I will keep the discussions going with Sentry and very pleased to have Chris Brown CEO and Greg Eisenstark who's the CFO. Thank you gentlemen for being with us this afternoon. I'm Joe O'Day. I lead the multis effort at Wells. Over the course of the discussion if you have a question, please just raise your hand and I'll get to you. Let's kick it off just kind of general background. Since joining the company coming in forming a strategic plan, obviously a lot of progress since then, but but talk about that forming of a plan your evaluation of the company and then implementation of that
plan thank you for the question I would say you know we we've got a massive 115 year experience and over the last 12 months we've used the the premise of building a long-term strategy to sort of align us all and we created vision one century which is has been our vehicle to sort of define our future has been the vehicle to actually align and pull us together as one company and not a number of operating companies. The work's been exceptionally well received by our entire team and has really delivered a good outcome. First of all we've been able to prove out what's a fantastic end market environment for us. So you've probably seen as we've rolled out our targets that We expect to grow the business between 10% and 15% from the revenue line across all of our end markets, collectively, without the gas, electric, or distributed power, or industrial. So the market tailwinds and the opportunity set that we have is allowing us to deliver on that 10% to 15%. We've got a big push as well from a profitability standpoint. We've set ourselves aggressive targets of between 20% and 25% EBIT growth, which is underpinned by our capital efficiency program, where we're looking to increase the fleet, but use leasing forms of fleet versus funding it through our own balance sheet cash. In addition to that, we've set lofty targets again around our book to bill and our targets to grow the backlog and our pipeline. this year alone we expect to add about another four billion of new business into the portfolio so the business the business context our alignment to it where we play has allowed us to really drive good top-line growth between 10 and the 15 percent increase our profitability both at the EBIT line and at the margin line where we believe our margins will start to increase from the current eight to 9.7%, and also build sustainability into the business. Sustainability by driving cash flow generation, investing in our people, investing in our business, and building up a broader and larger fleet to service our customer base. So it's all pretty good. It sits very well for where we are
in the market. Perfect. Expand a little bit on the one company side of things and what you saw when you came in and sort of what you've retooled in terms of driving the organization toward the
one company approach. Joe, this is a fantastic business that started over 115 years ago and we've rolled up through a number of acquisitions as well as some great investment through our former parents, Southwest Gas. And we've now got 11,000, 12,000 people that operate across 40 states, four Canadian provinces, but across a number of operating companies. And the former model was rather like our utility end markets operate as a whole co you know hunt kill and eat yourself and the center was just about allocating capital and that's ultimately not what our clients wanted um the one company approach that says has allowed us to go to our client base and say look we are century we've been around for 115 years we're union non-union gas electric distributed power, utility, industrial services, and what do you need from us? And as a consequence, when we meet with our customers, we take the entire team, the entire business of capability, the balance sheet, the services, the resources, and then align those to what the client needs are. The consequence of that is we end up sharing resources, we end up winning work collectively, we grab more of existing clients wallet and we overall raised that raised the bow as part of the tide for the entire business and that's the approach people people as well now see a different future as we've come together as one you know we've got talent in our in our union business in the northeast that's got ambition to be in the gas business we've got excellent resources in the gas business young talented people that want to move up across the broader organization so coming together as one not only offers business impacts creates value but also human capital impact people can develop we can invest more in people we can share more resources and develop more talent and then on on the demand
side of things um just unpack for us a little bit what you're seeing out there from the msa side the bid side of things you know regionally kind of union non-union um you know obviously some areas of really strong demand, but just to unpack that a little bit.
Yeah, we see the real benefit of having a union, non-union, gas, and electric and distributed business. And why is that? We are seeing volume growth, both from our revenue, pipeline growth of opportunity across all of our end markets. In fact, I think for the last three quarters, we've had green lights on every one of our end markets, every one of our businesses about opportunity so what's driving it um on the electric side uh transmission and distribution resiliency and reliability but making it affordable is key um we see that across again all of our end markets state states wide as well as uh utility wide on the gas on the gas side um a little different um a number a number of uh o m type contracts to replace old systems need uh across the northeast in the south we're seeing more and more new pipelines and gas systems going into play to deal with new homes and business transfers and we're also seeing the desire to have more gas-fired generation so running more gas pipelines around to support that distributed power is driving the demand on the union electric which does a lot of our project related work we see huge demand from data centers that want us to be doing the electrical gas hookups distributed power battery energy storage as well as other industrial projects again just just driven by the desire to get more gas for more generation or more electric more electrons um in terms of the the demand
trends you started the year with a really strong book to bill 1.8 times you're guiding 1.1 to 1.2 and so there's been a little bit of attention on well what does that imply for for the rest of the year so just in terms of how you see that pipeline and how you think about the the book to bill opportunity
through the rest of the year this year will will ultimately unfold just like last year we started the year with conservative targets so that we could plan consistently and deliver last year we delivered over four billion of new bookings and grew revenues to three billion started the year with two billion a backlog um 26 we start this year with a billion of backlog more for this calendar year than we did a year ago we set ourselves a an aggressive growth target of of uh at least 10 percent and so far this year we are close to 1.7, 1.8 billion of bookings to the end of April. We've got 400, 500 million more. That's in the negotiation hopper. So I think by the time we hit the mid-year, we'll be well over 2 billion of bookings for the year. And we've increased our targets publicly to the higher end of the range at about 1.2 times book to bill for the year. So I think we'll be over $4 billion of bookings for the fiscal 2026 year, Joe. I think the other notable thing is, and kind of the most important thing for us, is as we go into the next year, is how much work we have under contract for that fiscal year. If I go back to 2024, I restate, we have $2 billion of backlog for 2025 revenue. So we still had to find $700, $800, and we found nearly a billion. Going into 26, we have $3 billion of backlog, and we currently sit at about $3.4 billion of backlog for this year. We have a target to close this year out so that we've increased the backlog for 27 by at least 15%, and every indicator we see, even this early in the year, tells me that we will achieve that goal.
Perfect. In terms of the inflation side of things, what what you're seeing out there whether it's labor or you know any impact that it's having on project activity um i imagine it's a little bit more about just the ability to get things as opposed to pay for them in terms of the demand but but just what you're seeing on the inflationary
side yeah i i think we have um you know we have a very good client base um and and types of contracts that are smaller both in volume and timing. We have MSAs that have got escalators in there to adjust for inflation. So we see inflation, I mean it's a reality of life, but we see inflation as less impactful upon our business than maybe for those contractors that do larger multi-year, large supply chain type contracts. We just don't do that work so um inflation for us is is really a managed risk as part of our overall portfolio and not a not not a big impact upon us um talent and people are key um that's affecting us all um i think we've added um we've added about 2 000 people to the business so what's that 20 nearly 20 headcount in the last 15 16 months um we continue to find great people new apprentices is coming in veterans that transfer across lots of people within the industry that are currently in other sectors and find the utility the utility and markets attractive from both the lifestyle and the pay um but i think that i think the real shift you will see joe in the future is i think the historical model that most of us have had which is you position with a customer you tender some work you win it you go find the people i think those days need to go they need to we need to move on that's not how you can create capacity we need to be an environment whereby we're close to our customers we understand their future needs and we're investing with their help in building a talent pipeline ahead of their real need so that we're building capacity just like we do with a balance sheet just like we do with the fleet but we do that with human capital so our desire at century is to continue the decades of work with our customers to get closer to them show them how we can not just add 2 000 people but three four thousand people as long as they can align and share with us their information on what they need or where they need it we can pre-invest so there is a shift on the on the human capital that we have to make and i think the contractors that do that that be less reactive and more proactive that invest in talent acquisition learning and development will be the ones that capture more opportunity and manage that risk better as they
deliver and that's what we plan to do and those those line workers how long does it take to train
what kind of turnover rates do you see in that field well we have we ebb and flow um on our resourcing because we do do project work as we've said. We have union and non-union, but they follow a very similar process. On the non-union side, we have about 900 apprentices, and they do an 8,000 hour apprentice training program, which is really over four years. They start to become productive in the first year, and they develop through their career, doing more and more, taking on more responsibility as they develop. But it's about an 8,000-hour, four-year program. On the union side, it's somewhat similar. The non-union side, we basically drive it, control it, and manage it. Less so on the union side, where they bring their own apprentices through. But line workers are just one of our many, many skilled trades. We have electricians which follow a similar path to become journeymen, similar period of time and also on the mechanical trades plumbing trades so a lot line workers are a big component of our business but not the biggest want to
shift to MSA versus bid and a little bit of competition and so maybe just start by I think it seemed like for a while century was focused on the MSA opportunity set and and then saw that there was an opportunity to pursue the bid side a little bit more but a little bit of background there and kind of how you've pivoted
msa work for public utilities is the dna of our company and um i don't foresee a day that that will change because it's who we are it's where we came from it's what we do best and it's what our customers want us to do um you know nsa work is the baseline of the resources we have deployed. It's the bread and butter of the business. It brings us enough scale to operate at the right level. It grows each year. Is it 5%, 6%? That's clearly well below from just becoming and remaining as an MSA contractor. It's way below what the market affords us. So if we want to do more work and grow the business to the levels we believe the market affords us and our shareholders believe we could do, we've got to do more work, and that is typically bid work. Bid work and MSA work within the century organization and not dissimilar. It's the same services. It's often the same people doing the same things. And in many cases, the bid work is for the same clients. So I would argue that the MSA work and the bid work are very, very, very similar. They're just a different form of contract to get paid. That said, there are some differences in the bid work. You know, we do do some slightly larger projects within the bid work. I mean, the overall project size is still less than $4 million when you blend it all in. The original, when I came in, the mix of work was 80% MSA, 20% bid work. As we've rolled out our long-term plans, we think that will become 65% MSA, 35% bid work. And that's just purely, that mix is driven by the pace of growth in MSA versus the pace of growth in bid work. And that's how we think the organization will evolve with time to deliver those 10% to 15% annual growth targets.
And what about mix and to add data center activity into that? But when you think about the growth that you're going after in bid and how that's going to become a bigger portion of the revenue, think about the data center being a part of the revenue. Are those mixing margins up over time as you do that work?
Yeah. I mean, data centers is a topic that everybody enjoys to discuss. We look at basically MSA as our core of who we are, and we've got to love and nurture that, and that often yields a slightly low margin compared to non-MSA work because it's stable. it's over multi-years it's low risk it's with our core customers that are built to where we are built to where we are bid work is more of a transaction it could be with the same customers and you bid more work at a rapid clip you do more of it through the years whereas msas are often multi-years so the base of the business sits with the msa is the growth beyond the msa comes from the bid work and we use that we use that bid work as our opportunity to drive higher margin generate more free cash flow and then invest further in the business so that we can do more msa work um so typically the bid work is one to two percent more in terms of margin that comes out of the msa's that's factually correct and we don't we don't differentiate quite frankly between data centers industrial clients uh utility bid work because we are doing the same services It's the same people, same leadership, same type of work that may be bundled together in a project. We just look at each one on a case by cases. Can we deliver the services? Can we be predictable? Can we deliver the margin? And where's the best return on invested capital? And at the moment, data centers often are higher. But I can show you industrial clients that also give us a good return. So we kind of prioritize on the basis of what the return on invested capital is. And at the moment, data centers pop up, but also so do industrial clients. So it's just purely where do we get the best return for our services.
And then on the competitive front, who are you most frequently competing against, smaller competitors or some of the larger national competitors? And when you don't, you know, the MSAs are generally going to get kind of renewal.
that's a good question. We have struggled, you know, I refer back to the vision one century and I think anybody who goes through a stereotypical strategic review looks at competitor analysis. But we did the same. It's almost impossible to model. There are our public peers of which they're commonly known, I would imagine most are here, we don't typically compete against them. They do very different things to us. They do larger contracts. They are multi-sector, not just utility, and a bit of industrial. But they often have subsidiaries that are adjacent to where we operate, and we will compete against a few of the larger peer group subsidiary operations. But most of the competitive forces we bid against, most of the competitors we bid against and the forces we get are actually smaller businesses that are in the regions or the territories where we service our customers. So it's very, very abstract in terms of the competitive forces. There are one or two larger private companies, one on the gas side and one on the electric side, that are a common thread of who we tender against, but less so on the public side.
And how price-sensitive is it to winning versus how relationship-sensitive is it to winning?
I would say, yeah, it's often difficult to learn why you didn't win the work. I think a lot of situations, they're unique to the tender. We don't do a lot of three bids and a buy. it's all about price i think we typically don't win because we haven't been able to really drive our differentiation hub and we've got better at that over the last two years we are we're putting more effort into positioning ourselves as one century with the scale the history the knowledge we've captured i think if we can do more of that with better focus internally and a better value proposition with our customers we will win more work at better margin so i think that's something on the inside we can do remember historically we used to wait for the phone to ring and now we're not we're actively growing business um to have to have better resource utilization to grow. And what we now need to do more of is actually position, show differentiation, show value proposition to capture more at higher margins. We are not the cheapest in the market. We compete against a lot of mom and pops locally that could cut us on price every day. We compete on value, safe quality delivery, reliability, and agility with scale. That's what differentiates us. But I think we can do even better on a margin standpoint, if we can really, particularly on the bid work, get our differentiation across in the way we propose and the way we position the business.
If we talk about the electric side and kind of union versus non-union sides of the business, revenue split today, roughly 57% union. Is that the right kind of mix for you when you think about the growth potential between those? Do you expect that to shift over time?
Yeah, we're not driving the business to a specific mix, union, non-union. To me, the decision whether we go union or non-union really rests with where the work is, what the customer needs, what the customer's drivers are. So that kind of is the driver for the decision. If I look at the current pipeline, though, and I look at the opportunities, we're really pleased with both sides of the business. Our non-union electric does mainly distribution and transmission work. The union side of the business does transmission, distribution as well, but also does distributed power, battery energy storage, just some of the more complex projects. I think in the near term you'll see more growth and larger work coming through the non-union side. If you look at the bookings this year there was an MSA renewal which was quite sizable for the non-union electric if you look at the data centre work that's all in that non-union all in that union side excuse me and they've got a lot of bidding activity going on. They've got a big footprint. On the non-union electric side, it is down to transmission and distribution, as I've said. They don't do substation work. They don't do battery storage in there. They don't do data center work. It's true public utility transmission and distribution. That business will continue to grow higher than some of the growth rates we've given. We'll see a lot more bookings on the distribution side but i i think the um the revenue will still outpace on the union versus the non-union um i'd like to do as i've said publicly and i think he's laid out quite well by our team and our strategic documents um i listen to our customers we take their feedback on where they want us they want to see us doing more and more transmission work not the big projects not the large complex projects that need a massive balance sheet and project management competency smaller scopes of work that we have been well positioned for with local teams local agility and as we build the strategic plan and we execute rather on that strategic plan, we will invest more capital into the electric transmission world. So hopefully
that will catch up on the non-union side. And part of the reason customers want you to do more of that is because there's a lot of that out there. Just the sheer spends huge. There are not many contractors that can do that work.
There are some great ones that are capturing a lot of the market there and do a good job at it. But there are smaller scopes of work that the clients want others as an option to do that work and you start bundling in small transmission lines with substation and then a local execution that we have, you start to become very attractive to what the customer needs and that's what they want us to do. So you will absolutely see that we will have a more forceful view on building more capability and capturing more opportunity in the smaller-sized transmission projects on the electric side, yes? Union and non-union, they'll be both.
Shifting to U.S. gas, just to explain that business a little bit, where your strengths are both in terms of the capabilities of the organization but also the regional strengths of the organization.
I'm very proud. And as many know, I come from the gas side. more so than the electric side. I was surprised coming in that the industry was kind of down on gas, and I didn't understand it. I think we were starting to believe gas was at the beginning of the end, and I think as time has moved on the last two years, I think we're all starting to see the strengths of the gas business. we do we are predominantly a business that does public utility local distribution client work so we're in the neighborhoods installing pipe meters we're in we're in an elements of the states put in long piping runs and we don't do interstate pipelines we do small compressor stations we do small metering stations we do complex loops we do we do the the hookup of gas piping to generation facilities but not within the generation facilities so we basically do everything within within the domestic gas with the exception of very large transmission pipelines so that affords us a massive opportunity if you look at the type of work we do and you look at where the growth is the demand for power generation behind the meter distributed power the speed that that's needed is really akin to sort of gas fire so that's given us opportunity to to capture more gas work that allows us to run pipeline to support distributed power you've seen a migration of population with new homes i one of my customers was talking about 150 000 new homes in one part one part of where I live that needs to be connected to gas so we're putting main gas lines in we're putting new meters in we've got meter replacements so the general demand for the traditional LDC public utility work is there across everywhere from the Northeast all the way across the Sun Belt into Southern California we see compression hookups to gas generation right in our sweet spot that are bringing us new opportunity and our priority in our gas business is to be more consistent 12 months of the year which is the seasonality Joe we've talked about and what that means is we need to migrate more and more of our BD focus and our operational focus across the Sun Belt south of the Mason-Dixon line so you'll see us be more active with customers we've known for a while and sometimes new customers to capture more opportunities so we can work all the way through the year and eradicate the seasonality. We will not walk away from those customers in the northeast that close sort of close down work in the neighborhoods from Thanksgiving through to spring break. We'll just we'll just find alternative work that we can do to get rid of that seasonality. But I would I mean our future profitability improvement in profitability and our volume of work, 6-7% top line, will come from our gas business and more of it. We're very pleased
with it. We just want more of it. And that's been a focus in terms of Q1 margins versus rest of year margins. But as you look at the timeline to get to where you want to be, what do you think is a reasonable timeline?
You know, I'm pretty impatient. But I've got to recognize, you know, the winter only comes once a year and we we we added a lot of great new people into the organization to help the gas business the span of control of the team relationships with new customers new ideas new leads and those resources came on board during the course of last year and if you compare uh first quarter 25 to first quarter 26 this most recent winter period which is just behind us um we grew the gas business by 40 we went from 200 million of sales give or take to 280 million of sales this year um It was losing about $15 million in the first quarter. This year it only lost $6 million. And actually, normally we don't become profitable in the gas business until we get to sort of June and into July. The business was profitable on a partial year basis at the beginning of April this year. So we are on a good track to be where we want to be within a three-year time frame, which is to have normalized margins in the first quarter for the business in the first quarter within a three-year time frame so year one has just passed us we'll go into year two where we'll be better than break even and then by the third years of our planning shows we want to be at
normalized margins you touched on in the opening comments but fleet strategy so let's just expand on that a little bit what you're doing with the fleet you know another like timeline to get to where you want to be, and then with that, we know there's some EBITDA margin considerations.
Yeah. We would typically just allocators of capital in the center, and that's pretty inefficient. What we want to be is an integrated service provider, and that integration extends to fleet. So there's a number of things we are doing on the fleet side. um first of all the source of fleet we've historically um fully funded the fleet tracked our performance through depreciation and that's changed we we now are growing the fleet um significantly year over years i think to about 160 million of dollars 170 million dollars of fleet this year but instead of fully funding it through cash um half of that fleet will be purchased with cash from the balance sheet and half will be leased So the overall capital efficiency program starts with that decision. The second thing we are working on is a standard data set to capture all of the fleet to be able to track its utilization, to track its location, to start to build a pattern of behavior of where the best decisions we can take as an integrated team to put the fleet. where we should own it where we should rent it and where we should lease it intuitively we all know we're contractors but we want to be a bit more precise on that so that we can get a better return out that fleet by better utilization a better positioning of the fleet and a better structure to the way we operate it and then the third thing is instead of just buying it in in essentially silos we think there's some supply chain efficiency we can get by increasing the amount we buy or lease and then doing it in a more structured way with the supply chain not from just the acquisition of it but the operations the maintenance and the consumables we need to keep the fleet going so there's a there's a very very long-winded very detailed plan around how do we how do we get more out of the fleet as it is the procurement of it the mix of buy versus lease is well advanced um in fact last year we were 50 50 50 percent bought 50 lease this year will be the same um there's still work to do around the data and where the best place to move move the fleet to where it should be positioned throughout the year how do we share fleet between opcos um but i i'm hopeful we'll start to see some improved utilization through the remainder of this year and then the longer term target is to have all of this into a joined up plan including supply chain o and m um so that the business can operate as an integrated uh uh integrated contractor that's got an integrated uh fleet program the teams that we've we've brought great people in um industry leader on flea he joined us about a year ago we've made some internal promotions out of the opcos to come into the center so we've made great strides that the low hanging fruit as i say was to stop spending the cash but maintain the fleet growth by using uh leasing and other people's balance sheets so we've made good progress we just
want to keep faster and faster terrific well i think that brings us to the end but thank you very much really appreciate you being here and uh enjoy the discussion thank you thank you