CTRI 10-Q
Centuri Holdings, Inc. (CTRI)
10-Q
2025-05-12
For: 2025-03-30
View Original
Added on
April 12, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 30, 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ___ to ___
Commission file number 001-42022
_________________________
(Exact name of registrant as specified in its charter)
_________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | |||||||||||
| x | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x
As of May 2, 2025, the number of outstanding shares of Common Stock of the Registrant was 88,558,945 .
| Page | |||||
Item 1. Financial Statements (Unaudited) | |||||
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. federal securities laws. All statements other than historical factual information are forward-looking statements, including, without limitation, statements regarding our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Terminology such as “believe,” “anticipate,” “will,” “should,” “could,” “intend,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast,” “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.
Specific forward-looking statements in this Quarterly Report on Form 10-Q include:
•Our belief that our cash and cash equivalents are managed by high credit quality financial institutions;
•Our belief that 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 at least the next 12 months;
•Our belief that the trends listed in “Factors Affecting our Results of Operations” in Item 2. Management's Discussion and Analysis of Financial Condition and 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;
•Our belief that 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;
•Our belief that we are well-positioned to serve the increased demand resulting from system integrity management programs to enhance safety pursuant to federal and state mandates;
•Our belief that we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance;
•Our belief that we will continue to renegotiate some of our major contracts to address the increased costs of future work;
•Our belief that any liabilities resulting from any known legal matters, including the City of Chicago matter described in “Note 14 — Commitments and Contingencies — Legal Proceedings,” will not have a material effect on our financial position, results of operations or cash flows;
•Our expectation that we will continue to incur capital expenditures to meet anticipated needs for our services;
•Our belief 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;
•Our belief 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;
•Our belief 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;
•Our belief that rising interest rates on our variable-rate debt could have a negative effect on our business, financial condition and results of operations;
•Our belief that the impacts of tariffs will not be material to our results of operations;
•Our intent to refinance or extend our revolving credit facility in the coming quarters; and
•Our belief 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.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results may differ materially as a result of a number of factors, including, among other things:
•Customer project scheduling and duration;
•Weather, and general economic conditions;
•Results of bid work, differences between actual and anticipated outcomes of bid or other fixed-price construction agreements;
•Outcomes from contract and change order negotiations;
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•Our ability to successfully procure new work and impacts from work awarded or failing to be awarded work from significant customers, the mix of work awarded, and the amount of work awarded to us following work stoppages or reduction;
•The results of productivity inefficiencies from regulatory requirements, customer supply chain challenges, or otherwise, delays in commissioning individual projects, the ability of management to successfully finance, close on and assimilate any acquired businesses, and changes in our mix of customers, projects, contracts and business;
•Regional or national and/or general economic conditions and demand for our services;
•Price, volatility, and expectations of future prices of natural gas and electricity;
•Increases in the costs to perform services caused by changing conditions;
•The termination, or expiration of existing agreements or contracts;
•Decisions of our customers as to whether to pursue capital projects due to economic impacts resulting from a pandemic or otherwise;
•The budgetary spending patterns of customers;
•Inflation and other increases in construction costs that we may be unable to pass through to our customers;
•Cost or schedule overruns on fixed-price contracts;
•Availability of qualified labor for specific projects;
•The need and availability of letters of credit, payment and performance bonds, or other security;
•Costs we incur to support growth, whether organic or through acquisitions;
•The timing and volume of work under contract;
•Losses experienced in our operations;
•The results of the review of prior period accounting on certain projects and the impact of adjustments to accounting estimates;
•Developments in governmental investigations and/or inquiries;
•Intense competition in the industries in which we operate;
•Existing or future litigation or regulatory proceedings, dispute resolution proceedings or claims, including claims for additional costs;
•Failure of our partners, suppliers or subcontractors to perform their obligations;
•Cyber-security breaches;
•Failure to maintain safe worksites;
•Risks or uncertainties associated with events outside of our control, including severe weather conditions, public health crises and pandemics, political crises or other catastrophic events, such as the conflicts in the Middle East and the ongoing war in Ukraine;
•The impact of changes to federal policies, including those with respect to taxes, trade policies and tariffs, that affect U.S. relations with the rest of the world;
•Adverse developments affecting specific financial institutions or the broader financial services industry, including liquidity shortages or bank failures;
•Client delays or defaults in making payments;
•The cost and availability of credit and restrictions imposed by our debt agreements;
•The impact of credit rating actions and conditions in the capital markets on financing costs;
•Changes in construction expenditures and financing;
•Levels of or changes in operations and maintenance expenses;
•Our ability to continue to remain within the ratios and other limits in our debt covenants;
•Failure to implement strategic and operational initiatives;
•Risks or uncertainties associated with acquisitions, dispositions and investments;
•Possible information technology interruptions or inability to protect intellectual property;
•Our failure, or the failure of our agents or partners, to comply with laws;
•Our ability to secure appropriate insurance, licenses or permits;
•New or changing legal requirements, including those relating to environmental, health, licensing and safety matters;
•The loss of one or more clients that account for a significant portion of our revenue; and
•Asset impairments.
Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to, the risks and uncertainties detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including Item 1A . Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.
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Part I - Financial Information
Item 1. Financial Statements
Centuri Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share information)
(Unaudited)
| March 30, 2025 | December 29, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Accounts receivable, related party - parent, net | |||||||||||
| Contract assets | |||||||||||
| Contract assets, related party - parent | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill, net | |||||||||||
| Right-of-use assets under finance leases | |||||||||||
| Right-of-use assets under operating leases | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES, TEMPORARY EQUITY AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Current portion of finance lease liabilities | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Contract liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Line of credit | |||||||||||
| Finance lease liabilities, net of current portion | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 14) | |||||||||||
| Temporary equity: | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities, temporary equity and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Centuri Holdings, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per-share information)
(Unaudited)
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Revenue | $ | $ | |||||||||
| Revenue, related party - parent | |||||||||||
| Total revenue, net | |||||||||||
| Cost of revenue (including depreciation) | |||||||||||
| Cost of revenue, related party - parent (including depreciation) | |||||||||||
| Total cost of revenue | |||||||||||
| Gross profit | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Amortization of intangible assets | |||||||||||
| Operating loss | ( | ( | |||||||||
| Interest expense, net | |||||||||||
| Other expense (income), net | ( | ||||||||||
| Loss before income taxes | ( | ( | |||||||||
| Income tax benefit | ( | ( | |||||||||
| Net loss | ( | ( | |||||||||
| Net income (loss) attributable to noncontrolling interests | ( | ||||||||||
| Net loss attributable to common stock | $ | ( | $ | ( | |||||||
| Loss per share attributable to common stock: | |||||||||||
| Basic | $ | ( | $ | ( | |||||||
| Diluted | $ | ( | $ | ( | |||||||
| Shares used in computing earnings per share: | |||||||||||
| Weighted average basic shares outstanding | |||||||||||
| Weighted average diluted shares outstanding | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Centuri Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Foreign currency translation adjustment | ( | ||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||
| Comprehensive loss | ( | ( | |||||||||
| Comprehensive income (loss) attributable to noncontrolling interests | ( | ||||||||||
| Total comprehensive loss attributable to common stock | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Centuri Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||||||
| Depreciation | |||||||||||
| Amortization of intangible assets | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Non-cash stock-based compensation expense | ( | ||||||||||
| Gain on sale of equipment | ( | ( | |||||||||
| Amortization of right-of-use assets | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Changes in assets and liabilities, net of non-cash transactions | ( | ( | |||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from sale of property and equipment | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from line of credit borrowings | |||||||||||
| Payment of line of credit borrowings | ( | ( | |||||||||
| Principal payments on long-term debt | ( | ( | |||||||||
| Principal payments on finance lease liabilities | ( | ( | |||||||||
| Redemption of redeemable noncontrolling interest | ( | ||||||||||
| Other | ( | ( | |||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| Effects of foreign exchange translation | ( | ||||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Centuri Holdings, Inc.
Condensed Consolidated Statements of Changes in Equity
(In thousands, except share information)
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Equity | Temporary Equity: Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | — | — | ( | — | ( | — | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | — | ||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Distribution to related party - parent | — | — | ( | — | — | ( | — | ||||||||||||||||||||||||||||||||||
| Noncontrolling interest revaluation | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Balances at March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Balances as of December 29, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Distribution to related party - parent | — | — | ( | — | — | ( | — | ||||||||||||||||||||||||||||||||||
| Balances at March 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Centuri Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
1.Description of Business
Organization Structure
Centuri Holdings, Inc. (“Holdings” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company” or “Centuri”) was formed as a Delaware corporation in June 2023. Holdings was formed for the purpose of completing an initial public offering and facilitating the separation of Centuri Group, Inc. (the “Operating Company”) from Southwest Gas Holdings, Inc. (“Southwest Gas Holdings”) in order to carry on the business of the Operating Company. On April 13, 2024, Holdings issued 71,664,592 shares of common stock to Southwest Gas Holdings as consideration for the transfer of assets and assumption of liabilities of the Operating Company (“the Separation”). Following the completion of the Separation, the Operating Company became a wholly owned subsidiary of Holdings, and all of Holdings’ operations are conducted through the Operating Company. The Operating Company is considered to be Holdings’ predecessor for accounting purposes.
Description of Operations
The Company is a North American utility infrastructure services company, and it partners with regulated utilities to maintain, upgrade and expand the energy network that powers millions of homes and businesses. The Company’s service offerings primarily consist of the modernization of utility infrastructure through the replacement, maintenance, retrofitting and installation of electric and natural gas distribution and utility-scale transmission networks, building capacity to meet current and future demands. The Company operates through a family of complementary companies working together across different geographies to establish solid customer relationships and a strong reputation for a wide range of capabilities.
Initial Public Offering
On April 17, 2024, the registration statement related to the initial public offering of Centuri’s common stock was declared effective, and Centuri’s common stock began trading on the New York Stock Exchange under the ticker “CTRI” (the “Centuri IPO”) on April 18, 2024. On April 22, 2024, the Centuri IPO and a concurrent private placement were completed with total final net proceeds of $327.7 million. As of and since the closing of the Centuri IPO, Southwest Gas Holdings has owned 71,665,592 shares of Centuri common stock, or approximately 81 % of the total outstanding shares of Centuri.
2.Basis of Presentation and Recent Accounting Pronouncements
Interim Condensed Consolidated Financial Information
The unaudited condensed consolidated financial statements and footnotes were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to those rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto as included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2024. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations, comprehensive income and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations and comprehensive income for the interim periods are not necessarily indicative of the results for the entire fiscal year. The results of the Company have historically been subject to significant seasonal fluctuations.
The Company uses a 52/53-week fiscal year that ends on the Sunday closest to the end of the calendar year. Unless otherwise stated, references to months and quarters in the Company’s condensed consolidated financial statements relate to
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fiscal months and quarters rather than calendar months and quarters. The fiscal three month periods ended March 30, 2025 and March 31, 2024 each had 13 weeks.
Revisions
During the third fiscal quarter of 2024, management determined that certain cash outflows incurred during the fiscal quarter ended March 31, 2024 related to the implementation of a cloud computing arrangement were incorrectly classified as capital expenditures instead of as operating cash outflows. The Company quantitatively and qualitatively assessed the impact of this error on previously issued financial statements and concluded the impact was not material, but elected to revise the financial statements for these periods when presented as comparative periods in future filings. Accordingly, capital expenditures, operating cash flows, and investing cash flows for the fiscal three months ended March 31, 2024 have been revised from previous filings within the statement of cash flows, “Note 4 — Segment Information,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The update enhances income tax disclosure requirements. This update is effective beginning with the Company’s 2025 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this update will have on its disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The update enhances the level of detail available related to reporting about expenses. This update will be effective for the Company beginning with the annual reporting for the fiscal year ending 2027. The Company is currently evaluating the impact the rules will have on its disclosures.
3.Revenue and Related Balance Sheet Accounts
The following table presents the Company’s revenue from contracts with customers disaggregated by contract type (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Contract Type: | |||||||||||
| Master services agreements | $ | $ | |||||||||
| Bid contracts | |||||||||||
| Total revenue | $ | $ | |||||||||
| Unit-price contracts | $ | $ | |||||||||
| Time and materials contracts | |||||||||||
| Fixed-price contracts | |||||||||||
| Total revenue | $ | $ | |||||||||
Contract assets and liabilities consisted of the following (in thousands):
| March 30, 2025 | December 29, 2024 | ||||||||||
| Current contract assets | $ | $ | |||||||||
| Non-current contract assets | |||||||||||
| Contract assets, total | |||||||||||
| Contract liabilities | ( | ( | |||||||||
| Net contract assets | $ | $ | |||||||||
Contract assets primarily consist of revenue earned on contracts in progress in excess of billings, which relates to the Company’s rights to consideration for work completed but not billed and/or approved at the reporting date as well as contract retention balances. Contract assets that are not expected to be invoiced and collected within a year of the financial statement date (“Non-current contract assets”) are included in other assets on the condensed consolidated balance sheets.
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Revenue earned on contracts in progress in excess of billings are transferred to accounts receivable when the rights become unconditional.
As of March 30, 2025 and December 29, 2024, the Company had recorded approximately $25.2 million and $24.8 million, respectively, in contract assets related to net recovery claims. Claims occur when there is a dispute regarding a change in the scope of work and associated price for work already performed. The Company records estimated claims as variable consideration based on the most likely amount it expects to receive, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty with the variable consideration is resolved.
Total contract assets increased $35.6 million during the fiscal three months ended March 30, 2025 due primarily to timing of billings, which is based on the achievement of certain milestones. Contract assets are recoverable from the Company’s customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of a contract. In addition, many of the Company’s time and materials (“T&M”) contract arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in revenue earned on contracts in progress in excess of billings and/or unbilled receivables being recorded as revenue is recognized in advance of billings. The lag in billing due to the aforementioned contractual provisions may create circumstances in which material changes to a customer’s business, cash flows or financial condition, which may be impacted by negative economic or market conditions, could affect the Company’s ability to bill and subsequently collect amounts due. These changes may result in the need to record an estimate of the amount of loss from uncollectible receivables.
Contract liabilities primarily consist of amounts billed in excess of revenue earned related to the advance consideration received from customers for which work has not yet been completed. The increase in the contract liability balance of $0.4 million from December 29, 2024 to March 30, 2025 was due to additional payments received in advance of work completed, net of approximately $13.8 million of revenue recognized that was included in the balance as of December 29, 2024.
The Company considers retention and unbilled amounts to customers to be conditional contract assets, as payment is contingent on the occurrence of a future event. Accounts receivable, net, includes only amounts that are unconditional in nature, which means only the passage of time remains and the Company has invoiced the customer. Similarly, contract liabilities include amounts billed in excess of revenue earned on contracts in progress related to fixed-price, unit-price and T&M contracts. In the event contract assets or contract liabilities are expected to be recognized more than one year from the financial statement date, the Company classifies those amounts as long-term contract assets or contract liabilities, included in other assets or other long-term liabilities, respectively, on the condensed consolidated balance sheets. Similarly, accounts receivable balances expected to be collected beyond one year are recorded as long-term within other assets.
For contracts where payment is expected to be collected less than one year from when services are performed (as determined at contract inception), the Company uses the practical expedient and does not consider the time value of money. For contracts with an original duration of one year or less, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or the related timing of revenue recognition.
As of March 30, 2025, the Company had 43 fixed-price contracts with an original duration of more than one year. The aggregate amount of the transaction price allocated to the unsatisfied performance obligations of these contracts as of March 30, 2025 was $133.4 million. The Company expects to recognize the remaining performance obligations of these contracts over approximately the next 1.5 years; however, the timing of that recognition 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.
Accounts receivable, net consisted of the following (in thousands):
| March 30, 2025 | December 29, 2024 | ||||||||||
| Billed on completed contracts and contracts in progress | $ | $ | |||||||||
| Other receivables | |||||||||||
| Accounts receivable, gross | |||||||||||
| Allowance for doubtful accounts | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
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4.Segment Information
The Company reports its results under four reportable segments: (i) U.S. Gas Utility Services (“U.S. Gas”); (ii) Canadian Gas Utility Services (“Canadian Gas”); (iii) Union Electric Utility Services (“Union Electric”); and (iv) Non-Union Electric Utility Services (“Non-Union Electric”).
The Company’s president and chief executive officer serves as the Company's chief operating decision maker (the "CODM"). The Company’s reportable segments are established in consideration of differences in services, geographic areas and workforce composition (union vs. non-union). The Company has not aggregated any operating segments into reportable segments. The CODM reviews short-term and long-term trends and budget-to-actual variances in gross profit to assess performance across the different segments in determining where to allocate resources.
U.S. Gas
U.S. Gas provides comprehensive services, including maintenance, replacement, repair and installation for local natural gas distribution utilities (“LDCs”) focused on the modernization of customers’ infrastructure throughout the U.S. The work performed within this segment includes solutions for all stages of utility work and is performed primarily within the distribution, utility-scale transmission and end-user infrastructure, rather than large-scale, project-based, cross-country transmission. In addition, U.S. Gas performs other underground services, including water and fiber, and has an in-house fabrication shop providing pipe and component assembly. The Company is able to cater to the needs of its gas utility services and energy customers by serving union and non-union markets.
Canadian Gas
Canadian Gas provides comprehensive services, including maintenance, replacement, repair and installation for LDCs focused on the modernization of customers’ infrastructure in Canada. The work performed within this segment includes solutions for all stages of utility work and is performed primarily within the distribution, urban transmission and end-user infrastructure, rather than large-scale, project-based, cross-country transmission. Canadian Gas only serves union markets.
Union Electric
Union Electric provides a comprehensive set of electric utility services encompassing maintenance, replacement, repair, upgrade and expansion services for urban transmission and local distribution infrastructure within union markets. The work performed within this segment is focused primarily on recurring local distribution and urban transmission services under master services agreements (“MSAs”), as opposed to large-scale, project-based, cross-country transmission, and services are primarily focused on infrastructure between the substation and end-user meter. In addition to core electric utility infrastructure, this segment provides heavy industrial work, including civil, mechanical, electrical, and fabrication (component assembly) services.
Non-Union Electric
Non-Union Electric provides a comprehensive set of electric utility services encompassing maintenance, replacement, repair, upgrade and expansion services for urban transmission and local distribution infrastructure within non-union markets. The work performed within this segment is focused almost exclusively on recurring local distribution and urban transmission services under MSAs as opposed to large-scale, project-based, cross-country transmission, and services are primarily focused on infrastructure between the substation and end-user meter.
Other
Other primarily consists of corporate and non-allocated costs, including corporate facility costs, non-allocated corporate salaries, benefits and incentive compensation.
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Revenue and gross profit (loss) by segment were as follows (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Revenue: | |||||||||||
| U.S. Gas | $ | $ | |||||||||
| Canadian Gas | |||||||||||
| Union Electric | |||||||||||
| Non-Union Electric | |||||||||||
| Consolidated revenue | $ | $ | |||||||||
| Gross profit: | |||||||||||
| U.S. Gas | $ | ( | $ | ( | |||||||
| Canadian Gas | |||||||||||
| Union Electric | |||||||||||
| Non-Union Electric | |||||||||||
| Consolidated gross profit | $ | $ | |||||||||
Gross profit (loss) represents the difference between revenue and cost of revenue. Cost of revenue is a significant expense that is regularly reported to the CODM by segment. Cost of revenue by segment was as follows (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Cost of revenue | |||||||||||
| U.S. Gas | $ | $ | |||||||||
| Canadian Gas | |||||||||||
| Union Electric | |||||||||||
| Non-Union Electric | |||||||||||
| Consolidated cost of revenue | $ | $ | |||||||||
Depreciation expense, included in cost of revenue, by segment was as follows (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| U.S. Gas | $ | $ | |||||||||
| Canadian Gas | |||||||||||
| Union Electric | |||||||||||
| Non-Union Electric | |||||||||||
Consolidated depreciation expense (1) | $ | $ | |||||||||
(1)Depreciation expense within selling, general and administrative expense, which was immaterial for all periods presented, was excluded from the table above as it is not produced or utilized by management to evaluate segment performance.
Separate measures of the Company’s assets and cash flows, with the exception of capital expenditures, are not produced or utilized by management to evaluate segment performance.
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Capital expenditures by segment were as follows (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| U.S. Gas | $ | $ | |||||||||
| Canadian Gas | |||||||||||
| Union Electric | |||||||||||
| Non-Union Electric | |||||||||||
| Other | |||||||||||
| Consolidated capital expenditures | $ | $ | |||||||||
Foreign Operations
The Company recorded revenue in Canada of approximately $39.8 million (7 % of consolidated revenue) and $41.0 million (8 % of consolidated revenue) during the fiscal three months ended March 30, 2025 and March 31, 2024, respectively.
5.Per Share Information
The amounts used to compute basic and diluted loss per share attributable to common stock consisted of the following (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Amounts attributable to common stock: | |||||||||||
| Net loss attributable to common stock | $ | ( | $ | ( | |||||||
| Weighted average shares: | |||||||||||
| Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock | |||||||||||
There were no no potentially dilutive securities for the fiscal three months ended March 31, 2024.
6.Accounts Receivable Securitization Facility
In September 2024, the Company entered into a three-year accounts receivable securitization facility for an aggregate amount of up to $125.0 million (the “Securitization Facility”), with PNC Bank, National Association (“PNC"), to enhance the company's financial flexibility by providing additional liquidity.
Under the Securitization Facility, certain designated subsidiaries of the Company may sell or contribute their accounts receivable and contract assets generated in the ordinary course of their businesses and certain related assets to an indirect wholly owned bankruptcy-remote Special Purpose Entity (“SPE”) of the Company created specifically for this purpose. The SPE is a variable interest entity, and the Company is the primary beneficiary and therefore consolidates the SPE. The SPE transfers ownership and control of accounts receivable to PNC for payments as set forth in the agreement. The Company accounts for accounts receivable sold to the banking counterparty as a sale of financial assets and has derecognized the accounts receivable from the condensed consolidated balance sheet for the current period.
During the fiscal three months ended March 30, 2025, cash collections on sold accounts receivable were continuously reinvested in the Securitization Facility as more accounts receivable were sold to PNC. However, the Company decreased the amount of receivables sold (and derecognized) to $111.5 million as of March 30, 2025, down from $125.0 million as of December 29, 2024, which resulted in a net cash outflow of $13.5 million for the fiscal three months ended March 30, 2025. Accordingly, the Company had $13.5 million in unused capacity on the Securitization Facility as of March 30, 2025.
Additionally, the SPE owned accounts receivable and contract assets of $5.2 million and $72.3 million, respectively, as of March 30, 2025 and $45.2 million and $78.3 million, respectively, as of December 29, 2024 which were not sold to
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PNC. These balances are primarily included in accounts receivable, net and contract assets (and the accompanying related party captions) in the Company’s condensed consolidated balance sheet, with certain non-current balances being included in other assets.
7.Goodwill
Changes in the carrying amount of goodwill of each of the Company’s reportable segments were as follows (in thousands):
U.S. Gas | Canadian Gas(1) | Union Electric (2) | Non-Union Electric | Total | |||||||||||||||||||||||||
| Balances as of December 29, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Effect of exchange rate changes | |||||||||||||||||||||||||||||
| Balances as of March 30, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1)Net of accumulated impairment of $10.8
(2)Net of accumulated impairment of $391.1
8.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| March 30, 2025 | December 29, 2024 | ||||||||||
| Accrued compensation | $ | $ | |||||||||
| Other accrued expenses | |||||||||||
| Accrued insurance | |||||||||||
| Book overdrafts | |||||||||||
| Accrued expenses and other current liabilities | $ | $ | |||||||||
9.Long-Term Debt
Long-term debt, including outstanding amounts on the Company’s line of credit, consisted of the following (in thousands):
| March 30, 2025 | December 29, 2024 | ||||||||||||||||||||||
| Carrying Amount | Fair Value (1) | Carrying Amount | Fair Value (1) | ||||||||||||||||||||
| Borrowings under revolving line of credit | $ | $ | $ | $ | |||||||||||||||||||
| Term loans under loan facility | |||||||||||||||||||||||
| Total loan facility | |||||||||||||||||||||||
| Equipment loans: | |||||||||||||||||||||||
| Total long-term debt | $ | $ | $ | $ | |||||||||||||||||||
| Current portion of long-term debt | ( | ( | |||||||||||||||||||||
| Unamortized discount and debt issuance costs | ( | ( | |||||||||||||||||||||
| Long-term debt, net of current portion | $ | $ | |||||||||||||||||||||
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On August 27, 2021, the Company entered into an amended and restated credit agreement. The agreement provided for a $1.145 billion secured term loan facility, at a discount of 1.00 %, and a $400 million secured revolving credit facility, which in addition to funding the acquisition of Riggs Distler & Company, Inc. ("Riggs Distler"), refinanced the Company’s previous $590 million loan facility. This multi-currency facility allows the Company to request loan advances in either Canadian dollars or U.S. dollars. Amounts borrowed and repaid under the revolving line of credit portion of the facility are available to be re-borrowed. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of the Company, substantially all of the tangible and intangible personal property of each borrower, and all products, profits, and proceeds of the foregoing. The Company’s assets securing the facility as of March 30, 2025 totaled $1.9 billion. The credit agreement also contains a restriction on dividend payments with an available amount generally defined as 50 % of the Company’s consolidated net income since the beginning of the fourth fiscal quarter of 2020 adjusted for certain items, such as parent capital contributions, redeemable noncontrolling interest payments, and dividend payments, among other adjustments, as applicable. The term loan facility matures on August 27, 2028, and the revolving credit facility matures on August 27, 2026.
The applicable margins for the term loan facility are 1.50 % for base rate loans and 2.50 % for SOFR loans. The weighted average interest rate on the term loan facility was 6.94 % and 7.19 % as of March 30, 2025 and December 29, 2024, respectively. On May 13, 2024, the Company also amended its revolving credit facility to transition from Canadian Dollar Offered Rate benchmarks to Canadian Overnight Repo Rate Average (“CORRA”) benchmarks for Canadian dollar borrowing under its revolving credit facility. The applicable margin for the revolving credit facility now ranges from 1.00 % to 2.50 % for SOFR and CORRA loans and from 0.00 % to 1.50 % for base rate loans, depending on the Company’s net leverage ratio. The weighted average interest rate on the revolving credit facility was 5.35 % and 5.94 % as of March 30, 2025 and December 29, 2024, respectively.
On March 22, 2024, the Company amended the financial covenants of the revolving credit facility. Pursuant to the current terms, the Company is required to maintain a leverage ratio of 4.00 to 1.00. Under the amended terms of the revolving credit facility, the Company is also required to maintain an interest coverage ratio of greater than a minimum of 2.50 to 1.00. As of March 30, 2025, the Company was in compliance with all of the financial covenants under the revolving credit facility. The Company is required to pay a commitment fee on the unused portion of the commitments which ranges from 0.15 % to 0.35 % per annum, depending on the Company’s net leverage ratio.
As of both March 30, 2025 and December 29, 2024, the Company had borrowings outstanding of $0.8 241.8 million, net of outstanding letters of credit, of unused capacity on the revolving line of credit as of March 30, 2025. The Company had $64.6 2.5 million and $3.0 million, respectively, in debt issuance costs recorded in other assets on the condensed consolidated balance sheets.
As of March 30, 2025, the Company had $72.8 million of surety-backed letters of credit issued outside of its amended and restated credit agreement.
Debt issuance costs associated with the Company’s term loan are amortized over the term of the related debt, which approximates the effective interest method. As of March 30, 2025 and December 29, 2024, debt issuance costs of $10.6 million and $11.8 million, respectively, were recorded as a reduction to long-term debt on the condensed consolidated balance sheets.
Amortization expense related to debt issuance costs is recorded as a component of interest expense in the condensed consolidated statements of operations. During the fiscal three month periods ended March 30, 2025 and March 31, 2024 amortization of debt issuance costs was $1.2 million and $1.3 million, respectively.
The Company currently has seven equipment term loans with initial amounts totaling approximately $170 million, with certain owned equipment used as collateral. The loans are serviced in U.S. dollars. These term loans have prepayment penalties for the first three years of the agreements. The Company did not incur any material prepayment penalties during the fiscal three month periods ended March 30, 2025 or March 31, 2024.
The fair value of the Company’s debt as of both March 30, 2025 and December 29, 2024 was $0.9
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credit facility approximate market rates, and typically draws on the revolving credit facility are paid back in a short period of time. The fair values of the Company’s term loan facility and equipment loans were determined utilizing a market-based valuation approach, where fair values are determined based on evaluated pricing data, and as such are categorized as Level 2 in the hierarchy.
10.Leases
The Company has operating and finance leases for corporate and field offices, equipment yards, construction equipment and transportation vehicles. The Company is currently not a lessor in any significant lease arrangements. The Company’s leases have remaining lease terms of up to 14 five years , and some include options to terminate the leases within one year . The equipment leases may include variable payment terms in addition to the fixed lease payments if machinery is used in excess of the standard work periods. The occurrence of these variable payments is not probable under the Company’s current operating environment and has not been included in consideration of lease payments. Leases with an initial term of 12 months or less are classified as short-term leases and are not recognized on the condensed consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised, or unless it is reasonably certain that the equipment or property will be leased for greater than 12 months. Due to the seasonality of the Company’s operations, expense for short-term leases will fluctuate throughout the year with higher expense typically incurred during the periods when revenue is the greatest. As of March 30, 2025, the Company did not have any significant executed lease agreements that had not yet commenced.
The components of lease expense were as follows (in thousands):
| Fiscal Three Months Ended | ||||||||||||||
| Lease cost | Classification | March 30, 2025 | March 31, 2024 | |||||||||||
| Operating lease cost | Cost of revenue and selling, general and administrative expenses | $ | $ | |||||||||||
| Finance lease cost: | ||||||||||||||
| Amortization of ROU assets | Depreciation (1) | |||||||||||||
| Interest on lease liabilities | Interest expense, net | |||||||||||||
| Total finance lease cost | ||||||||||||||
Short-term lease cost (2) | Cost of revenue and selling, general and administrative expenses | |||||||||||||
| Total lease cost | $ | $ | ||||||||||||
(1)Depreciation is included within cost of revenue in the accompanying condensed consolidated statements of operations.
(2)Short-term lease cost includes both leases and rentals with initial terms of 12 months or less.
Supplemental cash flow information related to leases was as follows (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from finance leases | |||||||||||
| Financing cash flows from finance leases | |||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | $ | |||||||||
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Supplemental information related to leases was as follows:
| March 30, 2025 | December 29, 2024 | ||||||||||
| Weighted average remaining lease term (in years): | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted average discount rate: | |||||||||||
| Operating leases | % | % | |||||||||
| Finance leases | % | % | |||||||||
The following is a schedule of maturities of lease liabilities as of March 30, 2025 (in thousands):
| Operating Leases | Finance Leases | ||||||||||
| Fiscal year ended: | |||||||||||
| Remainder of 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less: Amount of lease payments representing interest | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Certain leases require the Company to pay variable property taxes, insurance and maintenance costs that have been excluded from the minimum lease payments in the above tables as they are variable in nature.
11.Income Taxes
The Company’s quarterly provision for income taxes was prepared using the effective annual tax rate adjusted to remove discrete items, as those items will impact the quarter in which those items were reflected. The Company’s effective tax rate for the fiscal three month periods ended March 30, 2025 and March 31, 2024 was 42.3 % and 45.2 %, respectively. The tax rates for both periods were unfavorably impacted by the disproportionate amount of non-deductible expenses in relation to loss before income taxes.
The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The Company maintains a valuation allowance on certain state net operating loss carryforwards. Such valuation allowances are released as the related tax benefits are realized or when sufficient evidence exists to conclude that it is more likely than not the deferred tax assets will be realized.
As of March 30, 2025 and December 29, 2024, the total amount of unrecognized tax benefits relating to uncertain tax positions was $0.5
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12.Supplemental Cash Flow Disclosures
The following table represents the Company’s supplemental cash flow disclosures and non-cash investing activity, excluding lease activity (which is disclosed in “Note 10 — Leases”) (in thousands):
| Fiscal Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid, net of refunds | |||||||||||
| Non-cash investing activities: | |||||||||||
| Accrued capital expenditures | $ | $ | |||||||||
| Proceeds from sale of property and equipment in accounts receivable | |||||||||||
13.Related Parties
The Company performs various construction services for Southwest Gas Corporation, a wholly owned subsidiary of Southwest Gas Holdings. The following table represents the Company’s revenue in dollars and as a percentage of total revenue as well as gross profit in dollars and as a percentage of total gross profit relating to contracts with Southwest Gas Corporation (in thousands):
| Fiscal Three Months Ended | |||||||||||||||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||||||||||||||
| Revenue | $ | % | $ | % | |||||||||||||||||||
| Gross Profit | $ | % | $ | % | |||||||||||||||||||
As of March 30, 2025 and December 29, 2024, approximately $0.4 million and $9.6 million (3 %), respectively, of the Company’s accounts receivable, and $2.3 million and $2.6 million, respectively, of contract assets, were related to contracts with Southwest Gas Corporation. Southwest Gas Corporation receivables sold through the Securitization Facility were $7.9 million as of March 30, 2025, and no Southwest Gas Corporation receivables were sold as of December 29, 2024. Refer to “Note 6 — Accounts Receivable Securitization Facility” for additional details about the Securitization Facility. There were no
Additionally, certain costs incurred by Southwest Gas Holdings have been allocated to Centuri, which are settled in cash during the normal course of operations. The Company recorded de minimis allocated costs for the fiscal three months ended March 30, 2025 and $0.4 million in allocated costs for the fiscal three months ended March 31, 2024. These costs are recorded within selling, general and administrative expenses on the Company’s condensed consolidated statements of operations.
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. These agreements are summarized below.
•Separation Agreement: Sets forth the agreements with Southwest Gas Holdings regarding the principal actions to be taken in connection with the Separation and govern, among other matters, (1) the allocation of assets and liabilities to Centuri and Southwest Gas Holdings (including Centuri’s indemnification obligations, for potentially uncapped amounts, for certain liabilities relating to Centuri’s business activities), (2) certain matters with respect to the Centuri IPO and subsequent disposition transactions by Southwest Gas Holdings, and (3) certain covenants regarding Southwest Gas Holdings’ right to designate members to Centuri’s Board, approve certain Company actions, and receive information and access rights.
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•Tax Matters Agreement: Sets forth responsibilities and obligations with respect to all tax matters, including tax liabilities (including responsibility and potential indemnification obligations for taxes attributable to Holdings’ business and taxes arising, under certain circumstances, in connection with the Separation and a distribution to Southwest Gas Holdings stockholders that is currently intended to be tax-free to Southwest Gas Holdings and its stockholders, if effected), tax attributes, tax contests and tax returns (including Centuri’s continued inclusion in the U.S. federal consolidated group tax return, and certain other combined or similar group tax returns, with Southwest Gas Holdings for applicable tax periods following the Separation, and Centuri’s continuing joint and several liability with Southwest Gas Holdings for such tax returns). As of March 30, 2025, Southwest Gas Holdings owed the Company $1.0 million and as of December 29, 2024, $0.6 million was due to Southwest Gas Holdings related to income taxes.
•Registration Rights Agreement: Grants to Southwest Gas Holdings certain registration rights with respect to the shares of Centuri common stock owned by Southwest Gas Holdings following the Centuri IPO.
On February 24, 2025, the Company entered into an Unutilized Tax Assets Settlement Agreement (the “Tax Assets Agreement”) with Southwest Gas Holdings. The Tax Assets Agreement addresses the Company’s arrangements with Southwest Gas Holdings with respect to certain unutilized tax assets (the “Tax Assets”) that the Company will retain following any deconsolidation from Southwest Gas Holdings for U.S. federal and relevant state income tax laws. Under the terms of the Tax Assets Agreement, the balance of the Tax Assets at tax deconsolidation, subject to true-up, and including the impact of any payments or deemed payments made by Southwest Gas Holdings in respect of the Tax Assets will be treated as deemed capital contributions, which will result in an increase in Southwest Gas Holdings’ basis in its ownership of the Company’s common stock. The deemed capital contributions will not require any cash payment from the Company and will have no impact on the Company’s liquidity or financial condition. Deconsolidation for federal income tax purposes occurs at the time when Southwest Gas no longer owns at least 80% of our common stock, and the deconsolidation for state law purposes occurs at various points depending on the relevant tax law of each state.
14.Commitments and Contingencies
Legal Proceedings
The Company is a named party in various legal proceedings arising from the normal course of business. Although the ultimate outcomes of active matters are currently unknown, the Company does not believe any liabilities resulting from these known matters will have a material effect on its financial position, results of operations or cash flows, unless otherwise stated below.
NPL Construction Co. (“NPL”), a subsidiary of the Operating Company, is currently pursuing a contract claim for damages against the City of Chicago and related parties (collectively, the “City”), arising out of work that NPL performed for the City. NPL initiated this dispute through the City’s required administrative process on August 26, 2019. In response to NPL’s claim, the City has taken the position that it is entitled to withhold payments on amounts NPL believes it is owed for work already completed, claiming that further corrective work by NPL on the project is necessary and that withholding payment is appropriate until remediation is complete. On July 18, 2024, the administrative agency issued a decision denying NPL’s claim for damages. 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. The Company may be entitled to additional revenue if all of its claims for relief are awarded in the Company’s favor. However, to the extent the Company is not successful in collecting the withheld receivables, this matter could result in an additional significant loss, which is not currently estimable due to uncertainties with respect to the proceedings. The Company can provide no assurance as to whether or when there will be material developments in this matter. The Company has not accrued any reserves for this matter to date.
22
The Company maintains liability insurance for various risks associated with its operations. In connection with its liability insurance policies, the Company is responsible for an initial deductible or self-insured retention amount per occurrence, after which the insurance carriers would be responsible for amounts up to the policy limits.
Employment Agreements
The Company has employment agreements with certain executives and other employees, which provide for compensation and certain other benefits and for severance payments under certain circumstances. Certain employment agreements also contain severance clauses that become effective upon a change in control of the Company. Upon the occurrence of certain defined events in the various employment agreements, the Company would be obligated to pay varying amounts to the related employees, which vary with the level of the employees’ respective responsibilities.
Concentration of Credit Risk
The Company provides full-service utility infrastructure services to various customers, primarily utility companies that are located throughout the U.S. and Canada. The Company is subject to concentrations of credit risk related primarily to its revenue and accounts receivable and contract asset positions with customers, which is defined as greater than or equal to 10% of the Company’s consolidated balances. One Non-Union Electric segment customer accounted for $56.1 million or 10 % of revenue during the fiscal three months ended March 30, 2025, and no customers individually accounted for more than 10% during the fiscal three months ended March 31, 2024. As of March 30, 2025 and December 29, 2024, one Non-Union Electric segment customer had a combined accounts receivable and contract asset balance above 10% of the consolidated accounts receivable and contract assets balance, which was $60.5 million and $52.5 million, respectively, or approximately 13 % and 10 %, respectively, of the consolidated balance of these accounts.
The Company primarily uses two financial banking institutions. The Company’s cash on deposit with these financial institutions exceeded the federal insurability limits as of March 30, 2025. The Company believes its cash and cash equivalents are managed by high credit quality financial institutions.
Bonds and Parent Guarantees
Many customers, particularly in connection with new construction, require the Company to post performance and payment bonds. These bonds provide a guarantee that the Company will perform under the terms of a contract and pay its subcontractors and vendors. In certain circumstances, the customer may demand that the surety make payments under the bond, and the Company must reimburse the surety for any expenses or outlays it incurs. The Company may also be required to post letters of credit as collateral in favor of the sureties, which would reduce the borrowing availability under its revolving credit facility. As of March 30, 2025, the Company was not aware of any outstanding material obligations for payments related to these bond obligations.
Performance bonds expire at various times ranging from mechanical completion of a project to a period extending beyond contract completion in certain circumstances, and therefore a determination of maximum potential amounts outstanding requires certain estimates and assumptions. Such amounts can also fluctuate from period to period based upon the mix and level of the Company’s bonded operating activity. As of March 30, 2025, the estimated total amount of outstanding performance and payment bonds was approximately $641.6 million. The Company’s estimated maximum exposure related to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately $102.4 million as of March 30, 2025.
Additionally, from time to time, the Company guarantees certain obligations and liabilities of its subsidiaries that may arise in connection with, among other things, contracts with customers, and equipment and real estate lease obligations. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. The Company is not aware of any claims under any guarantees that are material. The responsibility under a guarantee could exceed the amount recoverable from the subsidiary alone and could materially and adversely affect the Company’s consolidated financial condition, results of operations and cash flows.
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15.Stock-based Compensation
The Company maintains a stock-based compensation plan, which authorizes the granting of various equity-based incentives, including restricted stock units (“RSUs”) and performance stock units (“PSUs”). Stock compensation expense is amortized on a straight line basis over the service period, which is generally the vesting period. The fair value of the Company’s RSU and PSU awards is measured at the market price of the Company’s common stock on the grant date. PSUs are earned based on the achievement of certain performance metrics in relation to a set target, and stock compensation expense may fluctuate based on the forecasted achievement prior to vesting or actual achievement of these target metrics upon vesting.
RSU grants to employees generally vest ratably on an annual basis over a three-year period following the grant date, although some awards may vest ratably on an annual basis over two years or cliff vest at the end of a shorter time period. RSU grants to non-employee directors typically vest at the end of a one-year period. PSU grants generally cliff vest at the end of a three-year period following the grant date.
Forfeitures are recorded as they occur. During the fiscal three month periods ended March 30, 2025 and March 31, 2024, the Company recorded $1.6 million and $(0.6 ) million of stock compensation expense, respectively.
The table below summarizes activity related to the Company’s stock-based compensation plans during the first fiscal quarter of 2025. This table excludes shares of Southwest Gas Holdings stock that were granted to certain employees of the Company prior to the Centuri IPO. The fair value of these outstanding Southwest Gas Holdings shares was not material as of March 30, 2025 or December 29, 2024.
| RSUs | PSUs | ||||||||||||||||||||||
| Shares | Weighted Average Grant Date Fair Value (Per Unit) | Shares | Weighted Average Grant Date Fair Value (Per Unit) | ||||||||||||||||||||
| As of December 29, 2024 | $ | N/A | |||||||||||||||||||||
| Granted | $ | $ | |||||||||||||||||||||
| As of March 30, 2025 | $ | $ | |||||||||||||||||||||
As of March 30, 2025, total unearned compensation related to Centuri stock RSUs and PSUs was approximately $10.3 million and $2.1 million, respectively, and these amounts are expected to be recognized over a weighted average period of approximately 2.3 years and 3.0 years, respectively.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and corresponding notes in Item 1 — Financial Statements within Part I of this Quarterly Report on Form 10-Q, and our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 filed with the SEC on February 26, 2025 (our “2024 Annual Report”).
Unless the context otherwise requires, references to “we,” “is,” “our,” and “our company” refer to Centuri Holdings, Inc. and its consolidated subsidiaries. As discussed in “Note 1 — Description of Business” to the condensed consolidated financial statements, all financial information presented herein is the financial information of Centuri Holdings, Inc. and its subsidiaries, including Centuri Group, Inc. (“the Operating Company”). This discussion contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed within Item 1A. Risk Factors in our 2024 Annual Report. See “Cautionary Note Regarding Forward-Looking Statements.”
We use a 52/53-week fiscal year that ends on the Sunday closest to the end of the calendar year. Unless otherwise stated, references to months and quarters throughout relate to fiscal months and quarters rather than calendar months and quarters. The first fiscal three months of 2025 and 2024 ended on March 30, 2025 and March 31, 2024, respectively, and each period had 13 weeks.
Overview
Company Overview
We are a leading North American utility infrastructure services company, and we partner with regulated utilities to maintain, upgrade and expand the energy network that powers millions of homes and businesses. We serve as long-term strategic partners to, and an extension of, North America’s electric, gas and combination utility providers, delivering a wide range of infrastructure solutions. Our service offerings primarily consist of the modernization of utility infrastructure through the replacement, maintenance, retrofitting and installation of electric and natural gas distribution and utility-scale transmission networks, and building capacity to meet current and future demands. We also serve complementary, attractive and growing end markets such as renewable energy associated with the expected energy transition, data centers and 5G datacom. Our essential services enable our customers to enhance the safety, reliability and environmental sustainability of the electric and natural gas networks that consumers rely upon to meet their essential and evolving energy needs. Guided by our values and our unwavering commitment to serve as long-term partners to customers and communities, our employees enable our customers to safely and reliably deliver electricity and natural gas and achieve their goals for environmental sustainability.
Separation from Southwest Gas Holdings
We were incorporated in Delaware in June 2023 as a wholly owned subsidiary of Southwest Gas Holdings, Inc. (“Southwest Gas Holdings”). We were formed for the purpose of completing an initial public offering, facilitating the separation of the Operating Company from Southwest Gas Holdings and other related transactions in order to carry on the business of the Operating Company, our predecessor for financial reporting purposes. Prior to April 13, 2024, Southwest Gas Holdings owned 1,000 shares of our common stock, representing 100% of the issued and outstanding shares of our common stock. On April 13, 2024, we issued 71,664,592 shares of common stock to Southwest Gas Holdings as consideration for the transfer of assets and assumption of liabilities of the Operating Company (the “Separation”). Following the completion of the Separation, the Operating Company became our wholly owned subsidiary, and all of our operations are conducted through the Operating Company.
On April 17, 2024, the registration statement related to the initial public offering of our common stock (“IPO Registration Statement”) was declared effective, and our common stock began trading on the New York Stock Exchange (“NYSE”) under the ticker “CTRI” (the “Centuri IPO”) on April 18, 2024. On April 22, 2024, the Centuri IPO and a concurrent private placement were completed with final net proceeds of $327.7 million. As of and since the closing of the Centuri IPO, Southwest Gas Holdings has owned 71,665,592 shares of our common stock, or approximately 81% of the total outstanding shares of our common stock.
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Segment Information
We report our results under the following four reportable segments: (i) U.S. Gas Utility Services (“U.S. Gas”); (ii) Canadian Gas Utility Services (“Canadian Gas”); (iii) Union Electric Utility Services (“Union Electric”); and (iv) Non-Union Electric Utility Services (“Non-Union Electric”).
Factors Affecting Our Results of Operations
Our financial results may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, regulatory or environmental influences, rising interest rates, labor markets and costs (including in regard to contracted or professional services), and the availability of those resources. Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.
Market Developments
North America relies on electric and natural gas delivery infrastructure to maintain its dynamic economy, but existing infrastructure is subject to degradation and is often decades old. Governments have increased regulatory stringency and enacted legislation to support the necessary infrastructure investments in the sector, aimed at preventing disruption, enhancing safety and readying to meet current and future demands. Additionally, labor market constraints and a changing utility workforce have led utilities to become increasingly reliant on external outsourced utility infrastructure service providers, creating an overall growing market well-positioned for consolidation. 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.
Rising fuel, labor and material costs have in the past had, and could in the future have, a negative effect on our results of operations, to the extent we cannot pass these costs through to our customers. While we actively monitor economic, industry and market factors that could adversely impact our business, we cannot predict the effect that changes in such factors could have on our future results of operations, financial position and cash flows.
Generally, our contracts provide that the customer is responsible for supplying the materials for their projects. Fluctuations in the price or availability of materials and equipment that we or our customers utilize could impact (positively or negatively, as applicable) costs to complete projects or result in the postponement of projects. Although certain of our customers have experienced recent disruptions in their supply chain for certain project materials, most of our customers have generally been able to procure the necessary materials in a timely manner.
Our operations also depend on the availability of certain equipment to perform services. 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.
Demand for Services
The seasonal nature of the industry we serve affects demand for our services. In addition to weather conditions, capital expenditure and maintenance budgets of our customers, as well as the related timing of approvals and seasonal spending patterns, influence our contract revenue and results of operations. Factors affecting our customers and their capital expenditure budgets include, but are not limited to, overall economic conditions, the introduction of new technologies, and our customers’ capital resources, financial performance, and strategic plans. Other factors that may impact our customers and their capital expenditure budgets include new regulations or regulatory actions, merger or acquisition activity involving our customers and the physical maintenance needs of our customers’ infrastructure.
Fluctuations in market prices for oil, gas and other energy sources can impact demand for our services. Such fluctuations can affect the level of activity in energy generation projects as well as pipeline construction projects. The availability of transportation and transmission capacity can also impact demand for our services, including energy generation, electric grid and pipeline construction projects. These fluctuations, as well as the highly competitive nature of our industry, can result in changes in the levels of activity, project mix and moreover the profitability of the services we provide.
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Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S., and we believe that we are well-positioned to serve the increased demand resulting from these programs.
Our services support customers’ environmental goals, such as reducing methane emissions from pipeline leaks through pipe repair and replacement, hardening electric infrastructure to prevent damage from storms or otherwise, and assisting gas and electric customers with their renewable and sustainable energy infrastructure initiatives. We believe that we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance.
Project Variability
Margins for our projects may vary from period to period due to changes in the volume or type of work performed and the pricing structure of our projects. Additionally, factors such as site conditions, project location, labor shortages, weather events, environmental restrictions, regulatory delays, protests, political activity, legal challenges, or the performance of third parties may adversely impact our project performance.
In certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact our results of operations.
Seasonality and Severe Weather Events
Generally, our revenue is lowest during the first quarter of the year due to less favorable winter weather and related working conditions in many of the areas where we perform work. Revenue typically improves as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, we may be engaged to perform restoration activities related to above-ground utility infrastructure, which typically results in higher margins due to higher equipment utilization and the absorption of fixed costs. Alternatively, these severe weather events can also delay projects, negatively impacting our results of operations. Severe weather events and the related impacts on our performance and results are not solely within the control of management and cannot always be predicted or mitigated.
Inflation
Under the terms of a majority of our MSAs, materials used in our utility infrastructure service activities are specified, purchased and supplied by customers. However, our operations are affected by increases in prices, whether caused by inflation, tariffs, rising interest rates or other economic factors. We attempt to recover anticipated increases in the cost of labor, equipment, fuel and materials not purchased by customers through price escalation provisions that allow us to adjust billing rates for certain major contracts annually; by considering the estimated effect of such increases when bidding or pricing new work; or by entering into back-to-back contracts with suppliers and subcontractors. However, the annual adjustment provided by certain contracts is typically subject to a cap and there can be an extended period of time between the impact of inflation on our costs and when billing rates are adjusted. Our actual costs at times can exceed the contractual caps, and therefore negatively impact our operations. Additionally, rising interest rates on our variable-rate debt could have a negative effect on our business, financial condition and results of operations. Overall, our results for the first quarter of 2025 were not significantly impacted by increases in prices, including due to recently implemented tariffs. We are currently monitoring the impacts of tariffs on the price and availability of our equipment as well as any potential impacts to project scheduling, but we do not currently expect a material effect on our results of operations.
Backlog
Backlog as of March 30, 2025 was approximately $4.5 billion, with approximately 89% of backlog related to MSAs. Backlog represents contracted revenue on existing bid agreements as well as estimates of revenue to be realized over the contractual life of existing long-term MSAs. The contractual life of an MSA is defined as the stated length of the contract including any renewal options stated in the contract that we believe our customers are reasonably certain to execute.
Backlog differs from remaining performance obligations disclosed in “Note 3 — Revenue and Related Balance Sheet Accounts” to the condensed consolidated financial statements, as remaining performance obligations are limited to contractually obligated revenue on our contracts that exceed one year, which is typically only bid projects, whereas backlog
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is inclusive of all contracts regardless of length and includes estimated future work over the contractual life of MSAs. Generally, customers are not contractually committed to specific volumes of work under MSAs, and MSAs may be terminated by either party upon notice. Revenue estimates for MSAs are based on historical customer trends. As backlog only includes revenue estimates over the contractual life of MSAs, backlog tends to fluctuate based on the timing of MSA renewals.
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.
Results of Operations
Our results of operations, on a consolidated basis and by segment, for the fiscal three month periods ended March 30, 2025 and March 31, 2024 are set forth and compared below.
Fiscal three months ended March 30, 2025 compared to the fiscal three months ended March 31, 2024
The following table summarizes our consolidated results of operations for the fiscal three months ended March 30, 2025, and March 31, 2024 including as a percentage of revenue, as well as the dollar and percentage change period-over-period.
| Fiscal Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | March 30, 2025 | March 31, 2024 | $ | % | |||||||||||||||||||||||||||||||
| Revenue, net | $ | 550,081 | 100.0 | % | $ | 528,023 | 100.0 | % | $ | 22,058 | 4.2 | % | |||||||||||||||||||||||
| Cost of revenue (including depreciation) | 529,753 | 96.3 | % | 514,744 | 97.5 | % | 15,009 | 2.9 | % | ||||||||||||||||||||||||||
| Gross profit | 20,328 | 3.7 | % | 13,279 | 2.5 | % | 7,049 | 53.1 | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | 26,375 | 4.8 | % | 28,550 | 5.4 | % | (2,175) | (7.6 | %) | ||||||||||||||||||||||||||
| Amortization of intangible assets | 6,666 | 1.2 | % | 6,668 | 1.3 | % | (2) | — | % | ||||||||||||||||||||||||||
| Operating loss | (12,713) | (2.3 | %) | (21,939) | (4.2 | %) | 9,226 | (42.1 | %) | ||||||||||||||||||||||||||
| Interest expense, net | 17,862 | 3.2 | % | 24,099 | 4.6 | % | (6,237) | (25.9 | %) | ||||||||||||||||||||||||||
| Other expense (income), net | 480 | 0.1 | % | (32) | (0.1 | %) | 512 | NM | |||||||||||||||||||||||||||
| Loss before income taxes | (31,055) | (5.6 | %) | (46,006) | (8.7 | %) | 14,951 | (32.5 | %) | ||||||||||||||||||||||||||
| Income tax benefit | (13,131) | (2.3 | %) | (20,773) | (3.9 | %) | 7,642 | (36.8 | %) | ||||||||||||||||||||||||||
| Net loss | (17,924) | (3.3 | %) | (25,233) | (4.8 | %) | 7,309 | (29.0 | %) | ||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | 13 | — | % | (175) | (0.1) | % | 188 | (107.4 | %) | ||||||||||||||||||||||||||
| Net loss attributable to common stock | $ | (17,937) | (3.3 | %) | $ | (25,058) | (4.7 | %) | $ | 7,121 | (28.4 | %) | |||||||||||||||||||||||
NM — Percentage is not meaningful
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Revenue and Gross Profit
The following table summarizes our revenue, gross profit (loss) and gross margin for the periods indicated by segment as well as the dollar and percentage change from the prior year period. The discussion that follows highlights key revenue and gross margin changes at the segment level. Changes in gross profit (loss) correspond with the discussed changes in revenue and gross margin.
| Fiscal Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | March 30, 2025 | March 31, 2024 | $ | % | |||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| U.S. Gas | $ | 197,694 | 35.9 | % | $ | 226,578 | 42.9 | % | $ | (28,884) | (12.7 | %) | |||||||||||||||||||||||
| Canadian Gas | 39,784 | 7.2 | % | 40,979 | 7.8 | % | (1,195) | (2.9 | %) | ||||||||||||||||||||||||||
| Union Electric | 175,468 | 31.9 | % | 163,851 | 31.0 | % | 11,617 | 7.1 | % | ||||||||||||||||||||||||||
| Non-Union Electric | 137,135 | 25.0 | % | 96,615 | 18.3 | % | 40,520 | 41.9 | % | ||||||||||||||||||||||||||
| Consolidated revenue | $ | 550,081 | 100.0 | % | $ | 528,023 | 100.0 | % | $ | 22,058 | 4.2 | % | |||||||||||||||||||||||
| Gross profit (loss): | |||||||||||||||||||||||||||||||||||
| U.S. Gas | $ | (14,856) | (7.5 | %) | $ | (3,976) | (1.8 | %) | $ | (10,880) | 273.6 | % | |||||||||||||||||||||||
| Canadian Gas | 7,079 | 17.8 | % | 3,086 | 7.5 | % | 3,993 | 129.4 | % | ||||||||||||||||||||||||||
| Union Electric | 11,813 | 6.7 | % | 11,369 | 6.9 | % | 444 | 3.9 | % | ||||||||||||||||||||||||||
| Non-Union Electric | 16,292 | 11.9 | % | 2,800 | 2.9 | % | 13,492 | 481.9 | % | ||||||||||||||||||||||||||
| Consolidated gross profit | $ | 20,328 | 3.7 | % | $ | 13,279 | 2.5 | % | $ | 7,049 | 53.1 | % | |||||||||||||||||||||||
•Revenue from our U.S. Gas segment totaled $197.7 million, reflecting a decrease of $28.9 million, or 12.7%, compared to the prior year period. This decrease was due to a reduction in net volumes under existing customer MSAs caused in large part by adverse winter weather conditions in several regions which led to shutdown days and delays, as well as customer budgetary constraints which lowered MSA volumes with certain customers that reached the end of their fiscal years. As a percentage of revenue, gross profit decreased to (7.5%) in the current period from (1.8%) in the same period from the prior year as profitability was negatively impacted by weather-related work stoppages and delays. Revenue from Southwest Gas Corporation totaled $21.1 million for the current period compared to $23.3 million in the prior year period.
•Revenue from our Canadian Gas segment totaled $39.8 million, reflecting a decrease of $1.2 million, or 2.9%, compared to the prior year period. As a percentage of revenue, gross profit increased to 17.8% in the current period as compared to 7.5% in the same period from the prior year. This increase was primarily attributable to improvements on bid margins, as the prior year period was negatively impacted by performance issues on certain bid projects which did not recur in the current year period. Additionally, in the current year period the segment benefited from a $1.0 million government rebate related to surplus Workplace Safety and Insurance Board premiums paid in previous years.
•Revenue from our Union Electric segment totaled $175.5 million, reflecting an increase of $11.6 million, or 7.1%, compared to the prior year period. This increase was driven by incremental bid work, which was partially offset by a planned decline in offshore wind revenue of $22.3 million due to timing of projects. Emergency restoration services revenue for the Union Electric segment was $1.6 million for the current period compared to $7.5 million for the prior year period. As a percentage of revenue, gross profit decreased to 6.7% in the current period as compared to 6.9% in the prior year period.
•Revenue from our Non-Union Electric segment totaled $137.1 million, reflecting an increase of $40.5 million, or 41.9%, compared to the prior year period. This increase was primarily due to an increase in volumes on existing MSAs. Additionally, emergency restoration services increased $14.8 million, accounting for $16.6 million of the segment’s revenue for the current period compared to just $1.8 million for the prior year period. As a percentage of revenue, gross profit increased to 11.9% in the current period compared to 2.9% in the prior year period due to the higher profitability of storm work and more efficient utilization of fixed costs due to an increase in crew counts and weekly hours worked per crew under existing MSAs.
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Selling, General and Administrative Expenses
Selling, general and administrative costs decreased by $2.2 million, or 7.6%, in the current period compared to the same period in the prior year due to a decrease in strategic review costs, as well as a decrease in severance costs and corporate salaries related to restructuring efforts in the prior year. These decreases were partially offset by an increase in stock-based compensation (which was impacted by the timing of forfeitures in the prior year period) and other incentive compensation which increased due to improved operating results.
Amortization of Intangible Assets
Amortization expense remained consistent in the current period compared to the same period in the prior year as there were no changes to our amortizable base of intangible assets.
Interest Expense, Net
The decrease in interest expense, net in the current period compared to the prior year period was primarily due to a reduction in average debt balance and a reduction in interest rates on outstanding variable-rate borrowings.
Income Tax
The Company’s effective tax rate for the fiscal three months ended March 30, 2025 and March 31, 2024 was relatively consistent, at 42.3% and 45.2%, respectively. The tax rates for both periods were unfavorably impacted by the disproportionate amount of non-deductible expenses in relation to income before income taxes.
Non-GAAP Financial Measures
We prepare and present our financial statements in accordance with GAAP. However, management believes that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Loss, all of which are measures not presented in accordance with GAAP, provide investors with additional useful information in evaluating our performance. We use these non-GAAP measures internally to evaluate performance and to make financial, investment and operational decisions. We believe that presentation of these non-GAAP measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparisons of results. Management also believes that providing these non-GAAP measures helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such matters.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (i) non-cash stock-based compensation expense, (ii) separation-related costs, (iii) strategic review costs, and (iv) severance costs. Adjusted EBITDA Margin is defined as the percentage derived from dividing Adjusted EBITDA by revenue. Management believes that EBITDA helps investors gain an understanding of the factors affecting our ongoing cash earnings from which capital investments are made and debt is serviced, and that Adjusted EBITDA provides additional insight by removing certain expenses that are non-recurring and/or non-operational in nature. Management believes that Adjusted EBITDA Margin is useful for the same reason as Adjusted EBITDA, and also provides an additional understanding of how Adjusted EBITDA is impacted by factors other than changes in revenue. Because these non-GAAP metrics, as defined, exclude some, but not all, items that affect comparable GAAP financial measures, these non-GAAP metrics may not be comparable to similarly titled measures of other companies.
Adjusted Net Loss is defined as net loss adjusted for (i) separation-related costs, (ii) strategic review costs, (iii) severance costs, (iv) amortization of intangible assets, (v) non-cash stock-based compensation expense, and (vi) the income tax impact of adjustments that are subject to tax, which is determined using the incremental statutory tax rates of the jurisdictions to which each adjustment relates for the respective periods. Management believes that Adjusted Net Loss helps investors understand the profitability of our business when excluding certain expenses that are non-recurring and/or non-operational in nature.
Using EBITDA as a performance measure has material limitations as compared to net loss, or other financial measures as defined under GAAP, as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and
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amortization; however, as we use capital and intangible assets to generate revenue, depreciation and amortization are necessary elements of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net loss. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net loss in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the Company on a full-cost, after-tax basis.
As to certain of the items related to these non-GAAP metrics: (i) non-cash stock-based compensation expense varies from period to period due to changes in the estimated fair value of performance-based awards, forfeitures and amounts granted; (ii) separation-related costs represent expenses incurred post-Centuri IPO in connection with the separation and stand up of Centuri as its own public company, including costs incurred in connection with the establishment of Centuri’s Unutilized Tax Assets Agreement with Southwest Gas Holdings and under other separation-related agreements, which are not reflective of our ongoing operations and will not recur following the full separation from Southwest Gas Holdings; (iii) strategic review costs represent costs incurred during the Centuri IPO and related costs incurred to establish Centuri as a public company leading up to the IPO; and (iv) severance costs relate to non-recurring restructuring activities. The most comparable GAAP financial measure and information reconciling the GAAP and non-GAAP financial measures are set forth below.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
The following table presents reconciliations of net loss to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the specified periods:
| Fiscal Three Months Ended | |||||||||||
| (dollars in thousands) | March 30 2025 | March 31 2024 | |||||||||
| Net loss | $ | (17,924) | $ | (25,233) | |||||||
| Interest expense, net | 17,862 | 24,099 | |||||||||
| Income tax benefit | (13,131) | (20,773) | |||||||||
| Depreciation expense | 27,557 | 27,651 | |||||||||
| Amortization of intangible assets | 6,666 | 6,668 | |||||||||
| EBITDA | 21,030 | 12,412 | |||||||||
| Non-cash stock-based compensation | 1,587 | (588) | |||||||||
| Separation-related costs | 1,611 | — | |||||||||
| Strategic review costs | — | 3,877 | |||||||||
| Severance costs | — | 4,471 | |||||||||
| Adjusted EBITDA | $ | 24,228 | $ | 20,172 | |||||||
| Adjusted EBITDA Margin (% of revenue) | 4.4 | % | 3.8 | % | |||||||
Adjusted Net Loss:
The following table presents reconciliations of net loss to Adjusted Net Loss for the specified periods:
| Fiscal Three Months Ended | |||||||||||
| (dollars in thousands) | March 30 2025 | March 31 2024 | |||||||||
| Net loss | $ | (17,924) | $ | (25,233) | |||||||
| Separation-related costs | 1,611 | — | |||||||||
| Strategic review costs | — | 3,877 | |||||||||
| Severance costs | — | 4,471 | |||||||||
| Amortization of intangible assets | 6,666 | 6,668 | |||||||||
| Non-cash stock-based compensation | 1,587 | (588) | |||||||||
Income tax impact of adjustments(1) | (2,466) | (3,607) | |||||||||
| Adjusted Net Loss | $ | (10,526) | $ | (14,412) | |||||||
(1)Calculated based on a blended statutory tax rate of 25%.
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Liquidity and Capital Resources
Sources and Uses of Liquidity
Our primary liquidity needs have historically related to supporting working capital requirements, funding capital expenditures and servicing our debt. As of March 30, 2025 and December 29, 2024, cash and cash equivalents were $15.3 million and $49.0 million, respectively. 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 at least the next 12 months.
We evaluate our working capital requirements on a regular basis and regularly monitor financial markets and assess general economic conditions for possible impacts to our financial position. Our capital requirements may change to the extent we identify acquisition opportunities, if we experience difficulties collecting amounts due from customers, increase our working capital in connection with new or existing customer programs or repay certain credit facilities.
Cash Flows
The following table presents a summary of our cash flows:
| Fiscal Three Months Ended | |||||||||||
| (dollars in thousands) | March 30, 2025 | March 31, 2024 | |||||||||
| Net cash provided by (used in) operating activities | $ | 16,676 | $ | (26,451) | |||||||
| Net cash used in investing activities | (23,208) | (24,637) | |||||||||
| Net cash (used in) provided by financing activities | (27,243) | 36,284 | |||||||||
Operating Activities
Cash flows provided by operating activities are impacted by changes in the timing of demand for our services and related operating margins but can also be affected by working capital needs. Working capital is primarily affected by changes in accounts receivable, contract assets, prepaid expenses and other current assets, accounts payable, accrued expenses, contract liabilities, and income tax accounts, which are primarily related to changes in revenue and related costs of revenue. These working capital balances are affected by changes in revenue resulting from the timing and volume of work performed, variability in the timing of customer billings and collections of receivables, as well as settlement of payables and other liabilities.
Net cash provided by (used in) operating activities for the fiscal three months ended March 30, 2025 was $16.7 million, compared to $(26.5) million for the fiscal three months ended March 31, 2024, representing an increase in operating cash flows of $43.2 million. This increase was driven by better operating results in the current period and more favorable changes in contract liabilities, as in the fiscal three months ended March 31, 2024 we recognized revenue on several projects that had significant outstanding contract liability balances at the end of fiscal year 2023. This increase was partially offset by $13.5 million in net cash outflows on our Accounts Receivable Securitization Facility (“Securitization Facility”) in the first fiscal quarter of 2025 as we decreased the amount of accounts receivables sold during the quarter.
Investing Activities
Net cash used in investing activities was $23.2 million in the fiscal three months ended March 30, 2025 compared to $24.6 million for the fiscal three months ended March 31, 2024, a decrease of $1.4 million.
The construction industry is capital intensive, and we expect to continue to incur capital expenditures to meet anticipated needs for our services. For the fiscal three months ended March 30, 2025 and March 31, 2024, we had capital expenditures of $24.4 million and $26.3 million, respectively.
These items were partially offset by proceeds from the sale of property and equipment of $1.2 million and $1.6 million for the fiscal three month periods ended March 30, 2025 and March 31, 2024, respectively.
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Financing Activities
Net cash (used in) provided by financing activities was $(27.2) million for the fiscal three months ended March 30, 2025 compared to $36.3 million for the fiscal three months ended March 31, 2024. This decrease was due to increased repayments and decreased borrowings on our line of credit.
Foreign Operations
While we primarily operate in the United States, we also have operations in Canada. Therefore, changes in the value of Canadian dollars affect our financial statements when translated into U.S. dollars. The revenue from our Canadian operations was approximately 7% and 8% of total revenue for the fiscal three month periods ended March 30, 2025 and March 31, 2024, respectively. At times, we also enter into transactions in foreign currencies, primarily in Canadian dollars, that subject us to currency risks. We regularly monitor our foreign currency exposure to determine the most effective foreign currency risk mitigation strategies. Currently, we are not party to any foreign currency exchange contracts.
Credit and Securitization Facilities
Term Loan and Revolving Credit Facility
We have a senior secured revolving credit and term loan multi-currency facility. The line of credit portion comprises $400 million, and associated amounts borrowed and repaid are available to be re-borrowed. The term loan facility portion provided approximately $1.145 billion in financing as of August 27, 2021. The term loan facility expires on August 27, 2028, and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows us to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all of our direct and indirect subsidiaries, substantially all of our tangible and intangible personal property, and all products, profits and proceeds of the foregoing. Assets securing the facility totaled $1.9 billion as of March 30, 2025 and $2.0 billion as of December 29, 2024. During the fiscal three months ended March 30, 2025, the maximum amount outstanding on the combined facility was $804.2 million, at which point $706.4 million was outstanding on the term loan portion of the facility. As of March 30, 2025 and December 29, 2024, $97.8 million and $113.5 million, respectively, was outstanding on the revolving credit facility, in addition to $706.4 million that was outstanding on the term loan portion of the facility during both periods. Also, as of March 30, 2025 and December 29, 2024, there was approximately $241.8 million and $226.1 million, respectively, net of outstanding letters of credit, of unused capacity under the line of credit. We had $64.6 million of unused letters of credit available as of both March 30, 2025 and December 29, 2024.
On March 22, 2024, we amended the financial covenants of the revolving credit facility (the “2024 Credit Facility Amendment”) to increase the maximum net leverage ratio. The terms of the amended revolving credit facility require us to maintain a net leverage ratio of less than 4.00 to 1.00 and an interest coverage ratio of 2.50 to 1.00.
We presently intend to refinance or extend our revolving credit facility in the coming quarters, but we can provide no assurances that we will be able to do so on favorable terms or at all.
Accounts Receivable Securitization
In September 2024, we entered into our Securitization Facility with PNC Bank, National Association ("PNC") to improve cash flows from trade accounts receivable and used all of the proceeds to pay down our existing debt. Under the Securitization Facility, certain of our designated subsidiaries have sold and/or contributed, and will continue to sell and/or contribute, their accounts receivable and contract assets generated in the ordinary course of their business and certain related assets to the indirect wholly owned bankruptcy-remote Special Purpose Entity (“SPE”) we created specifically for this purpose. The SPE transfers ownership and control of accounts receivable to PNC for payments as set forth in the agreement. We account for accounts receivable sold to the banking counterparty as a sale of financial assets and have derecognized the accounts receivable from our condensed consolidated balance sheet for the current period.
During the fiscal three months ended March 30, 2025, cash collections on sold accounts receivable were continuously reinvested in the Securitization Facility as more accounts receivable were sold to PNC. However, we decreased the amount of our receivables sold (and derecognized) to $111.5 million as of March 30, 2025, down from $125.0 million as of December 29, 2024, which resulted in a net cash outflow of $13.5 million for the fiscal three months ended March 30, 2025. Accordingly, we had $13.5 million in unused capacity on the Securitization Facility as of March 30, 2025.
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Equipment Term Loans
We currently have seven equipment term loans with initial amounts totaling approximately $170 million, with certain owned equipment used as collateral. The loans are serviced in U.S. dollars.
Recently Issued Accounting Pronouncements
Refer to “Note 2 — Basis of Presentation and Recent Accounting Pronouncements” to our condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires the use of estimates and assumptions. A summary of our critical accounting policies and estimates is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our 2024 Annual Report. We are required to make estimates and judgments in the preparation of our condensed consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the fiscal three months ended March 30, 2025, there were no material changes in our critical accounting estimates or policies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to our quantitative and qualitative disclosures about market risk during the fiscal three months ended March 30, 2025. Refer to “Quantitative and Qualitative Disclosures about Market Risk” within our 2024 Annual Report for information on financial market risk related to changes in interest rates and currency exchange rates. Our primary exposure to market risk relates to unfavorable changes in interest rates and currency exchange rates.
For a discussion of our concentration of credit risk, refer to “Note 14 — Commitments and Contingencies” to our condensed consolidated financial statements.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 14d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer reviewed and participated in this evaluation, and both concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the first quarter of 2025 that have materially affected, or are likely to materially affect the Company’s internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
For discussion regarding legal proceedings, please refer to “Note 14 — Commitments and Contingencies” in the accompanying notes to our condensed consolidated financial statements.
Item 1A. Risk Factors
Our business is subject to a variety of risks and uncertainties that are difficult to predict and many of which are outside of our control. For a detailed discussion of the risks that affect our business, refer to the section entitled “Risk Factors” included in our 2024 Annual Report. As of the date of this filing, there have been no material changes to the risk factors previously described in our 2024 Annual Report. The matters specifically identified are not the only risks and uncertainties facing our company, and risks and uncertainties not known to us or not specifically identified also may impair our business operations. If any of these risks and uncertainties occur, our business, financial condition, results of operations and cash flows could be negatively affected, which could negatively impact the value of an investment in our company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
During the fiscal three months ended March 30, 2025, none of our directors or officers (as defined in Rule 16a1(f) under the Exchange Act) adopted terminated
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Item 6. Exhibits
| Exhibit Number | Exhibit Description | Incorporated by Reference | ||||||||||||||||||
| Form | File Number | Exhibit | Filing Date | Filed or Furnished Herewith | ||||||||||||||||
| 3.1 | S-8 | 333-278834 | 4.1 | April 19, 2024 | ||||||||||||||||
| 3.2 | S-8 | 333-278834 | 4.2 | April 19, 2024 | ||||||||||||||||
| 10.1 | 10-K | 001-42022 | 10.17 | February 26, 2025 | ||||||||||||||||
| 10.2† | 10-K | 001-42022 | 10.23 | February 26, 2025 | ||||||||||||||||
| 31.1 | X | |||||||||||||||||||
| 31.2 | X | |||||||||||||||||||
| 32.1 | X | |||||||||||||||||||
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X | ||||||||||||||||||
_________
†Indicates management contract or compensatory plan.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTURI HOLDINGS, INC. | ||||||||
Date: May 12, 2025 | By: | /s/ Gregory A. Izenstark | ||||||
Gregory A. Izenstark | ||||||||
Chief Financial Officer (Principal Financial Officer) | ||||||||
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