Sterling Reports Record Fourth Quarter and Full Year 2021 Results

EPS Continues to Outpace Expectations
Delivered Record Full Year Operating Cash Flow
Provides 2022 Full Year Revenue and Net Income Guidance

Sterling Construction Company, Inc. STRL ("Sterling" or the "Company") today announced financial results for the fourth quarter and full year 2021.

Fourth Quarter 2021 Results (as compared to Fourth Quarter 2020)

• Total Revenue of $401.3 million, an increase of 15.6%
• Net Income was $10.9 million, or $0.37 per diluted share, an increase of 87.3%; Adjusted Net Income⁽¹⁾ of $13.9 million or $0.47 per diluted share, an increase of 137.5%
• EBITDA⁽²⁾ of $28.1 million, a decrease of 2.7%; Adjusted EBITDA⁽²⁾ of $32.0 million, an increase of 10.7%
• Cash and Cash Equivalents totaled $81.8 million at December 31, 2021
• Total backlog at December 31, 2021 was $1.49 billion, an increase of 27.0%

For the three months ended December 31, 2021, the Company reported net income of $10.9 million, or $0.37 per diluted share, versus $5.8 million, or $0.20 per diluted share, in the fourth quarter 2020. Revenue increased by 15.6% on a year-over-year basis in the fourth quarter of 2021, supported by broad-based growth across the E-Infrastructure, Building and Transportation solutions segments. EBITDA increased 10.7% to $32.0 million in the fourth quarter of 2021, versus $28.9 million in the prior-year period. Fourth quarter Adjusted EBITDA benefited from strong revenue growth from each segment, partially offset by ongoing supply chain and inflation challenges.

For the full-year ended December 31, 2021, the Company reported net income of $62.6 million, or $2.15 per diluted share, versus $42.3 million, or $1.50 per diluted share, for 2020. Revenue increased by 10.8% on a year-over-year basis for the full-year 2021, driven by solid growth across all segments. Adjusted EBITDA increased 11.5% to $142.9 million for the full-year 2021, versus $128.1 million in the prior-year period. Full-year Adjusted EBITDA benefited from strong revenue growth from each segment and was partially offset by ongoing supply chain and inflation challenges that impacted gross margin realization.

Backlog at December 31, 2021 increased to $1.49 billion, versus $1.18 billion at the prior year-end period. The year-end 2021 backlog includes $210.6 million related to the late December 2021 acquisition of Petillo.

BUSINESS UPDATE

Sterling continued to successfully execute on a multi-year strategic business transformation during 2021. The management team remains focused on accelerating the business through an improved business mix, targeted margin expansion through high-growth vertical acquisitions, and through increased exposure within complementary adjacent markets, including two acquisitions in December.

Segment realignment. With the December 30, 2021 acquisition of Petillo, Sterling realigned its operating groups to reflect management's present oversight of operations. After realignment, Sterling's operations consist of three reportable segments: Transportation Solutions, E-Infrastructure Solutions and Building Solutions, with the commercial business reclassified from the previously reported Specialty Services operating group into the newly formed Building Solutions operating group. We incur expenses at the corporate level that relate to our business as a whole. Certain of these amounts have been charged to our business segments by various methods, largely on the basis of usage, with the unallocated remainder reported in the "Corporate" line.

Solidify the base. Since 2016, Sterling has improved bid discipline to reduce the likelihood of underperforming project margins. As a result of this key risk reduction objective, heavy highway backlog gross margin has improved to 9.5% as of December 31, 2021, up from 4% prior to 2016. The Company expects gross margins to continue improving, reflecting the improved mix of work.

Grow high margin products. During the last five years, Sterling's project mix shifted from low-bid heavy highway projects to alternative delivery projects and other higher margin work. This shift has resulted in low-bid heavy highway revenue reducing from 79% of total revenue in 2016 to 19% as of December 31, 2021.

Expansion into adjacent markets. Sterling is committed to a programmatic acquisition strategy; one that creates new platforms within higher-margin, specialty end markets that serve to broaden its portfolio of products, services and customers. Sterling has pursued platform acquisitions which are accretive to our financial results and with gross margin profiles at or above 15%. Since 2017, the Company has created its E-Infrastructure Solutions and Building Solutions segments with the significant acquisitions of Plateau, Petillo and Tealstone. A higher-value business mix, together with disciplined expense management, positions Sterling as one of the largest specialty site development companies in the Northeastern and Mid-Atlantic U.S.

The Company Provides Full Year 2022 Revenue and Net Income Guidance:

• Revenue of $1.825 billion to $1.875 billion
• Net Income of $83 million to $89 million
• EPS of $2.69 to $2.88
• EBITDA of $185 million to $200 million

CEO Remarks and Outlook

"Throughout 2021, we continued to execute our multi-year strategic business transformation that prioritizes profitable growth, higher-margins and reduced risk. We closed the year with solid fourth quarter results despite the ongoing supply-chain challenges. Our E-Infrastructure and Building Solutions represented 51% of revenue and 86% of our segment operating income in the fourth quarter, consistent with our focus on developing a higher-margin sales mix within our highest growing markets. We announced new E-Infrastructure project awards for both Plateau and Petillo, bringing our total E-Infrastructure Solutions backlog to $433 million," stated Joe Cutillo, Sterling's Chief Executive Officer.

"Full year revenues of $1.58 billion exceeded our initial and our third quarter updated guidance and were up 10.8% from the prior year. Our E-Infrastructure Solutions segment accounted for 30% of revenues, up from 28%, our Building Solutions segment represented 20%, up from 19% in the prior year, and our Transportation Solutions segment contributed 50% of revenues, compared with 53% in the prior year," continued Mr. Cutillo.

"During 2021 Sterling generated $152 million in cash flows from operations, an increase of 25% versus prior year. This allowed us the flexibility to pay down $48 million of debt, invest $43 million in net capital expenditures, and fund part of the Petillo and Kimes acquisitions. Our focus on paying down our debt enabled us to significantly reduce our interest expense, which totaled $19 million for the year, compared with $29 million during the prior year."

Mr. Cutillo concluded, "Entering 2022, we remain highly optimistic on the outlook for our business as we look out over the next year, driven by a combination of market share gains and accelerating demand across our higher margin markets. We view the continued investment in new data centers and e-commerce distribution centers as a benefit to our E-Infrastructure Solutions segment. Our Building Solutions segment's expansion into new markets is a direct result of the demand from our customers needing our services in new markets. In our Transportation Solutions segment we remain disciplined in our shift to alternative delivery and design build heavy highway and aviation projects, and focus on margin improvement opportunities with the recently released federal infrastructure programs. Taken all together, we anticipate another year of strong financial performance in 2022 driven by the continued execution of our strategic vision."

Conference Call

Sterling's management will hold a conference call to discuss these results and recent corporate developments on Tuesday, March 1, 2022 at 9:00 a.m. ET/8:00 a.m. CT. Interested parties may participate in the call by dialing (201) 493-6744 or (877) 445-9755. Please call in ten minutes before the conference call is scheduled to begin and ask for the Sterling Construction call. To coincide with the conference call, Sterling will post a slide presentation at www.strlco.com on the Investor Presentations & Webcast section of the Investor Relations tab. Following management's opening remarks, there will be a question and answer session.

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

About Sterling

Sterling Construction Company, Inc. operates through a variety of subsidiaries within three segments specializing in Transportation, E-Infrastructure and Building Solutions in the United States (the "U.S."), primarily across the Southern, Northeastern and Mid-Atlantic U.S., the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail, water, wastewater and storm drainage systems. E-Infrastructure Solutions projects develop advanced, large-scale site development systems and services for data centers, e-commerce distribution centers, warehousing, transportation, energy and more. Building Solutions projects include residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs and other concrete work. From strategy to operations, we are committed to sustainability by operating responsibly to safeguard and improve society's quality of life. Caring for our people and our communities, our customers and our investors – that is The Sterling Way.

Joe Cutillo, CEO, "We build and service the infrastructure that enables our economy to run, our people to move and our country to grow."

Important Information for Investors and Stockholders

Non-GAAP Measures

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

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

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

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that are considered forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about: our business strategy; our financial strategy; our industry outlook; and our plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this press release, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expect," "plan," "project," "intend," "anticipate," "believe," "estimate," "predict," "potential," "pursue," "target," "continue," the negative of such terms or other comparable terminology. The forward-looking statements contained in this press release are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this press release are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the "Risk Factors" section in our filings with the U.S. Securities and Exchange Commission and elsewhere in those filings. Additional factors or risks that we currently deem immaterial, that are not presently known to us or that arise in the future could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made. The forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise, notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

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