STERLING INFRASTRUCTURE, INC.

Red flags

• Management’s internal-control assessment excluded Drake and CEC, which together represented 30% of consolidated assets and 9% of revenue; acquired-business controls are not yet fully included in the assessment.
• The CEC purchase price was $562 million, including $443 million cash, $79 million of stock and up to $80 million of earn-out consideration, increasing integration and execution risk.
• Debt was $292.9 million at year-end, with the credit facility maturing June 5, 2028; the company must maintain total net leverage of no more than 3.00x and interest coverage of at least 3.00x.
• Goodwill increased to $585.2 million at year-end from $264.6 million after acquisitions, heightening impairment sensitivity if E-Infrastructure growth or CEC performance disappoints.
• The majority of revenue and backlog comes from fixed-unit-price and lump-sum contracts, leaving margins exposed to material, labor, weather and project-estimation overruns.