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01/10 16:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call showed mixed signals: strong revenue growth and improved net income, but a decline in gross profit margin and a slight decrease in adjusted EBITDA. The Q&A highlighted operational challenges, such as the impact of storm activities and resource mobilization costs. While management expressed optimism about future margins and revenue growth, the lack of specific guidance and unclear responses on margin differences suggest caution. Overall, the sentiment is neutral due to the balance of positive growth indicators and underlying operational concerns.
Adjusted Net Income $16.7 million, an increase of $11.4 million from the same quarter last year. The increase reflects improved base profitability and operational performance.
Base Revenue Increased by 25% year-over-year. This growth is attributed to the dedication of teams across the U.S. and Canada, and their commitment to safety, productivity, and exceptional service delivery.
Base Gross Profit Increased by 28% year-over-year. This reflects strong operational performance and growth in base business activities.
Consolidated Revenues $850 million, an 18% increase from Q3 2024. The increase is driven by growth in base business and MSA volumes.
Consolidated Gross Profit $78 million compared to $75.8 million in the prior year period. Gross profit margin decreased to 9.2% from 10.5% last year, reflecting changes in the mix of services.
Net Income Attributable to Common Stockholders $2.1 million, or $0.02 per share, compared to a net loss of $3.7 million, or $0.04 per share, in the same period last year. The improvement is due to better operational performance and profitability.
Adjusted EBITDA $75.2 million, compared to $78.8 million in the prior year's quarter. The slight decrease reflects charges related to debt refinancing and other adjustments.
U.S. Gas Revenue $412.4 million, a 13% increase from the prior year. The growth is attributed to solid MSA volumes and bid projects.
Canadian Gas Revenue $74.2 million, up nearly 40% from the prior year period. This growth is driven by sustained favorable demand and strong operational performance.
Union Electric Revenue $214.5 million, a 25% increase year-over-year. Growth is fueled by robust activity in industrial end-user projects, particularly substation infrastructure and inside electric work.
Non-Union Electric Revenue $149 million, a 16% increase year-over-year. Base revenue in this segment increased by 58%, driven by significant expansion in MSA activity.
Net Capital Expenditures (CapEx) $21.5 million. Free cash flow was negative $16.3 million, reflecting seasonal cash flow patterns and increased accounts receivable due to strong growth.
Net Debt to Adjusted EBITDA Ratio 3.8x at September 28, 2025, slightly up from 3.7x at June 29, 2025. The increase is due to timing issues in accounts receivable, expected to normalize in Q4.
New Non-GAAP Measures: Introduced base revenue, base gross profit, and base gross profit margin to provide better evaluation of business fundamentals.
New Service Offerings: Focused on storm restoration services and strategic bids on new MSAs, including a $50M mechanical vapor recompression system for the renewable natural gas sector.
Market Expansion in U.S. and Canada: Achieved 25% increase in base revenue and 28% increase in base gross profit, driven by strong customer relationships and operational excellence.
Strategic Bids and Contracts: Secured $815M in Q3 bookings, with 80% from new revenue opportunities. Total bookings for the year reached $3.7B, with a record backlog of $5.9B.
Fleet Optimization Initiative: Targeting a 50-50 funding mix and 20% improvement in fleet efficiency. Entered $50M in operating lease agreements.
Operational Performance: Improved gross profit margins in Canadian Gas and Union Electric segments, with significant growth in MSA activity.
Separation from Southwest Gas Holdings: Completed separation and appointed new leadership, including Christopher Krummel as Independent Chair and Ryan Palazzo as President of U.S. Gas.
Revenue Growth Outlook: Positioned for double-digit revenue growth in 2026, supported by a $13B opportunity pipeline and robust backlog.
Economic Conditions: Uncertainties surrounding the impacts of future economic conditions could adversely affect the company's performance.
Regulatory Approvals: Delays or challenges in obtaining regulatory approvals could impact the company's operations and strategic objectives.
Storm Restoration Services: The volatility in storm restoration services creates unpredictability in reporting numbers and could affect financial stability.
Debt Refinancing: The company incurred $8.2 million in charges related to debt refinancing, which could strain financial resources.
Margin Pressure in Non-Union Electric Segment: The Non-Union Electric segment experienced margin pressure due to ramping crews for new and expanding MSAs, which could impact profitability.
Accounts Receivable Timing: Increased accounts receivable balances due to growth could create cash flow timing issues, potentially affecting liquidity.
Leverage Ratio: The net debt to adjusted EBITDA ratio increased slightly, indicating higher leverage, which could pose financial risks.
Revenue Growth: Centuri expects double-digit revenue growth in 2026, supported by a record backlog of $5.9 billion and a robust opportunity pipeline of $13 billion. The company has visibility into incremental awards and near-term bookings, which are expected to drive this growth.
Backlog and Opportunity Pipeline: The company has a record backlog of $5.9 billion, up from $5.3 billion last quarter, and a total opportunity pipeline of $13 billion. This includes $1.7 billion in strategic bids and $1.3 billion in MSA renewals and new awards expected by the end of Q1 2026.
Fleet Optimization Initiative: Centuri is targeting a 20% improvement in fleet efficiency and a 50-50 funding mix between balance sheet and leasing structures. Initial operating lease agreements totaling $50 million have been executed, with further progress expected.
Capital Expenditures and Free Cash Flow: The company expects to generate meaningful free cash flow in Q4 2025, with net CapEx for the year projected at $75 million to $90 million. This is aligned with investments in a capital-efficient manner to optimize growth opportunities.
Debt and Leverage: Centuri anticipates a year-end leverage ratio of approximately 3.3x to 3.4x, supported by a step-up in Q4 free cash flow. The company has extended its revolver maturity to 2030 and its Term Loan B maturity to 2032.
2025 Financial Guidance: Full-year revenue guidance has been increased to $2.8 billion to $2.9 billion, with adjusted EBITDA expected between $240 million and $250 million. This reflects significant growth in the base business, offsetting lower storm activity.
The selected topic was not discussed during the call.
The earnings call showed mixed signals: strong revenue growth and improved net income, but a decline in gross profit margin and a slight decrease in adjusted EBITDA. The Q&A highlighted operational challenges, such as the impact of storm activities and resource mobilization costs. While management expressed optimism about future margins and revenue growth, the lack of specific guidance and unclear responses on margin differences suggest caution. Overall, the sentiment is neutral due to the balance of positive growth indicators and underlying operational concerns.
The earnings call presents a mixed picture: strong improvements in gross profit and EBITDA margins, but persistent net losses and declines in key segments like US and Canadian Gas. Positive elements include an increase in free cash flow and strategic pipeline improvements. However, the lack of specific shareholder return plans and unclear management responses in the Q&A, particularly on strategic changes and profitability, temper optimism. The absence of a market cap suggests moderate volatility, leading to a neutral stock price prediction.
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