Stifel Cross Sector Insights Conference June 2020
Disclosure: Forward-Looking Statements This presentation contains, and the officers and directors of the Company may from time to time make, statements that are considered forward – looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. 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; financial strategy; and plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this presentation, 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 presentation 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 presentation are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward- looking statements due to factors listed in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”) and elsewhere in those filings. The forward- looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. 2
Company Overview Sterling Construction is a leading heavy civil and residential construction company with strong competitive positions in the Western U.S. HEAVY CIVIL CONSTRUCTION - 53% of Q1’20 Revenues NASDAQ: STRL Heavy highway, commercial concrete projects, aviation, and water HQ: The Woodlands, TX containment/treatment Employees: ~3,000 Steady 3-5% growth; two-year average project duration Projects underway: ~200 Cost-driven Shares out: 28.0M SPECIALTY SERVICES – 35% of Q1’20 Revenues Market cap: $289.4M Construction site excavation, drilling and blasting, commercial concrete TTM Revenues: $1,199.0M projects, and drainage work Steady 5-7% growth; six month average project duration QTD EBITDA*: $20.8M Margin enhancing; mid-20% Gross Profit margin Combined Backlog: $1,432M TTM Revenues, EBITDA and Backlog as of 3/31/20; RESIDENTIAL CONSTRUCTION - 12% of Q1’20 Revenues market cap as of 6/8/20. Concrete foundations for single family homes *See EBITDA Reconciliation on page 29 High margin, low CAPEX, quick turnaround slab work with fast cash cycles Low risk – operate exclusively in the high growth markets of Dallas-Fort 3 Worth Metroplex and Houston
Peer Valuation Analysis Company Forward P/E 2020 Forward EV/EBITDA 2020 7.9x 5.8x 12.1x 5.0x 28.4x 10.9x 5.8x 3.8x 11.0x 3.5x S&P 500 24.9x 15.0x NASDAQ 35.5x 19.0x Russell 2000 76.1x 17.1x 4 Data from Bloomberg as of 6/3/20
Investment Considerations Organic diversification of end-markets driving significant margin and EPS growth . Disciplined project execution with emphasis on value-driven delivery model. Operational and financial turnaround has been completed by strong and experienced management team. Attractive geographic footprint with favorable funding environment. Acquisition of Plateau provides diversification of revenue streams, a broad range of high-quality customers in rapidly growing end markets, increasing profitability and cash flow, and reduced execution risk for the Company overall; closed on October 2 nd , 2019 New credit agreement in conjunction with the Plateau acquisition establishes more traditional balance sheet structure with reduced cost of capital; significant de-levering anticipated in 2020 and 2021. 5
Sterling 3-Year Strategic Vision - Introduced in 2016 2021 Blended Margin 2015 - Focused on Solidifying Base and not taking on 12% Expan ansi sion on into losing jobs 3 Ad Adjacent acent Markets ts 2016 - Focused on Solidifying Base and began to Grow 15%+ margins 10% High Margin Products…Margins increased to 6.4% Grow High 2 Marg rgin n Products cts 2017 - Continued to Solidify Base, Grow High Margin 50/50 Split at Threefold Products, and began Expansion into Adjacent Markets 12%+ margin 8% margin w/ Tealstone Acquisition...Margins increased to 9.3% 1 improvement 2018 - Continued Elements 1&2 and began growing out Solidify ify the Base in 6 years Tealstone …Margins increased to 10.6% 6% 7-8% 2019 - Continued 2018 activities and focus on adding 2015 Margins next adjacent Market…Combined Margins will increase 4% to over 12% with the October 2 nd , 2019 Plateau acquisition Key Objectives: Bottom-Line Growth, Risk Reduction, Exceed Peer Performance Key Objectives: Bottom-Line Growth, Risk Reduction, Exceed Peer Performance 6
Recent Project Awards Validate Strategy Project Location Value Start Date US-89 Farmington Joint Venture Utah $139 million Q2’20 Bangerter Highway Reconstruction Utah $70 million Q2’20 Multiple Plateau Excavation Awards Southeast US $70 million Q1’20 University Place Garage Utah $26 million Q2’20 Bucholz Army Airfield Runway Marshall Islands $80 million April 2020 Salt Lake City International Airport Utah $97 million Q3’20 UT Executing HI on Strategy Our RLW subsidiary has historically executed large scale projects across a Our RHB subsidiary leverages multitude of end-markets in its highway expertise to also the Rockies, contributing to pave airport runways at a sustainable margin expansion higher margin 7
Strategy Driving Profitable Growth Gross Margin vs. Revenue Growth Revenue 600% $1,600 $1,400 500% $1,200 400% $1,000 300% $800 $600 200% $400 100% $200 0% $0 2015 2016 2017 2018 2019 2020E 2015 2016 2017 2018 2019 2020E Revenue Growth Gross Profit Growth Record Combined Backlog with Improving Margins Adjusted EBITDA $1,400 12% $140 $1,200 $120 10% $1,000 $100 8% $800 $80 6% $600 $60 4% $400 $40 2% $200 $20 $- 0% $0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2020E Combined Backlog Gross Margin in Combined Backlog 8 Dollar amounts are in millions and 2020 estimates are using pre-COVID 19 guidance.
Backlog Growth and Margin Improvement March 31, 2020 December 31, 2019 Book to Burn In Q1'2020 Amount Margin % Amount Margin% Backlog $1,190 million 12.7% $1,068 million 11.5% 1.47X Combined Backlog $1,432 million 12.1% $1,342 million 11.0% 1.35X • Backlog reaches record $1.2 billion, including record Plateau backlog. • Combined Backlog which includes unsigned low-bid awards reaches $1.4 billion. • Backlog gross margin increased 120 bps to 12.7% and Combined Backlog gross margin increased 110 bps to 12.1% from end of 2019. 9
Revenue Composition Shifting Towards Higher Margin Business 2019 Proforma (1) 2016 Q1 2020 Actual 21% 36% 32% 68% 64% 79% Heavy Highway Heavy Highway Heavy Highway Other Heavy Civil, Specialty Services, and Residential Other Heavy Civil, Specialty Services, and Residential Other Heavy Civil, Specialty Services, and Residential (1) Proforma includes Plateau results for the full year 2019. 10
Plateau Acquisition October 2, 2019 11
Plateau Overview Plateau is the leading provider of infrastructure improvement services in the Southeastern U.S. serving blue-chip customers in the data center, distribution center/warehousing (e-commerce and traditional retail), energy and other growing end markets. Backlog by End Market as of 12/31/18 Headquarters: Austell, GA Energy & Other Employees: ~800 5% Commercial & 2018 Revenue: ~$290 million Residential 16% Three year Revenue CAGR: ~12% Distribution Backlog: ~$159 million as of 9/30/19 Center/ Warehouse Data Center 51% 10% E-Commerce 18% 12
Strong Relationships with High Profile Customers Majority of revenue derived from returning customers 14-year average tenure with top 10 customers Provides Sterling with a whole new (and quickly growing) customer base including: 13
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