Q3 2025 Everus Construction Group Inc Earnings Call

Speaker #3: Ladies and gentlemen , thank you for standing by . My name is Christa , and I will be your conference operator today at this time , I would like to welcome everyone to the Everest third Quarter 2025 earnings Conference call .

Speaker #3: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Speaker #3: If you would like to ask a question , simply press star followed by the number one on your telephone keypad . And if you'd like to withdraw that question again , press star one .

Speaker #3: Thank you . I would now like to turn the conference over to Paul Bartlett . Please go ahead .

Speaker #4: Thank you . Good morning , everyone , and welcome to Everus Construction Group, Inc. third quarter 2020 results conference call . Leading the call today are CEO Jeff Seed and CFO Max Marci .

Speaker #4: We issued a news release yesterday detailing our third quarter 2025 operational and financial results . This release and the accompanying presentation materials are publicly available on the website at investors Comm .

Speaker #4: I would like to remind you that management's commentary and responses to questions on today's conference call may include forward looking statements which , by their nature , are uncertain and outside of the company's control .

Speaker #4: Although these forward looking statements are based on management's current expectations and beliefs , after results could differ materially . For a discussion of some of the factors that could cause actual results to differ , please refer to the risk Factors section of our latest filings with the SEC .

Speaker #4: Additionally , please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday and the impending of today's presentation .

Speaker #4: Today's call will begin with prepared remarks from Jeff , who will provide a brief review of our recent business performance , followed by financial update from Max .

Speaker #4: At the conclusion of these prepared remarks , we will open the line for your questions . With that , I'll turn the call over to Jeff .

Speaker #4: Thank you , Paul , and good morning to everyone joining us today . We are very excited to be here with you all as we report our third quarter 2025 results .

Speaker #4: It is hard to believe it has been almost exactly one year since we reported our first quarterly results as a standalone public company.

Speaker #4: It has been a tremendous year and I'm extremely proud of our team and everything we have accomplished . We have a team of top industry talent , and Everest is well positioned for many more years of success .

Speaker #4: During our call today , I will provide a brief overview of our results and highlight some of our key accomplishments against our strategic priorities .

Speaker #4: Before I turn it over to Max for his financial review . Beginning with slide four , I'm pleased to report that we delivered another quarter of exceptional financial performance , demonstrating the strength of our business model and our outstanding execution capabilities .

Speaker #4: I'm incredibly proud of our employees across the organization , whose dedication , skill , and hard work enabled us to generate , record quarterly revenue , net income , and EBITDA for the third quarter .

Speaker #4: Revenue increased 30% from the prior year period , driven by continued strength in our electrical and mechanical segment , including sustained momentum in our data center submarket .

Speaker #4: Our strong revenue growth was complemented by excellent margin performance . Third quarter EBITDA increased 37% from the prior year period , driven by our revenue growth and solid execution .

Speaker #4: As a result , our EBITDA margin was up 50 basis points . Our team's ability to execute complex projects while maintaining our high standards of safety and quality .

Speaker #4: Continues to set us apart in the marketplace . Our total backlog at the end of the third quarter was $2.95 billion , up 2% from the same period last year and up 6% from the end of 2020 .

Speaker #4: For this is solid growth , given our record third quarter revenue performance , the strength of our backlog reflects our established reputation as a trusted partner for the most complex and demanding projects in our industry .

Speaker #4: Our clients continue to turn to us because they know we have the expertise , resources and track record to deliver exceptional results on schedule and within budget .

Speaker #4: This trust translates into repeat business and long term relationships that form the foundation of our sustained growth . Looking ahead , I'm confident in our ability to continue building this backlog momentum .

Speaker #4: The underlying demand drivers across our key markets remain robust, and our competitive positioning has never been stronger. We are seeing healthy pipeline activity, and we will remain disciplined in our approach to project selection, focusing on opportunities that align with our strategic objectives and offer attractive returns.

Speaker #4: I would now like to spend a few minutes discussing some of the trends in our key markets. We remain encouraged by the favorable trends in our TAD business, where strong spending plans by many of our key customers continue to drive our momentum.

Speaker #4: We think our recent revenue results are largely a timing issue , as evidenced by our year to date backlog growth . Our utility customers are accelerating their infrastructure programs , and we're actively evaluating a healthy pipeline of opportunities that positions us for continued growth in this segment .

Speaker #4: The broader context driving this momentum cannot be overstated . The United States faces an unprecedented need for power transmission , infrastructure upgrades driven by projected load growth from multiple sources , including data centers , electric vehicle adoption , industrial reshoring , undergrounding and the ongoing energy transition .

Speaker #4: This creates a multiyear tailwind that we believe will sustain demand for our specialized services well into the future . As we evaluate larger projects , we will remain disciplined in our approach , carefully considering each opportunity against our strategic criteria and risk parameters .

Speaker #4: This measured approach ensures that we're selecting projects that align with both our growth objectives and our commitment to operational excellence . Looking at our data center submarket , we continue to experience very strong demand with no signs of weakening .

Speaker #4: And urgency around data center infrastructure development seems to only have intensified our deep involvement in long term planning , with key customers . Provides us with visibility into future projects and revenue opportunities .

Speaker #4: From a competitive standpoint , we've strategically positioned ourselves in key geographic locations for data center development . Is active . We've established ourselves as one of the select few service providers in the industry , with the proven track record , technical expertise , and skilled workforce necessary to successfully execute these increasingly complex jobs .

Speaker #4: Data center projects demand precision , reliability , and the ability to work within extreme , tight tolerances . Requirements that play directly into our core strengths .

Speaker #4: Additionally, opportunities in our industrial end market continue to provide work opportunities for us. We are expanding our offering into other regions of the country to build upon our expertise.

Speaker #4: We have recently started work outside of our core geography at a semiconductor manufacturing facility . We believe more opportunities like this will come as we execute successfully .

Speaker #4: Now let me shift gears a bit and provide a quick update on some of our key accomplishments during the quarter . Regarding our forever strategy , which continues to serve as the foundation for our sustainable growth and competitive differentiation , the cornerstone of our long term success is our people .

Speaker #4: During the third quarter , we maintained our focus on attracting and retaining key talent , and I'm proud of our ability to secure and develop qualified labor in support of our strong top line results .

Speaker #4: Our ability to grow our employee base is critical to supporting our growth objectives and enabled us to generate nearly $1 billion in revenue during the third quarter.

Speaker #4: What makes me particularly proud is not just our success in attracting new talent, but our continued focus on developing and retaining our existing workforce.

Speaker #4: We've invested significantly in training programs , career development pathways and competitive compensation packages that recognize the value our skilled craftspeople bring to our organization .

Speaker #4: In an industry where skilled labor is increasingly scarce and competition for top talent is intense . Our ability to both attract and retain the best people in the business gives us a sustainable , competitive advantage .

Speaker #4: We had another quarter of efficient execution , which once again positively impacted results during the quarter . This is a direct reflection of our tremendous team throughout the organization .

Speaker #4: We had favorable variances and project pull forward across certain large projects that were spread across multiple end markets , highlighting the strength and depth of our team .

Speaker #4: Our focus on project selection , bidding , discipline , training , safety and execution are core to everything that we do . We are extremely proud of our track record of superior execution and work every day to maintain our success .

Speaker #4: In summary, I'm extremely proud of our third quarter results and everything we have accomplished in our first year as a standalone company.

Speaker #4: We are excited about the opportunities ahead and expect ongoing strong momentum into 2026 . While we continue to execute on our forever strategic priorities .

Speaker #4: With a focus on providing long term value to our shareholders . With that , I'll turn it over to Max . Thank you , Jeff , and good morning , everyone .

Speaker #4: I will provide additional details on the quarter , give an update on our liquidity and balance sheet , and wrap up with our guidance .

Speaker #4: Beginning on slide ten . In today's presentation , revenues for the third quarter were $986.8 million , an increase of 30% compared to the same period last year .

Speaker #4: The increase was driven by strong growth in N.M. , where revenue increased 43% versus last year . Total EBITDA was $89 million during the third quarter , an increase of 37% from the same period last year .

Speaker #4: That was driven by solid revenue growth and increases in segment level margins in both N.M. and T&E , including continued strong project execution .

Speaker #4: Our stand up cost continued to trend in line with our expectation for full year run rate , incremental costs of $28 million . As a result , our third quarter EBITDA margin was 9% , up 50 basis points from 8.5% in the prior year period .

Speaker #4: At September 30th , total backlog was 2.95 billion , up 2% from September 30th , 2020 . For . Even while we had a strong revenue , burn during the current quarter , our T&E backlog was up 19% from last year due to increases in the utility and market .

Speaker #4: Specifically , undergrounding and substation work . While our E backlog was relatively consistent , reflecting the strong revenue burn during the quarter , we remain confident in our ability to generate continued backlog growth .

Speaker #4: Our orders during the quarter were strong , and bidding activity remains healthy across most of our key markets , including commercial , industrial and utility .

Speaker #4: Now turning to our segment results . Let's first look at A&M , where our third quarter revenues increased 43% to $767.3 million . The increase was driven primarily by growth in our commercial and renewables markets .

Speaker #4: With the continued strength in our data center submarket once again , a key driver . Our E and M EBITDA was $66.9 million in the third quarter .

Speaker #4: An increase of 64% compared to last year . The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficiency gains on certain projects across several end markets , partially offset by higher SG&A expenses as a result , our INM segment EBITDA margin was 8.7% , up 110 basis points compared to 7.6% in the third quarter of 2020 .

Speaker #4: For our third quarter , TD revenues were $223.4 million , down modestly from $228.5 million last year , driven by growth in the transportation market , offset by a modest decline in utility .

Speaker #4: While our T&E revenues were down nominally . We attribute this mostly to timing and less storm work . We remain encouraged by the broader demand trends , as evidenced by the recent momentum in our T&E backlog .

Speaker #4: We continue to see strong opportunities across our long term customer relationships and are confident in the growth outlook heading into 2026 . TMD segment EBITDA increased 11% to $33.8 million in the third quarter , driven primarily by higher gross margin due to solid project execution and more favorable product mix .

Speaker #4: As a result , TMD segment EBITDA margin was 15.1% , up 180 basis points compared to 13.3% in the same period last year .

Speaker #4: Turning now to our balance sheet and liquidity . As of September 30th , we had 129.9 million of unrestricted cash and cash equivalents , $288.7 million of gross debt , and $207.4 million available under the credit facility , net of $17.6 million of standby letters of credit .

Speaker #4: Net leverage , defined as net debt to trailing 12 month EBITDA , was approximately 0.5 times operating cash flows were $108.6 million for the first nine months of 2025 , up from $82.7 million in the same period last year .

Speaker #4: Driven by our strong operating results , partially offset by changes in working capital to support our revenue growth . CapEx was $42.1 million for the first nine months of 2025 , up from $34.5 million in the first nine months of last year .

Speaker #4: The increase in CapEx reflects our strategy to increase investments that support our organic growth, including the purchase of our new prefab facility.

Speaker #4: We discussed in the first quarter , as well as additional vehicle and equipment purchases and T&E to support the growth of our business .

Speaker #4: We continue to expect CapEx for 2025 to be in the range of 65 to $70 million . We generated a free cash flow of $74.8 million for the nine months ended September 30th , 2025 , up from $57.8 million last year .

Speaker #4: Wrapping up with guidance . We are very pleased with our strong results for the first nine months of the year , which reflect the attractive demand drivers in our business .

Speaker #4: Excellent project execution and the pull forward of revenues and profits on certain projects based on our elevated backlog position and strong business momentum balanced against our typical fourth quarter seasonality , we expect a solid finish to the year .

Speaker #4: As a result of these factors , we are raising our 2025 guidance . We are now forecasting revenues for the full year in the range of 3.55 to $3.65 billion , which is up from our prior range of 3.3 to $3.4 billion .

Speaker #4: And we now expect EBITDA in the range of 290 million to $300 million , up from 240 to $255 million previously . At the midpoint of our updated range , our revenue and EBITDA forecasts represent growth of 26% and 40% , adjusted for the incremental standalone costs versus the prior fiscal year .

Speaker #4: Our revised guidance implies a fourth quarter EBITDA margin below our year to date EBITDA margin . As we have discussed in recent calls .

Speaker #4: And again this quarter , we have benefited from some very strong execution during fiscal 2025 with a few jobs where we recognized meaningful upside at this point , we believe our fourth quarter projected margin is a good starting point for our 2026 outlook .

Speaker #4: We will , of course , continue to strive for execution , upside , but that is not our baseline assumption as we start a year .

Speaker #4: Overall , we are very proud of our strong performance through the first three quarters of the year , and we are extremely excited by the trends in our core markets and the momentum in our business , our backlog remains at elevated levels , which provides a degree of visibility into revenue expectations for 2026 .

Speaker #4: And we feel confident in our ability to deliver on our long term financial targets . That completes our prepared remarks . Operator . We are now ready for the question and answer portion of the call .

Speaker #3: Thank you . If you would like to ask a question , please press Star One on your telephone keypad to raise your hand and join the queue .

Speaker #3: And if you would like to withdraw that question again , press star one . We also ask that you limit yourself to one question .

Speaker #3: For any additional questions , please Requeue . Your first question comes from Ian Zaffino with Oppenheimer . Please go ahead .

Speaker #5: Migrate . Thank you very much . You very good quarter . Congratulations . Thank you . You know , question would be on margins .

Speaker #5: And how do we think about margins going forward . You know I know initially there was talk about not getting so much margin expansion going forward .

Speaker #5: Or maybe just kind of leveraging some of the cost structure . But we're actually seeing some some really nice margin improvement in this quarter .

Speaker #5: You know , how sustainable is this . And how have you kind of rethought maybe the potential margins that you guys could eventually reach .

Speaker #5: Thanks .

Speaker #4: Yeah , thanks for the question , Ian . Our execution upside is really hard to forecast . And when things go right , most things on projects that we do , we have that uplift .

Speaker #4: We certainly strive to execute well as we have for many years through our repeatable playbook and this fiscal year , we saw really strong execution benefits more than in previous years .

Speaker #4: The upside in margins is not always possible when we've got labor , materials and schedules all lining up for us to be able to perform .

Speaker #4: We'll continue to to focus on margin uplift on our projects going forward .

Speaker #5: Okay , thanks . And then maybe as a follow up on the on the data center side , can you maybe talk about , you know , what regions or where you're seeing particular strength ?

Speaker #5: You know , also as far as your inbound , you're getting and then and then also maybe can you talk about the timeline for delivering some of these larger projects ?

Speaker #5: I mean , are you still kind of seeing them come into the backlog earlier ? And how do you think about that just in general ?

Speaker #5: Thanks .

Speaker #4: Certainly , we've got quite a few data center projects in the Upper Midwest part of the country . Also in the Midwest and the southwest and the Pacific Northwest .

Speaker #4: Those are our primary regions where we're doing data center work . And we've been asked to go to other regions as well . The data center work is real important part of our business .

Speaker #4: As you've seen , it's grown and our our revenue , but also in our backlog .

Speaker #5: Okay . Thank you very much . Great quarter .

Speaker #3: Your next question comes from the line of Brent Thielman with D.A. Davidson . Please go ahead .

Speaker #6: Hey , great . Thanks . Good morning , Jeff and Mac . I mean , look , you've got a morning , you've got a year here of pretty tremendous organic growth , kind of 25% or more .

Speaker #6: And on the other side , you know , bookings have been , you know , are inherently lumpy . But year to date you're sort of pacing what you did last year , backlog kind of more flattish , albeit at elevated levels .

Speaker #6: And I guess in that context . And to the extent that you can provide maybe some high level views around next year , I mean , can you do you still expect to be able to grow the business organically off this this really great year with all that you see in front of you ?

Speaker #6: I think would be just kind of helpful to give us a sense of what the starting point could be .

Speaker #4: Yeah . Thanks for the question , Brent . We're still seeing a very strong demand for the services that we provide . And and as you know , backlog in our business can be lumpy .

Speaker #4: Now , our ability to secure the backlog is is strong . And we'll continue to get the backlog that's going to support the growth of our business .

Speaker #4: And we're looking at our diversified end markets and our submarkets and try to navigate through any cyclicality . And we do that by being anticipatory , close communication with our operating companies .

Speaker #4: And of course , being disciplined in our project selection .

Speaker #6: Okay . Thank you .

Speaker #3: Your next question comes from the line of Brian Brophy with Stifel . Please go ahead .

Speaker #7: Thanks . Good morning everybody . Congrats on the nice quarter last quarter . You guys talked about . Having yeah last quarter you guys talked about having several projects in the pre-construction phase .

Speaker #7: And electromechanical . Is that still the case or did many of those projects convert into backlog this quarter ? Thanks .

Speaker #4: Yeah . We've seen an increase in large scale projects . We talked about previously that our revenue is divided up into the third to third or the third .

Speaker #4: But if you take a look at the large and mega projects , that is increased . So the projects that we have in pre-construction , they sometimes extend , as we've seen in the past , but also we've had some projects that came forward where the material , the labor and all the decisions and constructability reviews were completed earlier .

Speaker #4: So that contributed to our pull forward . So we're very excited about our ability to position ourselves for additional work and and create the backlog to support our growth .

Speaker #4: Max , you want to add to that ? Yeah . So , Brian , I would say yes , some some of those projects that were in early phases , did you accelerate and help us deliver some solid revenue this quarter ?

Speaker #4: So some of those convertible , we also still have a lot of projects in the kind of pre-construction early construction phases , which help us , you know , get some visibility into next year .

Speaker #7: Yeah , that's great . Appreciate it . And then I guess one other one for me , obviously there's been headlines around foot traffic slowing down in Vegas , I guess .

Speaker #7: Can you talk about what you're seeing in that local market . How have conversations with some of your customer base been going there as it relates to activity over the next year or so ?

Speaker #7: And then I guess , related , I'm assuming there was some sort of seasonal or theoretical slowdown there . Can you help us understand your ability to work through that , given the ability of the workforce and obviously the strength we're seeing in other end markets like data centers , or is a slowdown kind of like late 23 , early 24 a possibility , or how do you feel about your ability to move around resources if needed ?

Speaker #7: Thanks .

Speaker #4: Yeah , thanks for the question . We've got four great companies in the Las Vegas market , and we're very well positioned to do hospitality work .

Speaker #4: Nevertheless , we've diversified those businesses . We're doing data center work in Las Vegas . We're also doing correctional institutional work , and we've pivoted with some of our resources to other parts of the country .

Speaker #4: And we've moved data center talent down to Arizona . And also to the northern part of Nevada to be able to capitalize on our expertise in building data centers .

Speaker #4: So we're diversified . We're in a really good position for the projects that are available , and our work that we have this year in 2025 for Las Vegas is up over the prior year .

Speaker #4: And if you look at our our backlog in hospitality and of course , data center , those are up since the end of last year .

Speaker #4: Yeah . So Brian , I just add I mean , you know , we are a premier operator in that Vegas market , right ?

Speaker #4: And we will continue to be a premier operator . I think we we saw the slowdown from like 22 to 24 . And now we're , we're seeing some opportunities in 25 , as we've been talking about .

Speaker #4: But the important part, which you asked about, is the diversification, right? So we're a premier operator in the hospitality space, but we'll also be a premier operator outside of that, including data centers and other markets.

Speaker #4: So we feel we feel good about our , our , our positioning . There .

Speaker #7: Appreciate it . I'll pass it on .

Speaker #3: Again , if you would like to ask a question , please press star One on your telephone keypad . Your next question comes from the line of Chris Senik with Wolfe Research .

Speaker #3: Please go ahead .

Speaker #8: Hi , guys . Good morning . Great quarter with in INM . Could we unpack some of the data center and market revenue in terms of thinking about how that's progressed over the years , over the year ?

Speaker #8: I guess meaning , has anything changed in terms of the mix or size or length or timing ? Of the contracts or customer demands or even potentially geography that might change how we should model this business and INM as we as we think about things forward .

Speaker #4: I appreciate the question . Data centers have become a very big part of our business . It's in our commercial end market , and it's also the largest part of our backlog .

Speaker #4: And we're getting that work because of our relationships that are based upon our execution and the available labor and management to be able to accomplish those jobs .

Speaker #4: So we're still seeing a very strong demand in that market . Nevertheless , we try to keep ourselves diversified and capitalize on the hot markets , but also be anticipatory and cross-train our people so we can capture additional work .

Speaker #4: You know, should that market cool, but we're not seeing that. We're seeing a very long runway on data center opportunities, and we're very well positioned in the markets that we serve.

Speaker #4: And when it makes sense , we will travel and and meet the demands of our customers request to do projects outside of our core markets .

Speaker #8: And then in terms of where that business is today versus , let's say , the start of the year , there's been a gradual acceleration of of conversations and , and bidding and things of that nature .

Speaker #8: Is it sort of been up and to the right like , like many of the stocks in the space , or has that been more lumpier than , than what we might think in terms of the , the pace in that business , in terms of conversations ?

Speaker #4: It's grown . It's grown for us , and we continue to see that as an opportunity going into next year .

Speaker #8: Gotcha. And then, totally separately, leveraging down around 0.5 net leverage. I know Tim's now on board, leading corporate strategy. Can you remind us and update us on how you're evaluating M&A opportunities?

Speaker #8: What opportunities look like out there , areas that would be adjacent or how to think about the pace and scale of potential deployment of the the excess capital , if you will .

Speaker #4: And the strength of our balance sheet is putting us in a good position to be able to do a meaningful acquisition . And earlier this year , we added to our corporate development team .

Speaker #4: So, we're really excited about continuing to be very active in the M&A space. We see more opportunities than we did a year ago.

Speaker #4: Our funnel is broader and deeper , and if you think about our strategic priorities , to be able to get the right company and the right location for the right price , that's something that we're spending a lot of time and effort in and working on .

Speaker #4: We want a company that's going to have high integrity . Of course , also provide the same or similar services to what we currently do .

Speaker #4: And provide that geographical expansion in both the T and D segment . And also the electrical and mechanical segment .

Speaker #8: Okay . Great . Thanks for taking my questions .

Speaker #3: That does conclude our question and answer session . I will now turn the conference back over to Jeff Thiede for closing comments .

Speaker #4: Thank you . Operator . And thank you all again for joining us today . We are very excited about the opportunities ahead for Everest , and we're confident that we have the right strategy in place and the right team to execute on our plan .

Speaker #4: We will be attending several investor events during this quarter , including the Baird Industrial Conference in Chicago , the Oppenheimer Industrial Summit . The Jefferies , NC conference and the Goldman Sachs Energy Conference in Miami .

Speaker #4: If we are not able to connect during the quarter , we look forward to speaking with you on our next quarterly earnings call .

Speaker #4: Thank you for your time and interest in Everest . This concludes today's call .