Sterling Construction Company Inc

NASDAQ:STRL

Earnings Call Transcript 2020-Q2

[Operator]

Greetings and welcome to the Sterling Construction Company's Second Quarter 2020 Earnings Conference Call and Webcast. As a reminder, this conference is being recorded [Operator Instructions] There are accompanying slides on the Investor Relations section of the company's website.

Before turning the call over to Joe Cutillo, Sterling Construction's Chief Executive Officer, I will read the safe harbor statement. Some discussions made 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, 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 the most comparable GAAP financial measures in our earnings release issued yesterday afternoon.

I'll now turn the call over to Mr. Joe Cutillo. Thank you, sir. Please go ahead.

[Joseph Cutillo, executive]

Thanks, Donna. Good morning, everyone, and thank you for joining Sterling's Second Quarter 2020 Earnings Call. Words cannot express how proud I am of what our team was able to accomplish in one of our most challenging times in our company's history. With our primary focus on the health and safety of our people, our customers and their families during the quarter, it's hard to imagine we would be reporting another all-time record quarter and raising our full year guidance. This is truly a tribute to the culture of our people, the power of our strategy and the transformation of our company. Without the nimbleness, creativity and dedication of our employees and the diversity of our portfolio, we would have never been able to navigate the challenges put before us and deliver these results.

I'll be starting off on Slide 3 in the slide deck put on our website. During the quarter, our back-office employees transitioned overnight from operating in person to operating virtually. Our field teams rapidly developed and deployed new procedures and protocols to safeguard their colleagues. A COVID-19 task force was assembled to share best practices, develop response plans and ensure new processes and procedures were rolled out consistently. These teams then had daily and weekly calls to identify and fill any potential gaps or provide additional resources as needed. During this time, Sterling truly became one focused on the good of all.

In the quarter, all 3 sectors were deemed essential and performed at or above expectations and is the hard work of our people and the power of our strategy played out perfectly. Our heavy civil sector performed right on expectations, while our residential and specialty service sector, which includes our recent acquisition of Plateau, both significantly exceeded our expectations for the quarter.

I'd like to take a minute to give a little color around each sector. Starting with our heavy civil sector, we now have far less than 40% of our total Sterling business coming from low-bid, heavy highway work and continue to see strong bid activity in aviation and alternative delivery projects. Early in the quarter, we had a few bids and awards that were delayed. But by the end of the quarter, all of our markets were back to normal, and we're running as planned. We saw some productivity impact related to new procedures and temporary job shutdowns, but we're able to offset most of that impact with reduced fuel costs and higher throughput due to lower traffic conditions.

Our specialty service sector, which includes Plateau, came into the quarter with record wins, record backlog and rollover demand from a very wet February and March. This, coupled with near flawless execution and great weather in the second quarter, enabled them to double their operating profit versus the first quarter of 2020 and greatly exceeded our expectations. In the quarter, we did see a 45- to 60-day delay in new bids coming out. However, by the end of the quarter, activity had picked up significantly, enabled us to enter the third quarter with our second highest all-time backlog of over $160 million.

In our residential sector, we anticipated a significant slowdown in the quarter as Texas implemented their stay-at-home orders. Based on our early analysis and the projection provided by our major builders, we anticipated residential would slow down approximately 30% to 50% in the back half of the second quarter and remain at these levels for approximately 90 days before making a gradual recovery for the remainder of the year. Fortunately, we were all wrong. The Texas market saw a 10% to 15% dip in May and ramped up quickly in June. In addition to the smaller dip and quicker recovery, we were helped by the heavy rains in March to push incremental business into April. Also in the quarter, we saw a significant increase in volume coming from our Houston market expansion. Versus Q2 2019, our residential revenue was up approximately 22%, and operating income was up 24 -- 25%, sorry.

Now let's go to Slide 4. Our continued focus on growing the bottom line, reducing risk and building a diverse platform for future growth has shown its value in both good times and in bad. Versus the second quarter of 2019, our combined backlog grew 17%. Our revenue increased 51% to just over $400 million, and our gross margin was up over 500 basis points to 14.9%. Our adjusted EBITDA increased 166% to $41.4 million, and we saw a net gain in cash generated of $56.5 million year-to-date.

With all these great accomplishments, our record-high margins and backlog and rapid rebound in our residential and specialty service markets, we are reinstating guidance and raising our full year outlook. For 2020, our revised revenues will be between $1.415 billion and $1.430 billion, and our net income will be between $41 million and $44 million with an EPS midpoint of $1.52.

With that, I'll turn it over to Ron to give you more details on the quarter and the full year outlook. Ron?

[Ronald Ballschmiede, executive]

Thanks, Joe, and good morning, everyone. I'm pleased to provide a summary of our 2020 second quarter financial results. With this being the third quarter of including -- of the Plateau acquisition in our consolidated results, most of the acquisition and new financing noise and related onetime costs are now behind us, thus providing a clearer picture of our financial performance. The progress we have been making on our multiyear strategy, including the transformational acquisition of Plateau, continues to be apparent in substantially all of our financial measures.

Today's conference call, together with our earnings release, Form 10-Q and the investor deck posted to our website, should provide insight into our strategic progress in delivering strong earnings and strong cash flows with improving liquidity. Not to be overlooked, this strong performance came during the most challenging period across the country in many decades.

Now let me take you through the financial highlights, starting with our backlog metrics on Slide #5. At June 30, 2020, our backlog totaled $1.134 billion, a 6% increase over the prior period. Approximately 62% of the backlog increase is related to growth from the heavy civil segment with a balance of 38% driven by specialty services, which includes Plateau and our commercial businesses. The gross margin in our second quarter 2020 backlog was 12.9%, a record high and up 140 basis points from the beginning of the year. Both the heavy civil and specialty services gross margin and backlog were higher at June 30, 2020, than at the beginning of the year. Unsigned low bids totaled $437 million at the end of June 2020. We finished the second quarter with an all-time high combined backlog of $1.571 billion, a 17% increase over the beginning of the year. Our gross margin of our combined backlog increased to 11.7% at June 30, 2020, up 11% from the beginning of the year. Our book-to-burn factors for the combined heavy civil and specialty services segments were 111% and 137% for backlog and combined backlog, respectively. Note that the book-to-burn computations include only heavy civil and specialty services revenues. Residential, which accounted for 11% of our consolidated revenues, does not report backlog as it recognizes revenue as individual concrete slabs are completed.

Please look to Slide 6 for a summary of our consolidated results. Note that this slide includes quarterly results for 3 periods: the sequential first and second quarters of 2020 and the comparable period of 2019. Given the magnitude of the Plateau acquisition, and the related financing and changes in tax NOL accounting which occurred in late 2019, the first quarter of 2020 was included to highlight the "same-stores" sequential quarter comparisons. The first quarter for both the legacy Sterling businesses and Plateau tend to be our lowest revenue quarter, primarily driven by seasonality across our geographic footprint. Consequently, our second quarter of 2020 revenues increased by over 34%. Second quarter revenues totaled $400 million, an increase of $103 million over the first quarter of 2020. The increase reflects revenue growth for heavy civil, specialty services and residential, up 42%, 30% and 21%, respectively.

On a comparative quarter basis, revenues increased $137 million driven by the inclusion of $106 million from the October 3, 2019, acquisition of Plateau. Second quarter gross profit and gross margin for all 3 segments improved over the first quarter of 2020 driven by improved absorption of fixed costs from higher revenues and an improved gross margin mix of our work. The second quarter 2020 increase in gross profit from our 50% owned consolidated subsidiaries, resulted in a greater percentage of our heavy civil gross profit. Consequently, the other operating expense increased by $1.8 million as a result of the higher amount of income-sharing expense. Beginning in 2020, our income tax expense includes a noncash tax provision of approximately 21% of our taxable income or approximately $6.4 million for the first month -- first 6 months of 2020. Our second quarter net income totaled $18.2 million or $0.65 a share. Both more than double the second quarter of 2019, where we reported net income of $7.8 million or $0.29 per diluted share. Second quarter 2020 EBITDA also increased more than 2x to $41.2 million from $15.3 million over the comparable 2019 period.

Slide 7 highlights the second quarter segments results. Heavy civil revenues grew 10% in the second quarter, reflecting the increasing level of backlog over the prior year. Although our gross profit and margin increased during the 2020 period, operating margins declined by 1% or by $1.8 million, reflecting the additional members interest I discussed earlier. Additionally, the heavy civil segment was burdened by higher additional costs associated with the COVID-19 virus.

The increase in specialty services revenue and operating income primarily reflects the inclusion of Plateau in the 2020 quarterly results. Additionally, Plateau entered the second quarter with record backlog and experienced a poor weather in the first quarter which pushed work into the second quarter of 2020. Both of these factors enhanced our second quarter 2020 revenue burn.

Second quarter 2020 residential revenues exceeded our expectation as the COVID-19 revenue-related impact was not as severe as our major residential customers expected at the beginning of the second quarter. Additionally, our Houston market expansion continues to pick up steam. Houston accounted for 14% of the residential second quarter 2020 completed slabs compared to 6% in the second quarter of 2019. The Houston ramp-up and increasing scale has had a favorable impact on our operating income returns.

Now let's move to Slide 8, which summarizes our cash flow generation and deleveraging strategy. The graph presents our deleveraging expectations. Beginning with the October 2019 Plateau acquisition and the 5-year credit facility, our September 30, 2019, pro forma EBITDA coverage ratio was approximately 3.5x. Based on our continued progress in executing the strategic actions to improve our base business results and our confidence in the quality of future Plateau cash flows, we were comfortable with the initial leverage ratio. We set the objective to bring that coverage ratio down to 2.5x by the end of 2021. The graph reflects where we're at to date and our targets through the end of 2021. Importantly, only the scheduled funded debt payments are included in the computations for the period presented. The $75 million revolver, which adds availability of $55 million at the end of June 30, 2020, provides us with additional term loan prepayment flexibility. Our confidence in our deleveraging strategy has been reinforced by the experience of 3 quarters of Plateau results, together with Sterling's base business performance and our consolidated expectations. Examples supporting our confidence include record backlog levels with increasing backlog margins. Secondly, our first 6 months of 2020 performance exceeded our expectations, supporting an increase to our revenue and net income guidance for the year.

Importantly, the first 2 quarters of the year are our seasonally slowest quarters, even without the challenges of managing through COVID-19 issues. Next, our EBITDA for the 6 months of 2020 totaled $61.5 million, an increase of $37 million over the 2019 period. In addition, our cash flow from operating activities for the first 2 quarters of 2020 totaled $52.3 million, an improvement of $56.6 million over the comparable 2019 period. Additionally, for the full year 2020, we expect additional noncash expenses to total $25 million to $29 million, which consists of the utilization of our NOL, stock-based compensation and noncash interest expense. And finally, moving to our balance sheet. Our June 30, 2020, cash and cash equivalents totaled $71.6 million compared to $45.7 million at the beginning of 2020.

Also, please note, we have added a modeling consideration slide to our second quarter 2020 investor deck to assist our stakeholders in understanding the key components of our cash flow.

Now I'll turn it back to Joe.

[Joseph Cutillo, executive]

Thanks, Ron. I'll now pick up on Slide 9. Again, I want to reiterate what a great quarter this was and how well the company is positioned for the future. Sometimes the most challenging times bring the best out of teams, and our second quarter was a perfect example of that. With our record backlog and record margins, we believe the heavy civil sector will remain consistent and on track for the remainder of the year. With the rapid recovery of the Texas residential market and the growth of our Houston expansion, we anticipate the residential sector will remain strong throughout the balance of 2020 and could even exceed our full year expectations, barring any significant changes in COVID restrictions. With the recent increase in e-commerce activity, along with the caliber of projects we're seeing in the design phase, we are confident the specialty service sector will fill any backlog gaps they have in the fourth quarter and finish the year strong.

The tailwinds from our first half performance, coupled with the current market conditions, has enabled us to increase our full year guidance on Slide 10. For the full year, we expect revenues to be between $1.415 billion and $1.430 billion. We anticipate our net income to increase 73% over 2019 to a midpoint of $42.5 million and the midpoint of our adjusted diluted EPS to be $1.52. This guidance demonstrates truly amazing performance in some very challenging times and once again is a tribute to the caliber of our people and the strength of our strategy.

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

[Operator]

[Operator Instructions] Our first question is coming from Brent Thielman of D.A. Davidson.

[Brent Thielman, analyst]

Congratulations on a great quarter.

[Joseph Cutillo, executive]

Thanks.

[Ronald Ballschmiede, executive]

Thanks.

[Brent Thielman, analyst]

Joe or Ron, just kind of looking at the outlook for the remaining quarters of the year, well, I'll just get right to it. I mean it seems like it sets a pretty low bar relative to what you just did in the second quarter, heading into your seasonally stronger third quarter. I guess, outside of residential, I know you have less visibility. What are the sort of variables we need to consider in that outlook?

[Joseph Cutillo, executive]

Yes. What we've done is we've got -- the heavy civil is, as you know, the backlog's there. It's locked and loaded, and it's going to be pretty consistent. The only thing that's going to swing that any way is maybe a project or 2 starts a little earlier than we anticipate, but you're not going to see a lot of fluctuation in that. Anything we win for the rest of the year really is going to hit 2021.

When you talk about the specialty service sector and Plateau, I mean, they just -- they had an amazing second quarter, and they will have a very good third quarter. But they had a little bit of tailwinds from some work that was pushed out of the first quarter with rain that they're able to make that up, plus do what they anticipated in the second quarter. So we think they're going to have a very strong finish, and we built them in to kind of hit their original plan for the back half of the year.

I will tell you there are some nice projects out there, and they've got much quicker turn than the heavy civil side. They will still book and build projects in this year. If they're to hit 1 or 2 of those towards the back half, we can see upside to that business. But right now, we've got a little bit of a gap in the fourth quarter. We feel very confident in what we've got for backlog to get us to where we need to be and finish the year real strong.

On the residential front, we're letting them run out at the kind of the current pace for the rest of the year. And we're not anticipating and we're certainly hoping that we don't see any further COVID restrictions, and that, that market remains like it is. So second quarter was a barn burner. I'd like to tell you we could do 2 more of those, but the reality is that it'll be pretty challenging for us. So we'll have a very, very strong back half of the year. And if residential picks up a little more, we win 1 or 2 jobs in the specialty service side that we may even have the high end or some upside.

[Ronald Ballschmiede, executive]

Yes. It's interesting when you think about the strength of the strategic moves and you have an absolute full pedal down to the metal and at capacity, if you will, pretty darn close for Plateau, it really moves the needle. But you've got to remember, $10 million -- just an example, $10 million less Plateau revenue needs $30-some million of heavy civil revenue to make up for it. So yes, we got some revenue ramp, but it takes a fair amount to make up for such a powerful second quarter. So hopefully, we got all cylinders going again, but we got some more to do to get there.

[Brent Thielman, analyst]

Okay. And yes, I guess to follow on that, I mean, these are the best margins in specialty or Plateau since you've owned it. I'm just wondering how you -- how this sort of compares to the expectations you have going forward for the business.

[Joseph Cutillo, executive]

Yes. The margins are where we anticipated and where we'd anticipate them to stay. The revenue side was a little higher than we anticipated in the quarter, but we feel good about the margins where they were, and that would be our general expectation as we go forward.

[Ronald Ballschmiede, executive]

And I think you see the same seasonal trends that we expected with the slowest quarter generally being the first, similar to our heavy civil business, followed by the fourth and then the second and third being the strongest just because of the weather patterns, the summer and things like that. So, so far, no surprises in hitting the mark we thought that we bought them in.

[Brent Thielman, analyst]

Okay. And then on residential, it looks like the Houston business is really ramping up. Just wondering whether the -- in terms of profitability, whether that's nearing the DFW business, kind of where those margins sit today relative to the print we have.

[Joseph Cutillo, executive]

Yes. A couple of things, and then I'll let Ron give you some more details on the margins. But we're really pleasantly surprised, not only with our internal ramp-up, but the Houston market actually recovered a little quicker than the Dallas market. It didn't dip quite as far as the Dallas market in May. So that's been very nice. The Houston market now is #2 and is catching Dallas and we think could very quickly pass the Dallas market, so our timing is perfect.

With the increased volume, we saw significant improvements in margin in the Houston market in the quarter. We're still not up to the Dallas margins, more critical volume, and more resources and those sort of things will ultimately get us closer to those margins. But we're very happy with the margins that we got out of Houston relative to before. Ron, do you want to add anything to that?

[Ronald Ballschmiede, executive]

Yes. And I think we've reached equilibrium on the average price of a slab. If you recall, the last couple of years, we saw a pretty significant move to first home buyers, which, of course, equates to smaller homes, smaller footprint, less concrete in the slab. That pretty much has leveled off, so we hope to have some better comparability prospectively. So the average price was -- revenue from a slab was within 1% in both the first and second quarter, and our total slab count was up close to 8%. So the volumes there, we just got to do 8% more work to get the bigger footprint revenue side. But I think the -- that growth is really as planned if you think about it. So without that, we would not have had -- without the expansion into Houston to diversify our revenue, we would not have had an up quarter in that businesses.

[Brent Thielman, analyst]

Okay. And just lastly, guys, I guess for the rest of the year, can we still expect you can at least free cash flow your net income like you have in the first half? There's no pull forward or anything like that in the quarter.

[Ronald Ballschmiede, executive]

No. I think the quarter was pretty normal. I would expect kind of that pretty darn close to operating income is easiest thing to look at, and we're still in the same range to get a larger range in the EBITDA side, so nothing too crazy in there seasonality-wise.

[Operator]

Our next question is coming from Sean Eastman of KeyBanc Capital Markets.

[Sean Eastman, analyst]

Compliments to the team. Nice work this quarter. So you touched on this a little bit, Joe. But last quarter, you had talked about this dynamic in specialty where there were some book and burn work in the second half, some sort of capacity in the second half that would need to get filled up. It sounds like award activity really picked up exiting the second quarter, but I just wanted to touch on how that dynamic is shaping up relative to maybe some of the concerns around some of the more secular or speculative projects that Plateau is kind of pursuing. Any update around that dynamic would be great.

[Joseph Cutillo, executive]

Yes, yes. So the great news is when we were talking kind of early in mid-quarter, we still had gaps in the third and fourth quarter. Third quarter is booked. It's full again for Plateau. And we've got a small gap in the fourth quarter, but we're reflecting that in our numbers. But we have seen the activity pick back up. We had a lot of folks that were at, what I'll call the 2-yard line and the 5-yard line, and stuff just went to a stop, right? But as we got towards the end of June, certainly, as we're in July, we saw that activity pick back up. It looks like it's back on a normal pace. Not only are we seeing a lot of project activity, we're seeing some very, very good projects out there that we're actively working on. And if it goes back to normal, which we think it is, we should see some of those hit in the third and fourth quarter and not only position us for a great finish for the year, but that team is very bullish on 2021 and the outlook as we go into it.

[Ronald Ballschmiede, executive]

Yes. The one soft area we see just a little bit of recovery in is the multifamily housing, which is not a large part of our business, but it remains less active than certainly the residential home side of it.

[Joseph Cutillo, executive]

Yes. On the multifamily piece and the commercial side of the business, I would say up until about 2 to 3 weeks ago, we had really seen very little activity and are just starting to see that pick up with this.

[Sean Eastman, analyst]

Got it. That's helpful. And then residential, clearly, market trough and recovery has shaped up better than expected. I just wanted to check back in on the pricing discussions. How are those dynamics running with sort of the recovery? Are you starting to recover some of those concessions you might have been seeing in there?

[Joseph Cutillo, executive]

Yes, we are. We are. It actually shows -- I'll -- the -- as we talk about shifting the business and growing in adjacent markets and going to customers where we can add value and value the services and value proposition we provide, I think this is yet another very good example of the difference between the residential world where we are very, very close with our top 4, 5 customers, which are the top 4, 5 biggest builders in the country and also in the Plateau side with their end markets. But if we gave price concessions in the heavy highway market, we would have about 0 chance of ever recovering that.

In the residential world, there was a really interesting experience we went through and is really a tribute to the quality of our customers. Forget us for a minute. They came to us and said, "Hey, look. This is going to be a challenging time. We're not sure how bad it's going to get. We need some price concessions. We need to lower pricing to get inventory through, et cetera, et cetera. And if the market comes back, we'll come back to you." Almost like clockwork, when we saw the starts pick back up, one after another builders came back to us all over about a 2-week period and said we're taking you back to your historical pricing, which is really, really nice to have customers that honor their word, and we help them through the tough times, and they're there to help us get back to where we need.

So I would say as we go into the -- when we got into the middle of July or so, we started to see pricing come back, and we'll see that in the third quarter to some degree and in the fourth quarter for a while.

[Sean Eastman, analyst]

Okay. Got it. That's helpful. And then on the heavy civil margin side, we're a little lighter than we're modeling in the quarter. There is this members interest dynamic that maybe you could talk us through over the balance of the year and how to think about margins in this business long term through this COVID cost dynamic as well would be helpful to touch on in terms of the go forward.

[Joseph Cutillo, executive]

Sure. I'll let Ron get into the details. At a high level, actually, our -- on the gross margin level, our margins were better. This is one of the complications of our 50-50 ventures. The good news is they perform better than they have historically have. Unfortunately, we have to share half of that, so it comes out of the bottom line. Ron, do you want to explain that a little more?

[Ronald Ballschmiede, executive]

Sure. So our -- we have some nice projects going on at our Nevada/Hawaii and other island business, so they've had a great first half. So the good news is we have more expense, believe it or not. So what that means is, you can do the math, $1.8 million incremental sharing. They're both about -- they're both 50-50 entities, which meant that gross profit from the collective 2 entities increased by $3.6 million. Half of that, we give back. So that's just a mix item in the second quarter. Obviously, there's a pretty good-sized ramp coming up in the third -- second, third quarters, just because that's our big business for our other heavy civil businesses. So while the 50-50s will continue to have a strong year, it will be diluted a little bit from how it was noticeable in the first quarter.

So as part of our slide on modeling considerations, we actually have increased. Our original estimate for the 50-50 sharing for both that and the earnout in total was $11 million to $12 million for the full year. That's sort of the -- well, that would be the other operating expense total. We now provide some outlook that says it's going to be [ $14 million to $16 million ]. As you can tell, most of that increase occurred in the first half year, so I think the point is the balance of the year will be relatively consistent with the past.

[Sean Eastman, analyst]

Got it. Okay. Great. And just lastly for me, guys. Just want to make sure I understand -- good disclosures on the kind of free cash flow modeling. But maybe just to make sure I'm reading the EBITDA to operating cash flow bridge correctly, I think that the noncash items are clear, but the one piece that kind of confuses us is the tax part. So just trying to understand just that EBITDA to operating cash flow to make sure we got that kind of understood correctly.

[Ronald Ballschmiede, executive]

Sure. So as you recall, at the end of the year -- I tell about this every now and then that our core competence for many years was generating NOLs. And the good news is we started using those NOLs. So accounting requirements after you have a sustained profitable pass requires you to put that asset on the books. We wrote it off probably 5 or 7 years ago.

So in the fourth quarter, we had a bunch of noncash income coming from putting net NOL asset on our book. It's basically a receivable for the future. So we will be providing and had to provide in the first half just over an effective tax rate of 28%, and 21% of that number is federal income taxes. We will pay no federal income taxes in 2020. So that's the number I mentioned in the script, a little over $6 million of tax provision that will not be cash. The cash portion of it, which is, give or take, plus or minus $5 million for the full year is all state income taxes, which we paid almost nothing in the first half in cash, primarily because of the U.S. government and the federal government or the states follow the U.S. government, I should say, at delaying the payment of prior year's taxes due and the first 2 quarters of estimates. So we paid a fair amount of cash out, about half of that $5 million beginning in the third quarter. But the only cash is that $5 million, give or take, for the year, of which probably $3 million of it plus will be in Q3 and the balance in Q4. Before that, we had less than $200,000 of cash payments in the first half. So that's probably the largest of the strange one.

And then the other one is -- the noncash side is stock-based compensation. That is pretty much pro rata with income. So that shouldn't have any whipping factor in it by pluses and minuses. And that number is expected to be -- I think the range that we have in the back is $10 million to $12 million for the full year. About half is in the first half.

[Operator]

Our next question is coming from Gerry Heffernan of Walthausen.

[Gerard S. Heffernan, analyst]

Just want to go through a couple of things here, just for the purpose of clarity. On Slide 8, you show the forward-looking EBITDA and the debt coverage ratio. You show current 3.2 leverage point. But I think to get that, you need to use some different numbers for the third quarter and fourth quarter in '19 to get the proper trailing 12 month because you used some -- did you use pro forma numbers with Plateau in there? And if could you just give us those numbers, so everybody is clear as to how you're coming to the 3.2.

[Ronald Ballschmiede, executive]

Sure. These are all forward-looking EBITDA ratios. So at the beginning of the year, EBITDA range, which hasn't changed, by the way, EBITDA range for 2020 was $125 million to $135 million. So we use the midpoint in all those calculations. So what we've done -- so beginning of the year is pretty easy. Total funded debt was about $130 million is -- rounds to that 3.5 or just a little under it at start of the year. And what we've done, going forward, is a modest increase -- as we look forward, we use -- continue to use the $125 million, $130 million average, I'll call it, for the full year, and we have a modest 2% or 3% increase in our estimated EBITDA in the out-years -- in the out-quarters. So basically, it's still in that $130 million -- $125 million to $135 million range. And our total funded debt -- total long-term and current debt is what we're using. So that math should work.

[Gerard S. Heffernan, analyst]

Okay. I get that. I guess I was honing in on the 6/30/2020 actual to get the EBITDA -- the last 12-month EBITDA number for the actual number there.

[Ronald Ballschmiede, executive]

Yes. I can give you that. It's not what the calculation is based on. It's forward-looking EBITDA. But I'd have to dig that out, and I can give you that.

[Gerard S. Heffernan, analyst]

That's fine. When I saw actual, I thought it would be using the actual EBITDA.

[Ronald Ballschmiede, executive]

No, always forward-looking.

[Gerard S. Heffernan, analyst]

Okay. In the first quarter, we talked about there were certainly a lot of concern in what COVID is going to bring. And you spoke to CapEx coming down to a $15 million, $25 million range from a $25 million to $30 million stated at the end of '19. I think we're at $14.6 million so far. Do you have a new number for where you foresee CapEx for the year?

[Ronald Ballschmiede, executive]

We do. We went back to the $25 million to $30 million net number. So that's -- really, the 2 biggest components are there. About half each is -- about half, little over half of that is Plateau. Their volume is requiring some more CapEx or pretty much going back to our original expectations. Just with the support of their quarter and just the volume of work happening, the -- they need the work. So as we went into huddle forward -- going forward and uncertainty, we put in measures to control CapEx that wasn't critical and frankly expected some downside revenue side in the back half of the year. With the performance in the second quarter and looking at the third now and the visibility we have, particularly in the Plateau side and the heavy civil side, we're back at what we originally started the year looking at. So it's back to the $25 million to $30 million net spend on Capex. 80% of that is equipment, refreshing, if you will.

[Gerard S. Heffernan, analyst]

Okay. Great. Again, going back to the fourth quarter year-end period, you talked about 2 large design-build projects, the JV product projects. They were being -- having a delayed start. Are those projects that are cranking out revenues now that we're talking about with the additional -- the way the operating margin looks lower because of the member payments to the JV partners?

[Ronald Ballschmiede, executive]

Yes. The JV work -- or the big contract workers, 4 of them, will start being noticeable in Q3. We had some revenue in there but not a huge number. So going -- we have one, including our record backlog, our combined backlog or unsigned, is one project is about $200 million of that $400 million plus, almost $500 million of unsigned. That project, we've gotten some releases on, about somewhere in the $25 million to $40 million, so we're doing early work but not at a pace that we had thought. So that is pushing towards the end of the year, which is fine, because the other 3 projects, one is going full speed. It has been going full speed. The other 2 are ramping up as we speak. Second quarter, started. Third quarter, it will almost get to a run rate by the beginning of the fourth quarter, sort of the plan for those other 2.

[Gerard S. Heffernan, analyst]

Okay. Great. And just a last question here, just to some backup checking here. In the fourth

[Technical Difficulty]

[Ronald Ballschmiede, executive]

Gerry, are you there?

[Joseph Cutillo, executive]

Gerry, could you repeat that? We lost you for a minute.

[Gerard S. Heffernan, analyst]

Sure. I'm sorry. Yes. I'm hearing some cracks on my side, too. Fourth quarter, we talked about a bridge project in Texas, where you were happy that you had finally gotten into some agreements on how to handle future design changes and billings and things like that. Just wanted to hear how that was going, if all the efforts to come to agreements is playing out the way you had hoped it would.

[Joseph Cutillo, executive]

Yes. We came to all the agreements and everything at year-end and got the cash. I forget if it was late in the year or early this year.

[Ronald Ballschmiede, executive]

Fourth quarter.

[Joseph Cutillo, executive]

We're still continuing to build those. One of the first bridge will be done kind of early -- well, actually, 2 of them would be done in early January, and the third one will be done in June of next year. The first bridge is pretty much right on schedule. The second 2 are running a little ahead of schedule at this point in time. So we continue to plug through that project.

[Gerard S. Heffernan, analyst]

Great, great. Everything else looks great here. Thank you for all the work you did, and thank you for the appendix. It's some real good information in there.

[Joseph Cutillo, executive]

Thank you.

[Ronald Ballschmiede, executive]

Yes. Hopefully, it's helpful. There's a lot of moving pieces. As Joe mentioned, we're not the simplest organization you ever want to run into, so we try to help.

[Operator]

At this time, I'd like to turn the floor back over to Mr. Cutillo for closing comments.

[Joseph Cutillo, executive]

Thanks, Donna, and thank everyone else. I'd like to thank everyone again for joining today's call. If you have any follow-up questions or wish to schedule a call, please refer to the information provided in the press release associated with our Investor Relations group at Sterling or our partners at The Equity Group. I hope everybody has a great day, and thank you again for participating.

[Operator]

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect or log off the webcast at this time, and have a wonderful day.