Centuri Holdings, Inc.

A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you your host, Nate Tetlow, Centuries Vice President of Investors Relations. Please, you may begin.

Thank you, Libby, and good morning, everyone. Today we issued and posted to Century Holdings' website our third quarter 2025 earnings release and earnings slide deck. Please note that on today's call we will address certain factors that may impact this year's earnings and provide some longer-term guidance. Some of the information that will be discussed today contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are as of today's date and based on management's assumptions on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. A cautionary note, as well as a note regarding non-GAAP measures, is included on slide 2 and slide 15 of the presentation. today's press release and our filings with the Securities and Exchange Commission. We encourage you to review these documents. Also provided are reconciliations of our non-GAAP measures to related GAAP measures. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements and we assume no obligation to update any such statement, except as required by law. Today's call is also being webcast live and will be available for replay in the investor relations section of our website shortly after the completion of this call. On today's call, we have Chris Brown, President and Chief Executive Officer, and Greg Eisenstark, Chief Financial Officer. I will now turn the call over to Chris.

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