Earnings call transcript: Centuri Holdings misses EPS forecast, stock drops 9% in Q1 2025
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Overview
The earnings call presents a mixed picture: strong improvements in gross profit and EBITDA margins, but persistent net losses and declines in key segments like US and Canadian Gas. Positive elements include an increase in free cash flow and strategic pipeline improvements. However, the lack of specific shareholder return plans and unclear management responses in the Q&A, particularly on strategic changes and profitability, temper optimism. The absence of a market cap suggests moderate volatility, leading to a neutral stock price prediction.
Key Financial Performance
Consolidated Revenues $550,100,000, a 4.2% increase from Q1 2024.
Consolidated Gross Profit $20,300,000, a 53.1% increase over Q1 2024.
Gross Profit Margin 3.7%, up from 2.5% in Q1 2024.
Net Loss Attributable to Common Stock $17,900,000, improved from a net loss of $25,100,000 in Q1 2024.
Diluted Loss Per Share $0.20, improved from $0.35 in Q1 2024.
Adjusted EBITDA $24,200,000, approximately 20% higher than Q1 2024's $20,200,000.
Adjusted EBITDA Margin 4.4%, up from 3.8% in Q1 2024.
Non-GAAP Adjusted Net Loss $10,500,000, improved from $14,400,000 in Q1 2024.
Net CapEx $23,200,000, down from $24,600,000 in Q1 2024.
Free Cash Flow Improved by $44,600,000 compared to Q1 2024.
Net Debt to Adjusted EBITDA Ratio 3.5 times as of 03/30/2025, improved from 3.6 times at 12/29/2024.
Cash and Cash Equivalents $15,300,000 on the balance sheet.
US Gas Segment Revenue $197,700,000, a 12.7% decrease year-over-year.
Canadian Gas Segment Revenue $39,800,000, down 2.9% from the prior year.
Union Electric Segment Revenue $175,500,000, an improvement of 7.1% year-over-year.
Nonunion Electric Segment Revenue $137,100,000, a 41.9% increase year-over-year.
Union Electric Segment Gross Profit Margin 6.7%, largely in line with Q1 2024.
Nonunion Electric Segment Gross Profit Margin 11.9%, up from 2.9% in Q1 2024.
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Operating Highlights
Sales Pipeline Growth: Sales pipeline is now approaching $12 billion in revenue opportunities.
New MSAs and Bid Awards: Achieved approximately $5 million in new MSAs and new bid awards during Q1.
Record Bookings: New bookings totaled $1.2 billion in Q1, a significant increase from $221 million in Q4 2024.
Operational Efficiency: Enhanced pipeline management and sales strategies have been implemented, fostering a growth-oriented culture.
Backlog Increase: Backlog increased to $4.5 billion in Q1 2025 from $3.7 billion at year-end 2024.
Unified Business Development Strategy: Implemented a company-wide strategy focused on high growth pipeline development and refined market positioning.
Cultural Shift: Instilling a proactive growth mindset across the organization with aligned KPIs.
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Risk or Challenges
Economic Conditions: Uncertainties surrounding future economic conditions may impact the company's performance.
Regulatory Approval: The company faces risks related to obtaining necessary regulatory approvals for its operations.
Weather Impact on Gas Segment: The U.S. Gas segment experienced a significant impact from adverse weather conditions, leading to a decrease in revenue and gross profit margins.
Supply Chain Challenges: The company does not procure its own materials, which may expose it to supply chain risks.
Competitive Pressures: The company does not foresee margin erosion from competitive pressures, but acknowledges the need to monitor market dynamics.
Seasonality: The first quarter is typically a slow period for the gas business due to seasonal weather, which can affect performance.
Lumpiness in Awards: The timing of renewals and varying award sizes may create lumpiness in the magnitude of awards from quarter to quarter.
Tariff Impact: The company does not anticipate a material impact from tariffs on its business, but will continue to monitor developments.
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Guidance & Outlook
Sales Pipeline Growth: Sales pipeline approaching $12 billion in revenue opportunities, with a record booking of $1.2 billion in Q1 2025.
Unified Business Development Strategy: Implementation of a company-wide strategy focused on high growth pipeline development and securing new awards.
Cultural Shift: Instilling a proactive growth mindset across the organization, aligning KPIs with company-wide growth targets.
Market Expansion: Focus on expanding customer base and pursuing new opportunities within end markets.
Strategic Planning Process: Deeper examination of long-term potential in end markets to develop actionable initiatives for profitable growth.
Revenue Guidance: Expecting revenues between $2.6 billion and $2.8 billion for 2025.
Adjusted EBITDA Guidance: Forecasting adjusted EBITDA between $240 million and $275 million for 2025.
Capital Expenditures Guidance: Net CapEx forecasted to be between $65 million and $80 million for 2025.
Book to Bill Ratio: Expecting a book to bill ratio exceeding 1.1 times for the year.
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Shareholder Return Plan
Shareholder Return Plan: Century Holdings has not announced any specific share buyback program or dividend program during the earnings call. However, they have indicated a strong focus on capital efficiency and improving free cash flow, which may suggest potential for future shareholder returns.
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Key Q&A
Q:Can you just talk a little bit about the trajectory for 2025 and how you think you’re still going to get to the upper end of the revenue guidance despite the weaker 1Q in U.S. Gas?
A:The weather affected us in just January and February in the gas business. It bounced back and we were at the expected margins in March and continuing into April. For the full year, we have work under contract and backlog that is pushing us towards the upper end of the guidance.
Q:Can you just talk a little bit more about maybe some of the key findings of the strategic review?
A:We needed to make sure the business had a top to bottom across all operating companies detail available in live sales pipeline. We’ve got a fully integrated sales pipeline that allows us to make decisions around increasing the pipeline, pricing, and positioning. We also focused on cross-selling, culture, and aligning KPIs with growth and profitability.
Q:How would you frame the loss relative to what you would have expected going into the quarter? Is this a business or a segment that should generate a profit in Q1?
A:There’s no doubt when you do work in certain states, the weather comes and we can’t control it. We are migrating the business further south to mitigate the impacts of the weather. We have implemented work to build up a pipeline of opportunities in states that are less affected by the weather.
Q:With over two times in the first quarter, should we expect some pretty light quarters within that? What kind of visibility and cadence should we expect on the bookings from here?
A:The strength of the bookings has continued nicely into Q2. We’ve got good visibility on the full year. We foresee some lumpiness in the third quarter, but Q2 and Q4 look solid on bookings.
Q:Can you just tell in more detail if you were able to displace incumbents on those new MSAs or if that was an increase in the utility scope of work?
A:It was both. We’ve been performing well with many of our customers and have seen opportunities to displace incumbents, as well as clients spending more money.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific details of the strategic review findings, particularly in terms of how they will implement changes to achieve full year EBITDA margins. Additionally, there was a lack of clarity on the expected profitability of the U.S. Gas segment in Q1 and whether structural changes are needed to ensure profitability in the future.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank America
Capital Markets
Century Holdings
Chief Executive
Chief Financial
Eisenstark Chief
El Sabahi
Executive Officer
Financial Officer
Hockey
KeyBanc Capital
MSAs
Officer Century
President Chief
Sabahi Bank
backlog
bid work
booking
business
decision
end
gas
line
lot
lumpiness
margin
market
opportunity
profile
question
renewal
start
weather
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Earnings call transcript: Centuri Holdings misses EPS forecast, stock drops 9% in Q1 2025
Unknown5-12
The earnings call presents a mixed picture: strong improvements in gross profit and EBITDA margins, but persistent net losses and declines in key segments like US and Canadian Gas. Positive elements include an increase in free cash flow and strategic pipeline improvements. However, the lack of specific shareholder return plans and unclear management responses in the Q&A, particularly on strategic changes and profitability, temper optimism. The absence of a market cap suggests moderate volatility, leading to a neutral stock price prediction.
CTRI Slides
CTRI Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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