8-K: Centuri Holdings Reports Q4 and Fiscal Year 2024 Results, Introduces 2025 Outlook

Centuri Holdings announces its fourth quarter and full year 2024 financial results, exceeding revenue expectations and providing its outlook for 2025.

Summary

• Centuri Holdings reported fourth quarter 2024 revenue of $717.1 million.
• Net income attributable to common stock was $10.3 million, resulting in diluted earnings per share of $0.12.
• Adjusted Net Income was $18.4 million, with adjusted diluted earnings per share of $0.21.
• Adjusted EBITDA reached $70.7 million, with an Adjusted EBITDA Margin of 9.9%.
• The company reduced its net debt to Adjusted EBITDA ratio to 3.6x as of December 2024, down from 4.0x in December 2023.
• Centuri exited the fourth quarter with a backlog of $3.7 billion, 90% of which is related to MSA revenue.
• Full year 2024 revenue was $2.64 billion.
• The company reported a net loss attributable to common stock of $6.7 million for the full year.
• Adjusted EBITDA for the full year was $238.2 million, representing a 9.0% margin.
• Net capital expenditures for the year totaled $89.4 million.
• For 2025, Centuri anticipates revenue between $2.60 and $2.80 billion and Adjusted EBITDA between $240 and $275 million.
• Net capital expenditures for 2025 are projected to be between $65 and $80 million.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company exceeded revenue expectations, improved its debt ratio, and has a strong backlog. However, there were some negative impacts on margins in the U.S. Gas segment and a decrease in offshore wind revenue.

Positives

• Centuri's financial performance in the fourth quarter drove full-year revenues that exceeded the mid-point of its 2024 outlook.
• The company experienced higher-than-average emergency restoration services and saw continued improvement in crew counts in its core Non-Union Electric business.
• MSA volumes benefited from customers spending budgeted capital late in the period.
• Centuri booked $221 million in new awards during the quarter, of which 45% was MSA renewals and 55% was new contract awards.
• The company's priority is to continue driving sales growth and increasing both MSA and new contract awards.
• Centuri experienced a transformative year in 2024, highlighted by the completion of an initial public offering in April.

Negatives

• U.S. Gas margins were negatively impacted by unfavorable work mix despite stronger spending in the fourth quarter across several U.S. Gas customers driving a modest year-over-year improvement in revenues.
• Offshore wind revenues, included in the Union Electric segment, declined by $43.0 million, which aligned with expectations.
• Centuri faced headwinds from reduced customer spending under MSAs, particularly in the first half of the year.
• Full year revenue decreased from $2,899.276 billion to $2,637.229 billion.

Risks

• The company's forward-looking statements are subject to a number of important factors that could cause actual results to differ materially.
• These factors include capital market risks and the impact of general economic or industry conditions.
• Factors that could cause actual results to differ also include those discussed in Centuri's filings filed from time to time with the U.S. Securities and Exchange Commission.

Future Outlook

Centuri anticipates revenue between $2.60 and $2.80 billion and Adjusted EBITDA between $240 and $275 million for the full year 2025. Net capital expenditures for 2025 are projected to be between $65 and $80 million.

Management Comments

• Centuri experienced higher-than-average emergency restoration services and saw continued improvement in crew counts in its core Non-Union Electric business, while MSA volumes benefited from customers spending budgeted capital late in the period, said Centuri President & CEO Chris Brown.
• In my nearly three months as CEO, I have developed a solid appreciation for our teams, the safety and quality of our services, and the strength of our customer relationships, which are crucial as we secure several important MSA renewals in 2025 and pursue new opportunities.
• Todays energy markets offer tremendous growth potential for Centuri with both existing and new customers.
• We have implemented a company-wide review of our business development activities to institutionalize a more structured approach to market positioning, cross selling, and further focus on building our sales pipeline and the awarding of new business.

Industry Context

Centuri operates in the utility infrastructure services sector, which is influenced by factors such as infrastructure spending, regulatory changes, and energy market trends. The company's focus on MSA renewals and new contract awards aligns with the industry's emphasis on long-term partnerships and recurring revenue streams.

Comparison to Industry Standards

• Comparing Centuri's performance to companies like Quanta Services (PWR) and MasTec (MTZ), which are also major players in the infrastructure services sector, reveals some similarities and differences.
• Centuri's Adjusted EBITDA margin of 9.0% for the full year 2024 is within the range of what these companies typically report, but can vary based on project mix and market conditions.
• The company's focus on reducing net debt to Adjusted EBITDA ratio to 3.6x is a positive sign, as it demonstrates a commitment to financial discipline and balance sheet strength, which is important for attracting investors and securing future projects.
• The backlog of $3.7 billion provides a degree of revenue visibility, but the actual conversion of backlog to revenue can be influenced by project delays or changes in customer spending patterns.

Management Changes

Related Party Transactions

• Revenue from related party parent was $27.644 million for the three months ended December 29, 2024, and $106.835 million for the year ended December 29, 2024.

Stakeholder Impact

• Shareholders: The company's improved financial performance and positive outlook are likely to be viewed favorably by shareholders.
• Employees: The company's growth and expansion plans could create new job opportunities and career advancement prospects for employees.
• Customers: The company's focus on MSA renewals and new contract awards suggests a commitment to providing high-quality services to its customers.
• Suppliers: The company's increased revenue and capital expenditures could lead to increased demand for goods and services from its suppliers.
• Creditors: The company's improved debt ratio and focus on free cash flow are positive signs for its creditors.

Next Steps

• The company will continue to focus on improving free cash flow and strengthening the balance sheet throughout 2025.
• Centuri will conduct a conference call on February 26, 2025, to discuss its fourth quarter 2024 financial results and other business highlights.
• The company anticipates it will secure new awards in the next twelve months that will deliver a book to bill in excess of 1.1x.
• Centuri expects to finalize a new sales and pipeline process in 2025.

Key Dates