Centuri Holdings Aktie

Good afternoon. Thank you for joining us for this afternoon's panel. I'm Ryan Savoca with Morgan Stanley. I am very, very pleased to be joined today by Chris Brown, President and CEO of Centuri Holdings, and Kelly Youngblood, EVP, CFO of Centuri. Before we jump into Q&A here, Chris, you're two years into the seat. You've undergone a pretty incredible and active transformation into an independent business, public company. Can you walk us through the journey over the last couple years and really where the strategy stands today?

Thank you, Ryan. It's good to be here, and thank you for inviting Kelly and I. Two years, it feels like 20. It's been a busy, busy year, 2 years, I think. Rolling out the Vision One strategy early this year, both internally and externally, has given us a key guiding light to where we are trending, and that strategy focuses on really three key drivers. First of all, protecting and deepening the core of who we are and who our client base is. Secondly, expanding our portfolio into those end markets that bring more margin opportunity for us but using the same services. And building a sustainable integrated business model. So Vision One Centuri across those three areas is who we are, is where we're focused and where our guiding light is.

And if I think about what those individual components are, protecting and deepening the core is all about getting closer to our base customers in the utility market. It's about building capability alongside their needs. It's about getting closer to those customers and driving efficiency into their capital needs. It's about scaling up around what those customers need so that we can service them more consistently across both gas and electric. We can provide more and more integrated services there and also expand the margins to which we deliver for our shareholders. Expanding the portfolio, similar. We took a decision on the strength of our end markets to not deviate and to stick to the knitting. So bringing capability that we deploy across our utility base into adjacent industries is allowing us to capture higher margin work within those adjacent industries that have got high growth profiles, such as renewable gas, data centers, transmission, which is part of our business but has not got as much scale, as well as other areas in midstream services.

Integrating the business in a sustainable way. We came from an environment where we were part of a great utility, but we were very decentralized. And I think for a contractor like ours to be successful, you need to bring all of the resource, all of the capability, all of the balance sheet, all of the focus, all of the learnings, all of the knowledge together into an organization so you can maximize the value for all. So they're the three strands of Vision One Centuri focused on our core clients, expanding our portfolio underpinned by an integrated operation. And I guess the output from that, as we communicated, is we believe what we have with our end markets will drive into a minimum of 10% organic growth rate each year into our planning horizon of the next five years. We see that working together collectively affords us margin expansion, so we believe our base gross profit will get towards 10%, and I think it gives us a good platform as we learn more about our business as we separate from our former parent into a standalone contractor, gives us a good platform to go even further in the future.

That's helpful. So laying out the strategy and establishing the stand-alone strategy was a piece, right? There's also building the team, and there are several new faces in the C-suite. Can you walk us through some of the changes, the rationale for those changes?

Yes. I think before we talk specifics around people, we've got to go back to first principles. Two years ago, we were still a subsidiary of a public utility. It's only 12 months ago did we become totally independent. So over that period of time, we've been maturing into where we would like to be, which is a fully integrated service provider that maximizes value for all stakeholders and shareholders. Step one, when I came into the business, was to do some block and tackling. There were some elements of the business that needed to be strengthened around go-to-market, build good backlog into the business at good margins so we could manage utilization, get a presence in the market, get a position in the market that came across as One Centuri and not separate OpCos. More recently, you've seen a significant amount of investment, net investment needed in our overhead to build the tools, some advisory help, some capability in the near term that really takes us to where we are today, which is now adding to our teams so that we can drive sustainability. We can drive margin expansion and implement capital efficiency.

So we've made three recent, we brought in three recent additions to the team, Kelly joining us to lead as CFO. We're pleased and proud he's joined our business, and he brings everything and many years of experience that we need to get to where we need to be on those two key elements of margin expansion and capital efficiency. Danielle Hunter has joined us, coming in as General Counsel, as well as General Administration Officer. She brings years of experience around building back office capability, operational support, as well as legal support. And then finally, but as importantly, Mike Christie, who's got over 25 years in our utility industry, has joined us as Group Development Officer, and his role in life will be to drive the deepening and the cross-sell of our organization, which will underpin margin expansion, but also work very diligently in building capabilities so we can achieve our strategic objectives. And I think with those three additions, we've now got an exceptionally strong team that will lead us to success in the future.

Okay. Well, Kelly, welcome. Thank you. And as you continue your welcome tour, I think it would be helpful just walking through your background a little bit and also what attracted you to the opportunity at Centuri? Where are you going to be focused and first 30 days, what are the initial observations?

Yes. And thanks again for having us here, Ryan. Really appreciate it. Yes, as Chris kind of alluded, I've kind of been around a while. Started my career at Halliburton, one of the largest oil field service companies out there. Worked there for over 25 years in various roles. I worked international positions, domestic, corporate, ran their Investor Relations group for several years. And a big company like that is kind of great because even though you're working for one company, you feel like you have a lot of careers within the same company because they move you around quite a bit. I physically relocated my family seven times during the career and got a lot of good development from Halliburton.

But since Halliburton, over the last 11 years or so, I've held three other CFO positions at Diamond Offshore Drilling, then I was -- which was a public company. I went over to BJ Services, which was a spinoff from Baker Hughes. That was a private equity-owned company. I did that for a few years. And then most recently, over the last six years, I went to another public company, MRC Global, which was a distributor which was actually heavy into the gas utility business. So it's not completely new to me. Electric's a little bit new to me, but gas utilities I've been involved with. So that's briefly my background. And as I was trying to, my last company actually merged with a major competitor last November.

I took some time off, and as I was trying to determine what I was going to do next, this opportunity came up. And I was honestly being very picky about what I wanted to go into next. I wanted a company that was, that had tremendous growth potential, had a good balance sheet, had a CEO that I thought I could work well with, had a board of directors I thought I could work well with. I was kind of at that point in my career where I felt I could be pretty picky on what I wanted to do next. And this one, Chris was kind enough to spend a lot of time with me as I was doing the diligence of the company. And listen, it came down, it was pretty simple.

When I look at opportunities, I kind of simplify things into the good, the bad, the ugly. And when I looked at the good of this company, it is, the top line is just, there's a phenomenal growth opportunity for Centuri. I mean, it's grown first half 33% year-on-year. And Chris and the team have laid out a strategy to have double-digit growth out through 2029. That's great. The backlog of the company is incredible. So the top line and the growth potential of this company is just, you just couldn't really ask for more. And then when I got into looking at kind of the cost components, looking at the reputation of the company, and things like that. Chris has kind of touched on it.

There's some opportunity that we have that we're already addressing on improving margins. There are some things around capital efficiency that need to be done. But the things there's really nothing major broken here. It's just some growing pains. When a company grows this quickly, there's just going to be some growing pains or some speed bumps that you have to deal with. And I think there's already a good plan, there's a good foundation in place that Chris and the team have put in place here over the last couple of years. And I think with the team that we've got now, it's just pulling the right levers to take it to the next level. So I'm really excited to be joining at this time.

That's great. Congratulations.

We're glad you're here.

Chris, can we touch a bit on performance through the first half? How you see the second, the second half shaping up? I want to pull on the margin thread a bit. You've mentioned it a few times, clearly a focus. And then really just what are you hearing from your customer base on spend and outlook?

So let's -- yes, the first half we've added a couple of slides into the deck, which is on the website, to provide a little bit of a nuance, an explanation rather, around the nuances within our first half of the year. We had a good H1 this year, as Kelly just alluded to. We've demonstrated the ability to find work, win work, and push that to the revenue line. We added over $400 million more revenue compared to the prior year, which was up 33% in the first half of the year. Good quality work, bid at higher margins. So we're pleased with that. If we look at the focus area and that is converting that revenue into incremental margin, and you just refer to the bridge we've provided, we believe the underlying incremental margin from that work was at 11.6%. But equally, during the first half of the year, we kind of had three headwinds.

The first headwind, which I think was signaled to everybody but probably not understood, was around our change in capital allocation. And that change in capital allocation when we went public and were spun out of Southwest Gas, we had a net debt to EBITDA of 4x. We were spending $100 million a year servicing the debt, and we had a fleet program which was fully funded by balance sheet cash. And none of that was sustainable to us. We needed to improve, de-lever the balance sheet, improve liquidity so that we could be sustainable. And the decision we took was to instead of fully funding the fleet with cash, we went to a 50-50 mix of own versus lease.

That has had a positive impact on our ability to generate cash. It's allowed us to invest in new businesses, and I'm sure we'll talk about a couple of those. It's also allowed to build some sustainability into our business and also de-lever the balance sheet. The short-term trade-off for that was there was an impact on our margins. It wasn't that we booked work at a lower margin. It was the impact of some of that changing fleet strategy that couldn't be passed on to customers immediately.

Where we sit today in the world, the short term is basically the pricing on that fleet, the new fleet structure has been pushed into all of our bids that we are currently working on over the last few weeks. It's been pushed into the new MSAs, and there are some legacy MSAs that will renew over the next period that have yet to be updated to the new fleet pricing. 30% of those legacy MSAs, most of which sit within the gas business, will be renewed during the course of the year, this year, 30% into next year. And by the time we close out '27, there'll be a small amount still remaining, but it'll be sort of de minimis upon -- de minimis when it looks at the impact upon our margins. So that $9 million was a big impact in the second quarter.

We think most of it has now been wound out of the work we've bid with a little bit in the legacy gas business that will take some time to unwind.

The second impact was fuel, diesel. We drive 120 million miles around the U.S. and Canada each year, and we pay for that diesel at the pump. The war in Iran has really hurt that, and we had about a $9 million impact, comparable in terms of impact as the fleet in the second quarter. We've fully projected what that needs to be in the second half of the year, and where we have renewed and where we continue to renew contract pricing. We've been pushing that into the cost base and passing that on to our customers. So we think that will become less of an impact as we move forward. And then the third impact on our first half of the year is we built capacity into the business to actually deliver the backlog growth. And that's a good thing.

We added 1,700 new people into our business in the first half of this year. 1,200 of them were in the gas business. And yes, there was a $3 million or so impact in the second quarter, but the real impact is actually the fact it takes time for those 1,200 and the overall 1,700 people to become productive. And where we sit today, two months into the third quarter, the workforce additions are now at a level where productivity is normalized. And I think that will not be an issue for the second half of the year.

So all in all, I believe the incremental margins were 11.6%. The near-term headwinds we believe will pass through. And if I look to the second half of the year, there are a couple of messages I would give. Clearly, we've only got July and August results, but the 9% commitment in the second half of the year to overall base gross profit still stands. We don't see any downside pressure to that. We see the gas business, which is a fundamental impact on margin dilution, trending very nicely above the 7.5% we committed to. And I think the incremental revenue we anticipate in the second half of the year, we see the base gross profit being 10% plus, and that's included in absorbing the cost of the fleet and also the additional diesel cost in the second half of the year. So we see really the second quarter as a little transitional, borne out by where we believe we'll be in the second half of the year.

Okay, back on balance sheet and capital allocation priorities. Obviously, you've brought down leverage significantly since the time of the IPO, sitting 2.5 to 2.6 today. Longer term, where are you comfortable? You've obviously been an acquisitive business in the past, we'll get to that shortly, but what's the right level, steady state, and where are your capital allocation priorities today?

Yeah, listen, I think the team had laid out in the past, there's really no change to this guidance. We're trying to get below 2x leverage or around 2x or so by the end of the year. We're on track to do that. That's a very important priority of the company at the moment. When we look at capital allocation, funding, just the organic growth that we're experiencing, which is accelerated growth at the moment, is a high priority. That's probably the #1 priority. And as I said, trying to get to this 2x or lower leverage by the end of the year, and that we think that will continue to go down further even in 2027. And then looking at M&A, bolt-on M&A opportunities is something that we're very focused on. There's been two acquisitions done just in the last year. I'm sure Chris will probably cover that here shortly. But there are a lot of other things we're looking at to add additional scale.

We would like to have more scale in the business. I think there's some geographic diversity that we would like to achieve. And M&A that would get us access to new customers or underserved customers, that's an important priority for the company right now as well. I think we got the question in the meeting earlier today about dividends or buybacks. That is not a top priority at the moment. That's further down the road. We've got this, as we mentioned, this significant level of growth we're dealing with at the moment and trying to get the balance sheet a little bit cleaner. Those things will come in time, I believe, but just not here in the near future.

On the M&A front, between Connect and more recently JJ, can you touch on what that really added to the platform? An update on how the integration process has gone? In our view, following the story for a long time, it's really Centuri getting back to their DNA. You guys have been an acquirer. That's how you built the platform, a mix of organic and inorganic growth.

Look, the separation from Southwest Gas, the ability to put our own strategy to work, to operate as an independent business, to essentially de-lever the balance sheet has allowed us to do these transactions. Both of the transactions are totally consistent with the needs of our strategy. Connect gave us a position in Atlantic Canada that we had tried to achieve organically, and it was proving difficult. We had a customer there that many in the organization knew well, and they wanted us to do more work beyond just gas. It needed to be on the electric transmission, distribution substation side. So we were able to attract the owners of Connect and the Connect management team into joining Centuri. I mean, we avoided a competitive process, which is my preference in all cases. We brought a lot of value to them as a business. They needed our scale, our capability, also our client access beyond their Nova Scotia area.

So we brought them a lot of BD leads, a lot of balance sheet support, a lot of equipment support, and a big pedigree. And they brought us a business that allows us to diversify in Canada and grow more. Integration has gone really, really well. I think operationally, I would say we are there. There's still some back office stuff that will take some time, but Neil, John, and the team in the Canadian business have done a super job bringing us together as one. We've already started to cross-sell. We booked a recent wind project, wind farm project, in Canada, I think it was three, four months ago, which was about an 80 million Canadian dollar award. And we've got multiple numbers of these, of additional wind farms we're positioning for that Connect on their own would struggle to bid just purely size and scale, but collectively we can capture more opportunity.

So, the driver was our strategy to do more within our core markets. We needed an electrical business in Canada. Organic was too slow and too difficult, and we ended up with a great, great business that has integrated well. JJ White is, again, a business we've known for 20 or so years. The New Jersey team probably will tell you longer than that. Again, we were able to get ourselves in a negotiating position with a business that we knew well.

We knew some of the customers. It brought us nearly 1,000 people of great talent. It's a well-run legacy business. We're only, I think we closed July 20, so we're only a few weeks in. We've only seen the first levels of performance out of the business, all of which is on track. We are positioning with JJ White and our Riggs business to capture more opportunity both in the midstream as well as in the data center market, and that's allowing us to add new good solid backlog with really good margins attached to it. So JJ White so far, so good. I think Connect has already proven it was one of the best deals we've done.

Fantastic. Look, top-line growth, very strong. Backlog pipeline both up kind of 20% in your latest quarterly announcement. Are you seeing the type of spend, the type of projects you're seeing, go into backlog, go into your pipeline? Are you seeing a shift there? And look, I don't think I would get invited back to this conference if I didn't ask you about data center and expand on that a bit. Where are your capabilities today, and how are you set up?

Yes. Look, I mean, first of all, what are the couple of trends we're seeing in our end markets? Our pipeline of opportunity is $16 billion, and that $16 billion has been 100% refreshed over the last 12 months. So what that should tell us is that we're able to find opportunity in our end markets, understand it, compete for it, and win it, and we've now took our backlog to $6.5 billion. So I have got no concerns at all in our ability to find high-quality work. I think if you look at the margins that's coming from that high-quality work we're pushing to stretch ourselves, but we're targeting sort of the incremental base gross profit to be between 12% and 15%. And I think we shared some of that in the slides today.

So not only the volume, but the quality and the return on that market is very robust and very solid. We're seeing no significant pressure across the entire group on competitive forces. Clients still need more capability. So we believe we can continue to grow that and meet the commitments we've made. In specific segments, there's no doubt, if you look at our short term, we are about $2.7 billion to $2.75 billion booked already this year. We've got $1.2 billion of MSA renewals that'll happen between now and New Year's, and a further $2.6 billion of bid work that is currently being tendered. So the near-term activity has actually accelerated, and we still stand behind and feel good about the target of 1.2x book-to-bill this year.

Data centers you want to talk about. I mean, data centers for us is a part of our business. It sits in the expand the portfolio side of our Vision One Centuri. I've said it pretty much every time I get the question, we will be very selective on data center opportunities. We need to understand the customer. We need to make sure the actual scope of work has got capital investment decision. We need to see that the awarder of the contract has got funding in place, and then we need to know, can we win it, and we can generate margins? So there's a scrutiny around what we pursue, just like any other really, but probably with a heightened focus on data centers that we go through before we commit any time, any resource to bidding it, let alone executing it. We've got $3 billion in our pipeline at the moment of data center opportunity which we believe is close to fitting into that category.

There's still some proving out we need to do, but -- so we've got a $3 billion opportunity in the near term. We've currently booked about $400 million of data center work so far. Some of that's already gone through the revenue and the income line, healthy margins. We've got about another $150 million or so that we're currently negotiating. But I guess the punchline is not just data centers. We're a service provider to both utilities and adjacent industries. And the same work we do for data centers, we do it for our public utilities. They're a very important client, but it's the services that matter, not necessarily the end market. I foresee data center revenue as one of our end markets probably not eclipsing 10% of our revenue overall. So yes, meaningful, but certainly not the critical mass of what we do.

Yes. Maybe a little bit further on that one, just the capability set, right? You talk about electric, you talk about gas, but you actually look through your service offering. It's a lot deeper than that. What are you doing on the data center side? What else should we think about the broader capability set beyond T&D on the gas and electric side.

Yeah, thank you for reminding me on that one, Ryan. We don't have a set of special data center skills that we deploy. The capabilities we provide our utility customers, whether that be electrical interconnects, gas interconnects, battery energy storage, behind-the-meter generation of all forms. Fitting out all of the electrical instrumentation within the buildings, all sits within the skill set we have within the business and transfers from our core business into these adjacent end markets. And that's the kind of work we're doing. We bring a lot of value to the data centers because we can manage all the interfaces. We essentially become a one-stop shop for their services. We've added JJ White, which gives us even more scale to do more for the customers. So from a data standpoint, data center standpoint, it's the transfer of the skills and knowledge we've built up over 100 years across the utility market into data centers, coupled with the fact that we've got the competency to go with inside the fence line and do some of the tenant fit-out work to make sure power and utilities services the data center.

Thanks, Chris. Kelly, free cash flow. Talk a little bit about some changes on the fleet side. What else, how should we think about free cash flow targets? What are you doing to continue to drive improvements there?

Yes. No, great question. Listen, if you look at the company's history, we have not had a great track record with the cash flow, especially prior to last, I think it was a lot of times negative or break-even type cash flow. But in 2025, the company generated $36 million in cash, which was about a 14% EBITDA conversion. In 2026, we've guided to $75 million plus in free cash flow, which is about a 25% EBITDA conversion. And then I think in the '27 to '29 forecast that we put out there to the street, we're targeting to get to more of a 40% to 50% type metric on EBITDA conversion. So how do we get there? You mentioned one of them, the lease capital, the change in methodology there is going to be very, very helpful. That's going to reduce a lot of the capital outlay that we have on an annual basis.

The shifts, Chris has talked a little bit about, we have the MSA work, but we're doing more bid work that's going to come at better terms and better payment terms and things like that with customers, that's going to help reduce DSO, which will help improve our cash flow. And then just overall, I think, just looking at working capital management, when we look at DSOs and DPOs, just a few weeks I've been here, I think we've got a lot of leverage we can pull to improve our DSOs and DPOs to get better cash collections into the company. And I have no doubt we can make some progress there. It just takes some effort and time to make that happen. But I have no doubt that we're going to make progress there. And then the last thing is we continue to pay down debt. We will have lower interest costs to the company. That's going to help free cash flow. So I have no doubt, going forward, this is going to be a very sustainable, very consistent cash flow machine that we have here with the company. It's going to be good.

It's great. Back on the comment you made, 1,700 people you've hired this year. Can you...

We do a good job.

We are in a labor-constrained environment. The spend is there. The question mark is around, can you deliver the labor and get things built and set up? What are you doing to attract labor? How are you standing Centuri up as an employer of choice? And as you scale, how are you doing keeping up with the training, safety standards that are critical to your relationships with customers and, frankly, employees as well?

I think we -- over generations, we've been an employer of choice. I think finding people to join us, our reputation, the benefits we bring. The culture of our organization is really conducive to hiring people just generally. I think we are a great humane company. Organically and inorganically, we come from 9,600 people to I think this week we're about 12,800, all over a seven, eight month period. So I think the team's doing a good job. I think what has to fundamentally shift for any contractor is the following. I'm starting to sound like an old person now, and I feel that way sometimes, but if you look back in history, you'd receive an ITB from a customer. You'd analyze it. You'd put a proposal back into that customer on the back of our reputation. You would then win the work and then go find the people.

The world's different today. Yes, it's labor. Yes, the world's resource constrained, our country's resource constrained. But the way you deal with that is, yes, you need to be an employer of choice. You've got to be attractive. There are all the things you've got to do around retention and tools and around that. But I think having a strategy where you get close to your customers, you understand their needs in advance of those ITBs coming out, linking their needs to your funnel of opportunity and your pipeline needs allows you to have a view on what you will need for the future. And I think we've got there now.

We have a very, very good predictive tool around how many people we're going to need between now and the end of the year by skillset, by union, by non-union, by management, by craft. And the more and more you actually get data around that allows you to start planning resource identification, resource mobilization ahead of the need. And I use that, we use that as an organization as a tool to go to our customers and say, look, the closer we are to you, the closer you share with us means that we can do better planning, and we can find people. You can't just get them at a moment's notice.

So there's a big push not just on being the employer of choice, there's a big push to become more focused and more predictable and more aligned to our customers on their needs so we can start adding strategically ahead of the need without diluting margins. And I think that will become our differentiator. And I think also the ability to move information, lessons learned, knowledge capture around that organization to raise the overall bar will be attractive not just to the employees, but will be attractive to those that employ us as our customers in terms of all the knowledge we've got and where that resides across the entire organization. So I believe that will become a stronger and stronger differentiator to us in our ability to pre-advance, start positioning resource, supply, delivery, learning, and development ahead of its real need and ideally get the customers to fund that for us.

That's great. We are at time. I'm thrilled to have you both here today. Thank you for attending this year. Yes.

We appreciate you, Ryan.

Absolutely. Thank you.

Appreciate you. Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Centuri Second Quarter 2026 Earnings Conference Call.

[Operator Instructions]

I will now hand the conference over to Nathan Tetlow, Vice President, Investor Relations. Nathan, please go ahead.

Thank you, and good morning, everyone. Today, we issued and posted to Centuri Holdings website our second quarter earnings release and investor presentation. 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 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 today'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 Gregory Izenstark, Chief Financial Officer. I will now turn the call over to Chris.

Nate, thank you, and thank you, everyone, for joining our second quarter earnings call. We're proud to have delivered $962 million of revenue for the quarter, a new quarterly record for Centuri. Adjusted net income for the quarter was $24.4 million, an increase of 44% from the same quarter last year. In terms of our base measures, which excludes storm work and for this quarter, a onetime pre-IPO receivable write-off. Second quarter base revenue was 36% higher than last year and base gross profit was 21% higher. For the first half of the year, base revenue was 33% higher than last year and base gross profit was 35% higher than last year.

This is remarkable growth and reflects the dedication of our teams across the U.S. and across Canada.

I'll start with the recently announced acquisition of JJ White, a leading provider of union industrial, mechanical and electrical maintenance and construction services. JJ White has about 1,000 employees and will be integrated into our Riggs Distler business, adding scale and in-plant construction expertise across several end markets, including data centers.

This tuck-in acquisition is consistent with our strategy that we laid out earlier this year. We increased scale in the Northeast and Midwest, expanded our core business and added new customers in the electric end markets. We expect JJ White to add more than $20 million of gross profit on a full year annualized basis. The total cash consideration paid was approximately $62 million, funded from existing balance sheet liquidity. We, therefore, see no change to our year-end leverage target of 2x. And we're very much excited to welcome the JJ White team, and we look forward to the growth and their execution ahead.

Now for a commercial update, where we continue to see strength in our core and adjacent end markets and more than ample opportunity to deliver sustainable growth at double-digit levels. Second quarter bookings were nearly $850 million, bringing our year-to-date bookings to over $2.2 billion. Our book-to-bill ratio year-to-date is 1.3x. And on an organic basis, for the full year, we are targeting a 1.2x book-to-bill or approximately $4.4 billion of total bookings for 2026.

The successful negotiation and award of our largest data center project has demonstrated our ability to differentiate and secure complex value-added contracts into our portfolio. The $125 million award covers electrical infrastructure and utility for a multi-building data center campus. We continue to view the data center demand as robust, attractive and growing. And with the addition of JJ White, we will further increase data center backlog and the pipeline of opportunities for our company.

At quarter end, we had about $2 billion of data center opportunities in our pipeline. Other bid works in the quarter include the construction of an electrical transmission and substation project for Atlantic Canada, which was a very nice award for the Connect team and also the assembly and installation of key components of the gas infrastructure for a gas infrastructure company and finally, a large significant electrical high-voltage transmission project in the Northeast of the U.S.

On the MSA side, we booked approximately $250 million in renewals, which includes the gas distribution, infrastructure upgrades and expanded scopes of work for a long-standing utility customer. We also booked approximately $200 million between new MSAs and growth from existing MSAs. Demand for our core MSA work, including expanded scopes of work remains very strong.

Our current backlog stands at approximately $6.4 billion, which is up 21% year-over-year. Even more notable is the opportunity pipeline has increased to approximately $16 billion, which is up 23% from the first quarter, which demonstrates the strength of our end markets and our ability to position Centuri for backlog growth. We have nearly 700 differentiated bid opportunities in the pipeline, which collectively represents 60% of the $16 billion. And in the very near term, we have $2.5 billion of outstanding bids pending at the end of Q2, which represents a 15% increase from the first quarter.

This number has further increased as we moved into Q3, another positive indicator of the strength we are seeing across our end markets. Over 2/3 of these pending bids are from our Electrical segment. It should also be noted that as we bid and increased our volumes, our bid margins year-over-year have increased by more than 10%, which is fully in line with our long-term margin targets that we communicated earlier in February this year.

As we've discussed over the recent months, we are focused on driving longer-term sustainability into our business through margin expansion, backlog and greater coverage for the subsequent years. Coming into 2026, we had about $3 billion of coverage for 2026 revenue, and we are now forecasting to exit 2026 with more than $3.6 billion of revenue coverage for 2027.

This is a 20% organic increase. This visibility and predictability provides the foundation for sustainable growth, allowing us to plan and execute for the future. Lastly, to support customer demand and build for sustained growth over the first 6 months of this year, we have organically added approximately 1,700 employees, representing an 18% growth in headcount so far this year.

In the U.S. Gas business alone, we've added over 1,200 employees, a 25% increase to support client demand emanating from our strategy to mitigate seasonality in our business and expand our gross margins.

This significant capacity increase and near-term costs, which we estimate reduced second quarter gross profit by approximately $3 million. We fully expect these capacity investments to benefit Q3 '26 and the subsequent quarters as our resources generate revenue and margin expansion. We forecast approximately 7.5% gross margin for our U.S. Gas business in the second half of this year 2026.

We were also affected by elevated fuel prices in the quarter relating to the ongoing conflict in the Middle East. The average per gallon cost was up 48% year-over-year and the estimated cost impact within the second quarter was approximately $6 million. Higher fuel prices and the investment associated with the additional gas resources together had a combined 95 basis point impact on the second quarter base gross profit margin.

The fundamentals of our business remain strong, and we continue to invest in the future, guided by the priorities outlined within our Vision One Centuri strategy. I'll now turn over to Greg to discuss the financial results.

Thank you, Chris, and good morning, everyone. Second quarter 2026 consolidated revenues totaled $962 million, a new quarterly record and was a 33% increase from Q2 2025. Consolidated gross profit was $69 million and gross profit margin was 7.2% in the quarter. In terms of base results, which exclude the impact of storm work and for this quarter, a onetime write-off, I'll discuss shortly. Base revenue was up 36% and base gross profit was up 21%, compared to last year.

Base gross profit margin was 7.9% in the quarter versus 8.9% last year. And on a trailing 12-month basis, base gross profit margin was 7.8% versus 7.4% a year ago.

Net income attributable to common stock in the second quarter was $6.1 million or $0.06 per share compared to a net income attributable to common stock of $8.1 million or $0.09 on a per share basis in the same period last year. In the second quarter, adjusted EBIT was $40.5 million, 8% higher year-over-year, and adjusted EBITDA was $75.7 million, a 5% increase over the same period last year. Adjusted net income in the second quarter came in at $24.4 million or $0.24 on a per share basis compared to $16.9 million or $0.19 per share in the same period last year.

As Chris mentioned, second quarter results were impacted by elevated fuel prices from the ongoing conflict in the Middle East. We estimate that the higher fuel prices in the quarter amounted to an additional cost of approximately $6 million or approximately basis point impact on margins. In the second quarter, the company wrote down all of its remaining accounts receivable and contract assets related to work that was completed prior to 2020 for the City of Chicago.

The work -- the write-down reduced U.S. Gas revenue by $9 million in the quarter. We did not budget collection of this receivable in 2026, so the write-down has no impact on our cash flow expectations. We have excluded this onetime item from our non-GAAP measures, including our base metrics.

Now to our segments. U.S. Gas revenue was $489 million -- $489.5 million, an increase of 45% compared to the prior year. The growth was driven by increased bid work and MSA volumes, demonstrating the underlying strength of our customer relationships and market position. Gross profit margin was 4.2% in the quarter, down from 7.8% last year. Base gross profit margin for U.S. Gas was 5.9%. As previously mentioned, second quarter margins for U.S. Gas were impacted by approximately $3 million or 60 basis points from capacity added in the second quarter.

While the timing of these additions impacted Q2 costs, we expect the results scale benefits to support stronger performance in the second half of 2026 and further improve seasonality during the first quarter of 2027. On a year-to-date basis, we've seen significant growth and improvement in profitability of U.S. Gas. Base gross profit has more than doubled from last year and base gross profit margin improved by 36% over the same period last year.

Canadian Operations revenue was $81.4 million, up nearly 48% from the prior year period, primarily from the inclusion of Connect. Operational performance in this segment remains strong against the backdrop of sustained favorable demand as evidenced by the 16% gross profit margin in the quarter. Union Electric revenue was $224.2 million, an increase of 23% year-over-year. Growth has been fueled by robust activity in projects serving the industrial end user segments. Gross profit margin for the Union Electric segment was 9% in the second quarter, ahead of the 8.4% recorded in the same period last year.

Non-Union Electric revenue in the second quarter was $166.9 million, an increase of 11% year-over-year. Base revenues in the Non-Union Electric was $157.1 million in the quarter, which is a 15% increase from last year. This growth reflects the significant expansion we've seen in MSA activity, building on the momentum we've discussed in recent quarters. Gross profit margin in the Non-Union Electric segment was 9.1% in the current period compared to 11% in the prior year period, and base gross profit margin was 8.4% compared to 8.9% in the prior year.

Turning to cash flow and balance sheet. Net cash provided in operating activities for the second quarter was $20 million, and free cash flow was negative $7 million, consistent with our expectations. For the full year, we expect free cash flow to exceed $75 million, a 25% improvement over initial expectations. We ended the quarter with a net debt to adjusted EBITDA ratio of 2.6x, which was down from 3.7x a year ago. We continue to forecast net debt to adjusted EBITDA of around 2x by year-end.

Finally, turning to our 2026 outlook. We have increased our full year guidance and included expected contributions from JJ White. The full year guidance also includes approximately $5 million of forecasted incremental fuel expenses based on an assumption that higher fuel prices persist through the third quarter. As a reminder, base revenue and base gross profit are non-GAAP measures that exclude the impact of storm restoration services and the onetime write-down related to the City of Chicago.

For 2026, we expect base revenue of $3.5 billion to $3.7 billion and base gross profit of $270 million to $290 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 $3.59 billion to $3.79 billion, adjusted EBITDA of $285 million to $310 million and adjusted net income of $60 million to $75 million. And lastly, we are reducing our net CapEx outlook to a range of $60 million to $75 million following the sale-leaseback of select equipment early in the third quarter. I will now turn it back to Chris to wrap up our prepared remarks. Chris?

Thank you, Greg. As we wrap up today's call, I'd like to leave you with a few key thoughts. We've demonstrated our ability to capture market demand and deliver growth. Over the course of the last year and again in the first half of this year, we have successfully identified and secured opportunities across our end markets, expanded our workforce to meet our customer demand and continue to grow revenue, backlog and the opportunity pipeline.

The focus now is not on only sustaining that growth, but leveraging the scale we are building to expand margins and drive stronger profitability over time. We're very pleased with our first half performance, and more importantly, encouraged by the trajectory of our business.

As we outlined last quarter in our Vision One Centuri strategy, the path to achieving our 29 base gross profit margin target of 9.7% is built on 3 primary drivers: reducing the seasonality of our business, increasing the mix of higher-margin bid work and delivering operational excellence. We've already begun to see these initiatives gain traction. Our first quarter results demonstrated meaningful progress in seasonality.

Our opportunity pipelines and bookings continue to support growth in bid work, and we are now advancing several operational excellence initiatives that believe will bring lasting value over time. We are increasingly confident that the right tools, processes and leadership are in place to drive sustained progress. Initiatives like our newly established PMO organization, fleet optimization efforts, working capital management and enhanced job level performance attribution and analytics are in early stages.

These initiatives represent important building blocks in creating a more efficient, scalable One Centuri model.

We are investing with intention, executing against our clear strategy and are encouraged by the momentum we are seeing across the business. In short, the implementation of our margin improvement plan to deliver the 2029 targets continues in line with our expectation.

As we look ahead, we remain confident in our ability to deliver sustainable growth, achieve our long-term margin objectives, generate free cash flow and create significant value for all our shareholders. We truly appreciate everyone's time today and the interest that you've shown. Operator, let's begin the Q&A.

[Operator Instructions]

Your first question comes from the line of Sangita Jain with KeyBanc Capital Markets.

Can I start with the JJ White acquisition? And maybe you can discuss what your key goals are with this acquisition? And what type of synergies are you hoping to achieve?

Good morning, Sangita. Yes, I can cover that. First of all, we've known JJ White as an organization for a number of years. So the cultural fit, the capability and the relationship between our respective businesses were long established. So this wasn't finding a business we did not know well. So that was number one.

What JJ White brings us is more scale, more capacity to be able to deliver on growth in the Midwest and the Northeast, primarily focused on in-plant power, data center-related activities. The business has got a massive track record in developing talent within the business. It's currently 1,000 people. We believe it can flex to 2,000 people, so it brings capacity for us.

Your question on synergy, we don't see cost synergy at all in the transaction. JJ White is currently mobilizing into our overall Riggs offices in the New Jersey area. We see the synergy coming from their operational capability combined with ours to do more work for our customers. That's where we see the synergy in the supply chain of people they have, supervisors as well as craft giving us more capacity in that Northeast Midwest to deliver for customers in both data centers and energy.

And that's very helpful. And then maybe I can follow up for Greg. You gave us a look into second half. You said you're factoring in $5 million on higher fuel costs. Can you give us a sensitivity on how many basis points of margin that should mean for the second half?

Good morning. Yes. So overall, for the full year, fuel from the $7.5 million to $7 million in the first half and then the $5 million that I noted in the second quarter -- in the third quarter, excuse me, it's about 35 basis points of headwind for a full year basis.

And you're assuming just for third quarter, nothing for fourth quarter yet?

We -- our assumption in our guidance assumes a $5 million headwind in the third quarter and then back to some level of normalized increase year-over-year. So our guidance at the beginning of the year did assume some normal increase that you would expect.

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

Greg, I had a question for you on guidance. It looks like revenue is up about $300 million at the midpoint. EBITDA is up a little bit. Maybe if you can just help us understand the conversion, the EBITDA flow-through. And then I have a follow-up.

Yes. So maybe taking a step back, when you look at base gross profit of the increase that we've assumed in our guidance, about 2/3 of it kind of relates to organic business and then 1/3 of it kind of relates to the incremental JJ White in the 5 or so months of contribution that we'll get here in the back half of the year.

From an adjusted EBITDA perspective, we've assumed that same level of base gross profit along with our storm activity. Obviously, you have the previously discussed kind of headwind from moving to a 50-50 split on leasing, which we're on target with and have revised or finalized the sale and leaseback of our existing fleet. So any future purchasing will be along those lines. So the combination of all of that gets you to adjusted EBITDA about 8.1% at the midpoint.

And Greg, I think in the slides, you have fleet investments at 60% operating lease and 40% CapEx vis-a-vis the 50-50 split that we have talked about. So I guess what is the incremental impact to EBITDA of that sort of 10 percentage point increase in operating lease this year?

So the full year impact of our leasing is about 0.5 percentage point or about 55 basis points, excuse me.

On margin?

On EBITDA margin -- 55 basis points on EBITDA margin.

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

So I've got 2 questions here. I'll start. I guess first one, this one is really easy, and then I've got a question on the guidance. But the first question is just JJ White acquisition. I think you said $315 million of backlog and a $2.8 billion pipeline increase. Is that pipeline increase already in the $16 billion number that you gave? Or is that something...

Just that it's not. We didn't close on JJ White until, I think, the third week in July. So it's excluded from the numbers. So it will be at [ additive ].

Okay. All right. I figured that. I just didn't know given that pipeline number backlog.

But as Greg just said, the only element you'll see of JJ White within our release is the guidance where 1/3 of the guidance increase came from JJ White for that 5-month period. That's the other thing I would stress.

Yes. Well, that leads to my second question because I guess this is what I kind of want to understand a little bit better because the organic, as you just discussed, the revenue is $200 million higher. You've got another $100 million from JJ White.

You raised the EBITDA guidance by $5 million. You pick up $9 million or so from the 5 months that you have with JJ White and you offset that with the $5 million headwind from the higher fuel cost. So that basically just -- I guess I would look at that and say that it implies organically that there's no incremental margin on any of that acquired revenue. And so I guess I just want to understand that dynamic and also just the confidence in the second half base gross profit margin outlook, which is roughly 9% versus just under 8% that you did here in 2Q. I know there's seasonality, but just, I guess, help me understand some of those moving pieces a little bit better.

Let me talk about the second half, and then Greg can come to the overall guidance, just to help you map the numbers. We feel second half of the year very strongly about the volume of work and also about the 9% quoted margin. We've got total visibility on pretty much everything that we need to deliver this year is under contract. I think there's a slide within the deck that shows that to everybody.

We've added the capacity we needed to add in gas. I think everybody might be speaking, but everybody will recall, we have a massive drain on margins in our first quarter, even going into April. So adding more volume into the gas business, needed people to win work, put it into the backlog, which we did.

You've then got to mobilize people and we've added [indiscernible] in the quarter. As it goes, we'll stay within the headcount because we've now reached where we have to be on a capacity standpoint. So as -- we don't just look the business on a quarterly basis. The business is not -- it's just not linear like that because of the seasonality as well as the portfolio mix.

So what's the point? The point is we added the capacity we needed in the second quarter. We've got full visibility of where we're going to be for the second half of this year. We're really confident in the 9% margins as quoted. And our intent now is to drive very strongly to the end of the year. And then if you look even into '27, which I know we're not into '27 yet, we've already built up the backlog for next year, which is really important when it comes to seasonality. The seasonality for the first quarter next year requires us to win work now and have resources for next year.

So the bottom line is very confident in the second half of the year. We've got pretty much all of the revenue under contracts. We've added the capacity we need to, particularly in the gas business. So we feel very confident that the investment in the first quarter will have in margins in the second half of the year. I'm confident within that overall 9% for the second half of the year across the board.

And specific to the guidance, we talked about in our release that the annualized revenue profit -- gross profit contribution from JJ White being $20 million plus with margins consistent with our Union Electric business or our business as a whole. When you think about -- they also have a bit of G&A expense and they're very capital light in how they operate their business. And so very little depreciation within the business as they're very efficient from that perspective. And so taking into consideration lower depreciation within their numbers and then some level of G&A expense, you get to an EBITDA contribution that's a little bit less than where we -- what we said on a gross profit basis.

You also have to remember that our EBITDA guidance includes the fuel impact. It's about $12 million on a full year basis that we forecasted. When you factor all that in, G&A expense still being in line with what we previously said, which is 4% or better on a percentage of revenue basis. And then the last thing I'd just point out on gross profit, I mean gross profit margin on a full year basis is going to be in that kind of 7.8% to 8% range.

Your next question comes from the line of Zachary Schechtman with Wells Fargo.

I was wondering if you could give a little more color on that 9% for 2H 3Q versus 4Q. You mentioned the fuel headwind and U.S. Gas labor ramp delivers a meaningful impact. So just wondering if 3Q still hits around that mark or we're expecting to see a sizable step-up in 4Q?

Zach, I apologize, the line was particularly bad. Were you asking about Q3 over Q4 margins in gas? Was that your question?

Yes, that's correct. And just total base gross margin.

So I think we said in our prepared remarks that the back half of the year for U.S. Gas, we expect to have gross margins in the 7.5% range. And from a total basis perspective, gross margin in the second half of the year is going to be about 9%.

Got it. And we should expect a sizable increase from 3Q to 4Q due to the headwinds you mentioned previously?

I mean the third quarter generally is the most active quarter that we have just given weather throughout the United States and Canada. And the fourth quarter, while comparable to that, you obviously get weather and holidays in the back half that could impact productivity and -- but generally speaking, the third quarter is our strongest period.

Got it. Understood. And just as a follow-up, I see really nice growth acceleration in bid work the last couple of quarters. Can you just talk about how gross margins have been trending in that work, how they've been trending versus expectation and how it compares to MSA at this point?

Yes. Zach, we laid out previously our desire to grow the business and the bid mix moving from 80% MSA and 20% bid work to probably long term 65%, 35%, give or take. We see -- we are tracking bid margins as we are tracking now more closely as delivered margins. And bid work is between 1.1% and 1.5% higher than the MSA margin.

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

I believe you already answered this, but just want to make sure the $16 billion opportunity pipeline that you noted, that does not include JJ White. Is that correct?

I can confirm that's the case, Avi. The $16.2 billion, to be precise, excludes any JJ White pipeline of opportunity as does the backlog of $6.4-plus million (sic) [ $6.4-plus billion ] we quoted, it absolutely excludes.

Okay. Got it. So the opportunity pipeline of about $3 billion. The mix of bid work in there is up about 5 percentage points. But the number of bid opportunities that you called out is about the same as last quarter. So should we take that to mean that you're looking at meaningfully larger bid opportunities than previously? Or is that just reading into it too much?

I mean you can't -- I mean it's the same conversation on the margin as it is with the pipeline. You can't look at it. It's not Swiss watchmaking. We can't look at it on a quarter-by-quarter basis. So we look at absolute data over a longer time horizon. So what I will tell you is at the end of last year, December 31, we had $13 billion in the pipeline. It is now $16.2 billion. A 6-month time horizon is a fair in my view, direction of travel for a number of things, both pipeline as well as margins.

If you look at the mix of work over the same time line, we've gone from $6.7 billion of the $13 billion at the end of December was project work and $6.5 billion was MSA work. At the end of June, so the quarter we've just closed, the project work is $9.664 billion to be precise, and $6.56 billion is the MSA work. So we've seen just nearly a 50% increase in the bid work, which is totally consistent with the strategy we laid out in February.

I will tell you the average size of the scope of work within that project has only moved up by a couple of million dollars. So we're not deviating from doing the services and the projects that we've always done. There's a $2 million increase from the average contract size within the pipeline at the end of the year to where we are at the end of June. So it's not materially different. But the amount of work that is bid work has gone up by 46.5 or so percent to be precise.

Okay. I appreciate that. And yes, I understand that we're talking in approximate terms with the exact number of opportunities in there. I want to ask also about slide note that you're evaluating opportunities to expand geographically and with electric transmission capabilities. Do you see those more as organic growth opportunities? Or would they more likely to be through acquisitions?

I think you've got to decouple sort of 2 things there. The primary basis of our business is organic growth. And we've got the capability to do transmission work. We announced 2 awards in the quarter, one for Canada, which is -- one for the Northeast. We doubled in the sales pipeline, we have doubled the amount of transmission -- electric transmission opportunities from the December to where we are in June. So there is an absolute desire as we communicated in February as part of our strategy to drive organic growth into our transmission business across both union and non-union. And we're doing that. We're seeing that in the pipeline. We're also seeing that in the recent awards.

Your second question around M&A. I'll stick to what I think we said in February and what I've been saying for a year. We've got a very, very good platform to grow our business. We've got some evolution to do as we bring us together as one strategy, as one company, as one vision, mission and values to deliver the sustainable growth. But there are areas in the business where we would like to acquire.

We've essentially done 2 tuck-in acquisitions in my tenure here. One was Connect in Northern Atlantic Canada, which was electrical transmission, distribution substation. And the recent acquisition for union in the Northeast was Electrical Union to support the overall data center and utility clients.

As I said when we rolled out the strategy, I would anticipate as time moves on, if we see businesses that look similar in size, similar in quality that we can pay the right price for that complements our electrical business, especially our electric transmission, we would look to do those. So that's how I'd answer the question.

Our last question comes from the line of Manish Somaiya with Cantor.

Greg, I have one other question for you, and then I'll move on to Chris. Greg, if you could just kind of help us summarize all the puts and takes on the positive impact and the negative impact. I know we have talked about a lot of different numbers, and it's just been really hard to kind of make sure that I have what I need. And I'm sure there are folks on the call who probably feel the same way.

Obviously, the revenue uptick is positive, which is, I think, Chris, you've talked about things are happening, but we're just trying to get a better sense as to puts and takes on some of the things that we have already talked about. So maybe, Greg, if you can just help us figure out what the different line items are just so that we have a better feel for how we should be looking at the numbers? And then, Chris, I can have one other question for you.

When Greg just answers your question, I will just sort of wrap up a little bit on the margin commentary because it does get lost because it's a complicated business. I would just like to summarize where we are and how we look at this so the audience can understand it. So let's let Greg answer your question, then I'll just add something towards the back end of that.

Yes. And maybe let me focus on kind of full year gross margin, base gross margin because that's ultimately one of the key drivers for the management team. So when you think about base gross profit margin, there's the contribution of JJ White, which is about 1/3 of the gross profit increase in the margin in the base guide that we discussed.

You have fuel costs which between what's already occurred in the first half of the year and what we had forecasted for the second half of the year is about $12 million of a full year impact. And then you have the ramp-up costs, which were already incurred in the first half of the year. They're already in our full year numbers.

Obviously, that's about $3 million. So overall, gross margins are adjusted for fuel are about 8.1% on the base versus the guide of 7.8%, but that obviously doesn't add back the fuel. So...

Manish, one thing I would talk specifically about on the margins. We got a reported margin, then we've got the impact of the City of Chicago, which was pre-IPO and not even operationally, we're involved in it. It was just something that was on the balance sheet. We've then got fuel cost and then the Q2 increase.

If you look at year-to-date where we are on the margins and how we track it, our overall group margins '25 was 6.2%, and we're now at 6.3%. All that is doing is just excluding the City of Chicago onetime event.

And if you look on a trailing 12 months basis, last year, we were at 7.4% this year, we're at 7.8%. And the reason I look at the year-to-date and the trailing 12 months is not an excuse. It's just our business at the moment is not linear. We don't have 12 consecutive quarters that all look the same, mainly due to seasonality, the portfolio mix and the type of work. So we see our underlying margins, if you just take out one thing, which is the City of Chicago and you keep in there the fuel costs and the mobilization for capacity in the second quarter on a year-to-date are up 6.2% -- from 6.2% to 6.3% and on a trailing 12, 7.4% to 7.8%.

I think that's just getting lost a little bit because of the complexities of reporting. And I would say if you look at the gas margins where most of the seasonality is, year-to-date last year, we were at 2.2% gross profit. This year, we're at 2.9%. And on a trailing 12 months, we're well over 1%, 1.5% more than we were a year ago. So everything is moving in the right direction from a margin standpoint, Manish.

Okay. That's super helpful, Chris. And just kind of going back to our last meeting in June, Chris, we talked about maybe $3.5 billion or so of '27 work that you expected to book by the end of '26, and 15% plus backlog increase. If you can just give us a quick update on where that stands today, both excluding and including JJ White.

I can, I can. We deliberately added a slide for readers. I think it's Slide 12. Greg, correct me, that basically addresses that very point, Manish. So as you quite rightly said, 2025, we had $3 billion of coverage coming into '26. We are around about where we sit now with about $3.6 billion.

So we're up 20% in terms of expected coverage when we close out 2026 for 2027 revenue. So that trajectory has continued. And you'll recall, at the end of '24, we only have $2 billion going into '25 budget 12 months, '25, as I said, we had $3 billion. And you'll see on Slide 12, we're at $3.6 billion is where we forecast. And that excludes JJ White.

What I will tell you on JJ White, they have a similar level of coverage for both '26, and we are currently validating their coverage for '27. But I suspect that the JJ White coverage for next year will look very comparable to what we have within Centuri. So I think the guidance that we show on Slide 12, where we have $3.6 billion, excluding JJ White, is very accurate, and we will drive 20% to 20% more coverage going into next year. And I think JJ White will be of a similar mix.

We have reached the end of the Q&A session. I will now turn the call back to Nathan for closing remarks.

Thank you, everyone, for your questions and for participating in today's call. Please feel free to reach out to me if you have further questions, and that concludes today's call.

This concludes today's call. Thank you for attending. You may now disconnect.

Greetings, and welcome to Centuri's First Quarter 2026 Earnings and Strategy Overview Call.

[Operator Instructions]

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 Chris Brown, President and Chief Executive Officer; and Greg Izenstark, Chief Financial Officer. In a moment, Chris 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 on a per share basis last year. Adjusted net loss in the first quarter was $2 million or $0.02 on a per share basis 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 works, 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 Chris for the strategy discussion. Chris?

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, identify the measures that drive shareholder value and establish credible top-tier goals, advanced growth initiatives supported by our capabilities and the end markets and enhance 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 4 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 secure 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 4 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 in direction or we do not need to pivot differently. 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, being customers, employees and shareholders. To achieve this, we will focus on 3 fundamental principles. Firstly, we will protect and deepen the core. We'll remain diverted 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 '25, 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 4 years, and it's clear this is an area we are under serving. 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 the $200 million in size. This is a size where Centuri has the scale, 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 no longer will act in silos. Instead, we 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 Google with them 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 the utility customer and nice entry into the Floridian market. I absolutely expect more examples like these to materialize over the coming weeks, months and into the 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 just 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 prove immediate -- the right acquisition that can provide immediate scale from which to grow 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 fill 2 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 3 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 underway of 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 headcount, 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 exists into a groupwide PMO. We have full line 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 to 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 gross base 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 9 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 operational excellence program we have launched, increased pricing power, be 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 an appropriate margins and identify those components that we don't perform well and under deliver 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, I guess, 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 '26, 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 Centuri extremely excited about our path forward and delivering value for our shareholders.

I thank everybody for dialing in and listening to us today. And 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 I think with no raise in the revenue guidance for the year, just any color on how you're thinking about Q2 revenue growth, details on the gas and electric side as we think about kind of rest of the year tracking after Q1 strength?

Yes. I wouldn't read into just reaffirming guidance and no change to guidance. There's anything other than the conservatism that we run the business. Look, we're a quarter in first quarter beat what we expected internally from both the revenue. All businesses in the first quarter beat their budgeted EBIT margins and EBITDA margins and performed exceptionally well. So I wouldn't read into the fact we didn't break guidance in the first quarter of anything other than we're just conservative, and we'll be that way.

As I look forward to the remainder of the year, let's just deal with bookings first. We've reiterated we think the book-to-bill will be in the region of 1.1 to 1.2. There's every indication that, that is a really 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've got about and a little bit more than that actually bid work ongoing and our win rates are holding nicely. So I think it's fair to say that we have good confidence in continuing to build the backlog through the rest of the year and achieving the book-to-bill margins.

I'd also talk about the coverage for the year, and I think most on the call will know what I mean by coverage. It is sort of backlog under contract, the bid work that we're targeting adjusted to what our current win rates are and the confidence level we've got. 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've got further bid work, which we anticipate booking in the next few weeks that will take us to the upper end. So we feel really confident not only the ability to do well against the guidance, we also see a positive momentum in the margins as well as you've seen in the first quarter results.

So I guess to recap I'd say the conservatism in us is the reason that we didn't increase guidance. We did reaffirm it. I would look to various points in the deck that should indicate where we feel we are in the year, which is very strong bookings, a continued emphasis on booking more work to build backlog. You see margin improvements from a year ago of 7% trailing 12 months to now 8%. I think what gets lost is the seasonality aspect of our business. You can't look at the business in a sequential quarter basis. You've got to look at it Q1 last year to Q1 this year, and you've seen 30% growth in revenue. We have seen that in the gas seasonality, and you've seen gross margins go from sort of 2.7% to 4.1%. So overall, it's really good, and we feel good about the rest of the year.

I appreciate all those details. And then just on the longer-term side of things and the 2029 targets, when we think about really good base growth on revenue, 10% to 15% CAGR that you've got out there, the adjusted EBITDA CAGR, 9% to 17%. And so just the question in terms of why not greater opportunities for operating leverage? I think you've talked about the fleet strategy and owned versus lease as a near-term headwind, but efficiency opportunities to offset that. And so we would think that there's some operating leverage opportunity within that 10% to 15% base growth.

Yes, there is. I mean, look, we took a while -- I mean I just go back to the basic principles, we took a while to get our organization to work as one having been led as a subsidiary of the utility in an OpCo environment. So this exercise to pull the strategy together has been as much about change as it has been delivering a long-term strategy. What I will tell you is everything that we communicate is well backed by fact, alignment and data. So the numbers you see in the deck here are things that I can and my team and more broadly across the business have a plan around to understand and know how to get there. So there's an element of conservatism in what we produced.

So specific to your question, of course, we are very much focused on doing better than you see there. There is absolute desire to do better than that, but we wanted to be sure that we have a long-range plan, long-range targets, confirming that we are sticking to the knitting. We're not adding any more risk into the business that we know when we make the commitments we can deliver. And I will be challenged about the conservatism and I look with that every day, but we feel good about what we've published. You can go from top to bottom in this organization and our team is aligned that this is very well achievable. But you can also take from us wherever there's other opportunity to grow margin expansion or to do more work at higher margins or to be more efficient, we will.

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

I just wanted to go back to Chris, Q1, which, in your words, was a strong quarter. Obviously, I appreciate the long-term agenda that you put out. But I'm just 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%. And again, I just want to hear it from you in terms of what the market might be missing, which clearly is not something that's being digested. So I would appreciate your thoughts on that. And then I did have one other question.

I deliberately haven't looked at where the share price is this morning. But let me answer your question hopefully a complete way. We have a budget that we developed for 2026. That budget guides the midpoint, which we've communicated to the outside world. We set a target for the first quarter, which was to grow at least 10% and to mitigate some of the seasonality and improve margins. We just closed the first quarter, which not only includes the results of the first quarter, but the forecast for the full year. I compare that to what drove our budget process and I compare the absolute results to where we are in our forecast. And as I said in my earlier comment, every one of our operating businesses, whether that be nonunion electric, Union Electric, Canada Oil and Gas has to beat the budget, every one of them when it comes to revenue and profitability.

We are 35% -- excuse me, 30% on the revenue base. Everybody in this on the revenue base, but more importantly, the gas business is up $80 million and it delivered $80 million of growth at 10% margin. We reduced the loss from 15% down to 6%. So I would say this is a strong operating quarter, it met every expectation internally. Every forecast that we have taken out of our monthly reviews, and we're only just looking at April confirms that we continue to deliver on our expectations.

I can't explain what's getting lost with the outside world. I think some of it may be that people look at our business on a pure sequential basis and neglect the fact that we've got a massive seasonal impact that happens in the first quarter. I think that might be it. But I also -- I just believe that the business has maintained and stuck to what we said we were going to do. I just don't think that's always translated into what people write about us.

And then I just wanted to go back to the bookings. I know in the past, we've talked about the $13 billion opportunity pipeline, $1.4 billion of data center-related work. And then I think Greg alluded to the $2 billion in earlier stage opportunities. How soon can we get some more sort of completeness around actually formalizing some of those orders? Because we've been kind of hearing about this for some time. So I'm just trying to get a sense as to how we can sort of get more comfortable with the pipeline and the prospects that you see.

Yes. I'll talk a couple of things about it, Manish. That's a fair question. I think our book to bill, I think Greg said $170 million. And so we have we have found and we've been able to book and bill and collect cash on between $170 million and $200 million of revenue so far. We have been very selective and I will repeat what I think I said on prior calls to many people. Data centers are just one of our many customers. And our real challenge here is to make sure that we focus on those data center customers that have got capital that is deployed. We like the stuff to work. It's consistent with our capabilities and that we've got a contracting format allows us to deliver higher margins. And sometimes it's not always clear to see what is happening with the data center value chain. But what I will tell you is we've got close to $300 million, give or take of data center work that we believe we have been selected and are currently negotiating. So that should be in the next quarter, Manish. The next quarter being Q2, to be precise.

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 that you have through 2029. It's not totally clear -- does that include M&A in it or not? Because you have Slide 14 that kind of shows like there's an M&A piece, but then Slide 20, at segment level, you're saying that it doesn't include it.

Let me just give you clarity. If you look at Slide 14 on the strategy deck, I apologize if I jumped in. And I reiterate the words conservative. The base revenue growth organically is about 12%, which is higher than what we previously communicated at 10%. And the M&A component that's gone into our modeling is [ 73% ]

Okay. All right. Got it. And so I guess if I was doing the math on your free cash flow conversion of EBITDA, it looks like it would bring your leverage lower than kind of your target over the time line. So I'm assuming that, that's capital that you anticipate kind of redeploying into M&A to drive that 3% in the algorithm.

You've got it absolutely right. And I stress what I alluded to in the slide deck, and then I'll let Greg chime in a second. But this is a self-sustaining plan to 2029. So we don't need to issue equity, but there will be an allocation of capital in really 2 areas -- 3 areas. First of all, we've got to fund organic growth. Secondly, we've assumed we will do 3 possibly 4 tuck-in acquisitions over the planning period. And then we want to take the debt below the 2 mark. That's it. It's that simple.

Yes. Okay. All right. My other one, I just wanted to understand, we've talked a lot about the revenue conservatism, but I'm a little confused, too, on the book-to-bill, the 1.1 to 1.2 that you've maintained for the year. Just given that you did 1.8 here in the first quarter, 1.5 on a trailing 12-month basis and all the opportunity that you guys have kind of laid out that you expect. So I guess I'm just trying to understand why because mathematically, that would assume sub 1 for the rest of the year. So I just wanted to understand that disconnect a little bit. I don't know maybe it's the same conservatism as the revenue side.

I wish it was a finite science just to roll out 12 months, 52 weeks and the book-to-bill isn't. What I will tell you is, yes, there's some conservatism. I will commit to something we can just try. And every bit of data internally, as you know, data is confirming we're going to be in that range. I think immediately, Q2 will be just a little slower than the rest of the year, then it will pick up. And that's just part of the timing on the awards. We've got a couple of that awards, I think, at the end of Q3, beginning of Q4. But what I will also tell you, and I refer to Slide 9 in the deck for the overall quarter, we're not out bidding work for this year.

We pretty much have got this year's budget business to deliver on the commitment both to our business as well as our shareholders. What we're looking at now is work that allows us to improve margins for this year and building back for '27. So yes, conservatism. I'd just remind you that we've got ample work book for '26. So we're trying to find those opportunities that bring margin improvement for this year, but more importantly, building a bigger platform going into next year 2027, so that we can be -- we can meet or beat what we've laid out in the strategy deck.

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

So if I can ask one from each deck. From your earnings deck, I just want to kind of get some additional color on the pipeline, which seems to have stayed at $13 billion. So I just want to see what moved in, what moved out. And it also seems to have moved a little bit more towards gas from electric. So any color on what you may have added in gas and what may have come out of electric? And I have a follow-up.

Let me just talk about the dynamic in the pipeline. I care about quality in the pipeline, not necessarily quantity. We've booked in the last sort of 15 months close to just over $6 billion of work, which means we've clearly bid a lot more work than that because we don't win everything we bid, yet the pipeline has stayed flat. I mean that's a pretty good achievement, frankly. I feel as though the pipeline is of high quality, is very, very, very sustainable. We can add quantity into the pipeline. I just don't think we need to. I think we're very much focused on quality of opportunity in the pipeline that drives higher margins this year and build quality going into 2027. I wouldn't read anything into the mix, Sangita, about gas and electric.

As I said in my commentary, I think inevitably, the gas market grows at a slightly slower pace than the electric markets where we play. I'm quite pleased that we're about 50-50 in the mix. As long as it's 50-50, 48-52 or the other way, I'm not worried about it, quite frankly. If you go back a year to my first quarter last year, most of what we were booking was gas related, and that was driven by MSAs and the push to have more backlog for seasonality. If you look at the latter part of last year into the first quarter this year, most of the bookings are on the electrical side. So the takeaway is that I'm not concerned of the size of the pipeline.

Bear in mind, we've already booked $6 billion in the first 15 months and completely replenish that. The pipeline has held well at $13 billion. I'm also not worried that we've got a mix of more electric than gas. I think that just is consistent not only with the way our customers award work, but also where the market opportunity growth is. And I think I said in my strategy, I would anticipate that bookings in electrical will outpace those in gas, just purely driven by the market opportunity.

And then one on your strategy deck. You talked about $550 million of potential M&A in your 2029 outlook on Slide 14. I kind of just want to get a sense of the size of -- like should we think of the average size as being similar to the one you did in Canada recently? Or are you contemplating larger M&A to make up for that $550 million?

I'll restate we see the M&A funded by the existence of the balance sheet without doing any equity offering. And I think we believe we've got line of sight on some already, but they'll all be within the range of Connect but less than about $100 million of revenue.

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

So just on the margins in non-union electric in Q1, you noted that the new MSA that you're ramping up on was a drag in the quarter, but expect margins on that to improve throughout the year. I just want to understand, is that going to be a margin drag throughout the rest of the year? Or are you thinking that it should get up to segment level margins by sometime before the end of the year?

No. It's not a long-term issue at all. In fact, when we look at March and we look at some preliminary data from April already, we've already recovered where we think we should be and with some upside throughout the remainder of the year. So it is limited to earlier in the first quarter, just given the ramp-up after the holidays and some other things. So nothing of a long-term impact.

Okay. Got it. And just staying on the margins in that segment. Can you help us understand just why the storm work that you did there in the quarter came in at seasonally lower margin than it did last year. I noted that work for on-system customers came in, yes, lower margin. Was that more about like favorable rates for those customers or anything related to execution there?

Nothing about execution. I think it's just the reality that not all storm work comes at the same margin. It's something we've talked about in the past. When we do on system storm work, generally, the margins are lower than if we're able to travel or take crews from the Southeast and go to the Northeast or hurricanes where we work a little bit longer. It's just the makeup of the storm and when it occurs, if we're able to work over the weekend, our margins are a little bit greater than when we're working and replacing it with base work during the week. So there's a number of different factors. Regardless of the factors or the specifics, margin on storm work is greater than base work. How much greater kind of depends on the other variables that I just mentioned.

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

Just starting off, I wanted to touch on the quarter. The use of cash for free cash flow picked up this year versus last. Could you touch on what drove the use of cash?

Yes. It's just some timing and changes in working capital, and we grew our revenue over $150 million year-over-year. And obviously, there's an investment that we need to make and that will kind of unwind over the remainder of the year. We're still very confident that we'll see $60 million of free cash flow for the year, which is what we said back in February, and we remain very confident in that.

And then just looking at the bid work, it seems like the average sizes are picking up $3.9 million this quarter, $3.8 million in the last and $3.2 million the quarter before. Is it fair to say bid work projects on average are getting larger over time just given the scale of the build-out utilities are faced with? And then could you also just remind us of the average project size for MSA work?

Yes. From a bid perspective, yes, I guess there is a small increase quarter-over-quarter, but nothing is changing from the scope of work that we're doing, the size -- the type of work we're doing. Nothing is changing from the details. But yes, I guess it is upticking a little bit. I think as we continue to see increased opportunity on the bid side, and we'll continue to grow that part of our portfolio, you might see a bit of increase. But on average, it's still $4 million, and that's a pretty comfortable number for us.

From an MSA perspective, we're still in that $50,000 to $75,000 per work order range, whether it's gas or electric, no material changes from that perspective.

There's no shift, and I try to say it, Sherif, in my words. We're going to continue to stick to the knitting as we go through '29. I think the average contract size will still very small, probably less than $5 million is what we're projecting. MSAs don't change that materially. So the average contract size will be less than $100,000. What you'll see change is just the amount of bid work as a percentage of revenue going to that 65% and 35% bid work. But the overall concept of the business, the structure of it, the revenue streams and more importantly, the risk profile just won't change materially at all.

Understood. And looking at those long-term targets, as you highlighted, a big pickup in bid work, but still sort of in the 50-50 electric gas mix. Is that just driven by the fact that, again, there's that large-scale build-out needed by utilities. And so the opportunities in front of you are just for those somewhat larger projects versus sort of the day-to-day MSA work?

Yes. MSA, it's not science. I mean we've got customers that bid work to us and then choose to roll it into an MSA. And I think the MSA work is just generally by intent, grow year-over-year at a slower rate than bid work. MSA is a slower moving machine versus the bid cycle. So I think I wouldn't read a lot into the rates than they just reflect the rate that we will grow in the market we're currently in. But 50-50 on electric I will tell you will swing a little bit. It not only is it somewhat seasonal, as I referred to a question that Sangita asked, I mean, early last year, most of the bookings were driven by the gas business yet late in the year and early this year were electric driven. That's just a customer thing. It's nothing more than that.

I would say there is definitely a drive we hear from our customers, they want us to deliver services on the transmission side, electrical. So there will be absolutely a push to find more opportunities that we convert into bids and wins and backlog. But I wouldn't expect a violent shift in mix of gas and electric in the pipeline or in the backlog. You just won't see it. It's pretty steady.

And then just with that bid work mix shift, does that change your exposure to heavier transmission versus distribution? Anything on that front of the type of work that's going into that?

No. Look, we've done electrical transmission work, we've done -- we do about 10% of revenue less than that each year in transmission work. We do a lot more distribution work. If I look at the end markets and I look at the customers, what they're saying to us and the opportunity, and I referred to an award we've got in Florida, customers want us to do more small transmission projects. And those transmission projects may have a few miles of cable in the ground, they have substation attached to it, may have battery energy storage cost to a mix of things. And they fit our scope of work really well. So I think the margins are a little better on the transmission work because we have slightly larger contracts.

I think the scope of work is more integrated, which sits us well. I think the competitive forces for those probably play well to where we sit versus trying to bid against large, large contracts, which we're not equipped to do.

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

I had one question on the '25 to '29 targets. You have 10% to 15% CAGR for base revenue growth, 12% to 19% for base gross profit. I'm not sure why the adjusted EBITDA CAGR is 9% to 17%. Why isn't it at least in line or higher than the gross profit CAGR?

And then secondly, I know we just talked about backlog, Chris. But if you can also just help us understand the visibility that you have into '27. I think you mentioned '26 is pretty much kind of sold out for the most part. Maybe if you can just help us understand what that visibility picture looks like for '27.

Absolutely, Manish. I will let Greg talk about the margins because that's a really important point. I think it does get missed by the outside world. So he will take margin and then I'll take the backlog.

Yes. Thanks for the follow-up question. I think when you're reconciling and going from gross profit to adjusted EBITDA, one of the key characteristics of this model is the continuation of what we started late last year around our capital efficiency and purchasing and buying a more balanced amount of our fleet. So 50% buy, 50% leased. As that kind of compounds over the 5-year period, there is a bit of a headwind on margin when you get to EBITDA, not as much when you get to gross profit. Offsetting that is the scale that we're getting on a G&A perspective as a percent of revenue. So there is some partial offset. But net-net, there is a bit of a headwind just from the leasing impact. Obviously, you get that benefit on free cash flow, that's allowing us to reinvest it in the business and look at opportunities for tuck-ins and such like that.

Manish, on the backlog question, let's just close out '26 comment first. I think Slide 9 in the deck that shows the histogram there and the coverage. I'm talking about the quarter deck strategy deck. I think you can read that literally. We kind of got the midpoint and trending towards the upper end of the guidance, close to sort of $3.5 billion, $3.6 billion. And you can do the math. I mean it adds to it other than what we see within our pipeline is where we currently think we'll be during 2026, which, as you know, from last year is up from 3% to what you see in that chart, so somewhere between 15% and 18%.

When I look to 27%, which is kind of where the focus on BD is at the moment, Manish, I don't see any negative trends in the market around bookings that we will have this year that will feed next year's backlog and coverage. A little rule of thumb, I will tell you, even though the data was a little bit -- was not as developed as it is now, but if you go back 12 months ago when we were looking at the end of the first quarter to '26, I think we were about $1.8 billion of revenue -- sorry, if you go back to '25 first quarter, we're about $1.8 billion, give or take of coverage backlog rather going into '26. We've got about 35% more this time looking into '27 at this time of year. So the trends are all positive. I don't see any concern that we won't meet our bookings and our ultimate coverage going 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. And please feel free to reach out to myself 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.

Greetings, and welcome to Centuri's Fourth Quarter 2025 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nate Tetlow, Vice President, Investor Relations. Please, you may begin.

Thank you, Angeline, and hello, everyone. This morning, we issued and posted to [ Stree ] Holdings' website, our year-end 2025 earnings press release and investor presentation. 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 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 the note regarding non-GAAP measures is included in today'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 Chris Brown, President and Chief Executive Officer; and Greg Izenstark, Chief Financial Officer. I'll now turn the call over to Chris.

Thank you, Ned. Hello to all, and thank you for joining our call today. In 2025, we delivered $3 billion of revenue, a record for Centuri. We improved our [ peer's ] profitability and produced adjusted net income of $39million which was a 49% increase over the prior year.

As a reminder, when speaking of base revenue and best gross profit, we are referring to the measures that exclude the impact of storm restoration services. We believe that best results provide our stakeholders with information that is helpful in evaluating fundamental business performance and provide relevant period-over-period comparisons. In 2025, best revenue increased by 18%, this gross profit increased by 35% year-over-year. This exceeded expectations and reflects the strength of our company the dedication of our teams across the U.S. and Canada and their unwavering commitment to safety, productivity and delivering exceptional customer service.

I'll start with the commercial update. Committing to 2025, we set a goal to achieve a 1.1x book-to-bill ratio. We didn't just exceed our goal, we shattered it delivering a 1.5x book to bill for the year. In total, our bookings surpassed $4.5 billion. The mix of bookings included 34% of bid work new or expanded scopes of work on our [ MS ] and 45% MSA renewals. Our strong emphasis on business growth was evident with more than half of the bookings representing true incremental accretive work to our business. We maintained our 100% MSA renewal rate and are actively working to secure new customers and a new work scopes and geographies with existing customers.

In 2025, we added new news across Texas, Oklahoma, Arizona, Georgia, Indiana, Wisconsin and several other states. On the new bid work, we secured over 600 awards with an average size of approximately $2.4 million. A few notable bid awards included a significant natural steel gas pipe replacement projects, major substantial upgrade work to strengthen group reliability and increase capacity.

A mechanical beta recompression system for an ethanol plant, construction of a renewable natural gas facility. Several projects to rebuild and construct utility scale transmission lines, several data center awards with varying scopes of work. additional scopes of work that includes substations, transmission work, heat pump installation, compressor work, HVAC removals and installs for many others.

We anticipate continued strong bookings due to the multiyear tailwinds within our end markets and our $13 billion opportunity pipeline. Our renewal success and our consistent win rates support our desire for growth. Through February 20, we have booked approximately $1.1 billion, which includes approximately $800 million of renewals, nearly $150 million of new MSAs and more than $150 million of bid work, so we are off to a very good start in 2026.

For the year, we are targeting a book-to-bill ratio of 1.1 to 1.2x. Our opportunity pipeline in [ coupes ] about 580 bid opportunities, which collectively amount to $6.7 billion or just over half of our current opportunity pipeline. At year-end, we had $2.8 billion of near-term opportunities, which are active proposals with award decisions expected by the end of the second quarter.

These include about 2/3 of new bid work on [indiscernible] with over 75% within our electrical segment and the remainder in gas. If we consider our year-to-date bookings, we may have to proposals and prospects we've submitted in the new year, the current near-term opportunity sits around $1.3 billion. On data centers, we are actively executing several [ skirts ] to work at several data center sites.

An opportunity pipeline, we have more than 20 opportunities with an aggregate value of approximately $1.4 billion. We also have dozens of prospects that are not yet included in our pipeline figures because they are early in the evaluation process. We believe the total value of these prospects could reach as high as $2 billion.

Data center opportunities offer a variety of work scopes for Centuri, including power delivery services like simple cycle turbines, substation, compressors of [indiscernible] plus core electric work like switchgear transformers, UPS units and generators. On the mechanical side, we handled chiller and [ CAT ] system installed. Additionally, we will bid on traditional infrastructure work like gas, sewer water lines plus telecom and [indiscernible].

Now moving over to the backlog. At year-end, our backroom is approximately $5.9 billion, an increase of $2.2 billion or 59% from last year. This year in backlog forecast is to provide over 85% of 2026 base revenue guidance. More details on bookings, backlog and the opportunity pipeline are on Slides 8, 9 in the investor presentation, which we posted today.

Now moving to margins. In 2025, we reported a base gross margin of 8%, an increase of approximately 100 basis points over 2 and we have several initiatives underway focused on further margin improvement. First, we've initiated a plan to address the first quarter seasonality in our gas business. The first is expanding the volume of work in warmer geographies and securing more indoor work.

Our goal is to fully address the seasonality over 3 years with 2026 being year 1. Halfway through this current quarter, we are on track to deliver year-over-year improvement as a good first step towards our 3-year goal. Second, we're working to improve fleet efficiency through in fact, enhanced supplier pricing, improved utilization rates and optimize allocation across our business units. Through these efforts, we're in for at least 20% improvement in the efficiency of our fleet.

Third, we have driven improved crew efficiency in our non-union electric segment which has delivered significant growth over the last 12 months. As [indiscernible] and jobs to mature, we expect improved productivity. Base margin in this segment were up in the fourth quarter, and we expect to see more progress throughout 2026.

Finally, given the growing number of bid opportunities and our current win rates, we expect our average weighted bid margin to expand over the very near term. [indiscernible] are the first part of the equation and we will continue to drive operational execution to capture this favorable market dynamics and drive further margin growth.

Beyond the commercial and financial success, 2025 also included several important milestones. In September, we became fully separated from our former parent after completing 4 successful follow-on offerings. In November, we closed the acquisition of [ Connect Atlantic utility services ] given the [indiscernible] service platform for which we can grow and expand our customer relationships.

We also made significant strides reducing our leverage, ended the year end with net debt to adjusted EBITDA at 2.5x. We are not only driving significant growth in our business. We are doing some of the foundation of a stronger balance sheet and our [indiscernible] base. We are extremely well positioned to execute 2026. We look forward to delivering for our shareholders. Now I'll go to Greg to discuss the results.

Thank you, Chris, and thank you, everyone, for joining us today. I'll start with the fourth quarter, which included another record -- company record for revenue and overall strong financial results. Revenues totaled $859 million, a 20% increase from the same quarter last year. Base revenue was $855 million, which was 28% higher than the fourth quarter of 2024.

Gross profit for the quarter was $80 million compared to $71 million last year, and the gross profit margin was 9.4%. Base gross profit was $80 million, which was a 50% increase year-over-year. Net income attributable to common stock in the quarter was $30 million or $0.32 per share compared to $10 million or $0.12 on a per share basis last year.

Fourth quarter net income was impacted by a $23.7 million income tax benefit related to deferred tax asset allocations from our former parent. Adjusted net income in the fourth quarter was $16 million or $0.17 on a per share basis, compared to $18 million or $0.21 per share in the same quarter last year. Adjusted EBITDA for the quarter was $78 million, which compares to $71 million last year. Our cash flow from operations was $84 million, and free cash flow for the quarter was $106 million.

The remainder of my comments will focus on full year results. Revenues totaled $3 billion, a record for Centuri and was a 13% increase from 2024. Gross profit was $247 million compared to $221 million last year, and gross profit margin was 8.3% in 2025. Base revenues was $2.9 billion or 18% higher year-over-year. Base gross profit was $234 million, up 35% compared to 2024. Base gross profit margin was 8% in '25 versus 6.9% last year.

Net income attributable to common stock from 2025 was $23 million or $0.25 per share compared to a loss of $7 million or an $0.08 loss on a per share basis in 2024. Adjusted net income in 2025 was $39 million or $0.43 on a per share basis compared to $26 million or $0.32 per share in 2024. And finally, adjusted EBITDA for the year was $249 million, which compares to $238 million last year.

Now to our segments. U.S. gas revenue was $1.3 billion, an increase of 5% compared to 2024. This reflects solid growth in MSA volumes and bid projects, demonstrating the underlying strength of our customer relationships and market position. Gross profit margin was 5.4% in 2025, consistent with prior year. We continue to focus on expanding MSA work and the seasonality initiative that Chris mentioned earlier.

Canadian operations revenue was $247 million, up 25% over 2024. Operational performance in this segment remains strong against a solid demand backdrop. Gross profit margin was 18.6%, which compares to 15.9% in the previous year. [ Union Electric ] base revenue was $800 million, an increase of 21% year-over-year and base gross profit margin was 8.7% for the year, an increase of 110 basis points over the prior year.

Growth has been fueled by robust activity and projects serving industrial end user segments, particularly substation infrastructure and data center-related work. Our nonunion electric segment had base revenue in 2025 of $569 million, an increase of 51% over 2024. This growth reflects a significant expansion in MSA activity. Fees gross profit margin was 8.5% compared to 5.9% in the prior year. As Chris mentioned, in 2026, we're focused on performance management and improving crew efficiency.

Now turning to fleet investments and CapEx. In 2025, we began shifting away from the historic practice of purchasing all fleet equipment to a balanced approach that targets 50-50 by [indiscernible]. The new funding mix drives better free cash flow generation and more balance sheet flexibility. In 2025, we invested a total of $135 million in fleet assets and funded the investments through $55 million of operating interest, $38 million of sale leasebacks and $42 million of net CapEx. For 2026, we forecast [ complete ] investments of $150 million to $180 million with funding expected to be approximately 50-50 [ fibers ] lease.

Moving to the balance sheet. In November, we executed an underwritten equity offering and concurrent private placement raising net proceeds of approximately $251 million. We used $58 million of proceeds to fund the [ Connect ] acquisition with the remainder used for net debt reduction. We ended the year with a net debt to adjusted EBITDA ratio of 2.5x, down from 3.6x at year-end 2024.

In 2026, we plan to further delever and forecast net debt to adjusted EBITDA of around 2x by year-end. Last month, we repriced our Term Loan B, securing a 25 basis point rate reduction. Based on our current debt level and lower interest rates, we expect 2026 interest expense to be about 30% lower than it was in 2025.

Finally, turning to our outlook. Today, we initiated full year 2026 financial guidance. As we've talked about, base revenue and base gross profit, excluding impacts from 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 to 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, net CapEx is expected to be between $75 million and $90 million. I will now turn it back to Chris to wrap up our prepared remarks. Chris?

Thank you, Greg. 2025 was a pivotal year for Centuri. We demonstrated our ability to identify opportunities, to secure substantial bookings, to expand our footprint and capabilities, to deliver earnings growth, to grow base margins and to strengthen the balance sheet. The hard work of 2025 has positioned Centuri for continued success going into 2026.

The market backdrop remains very strong across multiple years with our end markets showing no sign of slide. Centuri offers top-tier growth while maintaining the low risk profile you expect from us. Our growth has come and will continue to come by focusing our core capabilities, delivering for our customers and stay disciplined on who we are.

We have a diverse, high-quality large utility customer base across gas and electric, union and nonunion and supported by a high percentage of long-term MSA contracts. In 2025, 78% of our revenue was generated under MSA contracts, and our year-end backlog included 82% MSA work. Whilst we absolutely expect big work revenue to grow at a faster rate than MSA revenue over the next few years, it's important to note that the scope of work under bid projects is consistent with the services that we deliver under [ MSS ]. It's the same capabilities only executed under a different type of agreement.

Our [indiscernible] portfolio is also well diversified with 285 different projects and average remaining project value of $3.8 million. For further context, the largest 25 big projects in the pipeline are expected to contribute about 15% of our total 2026 based revenue. We believe Centuri represents a compelling investment opportunity, carrying high growth in strong end markets with a notably low risk profile with further potential to drive margin expansion and capital efficiency through solid execution.

Inc closing, I want to commend our workforce who are executing day in and day out. Your dedication to operational excellence to safety and customer service is what earns our reputation as a leading provider of high-quality infrastructure services. I thank you all. We appreciate everybody's time and interest today. I'll hand to the operator so we can start Q&A.

[Operator Instructions]. The first question comes from Sangita Jain with KeyBanc Capital Markets.

So for the first question, I want to find out you're including a 3-year average storm revenue in your guidance. How much of that was already kind of realized in the January storm?

We did. When you refer to adjusted EBITDA and total revenue include some level of storm. The storm impact thus far this year has been pretty minor. It's largely in line with what we did last year. So no, nothing unexpected or nothing significant.

You mean in the January, strong winter storm [indiscernible] was what I was referring to.

Yes. Yes. And I would say that the [ proactivity ] that we've done thus far are largely in line with last year, nothing of a significant nature. Less [indiscernible] quite on it.

Okay. Got it. And then on the guidance, if I look at the core guidance, if I exclude storms for a minute, then the gross margin seems to be lower versus this year. Am I reading too much into that? Is there a mix impact that I'm misinterpreting? Can you help me understand?

No, the gross profit margin would be largely in line with this year, up a little bit on an annualized basis.

The next question comes from Justin Hauke with Robert Baird.

Great. First of all, I guess, thanks for all the color on the awards and the new disclosure. It's helpful for understanding things. So I wanted to, I guess, follow up on the on the margin expectations in the guidance. And maybe you could talk a little bit about the seasonality. I know one of the things you've talked about this initiative is reducing that seasonality for the [ Gas ] segment.

I think you said you were expecting margins to be up year-over-year in 1Q. But I guess I'm just curious how much of a gap you're narrowing? I mean, last year, there was a little bit of a loss. Are we more like to break even this year? Or what's kind of the expectation for how to think about the seasonality as we go through the year?

So Justin, I'll answer the question and then pass over to Greg for any additional commentary. But we are striving to be predictable and consistent and then build continued improvement, and that should be reflected in everything that you've seen us over the last few weeks and few months.

So when it comes to solid margins, it's like our [ confident ] flow. We feel very good about being able to deliver it. It reflects the current backlog. It doesn't assume that we've got lots of things to do to get to that margin. So there's an element of conservatism just to be consistent that we have in our margins.

Then we'll go specifically to the initiatives to improve margin, where the margin improvement are going to come from? The seasonality, which you just mentioned on the gas business and where [ will ] we are. We -- it's only 1 month in, but we see many positive signs in our ability to find work, to win work in the gas business and push that through to the revenue and the income line in the P&L.

It's only January numbers. We're really just getting to February numbers now, but I think we're going to make a big dent in that 3-year program to actually make the seasonality in the gas business don't exist in across the 4 quarters. So I can't give you much more than that at the moment for obvious reasons, but we are pleased as we close out the January results and we're pleased with the volume of work that we're tracking.

Then the big work, which drives the analogies upwards, we are very selective now in opportunities and the margins that those opportunities can deliver to us. And that instituted across all of our individual businesses, that tendering work every day, and there is -- as you see in the slides, we've got very good backlog, very good coverage to deliver our budget as well as the guidance this year.

And there's an opportunity, therefore, with any additional awards to drive margin improvement. And then the third thing, which will take a little bit longer is the efficiency through our fleet and the indirect costs associated with it. We've mobilized the resources we need. Our priority was to get the funding of our fleet aligned with better industry practices so that we can generate [indiscernible] free cash flow to invest in the business. So we've done that last year, and that's followed further into 2026.

And the focus of the team now is to actually figure out better ways to get more return on the existing asset fleet we've got across all of the businesses, operators on century. I guess the last comment, we did allude to it in the comments is on the nonunion side, nonunion electric side. We had a massive growth year-over-year with pretty much negligible amount of storms. There was a massive mobilization in the second quarter.

The third quarter we saw, as we signaled to everybody an improvement in margin. Those margins continued into Q4. The workforce now is really stable and are functioning very efficiently. And I suspect we'll see further improvement across the [indiscernible] need electrics as we close out the first quarter all the way through 2026.

Okay. I guess my second question before I turn it over would just be on the award front, I think data set is something, obviously, you guys highlighted as kind of newer tangential to what you were doing last quarter, you won $140 million in '25. You talked about this pipeline, $1.4 billion. I think that's actually up a little bit for the data center versus what you called out last quarter, and I know that you had a fair amount of work that was currently out for bid at the time.

And I guess I'm just curious on the status of kind of the win rates and how those have come in, in 4Q and year-to-date and the expectation for that pipeline when those awards will come in over the next couple of quarters.

Justin, fair question, I don't typically look at the win rates just on a quarterly basis. It's more of a trend. And our win rates actually have continued to go up all the way through to where we sit today going into February. So if you go back to 13 months that we've been really driving performance through our sales pipeline, we have seen continual improvement. I think the win rates were happy where they are.

Specifically to data centers, your observations are quite right. I think I have spoken about [ $2 billion to $2 billion ] of opportunity that we could see of which -- we got very -- we're very disciplined on what we will assume in our forecasting, what we really put capital behind to go win and resources to go win because you could [indiscernible] a lot of work that actually doesn't conclude with an award that can be that competitors. So the overall focus on data centers remains very much targeted on those customers that we know have capital, that we know are going to award contracts and that can deliver our returns and our margins. And we are the wind and data centers so far this year a little slower as expected. But we have a number we are going into commercial sensitivities awards that we are -- that are [ reorder-term ] pipeline of about [ $1 billion, $1.2 billion $1.4-billion ] currently that we are negotiating all tendering now.

The next question comes from Joe O'Dea with Wells Fargo.

In the release, you talk about how the organization has sort of proven its ability to identify and secure growth opportunities over the course of 2025 and certainly see it in terms of the backlog growth. But can you just outline -- I mean, this happened pretty quickly. And can you outline some of the key changes that were implemented in the business in 2025 to drive this? And how you think about the room and opportunity to further advance those in 2026, any specific initiatives underway?

Joe, thank you for your question. And I kind of take it all back to the beginning of '25, and I talked about the block and tackling that was needed in the business and the block and tackling was we needed to get a very effective sales pipeline to predict in a more thoughtful way what work was in the pipeline or wasn't in the pipeline, where we needed to find more work so that we could drive growth into the business.

So the interaction around the pipeline, the institutional sales pipeline across all of the opcos on a consistent basis is now at kind of what we do day-to-day without any without any hesitation. We speak about that daily, weekly, monthly, and that will continue, and that's driven the predictability in our revenue growth. It's driven the predictability on margins and it's driven the predictability when we speak about forecasted in the business.

The second thing we implemented was really tight block and tackle oversight in the business on a weekly, monthly basis and that's allowed us to not only drive accountability. It's also allowed us to identify opportunities to do better and create more returns. So they've been the 2 operational things which will continue into perpetuity with tweaks along the way.

The third thing was capital efficiency. We were funding our fleet with all balance sheet cash year-over-year, we were cash negative, I think, 4 out of [ prior ] to 6 years. As you've seen from this year's results, we've managed to fund growth in the fleet, but use in leasing and still being able to improve margins in the base business. So those 3 block and tackling items have just become institutionalized in the last 12 months and will continue to drive growth.

Now looking forward, I think if you look at Slide 8 on actually in the deck, we've given more color around backlog pending a wallet. You can see that the shift in the amount of work we've got coming in to the fiscal 2026 year and that's continued to grow. You can have the blocks up. We were $2 billion of backlog going into '25, and we're now over $3 billion going into 2026.

And our drive now is to capture these market tailwinds in our pipeline to build up more backlog to not only do more this year, but build a bigger backlog going to $27 million. So the [indiscernible] is fundamental to being a predictable service provider, which is our desire and our commitment and then using the pipeline to continue driving growth across all our opportunities, so a lot of our businesses, such that we have a greater backlog going into '27.

And we've committed to double-digit growth year-over-year, and we still stand by that -- we believe the pipeline affords that opportunity without relying upon things we can't control like store, and we will continue to drive the businesses to at least meet that obligation commitment.

That's great color. And maybe sticking with that last point, when you talk about 2025 backlog and the bookings you've had to date this year represent 85% of the '26 base revenue. When you think about how the organization is sized today relative to that '26 base revenue, what kind of investments are you making? And if the demand backdrop supports something better than the base revenue guide, are you sized for that today? Or what kind of additional investments will be required?

I think we've got -- if you look at Slide 9 again, I'll refer back to it, we're not sized to capacity. We've got more capacity that we build, we find, we add to the organization every day of every week. I mean, what probably [indiscernible] said is the work that our resourcing teams across the nation do every year. We added over 12. In fact, it's nearly 15% head count in the last 13 months. And our desire is to continue to hire that rate or better.

That's the princesses, that's veterans coming into our veterans program. It's resourcing from parts of the country where we can see people coming out of the therein industry is cross-training, cross development. So in terms of capacity, we are -- we will commit in our guidance, a conservative level of performance that we know we can meet based upon the backlog we have, the resources we can see and have and things we can control.

We are constantly seeking to add capacity so that we can drive better margins and more volumes through the business. So there is a full potential there as our teams continue to build capacity mainly on the people side. I am less worried about fleet. We cannot play as much as we need, and we can fund it efficiently so that we're still able to generate positive cash but all the people is our focus, and we're doing a number of things, some of which I alluded to on the last call to operate as one Centuri and other individual opcos, meaning that we can have a more longer-range plan more wholesome one Centuri approach to resourcing across the entire continent. And we think we can do therefore better in terms of hiring more than 12% to 15% more head count per year.

The next question comes from [ Manish Samara ] with [ Cantor ].

Greg, I had a question for you on guidance. I just want to be very, very clear on this that I understand this right. On the base guidance that you've given, the midpoint of the gross margin is 8.2%. And I guess, including the storm, you have an EBITDA range. And I was hoping maybe if you can just kind of help us with apples-to-apples comparisons? And maybe just tell us what that gross margin would be with storms just like the way you showed it for the base guidance, just to help us out, please?

Yes. So we said in our the earnings release that the gross profit we are assuming is about 28% or it's $28 million of storm on storm revenue of about [ $88 ] million. So when you factor that in on our midpoint you'd get something higher than 8.2%. I don't have that number. I'll give you the calculation of plan. It's not meant to be critical where we are. We've given margins on store. We've given revenues on stock base upon historical averages. We've given the margins. We can very quickly just do the calculation. At the midpoint, it's about 8.8%, yes.

Okay. That's super helpful. That's the number I was sort of guesstimating, I just wanted to confirm that. I appreciate that. The other question maybe for Chris is, obviously, we talked about this huge opportunity, I think $13 billion of opportunities, I think is a fairly big number through the end of the second quarter, I think, $2 billion plus closer to $3 billion. I know, Chris, you don't talk about win rates, but how should we think about what's kind of baked into the full year guidance when you look at these opportunities, when you look at this funnel.

Manish, I could be probably a little a little bit more -- if you look at the Slide 9, and I'm you -- we told you within the slide that the amount of backlog we have and that there is a component of the -- in addition to that in the histogram of anticipated MSA renewals in 2026. And if you add the 3 blocks of that takes you to -- we don't put the exact scale in it but it takes you to about $3.2 billion of backlog for this year across the 3 categories.

And that's exactly where we sit today. So how do we do more than the $3.2 billion that secured backlog, it's very predictable. We've got a good handle on that forecast. So I think I would argue that to sit and secure as any backlog could ever be. So when the upside potential, [indiscernible] is going to come from winning new bids.

And we've added within that histogram, the work that we have currently been in addition to all that in the first quarter. What is not in there are other opportunities that will flow through the pipeline and into the bidding during the course of the remaining tenant of this year. That's super helpful.

The next question comes from Sherif El-Sabbahy with Bank of America.

I just wanted to turn to free cash flow for a moment. understand your attempt to be more capital efficient with your fleet. But what parts of working capital are limiting cash from operations flow through currently? How do you plan to improve them? And then where do you think cash from ops can go in 2026 as a percent of sales?

So from a free cash flow perspective, I mean, we've done a number of things to improve in 2025 from the fleet efficiency to the refinancing of the debt. We are still hyper focused as a team on reducing our DSO and working with our customers to build our bill fill our revenue quicker and get collected quicker. And so that is the primary focus of 2026 from a free cash flow perspective beyond the capital efficiency work that we've already discussed.

And we think we can make some pretty meaningful progress and improvement in that -- on that front. From a conversion perspective, we look at it on a free cash flow conversion of adjusted EBITDA, and we look about where our peers are. And we think on a longer-term basis, 50% conversion is where we can target.

The next question comes from [ Avi Heroic ] with UBS.

So I thought that you highlighted a fiber project for data center in the slides. Can you just remind us what the base of communications is for your business and just kind of what type of growth you're expecting to see from communications this year?

[ Ami ], thank you for the question. I think we've tried to sort of demonstrate in the illustrative diagrams in the deck and then maybe some of the talking points that we're not actually bidding very much stand-alone fiber telecoms work. There's a little bit actually not on the border in Canada.

But what we're finding is that as part of the data center scopes of work, they're rolling in the customers a number of disciplined types of work, including fiber gas connections, electrical connections, a lot of the other scopes of work, you see the illustrative. We're not building out the telecoms business within Centuri at all. It's mainly complementary to what we already do for those customers.

Okay. Understood. Appreciate that. And then just as we think about the bid work awards that you're thinking of for this year, would you expect it to have a similar revenue burn kind of phasing as the bid work that you were awarded last year? Or could we see that timing differ materially this year?

it's A very good question. I think you'll see -- I think it will be exactly the same profile or very similar of why is that? The average contract is not changing. The start of the pipeline is remaining very solid. Our teams are very much focused on booking through the 4 quarters and taking away bookings [indiscernible]. So I think the profile will look very similar to last year. I don't see any of the underlying inputs will change it materially at all.

You've got a couple of -- on the MSAs, they're slightly different but not the bid work. I think we closed out the year of 30% of the bid work went to the revenue line. If you actually go back and look at the third quarter numbers to really 9 months of the year with a higher number, so clearly, we're booking work earlier in the year. We absolutely burn it. The bid contracts we booked in the fourth quarter typically really for 2026 for the following year, which is why the percentage went down from 45% to 30%.

The next question comes from Chris Ellinghaus with Siebert Williams Shank.

Chris, when you talk about reducing the Q1 seasonality, are you trying to get smoother across the year? And in general, is the goal to make Q1 look a lot more like a traditional Q2?

The answer to the question, Chris, is our [indiscernible] it is yes. Our desire is to deliver [ 7 ] plus gross profit, 7% gross profit margin in our gas business for 4 quarters of the year. We're currently doing it in 3 quarters. And that is the driver. We absolutely -- we've had some successes on the bookings. You've seen them. We've announced them. We just need to do more. You can't do it all in the sort of 6 to 7 months that we've been working at it. So the desire is, as you stated, is to get rid of seasonality across our gas business and deliver 7% plus gross profit each quarter, the fourth quarter of the year, and that's the commitment.

Got you. What are you guys seeing? You did the acquisition towards the end of the year. What are you seeing in general in M&A? And what sort of aspirations for tuck-ins do you have at this point?

Yes. Again, I'll be pretty consistent with what you've heard from me in the past. I think we really like our platform with where we are. We've got good scale. We've got good ability to grow organically. So we're not short of scale in the business. We took in acquisitions to which you refer, again, I'll be consistent. I think we've got some white space in the Midwest, I think we could do with more capability there. That lends itself to a possible acquisition.

And I think on the transmission -- electrical transmission and to a lesser degree, the distribution. I think we do need a little bit more of a geographic presence in that end market. So that lends itself to tuck-in acquisitions. So our focus would be on finding acquisitions that could fit into those 2 needs that support the business.

Okay. Great. Vis-a-vis the data center potential, what's in your pipeline? Have you got much visibility into timing? And do you expect to have some more tangible bookings throughout 2026?

Yes. Chris, I will tell you, I need to be a bit crisper in my commentary. We're very disciplined on what we put into our sales pipeline that forms the basis of our forecasting. And when it comes to data centers, we're hyper disciplined because there are some [indiscernible] opportunities around that and really don't have funding at just developers who are trying to create an option that may never lead to sub [indiscernible].

So when I talk about data centers and the discipline, the only thing that goes into the pipeline that we follow are those data centers where we have got dialogue going with dialogue engaged with the developer or with the end user who has capital and is going to deploy capital, and it's a real project. And where we can't get that confidence, doesn't mean to say we walk away from it. It just remains as a lead within our sales pipeline with no value against it.

So there's 2 numbers I've given out like 3 [indiscernible] actually. There's about $2 billion of opportunity we see in the pipeline where we feel there's a high probability that, that will get funded, and there will be real projects, which will allow us to generate revenue a good solid higher profits from it. Of the $2 billion, $1.3 billion is rail today where we've got comfortable. Client has funded all the permits are in place and some rail contracts. We are tendering that $1.3 billion as we speak. We'd expect our fair share of bookings from that $1.3 billion in the first 6 months of the year.

Okay. That helps a lot. Lastly, in the guidance for potential storm work, that's kind of the historical norm. But you scale the nonunion side significantly. So should there be a really good storm season in some year. Is the way to think about it the potential for storm revenues has increased proportionately with your capacity? Or are you going to try to stay within some kind of range?

Go back to -- Chris, again, it's a good question. But if you just go back to the principles of how we're explaining our business and how we are driving our business. We can't control the weather, but we can control our base business and the work we do for our customers 365 days a year. The nonunion business has increased by over 50% year-over-year. The majority of those resources almost all year work on system doing the day-to-day work for our customers.

The fact that we have increased that head count in the nonunion business, doing the day-to-day services on system for our customers. If there is a weather event that gives us more upside potential for the business to generate high margins and higher revenue from storm.

Thank you. We have reached the end of the question-and-answer session. I will now turn the call over to Nate Tetlow for closing remarks. Please go ahead.

Thank you all for joining us today and for your interest in Centuri. Please feel free to reach out to me with any follow-up questions and this concludes today's call.

Thank you. Ladies and gentlemen, this is now the operator. Today's conference is scheduled. You may now disconnect the call. Thank you.

Greetings, and welcome to Centuri's Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce you your host, Nate Tetlow, Centuri's Vice President of Investor Relations. Please, you may begin.

Thank you, Olivia, and good morning, everyone.

Today, we issued and posted to Centuri 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 Izenstark, 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 earnings call. 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. While 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.

Storm 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 1. Importantly, nearly 80% of the dollar value of the bookings reflects new revenue opportunities, meaning strategic bids on new MSAs. The work includes the 9-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 sizable contract for a mechanical vapor recompression 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 1.1x 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 long-standing 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 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 '26, 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 8 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 2 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 are aiming for a 20% plus improvement in fleet efficiency through enhanced supply and pricing, improved utilization 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. These initial leases are primarily focused on equipment that we had been -- that we have had on the short-term rental agreements. We will continue to keep the market updated as we make more progress -- more significant progress on these initiatives.

Recently, in September, we completed our separation from Southwest Gas Holdings upon the closing of their sale of the remaining shares in Centuri. In conjunction with the full separation, we appointed Christopher Krummel 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 3 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 Ryan to our team.

Now over to Greg to discuss the results.

Thank you, Chris, and good morning to everyone joining us today.

Third quarter 2025 consolidated revenues totaled $850 million, a new quarterly record and was an 18% increase from Q3 2024. Consolidated gross profit was $78 million compared to $75.8 million in the prior year period, and gross profit margin of 9.2% in the third quarter of 2025 compared to 10.5% last year. When isolating our base results, the strength and growth of the business is clear, with base revenues up 25% and base gross profit up 28% compared to last year.

Base gross profit margin was 9.1% in the third quarter versus 8.9% last year. Net income attributable to common stockholders in the third quarter was $2.1 million, or $0.02 per share compared to a net loss attributable to common stockholders of $3.7 million, or $0.04 on a per share basis in the same period last year.

In the third quarter of 2025, adjusted EBITDA was $75.2 million, which compares to $78.8 million in the prior year's quarter. Adjusted net income in the third quarter came in at $16.7 million, or $0.19 on a per share basis compared to $5.3 million, or $0.06 per share in the prior year's period. The difference between our GAAP and non-GAAP adjusted net income primarily reflects the after-tax impact of amortization of intangible assets, certain non-recurring costs and non-cash stock-based compensation. Notable in Q3 2025 was $8.2 million, or $0.09 per share in charges related to the debt refinancing executed early in the quarter.

Now to our segments. U.S. Gas revenue was $412.4 million, an increase of 13% compared to the prior year. This improvement largely reflects solid growth in MSA volumes and certain bid projects, demonstrating the underlying strength of our customer relationships and market position. Gross profit margin was 7.7% in the third quarter of 2025, modestly improved over last year's 7.6% in the third quarter. We continue to focus on margin improvement and our priority continues to be centered around better contract management and operational execution.

Canadian Gas revenue was $74.2 million, up nearly 40% from the prior year period. Operational performance in this segment remains strong against the backdrop of sustained favorable demand as evidenced by the 21.9% gross profit margin in the quarter.

Union Electric revenue was $214.5 million, an increase of 25% year-over-year. Base revenue in this segment was $213 million, reflecting a 29% year-over-year increase. Growth has been fueled by robust activity in projects serving industrial end-user segments, particularly substation infrastructure and inside electric work. Gross profit margin in the Union Electric segment was 9.1% in the third quarter of 2025, slightly ahead of the third quarter of last year. Base gross profit margin improved to 9% from 8.1% last year, driven by the strong increase in project work.

Non-Union Electric revenue in the third quarter of 2025 was $149 million, an increase of 16% year-over-year. This segment is most relevant to base business comparisons as historically, a majority of storm restoration services related to this segment, including last year's very active hurricane season. Base revenue in Non-Union Electric was also $149 million in the quarter, which is a 58% increase from last year. This growth reflects the significant expansion we've seen in MSA activity, building on the momentum we discussed in recent quarters.

Gross profit margin in the Non-Union Electric segment was 7.1% in the current period compared to 16.6% in the prior year period, reflecting the just mentioned significant storm work last year. Base gross profit margin was 7.1% compared to 8.7% in the prior year period. The primary driver of margin pressure in the quarter resulted from ramping crews for new and expanding MSAs.

Specifically, headcount increased more than 20% this year to support the growth in workload. As crews gained experience and these operations mature, we expect to improve productivity, resulting in margin improvement. We have already seen margins improve in October, and we expect continued progress throughout the remainder of Q4.

Turning to capital expenditures. Net CapEx was $21.5 million, and our free cash flow in the third quarter 2025 was negative $16.3 million. Our free cash flow generation tends to be seasonal in nature, with more generation occurring in the second half of the year. With the strong growth we delivered this year, our accounts receivable balance has increased. However, this is a timing issue, and we expect this to normalize in the fourth quarter. As such, we expect to generate meaningful free cash flow in the fourth quarter.

Moving to the balance sheet. On a trailing 12-month basis, our net debt to adjusted EBITDA ratio was 3.8x at September 28, 2025, a slight uptick from 3.7x at June 29, 2025. With the anticipated step-up in fourth quarter free cash flow, we expect our year-end leverage ratio to be approximately 3.3x to 3.4x.

We ended the quarter with $16.1 million in cash and cash equivalents on our balance sheet. Early in Q3, we successfully completed a refinancing of our debt arrangements. We extended our revolver maturity to 2030 and increased the facility size to $450 million. We also extended our $800 million Term Loan B maturity to 2032 at a modestly improved interest rate.

Finally, turning to our 2025 outlook. We increased our full-year revenue guidance to $2.8 billion to $2.9 billion. The increase is consistent with the significant growth in our base business, which more than offset the lack of storm activity this year. For adjusted EBITDA, we expect between $240 million and $250 million. Again, this revision is consistent with lower forecasted storm activity, including a de minimis amount of storm work assumed in the fourth quarter.

Lastly, our net CapEx. We've maintained our planned investment range of $75 million to $90 million. We remain confident in the outlook of our base business and are making the necessary investments in a more capital-efficient manner to optimize the growth opportunities ahead of us.

I will now turn it back to Chris to wrap up our prepared remarks. Chris?

Thank you, Greg.

As we wrap up today's call, I want to emphasize that Centuri continues to execute on its strategic vision of building a premier standalone utility services company capable of delivering sustainable and profitable growth. Our third quarter results demonstrate solid progress. Base revenue growth was 25%. Base profit -- gross profit was 28%, reflecting our team's commercial drive, dedication to operational excellence and customer service.

Our commercial momentum remains robust with $3.7 billion in bookings through September, a record backlog of $5.9 billion and a total opportunity pipeline of $13 billion. Put together, our commercial success so far in 2025, it positions us well for double-digit revenue growth in 2026. The fundamental drivers supporting our business remains strong, accelerating utility infrastructure investment, the energy transition and expanding customer relationships across North America.

As we advance our comprehensive multi-year strategic planning process, we're positioning Centuri to be a differentiated leader in this significant market opportunity. We very much appreciate your time and interest today.

And operator, let's begin the Q&A.

[Operator Instructions] Your first question comes from Justin Hauke of Robert W. Baird.

Great. I appreciate the new disclosure with the base revenue and gross profit. That certainly helps. And I guess it leads to my first question is just to maybe understand the EBITDA impact from the storm because you obviously quantified it for the third quarter and gross profit. But the $15 million decline in guidance, how much of that EBITDA impact is the storm? Is that the full $15 million? And then maybe if you can quantify the impact of 3Q versus 4Q in the guide, given that there was a decent amount of storm activity last year in 4Q?

So the decline in the kind of the midpoint of the guidance is all related to storm activities. In fact, our forecasted storm activities were a bit higher, and we've actually been able to make up some of that with just our base business growth. And it was probably 60-40 from a percentage perspective between Q3 and Q4 on a storm basis, but that was our expectations, I think was your second question.

Yes, no, I just was trying to confirm that it was entirely storm and that, that was the $15 million and the split between the quarters. So yes, I think that answers it.

I guess my second question -- I got a couple here, but I guess the second one that I would just ask about would be, you called out some of the ramp in the MSA contract work that wasn't at full utilization, I guess, in the Non-Union Electric piece. And I was just hoping maybe you could quantify that impact. And would you expect in 4Q that's at full utilization? Or is that something that's going to linger as a cost until we get into '26 and kind of get the revenue contribution in line with that?

Justin, it's Chris. Let me answer that. If you just look at the process we go through, you've got to deploy capital to find opportunity, deploy capital to bid opportunity. You've then got to win it. You've then got to reposition resources. You bring in new resources. All of that sort of costs the business with no revenue contribution. You then mobilize the teams and it takes a while for them to get productive. So, I think when you've had such a massive ramp-up, I think the Non-Union business in the core is up about 50% year-over-year.

There's always going to be a little bit of a lag before you get to that level of performance you want. I actually think as we look at October and we look into November, that more or less is fully recovered. By the time we close out the year, that particular scope of work will be at the levels we expected it to be from a margin standpoint. But I would caution, we will add progressively bigger scopes of work all around the nation, and we'll have a similar phenomenon. It's just the nature of project-related business.

Your next question comes from Sangita Jain of KeyBanc Capital Markets.

So, obviously, a lot of progress on bookings and the core profits improving. Can you help us understand the difference in margins between, let's say, the data center type opportunities versus PHMSA-related work or other bid work?

How do I answer that, Sangita? I would say -- I'll let Greg talk to the general margin profile in the business across the core and the MSAs in a minute. But let me talk more specifically around what we're seeing in the pipeline, first of all, and then to data centers. We've been playing a little bit of catch-up as we've discussed on prior calls to get a sufficient amount of both backlog and coverage to be sure that we're able to grow the business at the core and not rely upon storm.

I think it's taken us to maybe the third -- getting into the third quarter to have sufficient backlog, sufficient coverage and a sufficient data set. So, we've really got a good handle on our business so that we can be predictable. We've got volume into the business, and we're basically able to recover the overhead that we need to for the size of the business. We're now coming to a point where as we look to the future and we start to look at new bid opportunities, of which -- we're looking at $2 billion at the moment. We're looking at where it makes sense to put margins up in the competitive environment.

It's more difficult on MSAs that are renewals because there's already a price expectations set with the customer, and we're able to do some things. But we are now in a position as we start to look at new market opportunities, bid opportunities, including data center work where we can put our margins up in the core of the business. And that's what we're currently doing.

It's been very difficult to do that until we have enough baseload work, until we've got enough volume into the business until we've got a good control on it. But we're now at that point where we've got full coverage for this year. So, we know exactly what work we're going to do between now and the year-end. We've got high visibility for next year, and you saw it in the coverage slide in the deck, I think it was Slide 8, if my memory is good. Our focus now is how do we put margins up and get a better return on our invested capital, simple as that.

And to follow on that, you asked about the margins kind of in our backlog. And while margins project by project might differ a little bit, I think we're very pleased with the bid margin that we're getting on the awarded work. Some of that data center-related activity is a project-based, so it's a bit higher than maybe some of the MSAs, but we're very pleased with what we're getting on award.

Great. That was very helpful. Go ahead.

Sorry, Sangita. I was just going to add one thing is even with the sort of mobilization impacts in the Non-Union business, our core margins have gone up by 0.2% over the past. And that's despite the fact we've added over $100 million of core business of revenue in the quarter. So the work we were booking in the first part of this year, which is now going to the revenue line is already proving to be more profitable and it's still at its early stages of execution.

Right, right. That was very helpful. And then just a quick follow-up. In your double-digit revenue outlook for next year that you just alluded to, is there any kind of storm that you're building in that? I know this year, it was an average of 3 years, but just wondering what you're thinking about for next year?

Sangita, I stress what we said in our text that -- in our spoken word. Storm will always be part of our business because customers want us to do storm work for them when they're in a crisis situation and with that bad weather come. Our customers want that, and the population needs that. But it's very difficult to plan because we can't predict the weather, even though we don't like to be able to do that. So, you will only hear us talk about base business, base backlog, base coverage. And if storm happens, it would be upside to what you see. It will not be in our planning purposes. And the logic being is one, it makes us more predictable.

Two is if we add more to the base in terms of people, resources and equipment, it means that if there is a storm event, we get more opportunity and upside. So, we're just going to talk about the base in terms of growth, budgeting and guidance. And we will, of course, continue to let you know what storm has happened over a trailing period of time, so you can factor that in. But coverage is all going to be around base business that we can control.

Your next question comes from Joe O'Dea of Wells Fargo.

Can you just elaborate on the strength of the base revenue growth a little bit more in the quarter when you talk about that 25%? How that compared to internal planning? Anything that you saw coming into Q3 that you thought might be in Q4 versus just a broader acceleration?

Joe, without giving you my budget sheets, I talk generally. There was no -- let me deal with the second question first. There was no desire and no attempt, and there's no underlying pull from Q4 into Q3. That's not the case at all. So it's not like we've had a -- we pulled Q4 revenue into Q3. That's not the case. The $850 million that came out of the third quarter is exactly what it is, the revenue for the quarter. So, we've not looked to highly impressed in the third quarter. We've got really good coverage in the fourth quarter, and that's why we've raised the revenue guidance. So, we expect the momentum in the fourth quarter to continue. The only thing about the fourth quarter is we've clearly got 2 holidays being Thanksgiving and the year-end, and that's really the only factor we've got.

In terms of base business performance, I think we've done better overall in our performance in the base business that we all expected and that's a good thing. And that's really driven by the success of our teams in finding the opportunity, getting the organization focused on servicing our customers and doing more for our customers that led to the backlog and has led to the revenue growth. And I think everybody has seen double-digit growth within their base businesses across all of the 4 service lines.

And we would push to continue that going into next year. But we've performed better in the base business than we may have expected. But you also remember, Joe, we've only been at this as a team for a few quarters now. We're only just seeing the benefits of the pipeline. And it's good to be impressed and good to be pleased and good to exceed your internal targets on the base business. But we're also learning and we want more out of it, and that's what we seek to do in the future.

And then how do you think about the process for prioritizing the bid opportunities in front of you when you talk about the 600 bid opportunities in the pipeline and how you think about margin as a prioritization focus versus top line growth versus where you've identified regions that you want to get bigger in? Just how all that comes together for prioritization around the bid opportunities?

Yes. That's a big question. Our number -- I think the #1 priority, I think, really rests within the gas business. We've had a fantastic quarter. We've had 2 fantastic quarters of performance in the gas business. And I think Q4 sits really well when we look at the backlog, look at the work the team has done. We've added more strength to the team, some new people. But the priority is to sort of eliminate the seasonality in the business. So, that work we are starting ahead as we come into the first quarter.

So on the gas side, the priority is winning work around the U.S. that allows us to work 24/7, 365 days a year, primarily focused on the first quarter. So, that would be number one that jumps to mind immediately because once we're able to fix the seasonality, I think the profitability across the full gas business will completely change for us.

Then when it comes to the rest, look, general principle on margins, I'll just repeat. We've now got the sales analytics. We've got the organization positioned to profitable growth. We have a very accurate data set now. We track win rates. We track margins. But we need to monitor this a little bit. We've got -- we believe we don't have a problem finding profitable growth. You've seen that in this year's performance. If you just look at where we're trending from a full-year revenue target, we put the coverage slide into the deck, I've repeated twice now. That demonstrates a further 10-plus percent just on what we know today. So, I frankly don't believe we're at that phase where we're worried about end market opportunity. So, we're going to start to prioritize and get our margins up.

We've got to be very selective how we do that because we've got some core customers that we must nurture, continue to support because they rely upon us. But there'll be new opportunities with new customers where we can afford to price it up and we may win a few, we may lose a few. But the win rates are holding good already as we come through to the end of the third -- into the fourth quarter. So, we will be sensitive to trying to put our price margin -- our price up and our margins up as we look to the next phase of our growth going into '26.

Your last question comes from Steven Fisher of UBS.

Just wanted to follow up on a few of these things, particularly starting off with U.S. Gas. And I know you said you're pleased with the result. I'm just kind of curious how the margins and the overall profits from that compared to your expectations. It sounds like it's still somewhat of a business where you're putting some focus operationally. It sounds like there is some new leadership. Where is the focus there just from a sort of an execution perspective? I know you're trying to kind of build it out regionally to reduce the cyclicality. But just operationally, where is the focus there? And how did this quarter compare to your expectations?

And then I'll ask my second question now is just with regard to the $3 billion of strategic bids, how are you thinking about the discrete overall project mix relative to sort of distribution work and MSA just kind of flow work. Where are you comfortable having discrete size project as a percentage of the overall business mix?

All right, Steve. I'll try and answer the question for you. Let me talk intimately about the gas business. I think 8 months ago, gas performance was consuming an inordinate amount of time as well as the leadership's time to sort of complete what was started last year, which was sort of simplification of the organization. The delayering that building ahead of me was much needed. There was a refocusing effort. There was some rightsizing needed to be done. There was some accountability and performance management we needed to do. And I think we've really come through that.

I think the second quarter performance did better than I expected. The third quarter performance was very predictable with the mix of work we've got. And I think we're -- I wouldn't say we've taken our foot off the gas, nor have we taken our eyes off the ball here, but the team that leads that business is really operating at steady state now. And I don't foresee anything structurally we need to do there. I think we'll well up the experience curve about how we should be operating. And I think the margins are good. I really do. I know there's a lot written about the margin should be better. But if you look at -- and we just benchmark our margins.

If you look at the margins in our gas business with the mix of work that we currently execute, we're very pleased with where the margins are. What we're not pleased with is the seasonality. And we had a negative $15 million in the first quarter this year. We've got to fix that as quick as we can. So, that remains to be a priority where we're spending our time talking to different customers and new customers and migration of customers where we know we can work in that first quarter.

The second thing I would say to you is we've -- I'm proud of the gas business. I'm proud of the gas team. And I think Dylan and his team have done a fantastic job under difficult circumstances last year going into this year. We've got it at steady state, but we needed more bandwidth in the business so that we can grow with new customers. So the logic for bringing Ryan in -- and I'll talk a bit more about that in a second. Bringing Ryan in was to bring more bandwidth to the leadership team so that we can look at things differently. We can look at pricing. We've got slightly different customers but doing the same services and really much -- and focus the business more strategically about getting margins up.

So on the gas side, very pleased where we are. The mix of work and the margins we've got are commensurate with where we are. I don't think there's going to be much that changes there. The real focus is seasonality, new customers that allow us to take the same services at higher margins. And that's why Ryan has been brought in to support the team here. So, that's where the gas business is.

Super helpful.

On the $3 billion, Steve -- on the $3 billion -- so on the last call, and Nate is probably going to tell me, I'm not totally accurate on this. But we had -- I think July 4 week, when I got that sales report, we had about $2.2 billion of opportunities that would be decided in the next 6 months. That's now the $3 billion we referred to. So, this is like-for-like over a quarter period. And so that has increased well over 40%, 45%, which tells me that the opportunities that are in the pipeline are converted to real bids because that $3 billion are either tenders we've already submitted or the tenders we're working on and we're about to submit. It's not really stuff that we'll bid in the future. It's now. Its real and now.

Of that mix, most of it is actually accretive bid work. It's about $1.7 billion, if my memory is good. And then $1.3 billion of it is really MSA renewals, most of which -- I think 85% of the $1.3 billion is MSA renewals and the other 15% are new MSAs or additive MSAs to the base business. Meanwhile, the $1.7 billion is new additive bid work that we're working on. The mix within that, I know you was going to ask me, is about 60% electrical work and 40% gas related. That's the mix.

Does that answer your question, Steve?

Yes.

We have reached the end of the question-and-answer session. I will now turn the call over to Nate Tetlow. Please continue.

Thank you all for joining the call today, and we appreciate your interest in Centuri. That concludes the call.

Ladies and gentlemen, this concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.