Centuri Holdings (CTRI) Q3 2025 earnings call transcript

It is now my pleasure to introduce you your host, Nate Teplo, Century's Vice President of Investors Relations. Please, you may begin. Thank you, Libby, and good morning, everyone. Today, we issued and posted to Century Holdings website our 3rd Quarter 2025 earnings release and earnings slide deck. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer-term guidance.

Some of the information that will be discussed today contains forward-looking statements within the meaning 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, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals.

A cautionary note, as well as a note regarding non-gap measures, is included on slide 2 and slide 15 of the presentation. Today's press release and our filings with the Securities and Exchange Commission. We encourage you to review these documents.

Also provided are reconciliations of our non-gap measures to related gap measures. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement, except as required by law. Today's call is also being webcast live and will be available for replay in the investor relations section of our website shortly after the completion of this call.

On today's call, we have Chris Brown, President and Chief Executive Officer and Greg Eisenstark, Chief Financial Officer. I will now turn the call over to Chris.

Thank you, Nick. We'd like you to have your board and hello to everybody on the call. We appreciate you joining our third quarter in 2025 at Interpol.

We have prone to a delivered record revenue for the quarter, improved our base profitability, and produced third quarter adjusted net income of $16.7 million, an increase of $11.4 million from the same quarter last year.

While the concept of discussing our base business performance is not new to us, it does reflect a new way of discussing our results with the market. With today's end release, we've introduced a couple of new non-gap measures, which are base revenue, base gross profit, and base gross profit matching.

Each measure simply excludes the impact of storm restoration services, which is out of amount control and creates volatility in our reporting numbers. Storm restoration services are an important part of our service offerings for customers. However, we believe that these new measures will provide our stakeholders with better information, better aligned to evaluate the fundamentals of our business performance, and provide for improved period of a period from Paris.

In the third quarter, we increased our base revenue about 25%, and saw a 28% increase in base gross profit. This is remarkable growth and reflects identification of our teams across the U. S. and Canada, and there are way of recommitment to safety, productivity, and delivering exceptional services to our customers.

As I start with the commercial update, we have continued to make great strides in our business development. Our Q3 bookings of approximately $815 million reflects a book to Bill of Almost One. Importantly, nearly 80% of the dollar value of the bookings reflects new revenue opportunities, meaning strategic based on new NSS. The work includes the nine figure natural gas steel pipeline replacement project for an existing Midwest customer, driven by the PHMSA gas mega-rule pipeline regulations.

Additionally, work skirts exceed $50 million for data center campus projects across Pennsylvania, and a sizable contract for the chemical vaporization system, seven, a renewable natural gas sector.

We are seeing continued momentum in the pipeline for bid opportunities, and we are now winning bids at a very constant rate. Total bookings for the year now stand at $3.7 billion, put in as well ahead at the 1.1-times targeted book to Bill for the full year 2025.

On the MSA firm, we booked $170 million in renewals, which included an extension with a long-standing utility partner in the Northeast. We also secured more than $65 million in incremental MSA work, which included new MSA contracts in the Midwest and Southeast for gas and electric distribution work.

Our backlog reached a record high of approximately $5.9 billion, up from the $5.3 billion last quarter. We are experiencing significant growth with many of our existing customers, which gives Atlanta's site to incremental workload under existing MSA contracts. This is what drove the more than 10% increase in backlog from the last quarter. Our overall opportunity pipeline remains very robust at about $30 billion. We now have over 600 strategic bid opportunities in the pipeline, which collectively represent a little more than half of the 13 billion.

The strategic bids also include $1.3 billion related to various data center opportunities. Over the next 10, we have tracked a $1.7 billion strategic bids with an award decision expected by the end of the first quarter, 2026, and about $1.3 billion across MSA renewals and new MSA awards, also due by the end of Q1, 2026.

With the visibility we have in our backlog, the near-term booking expectations, and the conservative baseline for incremental awards in 26, we have line of site to double-digit revenue growth in 2026. More details on the backlog pipeline and the growth outlook are on slide eight within the investor debt we've posted today.

Let's turn to efficiency. We've executed a strategic fleet optimization initiative with the goal of generating more cash from them for the business. The initiative has two key components.

First, we're targeting an optimal 50-50 funded mix, maintaining half of our fleet on the balance sheet while leveraging lease instructors for the remainder. Second, we're aiming for a 20% plus improvement in fleet efficiency through enhanced supply and pricing, improved utilization rates, and optimized allocation across our business units.

Last month, we began executing the funding plan by entering into operating lease agreements, totaling approximately $50 million. These initial leases are primarily focused on equipment that we had been, that we had of the short-term rental agreements.

We will continue to keep the market updated as we make more progress, more significant progress on these initiatives. Recently in September, we completed our separation from Southwest gas holdings upon the closing of their sale of the remaining shares in century.

In conjunction with the full separation, we appointed Christopher Cromwell as independent chair of the Board of Directors. Chris brings over 30 years of financial executive experience in energy and construction, and serves well for lead out board. And lastly, we recently announced the addition of Ryan Palazzo as president of US gas. Ryan has more than three decades of experience, deep industry relationships, and leadership capabilities to drive operational excellence, drive further profitability, and strategic growth. We are thrilled to have added Ryan's loyalty.

Now, let's agree to discuss the results.

Thank you, Chris. And good morning to everyone joining us today. Third quarter 2025 consolidated revenues, total $850 million, a new quarterly record, and was an 18% increase from Q3 2024. Consolidated gross profit was $78 million, compared to $75.8 million to the prior year period, and gross profit margin of 9.2% in the third quarter of 2025, compared to 10.5% last year.

When isolating our base results, the strength and growth of the business is clear, with base revenues of 25% and base gross profit of 28% compared to last year. Base gross profit margin was 9.1% in the third quarter, versus 8.9% last year.

Then income attributable to common stockholders in the third quarter was $2.1 million, or $0.2 cents per share, compared to a net loss attributable to common stockholders of $3.7 million, or $0.4 cents on a per share basis in the same period last year. In the third quarter of 2025, adjusted to $75.2 million, which compares to $78.8 million in the prior year's quarter. A dozen net income in the third quarter came in at $16.7 million, or 19 cents on a per share basis, compared to $5.3 million, or $0.6 per share, in the prior year's period.

The difference between our gap and non-gap adjusts net income, primarily reflects the after-tax impact of the amortization of intangible assets, certain non-recurring costs, and non-cash stock-based compensation.

Notable in Q3 2025 was a $8.2 million, or $0.9 per share, in charges related to the debt refinancing, executed early in the quarter.

Now to our segments. U. S. gas revenue was $412.4 million, an increase of 13% compared to the prior year. This improvement largely reflects solid growth in MSA volumes and certain bid projects, demonstrating the underlying strength of our customer relationships and market positions.

Growth profit margin was 7.7% in the third quarter of 2025, modestly improved over last year's 7.6% in the third quarter. We continue to focus on margin improvement, and our priority continues to be centered around better contract management and operational execution.

Canadian gas revenue was $74.2 million, up to nearly 40% from the prior year period. Operational performance in this segment remains strong against the backdrop of sustained favorable demand as evidenced by the 21.9% growth profit margin in the quarter.

Union Electric revenue was $214.5 million, an increase of 25% year over year. Space revenue in this segment was $213 million, reflecting a 29% year over year of increase. Growth has been fueled by robust activity and projects, serving industrial end-user segments, particularly substation infrastructure and inside electric work.

Growth profit margin in the Union Electric segment was 9.1% in the third quarter of 2025, slightly ahead of the third quarter of last year. Space growth profit margin improved to 9% from 8.1% last year. Driven by the strong increase in project work, non-union electric revenue in the third quarter of 2025 was $149 million, an increase of 16% year over year.

This segment is most relevant to base business comparisons, as historically a majority of storm restoration services related to this segment, including last year's very active hurricane season. Base revenue in non-union electric was also $149 million in the quarter, which is a 58% increase from last year. This growth reflects the significant expansion we've seen in MSA activity, building on the momentum we've discussed in recent quarters.

Growth profit margin in the non-union electric segment was 7.1% in the current period, compared to 16.6% in the prior year period. Reflecting the just mentioned significant storm work last year, base growth profit margin was 7.1% compared to 8.7% in the prior year period. The primary driver of margin pressure in the quarter resulted from ramping crews for new and expanding MSA, specifically headcounting creates more than 20% this year to support the growth in workload.

As crews gained experience and these operations mature, we expect to improve productivity, resulting in margin improvement. We have already seen margins improve in October, and we expect continued progress throughout the remainder of Q4.

For any capital expenditures, neck half X was $21.5 million, and our free cash flow in the third quarter of 2025 was negative $16.3 million.

Our free cash flow generation tends to be seasonal in nature with more generation occurring in the second half of the year. With this strong growth we delivered this year, our account receivable balance has increased, however, this is a timing issue, and we expect this to normalize in the fourth quarter. As such, we expect to generate meaningful pre-cash flow in the fourth quarter.

Moving to the balance sheet, on a trailing 12 month basis, our net debt to adjust the unit of ratios 3.8 times, at September 28, 2025, a slight uptick from 3.7 times at June 29, 2025.

With the anticipated step up in fourth quarter free cash flow, we expect our year end leverage ratio to be approximately 3.3 to 3.4 times.

We ended the quarter with $16.1 million in cash cash equivalents on our balance sheet. Early in Q3, we successfully completed a refinancing of our debt arrangements. We extended our revolving maturity to 2030, and increased the facility size to $450 million. We also extended our $800 million terminally maturity to 2032 at a modestly improved interest rate.

Finally, turning to our 2025 outlook, we increased our full year revenue guidance to $2.8 to $2.9 billion. The increase is consistent with the significant growth in our base business, which more than offset the lack of storm activity this year.

For adjusted EBITDA, we expect between 240 million and 250 million. Again, this revision is consistent with lower forecasted storm activity, including an admittedly amount of storm work assumed in the fourth quarter.

Lastly, our net cap X. We've maintained our planned investment range of $75 to $90 million. We remain confident in the outlook of our base business and are making the necessary investments in a more capital efficient manner to optimize the growth opportunities ahead of us.

We'll now turn it back to Chris to wrap up our fair remarks, Chris.

Thank you, Greg. As we wrap up today's call, I want to emphasize that Century continues to execute on a strategic vision of building a premier standalone utility services company, capable of delivering sustainable and profitable growth. Our third quarter results demonstrate solid progress.

This revenue growth was 25%. This profit growth profit was 28%. Reflecting our team's commercial drive, dedication to operational excellence and customer service.

Our commercial momentum remains robust with $3.7 billion in booking through September, a record backlog of $5.9 billion, and a total opportunity pipeline of $13 billion. Put together our commercial success so far in 2025, it positions as well for double-digit revenue growth in 2026.

The fundamental drivers supporting our business remain strong, accelerating utility infrastructure investment, the energy transition, and expanding customer relationships across North America. As we advance our comprehensive multi-year strategic planning process, what position is Century to be a differentiated leader in this significant market opportunity?

We very much appreciate your time and interest today. And, operator, let's begin the Q&A.

And then maybe you can quantify the impact of 3Q versus 4Q in the guide, given that there was a decent amount of storm activity last year in 4Q.

Good morning, Justin. So the decline in the kind of the midpoint or the guidance is all related to storm activities. In fact, our forecast that storm activities were a bit higher and we've actually been able to make up some of that with just our base business growth.

And it was, you know, probably 6040 from a percentage perspective. Between Q3 and Q4 on a storm basis for that was our expectations. I think was your second question.

So let me answer that. If you just look at the process we go through, you know, you've got to, you've got to deploy capital to find opportunity deploy capital to bid up opportunity. You've then got to win it. You've then got to read position resources. You bring in new resources. All of that sort of costs the business with no revenue contribution. You then mobilize the teams and it takes a while for them to get productive.

So I think when you've had such a massive ramp up, I think I think the non-union business in the chorus of about 50% year over year. There's always going to be a little bit of a lag before you get to that level of performance you want. I actually think as we look at October and we're looking to November that more or less is fully recovered. Well, by the time we close out the year that particular scope of work will be the levels we expected it to be from a margin standpoint.

But I wouldn't caution, you know, we will add progressively bigger scopes work all around the nation and we'll have a similar phenomenon. It's just the nature of project related business.

So obviously a lot of progress on bookings and the core profits improving. Can you help us understand the difference in margins between, let's say, the data center type opportunities versus PHMSA related work or other bid work?

How do I have that, San Gita? I would say to the general margin profile in the business across the core and the episodes in a minute, but let me talk more specifically around what was seen in the pipeline. First of all, and then the data centers.

We've been playing a little bit of catch up as we discussed on prior calls to get a sufficient amount of book backlog. And coverage to be sure that we're able to grow the business of the core, not rely upon storm. I think he's taken us to maybe the third getting into the third quarter to have sufficient backlog sufficient coverage. And the sufficient data sets, we've really got a good handle on our business so that we can be predictable. We've got volume into the business and we're basically able to recover the overhead that we need to for the size of the business.

We're now coming to a point where as we look to the future and we start to look at new bid opportunities of which we're looking at two billion at the moment. We're looking at where it makes sense to put margins up in the competitive environment. It's more difficult on MSA that are renewals because there's already a price expectations set with a customer. We're able to do some things, but we are now in a position as we start to look at new market opportunities, bid opportunities, including data set data center work where we can put our margins up in the core of the business. And that's what we're currently doing. It's been very difficult to do that until we have enough base learning work until we've gotten a volume into the business, until we've got to control it.

But we're now at that point where we've got full coverage for this year, so we know exactly what work we're going to do between now and the year end. We've got high visibility for next year, and you saw it in the coverage slide in the deck. I think you've slide eight, and then we're good. I'll focus now without we put logic so we can get a return on our invested capital. Simple as that.

And to follow on that, you asked about the margins kind of in our backlog.

And while margins project by project might differ a little bit, I think we're very pleased with the bid margin that we're getting on the awarded work. You know, some of that data center related activities is a project based, so it's a bit higher than maybe some of the MSA's. But we're very pleased with what we're getting on award.

I was just going to add one thing is even with the sort of mobilization impacts in the non union business. Our core margins have gone up by 5.2% over the past. And that's despite the fact we've added over 100 million a cup. There's a revenue in the quarter. So the work we were booking in the first part of this year, which is now going to the revenue line, it's already proven to be more profitable.

And it's still at its early stages of execution. Right.

I know this year it was an average of three years, but just wondering what you're thinking about for next year.

So I need to write, I stress what we said in our text that in our, I know spoken word.

Storm will always be part of our business because customers want us to do storm work for them when they're in a crisis situation and with that bad weather cut. Our customers want our population needs that. But it's very difficult to plan because we can't predict the weather even though we don't like to be able to do that. So you will only hear us talk about this business, this backlog, base coverage.

And if storm happens, it would be upside to what you see will not be in our planning purposes. And the logic being is what it makes us more predictable to is if we add more to the base in terms of people, resources and equipment, it means that if there is a storm event, we get more opportunity and upside. So we're just going to talk about the base in terms of growth, budgeting and guidance.

And we will, of course, continue to let you know what storm has happened over a trailing period of time. So you can factor that in, but coverage is all going to be around business that we can control.

The revenue for the quarter. So we've not looked at how we impressed in the third quarter. We've got really good coverage in the fourth quarter. And that's why we've raised the revenue guys. So we expect the momentum in the fourth quarter to continue. The only thing about the fourth quarter is we've clearly got two holidays being Thanksgiving and the year end. And that's really the only factor we've got. In terms of base business performance, I think we've done better overall in our performance in the base business that we all expected.

And that's a good thing. And that's really driven by the success of our teams in finding the opportunity, getting the organization focused on servicing about customers and doing more for our customers. That led to the backlog and it's led to the revenue growth. And I think everybody's seen double digit growth within their business, within their business across all of the four service lines.

And we would push to continue that good into next year. But we perform better in the business than we may have expected. But you also remember Joe, we've only been at this as a team for a few quarters now. We're only just seeing the benefits of the pipeline. And it's good to be impressed and good to be pleased and good to exceed your internal targets on the business.

But we're also learning and we want more out of it. And that's what we seek to do in the future.

And then how do you think about the process for prioritizing the bid opportunities in front of you? And you talk about the 600 bid opportunities in the pipeline. And how you think about margin as a prioritization focus versus top line growth versus where you've identified regions that you want to get bigger in. Just how all that comes together for prioritization around the bid opportunities.

Yeah. That's a big question. Our number one priority, I think, really rests within the gas business. We've had a fantastic quarter. We've had two fantastic quarters of performance in the gas business. And I think Q4 sits really well when we look at the backlog, at the work teams done, we've added more strength to the teams and new people. But the priorities is just sort of eliminating the seasonality of the business. So that we're starting ahead as we come into the first quarter. So on the gas side, the priority is winning work around the US that allows us to work 24, 7, 3, 65 days a year, primarily focused on the first quarter. So that would be number one, that jumps to man immediately.

Because once we're able to fix the seasonality, I think the profitability across the full gas business will completely change for us. Then when it comes to the rest, look, we general principle on margins and just repeat, we've now got the sales analytics. We've got the organization positioned to profitable growth. We have the very accurate data set now. We track win rates, we track margins.

But we need a moment to this a little bit. We believe we don't have a problem finding profitable growth. You've seen that in this year's performance. If you just look at where we're trending from the full year revenue target, we put the coverage slide into the deck that repeats it twice now. That demonstrates a further 10% just on what we know today.

I frankly don't believe we're at that phase where we're worried about end market opportunity. So we're going to start some priorities and get our margins up. We've got to be very selective how we do that because we've got some core customers that we must nurture, continue to support because they're relying on us. But there'll be new opportunities when your customers wear, you know, we can afford to buy prices up and we may win a few. We may lose a few.

But the win rates are holding good already as we come through to the end of the first. Into the fourth quarter. So we will be sensitive to trying to put out price margin, out price up and our margin. So as we as we look to the next phase of our growth going into 26.

Well, where where's the focus there? Just from a sort of an execution perspective. I know you're trying to kind of build it out regionally to reduce the stability, but just operationally. Where is the the focus there and how did this quarter compared to your expectations? And then I'll ask my second question. Now is just regard to the regard to the three billion of strategic bids. How are you thinking about the discrete. Overall project mix relative to sort of distribution work and MSA just kind of flow work. Where are you comfortable having discrete size project as a percentage of the overall business mix? Thank you.

All right, Steve. I'll try that for the question for you. Let me talk intimately about the gas business. I think eight months ago, gas performance was consuming. And in order, man, at that time, as well as the really shouldn't cause time to sort of complete what was started last year, which was sort of simplification of the organization.

The delay in that building ahead of me was much needed. There was a refocusing effort. There was some right size. They needed to be done. There was some accountability and performance management we needed to do. And I think we've really come through that. I think the second quarter performance is better than I expected. The third quarter performance was very predictable with the mix of work we've got.

And I think we're, I wouldn't say we've taken our foot off the gas nor have we taken our eyes off the ball here, but the team that leaves that business is really operating a steady state now. And I don't, I don't see, I don't see anything structurally we need to do there. I think we'll well at the experienced curve about how we should be operating. And I think the margins are good. I really do. I know that there's a lot written about the margin should be better. But if you look at, and we've just benchmarked our margins. If you look at the margins of our gas business with the mix of work that we currently execute, we're very pleased with where the margins are.

What we're not pleased with is the seasonality. And I, you know, we had a negative 15 million in the first quarter of this year. We've got to fix that as quick as we can. So that remains to be a priority where we're spending our time talking to different customers and you customers and migration of customers where we know we can work in that first quarter.

The second thing I would say to you is we've, I'm proud of the gas business. I'm proud of the gas team. And I think Dylan and his team have done a fantastic, fantastic job and the difficult circumstances. Last year going into this year, we've got it at steady state, but we needed more bandwidth. In the business so that we can grow with new customers.

So the logic for bringing Ryan in, and I'll talk a bit more about that in a second, bringing Ryan in was to bring more bandwidth to the leadership team so that we can look at things differently. We can look at pricing. We've got slightly different customers, but doing the same services. I'm really much focused the business much strategically about getting margins up. So on the gas side, very pleased where we are. The mix of work and the margins we've got are commensurate with where we are. I don't think there's going to be much that changes there.

The real focus is seasonality, new customers that allow us to take the same services at higher margins. And that's why Ryan has been brought into support of the team here. So that's where the gas business is.

On the three billion, Steve, on the three billion. So on the last call, and it's probably going to tell me, I'm not totally entered on this, but we had, I think, July 4th week, when I got that sales report, we had about 2.2 billion of opportunities that would be decided in the next six months. That's now the three billion we're effective. So this is, this is, this is like for like over a quarter period. So we, and so that has increased well over 40, 45%, which tells me that the opportunities that are in the pipeline are converted to real bids, because that three billion are either tenders we've already submitted or the tenders we're working on and we're about to submit.

It's, it's not really stuff that will be in the future. It's now, it's real and now. Of, of, of that mix, most of it is actually a creative bid work. It's about 1.7 billion if that is good. And then 1.3 of it is really MSA renewals, most of which the 85% of the 1.3 billion is MSA renewals and do the 15% and new MSA's or additive MSA's to the base business.

Meanwhile, the 1.7 billion is new additive bid work that we're working on. The mix within that, I knew you was going to ask me, is about 60% electrical work and 40% gas related. That's the mix.

That's terrific. But that's, that's right. Did I ask you a question, Steve?

I will now turn the call over to Nate Patlow. Please continue. Thank you all for joining the call today and we appreciate your interest in century. That concludes the call.