10-Q: Centuri Holdings Reports Q1 2025 Results: Revenue Up, Losses Narrow Amidst Weather Challenges

Centuri Holdings saw a revenue increase but still reported a net loss for the first quarter of 2025, impacted by weather-related disruptions and customer budgetary constraints.

Summary

• Centuri Holdings, Inc. reported its financial results for the first quarter of 2025.
• Total revenue increased to $550.1 million from $528.0 million in the same period last year, a 4.2% increase.
• The company experienced a net loss of $17.9 million, an improvement from the $25.2 million loss in the first quarter of 2024.
• The U.S. Gas segment saw a revenue decrease of 12.7% due to adverse weather and customer budgetary constraints.
• The Non-Union Electric segment experienced a significant revenue increase of 41.9%, driven by increased volumes and emergency restoration services.
• Gross profit increased to $20.3 million from $13.3 million year-over-year.
• Selling, general, and administrative expenses decreased by 7.6% due to lower strategic review and severance costs.
• Backlog as of March 30, 2025, was approximately $4.5 billion, with 89% related to MSAs.
• The company intends to refinance or extend its revolving credit facility in the coming quarters.
• The effective tax rate was 42.3% for the quarter.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company still reported a net loss, there were improvements in revenue and gross profit, and the company is taking steps to manage its financial position. However, challenges in the U.S. Gas segment and the overall net loss temper the positive aspects.

Positives

• Overall revenue increased by 4.2% year-over-year.
• Net loss decreased, indicating improved financial performance.
• The Non-Union Electric segment showed strong growth, increasing revenue by 41.9%.
• Gross profit increased by 53.1% to $20.3 million.
• Selling, general, and administrative expenses decreased by 7.6%.

Negatives

• The company still reported a net loss of $17.9 million.
• The U.S. Gas segment experienced a revenue decrease of 12.7% due to weather and customer budget issues.
• Gross profit for the U.S. Gas segment decreased to (7.5%) due to weather-related work stoppages and delays.

Risks

• Adverse weather conditions can negatively impact revenue and profitability, as seen in the U.S. Gas segment.
• Customer budgetary constraints can lead to reduced MSA volumes.
• Project delays or cancellations due to regulatory requirements, weather, or customer requirements can impact revenue realization.
• Rising fuel, labor, and material costs could negatively affect results if they cannot be passed on to customers.
• Rising interest rates on variable-rate debt could negatively impact the company's financial condition.
• The company's reliance on a few key customers creates concentration risk.

Future Outlook

The company believes its capital resources, including existing cash balances, operating cash flows, and credit facilities, are sufficient to meet financial obligations for at least the next 12 months and intends to refinance or extend its revolving credit facility in the coming quarters.

Management Comments

• We believe these trends represent a significant challenge for utilities, but also an opportunity for outsourced utility infrastructure services companies to build and maintain more efficient, sustainable infrastructure that can meet the energy needs of future generations.
• We believe we have taken steps to secure delivery of a sufficient amount of equipment and do not anticipate any significant disruptions with respect to our fleet in the near-term.
• We believe that we are well-positioned to serve the increased demand resulting from these programs.
• We believe that we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance.

Industry Context

The company operates in the utility infrastructure services sector, which is experiencing increased demand due to aging infrastructure, stricter regulations, and a growing reliance on outsourced service providers. The company is also positioned to benefit from the energy transition and increasing focus on renewable energy and sustainable infrastructure.

Comparison to Industry Standards

• It is difficult to provide a precise comparison to industry standards without specific competitor data.
• However, companies like Quanta Services and MasTec are key players in the infrastructure services sector.
• Quanta Services, for example, often reports on backlog and revenue growth, which can be used as a general benchmark.
• MasTec's focus on energy transition projects provides a comparable context for Centuri's strategic positioning.
• Comparing Centuri's gross margins and revenue growth to these companies can provide insights into its relative performance.

Legal Proceedings

• NPL Construction Co. is pursuing a contract claim against the City of Chicago and related parties.
• The Company disagrees with the decision of the administrative agency, and NPL filed a petition seeking a review of the administrative agency's decision by the Circuit Court of Cook County Illinois on November 8, 2024.
• The Company intends to vigorously pursue this matter; however, the Company cannot accurately predict the ultimate outcome.

Related Party Transactions

• The Company performs various construction services for Southwest Gas Corporation, a wholly owned subsidiary of Southwest Gas Holdings.
• In connection with the Separation and the Centuri IPO, Holdings entered into several agreements with Southwest Gas Holdings on April 11, 2024, governing the relationship of the two parties following the Separation and Centuri IPO.

Stakeholder Impact

• Shareholders: The improved financial performance and backlog provide some reassurance, but the net loss remains a concern.
• Employees: The company's growth in certain segments and efforts to secure future work are positive for job security.
• Customers: The company's focus on infrastructure modernization and environmental sustainability supports their goals.
• Creditors: The company's efforts to manage its debt and refinance its credit facility are positive for creditworthiness.

Next Steps

• The company intends to refinance or extend its revolving credit facility in the coming quarters.
• The company intends to vigorously pursue its contract claim against the City of Chicago.

Key Dates

Keywords

revenue, net loss, utility infrastructure, EBITDA, Centuri Holdings, financial results, Q1 2025, segments, MSAs, backlog