Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Centuri Holdings Inc (CTRI, Financial) secured more than $347 million in new awards during the third quarter, including $206 million in Master Service Agreements (MSAs) and $140 million in strategic bid awards.
- The company has successfully renegotiated 14 major supply chain contracts, achieving average discounts of approximately 7%, which is expected to generate significant cost savings.
- Centuri Holdings Inc (CTRI) is experiencing growth in its electric business, with incremental onboarding of additional electric crews and strong performance in storm restoration services.
- The company is diversifying its services, with a nearly equal split between gas and electric services, and is expanding into adjacent markets such as renewable natural gas, hydrogen, and carbon capture.
- Centuri Holdings Inc (CTRI) is focused on cost control and capital discipline, with initiatives expected to generate annualized savings of $29 million in 2025.
Negative Points
- Consolidated revenues declined by 7.1% and gross profit decreased by 13.5% compared to the same period last year, driven by lower offshore wind activity and subdued MSA spending.
- The US gas segment faced a year-over-year revenue decrease of 7.5%, with lower utilization of fixed costs and higher equipment and insurance-related costs impacting results.
- The company's backlog decreased from $4.7 billion at the end of the second quarter to $4.3 billion at the end of the third quarter, reflecting timing issues with MSA renewals.
- Net loss attributable to common stock was $3.7 million, down from net income of $16.2 million in the same period last year, impacted by operational challenges and changes in the effective tax rate.
- The offshore wind segment was affected by the cancellation of a major project, leading to a decline in revenues and contributing to the overall decrease in the Union Electric segment.
Q & A Highlights
Q: Can you explain the storm contribution versus the base business, especially with the $50 million done in Q4?
A: Paul Caudill, Interim President & CEO, explained that while they don't control storm occurrences, the $50 million figure for Q4 is accurate. The electric non-union business is seeing growth in crew numbers and work hours, which is positive for 2024 and beyond. Reduced MSA spending on the gas side was anticipated, and there are some delays in union electric bid work, but overall, they are confident in their guidance.
Q: Can you clarify the cost savings programs, specifically the $12 million annualized savings versus the $29 million expected in 2025?
A: Paul Caudill clarified that the $29 million in annualized savings announced in Q2 is related to headcount reductions, with $6.5 million recognized in Q3. The $12 million is from supply chain and fleet savings, with $10 million from capital spend reductions and $2 million from O&M costs.
Q: Can you elaborate on the differences between union and non-union electric segments and their regional exposure?
A: Paul Caudill noted that the non-union electric segment is seeing increased demand for crews from core customers, while the union segment is more bid-focused, with some delays in bid projects. Both segments are showing encouraging signs.
Q: How are you progressing with supply chain reviews, and what is the timeline for completing them?
A: Paul Caudill stated that they are making progress on supply chain renegotiations, focusing on significant agreements first. There is no specific timeline, but they aim to make progress each quarter, with benefits appearing gradually in results.
Q: How much backlog is related to offshore wind, and how might elections impact this?
A: Paul Caudill mentioned approximately $100 million in offshore wind backlog, extending into early 2026. It's too early to comment on election impacts, but they are comfortable with their strong developer relationships and first-mover advantage in the space.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
