Sterling Construction Company, Inc. Aktie

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure First Quarter Webcast and Conference Call.

[Operator Instructions] As a reminder, this call is being recorded on Tuesday, May 5, 2026.

I would now like to turn the conference call over to Noelle Dilts, Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2026 First Quarter Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer; and Nick Grindstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and 2026 guidance, after which Joe will provide some additional commentary on our markets and outlook. We will then open the call up for questions.

As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full year 2026 financial guidance. Before turning the call over to Joe, I will read the safe harbor statement. The 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 obligations to update forward-looking statements as a result of new information, future events or otherwise.

Please also note that management may reference EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon.

I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining Sterling's First Quarter 2026 Earnings Call. Sterling is off to a fantastic start, delivering strong revenue growth of 92% and adjusted diluted EPS growth of 120%. Adjusted EBITDA more than doubled with margins expanding over 150 basis points year-over-year to reach a new first quarter record of 20%. During this period of unprecedented demand, our focus remains on pursuing projects that offer the most attractive returns. We're not looking to win all projects. We are looking to win the best projects.

Signed backlog at the end of the quarter totaled $3.8 billion, a 78% year-over-year increase and combined backlog grew 131% to reach $5.2 billion. Additionally, we have visibility into high probability future phase opportunities that now total over $1.3 billion. Together, our signed backlog, unsigned awards and future phase opportunities provide visibility into a total pool of work approaching $6.5 billion. This has grown by approximately $2 billion since year-end.

Notably, during the quarter, we were awarded the first phase of a multiphase semiconductor fabrication campus. This first phase, which will be executed under a joint venture, totals over $0.5 billion and is expected to be completed in late 2027 or early 2028. The campus build is expected to span a multi-decade period and presents opportunities for additional scopes of work through 2027 and beyond. The growth in our backlog and future phase work in the quarter, combined with our visibility into our customers' multiyear plans, strengthen our confidence in our outlook. We believe we are perfectly positioned to continue to deliver strong earnings growth and return for our shareholders for many years to come. The Sterling Way, which is our commitment to take care of our people, our environment, our investors and our communities, while we work to build America's infrastructure, remains our guiding principle as we execute our strategy and grow the company.

Now I'd like to discuss our segment results for the quarter in more detail. In E-Infrastructure, first quarter revenue grew 174%, including organic growth of over 100%. The data center market was again the primary growth driver in the quarter. E-Infrastructure adjusted operating income increased 177% as margins expanded despite the dilutive impact of the CEC acquisition. Revenue for our site development operations more than doubled and operating margins expanded both year-over-year and sequentially.

Margins continue to benefit from our strong execution on large time-sensitive mission-critical projects. CEC delivered 78% revenue growth compared to its prior year first quarter, with margins performing in line with our expectations. The Texas market remains exceptionally strong with robust award activity in early 2026.

During the quarter, CEC secured several large project wins, contributing to a $1.2 billion increase in its combined backlog since year-end 2025. We continue to see tremendous opportunities ahead for both electrical and site development. In aggregate, our E-Infrastructure signed backlog, unsigned electrical awards and future phase site development opportunities now exceeds $5 billion, representing an increase of $2 billion since year-end. Mission-critical work, including data centers, large manufacturing projects and semiconductor represented over 90% of E-Infrastructure signed backlog at the end of the quarter. Future phase work is predominantly related to mission-critical projects.

Moving to Transportation Solutions. First quarter revenue grew 10%, driven by strong activity in the Rocky Mountain region, which benefited from favorable weather conditions and some earlier-than-anticipated project starts. Adjusted operating income grew 26%, reflecting strong execution and mix shift towards higher-margin projects. We ended the quarter with Transportation Solutions backlog at $1.04 billion, a 20% year-over-year increase. Shifting to Building Solutions. In the first quarter, segment revenue grew 3%, driven by a pickup in homebuilder activity and adjusted operating margins were 8.7%.

While we're encouraged by the slight revenue increase in the quarter, we continue to anticipate that the residential market will face strong headwinds throughout 2026. The strength of Sterling's diversified portfolio and strategy to focus on high-growth and high-margin end markets enabled us to deliver another fantastic quarter.

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. Nick?

Thanks, Joe, and good morning. I'll begin with our consolidated backlog metrics. Our first quarter backlog totaled $3.8 billion, a 78% year-over-year increase or 51% excluding CEC. Combined backlog of $5.2 billion increased 131% or 46% excluding CEC. First quarter 2026 book-to-burn ratios were 2.1x for backlog and 3.5x for combined backlog.

Moving to our cash flow metrics. Cash flow from operating activities for the first quarter of 2026 was a strong $166 million. We expect continued strength in operating cash flow for the full year. Cash flow used in investing activities included $20 million of CapEx. For 2026, we are forecasting CapEx in the range of $100 million to $110 million, which is unchanged from prior guidance. Cash flow from financing activities was a $27 million outflow, including share repurchases of $12 million at an average price of $305.14 per share. Remaining availability under the existing repurchase authorization is $362 million.

We will remain opportunistic in our approach to share repurchases. We are in great shape from a balance sheet perspective. We ended the quarter with $512 million of cash and debt of $287 million for a cash net of debt balance of $224 million. Additionally, our $150 million revolving credit facility remained undrawn during the period. Given our strong liquidity, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead.

Our current backlog visibility and strong market tailwinds position us for an even better year than we originally anticipated. We're increasing our guidance ranges for 2026 as follows: Revenue of $3.7 billion to $3.8 billion, which at the midpoint is a 20% increase over previous guidance and represents more than 50% growth over 2025. Diluted EPS of $16.50 to $17.15. Adjusted diluted EPS of $18.40 to $19.05, which at the midpoint is a 36% increase from previous guidance and represents 72% growth over 2025. EBITDA of $801 million to $831 million, adjusted EBITDA of $843 million to $873 million.

Now I will turn the call back to Joe.

Thanks, Nick. For quite some time, we've been communicating a bullish view on our markets and outlook. As we sit here today, that outlook is stronger than ever and continues to surpass our expectations. Customers are continuing to ask for more with projects growing in size, complexity and duration. At the same time, we're being pulled into new geographies with urgency as customers prioritize alignment with partners who have the capability and capacity to execute over the long term. Together, these dynamics reinforce our conviction in the multiyear opportunities across our markets.

Moving to our segment expectations for 2026. In E-Infrastructure Solutions, we anticipate that the current strength in data center demand will continue for the foreseeable future. We continue to have conversations with our customers regarding how we can best support their strong multiyear capital deployment programs. As part of this, we are getting pulled more rapidly into new geographies, including Texas, the Pacific Northwest and the Midwest.

In the semiconductor market, our industry-leading capabilities enabled us to be selected as the site development partner for a mega-fab semiconductor campus. This award highlights how Sterling's highly differentiated capabilities make the company the partner of choice for large mission-critical projects in the U.S. We believe that this is just the beginning of a wave of semiconductor fabrication activity that will begin to accelerate at the end of the decade. In addition, there are still several opportunities in the broader manufacturing market that we believe could be awarded in 2026 or early 2027.

We're gaining meaningful traction in our cross-selling efforts between site development and electrical services. We are currently in active construction on 2 data center projects where we are executing both services in an integrated capacity. These joint awards have materialized approximately 6 to 8 months ahead of our original expectations. For the full year 2026, we expect to deliver E-Infrastructure revenue growth of 80% or higher, including the full year contribution of CEC. We anticipate that the legacy business will grow at rates approaching 60% or higher as several of our larger projects accelerate. Adjusted operating profit margins for E-Infrastructure are expected to be in the mid-20% range.

In Transportation Solutions, we're in the final year of the current federal funding cycle, which concludes in September of '26. We have built over 2 years of backlog and continue to see good levels of bid activity. For 2026, we anticipate continued growth in our core Rocky Mountain market. The downsizing of our low bid heavy highway business in Texas is progressing according to plan, resulting in some moderation of Transportation Solutions top line and backlog but should continue to drive margin improvement as we move through the year. We expect Transportation Solutions revenue to grow in the low to mid-single-digit range in 2026.

After the strong first quarter, we anticipate a moderation of growth rates in the remaining quarters. This is driven by 3 factors: The early start of projects in the first quarter that we originally expected to start in the second quarter; the allocation of resources towards E-Infrastructure projects; and the final wind down of our Texas low bid work.

In Building Solutions, we believe the business is well positioned for growth over a multiyear period. Our key geographies of Dallas-Fort Worth, Houston and Phoenix are expected to see population growth driving new home demand. Additionally, there is an opportunity for share gain coming out of the down cycle. We anticipate that Building Solutions revenue will be modestly down in 2026 and that adjusted operating margins will be in the low double digits.

On the acquisition front, we continue to look for acquisitions that are the right strategic fit to enhance our service offering and geographic footprint. We are seeing more high-quality acquisition targets in the market today than a year ago. Our significant balance sheet firepower positions us to take advantage of these opportunities.

Moving to our full year 2026 guidance. The midpoint of our guidance ranges would represent a 51% revenue growth, a 72% adjusted EPS growth and a 70% adjusted EBITDA growth.

With that, I'd like to turn it over for questions.

[Operator Instructions] Your first question comes from Sangita with KeyBanc.

Maybe, Joe, you can help us understand what you think went a lot better in 1Q versus expectations maybe on revenue and margins since usually we consider 1Q to be a seasonally slower quarter.

Yes, sure. Yes. Q1 is historically and will probably be consistently our lowest quarter. A couple of things helped us. We certainly had some very good weather in the Rocky Mountains and some of the other regions, which enabled us in the Transportation segment to start some projects a little earlier and execute projects through the winter months when we normally shut down. So that definitely helped us. But more importantly, as we look at E-Infrastructure, we're really starting to see the impact of the new projects that are coming in larger and more complex and what the added values of our vertical integration are adding to the margin profile and productivity through the build of these projects. So we're far enough along.

Again, a little bit of history. We started this journey when data centers became really data centers and data campuses and hit 100 acres. Now we're doing projects that are north of 1,000 acres and the future projects coming out look like they're multi-thousand acres. So the larger they get, the more complex they get, the more we can leverage our vertical integration and our size and our scope, which drives more productivity. And that's why we've said all along and we feel even more confident as we're executing, we'll continue to see nice margin growth in E-Infrastructure.

Great. And then if I can ask a follow-up on the comment you made on M&A targets and the fact that you're seeing better targets now. Can you tell us how you define these targets as being better than what you saw before?

Yes. So we have some significant criteria that we look at. We always say we buy people, we don't buy businesses. So it's absolutely critical on the caliber of the talent and the willingness of the key team to stay. But our primary focus is in the infrastructure. If we take a look in kind of a couple of different areas, either geographic expansion of capabilities that we have, more focus on the site development from a geographic expansion standpoint.

And then on the electrical side, a combination of geographic expansion and incremental services or products that we can offer. I'll tell you, we're looking beyond electrical as well. So we're looking at the whole portfolio. We really spend a lot of time with our customers and understand what are their needs and what are driving the success or the complexity of these projects, and we'll constantly look for those services to add to our portfolio. It's how we moved into electrical.

Your next question comes from Noah with William Blair.

Great quarter. You highlighted a robust bidding environment in Texas. Can you walk us through your current presence in that state as it relates to capacity, project manager availability and how you would characterize Texas' data center market today versus where, say, the Atlanta or Greater Georgia market is at today and your ability to gain share over there in Texas?

Yes. So our approach in Texas is we have CEC located up in Dallas, we'll call that North Central Texas. And we're attacking Texas from the West, and we're attacking Texas from the East. We're using our Rocky Mountain assets and businesses to come from the West to hit the Western Texas, even into New Mexico, there's a little bit of activity there. And then we're leveraging the Atlanta folks and Southeast team to come east. They'll make it all the way to Dallas and both of those teams are kind of meet in the middle. So we've got current capabilities and capacity to do that. We're constantly looking for acquisitions that could be in the upper Pacific Northwest, also in Texas that we can add capacity as we move along the way. So we'll continue to do that.

If I look at the market, I would tell you that the Atlanta Southeast market is more mature, has a longer runway and today is probably a larger market. As I look forward the next 4 to 5 years, I think people will be shocked with the size and scope and quantity of data centers along with some other stuff being built in the Texas market.

So we're in the early innings, but the projects are extremely big. They're coming out extremely quickly. And we see not only this year, next year, but what our core customers and key customers are talking about starting '28, '29. These projects on top of being large, will obviously take longer in time frame to complete. So a typical project today is more like 3 years. These will be pushing out more like 4- and 5-year projects.

And one other thing, Noah, just to add here is we're getting pulled into these new geographies by our customers. So it's not like we're just going into these new geographies cold. They're looking for partners that can support their builds in these new areas. And that's really a continuation of the geographic expansion strategy we've had since the beginning. So it's just kind of taking that one step further.

Yes. And just to add to that, I think that's a great point. Our customers, if you look at our geographic expansion from the beginning of this, going back to when we started this, we've let the major hyperscalers pull us into new markets. I will tell you, we generally take our time to do that. They're more than pulling now. They're kind of screaming to get into these markets faster with what they see coming in capital spending they're going to do.

So it's really -- it's exciting times for us. Our challenge is how do we grow as fast as we can and still deliver at the same levels in caliber. But it also allows us to be extremely picky on the projects we decide to do and the projects we're not going to do. And that only helps us long term on margins and capacity planning.

Fantastic. That was great color. And then just a follow-up. As it relates to CEC, can you walk us through your current level of integration with the business as it relates to what you're seeing with revenue and cost synergies? You mentioned the 2 active projects that are involved -- are involving both the legacy site development work with CEC's Electrical. But how much of their collective bidding pipeline is collaborative with this cross-selling? And then what's the progress on CEC's margin expansion opportunity?

Yes. So we call it assimilation, not integration. But we've been really happy with the progress made with CEC. As I said on the call, we're 6 to 8 months. We really didn't think we would see a joint opportunity or joint effort take place until late second quarter, early third quarter of this year. We started those in the first quarter, which is fantastic. We've got great reception from the hyperscalers, and they will quickly and are seeing the benefit of combining these together and what it does to the cycle time of the build process. So we're really happy with that. Integration is going great.

On the margin expansion piece, we're still extremely bullish that we're going to see 300 to 500 basis points of margin in really 12 to 18 months. One of the things that people need to realize that CEC is, there's a couple of end markets and products that we knew they were doing to have much lower margin. We are exiting those. And as we exit those, those margins will come up. I will tell you on the core business ex those markets, we saw a really nice margin expansion in the quarter. I would tell you that it was actually ahead of what we anticipated. So we're very confident in where those margins will go over the next 12 to 18 months and feel really good about what the business is bringing to us and what we can do jointly with that business as we go forward.

In addition, it's taken off so quickly. We talked about expanding or growing our modular capabilities. We just locked down a lease to triple the size of our modular build capabilities. We're building a world-class manufacturing site to do that. And we think we'll ultimately expand that to other locations in the U.S. over the next 18 months. So we're excited about it. I feel very good about what it's bringing. I just wish I had 2,000 or 3,000 more electricians, and we would grow it even faster.

Your next question comes from Manish with Cantor.

Manish? We lost him.

Your next question comes from Brian with Stifel.

Congrats on a great quarter here. Just a follow-up on Texas in your traditional site development business. How much do you expect Texas to account for as a percentage of revenue there, kind of putting CEC aside? And can you remind us where about it was last year? And then is there any notable differences in margin profile in the site development business in Texas relative to some of your other regions?

Yes. So it's really hard to say where Texas will be as a percent of revenue. I will tell you, it is growing extremely quickly. But so is -- people forget the Southeast is still growing incredibly fast, too, right? And we've just got pulled into the Midwest by one of our customers, and so there's another market there. So it's hard for me to -- I'll only be wrong if I try to give you an answer.

Margin profile, as legacy things are getting bigger and more complex, margin profiles will be fine. We certainly have seen in some of the far Pacific Northwest projects early on where we've got a little smaller equipment group, and we're not as fully vertically integrated as we are in the Southeast. Those margins are a little lower. but they would be margins everybody would love to have. So we're not worried about that.

Part of our acquisition strategy is to look at how do we start putting in those elements or even organically adding those elements of vertical integration. We are really, really seeing the benefits of these ancillary goods and services, not only from time reduction of the project because we control more of it, but that's what's really helping drive these margins. Everybody keeps asking us if we're getting more price. The answer is no, we're not getting more price. This is all around effectiveness and efficiency and what we're able to drive through the execution of these projects for our customers.

Yes. That's great. And then just a follow-up on CEC. In the release, you guys talked about $600 million-ish contribution to backlog, but a $1.9 billion contribution to combined backlog. Can you help us understand the delta here? Is that some underground electrical work that you won that hit RPOs and maybe some of the inside work is coming later? Or how should we think about that?

Yes, it's a combination. It's both external and internal electrical work, and that will be on upcoming centers and existing centers. The contracts with CEC are very similar to what we've talked about in our site development where this stuff is phased. So they'll release a small phase. We know the scope of the project. Internal electrical package is $300 million to $500 million generally. So we know kind of the total scope of the project but they'll release those in small pieces along the way. So that's why you see kind of some backlog, some in that future phase work. But those are projects that we're either actively working on or getting ready to work on.

Brian, this is -- sorry, just one thing to add. We've actually -- within some of that work that fell into combined backlog, they have -- and again, the terms and conditions are kind of already finalized on that piece of the contract that would -- is maybe unsigned, but would fall into combined backlog. And some of that has subsequently moved into signed here as we've moved into the second quarter, a pretty big chunk of it.

Your next call comes from Alex with Texas Capital.

How should we think about your new work being competitively bid versus negotiated? And how has that changed or how might that change?

Well, in theory, everything is bid. The question is, in certain instances, we're asked to go work on specific projects with the customer. I guess you could consider that negotiated. Our pricing -- what people don't understand, we've done a tremendous amount of work for these customers in the past. So it's not like we can raise our prices 20% or 30% even if we're negotiating it. They know what the price range is going to be. It's our ability at the end of the day to execute this stuff faster than anybody else and be on time every single time with our customers that gets us pulled into these jobs. So that's really where we're at.

I think as we go forward, we're looking at these multiyear programs of our core customers and the size and scope of these and it's really causing us to look harder at those. And we'll be passing up on more jobs as we go forward that may be smaller in size or scope or may have lower margin profiles because they're not as complex as some of these bigger jobs, and we'll just keep moving assets to where the most money is. I will tell you, with the combination of electrical and the site side, it really gives us a whole another avenue on some of these extremely large projects coming out in the future.

And congratulations on the semi-fab campus. It sounds really exciting. Do you see other opportunities developing sort of outside the data center market this calendar year? Or is that more of a 2027 event?

Yes. So let's talk about the semi fab for a little bit. here's a job that's going to be one of the bigger jobs in the U.S. It's the biggest semi-fab plant in the U.S. And I will tell you, it was fun. We actually participated in the process, and I say we, some of us in corporate because we didn't know if we wanted to do the project or not, to be honest. We went through the process and it was really fascinating to see the differentiation that we had over anybody else that spoke to the customer about doing this project. It was just so blindingly evident. There was no one else in the room that was going to have a chance at this.

But more importantly, it's the first semiconductor project we've done. It's not a market we've been in, in the past. It's not a market that's really existed in the U.S. But a lot of the GCs in that space, the engineering firms in that space are not people we deal with every day. Now we're dealing with them every day. And when we show them the capabilities of what we're able to do, we feel very confident that just like in data centers, we will be the supplier of choice for every chip plant that comes out in the future. We don't see the huge rush of chip plants coming out until '29, 2030 kind of looks like the timeline, but we're positioned perfectly for that as we go forward with that.

I'm sorry, what was the second part of the question?

That covered it.

Your next question comes from Julio with Sidoti.

I wanted to ask about how your competitive positioning is evolving due to these shifting and increasing customer needs. As you said, these customers are no longer asking you to scale, but kind of screaming for you to go into other geographies. And as they act with more urgency, are you realizing a better pricing environment? Are you negotiating better payment terms? And kind of related to that, how do you maintain risk discipline and essentially not allow these large customers to force your hand for lack of a better word, into taking on more work than you would typically handle?

Yes. I think if we were going to get criticized for something it would be that we're probably not aggressive enough on price. And we just -- we have a philosophy that we have a fair price and we make our money on execution. If we take care of customers, they'll have us back. There's no reason for us to try to take advantage of the situation. My history says at some point in time, that comes back, too. So if somebody wanted to be critical of us, it would be that we're probably not pushing price hard enough, but we keep -- we will keep growing margins with vertical integration and the productivity.

On the risk profile, the beauty of all of this stuff coming at us is we're not afraid to say no. And sometimes our biggest customers may not like that. There may be a geography or something that takes place. It could be a real small job that, frankly, just for the time, effort and energy would take away significant capacity from doing their bigger jobs. So what we try to do is work with them and say, here's the jobs we're going to do. Here's the jobs proactively we're going to pass on. We'll even help them in some cases if they need help try to find somebody to get that done. So that's where we go.

On the risk profile, we are incredibly risk averse. It's another reason why our margins are where they are. We won't take on high-risk jobs that are going to get us in trouble. So we don't see that as an issue. Right now, our biggest challenge is they would like to have us in 2 or 3 or 4 new markets tomorrow. We've had to say no to some of those. We really have. And some days, it kills us because we'd like to be in all those markets, but we've just had to say no. And over the long term, that enhances or continues to build our credibility with them because we'll never let them down. So that's important to us.

Very helpful. And that kind of dovetails into my next kind of question is about expanding production capacity. I know you discussed earlier expanding your modular build capabilities. I think last call, we talked about AI deployment internally to improve production capacity for product managers. And then obviously, you have a joint venture with the first phase of the semiconductor facility project here. How would you kind of rank order the levers you have to pull to expand production capacity to continue to grow, both in the near term and in the longer term?

Well, I think it's different in each area. So electrical is very different than site development. Electrical comes down to electricians. It really does. And so as we said before, we've got the university, it's great. We're graduating people as we speak. The downside of the university is it's a 4-year program to get somebody from start through apprenticeship into a certified electrician. That doesn't mean they can't work along the way as an apprentice, but it's a long, lengthy process, and we can't put out thousands of people a year. So that's one avenue.

Second avenue, as we get these larger multiyear jobs, you can actually attract electricians from smaller shops that may be on small jobs that are moving every 3 or 4 months to where they can be some place for 18, 24, 36 months, depending on the size and scope of the project. So there's an attractive piece of that.

And then the third piece is acquisitions. And that's a combination of can we buy something -- someone larger that gives us a nice geographic expansion element? Or are there some small tuck-in smaller shop electrical contractors that don't have the size and scope to do data centers or large mission-critical projects, but they've got 150 or 200 electricians. We can buy those and we can convert those electricians to work on mission-critical stuff. So that's kind of how we're going at it in the electrical space.

And then the last piece of the modular, which is anything I can build in a factory where I don't have to have a certified electrician doing 100% of the work, saves me that electrical work in the field, okay? Plus there's some added quality and other advantages of doing it in a factory, quite frankly. So we have that.

On the site development side, we have a waiting list of operators. It's really about project managers. We've talked about that in the past. The AI project we did first was focused on project managers. We picked up about 15% capacity in project managers. We've got the apprenticeship program or internship program, I should say. So we're literally hiring people in their sophomore year. We run them all through college, and then we got a program that they go into right after that. We're graduating for, I think, a year -- 4 or 5 a year right now that are not only through college, but through the program itself and are becoming real project managers in the field for us. So we'll continue to do that.

And we're looking hard for acquisitions. It's challenging on the site development side, candidly, for us to find the right acquisitions for a couple of reasons. One, the size and scale that we have is so much bigger than anybody else. There's a lot of small players out there. They tend to have either small equipment fleet or most of them have no equipment at all, they rent and lease it. And I would tell you that the rental and lease market right now is extremely tight. So they're going to be highly limited on capacity and capabilities. So we're looking hard. And if we can find the right ones, we will buy them. It's just hard for us to find that. But that's our strategy on that front on top of, I'll call it, the internal development.

Your next question comes from Adam with Thompson, Davis.

Congrats on putting up one of the best earnings reports I've ever seen.

Thanks, Adam.

You had some large awards, you said, recently for CEC. What should our expectation be for continued awards from those guys? And as they get out of some of their lower-margin ventures, you talked about that, does that free up electricians that you can move back and take on more mission-critical work?

Yes. So we get kind of a double benefit from the low-margin stuff we want to exit. You free up people and your margins move pretty significantly when you do that. So we get 2 benefits of that as we go forward. We have more opportunities than we have capacity to get to with CEC. So just like we've talked about with everything else, we'd like to focus more on where we get joint opportunities because we can really lever that on the total project scope and take out some significant time and drive some significant productivity. So our net margins will go up as well. So that's kind of where we're focusing their growth activities on as we go forward.

And we'll continue to look at it's been really fun to watch. We've had CEC for 8 months now or so, watching them kind of transform as well from where they were, which is a great business to with all these opportunities and what's happening in these joint opportunities, watching them quickly trying to shift and move more and more resources, assets and capabilities there because they really see the benefit of what that brings to them as well. So it's fun to watch. Like I said, if I had 2,000 more electricians, I can tell you we can put them to work in a quarter for sure out there right now. It's a really good time on the electrical insight side.

And then on the M&A side, you -- since your electrical deal has worked out so well, you said that you would go to where they're asking you to add scope. So I guess my question is where are they asking you to add more scope? And could that include maybe something just purely on the manufacturing side?

Yes. Well, it's interesting you say that because there's a lot more to these projects than people realize. And there are underground components that are manufactured by others that we purchase and put in that may make sense for us to do. As we look at this modular capability piece, we're kind of starting out with the basic stuff, but there's no reason that we can't go to whole modules of these being built in a factory and put on site. So we see that expanding and growing very rapidly as an opportunity. And for 2 reasons. One, just pure electrical capacity; and two, it could open up other end markets for us that we're not in today.

Your next question comes from Manish with Cantor.

Congrats again. Joe, 2 questions for you. One is on E-Infrastructure. The margins that we're seeing, are they structurally sustainable? And should we think of them as peak margins? Or is there more room to be had?

Well, when you ask if they're sustainable, I will tell you, if you consider them going up higher than they are now, then they're not sustainable because they will continue to go up. Our margins will improve, and they will improve for a couple of reasons. As these jobs become more complex, we drive better productivity. As we vertically integrate through the Rocky Mountains and add larger equipment suites, they will get further productivity. Those will both drive margins.

As we combine the electrical packages and the site civil packages, there's another element of productivity that we can drive, which helps the margins. And then the inherent margin of that is actually better for our CEC business on top of it. When you couple all those together on top of the end markets that we'll get out of with CEC, what that does with the margin profile, we will continue to see margins tick up in E-Infrastructure as we go forward.

So we're very bullish that we're certainly not at the top and feel like we've still got a long way to go before we're peaking out on this thing. So you may see some variability quarter-over-quarter because of volumes. But if you take the trend line of margins, we're going to -- we'll continue to grow.

And Joe, how should we think about margins, risk profile between data center and advanced manufacturing work?

Fundamentally the same. Margins are -- again, size matters to us. So I'll tell you a 50-acre data center is not going to have the margins that a 1,000-acre data center has, just like a 50-acre mission-critical plant is not going to have the margins of a 1,000-acre mission-critical plant is. But I will tell you, there's opportunity for some large manufacturing projects either late this year or early next year that we're on top of, and they will have similar margin profiles.

And then if I can just squeeze -- go ahead, sir.

The only variable that we see is that if you look geographically, historically, our Northeast region has had lower margins than the others. The driver of that is size of their projects is generally smaller and some of their projects mandate vertical integration more than others with the union base. But other than that, really not a big differentiation. Think of it in size, not end market.

Right. Okay. That's super helpful. And then, Joe, one last question. Residential and Transportation segments, we don't really talk about those 2 segments a whole lot. Obviously, all the thunder is on E-Infrastructure for all the right reasons. But how should we think about those 2 segments long term? I mean, are they core, noncore? Would you monetize them if you found a bigger acquisition that gives you more scale in E-Infrastructure?

Well, let's start with transportation. If you asked me 7 years ago, I probably would have answered this differently. But today, we turned transportation -- first, Transportation is like the Rodney Dangerfield of our business. They don't get enough respect. If you take a look at their margins, they are now almost 2x better than best-in-class in margins. So they've got great margins. They've done a phenomenal job. We've turned that into a cash cow that really we work off customers' money and that throws off great cash for us that we can then use to grow our high-margin, high-growth project -- product lines, E-Infrastructure and at one time it was Residential. So when we look at it, great solid business today.

But in addition, what we've been able to do is start shifting those assets towards E-Infrastructure. And I'll give you a couple of perfect examples. We started with a pilot with Meta, as a matter of fact, who asked us to go to the upper Northwest, Pacific Northwest, and we used the yellow iron and assets out of our highway business in Utah with our project management teams and stuff out of Atlanta, and they executed a project level. They've got 5 or 6 projects out of that between the customers and the GCs with their ability to execute.

So we continue to shift assets there. We've talked about closing down our low bid heavy highway business in Texas. We're coming into the final innings of that. However, what we've been able to do is we've started shifting their underground assets to E-Infrastructure. So now we're helping with underground utilities and some of the underground duct bank work by leveraging those assets and converting them into E-Infrastructure. So we've taken lemons and we're making lemonade out of it and the lemonade keeps getting better and better. So there's not really, one, a reason for us to do anything different with Transportation. And two, it will be really hard even if we wanted to because it's now so intertwined with our E-Infrastructure business, it's not an easy thing you can break out. So that's where we are with that.

Building Solutions, it's been a great business for us. It's been a great cash cow business for us. We'll continue to look for opportunities to grow it. We look at everything every day, is it or is it not a strategic fit for us. Right now, we believe it's still got long-term -- great long-term growth potential. We're in the best 3 markets in the U.S. So we have no different plans for Building Solutions, but to grow it out as we move.

Your next question comes from Louie with William Blair.

Following up, is your large semi-fab project for your Petillo division? And secondly, what is the timing for the expansions into the Northwest and the Midwest? I think you just referenced how you were doing a trial project with Meta in the Northwest but has that already started?

Yes. So let's talk about the semiconductor fab. It is being done in the Northeast, and it is being done by a union operation. And that would be Petillo that's doing that. So that's an exciting project for us. It's right in our backyard and it should be a great project. The Pacific Northwest, Louie, I have confused everyone. That's one we did. We started 2 years ago. That was our foray into kind of transitioning RLW into E-Infrastructure site development, and we've got multiple through there.

What we're seeing is we believe, based on conversations with our customers, in '27, '28, there will be some nice projects coming out in the Pacific Northwest. And believe it or not, the Pacific Northwest and Western Texas are a lot closer than people think from our Salt Lake City office to our West Texas job is plus or minus 200 miles difference than us driving from Houston, right? So Texas is a pretty big state. It goes pretty far west. So we're using those resources to come further east as well. But we believe in '27, '28 is going to be the start of some really nice projects in the Pacific Northwest. So you'll see us adding capacity and capabilities in that area over the next 6 to 12 months, and we'll be able to talk more about that probably in the second or third quarter.

Your next question comes from Julio with Sidoti.

You guided to legacy business E-Infrastructure growth of 60% for '26. I think that implies some moderation of the year-over-year growth rates above the 102% that was this quarter. That makes sense. But just given the larger order intake this quarter, which I assume has some timing variability, how would you have us think about the year-over-year legacy growth rates expected in the E-Infrastructure over the remaining 3 quarters of the year to get to that 60%.

I haven't laid it out in that level of detail. The question around the big wins and all that, it's timing, right? It's when do these kick off, when do they start, how fast do they go. If we get great weather through the rest of the year and projects kick off earlier, we'll be really happy and we'll beat those numbers. There's just a lot of variables left from now to the rest of the year. Julio, we can lay that out exactly for you and talk more about what that does quarter-by-quarter. I just don't -- I don't have that.

Thank you. There are no further questions at this time. I'll turn the call back over to Joe Cutillo. Please go ahead.

Thank you, Melissa. I want to thank everybody again for joining today's call. We're off to a great start, and we're going to have an amazing year. If you have any follow-up questions or want to schedule further calls, feel free to contact Noelle Dilts. Her contact information is in the press release. Hope everybody has a great day. And again, thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Fourth Quarter and Full Year Webcast and Conference Call. [Operator Instructions] As a reminder, this call is being recorded on Thursday, February 26, 2026. I would now like to turn the call over to Noelle Dilts, Vice President, Investor Relations and Corporate Strategy. Please go ahead.

Good morning to everyone joining us, and welcome to Sterling Infrastructure's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joseph Cutillo, Sterling's Chief Executive Officer; and Nick Grindstaff, Sterling's Chief Financial Officer.

Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and 2026 guidance, after which Joe will provide some additional commentary on our markets and outlook. We will then open the call up for questions.

As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full year 2026 financial guidance. Before turning the call over to Joe, I'll read the safe harbor statement. The 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 obligations to update forward-looking statements as a result of new information, future events or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP.

As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting of our RHB JV, unless otherwise noted. I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining Sterling's Fourth Quarter and Full Year 2025 Earnings Call. I'd like to start by thanking our team for delivering another outstanding year in 2025. We achieved strong revenue growth of over 32% and adjusted diluted EPS growth of over 53%. This is the fifth consecutive year we have achieved adjusted EPS growth of over 35%. Full year gross margins reached 23% and adjusted EBITDA margins exceeded 20% for the first time in our history.

The strength of our margins reflect our continued focus on pursuing opportunities that offer the most attractive returns. Additionally, our operating cash generation remained strong at $440 million. We are pleased to discuss these results with you today, but even more excited about the opportunities ahead of us. The Sterling Way, which is our commitment to take care of our people, our environment, our investors and our communities, while we work to build America's infrastructure remains our guiding principle as we execute our strategy and grow the company.

Moving to the fourth quarter results. Revenue grew 69%, fueled by 123% growth in Infrastructure Solutions and 24% growth in our Transportation Solutions. Organic growth in the quarter was 36%. We grew adjusted earnings per share by 78% to $3.08 and adjusted EBITDA by 70% to $142 million. Additionally, operating cash flow generation in the quarter was again very strong at $186 million. Our backlog position and strong visibility drive our confidence in the future.

Signed backlog at the end of the quarter totaled $3 billion, a 78% increase from year-end 2024. On a same-store basis, backlog increased approximately 50%. When you layer in our unsigned awards of $301 million, and pipeline of future phase opportunities, which now exceeds $1 billion, we have visibility into a pool of work approaching $4.5 billion for Sterling.

Now I'd like to discuss our segment results for the full year and fourth quarter in more detail. In infrastructure, full year revenue grew 59% including 40% organic growth and adjusted operating income grew 67%. Adjusted operating margins reached nearly 25% and an increase of more than 120 basis points. This was driven by our shift towards large mission-critical projects where our superior project management and ability to finish jobs on or ahead of schedule is extremely valuable to our customers.

In the fourth quarter, revenue grew 123%, including 67% organic growth. The data center market, again, was the primary growth driver in the quarter. Additionally, our geographic expansion efforts are really paying off. Our Rocky Mountain site development operation, which is solely focused on mission-critical work, grew more than 150% from the prior year period. Adjusted infrastructure operating income grew 91%. Operating margin for the legacy e-infrastructure site development business were flat with prior year levels. Margins continue to benefit from our focus on large mission-critical projects and strong execution.

The CBC acquisition is performing very well. In the quarter, CBC revenue increased 21% from its prior year fourth quarter, and margins were in line with our expectations. The Texas market, in particular, is very strong, and we continue to see tremendous opportunities ahead for both electrical and site development. Our multiyear visibility and the infrastructure business remains excellent. The aggregate of our e-infrastructure signed backlog, unsigned electrical awards and future phased site development opportunities totaled more than $3 billion.

Mission-critical work, including data centers, large manufacturing projects and semiconductor represented 84% of e-infrastructure signed backlog at the end of the year. Future phase work is predominantly related to mission-critical projects.

Moving to Transportation Solutions. For the full year, revenue grew 17% and adjusted operating profit grew 66%, driven by strong market demand and the benefit of mix towards higher margin services. Fourth quarter revenue grew 24% and adjusted operating profit grew over 100%. We ended the quarter with Transportation Solutions backlog at $1.1 billion, and 81% year-over-year increase, driven by strong award activity and the conversion of unsigned backlog to sign backlog.

Shifting to Building Solutions, Full year revenue declined 6%, and adjusted operating profit declined 23%. In the fourth quarter, segment revenue declined 9% and adjusted operating margins were 10%. Overall demand for homes has been impacted as potential buyers struggle with affordability challenges. Even with the headwinds in Building Solutions, the strength of Sterling's diversified portfolio and strategy to focus on growth in high-margin end markets enabled us to deliver another fantastic year. With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and the 2026 guidance. Nick?

Thanks, Joe, and good morning. I'll begin with our consolidated backlog metrics. Our year-end backlog totaled $3 billion, a 78% increase from year-end 2024 or 49%, excluding CEC. Combined backlog of $3.3 billion increased 81% from prior year-end or 42%, excluding CEC. Fourth quarter 2025 book-to-burn ratios were 1.64x for backlog and 0.81x for combined backlog.

Moving to our cash flow metrics. Cash flow from operating activities for 2025 was a strong $440 million. We expect continued strength in operating cash flow in 2026 in both the legacy and recently acquired businesses. Cash flow used in investing activities for 2025 included $77 million of CapEx and $482 million for acquisitions, including CEC. For 2026, we are forecasting CapEx in the range of $100 million to $110 million, with the increase driven by investments to support growth and productivity.

Cash flow from financing activities was $162 million outflow, primarily driven by share repurchases of $74 million at an average price of $168.2 per share. In the quarter, we deployed $26 million into share repurchases at an average price of $310.09 per share. Remaining availability under the existing repurchase authorization is $374 million. We will remain opportunistic in our approach to share repurchases. We are in great shape from a balance sheet perspective. We ended the quarter with $391 million of cash and debt of $291 million for a cash net of debt balance of $100 million.

Additionally, our $150 million revolving credit facility remained undrawn during the period. Given our strong liquidity, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead. Now I'd like to discuss our guidance. Our current backlog, visibility and strong market tailwinds position us well for another great year ahead. We are initiating the following guidance ranges for 2026.

Revenue of $3.05 billion to $3.2 billion; diluted EPS of $11.65 to $12.25. Adjusted diluted EPS of $13.45 to $14.05, EBITDA of $587 million to $620 million. Adjusted EBITDA of $626 million to $659 million. The midpoint of these ranges reflect strong year-over-year growth of 25% or higher for each of these metrics.

Now I will turn the call back to Joe.

Thanks, Nick. As we look to the future, we remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities. and conversations with our core customers on the size and number of future projects contribute to our confidence.

In e-infrastructure, site development, we anticipate that the current strength in data center demand will continue for the foreseeable future. We have discussed for some time that we're in conversations with our customers regarding how we can best support their strong multiyear capital deployment programs. As part of this, we are getting pulled more rapidly into new geographies, including Texas and the Pacific Northwest.

Additionally, our projects are getting larger and are spanning longer time periods. In the semiconductor and manufacturing markets, there remains a very big pool of mega projects on the horizon for the later part of the decade. This would include planned semiconductor fabrication facilities. We believe that some of these projects are close to shore and will be awarded in 2026.

In e-commerce distribution, award strengthened significantly in 2025 as large customers restarted their investment programs following the post-COVID build-out and correction. We believe that, that momentum will continue into 2026 as these programs accelerate. Together, these dynamics across our end markets support strong growth opportunities over a multiyear period. We have very good momentum in our Electrical business for 2026. Customer demand is very strong, particularly in the Texas data center market. We have a high degree of confidence in our ability to leverage the combination of our site development and electrical services to drive growth and margin expansion across the platform. For 2026, we expect to deliver e-infrastructure revenue growth of 40% or higher. This includes 20% growth or higher in the legacy business.

Adjusted operating profit margins for the e-infrastructure are expected to be in the 23% to 24% range. In Transportation Solutions, we're in the final year of the current federal funding cycle, which concludes in September of 2026. We have built over 2 years of backlog and continue to see good levels of this activity. For 2026, we anticipate continued growth in our core Rocky Mountain market. The downsizing of our low bid heavy highway business in Texas is progressing according to plan, resulting in some moderation of Transportation Solutions top line and backlog which should continue to drive margin improvement as we move through the year.

We expect Transportation Solutions revenue growth in the low to mid-single digits in 2026 and continued margin expansion. In Building Solutions, we believe the business is well positioned for growth over a multiyear period. Our key geographies of Dallas Fort Worth, Houston and Phoenix are all expected to see population growth, driving new home demand. Additionally, there is an opportunity for share gain coming out of the down cycle.

In the near term, we believe the current soft market conditions will continue. We anticipate that Building Solutions revenue will decline in the high single to low double digits in 2026 and that adjusted operating margins will remain in the low double digits.

As a reminder, from a seasonality perspective, our fourth quarter and first quarter tend to be slower than our second and third quarter, with the first quarter typically our lowest of the year. On the acquisition front, we are continuing to look for acquisitions that are the right strategic fit to enhance our service offering and geographic footprint. We are seeing more high-quality acquisition targets in the market today than we did a year ago.

Moving to our full year 2026 guidance. The midpoint of our guidance range would represent 25% revenue growth 26% adjusted EPS growth and 28% adjusted EBITDA growth. With that, I'd like to turn it over for questions.

[Operator Instructions] And your first question comes from Brian Baffi from Stifel.

I guess I just wanted to ask about transportation awards and backlog. It seems like it was a lot stronger than folks were expecting. Anything notable to call out there? Were there any large awards worth highlighting?

Yes. Thanks, Brian. Nothing in particular. There wasn't one big project or anything. I think what people tend to get confused with is even though we're coming to the end of a funding cycle, only about 50% to 60% of the total funding has been spent. So we will continue to see good bid activity through that September time frame as projects are continuing to be let, which will obviously be built for a time period after that. So we feel very good of where we're positioned, and we like the bid activity. Nothing major, just kind of good singles, doubles and maybe a little triple now and then. -- as we go forward. But I also want to just remind you and everybody that at the end of the funding cycle, the world doesn't stop. This isn't a toggle switch. Generally, what happens if they don't have the next funding bill in place is they will do an extension of the existing funding bill. They have generally historically adjusted that for inflation. And as a result, bids will continue to come up.

Yes, that's helpful. And then I guess just as a follow-up, you touched on this a bit in your opening comments, but hoping you could expand a little bit more. But just an update on some of the progress entering in Texas on the site prep side? And how is progress going kind of marrying that with some of the joint awards at CEC?

Yes. We're really excited about the Texas market, one from the CEC side on what we're seeing for data center expansion, electrical. But two, we're getting pulled very rapidly on the site development side. And I think in the first half of this year, we're going to be able to talk about some very nice awards that take place in Texas. And we have been, I will tell you what I believe, ahead of schedule and more optimistic about the strength of putting these 2 together and the responses that we're receiving from customers. So we're very pleased on the thesis is coming true. And I think we'll see some very good activity in the first half of this year that will make everybody happy.

And your next question comes from Brent Thielman from Davidson.

Joe, maybe just to tack on to Brian's question, to get out a little bit more about how the pipeline has evolved at CEC since you've acquired it? Are the award opportunities getting a lot bigger. And maybe if you could comment on kind of what you're doing or seeing already that might support a higher threshold for margins for that business going forward?

Yes. We are -- the jobs are getting a lot bigger. These data centers in Texas, we were joking at our recent leadership meeting our team said, remember when we were so excited, we got the first 100-acre data center. And this is just a few years ago. And we said, yes, we thought it was the biggest project and all that kind of stuff. And they said, "Yes, we just started one in Texas, in the parking lot is 100 acres, right? To kind of put it in perspective. .

These things keep getting larger and larger, or having more and more -- these aren't data centers anymore the data campuses. I think people get confused about that, and we'll have multiple buildings on them. CEC has got great traction and combined, the site development CEC are getting great traction. We see margin improvements in a couple of areas. Obviously, as CEC moves for the mix shift towards data center. That margin is historically better than the smaller kind of industrial commercial jobs. But also is we're combining the exterior electric with the site development. We have already seen significant margin improvements with the small dry utility business we bought in Georgia last year. And the exact same thing will happen with CEC over a period of time. So we're in the early phases of getting into those projects. That's where I say, I think we'll see some great progress in the first half of this year, and we'll start seeing some of that impact as we get to the second half of this year.

Okay. All right. And then maybe just on the legacy site development margins, as you mentioned, sort of flat here, obviously, at great levels. maybe, Joe, you could just comment on why we shouldn't think they peaked at this point.

Sorry, Brent. I misheard you. You're asking about site margin site development margins in the quarter. We don't see them going negative. That's for sure, especially as we're seeing larger and larger jobs come out, we're also seeing some opportunities in the Northeast for some larger jobs that will help their margins improve significantly.

One of the things we'll begin talking about more and more -- as we said in the script, our Rocky Mountain site development business grew 150% year-over-year. We're really excited about that. But one of the things we have that hurts our margins out in that area is we tend to have a little bit smaller and different equipment suite than we use on the East Coast. So we're going to be investing in some capital and doing some different capital planning that we think we can drive their margins up a fair amount as well, just by duplicating exactly what we do in the Southeast and the East Coast. And then strategically, we'll continue to look at more vertical integration. There's some leverage and productivity we can get out of vertical integration. As we move to a new geography, that's not where we start. We kind of get our feet wet, get into the site development, execute that. gives us time to evaluate some of those players around the vertical integration, pick the best ones.

And you'll see over the next 12 to 18 months. tucking in some of those around the U.S. I do want to add one more comment, though, on your CEC question on how rapid they're growing and everything else. I would tell you if I had another 1,000 electricians in Texas, and I have a much bigger number. I think we could put them to work in 30 days or less.

But when we bought CEC, they had a small modular build facility. We just are in the progress -- the process of signing a lease that triple the size of that -- that will also help their margins so we can start prebuilding more in a factory condition and ship those to the field.

And your next question comes from Manish Somaiya from Cantor.

Good morning. Noel Joe, Nick. Congrats on the quarter. A couple of questions for me. Maybe beginning with Joe. You talked about $1 billion of high probability future phase work. Can you give us a sense if that's tied to existing customers or programs? Or is it completely new? And how should we think about the expected conversion window?

Well, first, that $1 billion-plus is tied to projects we're actively working on today. So that's real work. That's what it's going to take in a minimum to finish out those projects. If you remember, as they continue to design, they release that work in a package, we did that next phase of work and then we execute it. So it's very solid. We can't technically call it backlog, but internally for capacity planning and everything else, it's a backlog for us.

It's tied to existing customers, but we're always getting a new customer here and there. So we're not just fixated on 1 or 2. But the lion's share of that are with the big name hyperscalers that everybody knows that have all announced their budget plans and future forecasts, which are all up significantly. I will tell you, as we look ahead in the next 3 to 5 years, and work with them on their planning. We don't see anything slowing down. If anything, we continue to see it accelerate.

And then a question for Nick. As you guys scale up the e-intra business, how should we think about investments in working capital and free cash flow conversion?

Yes. So we expect to continue to have strong free cash flow conversion. I mean, conservatively, we're seeing free cash flow version in the -- to EBITDA in the 80% range or so and that's a conservative number, and we expect that to continue as we move further into the infrastructure space throughout the year. .

Okay. And then back to Joe. As we think about capital allocation, Joe, you mentioned obviously, you have an active share buyback program, $400 million initiated back in November of last year. You talked about M&A. You're talking about good assets coming on the market, which is interesting because I haven't heard that in a while. Obviously, multiples are high. But maybe if you can just give us your sense of your priorities. Is that a fourth leg that we should be thinking about to the Sterling business. So how do you sort of think about allocation -- capital allocation, M&A, fourth leg and why this whole abundance of good acquisitions because we've heard that on a couple of calls, and it's been a little bit surprising. But if you can please help us understand that.

Yes, our focus won't be necessarily on a fourth leg. It's really around when we step back and we look at data centers, semiconductors, pharmas coming some other manufacturing that we see along with longer-term projects. Right now, for the next 5 to 7 years, the best returns for us are going to be how do we grow, expand good services and geographic footprint within the infrastructure. Now that's not to say we won't -- if the right fourth leg came along, we wouldn't aggressively go after it. But right now, the opportunities that are ahead of us and what our core customers are asking us for in asking locations that go to services to provide for the next 3 to 5 years, really has us focused on continuing to look for that geographic expansion of site development and then also incremental electrical footprint and services and skills, and we will be looking at mechanical along the way as well as kind of a natural progression.

So that's where we're focusing. Why do I think there's more quality businesses on the market. I think 2 things. Mobiles are certainly up some on the businesses. But two, I think a lot of these owners see this tremendous opportunity ahead of them, and they're not able to capitally fund the growth and they feel like they're going to miss the opportunity. And frankly, if they don't team up with somebody big, they're going to be on the outside looking into this and they're going to ultimately lose that work.

So they've been around this world a long time, and this is something that none of us have seen in our career. -- from a standpoint of the -- it's not billions. I think it will get the trillions of dollars of infrastructure spend that's coming in front of us that whether it's our yellow iron or our electrical skills or some of our other things that ride into.

And your next question comes from Alex Rygiel from Texas Capital.

When you talk about manufacturing and high tech and fab plants, can you just sort of help us to maybe understand how big that market opportunity could be sort of in the coming years?

Well, when you -- let's start -- we can start with the semiconductor stuff. And I'm a believer that we are -- we're at the early innings of semiconductor. I don't think we're going to see a major phase of semiconductor come on until 2030 or so just with the length of time of the announced capital spend that it takes to get a project ready to break ground.

But in the meantime, there are a few projects that are going to be hitting here in the near future. Put it in perspective, a data center job for us is kind of a 3-year average, I would say, semiconductor plants that are coming out will be closer to 7- to 10-year projects instead of hundreds of millions of dollars, the total scope of those projects could approach $1 billion. So that's pretty sizable for us. The pharma plants have announced multiple facilities around the country. Again, don't get confused when they announce it. From the time they announced that the time if anything happens, it's going to be 3 to 5 years. It's just the cycle by the time you get the land, you permit it, you get utilities run they have to purchase equipment. Usually, that's specialty equipment and it's not a quick turnaround. So there's anywhere from 2 to 5 years of lead times depending on the parts and components of the industry.

So we see all of that coming. In parallel, I would tell you, our data center customers over that same time horizon are not slowing down. They're talking about bigger builds, more builds and working with us to try to commit capacity and capabilities, but also when you see our geographic expansion taking place over the next 18 months, it's not necessarily because there's something there today. It's because we know something is coming in the future, and we're working with our customers to be prepared for that.

And the Texas market is on fire to say the least. It is unbelievable what is happening in Texas. And we're attacking that from the east, and we're attacking from the West, and then we've got our CEC business right in the middle of Dallas. We feel very, very good about what Texas will add to our company over the next 3 to 5 years.

And your next question comes from ouie DiPalma from William Blair.

Joe, you previously on past calls, you've discussed Sterling's entry into West Texas. Are you able to further expand into Texas to cover other key markets? I know you said that you're attacking it from the East and attacking it from the West, have you already won jobs on the east side of Texas and in other markets across the state.

Yes. Let me talk about the attacking from the east, attacking from the west and in the market, okay, just to make sure I don't create more confusion. So West Texas is growing very rapidly. And I would tell you, we're actively working and winning jobs in West Texas that we'll be able to announce in the first quarter. What we consider East is kind of Dallas, Houston, that corridor, not East Texas is the pine forest. There's not a lot going on there yet. Maybe there will be.

But when I say we're attacking it from the east and taking from the West, we're using our plateau business to come and start hitting what we call East Texas. So that Dallas market, there's stuff going on up in Oklahoma in the near future that's coming out. And then believe it or not, what most people don't realize is it's almost the same distance from Houston to West Texas as it is from Salt Lake City to West Texas. That's how big the state is we're attacking the West using our Rocky Mountain resources and assets.

And we'll be looking for strategic acquisitions obviously, within Texas or closer proximity to continue to add assets and resources and capability and capacity. Does that help?

Yes. That was great, Joe. And so should investors view 2026 as a year for -- in which you're focused in terms of your geographic expansion, you're focused mostly on Texas? Or are there other data center and mission-critical geographies outside of the Southeast and outside of Texas that you can potentially expand into for 2026?

Yes. I think in 2026, the lion's share of the data center growth will come in those areas. But there's some good activity taking place now in the Northeast. It's early. We're excited about some projects up there. We will -- the 2 other markets that are out there in one, I think, in 2026, you'll see us start moving more assets and resources to the Pacific Northwest. And again, there are several projects that will probably be released in '27 up there that could be very exciting for us. The market we haven't figured out how to get into yet is kind of the Ohio, Indiana market. That's always a potential for us. I won't tell you we're on the 10-yard line of getting in there or anything else but that's another fairly sizable market.

But when I step back and I just look at the Southeast, a few of the projects up in the Northeast and Texas, and you got the lion's share of the new stuff coming out, at least with our core customers and the size of those projects really fit our profile versus when you get into mid-Atlantic there's a lot of number of data centers, but they're small and just don't necessarily fit our profile.

One final one related to this discussion for your entry into new markets. Is it reasonable to assume that the profitability in terms of the operating margins will be lower than like the profitability for your core infrastructure mission-critical business such that as investors and the sell-side as we're modeling should there be any negative impact from expanding into Texas and expanding into the Northwest? Or how should we consider that?

Yes. I think depending on if we move equipment suite as an example from the Southeast to Texas, we're going to see the exact same margins. We've seen a little lower margins the same pricing, same kind of process, a little bit lower margins in our Rocky Mountain, not because of the market just because we're ramping up that equipment profile.

Remember, we kind of converted highway assets plus some large assets to get them underway as we continue to build that out, those margins will grow. Where we would see -- where I think we will see when we look at acquisitions, as an example, most acquisitions, margins are a little bit lower than ours, right? But we believe that after we get those acquisitions in our footprint, introduce our processes, our procedures, our technology and do those sort of things, we can continue to grow those margins up to where we are.

And just the other thing to keep in mind, Louie is our margins -- I'm sorry, our projects remember, the multiphase is anywhere 3, 5 7. They always start out at a lower margin and those margins improved based on productivity and what we're able to do staging earlier phases to help productivity on the future basis.

Your next question comes from Adam Thalhimer from Thomson Davidson. .

Nice quarter. Joe, can you talk more about the CEC modular expansion? Curious what that will take you to on a square footage basis? And what exactly are you doing modularly versus in the field?

Yes. So our simple take on that is we're not -- the other one is doing milder, but anything we can take out of the field and prefab to move into the field reduces the number of electricians we need on that site, right? But it also improves productivity and cost. So the new facility is over 300,000 square feet. I would tell you that we're looking at does it or does it make sense to have multiple facilities throughout the U.S. that can make these components. So we're doing everything from the exterior piping and conduit around the banks to the actual cabinets that go into these centers. And we're looking at how do we continue to expand that capability and growth. It's pretty exciting because it really -- when you run the numbers, it's significant, would it frees up for capacity and how it positively impacts your margins.

Future of construction. .

What's that? .

I guess it's the future of construction?

Yes, I think we will see, regardless of us or our space or other spaces, you're going to continue to see modular activities grow, is the labor pool just gets tighter and tighter. It's the most logical thing to do.

And then just lastly, I wanted to see where your head was at on the residential bussiness. And does it make sense to do an acquisition there when multiples might be more depressed? Or does it just make sense to let that play out?

Yes. And we don't -- I'd like to tell you there is light on the horizon. I think it's going to be tough, certainly first half of 2026. Things are just there's nothing positive that's happening to spark or drive the residential business to turn around and I'll also warn everybody that once it does turn around, there's 3 or 4 months of inventory on the ground that these builders are going to sell before we start seeing new builds start, right? I think that's just a fact -- but you're not far off. I will tell you, if the right acquisition came along in residential and multiples are down. And by the way, their earnings are down we feel optimistic long term because the last time when we went back and looked at Tealstone coming out of the last downturn, they picked up significant market share on the back half of this, and we think we'll pick up market share coming out of this, especially in the Houston and Arizona markets.

So if we found the right acquisitions, we would shy away from them, but we get them at a huge discount. And we look really smart 18 months from that.

And your last question comes from Julio Romero from Sidoti & Company. .

Wanted to stay on the topic of these projects getting bigger. As you said, Joe, they're not even data centers anymore their data center campuses. As these mission-critical projects get bigger, more complex, is the mix of above ground work versus underground infrastructure changing at all? And if so, is that mix shift margin accretive?

Yes. We -- I wouldn't say we've seen any significant shift on above ground versus below ground. I think what we will see kind of the next generation of these projects are going to have self power generation on them. That will create more development opportunities on these because if you have a power plant, you got all the underground, whether it's water utilities, you got the electric bill coming in, all that stuff. So we think that the size and scope of these projects, not only in physical size will get bigger, but the amount of stuff that we will touch will continue to grow.

Those projects really won't start getting until '27 or '28 we may see one this year, but that's the lion's share. But it also opens up opportunities to look at other goods and services that we can add to those projects.

Got it. And does that change at all if the mix within mission-critical begins -- does skew over time to semiconductor and advanced manufacturing.

Yes. No, there's not -- -- there's not a tremendous difference. Obviously, you got in the data centers, but there's a -- what people don't realize is any of these facilities, literally as thousands of miles, underground pipe and wire and everything else, it's an underground city. So for us, we're not concerned if the mix shifts more towards semiconductors and away from data centers or more towards manufacturing we've historically seen -- we've got more data on the site development side, obviously, but we've seen comparable margins. That's the beauty of the model we have. And now with electrical and as we continue to expand the footprint of electrical and capabilities. Our stuff is fungible. We really -- we -- big projects, obviously, are much better for us. but we don't really care if it's a data center or a chip plant or a large automotive facility or a battery plan.

Very helpful. And I wanted to ask how Sterling is positioned amongst other specialty contractors with regards to AI-driven tools as these tools kind of become more adopted across the industry, Joe, how are you thinking about staying ahead of competitors? I'm sure some of those competitors would say they're probably using AI to narrow the gap of reliability or maybe scale versus sterling. How do you see sterling position in that context? And could you be using tools to maybe widen your differentiation versus some of these peers?

Yes. Well, I certainly would not be able to speed. I don't know where our peers are. I can tell you what we are. I think people would be shocked what we've done and what we're doing in and around AI and how we're tying that to not only the estimating and bid process, but the project execution, we did 3 pilots last year. to say the teams were excited when we first -- when we first started them, everybody said, how is AI applicable to what we do.

Remember, we're running drones. We're running all kinds of analytics of our equipment. We're now tying all that into project management and making things happen faster. We picked up just in, remember, our capacity constraint in site development is project managers. And we picked up somewhere between 15% to 20% of incremental capacity on project managers just from our first AI project. We've got 6 AI projects underway right now.

So I will tell you, it's when people talk about, well, is AI real and all that, I would say if guys like us are running very quickly at this and our guys, every time they touch it, they come up with 4 or 5 other things that we can incorporate which will improve the efficiency, the effectiveness, the quality, and just as importantly, there's some really cool things we're doing on the safety side with this that will help think our employees even safer than they are today.

And there are no further questions at this time. Mr. Joe Cutillo, you may continue

Thank you. I want to thank everybody for joining today's call. If you have any follow-up questions, please contact Noelle Dilts. Her contact information is in the press release. I appreciate it, I appreciate what our team did another great quarter, and have a great day.

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Third Quarter Webcast and Conference Call. [Operator Instructions] As a reminder, this call is being recorded on Tuesday, November 4, 2025.

And I would now like to turn the conference over to Noelle Dilts, Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2025 Third Quarter Earnings Conference Call and Webcast.

I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer; and Nick Grindstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and guidance, after which Joe will provide a market and full year outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full year 2025 financial guidance.

Before turning the call over to Joe, I will read the safe harbor statement. The 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 obligations to update forward-looking statements as a result of new information, future events or otherwise.

Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting for RHB JV, unless otherwise noted. Additionally, all comparisons are to the prior year quarter unless otherwise noted.

I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining today's call. Sterling delivered another outstanding quarter as we achieved strong revenue growth, expanded margins, grew backlog and generated excellent cash flow. We are pleased to discuss these results today with you, but even more excited about the opportunities ahead of us.

Beginning with the third quarter results, revenue grew 32%, fueled by 58% growth in our E-Infrastructure Solutions segment, including 42% organic growth. In addition, our Transportation segment grew 10% in the quarter. We grew adjusted earnings per share by 58% to $3.48 and delivered adjusted EBITDA of $156 million, an increase of 47%. Our gross profit margins expanded 280 basis points from the prior year to reach 24.7%. Additionally, operating cash flow generation in the quarter was again very strong at $84 million.

Our backlog position and strong visibility drive our confidence in the future. Backlog at the end of the quarter totaled $2.6 billion, a 64% year-over-year increase. Excluding the contribution from the recent acquisition of CEC, backlog increased a strong 34% year-over-year. E-Infrastructure Solutions backlog of $1.8 billion was up 97% in total and 45%, excluding the contributions from CEC. When you layer in our unsigned awards and pipeline of future phase opportunities, we have visibility into a pool of work in excess of $4 billion for Sterling. The Sterling Way, which is our commitment to take care of our people, our environment, our investors and our communities while we work to build America's infrastructure, remains our guiding principle as we execute our strategy and grow the company.

Now I'd like to discuss our segment results in more detail. In E-Infrastructure, third quarter revenue grew 58% over prior year and over 34% sequentially. Excluding CEC, revenue grew more than 42% over prior year and 21% sequentially. The data center market, again, was a primary growth driver in the quarter, as revenue from this market grew more than 125% year-over-year. Adjusted segment operating income grew 57%, or 48%, excluding CEC.

Adjusted operating margins for the legacy E-Infrastructure Site Development business were 28.4% and increased over 140 basis points from prior year levels and 10 basis points sequentially. This was driven by our continued shift towards large mission-critical projects, including data centers, where our superior project management and ability to finish jobs on or as scheduled are extremely valuable to our customers.

We are pleased to have closed the CEC acquisition during the quarter. We see tremendous opportunities ahead to leverage our expanded service portfolio and are seeing early positive reception from our customers. CEC contributed $41.4 million of revenue in September and adjusted operating margins that were in line with our expectations. We continue to have very good visibility in the E-Infrastructure business. With the recent CEC acquisition, the aggregate of our E-Infrastructure signed backlog, unsigned electrical awards and future phase site development opportunities total approximately $3 billion.

Moving to Transportation Solutions. Third quarter revenue grew 10% and adjusted operating profit grew 40%, driven by strong market demand and the benefits of the mix shift towards higher margin services. We ended the quarter with Transportation Solutions backlog of $733 million, a 23% year-over-year increase. Sequentially, segment backlog was roughly flat, with awards keeping pace with burn. As a reminder, the wind down of our Texas low-bid heavy highway operation is impacting backlog to some extent this year, but will ultimately benefit segment margins.

Shifting to Building Solutions. In the third quarter, segment revenue declined 1% and adjusted operating income declined 10%. Adjusted operating margins in the quarter were 12%. Overall demand for homes has been impacted as potential buyers struggle with affordability challenges. Revenue from our legacy residential business declined 17%, driven by softness in the overall housing market. Even with these headwinds in Building Solutions, the strength of Sterling's diversified portfolio and strategy to focus on growth in high-margin end markets enabled us to deliver another record quarter.

With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and full year guidance. Nick?

Thanks, Joe, and good morning. I'll begin with our consolidated backlog metrics, all of which are adjusted to exclude RHB for the prior year. Our third quarter backlog totaled $2.58 billion, a 64% increase from the prior year second quarter. CEC contributed $475 million to backlog. Excluding CEC, backlog increased 33.8% year-over-year. We closed the quarter with combined backlog of $3.44 billion, which was up 88%. Excluding CEC, combined backlog increased 43.5% year-over-year. Third quarter 2025 book-to-burn ratios excluding CEC were 1.23x for backlog and 1.76x for combined backlog. Year-to-date, book-to-burn ratios excluding CEC were 1.31x for backlog and 1.58x for combined backlog.

Moving to our cash flow metrics. Cash flow from operating activities for the first 9 months of 2025 was a strong $253.9 million compared to $322.8 million in prior year period. Cash flow used in investing activities for the first 9 months of 2025 included $46.9 million of net CapEx and $484.2 million for acquisitions, including CEC. Year-to-date cash flow from financing activities was a $80.7 million outflow, primarily driven by share repurchases of $48.5 million at an average price of $135.96 per share. Remaining availability under the existing repurchase authorization is $80.9 million.

We are in great shape with the balance sheet perspective. We ended the quarter with a very strong liquidity position consisting of $306.4 million of cash and debt of $294.6 million for a cash net of debt balance of $11.8 million. Our $150 million revolving credit facility remained undrawn during the period.

Now I'd like to discuss our guidance. The strong tailwinds behind our business position us for another record year at Sterling in 2025. We are increasing our guidance ranges to: revenue of $2.375 billion to $2.390 billion, which is a more than 5% increase at the midpoint relative to our previous guidance range; diluted EPS of $8.73 to $8.87; adjusted diluted EPS of $10.35 to $10.52; this represents a 9% increase at the midpoint over our previous guidance range; EBITDA of $448 million to $453 million; adjusted EBITDA of $486 million to $491 million, a 6% increase at the midpoint over our previous guidance range.

From a financial standpoint, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead. Now I will turn the call back to Joe.

Thanks, Nick. As we look to the future, we remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities and discussions with our customers contribute to our confidence. First, in E-Infrastructure site development, we anticipate that the current strength in data center demand will continue for the foreseeable future. Our customers are discussing multiyear capital deployment plans and our focus on how to align with the right partners to support these plans. We are getting pulled into new geographies by our customers, including Texas, where we are now performing site development work.

In the manufacturing market, we are seeing a fairly steady pace of activity in 2025. As we look out to 2026 and 2027, there remains a very big pool of [ mega projects ] on the horizon. This would include planned semiconductor fabrication facilities. The e-commerce market has strengthened significantly in 2025. We have built a sizable level of backlog and believe we should continue to see momentum in 2026. Together, these dynamics support strong growth opportunities over a multiyear period.

Moving to CEC. We have very good momentum heading into 2026. Customer demand is very strong, particularly in the data center market, and the organization has booked several large projects in recent months. We continue to see opportunities for margin expansion over the next couple of years. We have a high degree of confidence in our ability to leverage the combination of site development and electrical services as we head into the new year. For 2025, we expect to deliver E-Infrastructure revenue growth of 30% or higher on an organic basis and approaching 50%, including CEC. Adjusted operating profit margins for E-Infrastructure should approximate 25% for the full year including CEC, as compared to 23.7% in 2024.

In Transportation Solutions, we are approaching the final year of the current federal funding cycle, which concludes September 2026. We have built over 2 years of backlog and continue to see good levels of bid activity. For 2025, we anticipate continued growth in our core Rocky Mountain and Arizona markets. The downsizing of our low-bid heavy highway business in Texas is progressing according to plan, resulting in some moderation of Transportation Solutions top line and backlog, but should drive meaningful margin improvements as we move through the year. We expect Transportation Solutions revenue growth in the low teens on an adjusted basis in 2025. We forecast adjusted operating profit margins in the 13.5% to 14% range compared to 9.6% in 2024.

In Building Solutions, we continue to believe the business is well positioned for growth over a multiyear period. Our key geographies of Dallas-Fort Worth, Houston and Phoenix are expected to see continued population growth, driving new home demand. Additionally, there is a significant opportunity for share gain in Houston and Phoenix. In the near term, we are anticipating a continuation of soft market conditions driven by affordability challenges.

For full year Building Solutions revenue, we forecast a mid- to high single-digit decline. We anticipate adjusted operating margins in the low double digits as compared to 14.8% in 2024. As a reminder, from a seasonality perspective, our fourth quarter and first quarter tend to be slower than our second and third quarter, with the first quarter typically our lowest of the year.

On the acquisition front, we are continuing to look for small to midsized acquisitions that are the right strategic fit to enhance our service offerings and geographic footprint. Moving to our full year guidance. The midpoint of our increased 2025 guidance range would represent 27% revenue growth year-over-year as adjusted for RHB, 47% adjusted EPS growth and 42% adjusted EBITDA growth.

With that, I'd like to turn it over for questions.

[Operator Instructions] The first question comes from Brent Thielman at D.A. Davidson.

Joe, yes, maybe just a first question. It looks -- I mean, it looks like CEC signed and unsigned work has substantially grown since the June deal announcement. So again, I would just be sort of interested on kind of what's behind the momentum and award activity there. And how do we think about -- sounds like some large data center projects. But how do we think about them converting that over the next sort of 12-plus months?

Yes. So they had very good and strong bookings and wins in the quarter. It's mostly around the data center front as that continues to move forward, along with a couple of other big projects that are a little outside of the data center front. We are -- here's what I'll tell you, they had a great bookings quarter. We're excited about that. But we're really excited about the reception that we're getting from our end customers in our end markets from this combination and are in the early stages of talking about several 2026 projects and how do we do those as a joint package instead of an individual package. So we're very excited about that.

As we said in the call, we have started doing site development in Texas. We think that is going to grow very aggressively as we go into 2026. And I will tell you, the teams are working diligently together to pull each other into that market into these next big future-based jobs. So we're -- man, I'm tickled to death with where we are. The team spent 2 weeks together right out of the chute, working on stuff, and I was excited about the deal before. I came away even more excited after that 2 weeks together on the opportunities they saw between the site development and the electrical teams.

And Joe, you [ sending ] you're optimistic around some margin expansion opportunities [ there are some ] specific things that you're seeing in the award activity that gives you some confidence there? What drives that margin expansion [indiscernible]?

Yes. So a combination of things. Certainly, on just the pure site development, the size of these projects continue to get bigger and bigger. And what our customers are talking to us about the next level of projects that are coming out, again, they just -- they're getting bigger, which is fantastic for us.

On the combination of the electrical and site development side, we've proven significant productivity gains with the small dry conduit business tuck-in we did at the beginning of January. We've seen their margins improve 40% just by combining that with the site development. We think there's certainly some opportunities to [ lever that larger ] with CEC. But also as CEC continues to move further and further into data center space, those margins are accretive to their average margin. So if we can build their portfolio and backlog stronger in that area, their margins will continue to increase as well. So we feel very good on continued margin enhancement across the segment.

Okay. Just last one, I think, along those lines on the E-Infrastructure business and that the current backlog, I guess, for the legacy Site Development side. Joe, could you talk about maybe how the size of projects even within mission-critical has evolved over the last 12-plus months? I know mission-critical is bigger for you now, but how is that sort of being redefined with the projects you're putting in backlog now?

I don't know that we're really redefining it. The only incremental add to E-Infrastructure is obviously the CEC acquisition [ piece ]. But the base business was up, it was at 34%, I think in backlog. And so for us, mission-critical, again, is data centers, manufacturing, e-commerce distribution is kind of what I'll call the 3 core elements of it. Did I miss anything?

45%.

45? Yes. So we're up 45% in that area. So we haven't redefined anything. Just the project size of these data centers. And when the chip plants come out, those are pretty sizable as well, will continue to help us on the margin front.

One of the things we really don't talk about in the script that I think is important that everybody understands is -- we said we're in Texas. I will tell you that there's some other geographic footprints that we are aggressively looking at expanding into. Not because there's large projects there today, but we believe there's going to be large projects there based on our customers telling us that over the next 2 to 3 years. So we're trying to get in early, get our footprint established and be ready for those to come up.

Yes, Brent, this is Noelle. I would just say we're now over 80% of our work is mission-critical in backlog, looking at kind of data centers, manufacturing, et cetera. So that continues to move higher. And then to Joe's point, even within that bucket of mission-critical, the projects are getting larger and more complex than that there's underground infrastructure, which is great for us. And so that intensity of the work we're doing continues to expand.

Yes. And just to add to that, I think it's part -- kind of the pot. If you think -- not only -- we talk about data centers getting bigger. But I will tell you that every piece of mission-critical jobs are getting bigger in size. As we talk about e-commerce distribution coming back, and I think we're up 150% in backlog growth in e-commerce distribution. Those jobs are about 2x to 2.5x the size of historical ones. Not only are the footprints getting bigger, but Noelle mentioned, the infrastructure associated with these -- an e-commerce distribution center is starting to look a little bit more like a data center. And what I mean by that is with all the EVs that are being used by an Amazon, all the underground utilities that now have to be run to these charging stations and everything else look like a mini [ duck bank ]. So it just continues to add to the complexity, the size and the scope, which is perfect for us. And now adding the electrical piece, you can quickly, in your head, see how we can integrate those two together and make that part of the package.

The next question comes from Julio Romero of Sidoti Company.

I wanted to hone in on the combined backlog plus the forward pipeline of future phase work of $4 billion plus that you mentioned. Help us think about the mix of end markets or customers that are driving the growth of that forward pipeline? And then secondly, what's your estimation of when that forward pipeline begins to convert into orders?

Well, I think you got to break it down into the pieces. The backlog, we're either converting or we'll be converting shortly into work. The low unsigned, those are projects that we either have letters of intent or we have won the physical job or negotiating terms of contracts or there's a final design work that's taking place. Those are likely to start in '26. Depending on the actual project, when in '26 could vary. And some may start first quarter, second quarter, third quarter.

A lot of the big design-build highway projects, I will tell you are going to start second and third quarter of next year, kind of in the process there. And then that future phase work, the way to look at it is as we burn off current backlog, the work we're working on today, that then flows into current backlog. So that spreads out over what I'll call a '26, '27 and into '28 time frame in which that will hit.

Got it. Very helpful there. And then just -- go ahead, sorry.

I'm sorry. I just want to make sure I answered everything you're looking for there, really.

I would say -- in terms of the composition of...

Well, if you take a look at it, $3 billion of the $4 billion is in E-Infrastructure. And the highest percentage of that is going to be data center, which would probably be 75% or 80% of that piece there.

Got it. Extremely helpful there. And then maybe just turning to Transportation Solutions, really notable margin strength there, here in the third quarter. If you could help us unpack the drivers there? I don't think the impact of low-bid phase is starting to come through, unless I'm mistaken. And then just talk about the margin profile of what you have in Transportation backlog and unsigned awards.

Yes. I think people grossly underestimate the progress that Transportation Group has really made. We have best-in-class margins, and they continue to get better. It's really -- again, it's really around what I'll call project selection and focus as we continue to do more design-build or alternative delivery-type projects, along with aviation and rail, continue to diversify that portfolio, the margins will continue to increase.

We haven't seen a significant part of that, though we've seen a little from the wind down of our Texas low-bid business. And we'll see that impact more in 2026 as we weed out or weaned out, I should say, that backlog. But that will continue. So probably the first -- most of that will be burned off in the first half of 2026.

The next question comes from Adam Thalhimer at Thompson Davis.

Joe, I wanted to ask you about -- so you said '26 and '27, big pool of mega projects. Obviously, your ability to bid on mega projects isn't -- your capacity to bid isn't infinite. So how do you think about how you prioritize what you're bidding on? And how do you price that work?

Yes. I think that's a good question, Adam. We do have a fair more capacity. We've been planning for this. We've been in conversations on some of these projects for a couple of years now with our customers. So we have been doing stuff internally to plan for this. As we've said, generally, our biggest limitation to capacity is around project management and the program we put in place to develop future project managers. We've been doing it for, I think, 4 or 5 years now, is really starting to pay off to add some increased capacity.

But at the end of the day, I don't want anybody to be surprised if we pass on one of these mega projects because if the pricing is not right, the margins are not right or the complexity of the contracts don't make sense for us, we're okay to pass on that with the visibility we have in data centers and the rest of mission-critical stuff coming out. But I will tell you, we're looking at those and we will continue to build capacity as needed to do those.

Just keep in mind, if we have a year runway to build capacity, we can build a lot. If somebody comes in tomorrow and says, "I've got $300 million, $500 million jobs," it may be tough for us -- and they need to start 60 days, that would be a challenge for us. But we've got -- our customers have been very good, the hyperscalers, and even these big chip plants have been very good, kind of forward looking and anticipating what's coming out. The other good thing on the chip plants is they've taken much longer than I think the builders have anticipated for them to hit the ground running with all the upfront work that's had to be done. So we've seen these coming now for 2 years. So we'll be ready.

And then I was curious, you talked about entering Texas for site prep. I guess you're doing that organically. And I was curious if -- or kind of what you're doing with the assets from the Texas highway work that's winding down?

Yes. Another good question. Well, you may see those on a site development job or 2. The smaller assets that we have there are very capable of doing some of the utility and underground work. With CEC and those assets combined, now we can start doing [ DUC ] banks in Texas. So I think over the next 6 to 12 months, if you go to one of our sites, you may see some stuff that has a [ TSC ] logo on.

Cool. And then lastly, you said you were -- you continue to look at small and midsized deals. Was that just a comment in the residential segment? Or is that for the whole company?

No, no. Yes, we're looking -- the vast majority of deals we're looking at are in and around E-Infrastructure. It's not that we won't look at stuff and be opportunistic in Building Solutions. But I would tell you right now, about 95% of everything we're looking at or folks we're talking to isn't around added either capabilities, geographic expansion or just pure assets in and around E-Infrastructure.

The next question comes from Noah Levitz at William Blair.

To start off on the Transportation side, has there been any impact from the government shutdown on Transportation funding? And you've also mentioned in the past about a potential successor bill to the IIJA. Can you give any update as to -- do you still think that's moving along? Should it be bigger? Anything you can add there.

Yes. So first, no impacts from government shutdown. The funding that's on these jobs has already been allocated. It's out there. So no impact at all on that. That's not to say there may be some grant projects or grant programs that somebody has out there, they could be delayed. Good news is, I'm not aware that we have anything tied to that. I haven't heard a single word from our business units in a few or so, not an issue there.

On the next bill, the existing bill ends at the end of September of 2026. I will say that I was with the DC team. It's probably been 4 weeks ago now or 5. Things have been progressing very well. I always use the caveat, it is DC, and it is the government, and we can see the functions or dysfunctions of things. But they're probably 6 months ahead of where they have been historically. And I'm optimistic that something will happen in a timely manner.

However, keep in mind that why we are not losing any sleep over this is we will go into September with roughly 2 years of backlog. Second, if there is not a resolution or a new bill passed is probably how I should phrase it, they will put an extension in place generally. Or historically, the extensions have been the current kind of spend rates plus an inflation adjustment. So we don't stop. We continue at that.

The thing that does generally happen in that year where there's a gap or that 6 months or whatever time frame it takes to bridge to the new bill is the states tend to do more smaller projects than the big multiyear projects because they're unsure of how much funding they'll have over a multiyear period. But the reality is the world doesn't shut down. Our projects don't stop. The bid activity projects change a little bit.

But what we're seeing, the thing that people don't understand is that there is spending that will continue to take place on this current bill. There's still 2 years of spending left approximately on the current bill that they have to get out before the end. So today, we're anticipating going in with 2 years of backlog, we can go in with more backlog than that, depending on what projects get squeezed into this last, call it, 18 months or less now, I guess it's almost a year until the next.

Great. That's helpful. And then just my last question. You said that data center growth was greater than 125%, which is exceptional, and it comes after last quarter, which was more than doubled. Can you break that down a bit more? Just -- is that growth in existing projects? Is that new projects coming online? Is it the current phases that the work was being done during the quarter being bigger phases? Like...

Yes, it's a combination. I think if you talk to our teams out in the field, one of the things we're most proud about in the quarter isn't the great quarter they had and the results they were able to deliver. But it was really impressive for them to grow total backlog with the burn rates that they have. But some of that is new projects. And the way to look at it is if we didn't get new projects and we just shifted from a future phase to backlog, our total would have decreased, right? So we not only shifted future phase to backlog, but we won enough new projects to offset that burn rate and grow that total backlog.

The next question comes from [ Alex Rigel ] at Texas Capital.

Very nice quarter. A lot of good answers here so far on the call, but I've got a few here, questions for you. Do you generally experience any permitting issues that possibly delay project starts historically?

Well, what I will tell you is -- the permitting process certainly is longer today than it was pre-COVID.and I would have told you, pre-COVID, that it sucked and was really long, okay? It definitely takes longer for permits to happen. But we -- generally, on the site development side, where we see the delay is it from the time we get the contracts to start, it's more waiting to get the contracts. So we know the projects are coming. We know that it's going to -- we're going to win them. But we may not win them in this month and maybe a month later, it may not be this quarter, maybe the next quarter.

We haven't seen historically where we've got equipment ready to go, we're ready -- or on the site and we have delays. So we're fortunate in that where it takes place in our process tends to be before we start. However, I will tell you that from historical numbers, it certainly is -- what used to take 6 weeks for a permit now takes 3 months. Maybe 5 in certain markets.

So that upfront piece is delaying stuff. It's also why some of these mega projects are taking so long to hit the ground, these chip plants. We know they're there. We know they're coming, but they're still going through a lot of the permitting, getting utilities, required permits and everything else, right? So it kind of cascades. So it's definitely a long pole in the tent.

I will tell you -- and I have told everybody this. If the U.S. wants to accelerate onshoring, reshoring chip plants, whatever it is out of build, if they can get through the regulatory and permitting issues, it would speed up these projects and spending and funding exponentially.

And then within Building Solutions, are you seeing any signs of green shoots?

I'm sorry. Say that again?

Within Building Solutions, are you seeing any signs that 2026 could start to improve again?

No. I think we don't believe, honestly, that anything would happen until the second half of '26 at the earliest. Certainly, interest rates continue to creep down, builders have a lot of programs in place. We have not seen -- we've flattened, okay? It's not getting worse. That's the good news. But we have not seen anything that would tell us we're going to see an uptick here anytime soon.

Thank you. We have no further questions. I will turn the call back over to Joe Cutillo for closing comments.

Thank you. Thanks again, everybody, for joining today's call. If you have any further follow-up questions or would like to set up a call, please contact Noelle Dilts. Or if -- contact information is in our earnings release. I hope everybody has a great day, and I appreciate you taking the time. Thanks.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask you that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Second Quarter Webcast and Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 5, 2025.

I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2025 Second Quarter Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer; and Nick Grindstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and guidance. after which Joe will provide a market and full year outlook. We will then open the call up for questions.

As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full year 2025 financial guidance. Before turning the call over to Joe, I will read the safe harbor statement.

The 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 obligations to update forward-looking statements as a result of new information, future events or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted EPS on this call, which are all financial measures not recognized under U.S. GAAP.

As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting of our RHB JV, unless otherwise noted. As a reminder, at year-end 2024, there was a change in the accounting treatment for the JV such that we no longer consolidate revenue and backlog, but it does not change our share of EBITDA that we recognize from the JV. Our press release and filings also include a reconciliation of these adjustments.

All comparisons are to the prior year quarter unless otherwise noted. Please also note that our guidance does not include any contributions from the previously announced planned acquisition of CEC Facilities Group, which has not yet closed.

I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining today's call. I'm excited to talk about another great performance by the Sterling team as we continue to drive bottom line growth at a rate roughly double top line growth. Revenue grew 21% in the quarter, fueled by growth of over 29% in our E-Infrastructure Solutions segment and 24% in our Transportation segment.

We grew adjusted earnings per share by 41% to $2.69 and delivered adjusted EBITDA of $126 million, an increase of 35%. Our gross profit margin expanded 400 basis points from the prior year to reach 23.3%. Additionally, operating cash flow generation in the quarter was again very strong at $85 million.

Looking to the future, we remain extremely positive on our outlook. We are in the markets and geographies that we believe have strong sustainable growth that will continue over the next several years. We will further build upon the strong base we have established and remain focused on pursuing the most attractive and highest return opportunities.

Our backlog position and visibility support our confidence in the future. Backlog at the end of the quarter totaled $2 billion, a 24% year-over-year increase. E-Infrastructure Solutions backlog of $1.2 billion was up a very strong 44%.

Our multiyear visibility is further supported by our pipeline of future phase opportunities tied to our current projects, which remain at approximately $0.75 billion. When you take both our signed backlog and future phase work, we have visibility into a pool of E-Infrastructure revenue approaching $2 billion.

Adding to our excitement is our previously announced agreement to acquire CEC Facilities Group. CEC will add mission-critical electrical and mechanical services to the Sterling portfolio. Combined with our best-in-class site development capabilities, this addition will allow us to deliver higher value end-to-end E-Infrastructure solutions to our customers. We believe that this service combination will allow us to capture even more value across the full life cycle of a facility, accelerate project time lines, create stickier customer relationships and expand our geographic footprint.

The Sterling Way, which is our commitment to take care of our people, our environment, our investors and our communities, while we work to build America's infrastructure remains our guiding principle as we execute our strategy and grow the company.

Now I'd like to discuss our segment results in more details. In E-Infrastructure, second quarter revenue grew 29% over prior year and over 42% sequentially. The data center market was again the primary growth driver in the quarter as revenue from this market more than doubled year-over-year.

Adjusted segment operating income grew 57% and adjusted operating margins reached 28% and an increase of over 500 basis points. This was driven by our continued shift towards large mission-critical projects, including data centers, where our superior project management and ability to finish jobs on or ahead of schedule are extremely valuable to our customers. Mission-critical data centers and manufacturing work continues to represent the vast majority of our E-Infrastructure backlog. However, we saw very strong growth in e-commerce distribution backlog in the quarter.

Moving to Transportation Solutions. Second quarter revenue grew 24% and adjusted operating profit grew 78%, driven by strong market demand and the benefit of mix shift towards higher margin services. We ended the quarter with Transportation Solutions backlog of $715 million, a 5% year-over-year increase. Sequentially, segment backlog declined 17%, which reflects the strong revenue burn in the quarter, combined with the seasonally slower awards in the second quarter, which has historically been the low point of the year. Additionally, the wind down of our Texas low-bid heavy highway operation will impact backlog, but ultimately benefit segment margins.

Shifting to Building Solutions. In the second quarter, segment revenue declined 1% and adjusted operating income declined 28%. Adjusted operating margins in the quarter were 11%. Overall demand for homes has been impacted as potential buyers struggle with affordability challenges. Revenue from our legacy residential business declined 11% driven by softness in the overall housing market.

Even with these headwinds in Building Solutions, the strength of Sterling's diversified portfolio and strategy to focus on growth in high-margin end markets enabled us to deliver another record quarter.

With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and full year guidance. Nick?

Thanks, Joe, and good morning. First, I would like to say that I'm excited about joining the Sterling team. This is a really great time for the company, and I'm looking forward to helping guide our financial strategy as we continue to grow.

Now I'll shift to our consolidated backlog metrics. Our second quarter backlog totaled $2.01 billion, a 23.8% increase from the prior year second quarter. We closed the quarter with combined backlog of $2.25 billion, which was up 17.6% from 2Q '24 and up slightly sequentially. Second quarter 2025 book-to-burn ratios were 0.77x for backlog and 1.03x for combined backlog. Year-to-date book-to-burn ratios were 1.36x for backlog and 1.47x for combined backlog.

Moving to our cash flow metrics. Cash flow from operating activities for the first 6 months of 2025 was a strong $170.3 million compared to $170.6 million in prior year period. Cash flow used in investing activities for the first 6 months of 2025 included $28.6 million of net CapEx and $37.9 million for acquisitions, including Drake Concrete. Year-to-date cash flow from financing activities was a $68.7 million outflow, primarily driven by first quarter share repurchases of $43.8 million at an average price of $128.98 per share. We did not repurchase any additional shares in the second quarter. The remaining availability under the existing repurchase authorization is $85.6 million. We are in great shape from a balance sheet perspective.

During the quarter, we announced an amendment to our 2019 credit agreement that extended the maturity of the credit facility to June 2028, expanded the size of the facility, improved rates and provided additional flexibility. We ended the quarter with a very strong liquidity position, consisting of $699.4 million of cash and debt of $298.2 million for a cash net of debt balance of $401.2 million. At close, the CEC transaction is expected to utilize $450 million of cash on hand. Our $150 million revolving credit facility remained undrawn during the period.

Now I'd like to discuss our guidance. As we look ahead to the remainder of 2025, the strong tailwinds behind our business position us for another record year at Sterling. We are increasing our guidance ranges to revenue of $2.1 billion to $2.15 billion which is a slight increase at the midpoint relative to our previous guidance range, net income of $243 million to $252 million, diluted EPS of $7.87 to $8.13, adjusted diluted EPS of $9.21 to $9.47. This represents an 8% increase at the midpoint of our previous guidance range.

EBITDA of $406 million to $421 million, adjusted EBITDA of $438 million to $453 million. This represents a 6% increase at the midpoint of our previous guidance range. Please note that our guidance does not include any contribution from CEC as we continue to work towards closing. Our expectations for CEC's full year performance are unchanged.

From a financial standpoint, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead.

Now I will turn the call back to Joe.

Thanks, Nick. As we look to the future, we remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities and discussion with our customers contribute to our confidence.

In the E-Infrastructure Solutions, we anticipate that the current strength in data center demand will continue for the foreseeable future. Our customers are discussing multiyear capital deployment plans and are focused on how to align with the right partners to support these plans. We are getting pulled into new geographies by our customers. including Texas, and believe that the pending CEC acquisition will only accelerate our footprint expansion.

In the manufacturing market, we're seeing a fairly steady pace of activity in 2025. As we look out to 2026 and 2027, there remains a very big pool of mega projects on the horizon. This would include planned semiconductor fabrication facilities. Given the complexity involved with the development, we believe it will take some time before awards start to flow. The e-commerce market has strengthened significantly in 2025. We have built a sizable level of backlog and believe we could see additional awards in the back half of the year.

Together, these dynamics support strong growth opportunities over a multiyear period. For 2025, we expect to deliver E-Infrastructure revenue growth of 18% to 20% and adjusted operating profit margins in the mid- to high 20% range as compared to 23.7% in 2024.

In Transportation Solutions, we are approaching the final year of the current federal funding cycle, which concludes in September of 2026. We have built over 2 years of backlog and continue to see good levels of bid activity. For 2025, we anticipate continued growth in our core Rocky Mountain and Arizona markets. The downsizing of our low bid heavy highway business in Texas is progressing according to plan resulting in some moderation of Transportation Solutions top line and backlog, but should drive meaningful margin improvements as we move through the year. We now expect Transportation Solutions revenue growth to be in the low to mid-teens on an adjusted basis for 2025. We forecast adjusted operating profit margins in the low teens compared to 9.6% in 2024.

In Building Solutions, we continue to believe the business is well positioned for growth over a multiyear period. Our key geographies of Dallas-Fort Worth, Houston and Phoenix are expected to see continued population growth driving new home demand. Additionally, there is a significant opportunity for share gain in Houston and Phoenix. In the near term, we are anticipating a continuation of soft market conditions driven by the affordability challenges.

For full year Building Solutions revenue, we forecast a mid- to high single-digit decline. We anticipate adjusted operating margins in the low double digits as compared to 14.8% in 2024. On the acquisition front, closing the CEC transaction is the top priority, but we are continuing to look for small to midsized acquisitions that are the right strategic fit to enhance our service offering and geographic footprint. The midpoints of our increased 2025 guidance ranges would represent 13% revenue growth as adjusted for RHB, 32% adjusted EPS growth and 30% adjusted EBITDA growth.

With that, I'd like to turn it over for questions.

[Operator Instructions] The first question comes from Louis Dipalma at William Blair.

One of the big trends coming out of earnings season thus far has been the major increases in CapEx from the data center hyperscalers. Investors are wondering is a significant portion of these projects expected to land in your core markets? And in the past, you've provided a qualitative color on the data center book-to-burn. Is it fair to assume that the book-to-burn remained above the 1x level?

Yes. So let me start with the first one. We think we're positioned extremely well for a large percentage of the data center capital that's coming out. As we talked about on the call, we are very actively looking at expanding into Texas. We see some very nice opportunities there.

And as we go into 2026 and 2027, we'll start looking to expand up into the Northwest. We think there's going to be some sizable projects based on talking to our customers out in those future years up in the mid -- sorry, Midwest or upper West, Northwest market by geography straight here this morning. So yes, I think we're positioned extremely well today. And I will tell you, from a strategic planning standpoint and what we're working on, we are following those customers into some new markets.

On the data center front, we saw very good bookings again in the quarter. Data centers are now 62% of our total backlog and E-Infrastructure. And that's up a couple of points, but it's even more impressive when you look at the growth of our e-commerce distribution businesses in the quarter. We were up almost 700% in the quarter for backlog in e-commerce.

Great. And related to those comments in terms of expansion into Texas and the Northwest, do you need any additional acquisitions for that to happen? Or is the general blueprint to expand organically.

Yes. I think we'll do both. We've got very nice reach out of Utah. We almost touch some of the far Northwest markets out of our Utah business today. So it's another few hundred miles for us to go. But we're also looking at potential acquisitions in those markets. Similarly with Texas, believe it or not, West Texas is much closer to our Utah operation that people realize with the size of Texas. So we can strike and do work in West Texas and we've bid work and won work all the way over to kind of the Dallas, Oklahoma region.

So we have the ability to do that organically. But long term, we either need to establish a beachhead in Texas and up in the Northwest. So we're not traveling quite as far or make an acquisition. So the bottom line is we're looking at both.

Great. And are there any expectations in terms of the timing in terms of how long will it take for Sterling to start winning like large jobs in the Texas and Northwest markets as you already have customer relationships, but how long will it take to hire than necessary workforce?

Yes. I think the Northwest is further out. The projects haven't come there, they're future projects. So we're, I'll call it, preplanning 12 to 18 months before those projects start to get released. But in Texas, I'd be disappointed if we didn't have some wins for the end of this year with the bid activity that we're seeing and what we're being asked to put project plans together for.

So we're excited about the Texas market that will only accelerate with bringing on CEC once we can start talking to customers jointly. I think we're going to see some very nice not only opportunities, but some very nice wins in Texas. Similarly, I don't think it's going to be very long before we start pulling them into the Southeast more and more with our existing customer base.

The next question comes from Brent Thielman at D.A. Davidson.

Great quarter. Joe, maybe just sticking on the infrastructure, especially the margins just continue to surpass expectations here. Could you talk about how these mission-critical projects continue to evolve for you? Maybe just comparing the work you're doing today relative to the work that you're adding to backlog now. Maybe how that or other factors give you conviction just in sustaining or even expanding out these obviously, really impressive margins?

Yes. We -- just to be clear, we believe very strongly with the backlog we have, the future phases we have and the projects we have on the books, we will continue to expand margins. I can tell you that.

The thing that we really like that's going on as we talk -- let's not talk about what we have in backlog today, but projects that are coming out because again, I'm very confident that we'll continue to expand the margins with what we have. But as power becomes more and more of a limiting factor, we are continuing to see these sites become larger and larger with more phases.

And if you remember, we are able to drive productivity through those future phases. So the bigger it is, the more phases there are, the more upside we have for margin throughout the course of the project. So the first site in it's happening in Texas, where they're putting self-contained power related to some mini nukes is getting ready to become underway. As we look at some of the future sites even up in the Northwest, our customers are talking about 1,000-plus acre sites, and that's driven by this power.

So we really like, obviously, the larger, the more phases, the more complex and power is driving that. As soon as they start putting self-contained power on, it's just more economical for them to make the sites larger. If you're going to go self-contained, whether it's gas or nuclear or anything else, it doesn't matter the incremental cost to grow that data campus 40% or 50% isn't doubling the power cost or input. So that's what's really driving that.

As we talk about some of the mega projects out there even bigger than these around the chip plants and those sort of things. Again, the premise is the exact same. It doesn't matter the end customer. It's how complex and how many phases are on there, which gives us a great opportunity to drive that productivity from 1 phase to the other.

Okay. That's great color, Joe. I appreciate that. The -- maybe just the status of the were -- I guess, the e-commerce opportunities, which seem to be reemerging in the segment. When did those start to become kind of more accretive the bottom line to the segment, Joe. Do you start executing on those now? Or is this really more of a 2026 event?

Yes. We're in some of the early phases on a couple of these. Several of them will start in the back half of this year and go into 2026. And we think the bid activity will continue through 2026. We had told everybody, this is back in 2023 that Amazon sitting down with some of their key executives at the time had told us that their program would start back up in 2025, We saw our first bid and activity take place in the fourth quarter at 24%, which was exciting. We anticipated 2 to 3 projects in total in 2025 that would fall into our footprint.

I think we'll end up by the end of this year having 7, 8, maybe even 9 of these projects. That's the good news. The better news is these projects based on what they're building, they're building a bigger warehouse than they have historically done. There are 4 stories, but it's 90-foot tall. The size and scope of these projects compared to our historicals are almost 2x the amount of revenue per project. so that makes it even better for us. So you put all those together, we'll have very nice margins on those, and it's a nice additional tailwind in on top of data centers and manufacturing and everything else that we're seeing.

Well, maybe at least on one of the tougher areas right now just on Building Solutions. Obviously, you've got some more challenging end market dynamics there. Maybe also, I'm guessing some poor weather here in the quarter, I know you didn't call out, but I will -- what is the kind of implied organic for the segment going into the second half, Joe, to the extent that you're getting any other feedback from customers or maybe good guys of that story? It'd be interesting to hear as well.

Yes. I mean that's certainly the headwind that we have. I think on a positive front, we're going to remain pretty focused on what can we do to maintain margins there. I think we'll see for the year, we'll see double-digit operating income in that even being down double digits on the revenue front.

Here's the bottom line. That market certainly is softer than we would like. The second quarter was slightly softer than what we saw than the first. We think we're close to bottom on it and will continue through the back half of the year. And the biggest thing for us is how do we maintain pricing and margins on the work that we have.

Now the good news is with the model that we have, -- you talked about our labor is highly our labor is all subcontracted. So if volume decreases, we eliminate labor. If it increases, we bring them back. We've continued to see price decreases on material. So that certainly has helped. We don't see any major increases coming forward on the material front, so that will continue to help us.

On a positive front, we have not seen the developers for our big customers slow down on their land development, which tells us they are optimistic with the pent-up demand out there, Once interest rates start to drop once the cost starts coming down for a customer in total, that this thing will take off very quickly. So we're kind of fighting the battle. We think organically, through the back half of the year, it will be down kind of low to mid-teens for the back half. But we get some interest rate drops and a couple of positive things. Maybe we could see a strong fourth quarter.

We're not betting on it though. We don't have any of that in our numbers. If anything, I think we're probably very conservative in our forecast versus what we anticipate happening.

The next question comes from Julio Romero at Sidoti.

Joe, Nick and Noelle, maybe staying on infrastructure for a little bit. As these infrastructure projects that you talked about, Joe, down the pipe get larger and larger and become more complex. There's only as far as I know on sterling out there, is it fair to say that the value they place on your reliability to keep the project on time rises with that complexity? And then what's your level of confidence in securing better pricing that reflects that value premium?

Yes. It's certainly the more complex, the more risk they have, which helps us, right, our certainty is a critical thing. On pricing, again, we get a slight premium maybe we should get more of a premium. But our goal isn't to take advantage of the situation. It's really to be fair on pricing, loyal to our customers that are loyal to us and make it up on the productivity side. And as these projects get bigger, we will continue to make margins on the productivity side.

And strategically, we feel like that enables us to limit people wanting to enter the market and take the risk it limits the customers wanting to take the risk because our prices upfront are at Regis and it puts the onus on us to do what we do best and that's execute, integrate new technologies and drive ways that improve our profitability.

And it's -- let's talk a little bit about CEC and about some of the upfront stuff, it was really interesting. We just had our management meeting, our quarterly management meeting last week, and we were having our plateau team explained to our other businesses how valuable the small acquisition we made on dry utilities has been and how fast it's growing and where CEC will come into play.

And to put it in perspective, on a data center, we talk about time being critical. And we talk about how we believe we could take out months of time. Interestingly enough, we're working on data centers now that we pulled our dry utility business into that we actually have all the dry utilities in, dug, put in, concrete board, finished before the electrician is even selected for the project.

You think about that. Think of how much time that can pick up and think of how much productivity that could pick up. As I said, I think on the last call, we're seeing 40% improvement on profitability in that business because of the productivity we can drive and do things simultaneously. Now what's exciting in that meeting, we started talking about some other opportunities for us is our Building Solutions business is down. We have traveling crews from our commercial side that can do concrete work. We're starting to look at using those crews in infrastructure to do that concrete work of those DUC banks. The margins on it are even better than our Building Solutions margins, and it's another complement that we can add to the customer. and it takes time out of the process, right?

So this is the thing that we're constantly looking at and we're constantly kind of driving. And when you focus on margins, it's amazing how your different business units can come together and come up with ideas that we wouldn't even have to drive margins higher, leverage capacity and leverage what we do.

Great answer. Really helpful there. And then -- you touched on it a little bit as data center CapEx and manufacturing CapEx as that opportunity increases. Can you speak a little bit to the competitive environment? Are you seeing any new entrants kind of trying to do what you do? And then Also, could you speak to your competitive positioning a little bit more relative to those potential new entrants? And how the tuck-ins like CEC kind of help you stand out?

Yes. Yes. So I mean, we'll always see people pop up here and there. And as I remind people that in the Southeast, there were 2 or 3 metas that were started by someone else. I would tell you, we finished all of those meta projects. So occasionally, someone comes in and tries to make a jump at it. Our biggest competitor, candidly, is local content. If we have a local entity, whether that's a county or a state require it could be a local contractor that's licensed there. It could be a minimum amount of local labor on a particular job. That's where we run into the biggest challenge, right? That's where we out.

But that's kind of the dynamic today. As we look forward, with CEC and continue to add electrical and mechanical capabilities, again, cost is always critical to customers, but speed is the most important thing. And by integrating these businesses together, we really believe we could take months out of the development of this project in months out of the total cycle time to build these. And that value to the customer in that certainty that customer for the small premium that we charge is well worth that in return.

Now what does that do to the competition? If we're offering both of those and the time reduction, and you have one of those you're kind of on the outside looking in. The only thing you can try to compete with is price. And we don't compete with price. We don't gouge but at the same time, we want a fair price and we feel we can add more value to that. So we think the CEC add just is another barrier to entry on the site development side, and we think ultimately will help on the electrical side, pull them into more projects.

Makes sense. Last one for me, if I could. Just what's your best guess of when CEC closes? And if you could just touch on the pipeline to maybe add more tuck-ins over the near to medium term.

Yes. We're certainly -- we're building a list of potential candidates. I can tell you where we want to focus strategically. We certainly like geographic expansions into the Southeast further. And then we'll look at as we go up to the Northwest, how do we continue to expand. They're currently in Utah with us right now. We're working on a job together in Wyoming. So they've shown the capabilities to expand where we are.

So geographically, Southeast and kind of moving towards that Northwest. From a skill set and capabilities, they've got a nice modular operation up in Dallas. I think there's other things from a modular capability that we can add, again, taking out time and reducing the pressure on a lot of labor on these sites, right? Those are always great things.

And then the other piece that is really critical as we think long term, in controlling and having the total life cycle of these facilities that are being built is further service capabilities once the facilities are built and what can we add and keep people at those locations for a long period of time.

On the closing front, making good progress. We're to the point now where we're really through all of the main things. We're waiting for states to bring back licenses and permits fundamentally. We're through everything else. So as you can imagine, we like that to be done. We would like that to have been done before today so we could talk about it and all that stuff. But whenever you're dealing with state licensing and permit agencies, it never happens as fast as you want. We've got everything submitted. And some have progressed. We're through probably 65%, 70% of those right now and are waiting to get through the rest. So progressing well, never as fast as you want, but we don't see any major hangups. -- it's just really getting, I call it through the process and the time of state and local agencies at this point.

Thank you. The next question comes from Adam Thalhimer at Thompson Davis.

Congrats on the strong quarter. And Nick, welcome to the call. .

Thanks.

Joe, can you comment on. So in the E-Infrasture business, at one point last year, we were talking about small fill-in projects. And I guess the question is, are we at the point where you're able to just better manage the mega projects, the finish dates and the start dates on the next one. Yes, you're just doing a better management .

Yes. We certainly are getting -- we continue to get better at managing that. The other thing that's really it's comical we joke about internally, it's fantastic for us. Historically, we've talked about filling projects being kind of $3 million to $10 million projects.

Right now, our guys call the e-commerce distribution projects, which are anywhere from $40 million to $90 million, they're fill-in projects, right? That's kind of how the size and scope of the business has changed. So they've helped and they will continue to help as they're coming on, be some of that fill in.

We're still -- we still would like to see a higher amount of the, what I call the $5 million to $10 million projects that are very quick for us that we can fill in and be more effective and more efficient. It's why in the fourth quarter last year, while we did get some of the fill-in projects, everybody expected our margins to go down and they went up, right? So those underutilized assets and capabilities that we have.

Now the good news is in the Southeast, our assets are certainly more utilized than they were last year. I won't say they're full. We can always add more but they're significantly fuller and we're seeing some of the increased margin associated with that. In the Northeast, we haven't seen the rebound nearly as much. However, what is very encouraging is several of these e-commerce distribution jobs that we're winning and are coming out in the back half of this year are in the Northeast, along with a couple of very nice sizable projects that should kick off towards the end of this year, first quarter of next year, hopefully, we have those tied up in the next quarter. We feel very confident on winning those. So I think we're going to see a really nice rebound of the Northeast as we start fourth quarter and first quarter next year, which is only going to help drive those margins up further.

And is it too early...

Adam it's really nice sitting at the margins we have, knowing they're going up. It's a very comfortable spot right now. .

I'm sure. Is it too early to start talking about the infrastructure top line expectations in '26?

Yes, a little bit. And the reason is there's a lot of stuff in the back half of this year that was coming. So I don't want to get over my skis 1 way or the other. -- but it's going up. It's not coming down. So I'm confident on that. It's just how much.

And then just a quick -- some time I'm actually just confused about in the transportation segment as your transportation subsidiaries start to do more E-Infrastructure work, how does that impact the reported results in transportation Solutions?

Yes. So it's not -- so none of that work goes into transportation, it all hits infrastructure. So the margin improvement that we're seeing in transportation is pure transportation margin improvement. What it's going to do is as we allocate more and more assets towards the E-Infrasture, it will slow down our revenue growth in Transportation. They slow down our backlog growth in transportation, but that's a good thing. We're swapping $3 for $1 of earnings. So we will continue to look at doing that.

Now if transportation margins are good enough, we'll add capacity for that, and we'll do both. But my first kind of desire is get a higher return on the people and equipment that we have today. And if that shifts from 1 segment to another, that's just okay.

Thank you. We have no further questions at this time. I will turn the call back over to Joe Cutillo closing comments.

Great. I want to thank everybody again for joining today's call. If you have any follow-up questions, please reach out to Noelle Dilts. Her contact information can be found in the press release, and I hope everybody has a great day. Thank you. .

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Agreement to acquire CEC Facilities Group Webcast and Conference Call. [Operator Instructions] This call is being recorded on Tuesday, June 17, 2025.

I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Thank you, Joanna, and good morning to everyone joining us. I'm pleased to be here today with Joe Cutillo, Sterling's Chief Executive Officer; and Ron Ballschmiede, Sterling's Chief Financial Officer, to discuss our agreement to acquire CEC Facility Services, LLC, which we will refer to as CEC today. We announced that this morning.

Before we begin, please note that today's call contains forward-looking statements intended to fall within the safe harbor provided under the securities laws. Factors that could cause results to differ materially from what we discuss today are described in the Risk Factors section of Sterling's SEC filings including its annual report on Form 10-K for the year ended December 31, 2024, and its other SEC filings as well as today's press release and slide deck. Also note that management may reference financial measures not recognized under U.S. GAAP.

I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone. Over the last year or so, we've discussed the strategic rationale of adding electrical and mechanical services to our E-Infrastructure segment and the value we believe it would bring to our core customers. During that time, we looked at multiple businesses, but were unable to find the right one.

Today, I'm excited to let you know, we have found that business and have signed a definitive agreement to acquire CEC Facility Services, a leading nonunion electrical contractor focused on high-growth, mission-critical end markets. CEC is headquartered in Irving, Texas and provides design, installation and maintenance services for complex electrical infrastructure across high-growth sectors. We are excited to welcome their outstanding team to the Sterling family.

We've been disciplined in our search for the right electrical or mechanical contractor to complement our infrastructure E-Infrastructure. We wanted to make sure that the business had significant exposure to mission-critical markets like data centers, semiconductors and manufacturing, had high margins and strong free cash flow, a great entrepreneurial management team, a scaled platform with opportunity to grow and, most importantly, a culture aligned with ours. CEC is a very strong fit with these characteristics and checks every box.

As we look at the combined service portfolio of Sterling and CEC, we begin to touch the full project life cycle. Within our E-Infrastructure business, Sterling is typically engaged at the earliest phases of large-scale mission-critical construction projects. This early involvement gives us valuable visibility into our customers' project pipeline. Based on the strength we're seeing in the data center market, we believe there's an opportunity for strong, durable growth for many years to come.

Additionally, the semiconductor and manufacturing markets should continue to strengthen into the later part of the decade. We're already delivering the earthwork and much of the underground infrastructure, including duct banks and conduit for these mission-critical sites. With CEC, we can now own the next critical phase of pulling wire, installing power systems and supporting long-term maintenance and service. Together, our combined capabilities allow us to deliver high-value end-to-end E-Infrastructure services. This combination will improve project execution, accelerate project time lines, create even stickier customer relationships and allow us to better capture value across the full life cycle of a facility.

In terms of the structure of the transaction, the total upfront considerations at closings totaled $505 million, consisting of $450 million in cash and $55 million in Sterling common stock. This represents a 9.6x multiple at the midpoint of CEC's 2025 estimated EBITDA range. Additionally, the company has an earn-out. Contingent upon achieving certain operating income levels through December 31, 2029. Our current timing expectations suggests that the deal will close in the third quarter for about 5 months of contribution to Sterling. The Hart-Scott-Rodino review is currently underway.

Now I'd like to give you a little more detail on why CEC is such a good fit. One of the first things that drew us to CEC is that over 80% of sales are from mission-critical markets, including semiconductors, data centers and advanced manufacturing. CEC's customers in these markets include Texas Instruments, Samsung, Intel and Meta. All these customers demand excellent execution and service, which CEC delivers. We believe their ability to consistently deliver superior service to their customers is a key element in CEC's top-tier financial performance.

Strategically, we believe we can leverage the strengths across the business to unlock new customer relationships and drive geographic expansion. Sterling brings the strength of data centers. We can pull CEC into those relationships. CEC brings depth in semiconductors. They can help expand our reach into that market. From a geographic perspective, CEC is strongest in Texas with reach across the Rocky Mountain, Southwest and Southeast regions.

We believe that we can pull CEC into some of our projects in the Southeast, while CEC can help provide a springboard for growth in Texas. In addition to new construction, CEC brings recurring service revenue capabilities, including maintenance, retrofits and system upgrades allowing Sterling to stay engaged throughout the asset life cycle.

Further, CEC's advanced in-house training center CEC University and modular fabrication capabilities are impressive differentiators that enhance safety, quality and efficiency and reduce build times. As I've said many times before, the most important part of any acquisition is the people. The team shares our values of safety, quality and commitment to excellence.

Ray Waddell, CEC's Founder, built this business from the ground up. We are pleased to announce that Ray will remain with Sterling in a strategic leadership role overseeing the success of CEC and helping drive growth and strategy across our new electrical platform. Daniel Williams, who has served as CEC CEO, will continue to lead the organization.

Shifting to the financial profile, CEC has top-tier performance within the electrical contractor space, a testament to the strong customer relationship and execution. CEC has a long track record of growth, which we're expecting to continue into 2025 and beyond. Margins that are well above the industry average, strong cash flow conversion, driven by a capital-light model and a high-return business with excellent return on invested capital.

Moving to backlog. We see robust tailwinds continuing across CEC's key markets, giving us high confidence in the strength of the pipeline and long-term demand outlook. The combined value of CEC's contracted backlog unsigned backlog and future phase opportunities is approximately 1.9x their 2025 revenue expectations, reinforcing our conviction.

Our expectations for full year 2025 CEC results include revenues of approximately $390 million to $415 million, which represents a 12% year-over-year growth at the midpoint. EBITDA of $51 million to $54 million, a 13% margin. Adjusted EPS accretion of approximately $0.63 to $0.70, per fully diluted share on an annualized basis, which represents roughly an 8% increase to Sterling's 2025 adjusted EPS guidance. The portion of CEC's revenue and earnings contribution to Sterling in 2025 will depend upon the timing of the closing. This acquisition marks a major step forward in Sterling's E-Infrastructure strategy.

It expands our reach, deepens our capabilities and positions us to better serve the high-growth, high-demand sectors shaping our economy. We're thrilled to welcome the CEC team to Sterling, and we're confident that together we'll deliver even greater value for our customers, our people, and our shareholders.

With that, I'd like to open it up for questions.

[Operator Instructions] The first question comes from Adam Thalhimer at Thompson, Davis.

Congrats on closing the deal. Joe, can you give a little more detail on how much of the business is based in Texas and how you see that changing moving forward?

Yes, a little -- over half of the business is based in Texas, but we've seen rapid expansion with them, especially in the data center space, reaching out into the Rocky Mountains in -- down in the Southeast. So what's interesting to us is their kind of expansion is following where we're expanding.

As you recall, we expanded into the Rocky Mountains a little over a year ago with data centers. We're currently actually working on a data center in Wyoming with CEC and down into the Southeast is obviously growing very rapidly. So they've expanded into there. And we think it's a great opportunity. We can further that expansion much more rapidly through the Southeast and leverage both those teams and maybe some facilities and assets in the Rocky Mountains for both of us to expand faster.

Okay. So you guys are -- you guys actually have experience working together. That's interesting. Are you thinking that this will go into the e-infrastructure segment? Or do you see this being a stand-alone segment in the financials?

Yes. So it will go into e-infrastructure. Now we will drive the electrical and mechanical platform to expand that strategically so that would go beyond just the infrastructure. We're not going to limit it to that area, but it will fall under our e-infrastructure segment.

Okay. And just lastly, what were the actual amount of shares issued for the deal for modeling purpose?

I don't have the exact number. It's off a 20-day average, trailing 20-day average, which is a little over $190 a share. So we can back into the math on that.

The next question comes from Louie DiPalma at William Blair.

Congrats on the deal. It seems there are significant cross-selling opportunities. Joe, can you provide more color on your comment about Sterling being able to use CEC's Texas presence as a springboard to expand your e-infrastructure business in Texas?

Yes. I mean CEC has a very strong presence in Texas. There's obviously a lot of projects, both in data center and in the semiconductor space, either taking place or coming up. We think we can certainly leverage some of the relationships in the semiconductor space to build those relationships back with us.

And as we've talked about, we're actually getting ready and looking at incremental jobs within Texas in the data center space and doing that from today from either Utah or Atlanta. With their presence and their footprint, this may help us expand that not only from afar, but also from an organic standpoint with the beachhead in Texas, Louie. So we're leveraging both customers, existing customers, they're leveraging can leverage our customers.

We'll start from a distance, but it would just help us drive that ability to either put an organic beachhead here. We're still looking for acquisitions in Texas. We just haven't found anybody of size or the right one to do that.

Great. And I know you just hired a new CFO, but from your perspective, how do you think of CEC's margins at 13%? Do you see any ability to drive those margins higher as you -- for data center customers and semiconductor customers, you bundle the electric and mechanical work with your other services?

Yes. Well, anybody that's followed us knows we're very good at continuing to drive margins higher and higher, and we will work on the same thing with CEC. We feel very confident in the data center space. If we can couple the electrical with the site development and do it all at the same time, instead of these are done in series instead of in parallel, that not only takes a significant amount more time for the customer, but it also costs a lot more because you're doing several of the operations, the same operations multiple times.

So we think that we can drive productivity, improve margins and actually take out significant time in the overall project time line. That's the value proposition to the customer at the end of the day. It's easier for them. It's more efficient. They save another month to 2 months of build time. It's of high value.

The next question comes from Brent Thielman at D.A. Davidson.

Congrats on the transaction. Joe, I want to follow up just on the revenue synergy discussion, how advanced are those conversations with some of those customers and their respective footprints just in terms of pulling one another into those territories where maybe there isn't critical mass in revenue. And I think what I'm getting at, Joe is, is this something that we can see leveraged relatively quickly?

Well, we haven't been able to talk to the outside world about CEC, obviously, but we have talked to our customers about the value of adding electrical mechanical to the portfolio and we've had high receptivity. As you may recall, we did a really small acquisition here last -- about 6 months ago that does the dry conduit dry utilities, I should say in data centers, and we were very -- we were able to rapidly move those into existing contracts. This package will take a little bit longer, Brent, from a standpoint that they would go into next generation of builds or new builds coming up. It's not something we would be able to replace like the dry utilities and existing work that we're doing.

Maybe we get lucky and something like that happens, but we're not planning on that. So what we're working on and we'll be working on very quickly is matching the teams up and getting into the 2026 build schedule and how do we start leveraging that for expanded growth.

Okay. And then it looks like -- I mean, it's coming with the backlog, I guess we're approaching midyear here. Maybe you could just talk about the level of visibility for the business out into 2026 as we sit here today.

Yes. So what we talk about the business is their backlog is very much like ours. It falls into 3 categories. Obviously, the signed backlog that's in and that projects they're actively working on beyond their WIP schedules today. They've got what I will call one where there's an LOI or some sort of commitment, but the contracts aren't signed. There's a small piece of that that's in there, but they also have the same future phase work that we have, which is their on-site doing work. The entire project hasn't been released to them. They're getting it released in segments and then they continue on.

And the piece we haven't really talked about a lot that we're also excited about is the ongoing maintenance that takes place after these facilities are built and getting into that service recurring revenue side how do we continue to drive that grow that and do more. But they've got very good visibility for the rest of this year, very good visibility into '26 in the project pipeline that's coming out for the remainder of '25 into '26 looks extremely positive for them at this point in time.

And I guess just the last one. I mean, this seems to be a platform to build off of within this sort of mix of services. Joe, I'm presuming they may come with their own M&A pipeline to the table and kind of your thoughts on how you want to approach this over the next few years in terms of this particular vertical?

Yes. No, we -- that's certainly something we've already started looking at, and they have some very good ideas that they've brought to the table. We think we can do multiple tuck-ins over the next 12 months in this space. They're going to be smaller, obviously. And then if the right larger-sized deal is strategic and fits in, we certainly wouldn't be shy of doing that.

But right now, I'd like to get them on board, do a couple of tuck-ins here in the next 6 to 12 months and lever that on a couple of different fronts, geographic expansion potentially along with a couple of more capabilities that we're looking at, and we'll continue to grow out the platform. The earn-out is a pretty substantial earn-out as far as targets to hit. They have to just about double the business. in that time frame, and that team is pretty confident they can do that. And that's without acquisitions, that's organic. So we're excited about the growth projections and the opportunities over the next 3 to 5 years.

The next question comes from Julio Romero of Sidoti & Company.

Congratulations on the deal. We know, Joe, you've had a high bar with regards to acquisitions in terms of the number of deals you've evaluated in the past. So I guess what attracted you to CEC in particular? What did CEC bring from a capability perspective that perhaps are the deals you've looked at perhaps didn't bring to the table?

Yes. So as we've talked, we've looked at a lot of deals in the space. We look at a lot of deals in general. But we've looked at a fair number of deals in the space. And what I've said to others is a lot of the deals we've looked at, it wasn't that they were necessarily bad businesses. It was their customer concentration and service offering. A lot of the electrical mechanical businesses we've looked at are kind of 75%, 80% work in the commercial space and have 5% to 10% in mission-critical. That could be some data centers or some semiconductors or some manufacturing. And what we really like with CEC is their portfolio looks a lot more like ours. They've got well over 50%, close to 80% of their work is in mission-critical space when you start looking at their work in backlog.

And that's the heaviest semiconductor. As I've said, we really wanted somebody with semiconductor experience because that's where we have the weakest relationships, but the demands and needs of a semiconductor facility or the exact as a data center. So that helps us bridge and build those connections to that customer base.

Our strength is in data centers. They've been doing data centers for the last couple of years. It's growing very rapidly. They saw kind of year-over-year growth similar to what we've seen on a percentage basis. And we feel like we can really lever that with the conversations we have had with our customers and their capabilities to expand the data center piece. And the manufacturing is pretty easy. It's pretty straightforward. We'll work collaboratively on that. So we looked at kind of the, I call it, puzzle pieces that fit together and puzzle pieces that don't. They fit very well with our core capabilities, where we're going strategically where they could help us get strategically, where we could help them get strategically. And their financials were as good or better than any that we've seen out there.

So we put it all together and pretty excited about it. And we couple that with they've got a great team of people very entrepreneurial, very excited about what Sterling can help them with and what they can help us with. So it was just -- it's a good fit, good marriage.

Really helpful there. And then, Joe, you mentioned that your customers have been talking to you about adding Electrical to the portfolio for some time now. Does adding CEC help you win more work as these mega projects, and in particular, the semiconductor fab facilities come to market over the, call it, '27 to '29 time frame. And does that full service offering make you a more attractive bidder for those type of projects?

Yes. The way we look at it is the most important thing to our customers are reliability and cycle time, right? They have to know that they can trust their partners to get the job done. And if you can do it faster, you're adding significant value. So we just inherently know that by combining these 2 pieces of business, we can do both of those better. And if we make our customers' lives easier in their projects months shorter in total time to build, we feel like we'll get more work. Or more importantly, we'll pick the work that we want and take the most attractive and the best projects.

Very helpful. And then last one for me would just be on -- you touched on it a little bit earlier, but it looks like service revenue is about 6% of the CEC revenue mix from '24. I think -- I believe that something that's new...

It's close to...

Work on existing facilities, Julio, is about a little -- 19%, so about 20% of backlog, and it's trending higher. So it's a little tough to -- on-demand services, you're right, is more like 6%. But when you start to look at work on existing facilities, it's higher than that.

And strategically, this is important to us because as we look at it, we certainly have a 3- to 5-year good visibility into the build cycle continuing. But we're also realistic that at some point in time, the build cycle will slow down. And we believe the next play there is retrofitting a service program to get you to the retrofit of these facilities for the next generation of technology that then comes in. So this is where we'll be talking more and more about the life cycle of a facility and how we get a bigger piece of that pie. And once we're in, we stay there until something else comes along and takes out the facility.

And does the services piece weigh to any end market in particular?

It's greater today in the semiconductor space, yes.

Great. Well, congrats again.

We have no further questions. I will turn the call back over to Joe Cutillo for closing comments.

Thanks, Joanna. Thanks again, everybody, for joining the call today. If you have any follow-up questions or like to set up follow-up calls, please contact Noelle Dilts. Her information is in the press release. I hope everybody has a great day and as excited about this as we are. Thanks.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.