Greetings, and welcome to Centuri's Third Quarter 2025 Earnings Call. This conference is being recorded. It is now my pleasure to introduce your host, Nate Tetlow, Centuri's Vice President of Investor Relations. Please, you may begin.

Thank you, Olivia, and good morning, everyone. Today, we issued and posted to Centuri Holdings' website our third quarter 2025 earnings release and earnings slide deck. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer-term guidance. Some of the information that will be discussed today contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are as of today's date and based on management's assumptions on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. A cautionary note as well as a note regarding non-GAAP measures is included on Slide 2 and Slide 15 of the presentation, today's press release and our filings with the Securities and Exchange Commission. We encourage you to review these documents. Also provided are reconciliations of our non-GAAP measures to related GAAP measures. 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 statements, except as required by law. Today's call is also being webcast live and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. On today's call, we have Chris Brown, President and Chief Executive Officer; and Greg Izenstark, Chief Financial Officer. I will now turn the call over to Chris.

Thank you, Nate. We're delighted to have you on board, and hello to everybody on the call. We appreciate you joining our third quarter 2025 earnings call. We are proud to have delivered record revenue for the quarter, improved our base profitability and produced third quarter adjusted net income of $16.7 million, an increase of $11.4 million from the same quarter last year. While the concept of discussing our base business performance is not new to us, it does reflect a new way of discussing our results with the market. With today's earnings release, we've introduced a couple of new non-GAAP measures, which are base revenue, base gross profit and base gross profit margin. Each measure simply excludes the impact of storm restoration services, which is out of our control and creates volatility in our reporting numbers. Storm restoration services are an important part of our service offerings for customers. However, we believe that these new measures will provide our stakeholders with better information, better aligned to evaluate the fundamentals of our business performance and provides for improved period-over-period comparisons. In the third quarter, we increased our base revenue by 25% and saw a 28% increase in base gross profit. This is remarkable growth and reflects the dedication of our teams across the U.S. and Canada, and their unwavering commitment to safety, productivity and delivering exceptional services to our customers. As I start with the commercial update, we have continued to make great strides in our business development. Our Q3 bookings of approximately $815 million reflects a book-to-bill of almost 1. Importantly, nearly 80% of the dollar value of the bookings reflects new revenue opportunities, meaning strategic bids on new MSAs. The work includes the 9-figure natural gas steel pipeline replacement project for an existing Midwest customer, driven by the PHMSA Gas Mega Rule pipeline regulations. Additionally, work scopes exceeding $50 million for data center campus projects across Pennsylvania and a sizable contract for a mechanical vapor recompression system serving a renewable natural gas sector. We are seeing continued momentum in the pipeline for bid opportunities, and we are now winning bids at a very constant rate. Total bookings for the year now stand at $3.7 billion, putting us well ahead of the 1.1x targeted book-to-bill for the full year 2025. On the MSA front, we booked $170 million in renewals, which included an extension with a long-standing utility partner in the Northeast. We also secured more than $65 million in incremental MSA work, which included new MSA contracts in the Midwest and Southeast for gas and electric distribution work. Our backlog reached a record high of approximately $5.9 billion, up from the $5.3 billion last quarter. We are experiencing significant growth with many of our existing customers, which gives us line of sight to incremental workload under existing MSA contracts. This is what drove the more than 10% increase in backlog from the last quarter. Our overall opportunity pipeline remains very robust at about $13 billion. We now have over 600 strategic bid opportunities in the pipeline, which collectively represent a little more than half of the $13 billion. The strategic bids also include $1.3 billion related to various data center opportunities. Over the near term, we are tracking $1.7 billion of strategic bids with an award decision expected by the end of the first quarter 2026 and about $1.3 billion across MSA renewals and new MSA awards also due by the end of Q1 2026. With the visibility we have in our backlog, the near-term booking expectations and a conservative baseline for incremental awards in 2026, we have line of sight to double-digit revenue growth in 2026. More details on the backlog, pipeline and the growth outlook are on Slide 8 within the investor deck we've posted today. Let's turn to efficiency. We've executed a strategic fleet optimization initiative with the goal of generating more cash for the business. The initiative has two key components. First, we're targeting an optimal 50-50 funding mix, maintaining half of our fleet on the balance sheet whilst leveraging leasing structures for the remainder. Second, we are aiming for a 20% plus improvement in fleet efficiency through enhanced supply and pricing, improved utilization rates and optimized allocation across our business units. Last month, we began executing the funding plan by entering into operating lease agreements totaling approximately $50 million. These initial leases are primarily focused on equipment that we have had on short-term rental agreements. We will continue to keep the market updated as we make more significant progress on these initiatives. Recently, in September, we completed our separation from Southwest Gas Holdings upon the closing of their sale of the remaining shares in Centuri. In conjunction with the full separation, we appointed Christopher Krummel as Independent Chair of the Board of Directors. Chris brings over 30 years of financial executive experience in energy and construction and serves well to lead our Board. Lastly, we recently announced the addition of Ryan Palazzo as President of U.S. Gas. Ryan has more than 3 decades of experience, deep industry relationships and leadership capabilities to drive operational excellence, drive further profitability and strategic growth. We are thrilled to have added Ryan to our team. Now over to Greg to discuss the results.

Thank you, Chris, and good morning to everyone joining us today. Third quarter 2025 consolidated revenues totaled $850 million, a new quarterly record and was an 18% increase from Q3 2024. Consolidated gross profit was $78 million compared to $75.8 million in the prior year period, with a gross profit margin of 9.2% in the third quarter of 2025 compared to 10.5% last year. When isolating our base results, the strength and growth of the business is clear, with base revenues up 25% and base gross profit up 28% compared to last year. Base gross profit margin was 9.1% in the third quarter versus 8.9% last year. Net income attributable to common stockholders in the third quarter was $2.1 million, or $0.02 per share compared to a net loss attributable to common stockholders of $3.7 million, or $0.04 on a per-share basis in the same period last year. In the third quarter of 2025, adjusted EBITDA was $75.2 million, which compares to $78.8 million in the prior year's quarter. Adjusted net income in the third quarter came in at $16.7 million, or $0.19 on a per-share basis compared to $5.3 million, or $0.06 per share in the prior year's period. The difference between our GAAP and non-GAAP adjusted net income primarily reflects the after-tax impact of amortization of intangible assets, certain non-recurring costs and non-cash stock-based compensation. Notable in Q3 2025 was $8.2 million, or $0.09 per share in charges related to the debt refinancing executed early in the quarter. Now to our segments. U.S. Gas revenue was $412.4 million, an increase of 13% compared to the prior year. This improvement largely reflects solid growth in MSA volumes and certain bid projects, demonstrating the underlying strength of our customer relationships and market position. Gross profit margin was 7.7% in the third quarter of 2025, modestly improved over last year's 7.6% in the third quarter. We continue to focus on margin improvement, and our priority is centered around better contract management and operational execution. Canadian Gas revenue was $74.2 million, up nearly 40% from the prior year period. Operational performance in this segment remains strong against the backdrop of sustained favorable demand as evidenced by the 21.9% gross profit margin in the quarter. Union Electric revenue was $214.5 million, an increase of 25% year-over-year. Base revenue in this segment was $213 million, reflecting a 29% year-over-year increase. Growth has been fueled by robust activity in projects serving industrial end-user segments, particularly substation infrastructure and inside electric work. Gross profit margin in the Union Electric segment was 9.1% in the third quarter of 2025, slightly ahead of the third quarter of last year. Base gross profit margin improved to 9% from 8.1% last year, driven by the strong increase in project work. Non-Union Electric revenue in the third quarter of 2025 was $149 million, an increase of 16% year-over-year. This segment is most relevant to base business comparisons as historically, a majority of storm restoration services related to this segment, including last year's very active hurricane season. Base revenue in Non-Union Electric was also $149 million in the quarter, which is a 58% increase from last year. This growth reflects the significant expansion we've seen in MSA activity, building on the momentum we discussed in recent quarters. Gross profit margin in the Non-Union Electric segment was 7.1% in the current period compared to 16.6% in the prior year period, reflecting the significant storm work we had last year. Base gross profit margin was 7.1% compared to 8.7% in the prior year period. The primary driver of margin pressure in the quarter resulted from ramping crews for new and expanding MSAs. Specifically, headcount increased more than 20% this year to support the growth in workload. As crews gained experience and these operations mature, we expect to improve productivity, resulting in margin improvement. We have already seen margins improve in October, and we expect continued progress throughout the remainder of Q4. Turning to capital expenditures. Net CapEx was $21.5 million, and our free cash flow in the third quarter 2025 was negative $16.3 million. Our free cash flow generation tends to be seasonal in nature, with more generation occurring in the second half of the year. With the strong growth we delivered this year, our accounts receivable balance has increased. However, this is a timing issue, and we expect this to normalize in the fourth quarter. As such, we expect to generate meaningful free cash flow in the fourth quarter. Moving to the balance sheet. On a trailing 12-month basis, our net debt to adjusted EBITDA ratio was 3.8x at September 28, 2025, a slight uptick from 3.7x at June 29, 2025. With the anticipated step-up in fourth quarter free cash flow, we expect our year-end leverage ratio to be approximately 3.3x to 3.4x. We ended the quarter with $16.1 million in cash and cash equivalents on our balance sheet. Early in Q3, we successfully completed a refinancing of our debt arrangements. We extended our revolver maturity to 2030 and increased the facility size to $450 million. We also extended our $800 million Term Loan B maturity to 2032 at a modestly improved interest rate. Finally, turning to our 2025 outlook. We increased our full-year revenue guidance to $2.8 billion to $2.9 billion. The increase is consistent with the significant growth in our base business, which more than offset the lack of storm activity this year. For adjusted EBITDA, we expect between $240 million and $250 million. Again, this revision is consistent with lower forecasted storm activity, including a de minimis amount of storm work assumed in the fourth quarter. Lastly, our net CapEx. We've maintained our planned investment range of $75 million to $90 million. We remain confident in the outlook of our base business and are making the necessary investments in a more capital-efficient manner to optimize the growth opportunities ahead of us. I will now turn it back to Chris to wrap up our prepared remarks.

Thank you, Greg. As we wrap up today's call, I want to emphasize that Centuri continues to execute on its strategic vision of building a premier standalone utility services company capable of delivering sustainable and profitable growth. Our third quarter results demonstrate solid progress. Base revenue growth was 25%. Base gross profit was 28%, reflecting our team's commercial drive, dedication to operational excellence and customer service. Our commercial momentum remains robust with $3.7 billion in bookings through September, a record backlog of $5.9 billion and a total opportunity pipeline of $13 billion. Put together, our commercial success so far in 2025 positions us well for double-digit revenue growth in 2026. The fundamental drivers supporting our business remain strong, accelerating utility infrastructure investment, the energy transition and expanding customer relationships across North America. As we advance our comprehensive multi-year strategic planning process, we're positioning Centuri to be a differentiated leader in this significant market opportunity. We very much appreciate your time and interest today. And operator, let's begin the Q&A.

Your first question comes from Justin Hauke of Robert W. Baird.

Great. I appreciate the new disclosure with the base revenue and gross profit. That certainly helps. And I guess it leads to my first question: just to maybe understand the EBITDA impact from the storm because you obviously quantified it for the third quarter and gross profit. But the $15 million decline in guidance, how much of that EBITDA impact is the storm? Is that the full $15 million? And then maybe if you can quantify the impact of 3Q versus 4Q in the guide, given that there was a decent amount of storm activity last year in 4Q?

So the decline in the midpoint of the guidance is all related to storm activities. In fact, our forecasted storm activities were a bit higher, and we've actually been able to make up some of that with just our base business growth. It was probably a 60-40 from a percentage perspective between Q3 and Q4 on a storm basis, but that was our expectations, I think was your second question.

I was trying to confirm that the $15 million was entirely due to the storm and how it split between the quarters. That answers my first question. For my second question, I wanted to know about the ramp in the MSA contract work that wasn't at full utilization in the Non-Union Electric segment. Could you quantify that impact? Additionally, do you expect it to be at full utilization in the fourth quarter, or is this going to be a lingering cost until 2026 when the revenue contribution aligns?

Justin, it's Chris. Let me answer that. If you just look at the process we go through, you've got to deploy capital to find opportunity, deploy capital to bid opportunity. You've then got to win it. You've then got to reposition resources. You bring in new resources. All of that sort of costs the business with no revenue contribution. You then mobilize the teams and it takes a while for them to get productive. So, I think when you've had such a massive ramp-up, I think the Non-Union business in the core is up about 50% year-over-year. There's always going to be a little bit of a lag before you get to that level of performance you want. I actually think as we look at October and we look into November, that more or less is fully recovered. By the time we close out the year, that particular scope of work will be at the levels we expected it to be from a margin standpoint. But I would caution, we will add progressively bigger scopes of work all around the nation, and we'll have a similar phenomenon. It's just the nature of project-related business.

Your next question comes from Sangita Jain of KeyBanc Capital Markets.

So, obviously, a lot of progress on bookings and the core profits improving. Can you help us understand the difference in margins between, let's say, the data center type opportunities versus PHMSA-related work or other bid work?

How do I answer that, Sangita? I'll let Greg discuss the general margin profile in the business across the core and the MSAs shortly. But first, let me explain what we are observing in the pipeline and in data centers. We've been trying to catch up, as we've mentioned in previous calls, to build a sufficient backlog and coverage to ensure that we can grow the core business without depending on storm work. I believe it has taken until the third quarter for us to establish enough backlog, coverage, and data sets. We now have a solid understanding of our business, allowing us to be predictable. We have volume coming in, and we can recover the overhead needed for the size of our business. Looking forward, as we evaluate new bidding opportunities, we're currently considering $2 billion worth of projects. We are also assessing where it makes sense to increase margins in a competitive environment. It’s more challenging to raise margins on MSAs that are renewals due to established price expectations with customers, but we can implement some strategies. We are now in a position to start exploring new market opportunities and bid opportunities, including data center work, where we can elevate our margins in the core business. This has been difficult until we had enough foundational work and volume to manage effectively. But now we have comprehensive coverage for this year, meaning we know exactly the work we will undertake between now and year-end. We also have strong visibility for next year, as shown in the coverage slide in the presentation, which I believe is Slide 8. Our current focus is on increasing margins and improving our return on invested capital.

And to follow on that, you asked about the margins kind of in our backlog. And while margins project by project might differ a little bit, I think we're very pleased with the bid margin that we're getting on the awarded work. Some of that data center-related activity is project-based, so it's a bit higher than maybe some of the MSAs, but we're very pleased with what we're getting on award.

Great. That was very helpful. Go ahead.

Sorry, Sangita. I was just going to add one thing: even with the sort of mobilization impacts in the Non-Union business, our core margins have gone up by 0.2% over the past. And that's despite the fact we've added over $100 million of core business revenue in the quarter. So the work we were booking in the first part of this year, which is now going to the revenue line is already proving to be more profitable, and it's still at its early stages of execution.

Right, right. That was very helpful. And then just a quick follow-up. In your double-digit revenue outlook for next year that you just alluded to, is there any kind of storm that you're building in that? I know this year, it was an average of 3 years, but just wondering what you're thinking about for next year?

Sangita, I want to emphasize what we mentioned earlier. Storm work will always be a part of our business because our customers rely on us during crisis situations when severe weather strikes. It's a necessity for the population. However, planning is challenging since we cannot predict the weather, even though we would like to. Therefore, our discussions will focus on our core business, backlog, and coverage. Any storm activity would be seen as an additional benefit beyond our planned operations. This approach enhances our predictability. Moreover, if we scale up our base in terms of personnel, resources, and equipment, we will have more opportunities and potential gains when storms occur. Consequently, we will primarily concentrate on the core aspects concerning growth, budgeting, and guidance. We will continue to update you on any storm events over a past period so you can take that into account, but our emphasis will remain on the controllable aspects of our core business.

Your next question comes from Joe O'Dea of Wells Fargo.

Can you just elaborate on the strength of the base revenue growth a little bit more in the quarter when you talk about that 25%? How that compared to internal planning? Anything that you saw coming into Q3 that you thought might be in Q4 versus just a broader acceleration?

Joe, to answer your second question first, there was no desire or attempt to pull revenue from Q4 into Q3. The $850 million reported for the third quarter is precisely that, the revenue for the quarter. We haven't pressured revenue for the third quarter. We've got solid coverage for the fourth quarter, which is why we've raised our revenue guidance, and we expect that momentum to persist. The only considerations for the fourth quarter are the two holidays, Thanksgiving and year-end. Regarding base business performance, we've actually done better than we expected, driven by our teams' success in identifying opportunities, focusing on customer service, and increasing efforts for our customers, which resulted in a backlog and revenue growth. All four service lines have seen double-digit growth in their base businesses, and we aim to continue this into next year. We’ve performed better than anticipated in the base business, but keep in mind that we've only been working together as a team for a few quarters. We're just beginning to realize the benefits of our pipeline. While it's encouraging to surpass our internal targets, we're also learning and striving for even more in the future.

And then how do you think about the process for prioritizing the bid opportunities in front of you when you talk about the 600 bid opportunities in the pipeline and how you think about margin as a prioritization focus versus top line growth versus where you've identified regions that you want to get bigger in? Just how all that comes together for prioritization around the bid opportunities?

Our top priority lies within the gas business, where we've had outstanding performance over the past two quarters. Looking ahead to Q4, we feel optimistic based on our backlog and the efforts of our team, which includes some new additions. A key focus is to reduce the seasonality in our operations. We're initiating that work as we enter the first quarter. Specifically, we aim to secure projects across the U.S. that will enable us to operate continuously year-round, especially during the first quarter. This is crucial because resolving seasonality issues will significantly enhance profitability throughout our gas business. Regarding general margin principles, I want to emphasize that we now have sales analytics and are well-positioned for profitable growth. We have a reliable data set, allowing us to track win rates and margins. We believe we can find profitable growth, as indicated by this year's performance and our revenue projections. Our coverage slide shows a potential increase of over 10% based on current insights. Thus, I'm not concerned about market opportunities. Moving forward, we need to focus on enhancing our margins selectively, taking care to support our core customers who depend on us. While we will explore new opportunities with new clients that allow for higher pricing, we may experience mixed outcomes. Our win rates remain strong as we transition from the third to the fourth quarter. We will be cautious in raising prices and margins as we plan for our growth into 2026.

Your last question comes from Steven Fisher of UBS.

Just wanted to follow up on a few of these things, particularly starting off with U.S. Gas. And I know you said you're pleased with the result. I'm just kind of curious how the margins and the overall profits from that compared to your expectations. It sounds like it's still somewhat of a business where you're putting some focus operationally. It sounds like there is some new leadership. Where is the focus there just from an execution perspective? I know you're trying to kind of build it out regionally to reduce the cyclicality. But just operationally, where is the focus there? And how did this quarter compare to your expectations? And then I'll ask my second question now is just with regard to the $3 billion of strategic bids, how are you thinking about the discrete overall project mix relative to sort of distribution work and MSA just kind of flow work? Where are you comfortable having discrete size projects as a percentage of the overall business mix?

I'll try to answer your question regarding the gas business. About eight months ago, we were spending an excessive amount of time addressing the gas performance and working to complete the simplification of our organization that began last year. The restructuring we implemented was necessary, along with a refocusing effort and some right-sizing. We've made significant progress in that area. The performance in the second quarter exceeded my expectations, and the third quarter was predictable based on our workload. We haven't eased up on our efforts, and the team overseeing the gas business is now operating steadily. I don't see any structural changes needed at this time, and I believe we are improving our operational methods. I'm satisfied with our margins, even though there's commentary suggesting they should be higher. When we benchmark our margins against our current workload, we're pleased with their status, though we're not satisfied with the seasonality we've experienced. The negative $15 million in the first quarter was concerning, and addressing that is a top priority as we engage with different customers. I'm proud of our gas team and the progress they made under challenging circumstances last year. We are at a steady state now, but we need additional capacity to accommodate new customers. That's the reason we brought Ryan on board, to enhance the leadership capacity and enable us to examine pricing strategies and customer dynamics more strategically. Overall, I am pleased with the gas business, especially regarding our workload and margins, though we aim to improve seasonality and attract new customers to achieve higher margins. This is why Ryan has joined the team. On the $3 billion, during the last call, I think it was mentioned that for the week of July 4, we had about $2.2 billion in opportunities that would be decided in the next six months. This has now grown to the $3 billion we talked about. This represents a comparison over a quarter period and has increased by well over 40% to 45%, indicating that these opportunities in the pipeline are turning into actual bids. The $3 billion consists of tenders we've either already submitted or are currently working on and are about to submit. It's not for future bids; it's real and urgent. Most of this mix consists of accretive bid work, totaling about $1.7 billion. Additionally, $1.3 billion is from MSA renewals, with around 85% of that amount being renewals and the remaining 15% being new or additive MSAs to our base business. The $1.7 billion is new additive bid work we are pursuing. In terms of the mix, it is approximately 60% electrical work and 40% gas-related. Does that address your question?

We have reached the end of the question-and-answer session. I will now turn the call over to Nate Tetlow. Please continue.

Thank you all for joining the call today, and we appreciate your interest in Centuri. That concludes the call.

Ladies and gentlemen, this concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.