Centuri Holdings, Inc.

05/08/2024 | Press release | Archived content

Centuri Reports First Quarter Results

PHOENIX--(BUSINESS WIRE)-- Centuri Holdings, Inc. (NYSE: CTRI) ("Centuri" or the "Company") today announced results for the first quarter, ended March 31, 2024.

Financial Highlights

  • On April 22, 2024, completed an initial public offering ("IPO") of 14.3 million shares of common stock (including the underwriters' full exercise of their over-allotment options) at a price to the public of $21.00 per share. Additionally, completed a concurrent private placement of 2.6 million shares of common stock at a price per share equal to the IPO price.
  • Total net proceeds from capital raise transactions after deducting underwriting discounts and commissions and estimated offering expenses were $329.3 million; funds were primarily used to pay down outstanding debt on our credit facility.
  • In April 2024, paid $92.0 million to acquire the remaining 10% outstanding noncontrolling interest in Linetec Services, LLC
  • Received over $40 million of new awards from existing master service agreements ("MSAs") customers supporting the work to advance critical reliability and integrity spending
  • First quarter consolidated revenue of $528.0 million
  • First quarter results include net loss attributable to common stock of $(25.1) million, adjusted net loss of $(14.4) million, and adjusted EBITDA of $20.2 million
  • First quarter results included $8.3 million of nonrecurring strategic review and severance costs

First quarter 2024 revenue was $528.0 million, compared to $653.3 million in the first quarter of 2023. Revenue was down from the previous year primarily due to unfavorable weather which drove a reduction in volumes under existing customer MSAs, as well as the timing of bid projects, and lower offshore wind and storm restoration services revenue.

Net loss attributable to common stock was $(25.1) million for the first quarter of 2024, which included nonrecurring strategic review costs and severance costs of approximately $8.3 million on a pre-tax basis, compared to $(8.8) million in the prior year period. Adjusted net loss for the first quarter of 2024 was $(14.4) million, compared to $(1.9) million in the previous year. Current year results were negatively affected due to the aforementioned factors that impacted our revenue. Adjusted EBITDA was $20.2 million in the first quarter of 2024 compared to $49.2 million in the first quarter of 2023.

"Delivering our financial results for the first time as a public company after successfully completing our IPO in April is a major milestone for the Centuri team and a reflection of our team's dedication, commitment and hard work," said Bill Fehrman, President and CEO of Centuri. "Moving past the typical seasonality experienced by our business during the first quarter of the year, we expect to continue to build on our track record of delivering consistent growth by serving our customers across the utility value chain. We are confident in Centuri's prospects to deliver value for our stockholders as a standalone company."

Centuri Group, Inc. and Subsidiaries

Supplemental Segment Data

For the Fiscal Three Months Ended

March 31, 2024 and April 2, 2023

(In thousands, except percentages)

(Unaudited)

Segment Results

Revenue

Fiscal Three Months Ended

Change

(dollars in thousands)

March 31, 2024

April 2, 2023

$

%

U.S. Gas

$

226,578

42.9%

$

259,337

39.7%

$

(32,759

)

(12.6%)

Canadian Gas

34,648

6.6%

39,303

6.0%

(4,655

)

(11.8%)

Union Electric

163,851

31.0%

205,669

31.5%

(41,818

)

(20.3%)

Non-Union Electric

96,615

18.3%

136,606

20.9%

(39,991

)

(29.3%)

Other

6,331

1.2%

12,378

1.9%

(6,047

)

(48.9%)

Consolidated revenue, net

$

528,023

100.0%

$

653,293

100.0%

$

(125,270

)

(19.2%)

Gross profit

Fiscal Three Months Ended

Change

(dollars in thousands)

March 31, 2024

April 2, 2023

$

%

U.S. Gas

$

(3,976

)

(1.8%)

$

3,366

1.3%

$

(7,342

)

(218.1%)

Canadian Gas

5,545

16.0%

4,476

11.4%

1,069

23.9%

Union Electric

11,369

6.9%

15,209

7.4%

(3,840

)

(25.2%)

Non-Union Electric

2,800

2.9%

18,487

13.5%

(15,687

)

(84.9%)

Other

(2,459

)

(38.8%)

411

3.3%

(2,870

)

NM

Consolidated gross profit

$

13,279

2.5%

$

41,949

6.4%

$

(28,670

)

(68.3%)

NM - Percentage is not meaningful

  • Revenue from our U.S. Gas segment totaled $226.6 million, reflecting a decrease of $32.8 million, or 12.6%, compared to the prior year. This decrease was primarily due to unfavorable winter weather which drove a reduction in net volumes under existing customer MSAs and timing of bid projects, as the prior year benefited from the commencement of a large project that has since been completed. As a percentage of revenue, gross profit decreased to (1.8%) in the current period from 1.3% in the prior period. Profitability was negatively affected by lower MSA volumes, unfavorable winter weather and the timing of bid projects.
  • Revenue from our Canadian Gas segment totaled $34.6 million, reflecting a decrease of $4.7 million, or 11.8%, compared to the prior year. This decrease was primarily due to a reduction in net volumes under existing MSAs. As a percentage of revenue, gross profit increased to 16.0% in the current period as compared to 11.4% in the prior period primarily due to favorable changes in mix of work.
  • Revenue from our Union Electric segment totaled $163.9 million, reflecting a decrease of $41.8 million, or 20.3%, compared to the prior year. This decrease was driven by a decline in offshore wind revenue of $12.6 million due to timing of project completion, as well as unfavorable winter weather conditions that led to a net reduction in volumes under other existing MSAs. Storm restoration services revenue for the Union Electric segment was $7.5 million for the first fiscal three months of 2024 compared to $8.3 million for the same period in 2023. As a percentage of revenue, gross profit decreased to 6.9% in the current period as compared to 7.4% in the prior period primarily due to changes in the mix of work, including less storm restoration services.
  • Revenue from our Non-Union Electric segment totaled $96.6 million, reflecting a decrease of $40.0 million, or 29.3%, compared to the prior year. This decrease was primarily driven by a $20.4 million reduction in revenue from storm restoration services ($1.8 million for the first quarter of 2024 compared to $22.2 million for the same period in 2023), as well as a decrease in volumes under existing MSAs. As a percentage of revenue, gross profit decreased to 2.9% in the current period, compared to 13.5% in the prior period. Profitability was negatively affected by unfavorable changes in mix of work, including a reduction in storm restoration services revenue, which typically generates a higher profit margin than core infrastructure services, and lower MSA volumes.

Conference Call Information

Centuri expects to hold its inaugural earnings conference call concurrent with the planned release of its second quarter 2024 financial results in August 2024. Additional information will be released closer to that time.

About Centuri

Centuri Holdings, Inc. was formed for the purpose of completing an IPO and other related transactions in order to carry on the business of Centuri Group, Inc., its predecessor for financial reporting purposes. Centuri Group, Inc. is a strategic utility infrastructure services company that partners with regulated utilities to build and maintain the energy network that powers millions of homes and businesses across the United States and Canada.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can often be identified by the use of words such as "will," "predict," "continue," "forecast," "expect," "believe," "anticipate," "outlook," "could," "target," "project," "intend," "plan," "seek," "estimate," "should," "may" and "assume," as well as variations of such words and similar expressions referring to the future. The specific forward-looking statements made herein include (without limitation) statements regarding our confidence in our prospects to deliver value for our stockholders as an independent standalone company; our expectation to continue to build on our track record of delivering consistent growth by serving our customers across the utility value chain; our estimation of offering expenses, which impact the net proceeds from our IPO; and our expectation to hold our first earnings conference call when announcing our results for the second quarter of 2024. A number of important factors affecting the business and financial results of Centuri could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, capital market risks and the impact of general economic or industry conditions. Factors that could cause actual results to differ also include (without limitation) those discussed in Centuri's filings filed from time to time with the SEC. The statements in this press release are made as of the date of this press release, even if subsequently made available by Centuri on its website or otherwise. Centuri does not assume any obligation to update the forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.

Non-GAAP Measures

We prepare and present our financial statements in accordance with GAAP. However, management believes that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Loss, all of which are measures not presented in accordance with GAAP, provide investors with additional useful information in evaluating our performance. We use these non-GAAP measures internally to evaluate performance and to make financial, investment and operational decisions. We believe that presentation of these non-GAAP measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparisons of results. Management also believes that providing these non-GAAP measures helps investors evaluate the Company's operating performance, profitability and business trends in a way that is consistent with how management evaluates such matters.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (i) non-cash stock-based compensation expense, (ii) strategic review costs, and (iii) severance costs. Adjusted EBITDA Margin is defined as the percentage derived from dividing Adjusted EBITDA by revenue.

Adjusted Net Loss is defined as net loss adjusted for (i) strategic review costs, (ii) severance costs, (iii) amortization of intangible assets, (iv) non-cash stock-based compensation expense and (v) the income tax impact of adjustments that are subject to tax, which is determined using the incremental statutory tax rates of the jurisdictions to which each adjustment relates for the respective periods.

Using EBITDA as a performance measure has material limitations as compared to net loss, or other financial measures as defined under GAAP, as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and amortization are necessary elements of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net loss. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net loss in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis.

As to certain of the items related to Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Loss: (i) non-cash stock-based compensation expense varies from period to period due to changes in the estimated fair value of performance-based awards, forfeitures and amounts granted; (ii) strategic review costs related to the separation of Centuri are non-recurring; and (iii) severance costs relate to non-recurring restructuring activities. Because EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Loss, as defined, exclude some, but not all, items that affect net loss, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net loss, and information reconciling the GAAP and non-GAAP financial measures, are set forth below.

Centuri Group, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

For the Fiscal Three Months Ended

March 31, 2024 and April 2, 2023

(In thousands)

(Unaudited)

Fiscal Three Months Ended

March 31, 2024

April 2, 2023

Net loss

$

(25,233

)

$

(7,105

)

Interest expense, net

24,099

22,376

Income tax benefit

(20,773

)

(4,208

)

Depreciation expense

27,651

31,203

Amortization of intangible assets

6,668

6,667

EBITDA

12,412

48,933

Non-cash stock-based compensation

(588

)

144

Strategic review costs

3,877

91

Severance costs

4,471

69

Adjusted EBITDA

$

20,172

$

49,237

Adjusted EBITDA Margin (% of revenue)

3.8

%

7.5

%

Fiscal Three Months Ended

March 31, 2024

April 2, 2023

Net loss

$

(25,233

)

$

(7,105

)

Strategic review costs

3,877

91

Severance costs

4,471

69

Amortization of intangible assets

6,668

6,667

Non-cash stock-based compensation

(588

)

144

Income tax impact of adjustments(1)

(3,607

)

(1,743

)

Adjusted net loss

$

(14,412

)

$

(1,877

)

(1)

Calculated based on a blended statutory tax rate of 25%.

Centuri Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Fiscal Three Months Ended

March 31, 2024 and April 2, 2023

(In thousands, except per share information)

(Unaudited)

Fiscal Three Months Ended

March 31, 2024

April 2, 2023

Revenue, net

$

504,745

$

624,489

Revenue, related party

23,278

28,804

Total revenue

528,023

653,293

Cost of revenue (including depreciation)

492,853

584,115

Cost of revenue, related party (including depreciation)

21,891

27,229

Total cost of revenue

514,744

611,344

Gross profit

13,279

41,949

Selling, general and administrative expenses

28,550

23,539

Amortization of intangible assets

6,668

6,667

Operating (loss) income

(21,939

)

11,743

Interest expense, net

24,099

22,376

Other (income) expense, net

(32

)

680

Loss before income tax benefit

(46,006

)

(11,313

)

Income tax benefit

(20,773

)

(4,208

)

Net loss

(25,233

)

(7,105

)

Net (loss) income attributable to noncontrolling interests

(175

)

1,739

Net loss attributable to common stock

$

(25,058

)

$

(8,844

)

Loss per share attributable to common stock:

Basic

$

(242,060

)

$

(85,433

)

Diluted

$

(242,060

)

$

(85,433

)

Shares used in computing earnings per share:

Weighted average basic shares outstanding

0.1

0.1

Weighted average diluted shares outstanding

0.1

0.1

Centuri Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

March 31,

2024

December 31,

2023

ASSETS

Current assets:

Cash and cash equivalents

$

18,405

$

33,407

Accounts receivable, net

279,406

335,196

Accounts receivable, related party, net

8,409

12,258

Contract assets

254,369

266,600

Contract assets, related party

3,461

3,208

Prepaid expenses and other current assets

48,951

32,258

Total current assets

613,001

682,927

Property and equipment, net

537,682

545,442

Intangible assets, net

361,911

369,048

Goodwill, net

373,646

375,892

Right-of-use assets under finance leases

41,089

43,525

Right-of-use assets under operating leases

117,827

118,448

Other assets

74,150

54,626

Total assets

$

2,119,306

$

2,189,908

LIABILITIES, TEMPORARY EQUITY AND EQUITY

Current liabilities:

Current portion of long-term debt

$

42,770

$

42,552

Current portion of finance lease liabilities

11,092

11,370

Current portion of operating lease liabilities

19,940

19,363

Accounts payable

114,613

116,583

Accrued expenses and other current liabilities

238,134

187,050

Contract liabilities

13,648

43,694

Total current liabilities

440,197

420,612

Long-term debt, net of current portion

1,021,318

1,031,174

Line of credit

125,229

77,121

Finance lease liabilities, net of current portion

21,670

24,334

Operating lease liabilities, net of current portion

104,110

105,215

Deferred income taxes

134,939

135,123

Other long-term liabilities

69,564

71,076

Total liabilities

1,917,027

1,864,655

Temporary equity:

Redeemable noncontrolling interests

4,511

99,262

Equity:

Common stock, $0.01 par value, 1,000 shares authorized, and 103.52 shares issued and outstanding

-

-

Additional paid-in capital

373,351

374,124

Accumulated other comprehensive loss

(6,568

)

(4,025

)

Accumulated deficit

(169,015

)

(144,108

)

Total equity

197,768

225,991

Total liabilities, temporary equity and equity

$

2,119,306

$

2,189,908

Centuri Group, Inc. and Subsidiaries

Condensed Statements of Cash Flows

For the Fiscal Three Months Ended

March 31, 2024 and April 2, 2023

(In thousands)

(Unaudited)

Fiscal Three Months Ended

March 31, 2024

April 2, 2023

Cash flows from operating activities:

Net loss

$

(25,233

)

$

(7,105

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation

27,651

31,203

Amortization of intangible assets

6,668

6,667

Amortization of debt issuance costs

1,318

1,260

Non-cash stock-based compensation expense

(588

)

144

Gain on sale of equipment

(944

)

(661

)

Amortization of right-of-use assets

5,100

3,712

Deferred income taxes

(1,600

)

(5,267

)

Changes in assets and liabilities, net of non-cash transactions

(34,585

)

21,925

Net cash (used in) provided by operating activities

(22,213

)

51,878

Cash flows from investing activities:

Capital expenditures

(30,499

)

(23,237

)

Proceeds from sale of property and equipment

1,624

2,666

Net cash used in investing activities

(28,875

)

(20,571

)

Cash flows from financing activities:

Proceeds from line of credit borrowings

55,896

8,137

Payment of line of credit borrowings

(5,931

)

(71,017

)

Principal payments on long-term debt

(10,557

)

(13,207

)

Principal payments on finance lease liabilities

(2,914

)

(3,056

)

Redemption of redeemable noncontrolling interest

(37

)

-

Other

(173

)

(213

)

Net cash provided by (used in) financing activities

36,284

(79,356

)

Effects of foreign exchange translation

(198

)

104

Net decrease in cash and cash equivalents

(15,002

)

(47,945

)

Cash and cash equivalents, beginning of period

33,407

63,966

Cash and cash equivalents, end of period

$

18,405

$

16,021

For Centuri investors, contact:

(623) 879-3700

[email protected]

For Centuri media information, contact:

Jennifer Russo

(602) 781-6958

[email protected]

Source: Centuri Holdings, Inc.