Centuri Holdings (CTRI) Q2 2025 earnings call transcript

Thank you, John, and hello, everyone. We appreciate you joining our call. This morning, we issued and posted the Century Holdings website, our 2nd Quarter 2025 earnings release. The slides of coming today's call are also available on Century Holdings website. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide longer-term guidance.

Some of the information that what we discussed today contains forward-looking statements within the meeting of the private securities litigation reform act. These statements are as of today's date and based on management's assumptions on what the future holds are subject to several risks and uncertainties, including uncertainties surrounding the impact of future economic conditions and regulatory approvals. A cautionary note, as well as a note regarding non-GAT measures, is included on slides 2 and 16 of this presentation.

Today's press release and our filings with the Securities and Exchange Commission, which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution to get placing undue reliance on any forward-looking statements and we assume no obligation to update any such statement. Today's call is also being webcast live and will be available to replay in the investor relations section of our website, shortly after the completion of this call.

On today's call, we have from Century Holdings the following members of the leadership team, Christian Brown, President, and Chief Executive Gregory Eigenstar, Chief Financial Officer. I'll now turn the call over to Chris.

Thank you, Jason, and good day to all of you. We thank you for attending our second quarter to 2025 earnings call. First of all, I'd like to sincerely thank our hard-working employees across the US and Canada who deliver the highest service quality to our customers in a safe and productive manner. Without them, we wouldn't be here today.

We're pleased with our performance in the second quarter, which delivered higher profitability year over year across all of our four business segments.

On a consolidated basis, gross profit was 12% higher than last year this time and nearly 20% improved year to date. We drove strong revenue growth across our union and non-unoelectric operations and also within our Canadian gas statements. US gas also performed well and continues to make good progress in margin improvement initiatives and delivering predictable performance.

Our sales and business development strategic initiative underpinned by a day-to-driven approach in a robust project pipeline, along with our shift towards an organisational-wide growth mindset through another strong quarter in commercial performance.

This is evidenced by 1.8 billion in new awards in the quarter, which materially tops our Q1 record performance of 1.2 billion in new orders. With 3 billion in total bookings through the first half of the year, we've already achieved a book to build through H1 of 2.3 times and are on track to exceed our targeted book-to-build ratio of 1.1 times for the full year 2025. Further, our strong bookings performance, our backlog, and near-term opportunities give us confidence to increase our full-year revenue guidance.

I'll expand on its success in Q2 shortly, but first, equally, it's not more compelling than our current bookings, other strong end markets that we serve. As a result of our shift to get closer to our customers and better understand their needs, we've been able to increase the near-term addressable market of differentiated opportunities to which we will pursue. These opportunities span all core end markets, including gas, electric, and distributed power, including data centers.

Since the first quarter of this year, we've added over 2 billion of new differentiated opportunities into the pipeline, which now stands at almost 14 billion.

Our sales strategy is twofold. Improve alignment about focus, resources, and capability in capturing a larger share of the wallet from our existing customer relationships, and delivering our core services into new differentiated opportunities. The latter includes migrating our resource delivery to mitigate seasonality in our business, particularly on the U. S. gas side.

Central to execute in this strategy is our one-century approach, which has fundamentally transformed how we engage with our customers in the broader market. The century approach requires the entire organization to engage with our customers to not only safely deliver quality services, but to identify how we can increase the scope of what we do to deliver future customer needs.

In addition, we have identified approximately 20 customers that we currently underserved, on which your forward is over $200 billion of opportunity over the next five years. We've created specific plans to engage more closely with these customers, aligning building capability and resource delivery to ensure we meet their needs and successfully maximize this opportunity. Over the last 90 days, I've been able to engage with almost all of these 20 customers to discuss their plans and challenges and share how century will align our business to ensure we meet their needs.

So drilling further into our commercial success in the second quarter. As outlined in February, we began 2025 targeting over $3 billion in bookings, compared to $1.8 billion from MSA renewals, and over $1.2 billion from expanded scope, we are effectively already there on that target. I'm proud that over one third of our new awards, our additive work above our existing MSA's, which will underpin our future growth.

Of the total bookings in the quarter, nearly $1.2 billion represents MSA renewals, primarily from a few hundred billion dollar agreement that longstanding gas utility customers in the northeast of Midwest, including one relationship that spans over 40 years. In one of these cases, the award came sooner in the year than we had previously anticipated.

A key focus of ours in the renewal process has been ensuring that we generate adequate returns so as to support the achievement of our historical norm of 7% plus gross margin in our gas business.

We've also secured nearly $250 million from incremental MSA work, primarily comprised about a new service territory through these gas-focused MSA renewals.

Lastly, we won a $375 million in strategic project towards Q2, heavily concentrated in our union electric businesses in the northeast. These awards are comprised of core electrical work, including utility transmission projects with both $345KV, how voltage line and $115KV line projects won during the period, as well as working adjacent and emerging markets, such as water infrastructure, distributed power, and of course data centers.

Notable windiness cascading included our second water infrastructure project when this year, and two awards related to RNG infrastructure. You'll recall that we secured an award related to data center electrical infrastructure in Q1 and have over 20 data center projects currently in our pipeline that we are pursuing. We anticipate the second half of 2025 to be focused on client engagement, positioning, and tendering for 2026. And we anticipate bookings to moderate during the remainder of 2025 with the exception of some MSA renewals and plan project awards.

I reiterate, we anticipate that we will exceed our full yearbook-to-build target of one-point walk. It's also worth noting that we are already positioning and tendering for 2026 opportunities, yet more evidence of the impact of our Forward Thinking Sales Initiative and Growth Oriented Mindset. Now a few words on another important facet about strategy, capital efficiency. We remain focused on improving the efficiency of the fleet, an area where we can see meaningful opportunity to drive balance sheet strength and confident that we can make significant strides.

As announced in July, we had a senior vice president of fleet in procurement with almost 30, sorry, almost three decades of experience in the energy and construction sectors to drive our enterprise-wide fleet and resource in strategy. Coming to us from one of North America's largest utility and infrastructure contractors where he managed 17,000 fleet assets globally. He will also focus on maximizing equipment utilisation and improving capital efficiency across our $1 billion of fleet portfolio. Further, as part of our strategic initiative to optimize our asset management approach, I'm pleased to report that we've made meaningful progress in establishing a more balanced equipment financing model. This hard-read approach to asset financing provides us greater flexibility in managing our fleet of service vehicles and equipment whilst maintaining our ability to efficiently deploy resources across all of our expensive operations.

Now to an overview of our business trends to the second quarter. In our U. S. gas segment and as expected, our revenue was stable year over year and we focused on executing our substantial backlog of awarded work to begin demonstrating year over year growth in the second half of 2025. The strength of our recent MSA renewals and improved commercial terms is providing better profitability. We've seen improvement in gross margins year over year, supported by better resource utilisation and work is ongoing as we continue to performance manage and identify further opportunities to drive further margin enhancement. We remain confident that our focus on operational excellence combined with our stronger commercial terms will create sustainable margin improvement in the months and quarters ahead.

Our Canadian gas operations delivered exceptional results with strong revenue growth and margin expansion demonstrating the effectiveness of our operating model within that market.

Turning to our electric business, we're seeing excellent momentum across both segments. Our union electrical operations delivered robust growth and profitability in core business activities, particularly in industrial focused markets where we play a role in executing on complex infrastructure projects. In our non-union electric segment, we've sustained a positive trajectory that began last year with significant revenue growth driven by increased MSA volume and improved deployment. To further elaborate on these trends, let me now turn over to Greg for more specific details on the financial results.

Thank you, Chris, and good morning to everyone joining us. Second quarter 2025 consolidated revenues totaled $724.1 million, a 7.7% increase from the second quarter of 2024. And consolidated gross profit was $67.8 billion, which is 12.1% higher than the prior year period. Growth profit margin of 9.4% in the second quarter of 2025 was approximately 40 basis points higher than the 9% reported in the second quarter of 2024.

On a gas basis, netting come attributable to common stock in the second quarter with $8.1 million, $4.9 cents per share. Compared to netting come attributable to common stock of $11.7 million or $14 cents on a per share basis in the same period last year. In the second quarter of 2025, total company adjusted even up a non-gas figure was $71.8 million or approximately 5% higher than prior year quarters, $68.6 million. Aligned with our internal expectation, adjusted even the margin was 9.9%, which compares with the 10.2% in the second quarter of 2024.

Non-gap adjusted netting come in the second quarter came in at $16.9 million or 19 cents on a per share basis. Compared to $17 million or 20 cents per share in the prior year period, the difference between our gap and non-gap adjusted net income primarily reflects the after-tax impact of the importization of intangible assets, certain non-reoccurring costs and non-cash stock-based compensation. Now we are reportable seconds. UN gas segment revenue was $338.8 million, flat compared to the prior year. With the backlog driven by recent successful awards, we anticipate that both revenue and profitability improvements will continue into the second half of 2025. Growth profit margin was 7.8% in the second quarter of 2025 and above prior year period, 7.4%.

This increase was due to better resource utilization under MSA compared to the second quarter of last year. Following on from Chris's comments, we remain focused on margin improvement in our US gap business through enhanced performance management. We've strengthened our foundation through strategic hiring and improved processes and saw improvement throughout the quarter. Our initiatives and achievements remain a work in process progress, but with strong market demand, we are confident in our ability to return to historical margin levels. Canadian gas segment revenues were $55.1 million, plus 18.1% from the prior year period. Both segment margin of 17.2% was approximately 210 basis points improved over the prior year period as we continue to execute very well against a backdrop of steady, strong demand.

Union Electric revenue was $182.2 million in improvement of 11% year over year. Our poor union electric sector, which excludes offshore wind and storm restoration services, grew by 26.4% over the same period in 2024, driven by continued strength in project work centered around industrial focus and markets, which we performed substation infrastructure and inside electric work. Within this segment, offshore wind revenues was $18.7 million in an expected decrease of approximately 41% or approximately $13 billion as the project work winds down in line with our expectations.

First profit in the union electric segment was 8.4% in the second quarter of 25.100 basis points ahead of the 7.4% reported in the second quarter of 24, due to the improvement in activity in our poor business. Non-union electric segment, revenue in the second quarter of 2025, was $149.9 million, a 24.4% increase here over year. Poor non-union work increased by more than 50% versus the prior year period, primarily due to an increase in volumes of the MSA. As we deployed to employees significantly more crews and had higher work hours, segment growth profit was 11% in the current quarter, which compares to 13.5% in the prior year period. This reflects the unfavorable impact of the decline in storm work, which carries much higher margins than our poor electric work in this segment.

And more than offset what was a strong performance in core margins, from the favorable impact of more efficient utilization of fixed costs to the much higher volume of work. Company-wide, our DNA expense, excluding one time in certain non-cash charges, increased $2 million a year over year due to costs associated with our sales and business development activities and improved performance.

Turning to capital expenditures, net CAF-X was $19.4 million, compared to $17.7 million in the prior year period. And our pre-cash flow in the second quarter 2025 improved by $27.1 million compared to the second quarter of 2024. As we typically see each year, working capital can increase in the second quarter to our higher activity levels compared to the first quarter. This seasonal pattern is normal for our business, and we remain confident that our leverage ratio will improve from year end 2024 to year end 2025. But we did some balance sheet highlights. On a trailing 12 month basis, our net debt to adjust to even a ratio was 3.7 times at June 29, 2025, compared to 3.5 times at March 30, 2025.

As amounts drawn under our revolver increased by $74.4 million during the period. We ended the quarter with $28.3 million in cash and cash equivalents on the balance sheet. Near the end of the second quarter, we initiated a refinancing of our debt arrangements, which was successfully completed in early July. These refinancing actions extended our revolver maturity to 2030, and increased the facility size to $450 million, and extended our $800 million term low fee maturity to 2032 at a modestly improved interest rate. These actions, along with the elimination of legacy change and control provisions from our time as a Southwest gas holding subsidiary, enhance our financial flexibility going forward.

During the second quarter, our free float significantly increased following two independent secondary offerings by Southwest, which as of today owns approximately 52% of our shares outstanding. Finding and turning to our 2025 outlook, on revenue we are increasing our range, now expecting to deliver between $2.7 and $2.85 billion, up from $2.6 to $2.8 billion previously, given the strong bookings. For adjusted even though we narrowed our outlook to $250 to $270 million, from $240 to $275 million, we continue to execute on our market improvement initiatives, notably in US gas. As we consistently review our business, we are investing in strategic planning initiatives and strengthening our talent acquisition efforts to support future growth, which will result in a slave uptick in our TNA expense.

Lastly, to CAPX, the growth we are experiencing, especially in our electric business, is creating opportunity for strategic investment. To capitalize on this momentum and support our expanding operations, we are increasing our planned investment to $75 to $90 million, up from our previous range of $65 to $80 million. This enhanced capital deployment reflects our confidence in the business, positions us to capture even more growth opportunities ahead. And importantly, does not inflict our ongoing efforts to ensure capital efficiency and transition our fleet financing next.

And now, back to Chris, to conclude our prepare- Thank you, Greg. Century continues to execute on our strategic plans of delivering sustainable, profitable growth. To summarize, our one-century approach is driving meaningful commercial momentum as evidenced by our $3 billion in first half bookings, and the growth in our pipeline to nearly $14 billion. This is underpinned by our robust end markets. Our second quarter performance demonstrates the strength of our diversified platform. We are seeing excellent momentum in our electric operations, particularly strong performance in our Canadian business, and we are making steady progress in our U. S. gas segment. The broad-verse execution gives us the confidence to increase our full-year guidance, revenue guidance. We are also advancing our strategic initiatives around capital efficiency, including good progress on our equipment financing model and fleet management optimization.

These efforts, combined with our enhanced commercial capabilities, position as well for continued growth. The fundamental drivers of our business remain robust, supported by increasing utility infrastructure spending and our expanding relationships with key customers across North America, and we look forward to updating you on our continued progress in the next quarter. Thank you very much for your time and support.

Thanks. And maybe I'll answer that one, Steve, and good morning to you, and then Greg possibly adds something to it. Look, your assessment's good. You know, we've had a very, very strong six months to get the backlog to give us more volume into the business that allows us to also be in better control and more predictable. So what I would say is the backlog that we have as we go into the second half of the year, is it a high margin than what we've delivered in the first half of the year. You know, the Q3, Q4, internal forecast demonstrate that we'll see an improvement across all the businesses in terms of margins. So the union and non-union electric as their projects mobilize during the first half of the year, we'll get into full flight as we hit the sum of them now and then we go into the later part of the year.

And we should, and we expect to see greater improved margins in the second half of the year, which is given as ultimately confidence on the full year forecast. You see the same in the MSA work, you know, January, February, March, there was some weather impact as we discussed on the last call. The MSA now work is now customers are now releasing more and more work towards, and we'll start to peak in the coming weeks and months ahead and inevitably we should see and expect to see greater margins in Q3 and even more volume into the pipeline. We've increased our booking levels. We're starting to get a better handle on our win rates, a better handle on pricing sensitivities.

And as we build further backlog, we will no doubt start looking at how do we get better pricing improvements, how do we become a little bit more differentiated in our offerings to get better margins whilst we'll be, you know, pretty diligent in the risk profile we take on the future work. So in summary, we expect second half of the year margins to improve the where we were in the first half. We see the backlog margins greater than what we've just delivered. We think it'll be across all of the segments.

And I think it's now we've got a good and stronger handle on the data within ourselves pipeline, as well as our win rates and our performance. We'll look to see if we can push out differentiations further and improve pricing in the future.

Yeah, I think in the near term, Steve, when we look at what we need to deliver from both a budget and a forecast standpoint in the next three, six, nine, and maybe even 12 months appreciating that, that's throttled into 26. I think we've got sufficient line of sight on what resources we need and where they're going to come from. I think as we start working a little bit longer range planning, we will need to do some we'll need to look at the lead supply and talent supply market differently in a more structured where currently we do a lot of resourcing through the op curs and I think there'll be a lot more work we need to do centrally.

But we'd also see that needed now to meet the next three, six, nine, even 12 months of resources as well within the current resourcing capabilities and well within what we've done previously. But in the long run, we will need to look at doing things in a bit more strategic where at a group level versus through the op curs.

Thanks for your question.

Greg, do you want to do you want to lead that one? Yeah. So good morning, Joe. And we have made a really considerable, you know, some considerable progress here in the second quarter and early in the third quarter on our on our capital efficiency initiative, not only from the strategic hire, like Chris mentioned, but also from just getting a repeat done that we alluded to in past calls that's been completed. We actually have leasing partners signed up now and ready to execute in very short order. And so we are working to get those done and you'll see some of that progress here in the second half of the year. Obviously, it'll continue to ramp up and fully be implemented, you know, over maybe a bit of a longer period of time.

From a margin perspective, I wouldn't expect material changes in margin over the long term. We think that we can get to our targeted goal. It's more than achievable with the work we've done. We'll be able to rebalance some of that potential unit of pressure, you know, with just increased pricing and better efficiency in our fleet utilization to largely offset any kind of impact from a margin perspective.

And then wanted to ask on the core electric utility, both union and non-union and what you're seeing versus, you know, earlier in the year expectations from customers, areas where you're seeing higher activity than you would have anticipated, as well as how much of this is the strength of underlying activity versus some areas where you've been able to pick up some share in the market.

Maybe, do you want me to do that Greg, answer this one? I would, I would say the following, all of our customers, I think I alluded to in my prepared notes, I spent time with 19 of the 20 customers over the last 90 days and every one of them is clearing up, they're increasing their capital budgets. There's a general positive trend across all electric transmission distribution, distributed power, data centers, it's certainly more favorable than at the early part of the year. And it even extends into gas.

You know, customers are very much focused on quality of and quantity of resource delivery and looking at maximizing outsourcing because they're ultimately resource constrained themselves. But this is as close to a seller's market that I've seen in my 35 years. The key for us is to get closer to our customers and really in line of what they need, that start planning our investment in people, equipment and know out and start building capability around their needs. And as I say, when I, when I speak with the customers, it isn't in many cases about displacing anybody. Although we've seen one or two of our MSA's where we've got a JSN contractors, we've been able to go to customers and say, look, give us more scope and we can give efficiency to you.

We can generate a better return. So we have displaced and being able to capture more opportunity on some MSA's. But that really isn't the prevalent theme. You know, customers are giving me the messages around, you know, keep delivering to the quality and safety standards we expect of you, build up a resource base that's of the same and highest quality. And we've got more work than we've got resources for.

Thanks for your question. So let's just run through it. You know, the pipeline, as you said, is, as we've stated, it's just shy of $14 billion. If you look at the mix in there, about two-thirds of it is actually new basically tell you our addressable market is very much focused on driving growth into the business.

We've also got about $2 billion of near-term opportunities that we are currently tendering now. All the bids are already in and we'd expect decisions this year and a further $600 to $700 million of MSU renewals this year. So the headlines are, yeah, $14 billion, two-thirds of it is new projects worth one-third of it is MSU renewals. In the very near term this year, we've got two billion of pending bids that are out there. And we've got, in addition, $600 to $700 million of MSU renewals that are pending this side of the Christmas break. About 20% of the project work is distributed power of data centers when you look at the mix. I think last thing I would say is the risk profile has not changed at all.

And we've had questions previously about, you know, we're looking at bigger contracts. The average size of the contract is less than $20 million. So it's well within our historical risk profile. We continue to deliver the same services, the same end market as we've always done. We've just been somewhat more aggressive in actually ourselves with a further opportunity.

Go ahead.

I will give you some sort of strategic outline and then let Greg go into some detail. Look, our overall objectives in the next period, next few years is to hit a steady run rate where half of our fleet is funded and balance sheet cash in half is from leasing.

And you could calculate very quickly how much free cash flow that generates over the next three to five years. Definitely, as we look to capture further opportunity, one of the real drivers for bringing in somebody new to lead it is we're trying to seek somewhere between a 15 up to 25 percent efficiency serving on the use of the fleet. That's either achieved by supply chain improvements by looking at the five businesses and going to the market as one or it's driven by a better utilisation or better life use on the assets. So the two strategic drivers are 50-50 mix and then driving between 15 and 25 percent efficiency across the fleet when we look at it as a whole.

And I would just add, even though we're increasing our CapEx guidance, we are not deviating from our internal expectations on mix between buying and to need. So we haven't changed or swayed that. But we are growing, as you can see in our electric businesses, be healthy.

Thank you, thank you to the questions.

Yeah, a couple things.

Yeah, you go correct.

That's fine. What I'd say as a reminder you know when we renew an MSA, we have the ability and we execute and negotiate you know greater price increases related to you know from the MSA contract. So I think that's one point that's important to call out as we renew these MSA is we've been able to renegotiate pricing a bit higher than what we have historically had. From a mix of work, you know we've been able to take our services with these customers. We've been taking in certain cases, territories, new territories and so you know I point you to one of our slides you know MSA renewals, the strategic bid, you know we've been able to increase the scope you know points substantially in certain areas.

Yes, specifically we've added 25% incremental growth on the volume that we on the renewal.

Yeah I mean we're obviously pointed out last year the second half of the year we had some seasonally higher storm revenues that came in. We've said in our guidance we've looked at more of a historical you know average and built that into our guidance. We also had higher offshore wind last year so those two are kind of headwinds going in year over year but offsetting that is just improved performance, improved core business that we've already alluded to in the first six months. We would expect that type of cadence to continue to offset you know year over year.

I appreciate your questions.

Good morning guys. Picker. Christian the bookings are are fairly balanced, slightly skewed to electric. Is that a strategic choice or is that just coincidental? I would say coincidental and some of it's timing but the overall pipeline 52 48 is I think that makes it shifts from day to day because this is a dynamic situation but it is coincidental. Some customers say it longer to decide some do not. I think I even alluded to in my commentary there was one award in the gas side that we didn't anticipate till later in the year and that landed in the quarter so it's not deliberate. No. Okay so given the increase in the backlog and sort of the balance contained within it, does that suggest to you you know sort of an inherent accretion to margin just due to the revenue balance?

I don't know do I answer that one other than to say you know we definitely see improved margins in the second half of the year. The outspoken backlog margins were and are higher than the outlooks in the first half. Some of that is driven just by the mobilization in the early part of the year. Some of that is driven by the fact that we've got more work now into the backlog and it's been repriced to current conditions. I think the most notable thing for the business on the amount of work we've booked in the backlog is allowing us to be more predictable which was kind of something we were lacking last year. We've now got such a head of theme in terms of pipeline size data analytics and backlog that we are now looking not just three months ahead.

We're looking six, nine, 12 months ahead. So that's allowing us to be very much more predictable in mobilizing resources making informed pricing decisions with our customers because we've got a really good view of where we're going to land at the end of the year and we're very predictable now because of the data and the bookings and the backlog of the market information we've got in house. So I would say yes as I answered one of the earlier questions to Steve and we've eluded to and now no second half margins were better across all businesses but the volume the bookings really helps predictability, resource planning and gives us confidence on making decisions about the future of the business and it's great to be sat here mid-year and know that you've essentially we've now got a really good view on where we are currently for Q1 so that we can inform our decisions now to win more work in areas of the country that can help mitigate the seasonality and we're in a conversation now around where we think we'll be for the full year 26 to drive double-digit growth.

So I yes, Margin, but more importantly for us I think it's the predictability allowing us to make informed decisions and basically deliver what we say we're going to deliver.

What I was what I was looting two grids in good morning is as well every year in an in an all-year agreement we have an annual escalator invented into the contract when we come up for renewal we have historically proven and this year is no different that we're able to reevaluate our unit pricing in a more precise way and ask for and achieve greater price increases than what a normal kind of annual escalator would generally give you. So we're okay that helps. I'm just providing things based on actual performance. Okay that clarifies that.

Just wrap up the call. I really appreciate everybody giving the time to us to supporting us and we look forward to providing updates over the coming weeks and in the next quarter. So thank you everybody.