Centuri Q2 2025 Earnings Report

Centuri EPS Results

• Actual EPS: $0.19
• Consensus EPS: $0.21
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $0.20

Centuri Revenue Results

• Actual Revenue: $724.05 million
• Expected Revenue: $702.35 million
• Beat/Miss: Beat by +$21.70 million
• YoY Revenue Growth: +7.70%

Centuri Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 10:00AM ET

Centuri (NYSE:CTRI) operates as a utility infrastructure services company in North America. It offers gas utility services, including maintenance, repair, installation, and replacement services for natural gas local distribution utility companies with focus on the modernization of infrastructure. The company also provides electric utility services comprising design, maintenance and repair, upgrade, and expansion services for transmission and distribution infrastructure. Its customers include electric, gas, and combination utility companies, as well as serves end markets, such as renewable energy and 5G datacom. The company was founded in 1909 and is headquartered in Phoenix, Arizona. Centuri Holdings, Inc. is a subsidiary of Southwest Gas Holdings, Inc.

Centuri Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: First-Half Booking Surge and Upgraded Guidance: Century secured $3 billion in new awards through H1 (a 2.3× book-to-bill ratio) and raised full-year revenue guidance to $2.7–2.85 billion (from $2.6–2.8 billion).
• Positive Sentiment: High-Value MSA Renewals: The company renewed $1.2 billion in MSAs—achieving ~25% incremental scope gains and higher pricing—to support historical gross margins above 7% in its gas business.
• Positive Sentiment: Robust $14 Billion Pipeline: Century’s near-term pipeline stands at almost $14 billion, with two-thirds in new project awards (including ~20% in data centers and distributed power) and one-third in upcoming MSA renewals.
• Positive Sentiment: Capital Efficiency Initiative: A newly appointed SVP of Fleet & Procurement will optimize the $1 billion fleet portfolio, targeting a 50/50 buy-lease mix and 15–25% equipment utilization gains.
• Positive Sentiment: Enhanced Financial Flexibility: Recent debt refinancings extended revolver maturity to 2030 and term-loan B to 2032 with improved rates and larger facility sizes, while free float increased.

Presentation

[Operator]

Greetings, and welcome to Century's Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jason Wilcox, Century's chief legal and administrative officer and corporate secretary. Please, you may begin.

[Jason Wilcock, EVP, Chief Legal & Administrative Officer and Corporate Secretary at Centuri Holding]

Thank you, John, and hello, everyone. We appreciate you joining our call. This morning, we issued and posted the Century Holdings website, our second quarter twenty twenty five earnings release. The slides accompanying 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 some longer term guidance.

[Jason Wilcock, EVP, Chief Legal & Administrative Officer and Corporate Secretary at Centuri Holding]

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 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 GAAP measures is included on slides two and sixteen 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 against placing undue reliance on any forward looking statements, and we assume no obligation to update any such statement.

[Jason Wilcock, EVP, Chief Legal & Administrative Officer and Corporate Secretary at Centuri Holding]

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 from Century Holdings the following members of the leadership team. Christian Brown, president and chief executive officer, Gregory Eisenstark, chief financial officer. I'll now turn the call over to Chris.

[Christian Brown, President & CEO at Centuri Holding]

Thank you, Jason, and good day to all of you. We thank you for attending our second quarter twenty twenty five earnings call. First of all, I'd like to sincerely thank our hard working employees across The U. S. And Canada who deliver the highest service quality to our customers in a safe and productive manner.

[Christian Brown, President & CEO at Centuri Holding]

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 nonunion electric operations and also within our Canadian Gas segments. U.

[Christian Brown, President & CEO at Centuri Holding]

S. 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 data driven approach and a robust project pipeline, along with our shift towards an organizational wide growth mindset, drove another strong quarter in commercial performance. This is evidenced by 1,800,000,000.0 in new awards in the quarter, which materially tops our q one record performance of 1,200,000,000.0 in new orders. With $3,000,000,000 in total bookings through the first half of the year, we've already achieved the book to bill through H1 of 2.3 times and are on track to exceed our targeted book to bill ratio of 1.1 times for the full year 2025.

[Christian Brown, President & CEO at Centuri Holding]

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 this subset in q two shortly, but first. Equally, if not more compelling than our current bookings are the strong end markets that we serve. Our result 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.

[Christian Brown, President & CEO at Centuri Holding]

Since the first quarter of this year, we've added over 2,000,000,000 of new differentiated opportunities into the pipeline, which now stands at almost 14,000,000,000. Our sales strategy is twofold, Improve alignment of our 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 US 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.

[Christian Brown, President & CEO at Centuri Holding]

In addition, we have identified approximately 20 customers that we currently under serve of which afford us over $200,000,000,000 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 ninety days, I've been able to engage with almost all of these 20 customers, 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 twenty twenty five targeting over 3,000,000,000 in bookings comprised of 1,800,000,000.0 from MSA renewals and over 1,200,000,000.0 from expanded scope, new MSAs, and strategic bid projects.

[Christian Brown, President & CEO at Centuri Holding]

Through the first half, we've effect are effectively already there on that target. I'm proud that over one third of our new awards are additive work above our existing MSAs, which will underpin our future growth. Of the total bookings in the quarter, nearly 1,200,000,000.0 represents MSA renewals, primarily from a few $100,000,000 agreement that long standing gas utility customers in the Northeast Of Midwest, including one relationship that spans over forty 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 achieve the so as to support the achievement of our historical norm of 7% plus gross margin in our gas business.

[Christian Brown, President & CEO at Centuri Holding]

We've also secured nearly 250,000,000 from incremental MSA work, primarily primarily comprised of adding new service territories through these gas focused MSA renewals. Lastly, we won a $375,000,000 in strategic project awards in q two, heavily concentrated in our union electric business in the Northeast. These awards are comprised of core electrical work, including utility transmission projects with both three forty five k b high voltage line and one fifteen k b line projects won during the period, as well as work in adjacent and emerging markets such as water infrastructure, distributed power, and, of course, data centers. Notable wins in this category included our second water infrastructure project win this year and two awards related to RNG infrastructure. You recall that we secured an award award related to data center electrical infrastructure in q one and have over 20 data center projects currently in our pipeline that we are pursuing.

[Christian Brown, President & CEO at Centuri Holding]

We anticipate the 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 M and renewals and planned project awards. I reiterate, we anticipate that we will exceed our full year book to bill target of 1.1. 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 orientated mindset. Now a few words on another important factor of our strategy, capital efficiency.

[Christian Brown, President & CEO at Centuri Holding]

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 hired a senior vice president of fleet and procurement with almost 30 sorry, with almost three decades of experience in the energy and construction sectors to drive our enterprise wide fleet and resourcing 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 utilization and improving capital efficiency across our $1,000,000,000 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 hybrid 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 extensive operations.

[Christian Brown, President & CEO at Centuri Holding]

Now to an overview of our business trends for 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 2025. The strength of our recent MSA renewals and improved commercial terms is providing better profitability.

[Christian Brown, President & CEO at Centuri Holding]

We've seen improvement in gross margins year over year, supported by better resource utilization, 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.

[Christian Brown, President & CEO at Centuri Holding]

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 nonunion electric segment, we've sustained the positive trajectory that began last year with significant revenue growth driven by increased MSA volumes and crude deployment. To further elaborate on these trends, let me now turn it over to Greg for more specific details on the financial results.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Thank you, Chris, and good morning to everyone joining us. Second quarter twenty twenty five consolidated revenues totaled $724,100,000, a 7.7% increase from the 2024, and consolidated gross profit was $67,800,000,000, which is 12.1% higher than the prior year period. Gross profit margin of 9.4% in the 2025 was approximately 40 basis points higher than the 9% we reported in the 2024. On a GAAP basis, net income attributable to common stock in the second quarter was $8,100,000 or $09 per share compared to net income attributable to common stock of $11,700,000 or $0.14 on a per share basis in the same period last year. In the 2025, total company adjusted EBITDA, a non GAAP figure, was $71,800,000 or approximately 5% higher than prior year quarter's $68.68600000.0 dollars Aligned with our internal expectations, adjusted EBITDA margin was 9.9%, which compares with the 10.2% in the 2024. Non GAAP adjusted net income in the second quarter came in at $16,900,000 or 19¢ on a per share basis compared to $17,000,000 or 20¢ per share in the prior year period. The difference between our GAAP and non GAAP adjusted net income primarily reflects the after tax impact of amortization of intangible assets, certain non reoccurring costs, and non cash stock based compensation. Now to our reportable segments.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

US gas segment revenue was $338,800,000 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 twenty twenty five. Gross profit margin was 7.8% in the 2025 and above prior year period 7.4%. This increase was due to better resource utilization under MSAs compared to the second quarter of last year. Following on from Chris' comments, we remain focused on margin improvement in our US gas business through enhanced performance management.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

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 $55,100,000, up 18.1% from the prior year period, while segment margin of 17.2% was approximately 210 basis points improved over the prior year period as we continue to execute very well against the backdrop of steady, strong demand. Union Electric revenue was a $182,200,000, an improvement of 11% year over year.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Our core Union Electric segment, which excludes offshore wind and storm restoration services, grew by 26.4% for this over the same period in 2024, driven by continued strength in project work centered around industrial focused end markets, which we perform substation infrastructure and inside electric work. Within this segment, offshore wind revenues was $18,700,000, an expected decrease of approximately 41% or approximately $13,000,000 as project work winds down in line with our expectations. Gross profit in the union electric segment was 8.4% in the '25, a 100 basis points ahead of the 7.4% we reported in the '24 due to the improvement in activity in our core business. Nonunion electric segment revenue in the 2025 was a $149,900,000, a 24.4% increase year over year. Core nonunion work increased by more than 50% versus the prior year period, primarily due to an increase in volumes under MSA as we deployed deployed significantly more crews and have high and had higher work hours.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Segment gross 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 core 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 cost to the much higher volume of work. Companywide, our g and a expense, excluding one time and certain noncash charges, increased $2,000,000 year over year due to costs associated with our sales and business development activities and improved performance. Turning to capital expenditures. Net CapEx was $19,400,000 compared to $17,700,000 in the prior year period, and our free cash flow in the 2025 improved by 27,100,000 compared to the 2024.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

As we typically see each year, working capital increased 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. Moving to some balance sheet highlights. On a trailing twelve month basis, our net debt to adjusted EBITDA ratio was 3.7 times at 06/29/2025 compared to 3.5 times at 03/30/2025 as amounts drawn under our revolver increased by $74,400,000 during the period. We ended the quarter with $28,300,000 in cash and cash equivalents on the balance sheet.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

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 $450,000,000 and extended our $800,000,000 term loan b maturity to 2032 at a modestly improved interest rate. These actions, along with the elimination of legacy change of control provisions from our time as a Southwest Gas Holdings 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. Finally, turning to our 2025 outlook.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

On revenue, we are increasing our range, now expecting to deliver between 2.7 and $2,850,000,000, up from 2.6 to $2,800,000,000 previously given the strong bookings. For adjusted EBITDA, we narrowed our outlook to 250 to $270,000,000 from 240 to $275,000,000. We continue to execute on our margin 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 slight uptick in our g and a expense. Lastly, CapEx.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

The growth we're experiencing, especially in our electric business, is creating opportunity for strategic investment. To capitalize on this momentum and support our expanding operations, we increased we're increasing our planned investment to 75 to $90,000,000, up from our previous range of 65 to $80,000,000. This enhanced capital deployment reflects our confidence in the business, positions us to capture even more growth opportunities ahead, and importantly, does not inflate their ongoing efforts to ensure capital efficiency and transition our fleet financing mix. And now back to Chris to conclude our prepared remarks.

[Christian Brown, President & CEO at Centuri Holding]

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 3,000,000,000 in first half bookings and the growth in our pipeline to nearly 14,000,000,000. This is underpinned by our robust end markets. Our second quarter performance demonstrates the strength of our diversified platform.

[Christian Brown, President & CEO at Centuri Holding]

We're seeing excellent momentum in our electric operations, particularly strong performance in our Canadian business, and we're making steady progress in our US Gas segment. The broad based execution gives us the confidence to increase our full year guidance revenue guidance. We're 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 us 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.

[Christian Brown, President & CEO at Centuri Holding]

Thank you very much for your time and support. Operator, you may start the Q and A session.

[Operator]

Yes, sir. Thank you. Ladies and gentlemen, we will now begin the question and answer session.

[Operator]

You. And we now have our first question. And this comes from Steve Fisher from UBS. Your line is now open. Please go ahead.

[Steven Fisher, MD & Equity Research Analyst at UBS Group]

Thanks. Good morning and congratulations on the progress you've been making. Just wanted to get a sense of with all the nice bookings you've added into the backlog here, if you can just give us a sense of the margins embedded there? And what's the ramp up in these projects and the confidence in the execution is now that the business development efforts are starting to pay off, the focus will shift to to execution of margins. So kind of what kind of confidence do you have in in sort of the margins outlook from there? Thanks.

[Christian Brown, President & CEO at Centuri Holding]

And maybe I'll I'll I'll answer that one, Steve. Good morning to you. And then and then Greg possibly add something to it. Look, Your assessment's good. You know, we we we've we've had a very, very strong six months to get the backlog up to give us more volume into the business that allows us to also be in better control and more predictable.

[Christian Brown, President & CEO at Centuri Holding]

So what I would say is the backlog that we we have as we go into the second half of the year, is is at a higher margin than what we've delivered in the first half of the year. You know, the q three, q four internal forecast demonstrate that we'll see an improvement across all the businesses in in terms of margins. So the union and nonunion electric, if their projects mobilize during the first half of the year, we'll get it to full flight as we hit the summer months now and as we go into the later part of the year. And we should we should and we expect to see greater improved margins in the second half of the year, which is give given us ultimately confidence on the full year forecast. You see the same in the MSA work.

[Christian Brown, President & CEO at Centuri Holding]

You know, January, February, March, there was some weather impact as we as we discussed on the last call. The MSA now work is now customers are now releasing more and more work to us, and we'll start to peak in the coming coming weeks and months ahead. And and, inevitably, we should see and expect to see greater margins in q three and even into q four. I guess the last part of the margins is that I think as we build we build more volume into the pipeline, we've we've increased our booking levels. We're starting to get a better handle on our win rates, a better handle on on pricing sensitivity.

[Christian Brown, President & CEO at Centuri Holding]

And as we build further backlog, we 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 on the future work. So, in summary, we expect second half of the year margins to to improve from where we were in the first half. We've seen the the backlog margins greater than what what we've just delivered. We think it will be across all of the segments. And I think it's now we've got a good and stronger handle on the data within our sales pipeline as well as our win rates and our performance.

[Christian Brown, President & CEO at Centuri Holding]

We'll look to see if we can push out push out differentiation further and improve pricing in the future.

[Steven Fisher, MD & Equity Research Analyst at UBS Group]

That's very helpful. And this is a follow-up. From a resource perspective, to to what extent now that you have this book of business, do you need to go out and and hire for these projects, or is it more of a utilization play? I think, Greg, you mentioned a a talent acquisition effort. So if you just can give us some sense of of how much of an effort you need to make on on talent acquisition.

[Christian Brown, President & CEO at Centuri Holding]

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

[Christian Brown, President & CEO at Centuri Holding]

But we don't foresee that needed now to meet the next three, six, nine, even twelve months of resources. It's well within well within the current resourcing capabilities and well within what we've done previously. But in the long run, we we will need to look at doing things in a bit more strategic way at a group level versus through the opcos.

[Steven Fisher, MD & Equity Research Analyst at UBS Group]

Terrific. Thank you very much.

[Christian Brown, President & CEO at Centuri Holding]

Thanks for your questions, Steve.

[Operator]

Thank you. And we'll now take the next question. And this comes from the line of Joe O'Dea from Wells Fargo. Your line is now open. Please go ahead.

[Joseph O'Dea, Managing Director at Wells Fargo]

Hi, good morning. Thanks for taking my questions. I wanted to start on the balanced fleet management comments and just any additional color with respect to the timeline you anticipate to achieve that that targeted balance and then how you think about that impact on EBITDA margins maybe relative to where you're you're pacing this year?

[Christian Brown, President & CEO at Centuri Holding]

Greg, do you wanna do you wanna lead that one and and the answer to that?

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Yeah. Yeah. So good morning, Joe. And 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 that Chris mentioned, but also, from just getting, our RFP done that we, alluded to in in past calls. That's been completed.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

We actually have leasing partners, signed up now and and ready to execute, in in very short order. And so we are, working to to get those done, and and you'll see some of that progress here in the second half of the year. Obviously, it'll continue to ramp up and 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 our targeted goal.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

It's it's more than achievable with the work we've done. We'll be able to, rebalance some of that potential, EBITDA pressure, you know, with just increased pricing and better efficiency in our fleet utilization to to largely offset any kind of, impact from a margin perspective.

[Joseph O'Dea, Managing Director at Wells Fargo]

And then wanted to ask on the core electric utility, both union and nonunion, and what you're seeing versus 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 to pick up some share in the market?

[Christian Brown, President & CEO at Centuri Holding]

Maybe do want me to do that, Greg, after this one?

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Sure.

[Christian Brown, President & CEO at Centuri Holding]

I would I would say the following. All of our customers, I I I think I alluded to in my prepared notes, spent time with 19 of the 20 customers over the last ninety days, and every one of them is clearing that they're they're increasing their capital budgets. There's a there's a there's a general positive trend across all electric transmission distribution, distributed power data centers. It's certainly more favorable than than at the early part of the year, and it even extends in into gas. You know, customers are are very much focused on quality of and quantity of resource delivery and looking at maximizing outsourcing because they're ultimately resource constrained themselves.

[Christian Brown, President & CEO at Centuri Holding]

So this is as close to a seller's market that I've that I've seen in my thirty five years. The key for us is is to get closer to our customers and really align on what they need and then start planning our investment in people, equipment, and know how 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 MSAs where we've got adjacent 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.

[Christian Brown, President & CEO at Centuri Holding]

And so we have displaced and been able to capture more opportunity on some MSAs, but that really isn't the prevalent theme. You know? Put customers are giving me the messages around, you know, keep delivering for the quality and safety standards we expect to be at, 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.

[Joseph O'Dea, Managing Director at Wells Fargo]

That's great color. Thank you.

[Operator]

Thank you. And the next question comes from the line of Sangeetha Jain from KeyBanc Capital Markets. Your line is now open. Please go ahead.

[Sangita Jain, Director & Equity Research Analyst at KeyBanc Capital Markets]

Thank you. Hi, Chris. Hi, Greg. If I can ask you a question on the $14,000,000,000 pipeline that you mentioned, How does that split between MSAs and bid work? And further, if there is any specific data center type distributed energy opportunities within that?

[Christian Brown, President & CEO at Centuri Holding]

Thank you. Thanks for your question. So let's just run through it. The pipeline is, as you said, is as we've stated, it's just shy of 14,000,000,000. If you look at the mix in there, about two thirds of it is actually new project work, and about one third of it is near term MSA renewals.

[Christian Brown, President & CEO at Centuri Holding]

So that should basically tell you our addressable market is very much very much focused on driving growth into the business. We've also got about 2,000,000,000 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 6 to 700,000,000 of MSA renewals this year. So the the the headlines are, yeah, 14,000,000,000. Two thirds of it is is new project work.

[Christian Brown, President & CEO at Centuri Holding]

One third of it is MSA renewals. In the very near term this year, we've got 2,000,000,000 of pending bids that are out there, and we've got, in addition, 6 to 700,000,000 of MSA renewals that are pending this side of the Christmas break. About 20% of the project work is is distributed power of data centers when you look at the mix. I think the last thing I would say is the risk profile has not changed at all. I know we've had questions previously about, you know, we're looking at bigger contracts.

[Christian Brown, President & CEO at Centuri Holding]

The average size of the contract is less than $20,000,000. So it's well within our historical risk profile. We continue to deliver the same services to the same end markets as we've always done. We've just been somewhat more aggressive in actually positioning ourselves for further opportunity.

[Sangita Jain, Director & Equity Research Analyst at KeyBanc Capital Markets]

Got it. Very helpful. And then one question on the increase in CapEx that you guided today. So just trying to think of how you are balancing your thinking between, let's say, your equipment needs buying the equipment versus leasing your equipment.

[Christian Brown, President & CEO at Centuri Holding]

I will give you some sort of strategic guidelines and then let let Greg go into some detail. Look, our our overall objectives in in the in the in the next period next next few years is to hit a steady run rate where half of our fleet is funded from balance sheet cash and half is funded from leasing. And that and you could calculate very quickly how much free cash flow that generates over the next three to five years. Secondly, we 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% efficiency saving on the use of the fleet. That's either that's either achieved by supply chain improvements, by looking at the five businesses and and and going to going to the market as one, or or it's driven by better utilization or better life use on the assets.

[Christian Brown, President & CEO at Centuri Holding]

So the the two strategic drivers are fifty fifty mix and then driving between 1525% efficiency across the fleet when we look at it as a whole.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

And I would just add I would just add, even though we're increasing our CapEx guidance, we are not deviating from our, internal expectations on mix between buy and other financing needs. So we haven't changed or swayed that. We're but we are growing, as you can see in our electric businesses, at at a pretty healthy, clip.

[Sangita Jain, Director & Equity Research Analyst at KeyBanc Capital Markets]

Got it. Thank you very much.

[Christian Brown, President & CEO at Centuri Holding]

Thank you, Saket, for the questions. You.

[Operator]

And the next question comes from Justin Hock from Braid. Your line is now open. Please go ahead.

[Justin Hauke, Senior Equity Research Associate at Robert W. Baird & Co]

Yes. Great. Thank you for taking my questions here. So, you know, obviously, the awards have been really strong. You know, they're really strong last quarter and even stronger this quarter.

[Justin Hauke, Senior Equity Research Associate at Robert W. Baird & Co]

I'm just curious on the MSA renewals, just given those are chunky and, you know, you you booked the whole, amount when they come in. But on those renewals, I'm just wondering, on average, what's kind of the scope addition versus, you know, the last time you kind of booked those with the same clients? Like, maybe just a way to quantify, you know, how that scope has changed over the last, I don't know, whatever, five years ago when when you booked it before. Yeah. A couple of things. You wanna start with

[Christian Brown, President & CEO at Centuri Holding]

that? Yeah. Because you've got you've you've got Greg. That's fine.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

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

[Gregory Izenstark, EVP & CFO at Centuri Holding]

And and so, you know, I'd I'd point you to one of our slides, you know, FSA renewals, the strategic bids. You know, we've been able to increase the scope, you know, quite substantially in certain areas.

[Christian Brown, President & CEO at Centuri Holding]

Specifically, we've added 25% incremental growth on the volume that we on the renewal, give or take.

[Justin Hauke, Senior Equity Research Associate at Robert W. Baird & Co]

Great. No. That that's helpful, the 25%. I guess my second question would just be on the guidance and maybe just the cadence for thinking about the back half of the year. You did almost 8% revenue growth here in the second quarter.

[Justin Hauke, Senior Equity Research Associate at Robert W. Baird & Co]

The midpoint of the guide is kind of looking for five ish percent for the back half. You had some really big storm comps last year, but just, I guess, balancing that would be The U. S. Gas operations getting better. But maybe just thinking about the cadence of how you expect three q and four q to kind of play out, to get to that that guidance range.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Yeah. I mean, we're obviously, you pointed out last year, the second half of the year, we had some, unseasonably higher storm revenues that came in. We've we've said in our guidance, we've looked at more of a historical, you know, average and 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.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

We'd expect that that type of cadence to continue, to offset, you know, year over year.

[Justin Hauke, Senior Equity Research Associate at Robert W. Baird & Co]

K. Great. Thank you very much, guys. Appreciate it.

[Christian Brown, President & CEO at Centuri Holding]

Appreciate your questions.

[Operator]

Thank you. And the next question comes from Chris Ellinghaus from Tabor, William, Shank. Your line is now open. Please go ahead.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Hey, good morning, guys.

[Christian Brown, President & CEO at Centuri Holding]

Hey, Chris.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Christian, the bookings are are fairly balanced, slightly skewed to electric. Is that a strategic choice or is that just coincidental?

[Christian Brown, President & CEO at Centuri Holding]

I would say coincidental. It and and it it some of it's timing. But the overall pipeline, fifty two forty eight is, I think, the mix. It shifts from day to day because this is a dynamic situation, but it it is coincidental. Some customers take longer to decide, some do not.

[Christian Brown, President & CEO at Centuri Holding]

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 I I don't it's not deliberate. No.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

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?

[Christian Brown, President & CEO at Centuri Holding]

I would I don't know how to answer that one other than to say, you know, we we definitely see improved margins in the second half of the year. I you know, the outs the outspoken backlog margins will and are higher than the outs delivered in the first half. Some of that is driven just by the mobilization in the early part of the year. Some of that's 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 for the business on on the amount of work we've booked and the backlog is allowing us to be more predictable, which was kind of something we were lacking last year.

[Christian Brown, President & CEO at Centuri Holding]

We've now got such a head of steam in terms of pipeline size, data analytics, and backlog that we are now looking not not just three months ahead, we're looking six, nine, twelve months ahead. So the 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 gonna land at the end of the year. We're very predictable now because of the the the data and the the bookings and the backlog and the market information we've got in house. So I I I would say yes because I answered one of the earlier questions to Steve, and we've alluded to it now. No.

[Christian Brown, President & CEO at Centuri Holding]

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, you know, it's great to be sat here at midyear and know that you've essentially got the full the full 26 that's full twenty twenty five backlog booked. And then we're now looking at seasonality. So we've now got a really good view of of where we are currently for q one 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 around where we think we'll be for the full year '26 to drive double digit growth.

[Christian Brown, President & CEO at Centuri Holding]

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

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Okay. That helps. Greg, you alluded to, you know, MSA escalators, and I'm not quite sure what you were saying about the increases. But let me ask the question in a slightly different way, and maybe you can add to it. But, would you call the escalators within the MSA extensions, sort of the historical norm or more elevated?

[Gregory Izenstark, EVP & CFO at Centuri Holding]

What I was what I was alluding to, Chris, and good morning, is is while every year in in in a multiyear agreement, we have an annual escalator embedded 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 would would generally give you. So we're Okay. That helps. I just pricing based on actual performance.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Okay. That that, clarifies that. I appreciate it. Thanks for the details, guys. Thank

[Christian Brown, President & CEO at Centuri Holding]

you, Chris.

[Gregory Izenstark, EVP & CFO at Centuri Holding]

Thanks, Chris.

[Operator]

Thank you. And there are no further questions at this time. I'll now hand the call over back to Christian Brown for any closing remarks. Please go ahead, sir.

[Christian Brown, President & CEO at Centuri Holding]

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.

[Operator]

Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.

Participants

Executives

• Jason Wilcock, EVP, Chief Legal & Administrative Officer and Corporate Secretary
• Christian Brown, President & CEO
• Gregory Izenstark, EVP & CFO

Analysts

• Steven Fisher, MD & Equity Research Analyst at UBS Group
• Joseph O'Dea, Managing Director at Wells Fargo
• Sangita Jain, Director & Equity Research Analyst at KeyBanc Capital Markets
• Justin Hauke, Senior Equity Research Associate at Robert W. Baird & Co
• Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.