Centuri Holdings, Inc. Price & Performance (CTRI)

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. Today's call is also being webcast live will be available for replay in the Investor Relations section of our website shortly after completion of this call. On today's call, we have from Century Holdings the following members of leadership team. Chris Brown, President and Chief Executive Officer Greg Eisensard, Chief Financial Officer I'll now turn the call over to Chris. Thank you, Jason.

Good day, everybody. Thank you for joining us for our fourth quarter and full year 2024. Vice President and CEO of Centuri.

It is an honor to lead this organization I deeply appreciate the warm welcome I've received since joining in early December. Thank you to all my colleagues. Long before officially joining Century, over a number of years, I had the opportunity to observe how Century has built its scale, reach and capability and admire how it operates and services its clients. Moreover, during seven months of recruitment process, I was able to further strengthen my knowledge from inside the organization. Now after over three months, having engaged with many of our employees, our customers routinely visited all of our primary operating locations and visited many sites across North America. In doing so, I've been truly impressed by the strength of our organization and the dedication of our people and our teams. Our leaders are deeply connected with their customers, possess a strong understanding of our organization, and consistently ensure that we deliver the safe, high quality service that defines our organization and our culture. Against this backdrop, I'm incredibly enthusiastic to speak with the investment community for the first time today and in the weeks and months ahead. Century is a leading utility infrastructure services company and is a platform that we can build from, growing our end markets in a more focused structured and significant way.

We believe we are incredibly well With respect to electric, we are able to capitalize on the involvement energy demands and infrastructure expansion. The need to upgrade an aging grid enhances reliability and expanded capacity due to the growth we have seen from data centers advanced manufacturing, electrification and renewables presents significant opportunity for us. At the same time, natural gas remains a vital part of our mix of solutions. That will be required to meet future end demands and there is an improving and healthy demand for our services, to expand and replace systems, pipelines and infrastructure across North America. It is my job to ensure the growth we're seeing in the market is reflected in the company's growth and subsequent returns. This is where I intend to lean on my past experiences leaving solid companies structured, profitable growth With the exciting prospects ahead, we are actively instilling a proactive growth mindset in our culture. One that maximizes capabilities across the entire enterprise and actively drives our expansion. This means growing with our existing customers adding new customers and continuously looking for opportunities. Our leaders have been challenged to not just deliver services under contract, but to actively look for opportunities to do more.

Achieving this requires having the best positioning the best people the best tools, a culture to deliver greater value and services to all our existing, As we complete the transition from subsidiary of a utility company to maturing as a standalone service provider we will further our focus on the following areas in the coming months. Firstly, who created a structured company wide approach to business development. Focused on high growth development of our pipeline, more focused market positioning, business winning strategies and securing of new awards beyond our existing MSAs. [indiscernible] we are contracted to provide but to grow and to bring further value to our customers. Secondly, we'll focus on improving capital efficiency with a focus on increasing returns across our asset base, which will include [indiscernible] during the fleet size, by reducing balance sheet funding maximizing other efficient sources of funding including leasing and rental. And two, a greater focus on reducing working capital by optimizing invoicing, and our collections. And thirdly, improving our financial performance through tighter performance management, which includes exiting and renegotiating any of the contracts that we feel are underperforming. The implementation of these plans across these three focus areas is well underway and we anticipate seeing tangible and quantifiable benefits over the coming months and quarterly reporting periods.

In the second half of twenty twenty five, we tend to see further we intend to build further on this work by conducting a more long term view of our end markets. And seek to quantify actions and plans needed to drive greater growth and sustainability into our business into the future. Before we turn to specific trends in our business it's worth commenting about the changed political dynamic and evolving energy policy in The United States. And how that impacts Centuria. Our view is that our core end markets across the entire value chain will remain strong. We are seeing capital investment levels continue to grow into the double digits driven by the need for energy resiliency, demand and growth. We are positioning and have positioned our pipeline of future opportunity to suspect we are not relying upon new offshore wind, and other unfunded major projects to deliver the growth expectations that we all have. Fortunately, Century has the capability people's expertise and the scale and platform to be able to meet infrastructure needs across the energy, and in utility value chain, Turning to business trends for the fourth quarter and today, starting with our gas business. During Q4, revenues and volumes under our MSA in our gas segment largely normalized.

While rate cases are a constant factor in our industry, for 2025, we have not identified any that pose significant concerns regarding their potential impact on our 2025 operations, In December, we were pleased to see several hard gas clients allocate remaining funds in their 2024 budgets to complete capital investments which positively impacted our top line. This pattern aligns with historical behaviors when clients set annual budgets, ensure they spend allocated funds by the end of the year, to maximize their returns.

Gas margins during 2024 went below our expectations. Driven by rate case approvals, competitive forces and the need to realign resources and improve utilization rates. When some of our customers slowed down given rate outpaced outcomes, we like near term sales opportunitation and should have optimized our crew counts faster. The work to exit Pulp performing contracts and restructure the gas group now has largely been completed and we anticipate gross margins to normalize during 2025 to their historical averages of between 77.5%. We will, of course, closely monitor customer dynamics and make adjustments as necessary and remain attentive to gas margin improvements. In our electric business, we saw steady improvement in our core operations throughout the second half, of 2024 into the year end. With a continued recovery in crude counts, especially in our nonunion segment, which has continued into 2025. As with the gas business, we've also benefited from some customers spending remaining budget dollars prior to the year end. Additionally, our core Union Electric business experienced a significant pickup in activity as well as a significant LNG award received in the fourth quarter. Our electric results were bolstered by a record year storm restoration work with revenues exceeding 80% of the recent historical average.

As mentioned on our last call, we have strategically built a highly skilled workforce both union and non union, that is rent to respond as and when needed. Our strong response success is a result of purposeful efforts in the training, positioning and strengthening of our customer relationships. Furthermore, it serves as an entry point for longer term opportunities with new customers. Pivoting to business development activity, During the quarter, we secured $221,000,000 in new awards, including 99,000,000 in Eversay awards $122,000,000 in strategic bid awards. This was and was expected to be a quiet quarter for new awards and bookings. Backlog at the year end stood at $3,700,000,000 with 90% related to work performed by MSA. Looking ahead, we anticipate that with our increased focus on business development, We will deliver a step change in bookings and will exceed a book to bill of 1.1 during 2020. End market has increased our pipeline by over 30% during the second half of twenty twenty four and we have approximately $1,500,000,000 of late stage bids and the potential for over $2,000,000,000 in new revenue based upon MSA renewals. During 2025. Before turning the call over to our CFO, Greg Eisenstock, I'd like to share a few high level thoughts on our 2025 outlook.

The guidance we are introducing today includes a range of revenue, [indiscernible] net capital expenditures. Informing these targets, we anticipate double digit EBITDA growth when our core business year over year.

Which includes the rundown of our offshore wind projects, and no new awards in this end market. We also assume revenue from store restoration services at recent historical levels. Which is approximately $60,000,000 less than we secured and delivered in 2024. I'll now turn over Greg to elaborate on our results and our 2020 Fauro outlook.

Correct? Thanks, Chris, and good morning to everyone joining us. Fourth quarter twenty twenty four consolidated revenues increased 7.8% and consolidated gross profit was 32% higher. Compared to the prior year period Gross profit margin of 9.9% in the fourth quarter of twenty twenty four was well above the 8.1% reported in the fourth quarter of twenty twenty three.

For the year, 2024 revenues of $2,640,000,000 came in ahead of the midpoint of the guidance range we provided in July of 2.5% to $2,700,000,000 On a GAAP basis, net income attributable to common stock in the fourth quarter was was $10,300,000 or diluted earnings per share of $0.12 up from a net loss attributable to common stock of $210,700,000 or diluted loss per share of $2.94 in the same period last year. As a reminder, the fourth quarter of twenty twenty three results included $2.00 $9,000,000 after tax impairment on goodwill in the fourth quarter of twenty twenty four, total company adjusted EBITDA a non GAAP figure, was $70,700,000 or 22.9% higher than the prior year quarters $57,500,000 Adjusted EBITDA margin was 9.9% for the quarter improvement from the 8.6% reported in the fourth quarter of twenty twenty three. For full year 2024, our adjusted EBITDA margin of 9% was in line with the guidance range provided with our midyear results.

Non GAAP adjusted net income in the fourth quarter came in at $18,400,000 or an adjusted diluted earnings per share of $0.21 up from $4,900,000 or an adjusted diluted earnings per share of $0.07 in the prior year period. The $8,100,000 difference between our GAAP and non GAAP adjusted net income primarily includes the impact of amortization of intangible assets as well as CEO transition costs non cash stock based compensation and severance costs. Now to each reportable segment.

Revenue from our U. S. Gas segment totaled $327,200,000 reflecting a year over year increase of 5.4%.

We benefited late in the quarter from customer spending planned 2024 budget dollars to complete projects which drove an improvement in volumes.

Gross profit margins decreased to 6.2% the fourth quarter of twenty twenty four from 7.8% in the prior year period This decline was due to changes in the mix of work and closeout of certain bid projects. We are taking steps to structurally improve our contracts and cost structure in this segment as margins were under pressure throughout 2024.

Revenue from our Canadian Gas segment totaled $56,800,000 effectively flat for the fourth quarter of twenty twenty three we experienced an uptick in volumes under MSA but bid work was down due to the timing of projects. Favorable mix drove an improvement in gross profit margin to 18%, from the prior year's periods 17.1%. In our Union Electric segment, revenue was 190 a decline of 5.5% year over year. Within this segment, offshore wind revenues were down 75% or $43,000,000 due to the expected wind down of project work. However, our core Union Electric segment experienced a 17.5% growth year over year driven by increased bid volumes, particularly in industrial work around substation infrastructure. Union storm restoration revenues also showed improvement with revenues of $9,300,000 up from $3,000,000 in the prior year Although these cruises are Northeast focused, we mobilized crews to the Southeast to support our nonunion efforts. Which I will touch on momentarily. Gross profit in the Union Electric segment increased 9.9% in the fourth quarter of twenty twenty four compared to 6.7% in fourth quarter of twenty twenty three, This improvement was due to several factors including an increase in higher margin storm work and improved margins on mid work during the quarter.

Non Union Electric segment revenue in the fourth quarter twenty twenty four was $139,300,000 a 49.7% increase year over year.

This increase was primarily due to revenue from storm restoration services, performed early in the quarter in response to hurricane Helene and Milton. Which accounted for $40,400,000 of the segment's revenue. Improved productivity driven by the additional crews and higher work hours for existing crews also contributed to year on year growth in our core nonunion electric business. Segment gross profit increased to 15.3% in the current period compared to 6.8% in the prior year period reflecting the contribution from the more profitable storm restoration work and higher work hours.

Chris referenced the strength of our restoration services efforts in 2024.

We generated revenues of $137,000,000 from emerging storm restoration work well above the prior three year average of approximately $75,000,000 Throughout our territories, we dispatched more than 3,200 employees to respond to severe weather events. We take pride in our ability to quickly mobilize and restore power those affected during these challenging times. One thing to take note of while we report storm revenues and profitability, there is some offset whereby those crews would have been working with their core customers at lower revenue and profitability levels.

For the full year, net CapEx was $89,400,000 down from $94,900,000 in 2023 and free cash flow was $69,000,000 down slightly from $73,000,000 in 2023. Note, we now define free cash flow to cash flow provided by or used in operations less net capital expenditures. Moving to balance sheet highlights. On a trailing twelve month basis, our net debt to adjusted EBITDA ratio improved to 3.6 times in December 2024 from four times in December 2023. And was lower sequentially from the end of the third quarter. Consistent with expectations previously disclosed. We ended the year with $49,000,000 in cash and cash equivalents on the balance sheet. Growing our business in a capital efficient manner remains a core strategic we will continue to target improved improving free cash flow and strengthening our balance sheet throughout 2025 by reducing our working capital needs, and being more disciplined in our capital allocation.

Finally, turning to our 2025 outlook. Which is outlined on Slide 13, our earnings presentation. For revenues, we expect to deliver between $2,600,000,000 and $2,800,000,000 For adjusted EBITDA, expect to deliver between $240,000,000 and $275,000,000 And lastly, on capital expenditures, we are forecasting our net spend to be between $65,000,000 and $80,000,000 Chris alluded to some of these factors behind our forecasting. Those include a continued improvement in our business that began in the second half twenty twenty four with growing crew counts and increased work hours.

And a return to modest growth in our gas business, and improved margins as we exit and or renegotiate under forming contracts These positives are partially offset by the additional wind down of offshore windward and our assumption that storm restoration services will return to normalized levels.

With that said, let me turn it back to Chris for some closing thoughts. Thank you, Greg. To close out my prepared remarks on Ritz Red seems discussed earlier. My first few months as President and CEO, we bought and liked them and also inspiring. Century is dedicated to increasing long term growth that drive profitable growth We are committed to fostering greater predictability in our business, through robust forecasting, comprehensive business reviews, strategic growth prioritization. Through a highly structured approach to business development, through my dynamic pipeline model, and a growth mindset. We can ensure optimized decision making. We are enhancing capital efficiency by refining our capital equipment Centuri and fleet management. And reducing working capital levels through improved, improved AR and DSO management. Lastly, we are highly committed to margin improvement with our gas business a key focus area have taken early steps to deliver improved performance. We thank you so much for your continued support and confidence in our vision and look forward to achieving new milestones. Operator, you can start our Q and A session.

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

And one follow-up.

One moment please for your first question. Your first question comes from Sangeetha Jain with KeyBanc. Your line is now open. Great. Thank you so much for taking my questions. Good morning. So first, can I ask one on the strategic review that you talked about and when we can expect to hear the outcome of that and what should we expect when that's concluded?

Hi, Gidra. It's Chris. I'll answer the question. I think the next sort of three to six as the last three months, really prioritizing the business waiting, the business development, organic sales, to determine how how large our mid term pipeline is and also been good, how do we build on the revenues we get from our core MSAs and really understand more data around our ability to grow the business organically. And several results that offset the past has been probably from a growth standpoint. And I think once we have a good handle on all of the native opportunities, we will conduct a more thorough longer term look at the end markets, the opportunities reside look at our differentiation in the long term market growth, and then start making some prioritization around where we want to deploy capital, which new customers, which end markets we want to further grow from. So basically, the first three to six months is focused on driving growth in our core business with our customers, but our core customers in our core market in our core locations. And then the longer term, we'll be more focused on how do we accelerate that growth in the next three to five years?

I think we'll end up being in a position towards the end of the year Sangeetha, to actually [indiscernible] Not before that. Our priority at the moment is the block and tackling and really driving growth in the in the core business as it is today.

Understood. That's super helpful. [indiscernible] The guidance that you've given us for this year, can you help us understand what's in the low end and what we should expect for you to reach the high end of that guidance range?

Yes. Good morning. So on the the high end, the upside of that, we talked about a number of grew growth opportunities Obviously, the timing of onboarding those crews will influence could influence the range using the sales work and the business development work that Chris just mentioned getting some greater bid opportunities and activity can obviously influence the top end of the range and then obviously, storm is a little bit of a wildcard. On the downside, project delays or any cancellations that might come out of Any of the other news that's in the world could contribute to it. That would probably be the biggest one.

Understood. Appreciate your responses. Thank you. Thank you, Sandeep.

Your next question comes from Justin Hawke with Robert Baird.

Your line is now open.

Great. Thank you. Good morning. Guess my first question here, I just I wanted to understand a little bit more the modified MSAs and just I guess what gives you confidence that the turns will improve to kind of meet what your new standards are?

And maybe just an update on how those negotiations are [indiscernible] the $2,000,000,000 that you kind of outlined as opportunities here guess 1.5 that was that are in final negotiations? Just let's I'll ask Greg to answer the initial response on the gas margins, and then I'll talk a little bit about what we're seeing in the near term pipeline.

So from the gas side, we've already taken we're well on our way taking steps exit areas that are underperforming or renegotiating underperforming contracts. This is both from an MSA perspective as well as new bit work as it comes up for as new bids come up. We're repricing them accordingly. MSA perspective, we have virtually 100% renewal in all our MSAs We've already started to experience certain renewals of some key MSAs and those will continue throughout the end of the year.

As we've talked in the past, when new renewals come up, it gives us an opportunity to look at the pricing and the scope of work that we expect and look to kind of improve both volumes and the price kind of above and beyond that normal annual cost of the annual escalator that's in the contracts. So those are all kind of well on the way and give us optimism as we head into 2025.

Okay. On the market, just in our outlook, I would say the following, but we're not concerned at all with the end market opportunity that fits with our capability, our reach our locations, so that we can grow beyond the core MSAs. So there's no concern about market opportunity. We're seeing about a 30% growth in near term pipeline opportunities. Whilst we're cautious after recent events, we think we will have a positive book to bill this year of about 1.1 And the late stage, you mentioned that we mentioned in the in the result as well as you mentioned here we are actively negotiating to convert.

We've had a good start to the year.

And so [indiscernible] no concern at all on the ability to identify opportunities for the near term pipeline to drive the growth.

We've got some work to do internally to be more structured and focused and deliberate in driving sales and And I think once we are efficient at that, we should see a greater improvement in our book to deliver the coming week Okay.

And I guess my second one, I guess it's a two parter, but just on the maybe the cadence or the seasonality of '25 even the first half of twenty twenty four kind of started slow. I guess, should we be thinking that the growth contribution is kind of higher in the first half versus maybe a seasonally abnormally low last year. Or just kind of how that works through? And then the last one, for that question would just also be on the offshore wind.

Is there anything in backlog for '26 at this point? Or is $40,000,000 for '25 kind of everything that you have left on the offshore wind? As it stands right now? Yes. So on the seasonality, I would expect first quarter to be consistent with last year. Obviously weather and other factors and just the seasonal nature of many of the territories in which we operate. Will drive that. And then see some of that increase start in the second quarter and then and then accelerate in the back half of the year. From an offshore wind perspective, I think we alluded to we have about $40,000,000 in backlog for 2025 we have about $25,000,000 remaining on the the existing backlog or existing projects in 2026.

And we have nothing else in our pipeline related to that Yes, we've stripped everything out of the near term pipeline partly driven by change in administration, but also the unpredictability of when those projects get sanctioned. So in the near term, anyone who has too many words about offshore wind as we come on our calls is It's not in the forecast. It's not in our data. We're not committed a lot of sales results to it at all. And if the future brings it back into focus with capital allocated, we'll be ready. But at the moment, we don't see that as a driver at all in our businesses. Pretty immaterial. [indiscernible] Got it. Okay. Thank you.

Your next question comes from Chris Ellinghaus with Siebert Williams Schenkel. Your line is now open.

Hey guys, how are you?

Good morning.

As you've sort of looked in the at the business from a outsider's perspective margins historically have been materially higher Question one, sometimes double digits, Do you see that as a realistic goal going forward? And two, you talked about some of the MSAs underperforming. Is that some lag that remains from inflationary periods? Let me Let me cover it from my perspective and then I'll show Greg may have a couple of supplementary inputs.

Hopefully, about focus at the moment is going to be on other than what we said on gas margin improvement, Our challenge today is not about cost efficiency and getting margins up. It's about getting the organization turned into becoming an organization that's not only focused on delivering the services we're attracting to deliver, but do more for our existing customers So I think there's a block of tackling focus on getting more volume into the business selling more and maintaining margins versus growing margins. I'm not overly concerned about where the margins the caveat being the improvement we do expect from the gas from the gas business turning to 25 Our focus is about driving profitable growth consistent with our existing margins. On the gas side, Dylan and I have done a great job in the last stages of '24 to sort of renegotiate those underperforming contracts. I think reallocate resources so we're more productive Early signs turning into 2024, into '25 as you look at the the seasonality effect. It looked like they're getting better So I think we've done all the work we need to do. With maybe one contract still to go. So I think the gas margins is now down to performance and making sure that we maintain the right levels of productivity within those contracts.

Okay.

And you're using a three year average for storm restoration revenues Is that a period that you see as normal? And given climate change issues, is that something that you expect off of that kind of base to have some upside to it over time.

Chris, I'm going to give you a we can go through the specifics with Greg's tagging with our business. Just chasing storm revenues won't allow us to grow our core business. So our push into the budgeting process our capital allocation and our resources has all been focused on driving more core business.

Right. And not setting an expectation to get an abnormal or even a sort of slightly greater revenue from stores. So we've set a cautious approach in what we believe we will get from STORM coming into '25 it's just not predictable as we all observe. And we've driven a discipline to the business that we won't grow growth from doing the day to day services that come from the utility sector are not predicated on storm events. So we felt the trailing three year average was was kind of a cautious approach to drive our organization into building more capability and doing more work for our customers in our core business.

Okay, that's fair. One last question, sort of alluded to some of the gas customers having some sort of catch up on their CapEx towards the end of the year. Does some of that carry forward into the first half or just the year for this year? There might be a pocket here or there, but generally speaking, Our gas customers were trying we're looking at what they had spent As of the end of the third quarter, where their budget was for the full year and trying to to spend the dollars that they had budgeted. For the most part. Got you. But I would add I would add, Chris, if you do dissect living without pipeline data, day at the moment as is The wider organization If you look at the data pipeline opportunities, that we will tender and hopefully win there's a significant component in gas It's well over 50% of our pipeline today.

With more than ample opportunities there. [indiscernible] Okay.

Thank you. Appreciate the details. Thanks, Chris.

There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.