Centuri Holdings, Inc. — Q1 2024 Form 10-Q
Business context and reporting period
Centuri provides utility infrastructure services to regulated electric and natural-gas utilities in the U.S. and Canada, with additional activity in renewable energy and other markets. The 13-week quarter ended March 31, 2024. The financial statements are for Centuri Group, Inc., Centuri Holdings’ predecessor for financial-reporting purposes; Holdings had no substantive operations at quarter-end. Results are seasonal and the first quarter is typically the lowest-revenue period.
After quarter-end, Centuri separated from Southwest Gas Holdings and completed its IPO on April 22, 2024. Its shares trade on the NYSE as CTRI.
Financial results and liquidity
| Metric | Q1 2024 | Prior comparable quarter |
|---|---|---|
| Revenue | $528.0 million | $653.3 million |
| Gross profit / margin | $13.3 million / 2.5% | $41.9 million / 6.4% |
| Operating income (loss) | $(21.9) million | $11.7 million |
| Net loss | $(25.2) million | $(7.1) million |
| Adjusted EBITDA / margin (non-GAAP) | $20.2 million / 3.8% | $49.2 million / 7.5% |
| Operating cash flow | $(22.2) million | $51.9 million |
| Capital expenditures | $30.5 million | $23.2 million |
Cash was $18.4 million at March 31, down from $33.4 million at year-end. Total debt carrying amount, including revolving borrowings and equipment loans, was approximately $1.21 billion; term-loan interest averaged 7.94%. Revolver availability, net of letters of credit, was $201.5 million. The company reported compliance with its financial covenants at quarter-end. Current assets were $613.0 million and current liabilities $440.2 million.
IPO and concurrent private-placement proceeds totaled $329.3 million net. The company used $156.0 million to repay revolver borrowings and $160.0 million to repay term debt; remaining proceeds were designated for general corporate and working-capital purposes. The filing does not provide a post-transaction debt balance.
Material changes versus the prior period
- Revenue fell 19.2%; lower activity and unfavorable winter weather affected multiple segments. Non-Union Electric revenue also declined as storm-restoration work fell to $1.8 million from $22.2 million.
- Gross margin contracted to 2.5% from 6.4%, with a U.S. Gas segment gross loss and sharply lower Non-Union Electric profitability. Management cited weaker volumes, work mix, and reduced higher-margin storm work.
- SG&A rose 21.3% to $28.6 million, including $8.3 million of strategic-review and severance costs, versus $0.2 million a year earlier. Interest expense rose 7.7% to $24.1 million, reflecting higher rates and revolver borrowings.
- Operating cash flow swung to an outflow, attributed to lower earnings and working-capital changes. Capital expenditures increased by $7.3 million.
- Reporting was reorganized into four segments—U.S. Gas, Canadian Gas, Union Electric, and Non-Union Electric—and prior-year segment data was recast.
Outlook, risks, contingencies, and unusual items
- No numerical earnings or revenue guidance is provided. Management expects sufficient liquidity for at least the next 12 months and expects continuing capital expenditures and separation-related costs through at least fiscal 2025.
- Backlog was approximately $4.8 billion at March 31, versus $5.1 billion at December 31. Much MSA work has no committed volume; projects may be delayed, changed, or cancelled. The filing reports $276.8 million of remaining performance obligations on 53 longer-duration fixed-price contracts, expected to be recognized over about two years, with timing substantially influenced by customers.
- Key risks include seasonality and weather, project and customer work mix, labor and other inflation, material and equipment availability, fixed-price cost overruns, variable-rate debt costs, customer payment and collection timing, and regulatory or project delays. One Union Electric customer represented about 13% of receivables and contract assets at quarter-end; no customer exceeded 10% of quarterly revenue.
- Outstanding performance and payment bonds were estimated at $561.3 million, with estimated costs to complete the bonded projects of $203.7 million. The company reported no known material bond-payment obligations or material claims under subsidiary guarantees. It does not believe known legal proceedings will materially affect its financial position or results.
- The company agreed to redeem the remaining 10% Linetec noncontrolling interest for $92.0 million, paid in April. Accrued redemptions and purchases of noncontrolling interests totaled $92.8 million at quarter-end and were excluded from Q1 cash flows because they were non-cash during the quarter.
- Southwest Gas Holdings retained approximately 81% ownership after the IPO. Separation agreements include allocation and indemnification provisions, tax responsibilities, and parent rights; tax liabilities and potential indemnification obligations are among the matters to monitor.
Important facts for investors to verify
- Whether lower volumes and margins improve as weather normalizes, and whether the Q1 segment declines were temporary or reflect ongoing customer and project trends.
- Post-IPO debt, interest expense, covenant headroom, and use of remaining offering proceeds; the filing does not state the post-paydown debt balance.
- Cash conversion, collection of unbilled and contract-asset balances, and the timing and funding of accrued noncontrolling-interest payments.
- Backlog conversion and exposure to customer-controlled schedules, cancellations, fixed-price contract performance, and the concentrated Union Electric receivable position.
- The effect of continuing separation costs, Southwest Gas Holdings’ control and contractual rights, and any related-party arrangements after separation.