10-Q: Centuri Holdings Reports Q2 Growth, Refinances Debt

Centuri Holdings, a North American utility infrastructure services company, reported increased revenue and gross profit for the fiscal six months ended June 29, 2025, alongside a reduced net loss and a significant debt refinancing.

Summary

• Total revenue for the fiscal six months ended June 29, 2025, increased by 6.2% to $1.27 billion, up from $1.20 billion in the prior year period.
• Gross profit rose by 19.4% to $88.1 million, compared to $73.8 million in the prior year, with gross margin improving from 6.1% to 6.9%.
• The net loss for the six-month period decreased by 27.3% to $9.8 million, down from $13.5 million in the prior year.
• Operating income significantly increased by 73.5% to $19.4 million, up from $11.2 million.
• Net cash used in operating activities improved substantially, decreasing to $11.0 million from $83.0 million in the prior year period.
• The company completed a significant debt refinancing on July 9, 2025, replacing the existing term loan with an $800 million facility maturing in 2032 and increasing the revolving credit facility to $450 million with a 2030 maturity.
• Southwest Gas Holdings' ownership in Centuri Holdings decreased to approximately 52% as of July 8, 2025, triggering tax deconsolidation for U.S. federal and certain state income tax purposes.
• The company's backlog as of June 29, 2025, was approximately $5.3 billion, with 92% related to Master Services Agreements (MSAs).
• The U.S. Gas segment experienced a 5.8% decrease in revenue and a 45.4% decrease in gross profit for the six-month period, primarily due to adverse winter weather and customer budgetary constraints.
• The Canadian Gas segment saw an 8.3% increase in revenue and a 63.7% increase in gross profit, driven by higher MSA volumes and improved bid margins.
• The Union Electric segment's revenue increased by 9.0% and gross profit by 15.9%, benefiting from new bid project wins.
• The Non-Union Electric segment reported a 32.2% increase in revenue and a 72.4% increase in gross profit, attributed to increased volumes under existing MSAs and improved productivity.

Sentiment

Score: 7

Explanation: The company shows strong operational improvements with increased revenue, gross profit, and significantly reduced net loss, alongside a favorable debt refinancing. However, the continued net loss, decreased cash balance, and ongoing legal dispute introduce some caution, preventing a higher score.

Positives

• Overall revenue increased by 6.2% for the six-month period, demonstrating continued growth in demand for services.
• Gross profit improved by 19.4% and gross margin expanded from 6.1% to 6.9%, indicating better operational efficiency.
• Net loss significantly reduced by 27.3% for the six-month period, moving closer to profitability.
• Operating income increased by 73.5%, reflecting stronger core business performance.
• Net cash used in operating activities decreased substantially by $72.0 million, indicating improved working capital management and cash generation from operations.
• The Canadian Gas segment showed strong performance with an 18.1% revenue increase and a 34.9% gross profit increase for the three-month period, and 8.3% revenue increase and 63.7% gross profit increase for the six-month period, driven by higher MSA volumes and improved bid margins.
• The Union Electric segment's revenue grew by 11.0% and gross profit by 27.1% for the three-month period, and 9.0% revenue increase and 15.9% gross profit increase for the six-month period, due to new bid project wins and improved MSA contract profitability.
• The Non-Union Electric segment achieved a 24.4% revenue increase and a 1.8% gross profit increase for the three-month period, and 32.2% revenue increase and 72.4% gross profit increase for the six-month period, driven by increased MSA volumes and improved productivity.
• Successful refinancing of the term loan facility to $800 million with an extended maturity to July 9, 2032, and an increase in the revolving credit facility to $450 million with an extended maturity to July 9, 2030, improves long-term financial flexibility.
• The interest rate margin on term loans decreased by 0.25% post-refinancing, reducing future interest expenses.
• The company received $30.2 million in estimated deferred tax assets (primarily net operating losses) as a capital contribution from Southwest Gas Holdings as part of tax deconsolidation.

Negatives

• The company reported a net loss of $9.8 million for the fiscal six months ended June 29, 2025, despite improvements.
• Cash and cash equivalents decreased to $28.3 million as of June 29, 2025, from $49.0 million at December 29, 2024.
• Selling, general and administrative expenses increased by 12.4% for the six-month period, partly due to separation-related costs and higher incentive compensation.
• The U.S. Gas segment experienced a 5.8% decrease in revenue and a 45.4% decrease in gross profit for the six-month period, primarily due to adverse winter weather conditions and customer budgetary constraints in the first fiscal quarter.
• The company had no unused capacity on its $125.0 million accounts receivable securitization facility as of June 29, 2025.
• The ongoing legal dispute with the City of Chicago regarding a contract claim could result in a significant loss, which is not currently estimable, and no reserves have been accrued.

Risks

• Customer project scheduling and duration can impact revenue recognition and project timelines.
• Adverse weather conditions and general economic conditions can affect demand for services and project execution.
• Differences between actual and anticipated outcomes of bid or other fixed-price construction agreements may impact profitability.
• Outcomes from contract and change order negotiations may not always be favorable.
• The ability to successfully procure new work and impacts from work awarded or failing to be awarded from significant customers can affect results.
• Productivity inefficiencies from regulatory requirements, customer supply chain challenges, or delays in commissioning projects can increase costs.
• Regional or national economic conditions and demand for services can fluctuate.
• Price, volatility, and expectations of future prices of natural gas and electricity can impact demand for energy infrastructure services.
• Increases in the costs to perform services caused by changing conditions, including inflation, may not be fully passed through to customers.
• Termination or expiration of existing agreements or contracts could reduce revenue.
• Decisions of customers regarding capital projects due to economic impacts can affect demand.
• The budgetary spending patterns of customers can influence contract revenue and results of operations.
• Inflation and other increases in construction costs that cannot be passed through to customers can negatively impact margins.
• Cost or schedule overruns on fixed-price contracts can lead to losses.
• Availability of qualified labor for specific projects is crucial for project execution.
• The need and availability of letters of credit, payment and performance bonds, or other security can impact financial flexibility.
• Costs incurred to support growth, whether organic or through acquisitions, can affect profitability.
• The timing and volume of work under contract can fluctuate.
• Losses experienced in operations can negatively impact financial results.
• Adjustments to accounting estimates, particularly for prior period accounting on certain projects, could impact financial statements.
• Developments in governmental investigations and/or inquiries can pose legal and financial risks.
• Intense competition in the industries in which the company operates can affect pricing and market share.
• Existing or future litigation or regulatory proceedings, dispute resolution proceedings or claims, including claims for additional costs, can result in significant liabilities.
• Failure of partners, suppliers, or subcontractors to perform their obligations can lead to project delays and cost overruns.
• Cyber-security breaches can result in data loss, operational disruption, and reputational damage.
• Failure to maintain safe worksites can lead to accidents, injuries, and associated costs.
• Risks or uncertainties associated with events outside of the company's control, such as severe weather conditions, public health crises, political crises, or other catastrophic events, can disrupt operations.
• The impact of changes to federal policies, including those with respect to taxes, trade policies, and tariffs, can affect U.S. relations with the rest of the world and business costs.
• Adverse developments affecting specific financial institutions or the broader financial services industry, including liquidity shortages or bank failures, could impact access to credit.
• Client delays or defaults in making payments can affect cash flow and liquidity.
• The cost and availability of credit and restrictions imposed by debt agreements can limit financial flexibility.
• The impact of credit rating actions and conditions in the capital markets on financing costs can affect borrowing expenses.
• Changes in construction expenditures and financing can impact project volumes.
• Levels of or changes in operations and maintenance expenses can affect profitability.
• The ability to continue to remain within the ratios and other limits in debt covenants is critical for maintaining financing.
• Failure to implement strategic and operational initiatives can hinder growth and efficiency.
• Risks or uncertainties associated with acquisitions, dispositions, and investments can impact financial performance.
• Possible information technology interruptions or inability to protect intellectual property can disrupt operations.
• Failure of the company, its agents, or partners to comply with laws can result in penalties and reputational damage.
• The ability to secure appropriate insurance, licenses, or permits is essential for operations.
• New or changing legal requirements, including those relating to environmental, health, licensing, and safety matters, can increase compliance costs.
• The loss of one or more clients that account for a significant portion of revenue can severely impact financial results.
• Asset impairments can lead to significant non-cash charges.

Future Outlook

Management believes its capital resources, including existing cash balances, operating cash flows, and credit facilities, are sufficient to meet financial obligations for the next 12 months and the foreseeable future. The company expects to continue incurring capital expenditures to meet anticipated service needs. It is well-positioned to serve increased demand from system integrity management programs and support environmental objectives through infrastructure construction and maintenance. The company will continue to renegotiate some major contracts to address increased costs of future work. The impact of the recently signed One Big Beautiful Bill Act (OBBBA) on financial statements is currently being evaluated.

Management Comments

• We believe our cash and cash equivalents are managed by high credit quality financial institutions.
• We believe our capital resources, including existing cash balances, together with our operating cash flows and borrowings under our credit facilities, are sufficient to meet our financial obligations for the next 12 months and the foreseeable future.
• We believe the trends listed in Factors Affecting our Results of Operations 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 we are well-positioned to serve the increased demand resulting from system integrity management programs to enhance safety pursuant to federal and state mandates.
• We believe we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance.
• We believe we will continue to renegotiate some of our major contracts to address the increased costs of future work.
• We believe any liabilities resulting from any known legal matters, including the City of Chicago matter, will not have a material effect on our financial position, results of operations or cash flows.
• We expect that we will continue to incur capital expenditures to meet anticipated needs for our services.
• We believe that the responsibility under a guarantee could exceed the amount recoverable from the subsidiary alone and could materially and adversely affect our consolidated financial condition, results of operations and cash flows.
• We believe that the timing of the recognition of remaining performance obligations of fixed-price contracts is largely within the control of the customer, including when the necessary equipment and materials required to complete the work will be provided by the customer.
• We believe that fuel, labor and material costs could rise in the future resulting in a negative effect on our results of operations or that fluctuations in the price or availability of materials and equipment could impact costs to complete projects or result in the postponement of projects.
• We believe that rising interest rates on our variable-rate debt could have a negative effect on our business, financial condition and results of operations.
• We believe that the impacts of tariffs will not be material to our results of operations.
• We believe that projects included in backlog can be subject to delays or cancellation as a result of regulatory requirements, adverse weather conditions, customer requirements and other factors that could cause actual revenue to differ significantly from the estimates, or cause revenue to be realized in periods other than originally expected.

Industry Context

The company operates within the North American utility infrastructure services sector, which is experiencing significant demand driven by the degradation of existing infrastructure, increased regulatory stringency, and government legislation supporting necessary investments. The industry is also seeing a growing reliance on outsourced utility infrastructure service providers due to labor market constraints and a changing utility workforce, creating opportunities for consolidation. Centuri Holdings positions itself to capitalize on these trends by focusing on modernization, safety enhancements, and supporting environmental objectives through infrastructure construction and maintenance, including renewable energy, data centers, and 5G datacom.

Corporate Governance

Legal Proceedings

• NPL Construction Co., a subsidiary, is pursuing a contract claim for damages against the City of Chicago and related parties. The administrative agency denied NPL's claim on July 18, 2024. NPL filed a petition seeking a review of this decision by the Circuit Court of Cook County Illinois on November 8, 2024. The company intends to vigorously pursue this matter, but cannot accurately predict the ultimate outcome. If unsuccessful, this could result in a significant loss not currently estimable, and no reserves have been accrued.

Related Party Transactions

• Revenue from Southwest Gas Corporation (a wholly owned subsidiary of Southwest Gas Holdings) totaled $26.1 million (4% of consolidated revenue) for the fiscal three months ended June 29, 2025, and $47.2 million (4% of consolidated revenue) for the fiscal six months ended June 29, 2025.
• Accounts receivable from Southwest Gas Corporation were approximately $5.9 million (2% of consolidated accounts receivable) as of June 29, 2025.
• Contract assets from Southwest Gas Corporation were approximately $3.9 million as of June 29, 2025.
• Southwest Gas Corporation receivables sold through the Securitization Facility were $4.9 million as of June 29, 2025.
• The company entered into a Separation Agreement, Tax Matters Agreement, and Registration Rights Agreement with Southwest Gas Holdings on April 11, 2024, governing the post-separation relationship.
• As of June 29, 2025, Southwest Gas Holdings owed the company $1.0 million related to income taxes.
• The company entered into an Unutilized Tax Assets Settlement Agreement with Southwest Gas Holdings on February 24, 2025, which resulted in the allocation of $30.2 million in estimated deferred tax assets (primarily net operating losses) as a capital contribution from Southwest Gas Holdings upon tax deconsolidation in May 2025.

Stakeholder Impact

• Shareholders: The reduction in net loss and improved operating cash flow are positive for shareholder value. The debt refinancing and extended maturities reduce financial risk, while the decreasing ownership by Southwest Gas Holdings signifies a move towards full independence. The ongoing legal proceeding with the City of Chicago presents an unquantified risk.
• Employees: Stock-based compensation plans are in place, and employment agreements provide for compensation and severance. The company's growth in certain segments may indicate job stability or creation, while the U.S. Gas segment's decline due to weather and budgetary constraints could impact employees in that area.
• Customers: The company's focus on modernizing utility infrastructure and supporting environmental objectives benefits customers by enhancing safety, reliability, and sustainability of energy networks. Supply chain challenges and project delays mentioned in risks could impact service delivery to customers.
• Suppliers/Subcontractors: The company's operations depend on the performance of third parties, and failure of suppliers or subcontractors to perform their obligations could impact project timelines and costs.
• Creditors: The successful refinancing of debt, including extended maturities and reduced interest rate margins, improves the company's credit profile and ability to service its obligations. Compliance with new debt covenants is crucial for maintaining creditor confidence.

Next Steps

• Continue to incur capital expenditures to meet anticipated needs for services.
• Continue to renegotiate some major contracts to address increased costs of future work.
• Vigorously pursue the contract claim for damages against the City of Chicago.
• Evaluate the impact of the One Big Beautiful Bill Act (OBBBA) on condensed consolidated financial statements.
• Monitor the impact of new accounting pronouncements (ASU 2023-09 and ASU 2024-03) on future disclosures.

Key Dates

Recommendation

While Centuri Holdings demonstrated strong revenue and gross profit growth, significantly reduced its net loss, and secured favorable debt refinancing terms, the company still reported a net loss for the six-month period. The ongoing legal dispute with the City of Chicago and the continued, albeit decreasing, significant ownership by Southwest Gas Holdings introduce elements of uncertainty. The improved operating cash flow and segment-specific performance are positive indicators, but a 'hold' recommendation is prudent given the current net loss and the need for sustained profitability and resolution of key risks.

Keywords

Utility Infrastructure, Energy Network, Natural Gas, Electric Utility Services, Construction, North America, SEC Filing, Quarterly Report, CTRI, Centuri Holdings, Infrastructure Modernization, Distribution Networks, Transmission Networks, Renewable Energy, Data Centers, 5G Datacom, Debt Refinancing, Tax Deconsolidation