STERLING INFRASTRUCTURE, INC.

Sterling Infrastructure, Inc. operates through three segments specializing in E-Infrastructure, Transportation and Building Solutions in the United States, primarily across the Southern, Northeastern, Mid-Atlantic and Rocky Mountain regions and the Pacific Islands. The E-Infrastructure Solutions segment provides advanced, large-scale site development services and mission-critical electrical services for data centers, semiconductor fabrication, manufacturing, distribution centers, warehousing, power generation and more. The Transportation Solutions segment includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail and storm drainage systems. The Building Solutions segment includes residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs, other concrete work, plumbing services, and surveys for new single-family residential builds. The construction industry historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in business cycles of customers, supply chain disruptions and the price or availability of building materials, inflationary pressures, interest rate fluctuations, international trade issues, including tariffs and counter tariffs, and other economic factors beyond the Company's control.

The competitors of the Company's segments vary widely, from small local contractors to large international construction companies. The Company aims to position itself in the mid-level market, traditionally bidding on work too large for the small local contractors yet too small for the large national and international construction companies. The Company's E-Infrastructure Solutions segment serves large, blue-chip end users in the data center, manufacturing, e-commerce distribution center, warehousing, power generation sectors and more. The top four customers in each year accounted for 27% of the segment's revenue in 2025 ¹, 31% in 2024 ² and 40% in 2023 ³. The Transportation Solutions segment's principal geographic markets are Utah, Arizona, Colorado, Nevada, Texas and the Pacific Islands, and its core customers are state Departments of Transportation and regional transit, airport, port, water and railroad authorities. The top four state DOTs in each year accounted for 58% of the segment's revenue in 2025 ⁴, 47% in 2024 ⁵ and 50% in 2023 ⁶. The Building Solutions segment's principal geographic market for its residential business is Texas, specifically Dallas-Fort Worth, Houston and the surrounding communities, and its core residential customer base is comprised of leading national, regional and custom home builders. The top four customers in each year, including their respective affiliates, accounted for 45% of the segment's revenue in 2025 ⁷, 36% in 2024 ⁸ and 42% in 2023 ⁹. In 2025, no individual customer accounted for more than 10% of the Company's consolidated revenues.

The Company generates revenue primarily from long-term contracts for customers in its E-Infrastructure Solutions and Transportation Solutions business segments, as well as short-term projects for customers in its Building Solutions business segment. Revenue for contracts that satisfy the criteria for over time recognition is recognized as the work progresses using the cost-to-cost measure of progress, with cost of revenue including direct costs such as materials and labor, and indirect costs that are attributable to contract activity. Revenue for the Company's Residential contracts is recognized at a point in time and utilizes an output measure for performance based on the completion of a unit of work. The Company's contracts are awarded on a competitively bid basis or negotiated bid basis using a range of contracting options, including fixed-unit price, lump sum and cost-reimbursable. At December 31, 2025, substantially all of the Company's Backlog was contracted on a fixed-unit price or lump sum basis. The Company's contracts are typically completed in 6 to 36 months.

The E-Infrastructure Solutions segment provides advanced, large-scale site development services and mission-critical electrical services for data centers, semiconductor fabrication, manufacturing, distribution centers, warehousing, power generation and more. For the year ended December 31, 2025, the segment's revenues were $1,466.8 million ¹⁰, an increase of $543.0 million ¹¹, or 58.8% ¹², compared to the prior year. The increase was primarily driven by higher volume from data centers and the inclusion of $170.4 million ¹³ of revenue from the electrical and mechanical business acquired late in the third quarter 2025, partly offset by lower volume from warehouses and the timing of advanced manufacturing projects. The segment's operating income was $346.0 million ¹⁴, or 23.6% ¹⁵ of revenue, for 2025, an increase of $142.7 million ¹⁶ compared to $203.4 million ¹⁷, or 22.0% ¹⁸ of revenue, in the prior year. The increase in operating income is partly attributable to a $19.4 million ¹⁹ (inclusive of $3.0 million ²⁰ of intangible amortization) contribution from the electrical and mechanical business acquired late in the third quarter 2025, and the remaining increases in operating income and margin were driven by a project mix shift toward large mission-critical projects.

The Transportation Solutions segment includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail and storm drainage systems. For the year ended December 31, 2025, the segment's revenues were $640.7 million ²¹, compared to $783.7 million ²² in the prior year. Excluding $235.9 million ²³ of RHB revenue from 2024, revenues increased $92.9 million ²⁴ or 17% ²⁵. The increase was driven by higher heavy highway and other non-highway service revenue, partly offset by lower aviation revenue. The segment's operating income was $77.8 million ²⁶, or 12.1% ²⁷ of revenue, for 2025, an increase of $26.9 million ²⁸ compared to $50.9 million ²⁹, or 6.5% ³⁰ of revenue, in the prior year. The increases in operating income and margin were driven by an improved project margin mix. The Building Solutions segment includes residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs, other concrete work, plumbing services, and surveys for new single-family residential builds. For the year ended December 31, 2025, the segment's revenues were $382.6 million ³¹, a decrease of $25.8 million ³², or 6.3% ³³, compared to the prior year. The decrease was driven by lower commercial volume compared to 2024. The segment's operating income was $39.1 million ³⁴, or 10.2% ³⁵ of revenue, for 2025, a decrease of $14.8 million ³⁶ compared to $53.8 million ³⁷, or 13.2% ³⁸ of revenue, in the prior year. The decrease in operating income and margin were driven by the aforementioned lower volume and the slowdown in residential markets in 2025.

On September 1, 2025, the Company acquired substantially all of the assets of Irving, Texas-based CEC Facilities Group, LLC, a leading specialty electrical and mechanical contractor. The purchase price was $562 million ³⁹, consisting primarily of $443 million ⁴⁰ in cash and $79 million ⁴¹ in common stock. Additionally, CEC has an earn-out opportunity of up to an aggregate of $80 million ⁴², contingent upon achieving certain operating income targets. CEC is included in the Company's E-Infrastructure Solutions segment. During the first quarter of 2025, Sterling acquired Drake Concrete, LLC for a purchase price of $25 million ⁴³ in cash plus a four year earn-out opportunity. The results of Drake are included in the Building Solutions segment. On December 31, 2024, the parties executed an amendment to the RHB operating agreement, and beginning January 1, 2025, the Company reports its portion of RHB's income as a single line item in the Consolidated Statements of Operations and reports its interest in RHB as a single line item in the Consolidated Balance Sheets. Effective November 12, 2025, the Board of Directors approved a program authorizing the Company to repurchase up to $400 million ⁴⁴ of its outstanding common stock over a 24-month period. Under the stock repurchase programs, the Company repurchased 440 ⁴⁵ shares of its common stock for $74.2 million ⁴⁶ during the year ended December 31, 2025. On June 5, 2025, the Company entered into an Amended and Restated Credit Agreement that provides the Company with a senior secured first lien term loan facility in the aggregate principal amount of $300 million ⁴⁷ and a senior secured first lien revolving credit facility in an aggregate principal amount of up to $150 million ⁴⁸.

For the year ended December 31, 2025, total revenues were $2.49 billion ⁴⁹, compared to $2.12 billion ⁵⁰ the prior year. Excluding $235.9 million ⁵¹ of RHB revenue from 2024, revenues increased $610.2 million ⁵². Gross profit was $572.3 million ⁵³ for 2025, an increase of $146.2 million ⁵⁴, or 34.3% ⁵⁵, compared to the prior year. The Company's gross margin as a percentage of revenue increased to 23.0% ⁵⁶ in 2025, as compared to 20.1% ⁵⁷ in the prior year. Operating income was $405.9 million ⁵⁸ for 2025, compared to $264.6 million ⁵⁹ in the prior year. Net income attributable to Sterling common stockholders was $290.2 million ⁶⁰ for 2025, compared to $257.5 million ⁶¹ in the prior year. Diluted EPS was $9.38 ⁶² for 2025, compared to $8.27 ⁶³ in the prior year.

The Company sees favorable opportunities for long-term growth across each of its business segments. The Company's strategic objectives include growth in the E-Infrastructure Solutions segment with particular focus on large, high-value projects; risk reduction through a continued shift in the Transportation Solutions business away from low-bid heavy highway work and toward alternative delivery and design-build projects; continuing to grow market share and geographic presence in Building Solutions; and improving margins in each segment. The Company foresees significant growth opportunities in E-Infrastructure Solutions tied to the implementation of multi-year capital deployment plans by data center customers, including hyperscalers, colocation providers and others, driven by the need to support the increasing use of cloud computing applications, increasing adoption and complexity of artificial intelligence applications and digital transformation across industries. The Company also continues to see significant opportunity related to the construction of manufacturing capacity in the U.S., including semiconductor fabrication. Following a decline that began in 2023, the e-commerce distribution sector began to strengthen in 2025 and the Company expects this momentum to continue in 2026.

The Transportation Solutions business is primarily driven by federal, state and municipal funding. The Company benefits from a number of federal, state and local infrastructure investment programs, including the Infrastructure Investments and Jobs Act, which includes approximately $643 billion ⁶⁴ in funding for transportation programs ($432 billion ⁶⁵ for highways, $109 billion ⁶⁶ for transportation and $102 billion ⁶⁷ for rail), of which $284 billion ⁶⁸ is an increase over historic investment levels. The IIJA also includes $25 billion ⁶⁹ of funding for airport modernization. In 2026, the Company expects that the combination of strong state-level funding in its core geographies and elevated federal funding will allow the transportation market to remain strong relative to historical levels. The Building Solutions segment is driven by new home starts in Dallas-Fort Worth, the segment's largest market, and continued expansion in the Houston and Phoenix markets. Beginning in the second half of 2024, demand from residential home builder customers began to decline, as prospective homebuyers struggled with affordability challenges. The Company anticipates that demand will remain muted in the near-term, but believes the dynamics in its markets, including population growth and structural housing shortages, support a return to growth over a multi-year time period.

The Company's gross margin as a percentage of revenue increased to 23.0% ⁷⁰ in 2025, as compared to 20.1% ⁷¹ in the prior year. The increases were driven by higher revenue volume and an improved project margin mix across the E-Infrastructure and Transportation Solutions segments. The Company's margin in Backlog has increased to 17.8% ⁷² at December 31, 2025 from 16.7% ⁷³ at December 31, 2024, driven by a greater mix of E-Infrastructure Solutions backlog and an improved backlog margin mix within Transportation Solutions. In early 2025, the Company announced the strategic downsizing of its Texas heavy highway business, which is expected to be complete in 2026, and this is anticipated to drive further improvement in heavy highway margins.

The Company procures raw materials essential for the operation of its segments, such as cement, aggregate, concrete, liquid asphalt, lumber, steel and fuels, including diesel, gasoline, natural gas and propane, from a broad network of sources. Fluctuations in the price and availability of these raw materials may vary over time due to changes in market conditions and production capacities. The Company's operations are often affected by weather conditions, especially during the first and fourth quarters of the fiscal year, which may disrupt construction schedules and lead to variability in revenues, profitability and the number of employees required. The Company's Backlog was $3.01 billion ⁷⁴ at December 31, 2025, as compared to $1.69 billion ⁷⁵ at December 31, 2024, with a book-to-burn ratio of 1.6X ⁷⁶ for the year ended December 31, 2025. The Company expects to recognize approximately 64% ⁷⁷ of its RPOs as revenue during the next 12 months, and substantially all of the remaining balance in the 12 to 24 months thereafter.

Capital expenditures incurred in 2025 were $77.3 million ⁷⁸. Management expects capital expenditures in 2026 to be in the range of $100 to $110 million ⁷⁹; however, the award of a project requiring significant purchases of equipment or other factors could result in increased expenditures. The Company will continue to explore additional revenue growth and capital alternatives to improve leverage and strengthen its financial position. The Company also expects to continue to pursue strategic uses of its cash, such as investing in projects or businesses that meet its gross margin and overall profitability targets, managing its debt balances and repurchasing shares of its common stock. Effective November 12, 2025, the Board of Directors authorized a new stock repurchase program, permitting the repurchase of up to $400 million ⁸⁰ of the Company's outstanding common stock over the following 24 months. The Company has never paid any cash dividends on its common stock and for the foreseeable future intends to retain any earnings and does not anticipate paying any cash dividends.

The Company's E-Infrastructure Solutions business, as well as the industries of many of its customers, is susceptible to economic downturns, including periods of slower than anticipated economic growth. Demand for the E-Infrastructure Solutions business is cyclical and may be vulnerable to economic downturns, market interest rate fluctuations or other adverse developments in the credit markets, and reductions in private industry spending. The Transportation Solutions business is highly dependent on the amount and timing of infrastructure work funded by various governmental entities, which in turn depend on the overall condition of the economy, the need for new or replacement infrastructure, the priorities placed on various projects funded by governmental entities and federal, state or local government spending levels. The Building Solutions business is sensitive to changes in economic conditions and other factors, such as the level of employment, consumer confidence, consumer income, availability of financing and interest rate levels. Beginning in 2022, rising inflation and increased interest rates made home ownership less affordable, which resulted in decreased demand for single-family homes.

Demand for the Company's services may decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect the business. The Company's E-Infrastructure Solutions business is susceptible to economic downturns, and the Transportation Solutions business is highly dependent on the amount and timing of infrastructure work funded by various governmental entities. The Company's Building Solutions business is sensitive to changes in economic conditions and other factors such as interest rate levels. The Company's use of over time revenue recognition involves significant estimates, and changes in job performance, job conditions and estimated profitability may result in revisions to costs and income. The Company had approximately $585 million ⁸¹ of goodwill and $555 million ⁸² of intangibles recorded on its Consolidated Balance Sheet at December 31, 2025, and a shortfall in revenues or net income could require impairment testing. The Company's Credit Agreement contains various covenants, and as of December 31, 2025, the aggregate principal amount outstanding under the Credit Agreement was $292.5 million ⁸³. The Company's ability to obtain bonding primarily depends upon its capitalization, working capital, past performance, management expertise and reputation, and events that affect the insurance and bonding markets may result in bonding becoming more difficult to obtain in the future.

Management's message emphasizes the Company's strategic vision since 2016, which has been based on solidifying the base, growing high margin products and services, and expansion into adjacent markets. Management highlights that the strategy to shift the Transportation Solutions project mix from low-bid heavy highway projects to alternative delivery heavy highway projects and other higher margin work has been successful, with low-bid heavy highway revenue decreasing from approximately 79% of total revenue in 2016 to 9% as of December 31, 2025 ⁸⁴. Management notes that the Company's focus on large, time-sensitive mission-critical projects where its superior capabilities are valued by customers has been a driver of segment margin expansion. Management states that the Company sees favorable opportunities for long-term growth across each of its business segments and remains focused on its strategic objectives. Management also discusses the recent strategic transactions, including the CEC Acquisition and the Drake Acquisition, and the deconsolidation of RHB. Management expresses that the Company has sufficient liquid financial resources to fund its requirements for the next year of operations and expects capital expenditures in 2026 to be in the range of $100 to $110 million ⁸⁵.