Everus Construction Group, Inc.

2024 Result Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Paul Martin, please go ahead.

Thank you. Welcome to Everest Construction Group's third quarter 2024 results conference call. Leaving the call today are CEO Jeff Seed and CFO Max Marcy. We issued a news release yesterday detailing our third quarter 2024 operational and financial results. This release, together with the accompanying presentation materials, are publicly available on our website at investors.everest.com. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday and in the appendix of today's presentation. Today's call will begin with prepared remarks from Jeff, who will provide a review of our recent business performance including an overview of our forever value creation strategy, followed by a financial update from Max. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I'll turn the call over to Jeff.

Thank you, Paul, and good morning to everyone joining us on the call today. We are very excited to be here with you all today as we report our first quarterly results as a standalone public company following our spinoff from MDU Resources, which we completed just last week. Over the 27 years, we have built a scaled national platform of market-leading local brands, positioning us as a leading specialty construction solutions provider. We have developed the scale needed to enter the market as an independent public company and are now ideally situated to execute on our forever strategy and drive value creation for our new shareholders. We are a people-first business with more than 8,500 highly skilled team members currently working across the United States. And we certainly would not be here today without the hard work and dedication of our entire team. From our operating brand leadership through our field employees, we have industry-leading skilled talent. I am eternally grateful for everything they do and feel honored and privileged to lead this tremendous team. Now turning to our third quarter performance, which we highlight on slide four. We generated strong third quarter results with continued execution across our portfolio of projects, financial discipline leading to solid free cash flow conversion and record backlog positioning us for continued success. Our third quarter revenue increased 6%, driven by balanced growth across our diversified end markets, particularly continued momentum in our data center work. Our electrical and mechanical revenues increased 4%, while our transmission and distribution revenues grew 12%. Our third quarter EBITDA increased 12%, driven by our balanced revenue growth, strict financial discipline, and project efficiencies, demonstrating our strong execution. As a result, our third quarter EBITDA margin improved 40 basis points to 8.5% versus 8.1% in the third quarter last year. Our total backlog at the end of the third quarter was nearly 2.9 billion, an all-time record with an increase of 56% from the end of the third quarter last year. Our backlog growth emphasizes the strength of our national platform of market-leading local brands, our deep customer relationships, and our strong strategic positioning in markets that are benefiting from favorable secular tailwinds. Our record backlog provides good visibility into our near-term growth outlook and strong operating momentum. We are pleased with our solid third quarter performance and based on our strong backlog growth and continued momentum in our key end markets, we are reaffirming our 2024 financial outlook and are very excited about the opportunities ahead. Let me shift gears a bit and provide an overview of our Forever Strategy, which forms the foundation for our value creation framework and is detailed on slide five of today's presentation. Our Forever Strategy is the basis for everything we do and is designed to deliver value creation through sustained profitable growth, operational excellence, and disciplined capital allocation. Our Forever Strategy starts with E for our employees. We are a people-first business and our highly skilled, industry-leading workforce is critical to ensuring successful outcomes for our customers. Our culture starts with safety. We are an industry and safety standards and our extensive training program ensures that we constantly maintain, grow and share our skills across our national platform. Our strong union relationships, which covers 82% of our workforce ensures that we have access to a highly skilled and scalable workforce as we grow. The V in our forever strategy is for value. value for our customers, and ultimately value for our shareholders. Driving value for our customers ensures long-term relationships that drive repeat business and a platform for growth. The second E in FOREVER is execution. Our proven, repeatable project playbook is at the heart of our execution strategy. Our disciplined focus on our playbook enables our consistent, high-quality execution across the project lifecycle. This helps us reduce risk, generate a resilient margin profile, and provide high-quality outcomes for clients. Our playbook runs from pre-construction through construction and into the post-construction phase. It covers everything from thoughtful project selection to bidding discipline and systematic project execution with a relentless focus on safety to post-construction services. We also review lessons learned and prioritize customer satisfaction and customer retention. Finally, the R in FOREVER is for relationships. Our high-quality execution on complex projects for marquee customers ensures strong customer relationships and repeat business. We are very committed to building and maintaining these long-term relationships, which is clearly demonstrated by the tenure of our top customers who have been trusted partners for an average of more than 30 years with some of the customer relationships predating Everest's acquisition of the local operating brand. These long-term relationships prove that our highly capable team provides long-term added value through safe, high-quality project execution. We are committed to driving sustained value creation through a dedicated focus on our Forever Strategy while targeting growing submarkets, focusing on operational excellence, and prioritizing disciplined capital allocation. Our plan is highlighted on slide 6 in today's presentation. Our Forever Strategy is designed to help us deliver sustained growth And we have multiple levers for growth. First, our strong customer relationships provide opportunities for us to grow in existing end markets. We have a strong track record of growing with our customers, and we are well positioned to continue doing so in the future while gaining additional market share. Second, we are well positioned with proven capabilities and experience to capitalize on multiple megatrends in the submarkets that we serve. Some of our key near-term opportunities include the strong growth in data center construction and the focus on grid modernization, high-tech reshoring, and the energy transition. Third, our existing long-term relationships with customers give us opportunities to grow into new geographies with our customers through satellite projects. When we've successfully completed a complex project in one location, A customer may ask us to perform the same or similar work in another location. Our national platform with market leading local operating companies enables us to readily transfer our capabilities to another area and utilize our proven repeatable playbook to successfully execute the project and expand our geographic footprint. And finally, the last lever of our growth strategy is the ability to supplement our organic initiatives through strategic M&A. We operate in fragmented industries, and we have a proven track record of successfully identifying and integrating acquisitions that have generated compelling financial results. We benefit from a capital life business model that produces strong, free cash flow. Now, as a standalone company with total control over our capital decisions, We have the financial flexibility to execute on our M&A strategy. Also, a focus of our value creation framework is operational excellence, with a priority on consistent and resilient margins. Our operating excellence is driven by our bidding discipline, a focus on higher margin submarkets within respective end markets, and our operating leverage. Based on the discipline focus on these initiatives, Coupled with the execution of our growth strategy, we expect a resilient margin profile with an opportunity for modest margin expansion over time. And finally, the last part of our value creation framework is built on our disciplined capital allocation strategy. Our first priority will be to continue to invest in our business. Going forward, we will increase our capital expenditures slightly between 2% and 2.5% of revenues up from our historical average of roughly 1.5% with the incremental amount focused on organic growth opportunities. Second, we will look for value-enhancing opportunities through M&A that either expand our geographic reach or strengthen our market position, particularly in high-growth submarkets. It is important to note that we will only complete a transaction at the right time, with the right metrics, at the right value. We will look for deals that are financially accretive and maintain optimal leverage. Third, if we don't see the right organic or inorganic investments, we will pay down debt and de-lever our balance sheet to provide ample dry powder for when the timing of investment is right. Lastly, we do not have a dividend policy or share repurchase authorization in place. However, we will work with our board to decide when those returns are prudent in the future. Right now, as a new standalone company with meaningful growth opportunities, we feel it's best to invest in ourselves to drive maximum shareholder value. Max will provide more details during his comments. But as we highlight on a long-term value basis on slide 7 of today's presentation, we expect our forever strategy to drive us toward a financial framework of organic revenue growth in a range of 5 to 7% annually, which combined with our discipline focused on operational excellence will enable annual EBITDA growth of 7 to 9%. Our framework is based on capital spending of 2 to 2.5% of revenue which is slightly higher than historical levels as we will invest more in our growth opportunities. We will deliver these financial results while maintaining a targeted net leverage of 1.5 to two times. Importantly, this is our expectation for organic growth. And as I've discussed, we expect that M&A will play an important role in our growth framework and will supplement our organic growth strategy. Bottom line, We could not be more excited by our strategic position and the opportunities that lie ahead for Everest. We are strongly positioned to benefit from multiple megatrends in the submarkets and end markets we serve. We have a seasoned leadership team that has been instrumental in developing and executing on our Forever strategy. We have a scaled national platform with market-leading local brands and long-tenured customer relationships. Our people-first culture helps us attract and retain top industry talent and maintain industry-leading safety results. And our diversified revenue base, capital-light investment model, and disciplined capital allocation approach position us for sustained growth and business resilience. With that, I'll turn it over to Max.