Everus Construction Group Inc.
11/05/2025 | Press release | Distributed by Public on 11/05/2025 15:52
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report"). The following discussion may contain forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances.
Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed in the following and elsewhere in this Quarterly Report, particularly in the section entitled "Cautionary Note Regarding Forward-Looking Statements." Refer to the section titled "Item 1A. Risk Factors" included in our 2024 Annual Report on Form 10-K ("2024 Annual Report") for more information concerning our risk factors. References to the "Company," "Everus," "we," "us," and "our" refer to Everus Construction Group, Inc. and its consolidated subsidiaries, unless otherwise stated or indicated by context.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements that reflect our expectations, assumptions or projections about the future, other than statements of historical facts, including, without limitation, statements regarding plans, trends, objectives, goals, business strategies, market potential, future financial performance and other matters are considered forward-looking statements. The words "believe," "expect," "estimate," "could," "should," "would," "intend," "may," "plan," "predict," "seek," "anticipate," "project" and similar expressions generally identify forward-looking statements, which speak only as of the date the statements were made. In particular, information included under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 3. Quantitative and Qualitative Disclosures about Market Risk" of this Quarterly Report contains forward-looking statements.
The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. Although we believe that the expectations reflected in any forward-looking statements we make are based on reasonable assumptions as of the date they are made, we can give no assurance that the expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see the discussion under "Item 1A. Risk Factors" in our 2024 Annual Report.
You should read this Quarterly Report completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this Quarterly Report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this Quarterly Report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Overview
We are a leading construction solutions provider offering specialty contracting services to a diverse set of end markets, which are provided to commercial, industrial, institutional, renewables, service, transportation, utility and other customers. We operate throughout most of the United States through two reportable, operating segments:
Electrical & Mechanical ("E&M"): Contracting services including construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, renewables infrastructure and mechanical piping and services in both the public and private sectors.
Transmission & Distribution ("T&D"): Contracting services including construction and maintenance of overhead and underground electrical, gas, communication infrastructure and transportation-related lighting, as well as the manufacture and distribution of overhead and underground transmission line construction equipment and tools.
We focus on safely executing projects; providing a superior return on investment by building new and strengthening existing customer relationships; ensuring quality service; effectively managing costs; retaining, developing and recruiting talented employees; growing through organic and strategic acquisition opportunities; and focusing efforts on projects that will permit higher margins while properly managing risk. The growth we have experienced in recent years is due in part to the project awards in the end markets and submarkets served and the ability to support national customers in most of the regions in which we operate. Our strong presence in the Western, Midwestern and Eastern regions of the United States has driven opportunities in data centers, high tech, hospitality and utilities, while customer expansion nationwide continues to extend our reach through partnerships through our 15 wholly owned operating companies. At Everus, people are our core, and we prioritize integrity, safety and growth through comprehensive training, hands-on development, safety compliance metrics and strong union partnerships to instill a safety first culture and ethical leadership across all levels.
Economic and Industry Factors Impacting Our Business
We have experienced increased insurance costs and anticipate continued increases in insurance costs. Premiums in the insurance industry have risen due to many factors, such as economic inflation and a rise in insurance carriers' losses, in particular for wildfire risks. We experienced these aforementioned impacts with coverage for our insurance lines on a standalone basis following the Separation and expect further increases in insurance costs during our next renewal cycle due to our revenue growth during the fiscal year thus far. However, we are formulating strategies to minimize these costs and/or ensuring these costs are built into our bidding opportunities going forward.
Despite these increased costs, we are focused on growing our total revenues, expanding margins, managing costs and generating cash, all of which would result in increased operating income.
Market Conditions and Outlook
The U.S. construction services industry is highly fragmented. It includes a wide spectrum of players, from small, private companies whose activities are geographically concentrated to larger public companies with nationwide capabilities. Competition within the industry is influenced by various elements such as technical expertise, service pricing, financial and operational resources, track record for safety, industry reputation and dependability.
The U.S. construction services industry serves a diverse customer base that includes federal, state and municipal governmental agencies, commercial and residential developers and private parties. The mix of customers varies by region and economic conditions.
The main factors and trends in the U.S. construction services industry include:
•Key economic factors.Many factors affect product demand, including public spending on infrastructure projects, general economic conditions, including population growth and employment levels, imposed and proposed tariffs, and prevailing interest rates.
•Inflation.Rising inflation can increase the cost of construction materials, labor and insurance premiums, impacting project budgets and profitability.
•Industry fragmentation.There are thousands of construction services providers of varying scope and size. Market participants may enter new geographies or expand existing positions through organic growth or the acquisition of existing providers.
•Seasonality.Activity in certain areas is seasonal due to the effects of weather, which can impact safety and efficiency of operations but could also lead to demand for our services.
•Cyclicality.The demand for construction services is significantly influenced by the cyclical nature of the economy.
•Regulations.Operations are subject to extensive laws and regulations relating to the maintenance of safe conditions in the workplace.
•Production inputs.Cost of labor, equipment and other inputs can vary over time based on macroeconomic factors and impact profitability of operations.
•Personnel.Ability to maintain productivity and operating performance is heavily dependent on the ability to employ, train and retain qualified personnel necessary to operate efficiently.
We continued to have bidding opportunities in the specialty contracting markets we have operated in during 2025, as evidenced by our backlog, even with our revenue growth during the fiscal year thus far. We continue to see strong project opportunities across our diverse service offerings, particularly for data center, undergrounding and hospitality work. With our successful track record of executing on complex projects, our long-term customer relationships, safe and skilled workforce, quality of service and effective cost management, we remain well-positioned to benefit from favorable demand drivers, including high tech reshoring, data center construction and utility infrastructure investments, giving us the opportunity to continue securing and executing profitable projects in the future.
The Separation and Distribution
On November 2, 2023, MDU Resources Group, Inc. ("MDU Resources") announced its intention to pursue a tax-free spinoff of Everus Construction, Inc. (formerly known as MDU Construction Services Group, Inc.) ("Everus Construction") from MDU Resources (the "Separation"). Prior to the Separation, Everus Construction was the construction services segment of MDU Resources and operated as a wholly owned subsidiary of CEHI, LLC ("Centennial"), which is a wholly owned subsidiary of MDU Resources. In anticipation of the Separation, MDU Resources formed a new wholly owned subsidiary, Everus Construction Group, Inc., that became the new parent company of Everus Construction.
On October 31, 2024, MDU Resources completed the Separation by transferring Everus Construction, inclusive of all its assets and liabilities, to Everus and distributing 50,972,059 shares of Everus common stock ($0.01 par value) to MDU Resources stockholders of record as of October 21, 2024 (the "Distribution"). The Distribution was structured as a pro rata distribution of one share of Everus common stock for every four shares of MDU Resources common stock (such ratio, the "Distribution Ratio"). MDU Resources did not distribute any fractional shares of Everus common stock to its stockholders as part of the distribution. Instead, MDU Resources' stockholders received cash in lieu of any fractional shares of Everus common stock that they would have received after application of the Distribution Ratio.
As a result of the Separation and Distribution, Everus is an independent publicly traded company and our common stock is listed under the symbol "ECG" on the New York Stock Exchange.
The Separation and Distribution was completed pursuant to a separation and distribution agreement and other agreements with MDU Resources, including, but not limited to, a transition services agreement, a tax matters agreement and an employee matters agreement. Refer to Note 14 - Related-Party Transactions in the unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report for additional information on the transition services agreement. We have incurred costs related to becoming an independent public entity and expect additional ongoing expenses related to continued operations as such.
For a complete discussion of the associated risks and uncertainties associated with the Separation and Distribution, see "Risk Factors-Separation and Distribution Risks" in our 2024 Annual Report.
Basis of Presentation
Prior to the Separation, Everus Construction historically operated as a wholly owned subsidiary of Centennial and an indirect, wholly owned subsidiary of MDU Resources and not as a standalone company. For periods prior to the Separation, financial information included in the accompanying unaudited condensed consolidated financial statements and related footnotes of this Quarterly Report were prepared on a "carve-out" basis in connection with the Separation and were derived from the unaudited condensed consolidated financial statements of MDU Resources as if we operated on a standalone basis. However, the financial information included in the unaudited condensed consolidated financial statements and related footnotes for periods prior to the Separation do not necessarily reflect what our results of operations, financial position and cash flows would have been had we operated as a separate, publicly traded company and may not be indicative of our future performance. For additional information related to our basis of presentation, see Note 2 - Basis of Presentation and Summary of Significant Accounting Policies in the unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Before the Separation, we historically participated in MDU Resources' centralized cash management program through Centennial, including its overall financing arrangements. We had related-party agreements in place with Centennial for the financing of our capital needs, which were reflected as related-party notes payable on the unaudited condensed consolidated balance sheets for periods prior to the Separation. Interest expense in the unaudited condensed consolidated statements of income primarily reflected the allocation of interest on borrowing and funding associated with the related-party agreements for periods prior to the Separation. Refer to Note 14 - Related-Party Transactions in the unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report for additional information.
Following the Separation, we rely on our own credit and financing arrangements and incur interest expense associated with those arrangements. For additional information related to our current credit and financing arrangements, refer to Note 6 - Debt in the unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Cash-settled related-party transactions between Everus, MDU Resources, Centennial, and other MDU Resources subsidiaries were included in the unaudited condensed consolidated financial statements for periods prior to the Separation. For additional information regarding the agreements between us, MDU Resources and Centennial, refer to the "Certain Relationships and Related Person Transactions, and Director Independence" section in our 2024 Annual Report.
All intercompany balances and transactions between the businesses comprising Everus have been eliminated in the accompanying unaudited condensed consolidated financial statements.
Consolidated Results of Operations
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
The following table sets forth our consolidated selected statements of income data, with percentages of operating revenues for the interim periods indicated, as well as the percentage change from the prior comparative interim period:
| Three months ended September 30, | |||||||||||||||||||||||||||||
| 2025 |
% of revenues
|
2024 |
% of revenues
|
% change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues
|
$ | 986.8 | 100.0 | % | $ | 761.0 | 100.0 | % | 29.7 | % | |||||||||||||||||||
|
Cost of sales
|
862.6 | 87.4 | 671.1 | 88.2 | 28.5 | ||||||||||||||||||||||||
|
Gross profit
|
124.2 | 12.6 | 89.9 | 11.8 | 38.2 | ||||||||||||||||||||||||
|
Selling, general and administrative expenses
|
51.8 | 5.3 | 36.2 | 4.7 | 43.1 | ||||||||||||||||||||||||
|
Operating income
|
72.4 | 7.3 | 53.7 | 7.1 | 34.8 | ||||||||||||||||||||||||
| Interest income | 1.3 | 0.1 | - | - | 100.0 | ||||||||||||||||||||||||
|
Interest expense
|
5.4 | 0.5 | 2.8 | 0.4 | 92.9 | ||||||||||||||||||||||||
|
Other income, net
|
3.7 | 0.4 | 1.1 | 0.1 | NM | ||||||||||||||||||||||||
|
Income before income taxes and income from equity method investments
|
72.0 | 7.3 | 52.0 | 6.8 | 38.5 | ||||||||||||||||||||||||
|
Income taxes
|
20.6 | 2.1 | 14.0 | 1.8 | 47.1 | ||||||||||||||||||||||||
|
Income from equity method investments
|
5.6 | 0.6 | 3.8 | 0.5 | 47.4 | ||||||||||||||||||||||||
|
Net income
|
$ | 57.0 | 5.8 | % | $ | 41.8 | 5.5 | % | 36.4 | % | |||||||||||||||||||
NM - Not Meaningful
Operating Revenues
Operating revenues for the three months ended September 30, 2025, were $986.8 million, an increase of $225.8 million, or 29.7%, from $761.0 million for the three months ended September 30, 2024. E&M revenues rose $230.4 million, or 42.9%, and T&D revenues modestly declined $5.1 million, or 2.2%. See Segment Results of Operations-Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024 for further comparative analysis of segment revenues for the periods indicated.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied prior to the previous year end positively net impacted revenues and accounted for approximately 5.2% of revenues for the three months ended September 30, 2025, compared to 3.4% of revenues for the three months ended September 30, 2024.
For the three months ended September 30, 2025, the changes in estimates mentioned above favorably accounted for approximately 7.1% of revenues, compared to 5.7% of revenues for the three months ended September 30, 2024. Favorable impacts to revenues were primarily due to project pull forward, labor efficiencies and favorable impacts from projected cost changes, including material costs, project risk mitigation and change orders. However, these changes in estimates unfavorably accounted for approximately 1.9% of revenues for the three months ended September 30, 2025, compared to 2.3% of revenues for the three months ended September 30, 2024. Unfavorable impacts to revenues were primarily due to labor inefficiencies related to sequencing on projects and unfavorable impacts from project delays and cost overruns.
Cost of Sales
Cost of sales for the three months ended September 30, 2025, was $862.6 million, an increase of $191.5 million, or 28.5%, from $671.1 million for the three months ended September 30, 2024. This increase primarily related to higher E&M operating costs due to increased workloads and changes in project mix, partially offset by efficiency gains on certain projects and lower T&D operating costs with reduced workloads. Labor, subcontractor, material and equipment and tools costs increased $97.6 million, $45.5 million, $24.1 million and $17.5 million, respectively, along with higher other job expenses of $6.8 million.
Gross Profit
Gross profit for the three months ended September 30, 2025, was $124.2 million, an increase of $34.3 million, or 38.2%, from $89.9 million for the three months ended September 30, 2024. The increase was primarily from increased revenues and gross margin expansion due to project timing and efficiency gains on certain projects, partially offset by changes in project mix. Gross margin increased to 12.6% for the three months ended September 30, 2025, compared to 11.8% for the three months ended September 30, 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended September 30, 2025, were $51.8 million, an increase of $15.6 million, or 43.1%, from $36.2 million for the three months ended September 30, 2024. The increase was primarily driven by higher labor expenses of $12.3 million, including incremental stand-alone operating costs, to support the operational growth of the business, and higher general expenses of $3.7 million including higher corporate overhead expenses.
Operating Income
Operating income for the three months ended September 30, 2025, was $72.4 million, an increase of $18.7 million, or 34.8%, from $53.7 million for the three months ended September 30, 2024. The increase was primarily driven by increased gross profit, partially offset by increased selling, general and administrative expenses, both of which are discussed above. Operating income margin increased to 7.3% for the three months ended September 30, 2025, compared to 7.1% for the three months ended September 30, 2024. See Segment Results of Operations-Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024 for further comparative analysis of segment operating income and "Corporate and Other" category operating income for the periods indicated.
Interest Income
For the three months ended September 30, 2025, we earnedinterest income of $1.3 million, including $1.2 million from our central cash management program, including daily cash sweep and money market deposit account programs,and $0.1 million from ourCaptive Cell. There was no such activities earning interest income for the three months ended September 30, 2024.
Interest Expense
Interest expense for the three months ended September 30, 2025, was $5.4 million, an increase of $2.6 million, or 92.9%, from $2.8 million for the three months ended September 30, 2024. This increase primarily related to average higher debt balances under the Term Loan (as defined below) during the three months ended September 30, 2025, compared to the average debt balances from the related-party cash management program for working capital needs during the three months ended September 30, 2024.
Other Income, Net
Other income, net for the three months ended September 30, 2025, was $3.7 million, an increase of $2.6 million from $1.1 million for the three months ended September 30, 2024. This increase primarily related to miscellaneous income activity, including settlements and rebates, partially offset by miscellaneous expense activity including bank fees.
Income Taxes
Income taxes for the three months ended September 30, 2025, were $20.6 million, an increase of $6.6 million, or 47.1%, from $14.0 million for the three months ended September 30, 2024, reflecting higher income taxes from greater pretax income for the period. The effective tax rate was 26.6% for the three months ended September 30, 2025, compared to 25.1% for the three months ended September 30, 2024.
Income from Equity Method Investments
Income from equity method investments for the three months ended September 30, 2025, was $5.6 million, an increase of $1.8 million, or 47.4%, from $3.8 million for three months ended September 30, 2024. This increase primarily related to increased activity on joint ventures during the period.
Net Income
Net income for the three months ended September 30, 2025, was $57.0 million, an increase of $15.2 million, or 36.4%, from $41.8 million for the three months ended September 30, 2024. The increase was primarily from increased gross profit and income from joint ventures, partially offset by higher selling, general and administrative expenses and higher taxes on greater pretax income. Net income margin increased to 5.8% for the three months ended September 30, 2025, compared to 5.5% for the three months ended September 30, 2024.
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
The following table sets forth our consolidated selected statements of income data, with percentages of operating revenues for the interim periods indicated, as well as the percentage change from the prior comparative interim period:
| Nine months ended September 30, | |||||||||||||||||||||||||||||
| 2025 |
% of revenues
|
2024 |
% of revenues
|
% change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues
|
$ | 2,734.9 | 100.0 | % | $ | 2,090.0 | 100.0 | % | 30.9 | % | |||||||||||||||||||
|
Cost of sales
|
2,398.3 | 87.7 | 1,836.8 | 87.9 | 30.6 | ||||||||||||||||||||||||
|
Gross profit
|
336.6 | 12.3 | 253.2 | 12.1 | 32.9 | ||||||||||||||||||||||||
|
Selling, general and administrative expenses
|
140.7 | 5.1 | 109.3 | 5.2 | 28.7 | ||||||||||||||||||||||||
|
Operating income
|
195.9 | 7.2 | 143.9 | 6.9 | 36.1 | ||||||||||||||||||||||||
|
Interest income
|
2.8 | 0.1 | - | - | 100.0 | ||||||||||||||||||||||||
|
Interest expense
|
16.4 | 0.6 | 8.8 | 0.5 | 86.4 | ||||||||||||||||||||||||
|
Other income, net
|
6.2 | 0.2 | 3.7 | 0.2 | 67.6 | ||||||||||||||||||||||||
|
Income before income taxes and income from equity method investments
|
188.5 | 6.9 | 138.8 | 6.6 | 35.8 | ||||||||||||||||||||||||
|
Income taxes
|
53.6 | 2.0 | 37.6 | 1.8 | 42.6 | ||||||||||||||||||||||||
|
Income from equity method investments
|
11.6 | 0.5 | 7.8 | 0.4 | 48.7 | ||||||||||||||||||||||||
|
Net income
|
$ | 146.5 | 5.4 | % | $ | 109.0 | 5.2 | % | 34.4 | % | |||||||||||||||||||
Operating Revenues
Operating revenues for the nine months ended September 30, 2025, were $2.73 billion, an increase of $644.9 million, or 30.9%, from $2.09 billion for the nine months ended September 30, 2024. E&M revenues grew $647.4 million, or 43.7%, and T&D revenues slightly declined $3.0 million, or 0.5%. See Segment Results of Operations-Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024 for further comparative analysis of segment revenues for the periods indicated.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied prior to the previous year end positively net impacted revenues and accounted for approximately 3.7% of revenues for the nine months ended September 30, 2025, compared to 3.4% of revenues for the nine months ended September 30, 2024.
For the nine months ended September 30, 2025, the changes in estimates mentioned above favorably accounted for approximately 4.6% of revenues, compared to 4.5% of revenues for the nine months ended September 30, 2024. Favorable impacts to revenues were primarily due to project pull forward, labor efficiencies and favorable impacts from projected cost changes, including material costs, project risk mitigation and change orders. However, these changes in estimates unfavorably accounted for approximately 0.9% of revenues for the nine months ended September 30, 2025, compared to 1.1% of revenues for nine months ended September 30, 2024. Unfavorable impacts to revenues were primarily due to labor inefficiencies related to sequencing on projects and unfavorable impacts from project delays and cost overruns.
Cost of Sales
Cost of sales for the nine months ended September 30, 2025, was $2.40 billion, an increase of $561.5 million, or 30.6%, from $1.84 billion for the nine months ended September 30, 2024. This increase primarily related to higher E&M operating costs due to increased workloads and changes in project mix, partially offset by efficiency gains on certain projects and lower T&D operating costs with reduced workloads. Labor, subcontractor, material, and equipment and tools costs increased $291.9 million, $130.9 million, $87.5 million and $32.9 million, respectively, along with higher other job expenses of $18.3 million.
Gross Profit
Gross profit for the nine months ended September 30, 2025, was $336.6 million, an increase of $83.4 million, or 32.9%, from $253.2 million for the nine months ended September 30, 2024. The increase was primarily from increased revenues and gross margin due to project timing and efficiency gains on certain projects, partially offset by changes in project mix. Gross margin was 12.3% for the nine months ended September 30, 2025, compared to 12.1% for the nine months ended September 30, 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended September 30, 2025, were $140.7 million, an increase of $31.4 million, or 28.7%, from $109.3 million for the nine months ended September 30, 2024. The increase was driven primarily by higher labor and professional service-related expenses of $24.0 million and $3.0 million, respectively, including incremental stand-alone operating costs, to support the operational growth of the business, and higher general expenses of $5.8 million, including higher corporate overhead expenses. Partially offsetting these increases was lower provision for expected credit losses of $1.4 million.
Operating Income
Operating income for the nine months ended September 30, 2025 was $195.9 million, an increase of $52.0 million, or 36.1%, from $143.9 million for the nine months ended September 30, 2024. The increase was primarily driven by increased gross profit, partially offset by increased selling, general and administrative expenses, both of which are discussed above. Operating income margin increased to 7.2% for the nine months ended September 30, 2025, compared to 6.9% for the nine months ended September 30, 2024. See Segment Results of Operations-Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024 for further comparative analysis of segment operating income and "Corporate and Other" category operating income for the periods indicated.
Interest Income
For the nine months ended September 30, 2025, we earnedinterest income of $2.8 million, including $2.7 million from our central cash management program, including daily cash sweep and money market deposit account programs,and $0.1 million from ourCaptive Cell. There was no such activities earning interest income for the nine months ended September 30, 2024.
Interest Expense
Interest expense for the nine months ended September 30, 2025, was $16.4 million, an increase of $7.6 million, or 86.4%, from $8.8 million for the nine months ended September 30, 2024. The increase primarily related to average higher debt balances under the Term Loan (as defined below) during the nine months ended September 30, 2025, compared to the average debt balances from the related-party cash management program for working capital needs during the nine months ended September 30, 2024.
Other Income, Net
Other income, net for the nine months ended September 30, 2025, was $6.2 million, an increase of $2.5 million, or 67.6%, from $3.7 million for the nine months ended September 30, 2024. The increase primarily related to miscellaneous income activity, including settlements and rebates, partially offset by miscellaneous expense activity including bank fees.
Income Taxes
Income taxes for the nine months ended September 30, 2025, were $53.6 million, an increase of $16.0 million, or 42.6%, from $37.6 million for the nine months ended September 30, 2024, reflecting higher income taxes from greater pretax income for the period. The effective tax rate was 26.8% for the nine months ended September 30, 2025, compared to 25.7% for the nine months ended September 30, 2024.
Income from Equity Method Investments
Income from equity method investments for the nine months ended September 30, 2025, was $11.6 million, an increase of $3.8 million, or 48.7%, from $7.8 million for the nine months ended September 30, 2024. The increase primarily related to increased activity on joint ventures for the period.
Net Income
Net income for the nine months ended September 30, 2025, was $146.5 million, an increase of $37.5 million, or 34.4%, from $109.0 million for the nine months ended September 30, 2024. The increase was primarily from increased gross profit and income from joint ventures, partially offset by higher selling, general and administrative expenses and higher taxes on greater pretax income. Net income margin increased to 5.4% for the nine months ended September 30, 2025, compared to 5.2% for the nine months ended September 30, 2024.
Segment Results of Operations
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
We report our results under two reportable, operating segments: E&M and T&D. The following table sets forth segment revenues, segment operating income and "Corporate and Other" category operating income for the periods indicated, with segment revenues compared to total consolidated revenues and operating income margins for the interim periods indicated, as well as the percentage change from the prior comparative interim period:
| Three months ended September 30, | |||||||||||||||||||||||||||||
| 2025 |
% of revenues
|
2024 |
% of revenues
|
% Change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 767.3 | 77.8 | % | $ | 536.9 | 70.6 | % | 42.9 | % | |||||||||||||||||||
|
T&D
|
223.4 | 22.6 | 228.5 | 30.0 | (2.2) | ||||||||||||||||||||||||
|
Eliminations
|
(3.9) | (0.4) | (4.4) | (0.6) | (11.4) | ||||||||||||||||||||||||
|
Consolidated revenues
|
$ | 986.8 | 100.0 | % | $ | 761.0 | 100.0 | % | 29.7 | % | |||||||||||||||||||
|
Operating income:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 57.0 | 7.4 | % | $ | 34.9 | 6.5 | % | 63.3 | % | |||||||||||||||||||
|
T&D
|
27.5 | 12.3 | 25.3 | 11.1 | 8.7 | ||||||||||||||||||||||||
|
Corporate and Other
|
(12.1) | (1.2) | (6.5) | (0.9) | (86.2) | ||||||||||||||||||||||||
|
Consolidated operating income
|
$ | 72.4 | 7.3 | % | $ | 53.7 | 7.1 | % | 34.8 | % | |||||||||||||||||||
Corporate and Other operating income percentage of revenues was calculated by dividing Corporate and Other operating income by consolidated revenues for the interim periods indicated.
Operating Revenues
E&M segment revenues for the three months ended September 30, 2025, were $767.3 million, an increase of $230.4 million, or 42.9%, from $536.9 million for the three months ended September 30, 2024. The increase was primarily driven by higher workloads in the commercial, renewables and service & other end markets, particularly continued growth in the data center submarket, partially offset by lower industrial and institutional submarket activity.
•Commercial revenues increased $225.7 million with higher submarket activity across data center and commercial due to increased workloads, particularly growth in data center work.
•Renewables revenues increased $9.0 million with increased submarket activity across generation and commercial due to the timing of projects.
•Service & other had higher revenues of $4.5 million as a result of increased repair and maintenance demand.
•Institutional revenues decreased $2.4 million, driven by lower workloads in healthcare and education, partially offset by increased submarket activity in government.
•Industrial revenues decreased $6.4 million, due to reduced activity in the high tech and oil & gas submarkets, partially offset by higher workloads in manufacturing.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied prior to the previous year end positively net impacted E&M revenues and accounted for approximately 3.8% of E&M revenues for the three months ended September 30, 2025, compared to 2.7% of E&M revenues for the three months ended September 30, 2024.
For the three months ended September 30, 2025, the changes in estimates mentioned above favorably accounted for approximately 5.0% of E&M revenues, compared to 4.6% of E&M revenues for the three months ended September 30, 2024. However, these changes in estimates unfavorably accounted for approximately 1.2% of E&M revenues for the three months ended September 30, 2025, compared to 1.9% of E&M revenues for the three months ended September 30, 2024. The primary drivers of favorable and unfavorable impacts to revenues were previously mentioned in the consolidated results of operations sections above.
T&D segment revenues for the three months ended September 30, 2025, were $223.4 million, a decrease of $5.1 million, or 2.2%, from $228.5 million for the three months ended September 30, 2024. The modest decline was driven by lower utility end-market revenues, partially offset by increased workloads in the transportation end market.
•Utility revenues decreased $10.2 million due to lower workloads in telecommunication, storm and transmission due to the timing of project availability, partially offset by increased submarket activity in undergrounding work.
•Transportation revenues increased $5.1 million with higher workloads in the traffic signalization submarket, partially offset by reduced project activity in the street lighting submarket.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied prior to the previous year end positively net impacted T&D revenues and accounted for approximately 1.4% of T&D revenues for the three months ended September 30, 2025, compared to 0.7% of T&D revenues for the three months ended September 30, 2024.
For the three months ended September 30, 2025, the changes in estimates mentioned above favorably accounted for approximately 2.0% of T&D revenues. compared to 1.1% of T&D revenues for the three months ended September 30, 2024. However, these changes in estimates unfavorably accounted for approximately 0.6% of T&D revenues for the three months ended September 30, 2025, compared to 0.4% of T&D revenues for the three months ended September 30, 2024. The primary drivers of favorable and unfavorable impacts to revenues were previously mentioned in the consolidated results of operations sections above.
Operating Income
E&M
E&M segment operating income for the three months ended September 30, 2025, was $57.0 million, an increase of $22.1 million, or 63.3%, from $34.9 million for the three months ended September 30, 2024. The increase was primarily driven by higher gross profit across the commercial, industrial and renewables end markets due to project timing and efficiency gains on certain projects, partially offset by changes in project mix. E&M gross margin increased to 11.2% for the three months ended September 30, 2025, compared to 10.2% for the three months ended September 30, 2024.
Operating income was also impacted by higher selling, general and administrative expenses, particularly increases in labor expenses of $7.8 million, as well as higher general expenses of $1.2 million. Operating income margin for our E&M segment increased to 7.4% for the three months ended September 30, 2025 compared to 6.5% for the three months ended September 30, 2024.
T&D
T&D segment operating income for the three months ended September 30, 2025, was $27.5 million, an increase of $2.2 million, or 8.7%, from $25.3 million for the three months ended September 30, 2024. The increase was the result of higher gross profit due to efficient project execution and project mix, particularly within the transportation end market, with T&D gross margin expansion of 16.9% for the three months ended September 30, 2025, compared to 15.4% for the three months ended September 30, 2024.
Selling, general and administrative expenses remained consistent period over period, with increased labor expenses of $0.8 million and general expenses of $0.6 million, partially offset by lower professional-related services of $0.9 million. Operating income margin for our T&D segment increased to 12.3% for the three months ended September 30, 2025, compared to 11.1% for the three months ended September 30, 2024.
Corporate and Other
The increase in Corporate and Other costs during the three months ended September 30, 2025 was primarily due to higher labor expenses of $3.7 million, respectively, including incremental stand-alone operating costs, to support the operational growth of the business, along with higher general expenses of $1.9 million, including higher corporate overhead expenses.
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
The following table sets forth segment revenues, segment operating income and "Corporate and Other" category operating income for the periods indicated, with segment revenues compared to total consolidated revenues and operating income margins for the interim periods indicated, as well as the percentage change from the prior comparative interim period:
| Nine months ended September 30, | |||||||||||||||||||||||||||||
| 2025 |
% of revenues
|
2024 |
% of revenues
|
% Change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 2,129.1 | 77.9 | % | $ | 1,481.7 | 70.9 | % | 43.7 | % | |||||||||||||||||||
|
T&D
|
620.8 | 22.7 | 623.8 | 29.8 | (0.5) | ||||||||||||||||||||||||
|
Eliminations
|
(15.0) | (0.6) | (15.5) | (0.7) | (3.2) | ||||||||||||||||||||||||
|
Consolidated revenues
|
$ | 2,734.9 | 100.0 | % | $ | 2,090.0 | 100.0 | % | 30.9 | % | |||||||||||||||||||
|
Operating income:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 160.5 | 7.5 | % | $ | 100.8 | 6.8 | % | 59.2 | % | |||||||||||||||||||
|
T&D
|
65.7 | 10.6 | 60.1 | 9.6 | 9.3 | ||||||||||||||||||||||||
|
Corporate and Other
|
(30.3) | (1.1) | (17.0) | (0.8) | (78.2) | ||||||||||||||||||||||||
|
Consolidated operating income
|
$ | 195.9 | 7.2 | % | $ | 143.9 | 6.9 | % | 36.1 | % | |||||||||||||||||||
Corporate and Other operating income percentage of revenues was calculated by dividing Corporate and Other operating income by consolidated revenues for the interim periods indicated.
Operating Revenues
E&M segment revenues for the nine months ended September 30, 2025, were $2.13 billion, an increase of $647.4 million, or 43.7%, from $1.48 billion for the nine months ended September 30, 2024. The increase primarily related to growth across all E&M end markets, except for industrial, which had a modest decrease in revenues.
•Commercial revenues rose $620.0 million with higher data center, commercial and hospitality submarket activity due to increased workloads, particularly growth in data center work.
•Renewables revenues grew $15.3 million due to increased submarket activity across generation and commercial due to the timing of projects.
•Institutional revenues increased $11.7 million from higher workloads in the government and education submarkets, with lower project activity in healthcare.
•Service & other revenues increased $2.9 million due to increased repair and maintenance demand.
•Industrial revenues decreased $2.5 million with reduced project activity in the high tech submarket, partially offset by higher workloads in the manufacturing and oil & gas submarkets.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied prior to the previous year end positively net impacted E&M revenues and accounted for approximately 3.0% of E&M revenues for the nine months ended September 30, 2025, compared to 3.1% of E&M revenues for the nine months ended September 30, 2024.
For the nine months ended September 30, 2025, the changes in estimates mentioned above favorably accounted for approximately 3.7% of E&M revenues, compared to 4.0% of E&M revenues for the nine months ended September 30, 2024. However, these changes in estimates unfavorably accounted for approximately 0.7% of E&M revenues for the nine months ended September 30, 2025, compared to 0.9% of E&M revenues for the nine months ended September 30, 2024. The primary drivers of favorable and unfavorable impacts to revenues were previously mentioned in the consolidated results of operations sections above.
T&D segment revenues for the nine months ended September 30, 2025, were $620.8 million, a decrease of $3.0 million, or 0.5%, from $623.8 million for the nine months ended September 30, 2024. The slight decline was driven by lower utility end-market revenues, partially offset by increased workloads in the transportation end market.
•Utility revenues decreased $14.0 million from lower workloads in the distribution, storm, transmission and telecommunication submarkets, partially offset by increased project activity across the underground submarket due to timing of project availability, along with increased utility sales.
•Transportation revenues increased $11.0 million due to higher workloads in the traffic signalization submarket, partially offset by reduced project activity in the street lighting submarket.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied prior to the previous year end positively net impacted T&D revenues and accounted for approximately 0.8% of T&D revenues for the nine months ended September 30, 2025, compared to 0.4% of T&D revenues for the nine months ended September 30, 2024.
For the nine months ended September 30, 2025, the changes in estimates mentioned above favorably accounted for approximately 1.0% of T&D revenues, compared to 0.6% of T&D revenues for the nine months ended September 30, 2024. However, these changes in estimates unfavorably accounted for approximately 0.2% of T&D revenues for both of the nine months ended September 30, 2025 and 2024. The primary drivers of favorable and unfavorable impacts to revenues were previously mentioned in the consolidated results of operations sections above.
Operating Income
E&M
E&M segment operating income for the nine months ended September 30, 2025, was $160.5 million, an increase of $59.7 million, or 59.2%, from $100.8 million for the nine months ended September 30, 2024. The increase was primarily driven by higher gross profit across all E&M end markets, particularly commercial and industrial, due to project timing and efficiency gains on certain projects, partially offset by changes in project mix. As a result, gross margin increased to 11.3% for the nine months ended September 30, 2025, compared to 11.0% for the nine months ended September 30, 2024.
Operating income was also impacted by higher selling, general and administrative expenses, including increased labor expenses of $14.9 million, professional-related services of $1.8 million and general expenses of $1.7 million, partially offset by lower provision for expected credit losses of $1.2 million. Operating income margin for our E&M segment increased to 7.5% for the nine months ended September 30, 2025, compared to 6.8% for the nine months ended September 30, 2024.
T&D
Operating income in the T&D segment for the nine months ended September 30, 2025, was $65.7 million, an increase of $5.6 million, or 9.3%, from $60.1 million for the nine months ended September 30, 2024. The increase was the result of higher gross profit due to efficient project execution and project mix, particularly within the transportation end market, with T&D gross margin expansion of 15.4% for the nine months ended September 30, 2025, compared to 14.3% for the nine months ended September 30, 2024.
Selling, general and administrative expenses remained consistent period over period, with increased labor expenses of $0.6 million and general expenses of $0.9 million, partially offset by lower professional-related services of $0.7 million. Operating income margin for our T&D segment increased to 10.6% for the nine months ended September 30, 2025, compared to 9.6% for the nine months ended September 30, 2024.
Corporate and Other
The increase in Corporate and Other costs during the nine months ended September 30, 2025 was primarily due to higher labor and professional service-related expenses of $8.5 million and $2.0 million, respectively, including incremental stand-alone operating costs, to support the operational growth of the business, along with higher general expenses of $3.2 million, including higher corporate overhead expenses.
Backlog
Backlog is a common measurement in the construction services industry. Our determination of backlog can include projects that have a written award, a letter of intent, a notice to proceed, an agreed upon work order to perform work on mutually accepted terms, and conditions and change orders or claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Contracts are subject to delays, defaults or cancellations; changes in scope of services to be provided; and adjustments to costs. Backlog may also be affected by project delays or cancellations resulting from weather conditions, external market factors and economic factors beyond our control, among other things. Accordingly, there is no assurance that backlog will be realized. For the periods presented in the backlog table below, we did not experience any material impacts related to delays or cancellations of planned projects that were included in backlog. The timing of contract awards, including contracts awarded pursuant to master service agreements, duration of large new contracts and the mix of services can significantly affect backlog. Backlog at any given point in time may not accurately represent the revenue or net income that is realized in any period, and backlog as of the end of the period may not be indicative of the revenue or net income expected to be realized within the next 12 months. Backlog should not be relied upon as a standalone indicator of future results. Factors noted in "Item 1A. Risk Factors" included in our 2024 Annual Report could cause revenues to be realized in periods and at levels that are different from originally projected.
Subject to the foregoing discussions, the following table provides estimated backlog as of the dates indicated and the amounts we reasonably estimate will be recognized within the next 12 months following September 30, 2025:
|
Amounts estimated to be recognized within 12 months
|
September 30, 2025
|
December 31, 2024
|
September 30, 2024
|
|||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
|
E&M
|
$ | 2,087.5 | $ | 2,570.4 | $ | 2,507.0 | $ | 2,567.9 | ||||||||||||||||||
|
T&D
|
295.0 | 375.8 | 273.6 | 316.9 | ||||||||||||||||||||||
| Total | $ | 2,382.5 | $ | 2,946.2 | $ | 2,780.6 | $ | 2,884.8 | ||||||||||||||||||
Changes in backlog from period to period are primarily the result of fluctuations in the timing of contract awards and timing of revenue recognition of contracts.
The increase in E&M backlog from September 30, 2025, compared to December 31, 2024, and September 30, 2024, primarily reflected backlog growth in the commercial end market, partially offset by declines in the remaining E&M end markets.
The increase in T&D backlog from September 30, 2025, compared to December 31, 2024, and September 30, 2024, primarily reflected backlog growth in the utility end market, partially offset by declines in the transportation end market.
Non-GAAP Financial Measures
All financial information presented in this Quarterly Report has been prepared in U.S. dollars in accordance with generally accepted accounting principles in the United States ("GAAP"), except for the presentation of the following non-GAAP financial measures: EBITDA, EBITDA margin and free cash flow. We evaluate our operating performance using EBITDA and EBITDA margin and evaluate our liquidity using free cash flow. These non-GAAP financial measures are not intended as alternatives to GAAP financial measures and have limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Because of these limitations, EBITDA, EBITDA margin and free cash flow should not be considered as replacements for net income, net income margin or cash provided by (used in) operating activities, the most comparable GAAP measures, respectively. Our non-GAAP financial measures are not standardized; therefore, it may not be possible to compare them with other companies' EBITDA, EBITDA margin and free cash flow having the same or similar names.
EBITDA and EBITDA Margin
We utilize EBITDA and EBITDA margin to consistently assess our operating performance and as a basis for strategic planning and forecasting, since we believe that EBITDA closely correlates to long-term enterprise value. We believe that measuring performance on an EBITDA basis is useful to investors, because it enables a more consistent evaluation of our operational performance period to period. We also believe these non-GAAP financial measures, in addition to the corresponding GAAP measures of net income and net income margin, are useful to investors to provide meaningful information about operational efficiency by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. Investors also may use EBITDA to calculate leverage as a multiple of EBITDA. We use EBITDA and EBITDA margin, in addition to GAAP metrics, to evaluate our operating results, calculate compensation packages and determine leverage as a multiple of EBITDA to establish the appropriate funding of operations.
EBITDA is calculated by adding back interest expense, net of interest income, income taxes, and depreciation and amortization to net income. EBITDA margin is calculated by dividing EBITDA by operating revenues.
The following table reconciles net income to EBITDA and provides the calculation of EBITDA margin.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||
|
Net income
|
$ | 57.0 | $ | 41.8 | $ | 146.5 | $ | 109.0 | |||||||||||||||
|
Interest expense, net
|
4.1 | 2.8 | 13.6 | 8.8 | |||||||||||||||||||
|
Income taxes
|
20.6 | 14.0 | 53.6 | 37.6 | |||||||||||||||||||
|
Depreciation and amortization
|
7.3 | 6.4 | 21.3 | 18.5 | |||||||||||||||||||
|
EBITDA
|
$ | 89.0 | $ | 65.0 | $ | 235.0 | $ | 173.9 | |||||||||||||||
|
Operating revenues
|
$ | 986.8 | $ | 761.0 | $ | 2,734.9 | $ | 2,090.0 | |||||||||||||||
|
Net income margin
|
5.8 | % | 5.5 | % | 5.4 | % | 5.2 | % | |||||||||||||||
|
EBITDA margin
|
9.0 | % | 8.5 | % | 8.6 | % | 8.3 | % | |||||||||||||||
Free Cash Flow
We use free cash flow as a measure of liquidity that indicates how much cash we can produce after taking cash outflows from operations and assets into consideration. We believe this non-GAAP financial measure, in addition to the corresponding GAAP measure of cash provided by (used in) operating activities, is useful to investors because it provides meaningful information about our financial health and our ability to generate cash, support additional debt obligations, pay future dividends and fund growth. Free cash flow does not represent our residual cash flow available for discretionary purposes.
Free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures.
The following table reconciles cash provided by operating activities to free cash flow.
| Nine months ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In millions) | |||||||||||
|
Net cash used in investing activities
|
$ | (33.6) | $ | (25.5) | |||||||
|
Net cash used in financing activities
|
$ | (11.8) | $ | (58.2) | |||||||
|
Net cash provided by operating activities
|
$ | 108.6 | $ | 82.7 | |||||||
|
Capital expenditures
|
(42.1) | (34.5) | |||||||||
|
Net proceeds from sale or disposition of property, plant and equipment
|
8.3 | 9.6 | |||||||||
|
Free cash flow
|
$ | 74.8 | $ | 57.8 | |||||||
Liquidity and Capital Resources
As of September 30, 2025 and December 31, 2024, we had $149.2 million and $86.0 million of cash, cash equivalents and restricted cash, respectively, including $19.3 million and $16.1 million of restricted cash held by the Captive Cell, respectively.
Prior to the Separation, we historically participated in MDU Resources' centralized cash management program through Centennial, including its overall financing arrangements. After the Separation, we no longer rely on MDU Resources' central cash management and financing program and instead rely on our own credit. We have implemented our own centralized cash management model and will use cash on hand and third-party credit facilities to fund day-to-day operations.
Our ability to fund our cash needs depends on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates. We rely on access to capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations.
Our principal uses of cash are tofund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions.
On October 31, 2024, we entered into a five-year senior secured credit agreement (the "Credit Agreement"), whereby we have the capacity to incur indebtedness of up to $525.0 million, consisting of a $300.0 million term loan ("Term Loan"), in aggregate principal amount, and a $225.0 million revolving credit facility ("Revolving Credit Facility"). Letters of credit are available under the Credit Agreement in an aggregate amount of up to $50.0 million.
The Term Loan and the Revolving Credit Facility both bear interest at an annual rate equal to adjusted term Secured Overnight Financing Rate, defined in a customary manner ("Term SOFR") plus an applicable rate.
The Credit Agreement contains financial covenants requiring us to maintain a maximum consolidated total net leverage ratio of 3.00:1.00 and a minimum interest coverage ratio of 3.00:1.00, in each case, measured as of the last day of each fiscal quarter. The consolidated total net leverage ratio may be increased at our option to 3.50:1.00 in connection with certain qualifying material acquisitions. The covenants also include restrictions on the sale of certain assets, loans and investments.
The Term Loan requires quarterly amortization payments of 5.00% per annum of the original principal amount thereof. We repaid our required quarterly amortization payments totaling $11.3 million of the Term Loan during the nine months ended September 30, 2025.
As of September 30, 2025 and December 31, 2024, we had $288.7 million and $300.0 million outstanding under the Term Loan, respectively, with $207.4 million and $209.4 million of available capacity under the Revolving Credit Facility, respectively, net of $17.6 million and $15.6 million of outstanding standby letters of credit, respectively.
In order to borrow under the debt instruments, we must be in compliance with the applicable covenants and certain other conditions, all of which we were in compliance with as of both September 30, 2025 and December 31, 2024. Non-compliance with applicable covenants or conditions may constitute an event of default under the loan agreement. Subject to any applicable cure periods, failure to remedy such a default may require the Company to pursue alternative sources of funding. For additional information on our debt arrangements, refer to Note 6 - Debt in the unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Working Capital
Working capital, defined as current assets minus current liabilities, was $523.5 million and $403.9 million as of September 30, 2025 and December 31, 2024, respectively. Our working capital requirements may increase when we commence multiple projects or particularly large projects because labor, subcontractor, inventory and certain other costs typically become payable before the receivables resulting from work performed are collected. Working capital may also increase when we incur costs for work that is the subject of unpaid retainage, change orders and claims. The typical payment billing terms are due within 30 days but may differ depending on contract terms. Retention on receivables can impact the cash collection cycle beyond expenses incurred. The timing of billings and project completions can contribute to changes in unbilled revenue. As of September 30, 2025, we expect that substantially all unbilled receivables will be billed to customers in the normal course of business within the next 12 months.
Capital Expenditures
Our cash capital expenditures for the nine months ended September 30, 2025, were $42.1 million, or $33.8 million net of proceeds from asset disposals, compared to $34.5 million, or $24.9 million net of proceeds from asset disposals, for the nine months ended September 30, 2024. Capital expenditures wereprimarily used for vehicle, equipment and building investments to support the growth of our business. For the nine months ended September 30, 2025, capital expenditures were funded by internal sources and borrowings under our credit and financing arrangements. Whereas, for the nine months ended September 30, 2024, capital expenditures were funded by internal sources and related-party borrowings from MDU Resources and Centennial.
We expect capital expenditures and commitments for equipment purchase, lease and rental arrangements to be necessary for the foreseeable future in order to meet anticipated demand for our services. We still expect gross capital expenditures for full-year 2025 to be in the range of $65.0 million to $70.0 million. Actual capital expenditures may increase or decrease depending upon business activity levels, as well as ongoing assessments of equipment leasing versus purchasing decisions based on short- and long-term equipment requirements. We continuously monitor our capital expenditures for project delays and changes in economic viability and adjust as necessary. We anticipate that the combination of cash on hand, cash flows from operations, credit facilities and issuances of debt and equity securities, if necessary, will provide sufficient funding to enable us to meet the need of future capital expenditures.
We also continue to evaluate the potential for future acquisitions and other growth opportunities that would be incremental to our capital program; however, they are dependent on the availability of opportunities and, as a result, capital expenditures may vary significantly from the estimated range provided.
Cash Flows
The following table summarizes our net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30, 2025 and 2024:
| Nine months ended September 30, | 2025 | 2024 | ||||||||||||
| (In millions) | ||||||||||||||
| Net cash provided by (used in): | ||||||||||||||
| Operating activities | $ | 108.6 | $ | 82.7 | ||||||||||
| Investing activities | (33.6) | (25.5) | ||||||||||||
| Financing activities | (11.8) | (58.2) | ||||||||||||
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
63.2 | (1.0) | ||||||||||||
|
Cash, cash equivalents and restricted cash - beginning of period
|
86.0 | 1.6 | ||||||||||||
|
Cash, cash equivalents and restricted cash - end of period
|
$ | 149.2 | $ | 0.6 | ||||||||||
Operating Activities
Cash provided by operating activities totaled $108.6 million for the nine months ended September 30, 2025, compared to $82.7 million for the nine months ended September 30, 2024, an increase of $25.9 million. The increase in cash provided by operating activities was primarily driven by increased operating results, partially offset by changes in working capital to support the revenue growth. These changes in working capital drove a decrease in cash period over period with a use of cash of $59.6 million for the nine months ended September 30, 2025, compared to a use of cash of $31.9 million for the nine months ended September 30, 2024, with decreases in cash from changes in contract assets and receivables of $73.2 million and $37.0 million, respectively, partially offset by increases in cash from changes in net contract liabilities, accounts payable, other current assets and other current liabilities of $38.7 million, $30.8 million, $8.6 million and $3.6 million, respectively.
Investing Activities
Cash used in investing activities totaled $33.6 million for the nine months ended September 30, 2025, compared to $25.5 million for the nine months ended September 30, 2024, an increase of $8.1 million in cash used in investing. The increase in cash used in investing activities was primarily due to higher capital expenditures of $7.6 million, decreases in cash from changes in investments of $1.4 million and lower proceeds from the sale or disposition of property plant and equipment of $1.3 million, partially offset by proceeds from insurance contracts of $2.2 million during 2025.
Financing Activities
Cash used infinancing activities totaled $11.8 millionfor the nine months ended September 30, 2025, compared to $58.2 millionfor the nine months ended September 30, 2024, a decrease in cash used in financing activities of $46.4 million. The decreasein cash used in financing activities was primarily the result ofcash outflows of $104.2 million for transfers to CEHI, LLC and MDU Resources during the nine months ended September 30, 2024. Partially offsetting the decreases in cash used in financing activities were the cash outflows from repayments of long-term debt under our Term Loan of $11.3 million and $0.6 million for tax withholding on stock-based compensation during the nine months ended September 30, 2025, as well as net cash inflows of $46.0 millionfrom the MDU Resources related-party cash management program during the nine months ended September 30, 2024.
Material Cash Requirements
There were no material changes in our contractual obligations from those reported in our 2024 Annual Report. For more information on our contractual obligations, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Material Cash Requirements" in our 2024 Annual Report.
Off-Balance Sheet Arrangements
As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected on our balance sheet. Our significant off-balance sheet transactions include surety guarantees, performance guarantees and letters of credit obligations.
Some of our customers require us to post performance bonds issued by a surety. Those bonds guarantee the customer that we will perform under the terms of a contract. In the event that we fail to perform under a contract, the customer may demand the surety to pay or perform under our bond. Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts also can fluctuate from period to period based upon the mix and level of our bonded operating activity. Our relationship with our sureties is such that we will indemnify the sureties for any expenses they incur in connection with any of the bonds they issue on our behalf.
As of September 30, 2025 and December 31, 2024, we had approximately $1.93 billion and $2.05 billion in surety bonds outstanding for projects, respectively. As of September 30, 2025 and December 31, 2024, $1.57 billion and $1.75 billion of bonding was posted for E&M, respectively, and $349.7 million and $296.3 million of bonding was posted for T&D, respectively. In addition, approximately $8.3 million and $8.2 million of bonding was posted for Corporate and other as of September 30, 2025 and December 31, 2024, respectively. These amounts were not reflected on the unaudited condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024. As of September 30, 2025 and December 31, 2024, the potential maximum payment amounts we would be required to make under the outstanding surety bonds were approximately $697.9 million and $717.0 million, respectively.
To date, we are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future. If we experience changes in our bonding relationships or if there are adverse changes in the surety industry, there would be no assurance that we would be able to effectuate alternatives to providing surety bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require surety bonds. Accordingly, a reduction in the availability of surety bonds could have a material adverse effect on our financial position, financial results and cash flows.
We also guarantee obligations of our subsidiaries under certain contracts. Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. As of September 30, 2025 and December 31, 2024, the fixed maximum amounts guaranteed under these agreements aggregated to $739.6 million and $542.7 million, respectively. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees. However, in the event of default under these guarantee obligations, we would be required to make payments to satisfy our guarantees.
In addition to the above guarantees, there were $17.6 million and $15.6 million of outstanding standby letters of credit for certain guarantees to third parties under our under our Revolving Credit Facility as of September 30, 2025 and December 31, 2024, respectively. In the event we default under these letter-of-credit obligations, we would be obligated for reimbursement of payments made under the letters of credit.
We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein. For more information on the circumstances regarding our guarantees and off-balance sheet arrangements, refer to Note 13 - Commitments and Contingencies in the unaudited condensed consolidated financial statementscontained elsewhere in this Quarterly Report.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting standards, see Note 2 - Basis of Presentation and Summary of Significant Accounting Policies in the unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Critical Accounting Estimates
There have been no material changes in our critical accounting estimates from those that were disclosed in our 2024 Annual Report. For further information regarding our critical accounting estimates, please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" included in our 2024 Annual Report.
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