Centuri Holdings, Inc. (CTRI) Q1 2026 Earnings Call Transcript

Greetings, and welcome to Centuri's First Quarter 2026 Earnings and Strategy Overview Call. It is now my pleasure to introduce your host, Nathan Tetlow, Vice President, Investor Relations. Please, you may begin.

Thank you, Liz, and hello, everyone. Yesterday, we issued and posted to Centuri Holdings' website our first quarter earnings release and investor presentation. In addition, we have posted to the website a Vision One Centuri presentation that will be referenced during this call. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide 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 and 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 in yesterday's press release, in the investor presentation, and in our filings with the Securities and Exchange Commission, which we encourage you to review. Also provided are reconciliations of our non-GAAP measures to related GAAP measures. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statements, except as required by law. Today's call is also being webcast live and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. On today's call, we have Christian Brown, President and Chief Executive Officer; and Greg Izenstark, Chief Financial Officer. In a moment, Christian will discuss our strategy. But first, I'll turn the call to Greg to review the first quarter results. Greg?

Thank you, Nate, and thank you, everyone, for joining us today. In the first quarter, we delivered exceptional results, highlighted by significant year-over-year growth, including revenue up 31%, base revenue up 29%, gross profit up 76% and base gross profit up 96%. For the quarter, we reported revenue of $723 million and base revenue of $689 million, gross profit of $36 million and base gross profit of $28 million. Our base gross profit margin was 4.1% for the quarter, up from 2.7% last year and on a trailing 12-month basis was 8%, a 100 basis point increase from the same measure last year. Net loss attributable to common stock in the quarter was $9 million or $0.09 per share compared to a loss of $18 million or $0.20 per share last year. Adjusted net loss in the first quarter was $2 million or $0.02 per share compared to a loss of $11 million or $0.12 per share in the same quarter last year. And our adjusted EBITDA for the quarter was $33 million, representing a 35% increase from last year. Net cash used in operating activities for the quarter was $35 million and free cash flow was negative $54 million, both of which were driven primarily by the timing of changes in working capital. First quarter free cash flow was consistent with our expectations. And for the full year, we continue to expect free cash flow to exceed $60 million. SG&A for the quarter was $33 million, an increase of about $6 million year-over-year. Approximately $2 million of the increase relates to the timing of professional fees in support of our strategic initiatives, with the remaining increase consistent with the growth of the business. As a percent of revenue, SG&A is down 25 basis points versus a year ago. As we previously stated, we anticipate that SG&A will be around 4% of revenue for the full year. We ended the quarter with a net debt to adjusted EBITDA ratio of 2.7x, which was down from 3.5x a year ago. And we continue to forecast net debt to adjusted EBITDA of around 2x by year-end. Now to our segments. U.S. Gas revenue was $284 million, an increase of 44% compared to 2025. The increase was driven by progress on bid work, bid projects, and our actions to secure work that is less impacted by weather. Gross loss for the quarter was $6 million, a 57% improvement from a $15 million gross loss last year. The year-over-year improvement is a testament to our work addressing seasonal impacts, particularly considering the challenge that winter storm Fern posed, which not only impacted work in the Northeast, but also briefly slowed work on a new multiyear MSA in Texas. Canadian operations revenue was $60 million, up 51% from last year. The increase is primarily from the inclusion of Connect Atlantic Utility Services in the current year results. Operational performance in this segment remains strong against a solid demand backdrop. As expected, gross profit margin was down slightly to 15%, driven by the inclusion of Connect. Union Electric base revenue was $199 million, an increase of 14% year-over-year. Base gross profit margin was 8.7% for the quarter, up 200 basis points from a year ago. Growth has been fueled by robust activity in projects serving industrial end-user customers, particularly substation infrastructure and data center-related work. Non-union electric base revenue was $151 million, an increase of 25% over last year. This growth reflects a significant expansion in MSA activity. Base gross profit margin was 6.3% compared to 8.7% in the prior year, driven by activity ramp early in the year on an MSA contract, resource allocations to on-system storm restoration work and seasonal weather impacts in January and early February. Activity and margins were back to normal by the end of March. Moving on to our commercial update. In the first quarter, we delivered bookings of $1.3 billion or a 1.8x book-to-bill ratio. Awards included $900 million of MSA renewals, $180 million of new or growth MSAs and $250 million in bid work. Momentum has continued into April as we have approximately $2 billion of pending bids outstanding, including nearly $200 million of data center work that is in negotiations. For the year, we are targeting a 1.1x to 1.2x book-to-bill ratio. Our focus remains on securing higher-margin work and building on the backlog for 2027. Lastly, we are reiterating our full year 2026 guidance. As a reminder, base revenue and base gross profit are non-GAAP measures that exclude the impact of storm restoration services. For 2026, we expect base revenue of $3.15 billion to $3.45 billion and base gross profit of $255 million to $285 million. Revenue, adjusted EBITDA, and adjusted net income are measures that include storm restoration services. Guidance for these measures include storm restoration services using a 3-year average of $88 million in revenue and $28 million in gross profit. For 2026, we expect revenue of $3.24 billion to $3.54 billion, adjusted EBITDA of $280 million to $310 million, adjusted net income of $55 million to $75 million; and lastly, the net CapEx outlook at $75 million to $90 million. I will now turn it to Christian for the strategy discussion. Christian?

Thank you, Greg, and hello to all, and thank you for joining the call today. I'll be discussing our strategy and multiyear financial outlook, and I'll be referring to the Vision One Centuri slide deck that was posted on our website late yesterday. I've now been CEO for about 17 months, and I'm extremely proud of what has been accomplished in that very short time and the path that we are on as demonstrated by the strength of the first quarter results and the incredible year-over-year growth. Centuri has more than 115 years of successful operating history, as we can see on Slide 2, has a long-standing relationship and reputation as a trusted, high-quality and above all safe infrastructure services partner. Everything we're building now is on the solid foundation of decades of operating history and industry leadership paired with intentional decisions aimed at building a lasting and successful future. We will start with purchase of our largest operating company, NPL, in 1996 through to the mid-2000s, the company has significantly achieved growth from geographic expansion with a focus on servicing regulated utilities and building strong customer relationships through master services agreements. In 2012, the company reached $500 million in revenue and just 3 years later, revenue doubled to $1 billion. From there, the company continues to grow through strategic acquisitions that diversify the service capabilities and the reach of our business. After joining Centuri in late 2024, my assessment was clear: nothing was broken from within the business. That view remains the same. My initial focus was centered around breaking away from certain legacy priorities and practices born under a utility parent, establishing a growth mindset, installing growth-related KPIs across the organization, driving capital efficiency and unifying the company around a clear vision, what we now call One Centuri. Simply put, we all have a common purpose, strategic direction and a common set of values. To advance the One Centuri vision, the leadership team began a strategic evaluation last year with several areas of focus, assessing our end markets, benchmarking all our peers, identifying the measures that drive shareholder value and establishing credible top-tier goals, advancing growth initiatives supported by our capabilities and the end markets and enhancing internal functions to enable sustainable growth, specifically focused on resource planning and risk management. In 2025, we began implementing the One Centuri approach, which proved to be a true inflection year for Centuri. On Slide 3, we highlight some of what we achieved, including becoming fully independent, reducing our net debt to adjusted EBITDA to 2.5x, commencing the fleet initiatives and achieving records for bookings, backlog and revenue. Beyond the tangible results of 2025, I'm also proud of the way the organization emboldened commitments to our customers while also embracing the changes necessary to set Centuri on a path for value creation. We are all very well positioned to execute against a favorable market backdrop and look forward to delivering for our stakeholders. Moving to Slide 4. We are anchored by four objectives: top-tier earnings growth, top-tier revenue growth, being an agile, integrated customer-facing organization and establishing a world-class resource delivery-led organization. These objectives were established based on the value drivers we believe matter most to our stakeholders. While scaling the business will drive revenue growth, long-term shareholder value creation will be achieved through earnings growth. Retaining existing business, expanding relationships and securing new customers are all about how we execute and engage with our customers. This is the strength of Centuri and will remain core to our culture. To enable the growth, we will execute a plan to build further on our industry-leading workforce, more on that later. To set the stage, let me first review the end markets, starting on Slide 5. The North American energy infrastructure build-out represents a true tailwind for Centuri. It's durable and long term in nature. Between grid modernization, electrification expansion, gas infrastructure replacement and power demand for industrial and data center customers, the opportunity set for Centuri is evident. None of this should be used to anybody on this call. Slide 6 is the big picture view. We started with an overall analysis of our core gas and electrical T&D end markets and the relevant adjacent end markets. This represents over $2 trillion of cumulative spend from 2026 through to 2029. Our next step in the process was to drill into the data and capture those areas that were relevant to Centuri. This results in a true Centuri total addressable market of $625 billion over the next four years. For perspective, our current $13 billion pipeline and $6.5 billion of record backlog reflects only a fraction of this opportunity. On an annual basis, the opportunity pipeline is less than 10% of Centuri's total addressable market. Importantly, the market data and our analysis reinforce that we do not need to change direction. Instead, we are all well positioned to drive profitable growth through our existing capabilities, expanding our scale and geography and selectively pursuing market-supported initiatives. Our operational leadership has all confirmed through the process that the end markets fully underpin our growth targets as we've laid out. Moving to Slide 7. This breaks down the core end markets into electric and gas across transmission and distribution. In short, the forecasted 8% CAGR to 2029 confirms the tailwinds we've been seeing and expect moving forward. In nominal dollars, the electric market offers the largest opportunity with transmission expected to grow a bit faster than the distribution segment. On Slide 8, we highlight the adjacent markets. Again, the data suggests further tailwinds and ample opportunity to capture more market share. It's no surprise that data spend exhibits the highest percentage growth, but each of these markets have the size and growth qualities that makes some very attractive opportunities for Centuri as a group. Now let's get into our strategy on Slide 9. Our strategy is designed to be sustainable, successful through market cycles, driven by choices rather than acting out of necessity, and it maintains our low risk profile in the work we execute as we expand our business. We've laid out our ambition on the slide, which ultimately centers around delivering exceptional value to all stakeholders: customers, employees and shareholders. To achieve this, we will focus on three fundamental principles. Firstly, we will protect and deepen the core. We'll remain devoted to our long-standing relationships with regulated utilities, executing with the quality, reliability and safety they expect and trust us to deliver. We will expand relationships with existing customers, pursue increased MSA work through new customer relationships, cultivate cross-selling opportunities and continue to lean into bid work by leveraging our core capabilities in our well-defined adjacent markets. Second, we will pursue initiatives to grow the portfolio. These growth initiatives build on our existing capabilities, existing services and the strength of our organization and are supported by strong end market demand. In parallel, we will pursue tuck-in acquisitions that are accretive to our core business or directly advance our targeted growth initiatives. And lastly, to enable long-term growth, we will sustainably scale the enterprise. We will do this by achieving industry-leading talent acquisition capabilities, driving operational excellence through standardized performance management and enhancing our risk management practices. The result of this work will be 10% to 15% compounded annual growth rate in base revenue through 2029 and an improvement of 70 to 170 basis points in base gross profit margin. On Slide 10, we dig into the first principle, protect and deepen the core. This is the foundation that defines Centuri today and also our future. Across both gas and electric, MSA work is the cornerstone of Centuri. These agreements represent stable, long-cycle opportunities, and we are deeply committed to protecting and strengthening this core. Our 100% MSA renewal rate is a powerful validation of the trust we have earned through relationships with our customers over many years and in many cases, decades. When it comes to growth, our priority is securing new and expanding scope of work from existing customers by leveraging our operating track record, the execution consistency and the reputation we have earned. We are focused on adding new customers, again, leveraging our reputation and relationships through cross-selling and our One Centuri go-to-market approach. Our ability to offer integrated solutions across the value chain positions Centuri as a differentiated service provider and partner to our customers. Looking back to 2025, we booked $900 million of new or expanded scope MSAs. And in the first quarter this year, we booked a further $180 million. We absolutely intend to keep this momentum going as we move into subsequent quarters and subsequent years. At the same time, big work opportunities are abundant and represent meaningful incremental growth and margin upside. For us, big work is a natural extension of MSA work. It's the same services utilizing the same capabilities and equipment, just executing on a different contract structure. This work not only originates from our well-defined adjacent markets, but also from many of our existing MSA customers who often have projects that fall outside the MSA scope. As mentioned many times before, the data center market is our fast-growing adjacent market. Data centers offer a range of work scopes well suited for Centuri. And since the start of 2025, we've already secured $170 million of data center-related work. Additionally, we continue to evaluate and bid for approximately $1.5 billion of further data center work. We see this as a market with strong multiyear growth potential and attractive margin characteristics. In summary, MSA work is our core today and will continue to be our core. We are focused on deepening and expanding that core through new and broader MSAs, while bid work serves as a growth engine and is margin accretive. This is protect and deepen the core. Moving to Slide 11. We have identified several initiatives to enhance our growth rates and drive margin expansion. Each initiative is supported by end market data and represents an extension of our core capabilities. Let me start with electric transmission. Today, we have electric transmission capabilities in both our union and nonunion electric businesses, generating less than 10% of our annual revenue. Compare this to the $150 billion of utility spend on electric transmission work expected over the next four years, and it's clear this is an area we are underserving. And we've recently had a number of customers driving us to build further capability and execute more of these services within this segment. With grid modernization, significant work for us and the build-out of high-voltage lines as an opportunity for Centuri to capture transmission projects in the low to mid-voltage range. Our focus will be on projects under $200 million in size. This is a size where Centuri has the scale and track record to compete and win against smaller regional players, while also remaining below the typical size targeted by larger industrial players. In addition, we offer customers a fully integrated solution across transmission line tower construction, substation work, interconnects and battery storage. This is true differentiation for Centuri. While larger than our current portfolio of transmission projects, we have confidence in our ability to execute based on our track record of core capabilities over many years. Next, we will expand our service offerings into underserved geographies and areas that need more scale. Our One Centuri go-to-market strategy will facilitate this initiative. Our operating companies will no longer act in silos. Instead, we will approach customers with a full suite of services across gas, electric, union and nonunion. Several recent awards highlight the success of this approach. First, we were able to leverage a long-standing relationship with a premier customer in Canada to make introductions with the Midwest gas utility who is owned by the same parent company. This introduction, coupled with the trust we've built through many years of quality service, has led to a new multiyear FSA award across the U.S. In another example, a recent electric award for a Florida customer was secured through relationships and introductions originating from our gas business. This represents our first work for that utility customer and a nice entry into the Florida market. I absolutely expect more examples like these to materialize over the coming weeks, months and into subsequent years. On the slide, we've highlighted a few areas where we see logical geographic expansion, including the Southeast for gas, the Midwest for electric and in Canada, where we are targeting expansion of our new electric capabilities into the Ontario region. Lastly, we believe there's an opportunity to exceed expectations on our new bid work. This can be achieved through business development efforts to generate more opportunities from the total addressable market or by exceeding our historical win rates. We also aim to do more for existing customers, offering them access to all of our services and being their partner of choice. The strength of the market is unlike anything I've seen in my career. And as the market data supports, we believe this trend will continue at least through the end of the decade. Now let's shift to Slide 12 for the other leg of grow the portfolio, which is M&A. We operate in a fragmented industry and believe there are strong merits to consolidation and benefits of scale. At Centuri, we've established several attributes we look for in tuck-in acquisitions. In terms of geography, we're focused on the Midwest and Southeast and in terms of scope, electric services, in particular, transmission is a focus. While we are pursuing these areas organically, the right acquisition could provide immediate scale and is attractive to us. Strategically, our focus is not on acquisitions that need to be fixed. Rather, we target companies that match Centuri's operating excellence, our culture and bring already established customer relationships. We look for opportunities that add to the foundation of Centuri, providing more scale and scope for the core business to grow. Slide 13 highlights the Connect acquisition that we closed last year. It's the perfect case study for what we look for in an acquisition. Connect filled two needs. It gives us an electrical T&D services platform in Canada and entrance into the Atlantic region of Canada. Connect has a strong track record of operations and has existing long-term relationships with high-quality customers. Focus now is leveraging our existing gas relationships to grow the Connect platform into the Ontario region. Just a few months into this acquisition, we are already gaining traction on the business development side and expect to have positive updates on these efforts in the coming quarters. Now turning to Slide 14. We believe the execution of our strategy supports a conservative base revenue compounded annual growth rate of 10% to 15% through 2029. We believe we have the strategic direction and plans in place to deliver this top-tier revenue growth. In order to achieve our targets and scale the organization, we must advance our enabling functions and our structure. On Slide 15, we highlight three areas of ongoing focus. First on the talent side, we've added several key additions to the team in 2025: a Head of Fleet and a President of Gas. In addition, we launched development efforts and began building out our talent pipeline. We anticipate adding more leadership talent within the coming year. Second, on fleet, we shifted away from the historic practice of purchasing all equipment to a balanced funding plan that aims to be 50-50 lease versus buy. This allows us to generate more free cash flow and be more strategic with our equipment sourcing. We are also well underway with our analysis and implementation of fleet utilization improvement plans, which will drive margins higher and improve efficiency across the entire organization. Lastly, we established a sales pipeline, which now houses all opportunities that our business development team is evaluating and preparing to bid. The pipeline allows us to track win rates, see trends more quickly, be more accountable and forecast more accurately. Now moving to Slide 16. A critical aspect to enable our strategic execution is our ability to source human capital. Centuri is starting from a solid platform. We have many programs in place, including local relationships and partnerships with colleges, trade schools and vocational programs. We also have an apprentice program in our nonunion electric segment that is currently training more than 800 people. We do an excellent job sourcing our labor needs today, but we must think ahead and take our platform to the next level. To that end, we are already building an integrated group-wide data-driven workforce forecasting tool that will interface with our sales pipeline. This interface will allow us to stay ahead of growth. We'll be able to identify specific skill set needs for specific projects and specific regions over long time frames. Rather than just knowing we need to add head count, we will be precise and strategic with our sourcing. Our goal is to ensure that each job has the right people at the right time. We'll also use the tool to identify new geographies to establish as resourcing hubs. This program, along with our other deliberate work to upskill the workforce and our mix of union and nonunion labor will provide Centuri the flexibility to support expanded MSA, new bid work and expansion into new geographies. We expect to have this tool fully implemented during the course of this year. Developing a group-wide resourcing delivery plan is critical to our success. We will be investing in our people and our workforce pipeline in a far more structured and focused way. And as we grow, we'll seek to capture and share lessons learned across the business to up-level the entire organization through a formal knowledge network. This culture of continuous improvement will further differentiate us for our customers and enable us to deliver true value-added solutions. Another critical aspect required to achieve our goals is managing the risk that comes with growing our business. We outlined this on Slide 17. We are currently in the process of establishing an enterprise-level project management office that will guide the organization through consistent good practices, standardization of controls, data analysis to drive margin improvement and continuous learning. This effort will leverage the existing talent by consolidating our operating company PMO competencies that already exist into a groupwide PMO. We have full line support across our operating company leadership team regarding the critical nature of this function, and we expect to have this group up and running during the course of this year. Now let's jump to the financial outputs beginning with Slide 19. In 2025, our business mix was about 78% MSA and 22% bid work. And our split between gas and electric was 53% gas and 47% electric. As we've talked about, we expect bid work growth to outpace MSA growth over the next few years. And we also see more opportunity on the electric side, recognizing that both electric and gas end markets are growing. When we project out to 2029, we anticipate that bid work will grow approximately to 35% of the business and the gas and electric split to be equal at 50-50. Importantly, turn to Slide 20, where we provide base revenue growth and base gross profit margin targets by segments. These targets do not include impacts from potential M&A or storm restoration work. For U.S. gas, we are targeting base gross profit margins between 7% and 8% by 2029, reflecting our action plan to fully mitigate the seasonal impacts of the business. Consistent with the mix shift, growth in the Electric segment is expected to outpace the gas segment. On Slide 21, we outlined both the progress made and expectations for our corporate level base gross profit margin. I remind everyone in 2025, we delivered significant improvements from 2024 going from a 6.9% to 8% base gross profit margin. As we look out to 2029, we have clearly identified areas of focus and several drivers that will allow us to drive further growth and margin expansion at a 70 to 170 basis point level. First on seasonality. We are about a year into this initiative. And as Greg talked about, we have achieved a meaningful year-on-year improvement in the first quarter of 2026. We continue to be focused on securing customers and work that is less impacted by weather in the first quarter. The ultimate goal, as we've consistently said, is to achieve consistent profitability in the first quarter when compared to the remaining nine months of the year. Next, our overall margin profile will improve as our mix shifts over the next few years towards higher-margin bid work. Lastly, we see margin improvement from the operational excellence program we have launched, increased pricing power, being more selective on projects as well as the work that is advanced on fleet efficiency. We are already excited about the operational excellence opportunity and believe it offers upside potential. Operational excellence involves dissecting each job and identifying components that perform well and at appropriate margins and identifying those components that we don't perform well on and underdeliver on margin. This level of performance attribution analysis will allow us to make informed decisions moving forward. In some cases, certain aspects of the job might always underperform, and we should look to subcontract the work or increase our pricing or in some cases, we might have inconsistent margin delivery across different locations of the operations. In this case, we can assess what's causing the underperformance and quickly apply lessons learned to improve. We have well advanced this granular analysis and expect the benefits to accrue over the coming months and years. Moving to Slide 22. Here, for the first time, we present the long-term financial targets for Centuri. In addition to the top line growth and the margin improvements I talked about, we expect significant growth in earnings over the next few years. From a bottom line perspective, adjusted EPS is expected to grow at a compounded annual growth rate of 30% to 45% through 2029. We expect our net debt to adjusted EBITDA to be around 2x by year-end 2026, and we anticipate keeping year-end leverage below 2x thereafter. This plan is also achieved with no equity issuances pursued over the forecasted period. Lastly, we expect a meaningful improvement in our free cash flow conversion over the next few years. This will be fueled by lower interest expense, the shift to more bid work, fleet leasing, capital efficiency and working capital efforts aimed at reducing our DSO. We expect to reach a free cash flow conversion rate of between 40% and 50% by 2029. I'll conclude on Slide 23. Centuri is well positioned today. We have the scale, the capabilities and talent across gas and electric to execute. We have long-term and deep customer relationships with end market tailwinds, and we have a leadership team fully aligned and committed to the long Centuri vision. Our strategy is conservative, but built for long-term success. It is anchored in staying true to who we are and what we do best, and it will deliver top-tier growth while maintaining a low-risk profile. We are all in at Centuri and extremely excited about our path forward and delivering value for our shareholders. I thank everybody for dialing in and listening to us today. Operator, I think we're ready to open up the call to any questions that people dialing in may have.

Your first question comes from the line of Joe O'Dea with Wells Fargo.

Chris, I appreciate all the details on the strategic vision. I got one short-term and one longer-term question. I'll start on the shorter-term side. So just in terms of the revenue strength that we saw in the quarter and demand strength with revenue up 31% and book-to-bill at 1.8, and with no raise in the revenue guidance for the year, any color on how you're thinking about Q2 revenue growth, details on the gas and electric side as we think about the rest of the year tracking after Q1 strength?

Yes. I wouldn't read into us affirming guidance as anything other than the conservatism with which we run the business. We're a quarter in; the first quarter beat what we expected internally for both revenue and margins. All businesses in the first quarter beat their budgeted EBIT and EBITDA margins and performed exceptionally well. So I wouldn't read into the fact we didn't raise guidance anything other than we're conservative, and we'll remain that way. As I look forward to the remainder of the year, let's first address bookings. We've reiterated we think book-to-bill will be in the region of 1.1 to 1.2. There's every indication that that is a solid number for us. The end markets are supporting the amount of bid work and Greg referred to some of it when he spoke earlier. We have about $2 billion in pending bids, and our win rates are holding nicely. So we have good confidence in continuing to build the backlog through the rest of the year and achieving the book-to-bill range. I'd also talk about coverage for the year; that is backlog under contract, bid work adjusted by current win rates and our confidence level. I think Slide 9 shows it quite well in the quarter deck. We've got almost all of the midpoint guidance under contract, and we've got upside. We expect further bid work to be booked in the next few weeks that will take us toward the upper end. So we feel really confident not only in our ability to do well against guidance, but we also see positive momentum in margins as well as you've seen in the first quarter results. To recap: conservatism is the reason we didn't increase guidance. We reaffirmed it. Look to the deck for indicators of where we are in the year: strong bookings, continued emphasis on booking more work to build backlog, and margin improvements from a year ago. Also keep seasonality in mind: compare Q1 this year to Q1 last year, not sequential quarters. We saw 30% growth in revenue year-over-year. We believe the rest of the year remains constructive.

I appreciate all those details. And then on the longer-term side and the 2029 targets, when we think about good base growth on revenue, the 10% to 15% CAGR that you've outlined, and adjusted EBITDA CAGR of 9% to 17%, why not greater opportunities for operating leverage? I know you've talked about the fleet strategy and owned versus lease as a near-term headwind, but there seem to be efficiency opportunities to offset that. Is there operating leverage opportunity beyond what's modeled?

Yes, there is. We took time to get the organization to work as one after being led as a subsidiary under a utility parent. This exercise to pull the strategy together has been as much about change as it has been about delivering a long-term plan. Everything we communicate is backed by fact, alignment and data. The numbers in the deck represent targets we have plans to achieve. There is an element of conservatism in what we produced. We are focused on doing better than what's published, but we wanted to be sure we have a long-range plan we can deliver. You can take from us that wherever there's opportunity to grow margin expansion or do more higher-margin work or be more efficient, we will pursue it.

Your next question comes from the line of Manish Somaiya with Cantor Fitzgerald.

I just wanted to go back to Chris. Q1, in your words, was a strong quarter. I appreciate the long-term agenda, but I'm trying to understand the disconnect perhaps based on what you're saying and how the market is looking at it, with the stock down 15%. What might the market be missing? Also, I have another question after that.

I deliberately haven't looked at the share price this morning, but let me answer. We developed a budget for 2026 that guides the midpoint we've communicated externally. We set a target for Q1 to grow at least 10% and to mitigate seasonality and improve margins. We closed the first quarter and compared actual results to our forecast. Every one of our operating businesses—nonunion electric, Union Electric, Canada, oil and gas—beat budget on revenue and profitability. We are 30% up on the revenue base; the gas business grew by $80 million and delivered about a 10% margin. We reduced the gross loss from $15 million to $6 million. This is a strong operating quarter and met internal expectations. I can't explain what's getting lost with the outside world; some may look at our business on a sequential basis and neglect seasonality. I believe the business has maintained and stuck to what we said we were going to do. That hasn't always translated in coverage by the market, but internally we remain confident.

On bookings: we've talked about the $13 billion opportunity pipeline and $1.4 billion of data center-related work in the past, and Greg mentioned approximately $2 billion in earlier-stage opportunities. How soon can we get more completeness around formalizing some of those orders? We've heard about this pipeline for some time, so how can we get more comfortable with it?

Fair question. Our book-to-bill and bookings reflect that we have been able to book and bill and collect cash on between $170 million and $200 million of data center-related revenue so far. We are very selective: we focus on data center customers that have deployed capital, whose projects fit our capabilities and offer contracting formats that allow higher margins. We currently believe we have close to $300 million, give or take, of data center work that we have been selected for and are negotiating. That should progress in the next quarter—Q2.

Your next question comes from the line of Justin Hauke with Robert W. Baird.

I wanted to clarify on the 10% to 15% base revenue growth forecast through 2029: does that include M&A? Slide 14 shows an M&A piece, but Slide 20 at the segment level says it doesn't include M&A.

Let me give clarity. If you look at Slide 14, the base revenue growth organically is about 12%, which is higher than what we previously communicated at 10%. The M&A component included in our modeling is about 3%.

Okay, got it. And on free cash flow conversion of EBITDA, it looks like that would bring leverage lower than your target over time. I'm assuming that capital would be redeployed into M&A to drive that 3% in the model?

You've got it. This is a self-sustaining plan to 2029. We don't need to issue equity, but there will be an allocation of capital in three areas: fund organic growth, pursue three to four tuck-in acquisitions over the planning period, and reduce debt below the 2x mark. That's the plan.

One more: I'm a little confused on the book-to-bill guidance of 1.1 to 1.2 given a 1.8 in Q1 and a 1.5 trailing 12 months. Mathematically that would assume sub-1 for the rest of the year. Can you explain that?

I wish it were a finite science. Yes, there's conservatism in the guide. Internally the data confirms we'll be in that range. Q2 will be a little slower, then activity picks up; some awards are timed for the end of Q3 and beginning of Q4. We're not out bidding work for this year beyond what's necessary; we expect to deliver this year's budget business and to book opportunities that improve margins this year and build backlog into 2027. So yes, conservatism, but we have ample work for 2026.

The next question comes from the line of Sangita Jain with KeyBanc Capital Markets.

I have one from each deck. From your earnings deck, the pipeline seems to have stayed at $13 billion. What moved in and what moved out? It also seems to have shifted a bit more toward gas from electric. Any color on what was added in gas and what may have come out of electric? I have a follow-up.

I care about quality of the pipeline, not just quantity. We've booked just over $6 billion of work in the last 15 months, which means we've bid far more, yet the pipeline has stayed flat at $13 billion—an achievement. The pipeline is high quality and sustainable. We can add quantity, but we don't need to; we're focused on quality that drives higher margins this year and builds into 2027. I wouldn't read anything significant into the mix swings between gas and electric. The market dynamics drive timing; early last year bookings were gas-driven, later in the year and early this year bookings were electric-driven. I'm not concerned about a 50-50 mix. If anything, we expect electrical bookings to outpace gas due to market opportunity.

On your strategy deck, you talked about $550 million of potential M&A in your 2029 outlook on Slide 14. Should we think the average size is similar to Connect, or are you contemplating larger M&A to reach $550 million?

The M&A we see will be funded from the balance sheet without equity. We believe we have line of sight on some targets, and they will generally be within the range of Connect but less than about $100 million of revenue each.

Your next question comes from the line of Avinatan Jaroslawicz with UBS.

On margins in non-union electric in Q1, you noted that a new MSA ramp was a drag in the quarter but you expect margins to improve throughout the year. Will that MSA be a margin drag throughout the rest of the year, or should it get up to segment-level margins before year-end?

No, it's not a long-term issue. When we look at March and preliminary April data, we've already recovered to expected levels with some upside for the remainder of the year. The drag was limited to earlier in Q1 due to ramp-up after the holidays and other factors. Nothing long-term.

And on margins in that segment, why did the storm work come in at seasonally lower margin than last year? Specifically, the on-system storm work came in lower margin—was that due to rates for those customers or execution?

Nothing about execution. Not all storm work comes at the same margin. When we do on-system storm work, generally the margins are lower than when we travel or take crews from other regions for extended storms. It's the makeup of the storm and when it occurs. If we're able to work over the weekend, margins are a little greater than when we're replacing base work during the week. So margins on storm work are greater than base work on average, but how much greater depends on variables like location, timing and work structure.

Your next question comes from the line of Sherif El-Sabbahy with Bank of America.

Starting off, the use of cash for free cash flow picked up this year versus last. Could you touch on what drove the use of cash?

It's timing and changes in working capital. We grew revenue over $150 million year-over-year, and that requires some investment that will unwind over the remainder of the year. We're still very confident we'll see $60 million of free cash flow for the year, as we said in February, and we remain confident in that outlook.

Looking at bid work, average sizes appear to be picking up: $3.9 million this quarter, $3.8 million last quarter and $3.2 million the prior quarter. Are bid work projects getting larger over time given the scale of the build-out utilities face? And can you remind us of the average project size for MSA work?

From a bid perspective, there's a small increase quarter-over-quarter, but nothing changing in the scope of work we do. The average is still about $4 million, which is comfortable for us. From an MSA perspective, we're still in the $50,000 to $75,000 per work order range, with no material changes.

To reiterate, the business structure won't materially change through 2029. The average contract size will remain small—probably less than $5 million for bid work on average. MSAs remain much smaller on a per-work-order basis. What will change is the percentage of revenue from bid work moving toward 35% by 2029, but the revenue streams and risk profile remain consistent.

Looking at the long-term targets and the shift to bid work and a roughly 50-50 electric-gas mix, is that driven by larger projects utilities need to build out, meaning opportunity for larger projects versus day-to-day MSA work?

MSA growth is typically slower-moving compared to bid cycles. The longer-term shift reflects where market opportunity is growing, particularly on the electric side. Customers are asking us to do more small transmission projects—these often have integrated scopes like some trenching, substation work and storage; they fit our capabilities and generally offer slightly better margins. I wouldn't expect a violent shift in gas-electric mix; it will vary over time and by customer activity.

Your next question comes from the line of Manish Somaiya with Cantor Fitzgerald.

On the '25 to '29 targets: you have 10% to 15% CAGR for base revenue and 12% to 19% for base gross profit. Why is adjusted EBITDA CAGR 9% to 17% and not at least in line with or higher than gross profit CAGR? Also, can you help us understand visibility into 2027? You mentioned 2026 is largely sold out; how does visibility look for '27?

Good question. Reconciling gross profit to adjusted EBITDA, one key characteristic is the fleet funding shift to a 50% owned, 50% leased model. Over the five-year period, leasing creates a headwind on EBITDA margins compared to gross profit. Offsetting that is scale-driven G&A improvement as a percent of revenue. Net-net, there's a modest headwind on EBITDA from the leasing impact. The benefit shows up in free cash flow, allowing reinvestment and potential tuck-ins.

On backlog and 2027: Slide 9 shows our coverage histogram. We are near the midpoint trending toward the upper end of guidance for 2026. Looking to 2027, I don't see negative trends in the market that would reduce bookings that feed next year's backlog. As a rule of thumb, compared to this time last year we have roughly 35% more coverage looking into 2027. Trends are positive and I don't see concern about meeting bookings to build into next year.

We have no further questions at this time. I would now like to turn the call back over to Nate Tetlow for closing remarks.

Great. Thanks, Liz. Thank you, everyone, for participating today and all of your questions. Please feel free to reach out to me if you have further questions. Thank you. That concludes the call.

Ladies and gentlemen, that does conclude today's call. Thank you all for joining. You may now disconnect.