Everus Construction Group Inc.
11/06/2026 | Press release | Distributed by Public on 11/06/2026 16:09
Quarterly Report for Quarter Ending September 30, 2026 (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" in this Quarterly Report, as well as in our 2025 Annual Report on Form 10-K ("2025 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 (the "Securities Act"), 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 this Quarterly Report and in our 2025 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 and in parts of Canada 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.
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.
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 center, high tech, hospitality and utilities work, while customer expansion nationwide continues to extend our reach through partnerships through our 17 wholly owned operating companies, including SE&M and Epsilon, which were acquired during the nine months ended September 30, 2026, expanding our geographic footprint in the Northeast and Southeast regions of the United States and Canada.
In particular, we currently generate a significant portion of our revenues from data center and other similar high tech and advanced technology contracts and our revenue mix has changed significantly in the last couple of years. Demand in these markets may fluctuate based on customer procurement and deployment schedules, information technology spending, timing of hyperscale infrastructure investments, timing of new technology deployments, budgets and pace of their AI-related infrastructure investments, timing of our customers' monetization of AI investments, or customer access to capital. We have not experienced, but may in the future be, adversely affected by reduced, delayed, loss of or canceled projects by one or more of them, including large hyperscale data center companies.
The regulatory and legislative landscape surrounding data center development is evolving rapidly, and we are monitoring increased scrutiny and potential regulation in the near and long term. Any such developments could potentially result in adverse effects on our operations, financial condition, cash flows and stock price in ways that are difficult to predict.
While we believe there is still strong demand for these types of projects in the foreseeable future, we cannot guarantee that will be the case. The loss of, or reduction in business from, these types of contracts could have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price. For more information on the associated risks, see the discussion under "Item 1A. Risk Factors" in our 2025 Annual Report.
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 auto and wildfire risks. We experienced these aforementioned impacts with coverage for our insurance lines on a standalone basis following the Separation and again saw increases in insurance costs during our latest renewal cycle, partially due to our continued revenue and operational growth during 2026 at the time of renewal. However, we are continuing to formulate 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 gross 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, U.S. involvement or indirect effects from global conflicts 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 2026, as evidenced by our backlog, even with our revenue growth during the fiscal year thus far. We believe our backlog supports our strong project pipeline across our diverse service offerings, particularly for data center, high tech 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 believe 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.
Consolidated Results of Operations
Three Months Ended September 30, 2026, Compared to Three Months Ended September 30, 2025
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, | |||||||||||||||||||||||||||||
| 2026 |
% of revenues
|
2025 |
% of revenues
|
% change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues
|
$ | 1,384.2 | 100.0 | % | $ | 986.8 | 100.0 | % | 40.3 | % | |||||||||||||||||||
|
Cost of sales
|
1,179.2 | 85.2 | 862.6 | 87.4 | 36.7 | ||||||||||||||||||||||||
|
Gross profit
|
205.0 | 14.8 | 124.2 | 12.6 | 65.1 | ||||||||||||||||||||||||
|
Selling, general and administrative expenses
|
80.7 | 5.9 | 51.8 | 5.3 | 55.8 | ||||||||||||||||||||||||
| Increase in fair value of contingent consideration | 1.9 | 0.1 | - | - | NM | ||||||||||||||||||||||||
|
Operating income
|
122.4 | 8.8 | 72.4 | 7.3 | 69.1 | ||||||||||||||||||||||||
| Interest income | 2.2 | 0.2 | 1.3 | 0.1 | 69.2 | ||||||||||||||||||||||||
|
Interest expense
|
6.1 | 0.4 | 5.4 | 0.5 | 13.0 | ||||||||||||||||||||||||
|
Other income, net
|
0.2 | - | 3.7 | 0.4 | (94.6) | ||||||||||||||||||||||||
|
Income before income taxes and income from equity method investments
|
118.7 | 8.6 | 72.0 | 7.3 | 64.9 | ||||||||||||||||||||||||
|
Income taxes
|
29.4 | 2.2 | 20.6 | 2.1 | 42.7 | ||||||||||||||||||||||||
|
Income from equity method investments
|
2.6 | 0.2 | 5.6 | 0.6 | (53.6) | ||||||||||||||||||||||||
|
Net income
|
$ | 91.9 | 6.6 | % | $ | 57.0 | 5.8 | % | 61.2 | % | |||||||||||||||||||
NM - Not Meaningful
Operating Revenues
Operating revenues for the three months ended September 30, 2026, were $1.38 billion, an increase of $397.4 million, or 40.3%, from $986.8 million for the three months ended September 30, 2025. E&M revenues rose $368.4 million, or 48.0%, including 2026 completed acquisitions contributing $43.7 million. T&D revenues increased $32.2 million, or 14.4%. See Segment Results of Operations-Three Months Ended September 30, 2026, Compared to Three Months Ended September 30, 2025 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 6.0% of revenues for the three months ended September 30, 2026, compared to 5.2% of revenues for the three months ended September 30, 2025.
For the three months ended September 30, 2026, the changes in estimates mentioned above favorably accounted for approximately 7.8% of revenues, compared to 7.1% of revenues for the three months ended September 30, 2025. Favorable impacts to revenues were primarily due to labor efficiencies and favorable impacts from projected cost changes, including material costs, project risk mitigation and change orders. As part of the favorable changes in estimates, we recognized a $7.6 million net benefit from a resolution on prior billings from a customer. However, these changes in estimates unfavorably accounted for approximately 1.8% of revenues for the three months ended September 30, 2026, compared to 1.9% of revenues for the three months ended September 30, 2025. 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, 2026, was $1.18 billion, an increase of $316.6 million, or 36.7%, from $862.6 million for the three months ended September 30, 2025. This increase primarily related to higher E&M and T&D operating costs due to increased workloads and changes in project mix, partially offset by efficient project execution. Labor, materials, subcontractors, and equipment and tools costs increased $143.4 million, $71.4 million, $47.7 million and $38.0 million, respectively, along with higher other job expenses of $16.1 million.
Gross Profit
Gross profit for the three months ended September 30, 2026, was $205.0 million, an increase of $80.8 million, or 65.1%, from $124.2 million for the three months ended September 30, 2025. The increase was primarily from revenue growth and gross margin improvement due to increased workloads, solid project execution and project timing. As mentioned above, we recognized a $7.6 million net benefit related to a dispute resolution on prior billings from a customer. Gross margin increased to 14.8% for the three months ended September 30, 2026, compared to 12.6% for the three months ended September 30, 2025.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the three months ended September 30, 2026, were $80.7 million, an increase of $28.9 million, or 55.8%, from $51.8 million for the three months ended September 30, 2025. The increase was primarily driven by higher incentive compensation of $13.4 million, primarily resulting from increased business performance, acquisition-related costs of $6.7 million in the current period, and higher amortization expenses of $5.7 million from the 2026 completed acquisitions.
Increase in Fair Value of Contingent Consideration
The increase in fair value of contingent consideration for the three months ended September 30, 2026, was $1.9 million. The contingent consideration liability relates to the potential SE&M earn-out payment and is remeasured to fair value at each reporting date. The increase was due to an updated forecast and expected achievement of the financial earn-out target, along with the time value of money. As no contingent consideration arrangements existed during 2025, no corresponding expense was recognized in the prior-year period.
Operating Income
Operating income for the three months ended September 30, 2026, was $122.4 million, an increase of $50.0 million, or 69.1%, from $72.4 million for the three months ended September 30, 2025. The increase was primarily driven by increased gross profit, partially offset by increased SG&A expenses, both of which are discussed above. Operating income margin increased to 8.8% for the three months ended September 30, 2026, compared to 7.3% for the three months ended September 30, 2025. See Segment Results of Operations-Three Months Ended September 30, 2026, Compared to Three Months Ended September 30, 2025 for further comparative analysis of segment operating income and "Corporate and Other" category operating income for the periods indicated.
Interest Income
Interest income for the three months ended September 30, 2026 was $2.2 million, an increase of $0.9 million, or 69.2%, from $1.3 million for the three months ended September 30, 2025. The increase was primarily driven by increased interest income of $0.8 million from our central cash management program, including daily cash sweep and money market deposit account programs, as well as increased interest income of $0.1 million from our captive insurance arrangement.
Interest Expense
Interest expense for the three months ended September 30, 2026, was $6.1 million, an increase of $0.7 million, or 13.0%, from $5.4 million for the three months ended September 30, 2025. The increase is primarily related to higher debt balances under the 2026 Refinancing Term Loan and 2026 Refinancing Revolving Credit Commitments (defined below), partially offset by reduced borrowings under the Original Term Loan (defined below) for the first two months of the current quarter before refinancing and lower average interest rates during the three months ended September 30, 2026, compared to the three months ended September 30, 2025.
Other Income, Net
Other income, net for the three months ended September 30, 2026, was $0.2 million, a decrease of $3.5 million, or 94.6%, from $3.7 million for the three months ended September 30, 2025. Other income, net decreased primarily due to higher miscellaneous income activities in 2025, including settlements, as well as $0.8 million of foreign currency transaction losses in 2026. There was no activity in 2025 related to foreign currency transaction gains or losses.
Income Taxes
Income taxes for the three months ended September 30, 2026, were $29.4 million, an increase of $8.8 million, or 42.7%, from $20.6 million for the three months ended September 30, 2025, primarily due to greater pretax income for the period, partially offset by a decrease in the effective tax rate for the current period. The effective tax rate was 24.2% for the three months ended September 30, 2026, compared to 26.6% for the three months ended September 30, 2025.
Income from Equity Method Investments
Income from equity method investments for the three months ended September 30, 2026, was $2.6 million, a decrease of $3.0 million, or 53.6%, from $5.6 million for the three months ended September 30, 2025. This decrease primarily related to certain joint venture project completions in 2025, resulting in decreased activity on joint ventures during the current period.
Net Income
Net income for the three months ended September 30, 2026, was $91.9 million, an increase of $34.9 million, or 61.2%, from $57.0 million for the three months ended September 30, 2025. The increase was primarily from increased gross profit, partially offset by higher SG&A expenses, higher income taxes on greater pretax income, and lower other income. Net income margin increased to 6.6% for the three months ended September 30, 2026, compared to 5.8% for the three months ended September 30, 2025.
Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025
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, | |||||||||||||||||||||||||||||
| 2026 |
% of revenues
|
2025 |
% of revenues
|
% change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues
|
$ | 3,652.7 | 100.0 | % | $ | 2,734.9 | 100.0 | % | 33.6 | % | |||||||||||||||||||
|
Cost of sales
|
3,134.1 | 85.8 | 2,398.3 | 87.7 | 30.7 | ||||||||||||||||||||||||
|
Gross profit
|
518.6 | 14.2 | 336.6 | 12.3 | 54.1 | ||||||||||||||||||||||||
|
Selling, general and administrative expenses
|
204.8 | 5.6 | 140.7 | 5.1 | 45.6 | ||||||||||||||||||||||||
| Increase in fair value of contingent consideration | 1.9 | 0.1 | - | - | NM | ||||||||||||||||||||||||
|
Operating income
|
311.9 | 8.5 | 195.9 | 7.2 | 59.2 | ||||||||||||||||||||||||
|
Interest income
|
5.9 | 0.2 | 2.8 | 0.1 | NM | ||||||||||||||||||||||||
|
Interest expense
|
15.4 | 0.5 | 16.4 | 0.6 | (6.1) | ||||||||||||||||||||||||
|
Other income, net
|
2.2 | 0.1 | 6.2 | 0.2 | (64.5) | ||||||||||||||||||||||||
|
Income before income taxes and income from equity method investments
|
304.6 | 8.3 | 188.5 | 6.9 | 61.6 | ||||||||||||||||||||||||
|
Income taxes
|
79.0 | 2.1 | 53.6 | 1.9 | 47.4 | ||||||||||||||||||||||||
|
Income from equity method investments
|
8.5 | 0.2 | 11.6 | 0.4 | (26.7) | ||||||||||||||||||||||||
|
Net income
|
$ | 234.1 | 6.4 | % | $ | 146.5 | 5.4 | % | 59.8 | % | |||||||||||||||||||
NM - Not Meaningful
Operating Revenues
Operating revenues for the nine months ended September 30, 2026, were $3.65 billion, an increase of $917.8 million, or 33.6%, from $2.73 billion for the nine months ended September 30, 2025. E&M revenues grew $852.1 million, or 40.0%, including 2026 completed acquisitions contributing $77.1 million. T&D revenues increased $66.6 million, or 10.7%. See "Segment Results of Operations-Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025" for further comparative analysis of segment revenues for the periods indicated.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied in prior periods positively net impacted revenues and accounted for approximately 4.6% of revenues for the nine months ended September 30, 2026, compared to 3.7% of revenues for the nine months ended September 30, 2025.
For the nine months ended September 30, 2026, the changes in estimates mentioned above favorably accounted for approximately 5.3% of revenues, compared to 4.6% of revenues for the nine months ended September 30, 2025. Favorable impacts to revenues were primarily due to labor efficiencies and favorable impacts from projected cost changes, including material costs, project risk mitigation and change orders. As part of the favorable changes in estimates during the current period, we recognized a $7.6 million net benefit from a resolution on prior billings from a customer. However, these changes in estimates unfavorably accounted for approximately 0.7% of revenues for the nine months ended September 30, 2026, compared to 0.9% of revenues for the nine months ended September 30, 2025. 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, 2026, was $3.13 billion, an increase of $735.8 million, or 30.7%, from $2.40 billion for the nine months ended September 30, 2025. This increase primarily related to higher E&M and T&D operating costs due to increased workloads and changes in project mix, partially offset by efficient project execution. Labor, materials, subcontractors, and equipment and tools costs increased $306.6 million, $173.7 million, $138.1 million, and $74.0 million, respectively, along with higher other job expenses of $43.4 million.
Gross Profit
Gross profit for the nine months ended September 30, 2026, was $518.6 million, an increase of $182.0 million, or 54.1%, from $336.6 million for the nine months ended September 30, 2025. The increase was primarily due to continued revenue growth and gross margin improvement due to increased workloads, solid project execution and project timing. As mentioned above, we recognized a $7.6 million net benefit related to a dispute resolution on prior billings from a customer. Gross margin increased to 14.2% for the nine months ended September 30, 2026, compared to 12.3% for the nine months ended September 30, 2025.
Selling, General and Administrative Expenses
SG&A expenses for the nine months ended September 30, 2026, were $204.8 million, an increase of $64.1 million, or 45.6%, from $140.7 million for the nine months ended September 30, 2025. The increase was driven primarily by higher incentive compensation of $28.2 million, primarily resulting from increased business performance, acquisition-related costs of $10.2 million in the current period, higher amortization expenses of $8.9 million from the 2026 completed acquisitions, and increased labor costs, excluding incentive compensation, of $8.4 million to support continued operational growth.
Increase in Fair Value of Contingent Consideration
The increase in fair value of contingent consideration for the nine months ended September 30, 2026, was $1.9 million. The contingent consideration liability relates to the potential SE&M earn-out payment and is remeasured to fair value at each reporting date. The increase was due to an updated forecast and expected achievement of the financial earn-out target, along with the time value of money. As no contingent consideration arrangements existed during 2025, no corresponding expense was recognized in the prior-year period.
Operating Income
Operating income for the nine months ended September 30, 2026 was $311.9 million, an increase of $116.0 million, or 59.2%, from $195.9 million for the nine months ended September 30, 2025. The increase was primarily driven by increased gross profit, partially offset by increased SG&A expenses, both of which are discussed above. Operating income margin increased to 8.5% for the nine months ended September 30, 2026, compared to 7.2% for the nine months ended September 30, 2025. See "Segment Results of Operations-Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025" for further comparative analysis of segment operating income and "Corporate and Other" category operating income for the periods indicated.
Interest Income
Interest income for the nine months ended September 30, 2026 was $5.9 million, an increase of $3.1 million, from $2.8 million for the nine months ended September 30, 2025. The increase was primarily driven by increased interest income of $2.9 million from our central cash management program, including daily cash sweep and money market deposit account programs, as well as increased interest income of $0.2 million from our captive insurance arrangement.
Interest Expense
Interest expense for the nine months ended September 30, 2026, was $15.4 million, a decrease of $1.0 million, or 6.1%, from $16.4 million for the nine months ended September 30, 2025. The decrease during the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, is primarily related to reduced borrowings under the Original Term Loan (defined below) for approximately eight months of the current-year period, and average lower interest rates, partially offset by September borrowings under the 2026 Refinancing Term Loan and 2026 Refinancing Revolving Credit Commitments (defined below).
Other Income, Net
Other income, net for the nine months ended September 30, 2026, was $2.2 million, a decrease of $4.0 million, or 64.5%, from $6.2 million for the nine months ended September 30, 2025. Other income, net decreased primarily due to higher miscellaneous income activities in 2025, including settlements, as well as $0.8 million of foreign currency transaction losses in 2026. There was no activity in 2025 related to foreign currency transaction gains or losses.
Income Taxes
Income taxes for the nine months ended September 30, 2026, were $79.0 million, an increase of $25.4 million, or 47.4%, from $53.6 million for the nine months ended September 30, 2025, primarily due to greater pretax income for the period, partially offset by a decrease in the effective tax rate for the current period. The effective tax rate was 25.2% for the nine months ended September 30, 2026, compared to 26.8% for the nine months ended September 30, 2025.
Income from Equity Method Investments
Income from equity method investments for the nine months ended September 30, 2026, was $8.5 million, a decrease of $3.1 million, or 26.7%, from $11.6 million for the nine months ended September 30, 2025. This decrease primarily related to certain joint venture project completions in 2025, resulting in decreased activity on joint ventures during the current period.
Net Income
Net income for the nine months ended September 30, 2026, was $234.1 million, an increase of $87.6 million, or 59.8%, from $146.5 million for the nine months ended September 30, 2025. The increase was primarily from increased gross profit, partially offset by higher SG&A expenses and higher income taxes on greater pretax income. Net income margin increased to 6.4% for the nine months ended September 30, 2026, compared to 5.4% for the nine months ended September 30, 2025.
Segment Results of Operations
Three Months Ended September 30, 2026, Compared to Three Months Ended September 30, 2025
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, | |||||||||||||||||||||||||||||
| 2026 |
% of revenues
|
2025 |
% of revenues
|
% Change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 1,135.7 | 82.0 | % | $ | 767.3 | 77.8 | % | 48.0 | % | |||||||||||||||||||
|
T&D
|
255.6 | 18.5 | 223.4 | 22.6 | 14.4 | ||||||||||||||||||||||||
|
Eliminations
|
(7.1) | (0.5) | (3.9) | (0.4) | 82.1 | ||||||||||||||||||||||||
|
Consolidated revenues
|
$ | 1,384.2 | 100.0 | % | $ | 986.8 | 100.0 | % | 40.3 | % | |||||||||||||||||||
|
Operating income:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 109.1 | 9.6 | % | $ | 57.0 | 7.4 | % | 91.4 | % | |||||||||||||||||||
|
T&D
|
30.9 | 12.1 | 27.5 | 12.3 | 12.4 | ||||||||||||||||||||||||
|
Corporate and Other1
|
(17.6) | (1.3) | (12.1) | (1.2) | (45.5) | ||||||||||||||||||||||||
|
Consolidated operating income
|
$ | 122.4 | 8.8 | % | $ | 72.4 | 7.3 | % | 69.1 | % | |||||||||||||||||||
1.Corporate and Other operating income percentage of revenues was calculated by dividing Corporate and Other operating income by consolidated revenues for the periods indicated.
Operating Revenues
E&M
E&M segment revenues for the three months ended September 30, 2026, were $1.14 billion, an increase of $368.4 million, or 48.0%, from $767.3 million for the three months ended September 30, 2025. The increase in revenues was primarily driven by higher revenues in the commercial and industrial end markets, particularly continued growth in the data center and high-tech submarkets, partially offset by lower revenues in the renewables end market. For the three months ended September 30, 2026, 2026 completed acquisitions contributed $43.7 million to E&M segment revenues.
•Commercial revenues grew $290.7 million, primarily from higher data center and hospitality submarket activity due to increased workloads from continued increased demand for services.
•Industrial revenues increased $98.7 million, primarily due to increased activity in the high tech and manufacturing submarkets.
•Institutional revenues declined $3.8 million, primarily from lower project activity in the education submarket due to project timing and decreased demand for services, partially offset by increased activity in the healthcare and low voltage submarkets.
•Service & other revenues declined $5.3 million, as a result of lower repair and maintenance demand.
•Renewables revenues declined $11.9 million, reflecting decreased activity in the generation and commercial 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 5.3% of E&M revenues for the three months ended September 30, 2026, compared to 3.8% of E&M revenues for the three months ended September 30, 2025.
For the three months ended September 30, 2026, the changes in estimates mentioned above favorably accounted for approximately 5.7% of E&M revenues, compared to 5.0% of E&M revenues for the three months ended September 30, 2025. However, these changes in estimates unfavorably accounted for approximately 0.4% of E&M revenues for the three months ended September 30, 2026, compared to 1.2% of E&M revenues for the three months ended September 30, 2025. The primary drivers of favorable and unfavorable impacts to revenues were previously mentioned in the consolidated results of operations sections above.
T&D
T&D segment revenues for the three months ended September 30, 2026, were $255.6 million, an increase of $32.2 million, or 14.4%, from $223.4 million for the three months ended September 30, 2025. The increase was driven by higher utility end-market revenues, partially offset by lower workloads in the transportation end market.
•Utility revenues increased $41.4 million, primarily from increased project activity across several submarkets, particularly transmission, distribution, underground, and rentals.
•Transportation revenues declined $9.2 million, with reduced project activity in the traffic signalization submarket, partially offset by marginal increase in street lighting submarket activity.
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 1.6% of T&D revenues for the three months ended September 30, 2026, compared to 1.4% of T&D revenues for the three months ended September 30, 2025.
For the three months ended September 30, 2026, the changes in estimates mentioned above favorably accounted for approximately 3.4% of T&D revenues, compared to 2.0% of T&D revenues for the three months ended September 30, 2025. However, these changes in estimates unfavorably accounted for approximately 1.8% of T&D revenues for the three months ended September 30, 2026, compared to 0.6% of T&D revenues for the three months ended September 30, 2025. 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, 2026, was $109.1 million, an increase of $52.1 million, or 91.4%, from $57.0 million for the three months ended September 30, 2025. The increase was primarily from E&M segment revenue growth and higher gross profit across commercial and institutional end markets, due to increased workloads, project timing and project execution. E&M gross margin increased to 14.3% for the three months ended September 30, 2026, compared to 11.2% for the three months ended September 30, 2025.
Operating income was also impacted by higher SG&A expenses primarily from higher incentive compensation of $12.9 million, primarily resulting from increased segment performance, and higher amortization expenses of $5.7 million from 2026 completed acquisitions. Operating income margin for our E&M segment increased to 9.6% for the three months ended September 30, 2026 compared to 7.4% for the three months ended September 30, 2025.
T&D
T&D segment operating income for the three months ended September 30, 2026, was $30.9 million, an increase of $3.4 million, or 12.4%, from $27.5 million for the three months ended September 30, 2025. The increase was the result of higher gross profit in the utility end market from higher revenues and efficient project execution, partially offset by lower gross profit in the transportation end market caused by lower revenues and reduced gross margin. T&D gross margin decreased to 16.3% for the three months ended September 30, 2026, from 16.9% for the three months ended September 30, 2025.
SG&A expenses remained relatively consistent period over period, primarily from increased other general expenses of $0.5 million and professional-related services of $0.3 million, partially offset by decreased corporate overhead of $0.4 million. Operating income margin for our T&D segment modestly declined to 12.1% for the three months ended September 30, 2026, compared to 12.3% for the three months ended September 30, 2025.
Corporate and Other
The increase in Corporate and Other costs during the three months ended September 30, 2026 was primarily due to acquisition-related costs of $6.7 million and increased labor, including incentive compensation, of $1.5 million, partially offset by reduced corporate overhead of $1.2 million.
Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025
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, | |||||||||||||||||||||||||||||
| 2026 |
% of revenues
|
2025 |
% of revenues
|
% Change | |||||||||||||||||||||||||
|
(In millions, except percentages)
|
|||||||||||||||||||||||||||||
|
Operating revenues:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 2,981.2 | 81.6 | % | $ | 2,129.1 | 77.8 | % | 40.0 | % | |||||||||||||||||||
|
T&D
|
687.4 | 18.8 | 620.8 | 22.7 | 10.7 | ||||||||||||||||||||||||
|
Eliminations
|
(15.9) | (0.4) | (15.0) | (0.5) | 6.0 | ||||||||||||||||||||||||
|
Consolidated revenues
|
$ | 3,652.7 | 100.0 | % | $ | 2,734.9 | 100.0 | % | 33.6 | % | |||||||||||||||||||
|
Operating income:
|
|||||||||||||||||||||||||||||
|
E&M
|
$ | 280.2 | 9.4 | % | $ | 160.5 | 7.5 | % | 74.6 | % | |||||||||||||||||||
|
T&D
|
77.0 | 11.2 | 65.7 | 10.6 | 17.2 | ||||||||||||||||||||||||
|
Corporate and Other1
|
(45.3) | (1.2) | (30.3) | (1.1) | (49.5) | ||||||||||||||||||||||||
|
Consolidated operating income
|
$ | 311.9 | 8.5 | % | $ | 195.9 | 7.2 | % | 59.2 | % | |||||||||||||||||||
1.Corporate and Other operating income percentage of revenues was calculated by dividing Corporate and Other operating income by consolidated revenues for the periods indicated.
Operating Revenues
E&M
E&M segment revenues for the nine months ended September 30, 2026, were $2.98 billion, an increase of $852.1 million, or 40.0%, from $2.13 billion for the nine months ended September 30, 2025. The increase was primarily driven by higher revenues in the commercial and industrial end markets, particularly continued growth in the data center and high-tech submarkets, partially offset by decreased revenues in the institutional and renewables end markets. For the nine months ended September 30, 2026, 2026 completed acquisitions contributed $77.1 million to E&M segment revenues.
•Commercial revenues grew $771.6 million, primarily from higher data center and hospitality submarket activity due to increased workloads from continued increased demand for services.
•Industrial revenues increased $161.1 million, primarily from increased project activity in the high tech and manufacturing submarkets.
•Service & other revenues declined $3.6 million, due to decreased repair and maintenance demand.
•Renewables revenues declined $12.3 million, reflecting decreased project activity within the generation and commercial submarkets.
•Institutional revenues declined $64.8 million, primarily from lower project activity due to project timing and decreased demand for services in the education, government and healthcare submarkets.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied in prior periods positively net impacted E&M revenues and accounted for approximately 5.3% of E&M revenues for the nine months ended September 30, 2026, compared to 3.0% of E&M revenues for the nine months ended September 30, 2025.
For the nine months ended September 30, 2026, the changes in estimates mentioned above favorably accounted for approximately 5.7% of E&M revenues, compared to 3.7% of E&M revenues for the nine months ended September 30, 2025. However, these changes in estimates unfavorably accounted for approximately 0.4% of E&M revenues for the nine months ended September 30, 2026, compared to 0.7% of E&M revenues for the nine months ended September 30, 2025. The primary drivers of favorable and unfavorable impacts to revenues were previously mentioned in the consolidated results of operations sections above.
T&D
T&D segment revenues for the nine months ended September 30, 2026, were $687.4 million, an increase of $66.6 million, or 10.7%, from $620.8 million for the nine months ended September 30, 2025. The increase was primarily driven by increased workloads in the utility end market, partially offset by reduced transportation end-market revenues.
•Utility revenues increased $80.7 million, primarily from increased project activity across many submarkets, particularly transmission, distribution, underground, rentals, storm and substation, partially offset by decreased submarket activity in the gas submarket due to the timing of project availability.
•Transportation revenues declined $14.0 million, reflecting lower workloads in the traffic signalization and street lighting submarkets.
Changes in estimates associated with performance obligations that were satisfied or partially satisfied in prior periods positively net impacted T&D revenues and accounted for approximately 1.6% of T&D revenues for the nine months ended September 30, 2026, compared to 0.8% of T&D revenues for the nine months ended September 30, 2025.
For the nine months ended September 30, 2026, the changes in estimates mentioned above favorably accounted for approximately 3.4% of T&D revenues, compared to 1.0% of T&D revenues for the nine months ended September 30, 2025. However, these changes in estimates unfavorably accounted for approximately 1.8% of T&D revenues for the nine months ended September 30, 2026, compared to 0.2% of T&D revenues for the nine months ended September 30, 2025. 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, 2026, was $280.2 million, an increase of $119.7 million, or 74.6%, from $160.5 million for the nine months ended September 30, 2025. The increase was primarily from E&M segment revenue growth and higher gross profit across multiple end markets, particularly commercial, institutional and industrial, due to due to increased workloads, project timing and project execution. As a result, gross margin improved to 13.7% for the nine months ended September 30, 2026, compared to 11.3% for the nine months ended September 30, 2025.
Operating income was also impacted by higher SG&A expenses, primarily from higher incentive compensation of $25.6 million, primarily resulting from increased segment performance, higher amortization expenses of $8.9 million from 2026 completed acquisitions, increased labor cost, excluding incentive compensation, of $3.9 million, to support continued segment operational growth and higher office expenses of $3.9 million. Operating income margin for our E&M segment increased to 9.4% for the nine months ended September 30, 2026, compared to 7.5% for the nine months ended September 30, 2025.
T&D
Operating income in the T&D segment for the nine months ended September 30, 2026, was $77.0 million, an increase of $11.3 million, or 17.2%, from $65.7 million for the nine months ended September 30, 2025. The increase was the result of higher gross profit due to T&D segment revenue growth and efficient project execution within the utility end market, with modest T&D gross margin improvement of 15.7% for the nine months ended September 30, 2026, compared to 15.4% for the nine months ended September 30, 2025.
SG&A expenses remained largely consistent period over period, primarily reflecting increased labor costs, excluding incentive compensation, of $0.8 million to support segment operational growth. Operating income margin for our T&D segment increased to 11.2% for the nine months ended September 30, 2026, compared to 10.6% for the nine months ended September 30, 2025.
Corporate and Other
The increase in Corporate and Other costs during the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to acquisition-related costs of $10.2 million and increased labor cost, excluding incentive compensation, of $3.7 million, to support continued business growth, and higher incentive compensation of $2.6 million due to increased business performance.
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 underneath 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. See "Item 1A. Risk Factors" included in our 2025 Annual Report for factors that 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, 2026:
|
Amounts estimated to be recognized within 12 months
|
September 30, 2026
|
December 31, 2025
|
September 30, 2025
|
|||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
|
E&M
|
$ | 4,135.6 | $ | 5,111.4 | $ | 2,843.8 | $ | 2,570.4 | ||||||||||||||||||
|
T&D
|
299.2 | 371.3 | 384.5 | 375.8 | ||||||||||||||||||||||
| Total | $ | 4,434.8 | $ | 5,482.7 | $ | 3,228.3 | $ | 2,946.2 | ||||||||||||||||||
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, as well as additions from acquisitions. Businesses acquired during the nine months ended September 30, 2026 contributed estimated backlog of $742.3 million as of September 30, 2026, included within the E&M segment detail above.
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 we 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 substitutes 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. EBITDA and EBITDA margin are considered non-GAAP financial measures and are comparable to the corresponding GAAP measures of net income and net income margin, respectively.
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, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | % Change | 2026 | 2025 | % Change | |||||||||||||||||||||||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||||||||||||||||
|
Net income
|
$ | 91.9 | $ | 57.0 | 61.2 | % | $ | 234.1 | $ | 146.5 | 59.8 | % | ||||||||||||||||||||||||||
|
Interest expense, net
|
3.9 | 4.1 | (4.9) | 9.5 | 13.6 | (30.1) | ||||||||||||||||||||||||||||||||
|
Income taxes
|
29.3 | 20.6 | 42.2 | % | 79.0 | 53.6 | 47.4 | % | ||||||||||||||||||||||||||||||
|
Depreciation and amortization
|
15.1 | 7.3 | NM | 35.1 | 21.3 | 64.8 | % | |||||||||||||||||||||||||||||||
|
EBITDA
|
$ | 140.2 | $ | 89.0 | 57.5 | % | $ | 357.7 | $ | 235.0 | 52.2 | % | ||||||||||||||||||||||||||
|
Operating revenues
|
$ | 1,384.2 | $ | 986.8 | 40.3 | % | $ | 3,652.7 | $ | 2,734.9 | 33.6 | % | ||||||||||||||||||||||||||
|
Net income margin
|
6.6 | % | 5.8 | % | 6.4 | % | 5.4 | % | ||||||||||||||||||||||||||||||
|
EBITDA margin
|
10.1 | % | 9.0 | % | 9.8 | % | 8.6 | % | ||||||||||||||||||||||||||||||
NM - Not Meaningful
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 potential 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 provides reconciliations of cash provided by operating activities to free cash flow.
| Nine months ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In millions) | |||||||||||
|
Net cash used in investing activities
|
$ | (429.5) | $ | (33.6) | |||||||
|
Net cash provided by (used in) financing activities
|
$ | 257.2 | $ | (11.8) | |||||||
|
Net cash provided by operating activities
|
$ | 267.3 | $ | 108.6 | |||||||
|
Capital expenditures
|
(53.4) | (42.1) | |||||||||
|
Net proceeds from sale or disposition of property, plant and equipment
|
7.3 | 8.3 | |||||||||
|
Free cash flow
|
$ | 221.2 | $ | 74.8 | |||||||
Liquidity and Capital Resources
As of September 30, 2026 and December 31, 2025, we had $264.2 million and $170.5 million of cash, cash equivalents and restricted cash, respectively, including $19.4 million and $17.8 million of restricted cash largely held by the Captive Cell, respectively.
On April 1, 2026, we completed the acquisition of SE&M for initial base consideration of $158 million, subject to certain closing adjustments, funded by cash on hand.
On September 1, 2026, we completed the acquisition of Epsilon for initial base consideration of $295 million, subject to certain closing adjustments, funded through a combination of borrowings under the Credit Agreement (defined below) and cash on hand.
To fund day-to-day operations, we may use cash on hand and third-party credit facilities that are available through certain credit arrangements we have in place. In addition, we have a centralized cash management model to monitor and help maximize daily cash flows for our cash needs.
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 to fund 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 "Original Credit Agreement"), whereby we had the capacity to incur indebtedness of up to $525.0 million, which consisted of a $300.0 million senior secured first lien term loan ("Original Term Loan"), in aggregate principal amount, and a $225.0 million revolving credit facility containing senior secured first lien revolving credit commitments ("Original Revolving Credit Commitments"). The Original Revolving Credit Commitments included a letter-of-credit sublimit aggregate amount of up to $50.0 million.
On September 1, 2026, we entered into a First Amendment (the "First Amendment") to the Original Credit Agreement (together with the First Amendment, the "Credit Agreement"). Pursuant to the First Amendment, the Original Credit Agreement was amended to, among other things, (a) refinance the Original Term Loan outstanding, together with interest, under the Original Credit Agreement in full; (b) increase the Original Term Loan outstanding by an aggregate principal amount of $200.0 million for a total aggregate principal amount of $477.5 million (the "2026 Refinancing Term Loan"); (c) refinance the Original Revolving Credit Commitments outstanding under the Original Credit Agreement in full; and (d) increase the Original Revolving Credit Commitments by an additional $125.0 million for a total aggregate commitment of $350.0 million (the "2026 Refinancing Revolving Credit Commitments"). Any outstanding portion of the $50.0 million aggregate letter-of-credit sublimit under the Original Revolving Credit Commitments will be deemed outstanding under the 2026 Refinancing Revolving Credit Commitments.
The proceeds from the 2026 Refinancing Term Loan were made available to us, (a) to refinance the Original Term Loan, (b) to fund the Epsilon acquisition, (c) to pay fees and expenses related thereto and (d) for working capital and other general corporate purposes.
In connection with the First Amendment, we repaid and immediately re-borrowed the outstanding term loan amount of $277.5 million as part of the refinance and also drew $100.0 million under the 2026 Refinancing Revolving Credit Commitments, which was still outstanding as of September 30, 2026.
The proceeds of any borrowings under the 2026 Refinancing Credit Commitments are expected to be used by us for general corporate purposes, including the Epsilon acquisition, acquisitions, restricted payments and other permitted investments, and/or for other purpose not prohibited by the Credit Agreement.
In connection with the First Amendment, the Company paid certain customary fees.
As a result of the Credit Agreement activity disclosed above, we had $471.5 million outstanding under the 2026 Refinancing Term Loan and $247.8 million of available capacity under the 2026 Refinancing Revolving Credit Commitments, net of $100.0 million of outstanding commitments and $2.2 million of outstanding standby letters of credit, respectively, as of September 30, 2026.
As of December 31, 2025, we had $285.0 million outstanding under the Original Term Loan and $222.8 million of available capacity under the Original Revolving Credit Commitments, net of $2.2 million of outstanding standby letters of credit.
The term loan (including original and refinancing) and the revolving credit commitments (including original and refinancing) 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 to 1.00 and a minimum interest coverage ratio of 3.00 to 1.00, each determined as of the end of each fiscal quarter. Per the Credit Agreement, consolidated total net leverage ratio is defined as the ratio of (a) consolidated funded indebtedness of the Company to (b) last twelve months ("LTM") earnings before interest, taxes, depreciation and amortization ("EBITDA"). Interest coverage ratio is defined as the ratio of (a) LTM EBITDA to (b) consolidated cash interest expense of the Company. The consolidated total net leverage ratio may be increased at the Company's option to 3.50 to 1.00 in connection with certain qualifying material acquisitions. The covenants also include restrictions on the sale of certain assets, loans and investments.
The Original Term Loan required quarterly amortization payments of 1.25% of the aggregate initial principal amount of the Original Term Loan on the last business day of each fiscal quarter starting with the fiscal quarter ending on March 31, 2025 and through and including the last full fiscal quarter ending prior to the maturity date, or 5.00% per annum.
The 2026 Refinancing Term Loan requires quarterly amortization payments of 1.25% of the aggregate initial principal amount of the 2026 Refinancing Term Loan on the last business day of each fiscal quarter starting with the fiscal quarter ending on September 30, 2026 and through and including the last full fiscal quarter ending prior to the maturity date, or 5.00% per annum.
For the nine months ended September 30, 2026 and 2025, we paid our required quarterly amortization payments under the Original Term Loan and the 2026 Refinancing Term Loan totaling $13.5 million and $11.3 million, respectively.
We also paid $10.9 million and $14.5 million of associated interest on outstanding borrowings under the Original Term Loan and the 2026 Refinancing Term Loan for the nine months ended September 30, 2026 and 2025, respectively.
The Credit Agreement also requires mandatory prepayments in connection with certain asset sales, subject to certain exceptions.
The Credit Agreement provides for incremental revolving and term facilities at our request and at the discretion of the lenders or other persons providing such incremental facilities, and also permits us to incur other secured or unsecured debt, in all cases subject to conditions and limitations on the amount of such incremental facility or other debt as specified in the Credit Agreement.
The Credit Agreement contains certain limitations with respect to indebtedness, liens, acquisitions and other investments, fundamental changes, restrictive agreements, dividends and redemptions or repurchases of stock, prepayments of certain subordinated indebtedness, dispositions of assets and transactions with affiliates, in each case subject to certain exceptions.
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 September 30, 2026. Non-compliance with applicable covenants or conditions may constitute an event of default under the Credit Agreement. Subject to any applicable cure periods, failure to remedy such a default may require us to pursue alternative sources of funding. For additional information on our debt arrangements, refer to Note 7 - 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 $612.3 million and $560.2 million as of September 30, 2026 and December 31, 2025, 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. Acquisitions and credit/financing arrangements have and may in the future impact working capital.
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, 2026, 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, 2026, were $53.4 million, or $46.1 million net of proceeds from asset disposals, compared to $42.1 million, or $33.8 million net of proceeds from asset disposals, for the nine months ended September 30, 2025. Capital expenditures were primarily used for vehicle, equipment and building investments to support the operational growth of our business. For the nine months ended September 30, 2026 and 2025, capital expenditures were funded by internal sources and borrowings under our credit and financing arrangements.
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. As of September 30, 2026, we still expect gross capital expenditures for full-year 2026 to be in the range of $90.0 million to $100.0 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 needs 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, 2026 and 2025:
| Nine months ended September 30, | 2026 | 2025 | ||||||||||||
| (In millions) | ||||||||||||||
| Net cash provided by (used in): | ||||||||||||||
| Operating activities | $ | 267.3 | $ | 108.6 | ||||||||||
| Investing activities | (429.5) | (33.6) | ||||||||||||
| Financing activities | 257.2 | (11.8) | ||||||||||||
|
Effect of foreign currency translation adjustments on cash, cash equivalents, and restricted cash
|
(1.3) | - | ||||||||||||
|
Increase in cash, cash equivalents and restricted cash
|
93.7 | 63.2 | ||||||||||||
|
Cash, cash equivalents and restricted cash - beginning of period
|
170.5 | 86.0 | ||||||||||||
|
Cash, cash equivalents and restricted cash - end of period
|
$ | 264.2 | $ | 149.2 | ||||||||||
Operating Activities
Cash provided by operating activities totaled $267.3 million for the nine months ended September 30, 2026, compared to $108.6 million for the nine months ended September 30, 2025, an increase of $158.7 million. The increase in cash provided by operating activities was primarily driven by favorable changes in operating assets and liabilities to support company growth and performance, including revenue growth, and increased operating results.
These changes in operating assets and liabilities drove an increase in cash period-over-period with a use of cash of $16.1 million for the nine months ended September 30, 2026, compared to a use of cash of $59.6 million for the nine months ended September 30, 2025. The changes in operating assets and liabilities period-over-period were primarily related to increases in cash from changes in contract liabilities, contract assets and other current liabilities of $78.7 million, $42.9 million and $33.9 million, respectively, partially offset by decreases in cash from changes in receivables and accounts payable of $97.4 million and $19.7 million, respectively.
Investing Activities
Cash used in investing activities totaled $429.5 million for the nine months ended September 30, 2026, compared to $33.6 million for the nine months ended September 30, 2025, an increase of $395.9 million in cash used in investing. The increase in cash used in investing activities was primarily due to net cash outflows related to acquisitions of $380.5 million during the nine months ended September 30, 2026, higher net capital expenditures of $11.3 million, and proceeds from insurance contracts of $2.2 million during the nine months ended September 30, 2025, which did not recur in 2026.
Financing Activities
Cash provided by financing activities totaled $257.2 million for the nine months ended September 30, 2026, compared to cash used in financing activities of $11.8 million for the nine months ended September 30, 2025, an increase in cash for financing activities of $269.0 million. The increase in cash for financing activities was primarily the result of the First Amendment to the Credit Agreement entered into in the third quarter of 2026, whereby we refinanced the term loan debt and increased the amount outstanding by $200.0 million. In addition, we borrowed $100.0 million under the revolving credit commitments during 2026, with no such activity occurring in 2025. These increases in cash were partially offset by a $22.3 million repayment of long-term debt that was assumed through acquisition and and increase of $2.2 million in quarterly amortization payments on the term loan.
Material Cash Requirements
As of September 30, 2026, the Company's material cash requirements were as follows:
| Remainder of 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
Long-term debt maturities1
|
$ | 6.0 | $ | 23.9 | $ | 23.9 | $ | 417.7 | $ | - | $ | - | $ | - | $ | 471.5 | ||||||||||||||||||||||||||||||||||
|
Estimated fixed-maturity interest payments2
|
6.6 | 25.5 | 25.2 | 19.1 | - | - | - | 76.4 | ||||||||||||||||||||||||||||||||||||||||||
| Operating leases | $ | 11.7 | $ | 38.1 | $ | 25.8 | $ | 16.8 | $ | 11.4 | $ | 9.6 | 48.6 | $ | 162.0 | |||||||||||||||||||||||||||||||||||
1.Represents borrowings outstanding under the 2026 Refinancing Term Loan. Unamortized debt issuance costs are excluded from the table.
2.Represents the estimated interest payments associated with the 2026 Refinancing Term Loan, assuming current interest rates and amounts outstanding as of September 30, 2026, until respective maturity date over the periods indicated in the table above.
Revolving credit commitments by nature do not have contractual maturity. The estimated interest payments and the unused commitment fees assuming current interest rates and $100.0 million outstanding under the 2026 Refinancing Revolving Credit Commitments would equal $6.4 million on an annualized basis.
There were no other material changes in our contractual obligations from those reported in our 2025 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 2025 Annual Report.
Off-Balance Sheet Arrangements
As is common in our industry, we enter 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 can include, but are not limited to, surety guarantees, performance guarantees, letters of credit obligations and firm purchase commitments for maintenance items, materials and lease 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, 2026 and December 31, 2025, we had approximately $2.66 billion and $2.10 billion in surety bonds outstanding for projects, respectively. As of September 30, 2026 and December 31, 2025, approximately $2.23 billion and $1.66 billion of bonding was posted for E&M, respectively, and approximately $409.8 million and $410.0 million of bonding was posted for T&D, respectively. In addition, approximately $27.9 million of bonding was posted for Corporate and Other for each period presented. These amounts were not reflected on the unaudited condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025. As of September 30, 2026 and December 31, 2025, the potential maximum payment amounts we would be required to make under the outstanding surety bonds were approximately $986.0 million and $767.7 million, respectively.
As of both September 30, 2026 and December 31, 2025, the Company had $18.1 million of surety-backed standby letters of credit that were included in the bonding posted for Corporate and Other.
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, 2026 and December 31, 2025, the fixed maximum amounts guaranteed under these agreements aggregated to $1.00 billion and $641.1 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 $2.2 million of outstanding standby letters of credit for certain guarantees to third parties under our revolving credit commitments as of both September 30, 2026 and December 31, 2025. 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 14 - Commitments, Contingencies and Guarantees in the unaudited condensed consolidated financial statements contained 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
Except as disclosed below, there have been no other material changes in our critical accounting estimates from those that were disclosed in our 2025 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 2025 Annual Report.
Valuation of Intangible Assets
Finite-lived Intangible Assets
The valuation of acquired intangible assets requires significant assumptions and estimates. The fair value of finite-lived intangible assets acquired on the respective acquisition dates, including the respective gross intangible asset value as well as the appropriate amortization periods, was determined using the following methodologies. Customer relationships and backlog were valued using the multi-period excess earnings method, which utilized various significant inputs and assumptions, including future revenues, contributory asset charges, discount rates, customer attrition rates and tax amortization benefits. Trade names and trademarks were valued using the relief-from-royalty method, which utilized various significant inputs and assumptions, including market royalty rates, forecasted revenues, expected useful lives and obsolescence assumptions, and tax amortization benefits.
Indefinite-lived Intangible Assets
The fair value of the indefinite-lived intangible asset acquired on the acquisition date was determined using the relief from royalty method-profit split analysis, which used various significant inputs and assumptions, including market royalty rates, operating history, brand reputation, discount rates, long-term growth and capitalization rates, and tax amortization benefits.
Contingent Consideration
The valuation method for the acquisition-date fair value of the contingent consideration that is not subject to continued employment of the sellers involved the use of a Monte Carlo simulation model that used numerous significant inputs, including a risk-free rate, EBITDA volatility, EBITDA risk premium, and a credit risk-adjusted discount rate.
Everus Construction Group Inc. published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 22:09 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]