10-Q: Centuri Holdings Reports Strong Revenue Growth in Q2 2026

Centuri Holdings, Inc. announced a significant increase in revenue for the second quarter of 2026, driven by strong performance across its U.S. Gas and Canadian Operations segments, alongside strategic acquisitions.

Summary

• Centuri Holdings, Inc. reported total revenue of $961.986 million for the three months ended June 28, 2026, a 32.9% increase from $724.052 million in the prior year period.
• For the six months ended June 28, 2026, total revenue was $1.685 billion, up 32.3% from $1.274 billion in the same period last year.
• The U.S. Gas segment saw a 45.3% revenue increase year-over-year for the quarter, driven by new contracts and increased volumes.
• The acquisition of Connect Utility Services Corporation in November 2025 contributed significantly to the Canadian Operations segment's revenue growth.
• Net income for the quarter was $6.1 million, a decrease from $8.1 million in the prior year, impacted by a $9.0 million revenue reversal related to the City of Chicago matter.
• The company's backlog stood at approximately $6.4 billion as of June 28, 2026, with 83% related to Master Service Agreements (MSAs).

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive, reflecting revenue growth and improved operational efficiency in key segments, despite some challenges like the City of Chicago reversal and increased fuel costs.

Positives

• Total revenue increased by 32.9% to $961.986 million for the three months ended June 28, 2026, and by 32.3% to $1.685 billion for the six months ended June 28, 2026.
• The U.S. Gas segment revenue grew by 45.3% year-over-year for the quarter, driven by new bid and MSA contracts.
• Canadian Operations segment revenue increased by 47.8% for the quarter, significantly boosted by the Connect acquisition.
• Union Electric segment revenue increased by 23.0% for the quarter, primarily due to new bid projects.
• Gross profit increased by 2.0% to $69.142 million for the quarter and by 19.0% to $104.900 million for the six months.
• The company's backlog remains strong at approximately $6.4 billion as of June 28, 2026.
• Interest expense decreased by $6.1 million for the quarter and $11.6 million for the six months due to lower debt balances and interest rates.

Negatives

• Net income for the three months ended June 28, 2026, decreased to $6.1 million from $8.1 million in the prior year period.
• The company recorded a $9.0 million revenue reversal related to a legacy contract with the City of Chicago, impacting gross profit by the same amount.
• Gross profit margin for the U.S. Gas segment decreased to 4.2% from 7.8% year-over-year for the quarter, partly due to the Chicago reversal and elevated fuel costs.
• Non-Union Electric segment gross profit decreased by 7.7% for the quarter, impacted by lower storm restoration profitability and elevated fuel prices.
• Selling, general and administrative expenses increased by 28.6% for the quarter, driven by non-recurring strategy implementation and acquisition costs, as well as higher bonus and stock-based compensation.

Risks

• Rising fuel, labor, and material costs could negatively impact results if not passed on to customers.
• Customer project scheduling and duration, weather, and general economic conditions can affect performance.
• The timing of revenue recognition for fixed-price contracts is largely dependent on customer actions regarding equipment and materials.
• Fluctuations in the price or availability of materials and equipment could impact project costs or lead to postponements.
• Rising interest rates on variable-rate debt could negatively affect the business.
• Projects in backlog are subject to delays or cancellation due to regulatory requirements, weather, or customer needs.
• The City of Chicago legal matter has resulted in a $9.0 million revenue reversal and ongoing legal pursuit.
• The company is subject to performance and payment bonds totaling approximately $917.4 million as of June 28, 2026.

Future Outlook

The company anticipates continued capital expenditures to meet service demands. Management believes its capital resources are sufficient for the next 12 months and the foreseeable future. The company expects to continue renegotiating major contracts to address increased future work costs and is well-positioned to serve increased demand from system integrity management programs and growing customer focus on environmental objectives.

Management Comments

• Management believes the trends in utility infrastructure represent a significant challenge but also an opportunity for outsourced service providers.
• The company believes it has taken steps to secure sufficient equipment and does not anticipate significant fleet disruptions.
• Management believes its ongoing obligations related to agreements with Southwest Gas Holdings are not expected to have a material impact.
• The company believes its capital resources, operating cash flows, and credit facilities are sufficient to meet financial obligations for the next 12 months and the foreseeable future.

Industry Context

StockSavvy.ai notes that Centuri operates in a growing market driven by the need to modernize aging utility infrastructure, increasing regulatory stringency, and a trend towards outsourcing by utilities. The company is well-positioned to benefit from these trends, particularly in areas like system integrity management and environmental sustainability initiatives.

Comparison to Industry Standards

• The company's gross profit margin for the U.S. Gas segment (4.2% for the quarter, 1.8% for the six months) appears lower than its Canadian Operations (16.0% and 15.7%) and Union Electric (9.0% and 9.0%) segments, suggesting potential variations in project mix, contract terms, or operational efficiencies across segments.
• The reported revenue growth of 32.9% for the quarter and 32.3% for the six months significantly outpaces general economic growth, indicating strong market penetration or acquisition-driven expansion.
• The company's reliance on MSAs (83% of backlog) is a common strategy in the utility services sector, providing recurring revenue streams, though bid contracts can offer higher margins when successful.
• The increase in selling, general, and administrative expenses as a percentage of revenue in the quarter (3.9% vs 4.1%) and six months (4.1% vs 4.4%) indicates effective cost management relative to revenue growth, despite non-recurring charges.

Legal Proceedings

• NPL Construction Co. (a subsidiary) is pursuing a contract claim against the City of Chicago for damages related to work performed. The administrative agency denied the claim, and the company is seeking review by the Circuit Court of Cook County, Illinois. This matter resulted in a $9.0 million revenue reversal.

Related Party Transactions

• Centuri Holdings, Inc. performs construction services for Southwest Gas Corporation, a subsidiary of its former parent, Southwest Gas Holdings. Revenue from Southwest Gas Corporation was $29.965 million (3% of total revenue) for the quarter and $53.203 million (3% of total revenue) for the six months ended June 28, 2026.
• As of June 28, 2026, approximately $9.1 million of accounts receivable and $4.9 million of contract assets were related to contracts with Southwest Gas Corporation.

Stakeholder Impact

• Shareholders may see continued revenue growth but should note the impact of non-recurring charges and cost pressures on profitability.
• Employees may benefit from increased hiring to support growth, as indicated by higher salaries and benefits costs.
• Customers may experience continued service improvements and infrastructure modernization, with the company well-positioned to support environmental goals.
• Creditors and lenders will note the company's compliance with debt covenants and the availability of credit facilities.

Next Steps

• Continue to monitor and assess the impact of elevated fuel costs.
• Continue to renegotiate major contracts to address increased future work costs.
• Complete the initial accounting for the JJ White, Inc. acquisition.
• Continue to pursue the City of Chicago legal matter.
• Manage working capital requirements and monitor financial markets.

Key Dates

Recommendation

Centuri Holdings demonstrates strong revenue growth and strategic execution through acquisitions, positioning it well within the growing utility infrastructure market. However, the impact of the City of Chicago legal matter, elevated fuel costs, and increased SG&A expenses warrant a cautious 'hold' rating until these factors are fully resolved or mitigated, and consistent profitability is demonstrated.

Keywords

utility infrastructure, energy services, natural gas, electric utility, construction services, revenue growth, segment reporting, acquisition