Centuri Holdings, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Introduced new non-GAAP measures (base revenue, base gross profit, base gross profit margin) excluding storm restoration services to provide better insights into business fundamentals.
• Q3 base revenue increased by 25% and base gross profit by 28%.
• Q3 bookings were approximately $815 million with a book-to-bill of almost 1, nearly 80% of which were new revenue opportunities. Backlog reached a record high of approximately $5.9 billion.
• Executed a fleet optimization initiative, entering operating lease agreements totaling approximately $50 million. Completed separation from Southwest Gas Holdings, appointed a new Board Chair, and added Ryan Palazzo as President of U.S. Gas.
• Third quarter adjusted net income was $16.7 million, an increase of $11.4 million from the same quarter last year.

Segment Performance

• U.S. Gas: Revenue was $412.4 million, a 13% increase from the prior year. Gross profit margin was 7.7% in Q3 2025, modestly improved from 7.6% in the prior year's Q3.
• Canadian Gas: Revenue was $74.2 million, up nearly 40% from the prior year period. Gross profit margin was 21.9% in the quarter.
• Union Electric: Revenue was $214.5 million, an increase of 25% year-over-year. Base revenue was $213 million, reflecting a 29% year-over-year increase. Gross profit margin was 9.1% in Q3 2025, slightly ahead of the prior year's Q3.
• Non-Union Electric: Revenue was $149 million, an increase of 16% year-over-year. Base revenue was $149 million, a 58% increase from the prior year. Gross profit margin was 7.1% in Q3 2025 compared to 16.6% in the prior year period, with margin pressure due to ramping crews for new and expanding MSAs but expected to improve.

Guidance

• Increased full-year revenue guidance to $2.8 billion to $2.9 billion, driven by base business growth offsetting lack of storm activity.
• Adjusted EBITDA expected between $240 million and $250 million, reflecting lower forecasted storm activity.
• Net CapEx planned within the range of $75 million to $90 million.

Risks

• Uncertainties surrounding future economic conditions and regulatory approvals that may cause actual results to differ materially from forward-looking statements.
• Seasonality and storm-related uncertainties impacting the predictability of financial performance.

Question and Answer

• Q: EBITDA impact from storm and split between quarters? **A: The decline in guidance was entirely related to storm activities, with a rough 60-40 split between Q3 and Q4 on a storm basis.
• Q: Quantify Non-Union Electric ramp impact? **A: Ramp-up of crews for new and expanding MSAs caused margin pressure initially, but margins were expected to improve by the end of Q4 as crews gain experience.
• Q: Storm inclusion in next year's revenue outlook? **A: Storm was not built into the planning for next year's revenue outlook, with focus on base business for predictability; storm would be an upside factor if it occurs.
• Q: Prioritization of bid opportunities? **A: Focus on fixing seasonality in U.S. Gas first, then prioritizing profitable growth while being selective with margins, monitoring win rates and margins closely.
• Q: U.S. Gas margins and execution focus? A: Pleased with current margins but focused on fixing seasonality; brought in Ryan Palazzo to bring more bandwidth for strategic growth and margin improvement.