802				9,196
Other current assets		14,171				11,790
Total current assets		427,218				357,521
Property and equipment, net		121,534				116,030
Operating lease right-of-use assets		17,250				13,979
Goodwill		192,014				191,892
Other intangibles, net		247,754				256,323
Deferred tax asset, net		16,589				26,012
Other non-current assets, net		153				183
Total assets		$	1,022,512			$	961,940
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	127,336			$	137,593
Billings in excess of costs and estimated earnings		126,986				85,011
Current maturities of long-term debt		57,476				42,473
Current portion of long-term lease obligations		7,624				7,095
Income taxes payable		2,251				1,212
Accrued compensation		24,328				13,727
Other current liabilities		11,368				6,393
Total current liabilities		357,369				293,504
Long-term debt		335,237				390,627
Long-term lease obligations		9,668				6,976
Members’ interest subject to mandatory redemption and undistributed earnings		50,798				49,003
Other long-term liabilities		10,124				619
Total liabilities		763,196				740,729
Stockholders’ equity:
Common stock		283				283
Additional paid in capital		254,860				251,019
Treasury Stock, at cost		(2,651)				(6,142)
Retained earnings (deficit)		11,449				(25,033)
Accumulated other comprehensive loss		(6,313)				(209)
Total Sterling stockholders’ equity		257,628				219,918
Noncontrolling interests		1,688				1,293
Total stockholders’ equity		259,316				221,211
Total liabilities and stockholders’ equity		$	1,022,512			$	961,940

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
		Nine Months Ended September 30,
		2020				2019
Cash flows from operating activities:
Net income		$	36,877			$	18,235
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		24,639				12,288
Amortization of debt issuance costs and non-cash interest		2,489				2,375
Gain on disposal of property and equipment		(1,042)				(466)
Deferred taxes		10,946				1,561
Stock-based compensation expense		7,961				2,489
Change in interest rate hedge		251				—
Changes in operating assets and liabilities		8,828				(28,005)
Net cash provided by operating activities		90,949				8,477
Cash flows from investing activities:
Capital expenditures		(22,088)				(7,871)
Proceeds from sale of property and equipment		1,557				1,265
Net cash used in investing activities		(20,531)				(6,606)
Cash flows from financing activities:
Repayments of debt		(52,695)				(10,435)
Distributions to noncontrolling interest owners		—				(5,900)
Purchase of treasury stock		—				(3,201)
Other borrowings		9,137				100
Net cash used in financing activities		(43,558)				(19,436)
Net change in cash and cash equivalents		26,860				(17,565)
Cash and cash equivalents at beginning of period		45,733				94,095
Cash and cash equivalents at end of period		$	72,593			$	76,530

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Reconciliation of Non-GAAP Supplemental Adjusted Financial Data (1) (In thousands, except per share data) (Unaudited)
The Company reports its financial results in accordance with GAAP. This press release also includes several Non-GAAP financial measures as defined under the SEC’s Regulation G. The following tables reconcile certain Non-GAAP financial measures used in this press release to comparable GAAP financial measures.
		Three Months Ended September 30, 2020
		As Reported (GAAP)				Adjustment				Adjusted (Non-GAAP)
Revenues		$	383,458			$	—			$	383,458
Cost of revenues		(333,542)				—				(333,542)
Gross profit		49,916				—				49,916
General and administrative expense		(15,154)				—				(15,154)
Intangible asset amortization		(2,866)				—				(2,866)
Acquisition related costs		(401)				401				—
Other operating expense, net		(2,664)				—				(2,664)
Operating income		28,831				401				29,232
Interest income		23				—				23
Interest expense		(7,177)				—				(7,177)
Income before income taxes		21,677				401				22,078
Income tax expense (2)		(6,280)				(116)				(6,396)
Net income		15,397				285				15,682
Less: Net income attributable to noncontrolling interests		(240)				—				(240)
Net income attributable to Sterling common stockholders		$	15,157			$	285			$	15,442
Net income per share attributable to Sterling common stockholders:
Basic		$	0.54			$	0.01			$	0.55
Diluted		$	0.54			$	0.01			$	0.55
Weighted average common shares outstanding:
Basic		28,003								28,003
Diluted		28,233								28,233
(1) The summary unaudited adjusted financial data is presented excluding the costs of acquiring Plateau, net of tax. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.
(2) Adjusted Non-GAAP income tax expense of $6,396 includes non-cash federal income tax expense of $4,839.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Reconciliation of Non-GAAP Supplemental Adjusted Financial Data (1) (In thousands, except per share data) (Unaudited)
The Company reports its financial results in accordance with GAAP. This press release also includes several Non-GAAP financial measures as defined under the SEC’s Regulation G. The following tables reconcile certain Non-GAAP financial measures used in this press release to comparable GAAP financial measures.
		Three Months Ended September 30, 2019
		As Reported GAAP)				Adjustment				Adjusted (Non-GAAP)
Revenues		$	291,699			$	—			$	291,699
Cost of revenues		(262,483)				—				(262,483)
Gross profit		29,216				—				29,216
General and administrative expense		(10,239)				—				(10,239)
Intangible asset amortization		(600)				—				(600)
Acquisition related costs		(1,896)				1,896				—
Other operating expense, net		(4,366)				—				(4,366)
Operating income		12,115				1,896				14,011
Interest income		331				—				331
Interest expense		(3,024)				—				(3,024)
Income before income taxes		9,422				1,896				11,318
Income tax expense (2)		(913)				(184)				(1,097)
Net income		8,509				1,712				10,221
Less: Net income attributable to noncontrolling interests		(552)				—				(552)
Net income attributable to Sterling common stockholders		$	7,957			$	1,712			$	9,669
Net income per share attributable to Sterling common stockholders:
Basic		$	0.30			$	0.07			$	0.37
Diluted		$	0.30			$	0.06			$	0.36
Weighted average common shares outstanding:
Basic		26,365								26,365
Diluted		26,637								26,637
(1) The summary unaudited adjusted financial data is presented excluding the costs of acquiring Plateau, net of tax. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.
(2) Adjusted Non-GAAP income tax expense of $1,097 includes non-cash federal income tax expense of $984.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Reconciliation of Non-GAAP Supplemental Adjusted Financial Data (1) (In thousands, except per share data) (Unaudited)
The Company reports its financial results in accordance with GAAP. This press release also includes several Non-GAAP financial measures as defined under the SEC’s Regulation G. The following tables reconcile certain Non-GAAP financial measures used in this press release to comparable GAAP financial measures.
		Nine Months Ended September 30, 2020
		As Reported (GAAP)				Adjustment				Adjusted (Non-GAAP)
Revenues		$	1,080,184			$	—			$	1,080,184
Cost of revenues		(935,424)				—				(935,424)
Gross profit		144,760				—				144,760
General and administrative expense		(51,209)				—				(51,209)
Intangible asset amortization		(8,569)				—				(8,569)
Acquisition related costs		(1,013)				1,013				—
Other operating expense, net		(9,989)				—				(9,989)
Operating income		73,980				1,013				74,993
Interest income		146				—				146
Interest expense		(22,537)				—				(22,537)
Income before income taxes		51,589				1,013				52,602
Income tax expense (2)		(14,712)				(289)				(15,001)
Net income		36,877				724				37,601
Less: Net income attributable to noncontrolling interests		(395)				—				(395)
Net income attributable to Sterling common stockholders		$	36,482			$	724			$	37,206
Net income per share attributable to Sterling common stockholders:
Basic		$	1.31			$	0.03			$	1.34
Diluted		$	1.30			$	0.03			$	1.33
Weighted average common shares outstanding:
Basic		27,832								27,832
Diluted		27,986								27,986
(1) The summary unaudited adjusted financial data is presented excluding the costs of acquiring Plateau, net of tax. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.
(2) Adjusted Non-GAAP income tax expense of $15,001 includes non-cash federal income tax expense of $11,235.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Reconciliation of Non-GAAP Supplemental Adjusted Financial Data (1) (In thousands, except per share data) (Unaudited)
The Company reports its financial results in accordance with GAAP. This press release also includes several Non-GAAP financial measures as defined under the SEC’s Regulation G. The following tables reconcile certain Non-GAAP financial measures used in this press release to comparable GAAP financial measures.
		Nine Months Ended September 30, 2019
		As Reported (GAAP)				Adjustment				Adjusted (Non-GAAP)
Revenues		$	779,734			$	—			$	779,734
Cost of revenues		(705,519)				—				(705,519)
Gross profit		74,215				—				74,215
General and administrative expense		(32,302)				—				(32,302)
Intangible asset amortization		(1,800)				—				(1,800)
Acquisition related costs		(2,158)				2,158				—
Other operating expense, net		(9,936)				—				(9,936)
Operating income		28,019				2,158				30,177
Interest income		986				—				986
Interest expense		(8,988)				—				(8,988)
Income before income taxes		20,017				2,158				22,175
Income tax expense (2)		(1,782)				(192)				(1,974)
Net income		18,235				1,966				20,201
Less: Net income attributable to noncontrolling interests		(635)				—				(635)
Net income attributable to Sterling common stockholders		$	17,600			$	1,966			$	19,566
Net income per share attributable to Sterling common stockholders:
Basic		$	0.67			$	0.07			$	0.74
Diluted		$	0.66			$	0.07			$	0.73
Weighted average common shares outstanding:
Basic		26,359								26,359
Diluted		26,661								26,661
(1) The summary unaudited adjusted financial data is presented excluding the costs of acquiring Plateau, net of tax. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.
(2) Adjusted Non-GAAP income tax expense of $1,974 includes non-cash federal income tax expense of $1,753.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Reconciliation of Non-GAAP Supplemental Adjusted Financial Data (1) (In thousands, except per share data) (Unaudited)
The Company reports its financial results in accordance with GAAP. This press release also includes several Non-GAAP financial measures as defined under the SEC’s Regulation G. The following tables reconcile certain Non-GAAP financial measures used in this press release to comparable GAAP financial measures.
		Year Ended December 31, 2019
		As Reported (GAAP) (2)				Adjustment				Adjusted (Non-GAAP)
Revenues		$	1,126,278			$	—			$	1,126,278
Cost of revenues		(1,018,484)				—				(1,018,484)
Gross profit		107,794				—				107,794
General and administrative expense		(49,200)				—				(49,200)
Intangible asset amortization		(4,695)								(4,695)
Acquisition related costs		(4,311)				4,311				—
Other operating expense, net		(11,837)				—				(11,837)
Operating income		37,751				4,311				42,062
Interest income		1,142				—				1,142
Interest expense		(16,686)				—				(16,686)
Loss on extinguishment of debt		(7,728)				7,728				—
Income before income taxes		14,479				12,039				26,518
Income tax expense		26,216				(27,398)				(1,182)
Net income		40,695				(15,359)				25,336
Less: Net income attributable to noncontrolling interests		(794)				—				(794)
Net income attributable to Sterling common stockholders		$	39,901			$	(15,359)			$	24,542
Net income per share attributable to Sterling common stockholders:
Basic		$	1.50			$	(0.58)			$	0.92
Diluted		$	1.47			$	(0.57)			$	0.90
Weighted average common shares outstanding:
Basic		26,671								26,671
Diluted		27,119								27,119
(1) The summary unaudited adjusted financial data is presented excluding the costs of acquiring Plateau (including related refinancing) and non-cash taxes. This presentation is considered a non-GAAP financial measure, which the Company believes provides a better indication of our operating results prior to the excluded items.
(2) Includes a fourth quarter charge for a legacy project of $10.2 million or $0.36 per diluted share based on 28,201 weighted average common shares outstanding in the quarter.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES EBITDA Reconciliation (In thousands) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net income attributable to Sterling common stockholders		$	15,157			$	7,957			$	36,482			$	17,600
Depreciation and amortization		8,098				3,815				24,639				12,288
Interest expense, net of interest income		7,154				2,693				22,391				8,002
Income tax (benefit) expense		6,280				913				14,712				1,782
EBITDA (1)		36,689				15,378				98,224				39,672
Acquisition related costs		401				1,896				1,013				2,158
Adjusted EBITDA (2)		$	37,090			$	17,274			$	99,237			$	41,830
(1) The Company defines EBITDA as GAAP net income (loss) attributable to Sterling common stockholders, adjusted for depreciation and amortization, net interest expense, taxes, and loss on extinguishment of debt.
(2) Adjusted EBITDA excludes the impact of acquisition related costs.