Centuri (CTRI) Q2 FY26 earnings call: guidance and Q&A

Centuri completed the tuck-in acquisition of JJ White, a union industrial, mechanical, and electrical maintenance and construction services provider with approximately 1,000 employees. This acquisition, integrated into the Riggs Distler business, adds scale and in-plant construction expertise, particularly in data centers, across the Northeast and Midwest. The total cash consideration was approximately $62 million, funded from existing balance sheet liquidity, with no expected change to the year-end leverage target of 2x. JJ White is expected to contribute over $20 million in gross profit on a full-year annualized basis, with synergies focused on operational capability and capacity rather than cost.

The company continues to experience strong demand in its core and adjacent end markets. Second quarter bookings were nearly $850 million, bringing year-to-date bookings to over $2.2 billion, resulting in a year-to-date book-to-bill ratio of 1.3x. The opportunity pipeline has expanded to approximately $16 billion, a 23% increase from Q1, with nearly 700 differentiated bid opportunities. Outstanding bids pending at the end of Q2 totaled $2.5 billion, a 15% increase from Q1, with over two-thirds from the Electrical segment. Bid margins have increased by more than 10% year-over-year, aligning with long-term targets.

Centuri secured its largest data center project, a $125 million award for electrical infrastructure and utility for a multi-building campus, demonstrating its capability in complex, value-added contracts. The data center demand remains robust and attractive, with approximately $2 billion of data center opportunities in the pipeline at quarter-end. The acquisition of JJ White is expected to further increase data center backlog and pipeline opportunities, reinforcing Centuri's position in this growing market.

To support customer demand and sustained growth, Centuri organically added approximately 1,700 employees in the first half of the year, representing an 18% growth in headcount. The U.S. Gas business alone saw a 25% increase with over 1,200 new employees, aimed at mitigating seasonality and expanding gross margins. These capacity investments, while reducing Q2 gross profit by an estimated $3 million, are expected to yield benefits in Q3 FY26 and subsequent quarters, with U.S. Gas forecasting approximately 7.5% gross margin in the second half of the year.

Centuri's Vision One Centuri strategy targets a 9.7% base gross profit margin by 2029, driven by reducing seasonality, increasing higher-margin bid work, and operational excellence. Initiatives such as a newly established PMO organization, fleet optimization, working capital management, and enhanced job-level performance analytics are in early stages. The company is confident in its ability to drive sustained progress and achieve long-term margin objectives, with underlying margins showing improvement on a year-to-date and trailing 12-month basis when excluding one-time items^📎.