Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Everus Construction Group Inc (ECG, Financial) reported a 20% increase in fourth-quarter revenue, driven by balanced growth across diversified markets such as commercial data centers, institutional, and utility sectors.
- The company's total backlog at the end of the fourth quarter was $2.8 billion, marking a 38% increase from the previous year, providing good visibility into near-term growth.
- Everus Construction Group Inc (ECG) ended the year with a net leverage of one times, below their long-term target, offering significant financial flexibility for strategic growth.
- The company has a strong focus on strategic M&A, aiming to leverage its asset-light model and strong free cash flow to ramp up investments in both organic and inorganic opportunities.
- Everus Construction Group Inc (ECG) is optimistic about favorable market trends, particularly in the T&D and E&M sectors, driven by factors like electrification and data center construction, which are expected to continue as growth drivers.
Negative Points
- Fourth-quarter EBITDA remained relatively flat due to incremental public company stand-up costs, despite higher revenues.
- Corporate expenses were higher than expected in the fourth quarter, partly due to timing issues such as audit fees and the costs associated with building corporate teams.
- The company's EBITDA margin guidance for 2025 is down about 30 basis points from 2024, reflecting assumptions of more normal levels of project execution.
- Everus Construction Group Inc (ECG) faces potential market impacts from factors such as tariffs, higher inflation, and interest rates, which could affect economic growth and business operations.
- The company is experiencing a slightly longer backlog conversion cycle due to larger, more complex projects, which could impact revenue timing and execution.
Q & A Highlights
Q: Can you elaborate on how you approached the revenue guidance for 2025, particularly regarding backlog conversion and project duration?
A: Jeffrey S. Thiede, CEO: We've been able to handle larger, more complex projects, which take longer to complete. This is especially true in sectors like data centers and hospitality. We plan and procure materials early, which aligns with our strategic focus on large projects. Maximillian J. Marcy, CFO: We won't provide specific numbers, but the backlog conversion can be up to 10 points different from past figures due to these larger projects.
Q: What are you seeing in terms of project pipeline and backlog trends?
A: Jeffrey S. Thiede, CEO: We see strong demand in commercial areas, particularly data centers and hospitality. Industrial and institutional markets are also growing, with projects like battery plants complementing our T&D work. Our capabilities align well with market trends, and we expect continued growth.
Q: Can you explain the higher corporate expenses in the fourth quarter and how we should think about them going forward?
A: Maximillian J. Marcy, CFO: There were no significant one-time expenses, but some timing issues like audit fees. We're building our corporate team, and we feel confident about the $28 million full-year estimate for dis-synergies. This includes costs related to standing up as a public company.
Q: How are you approaching M&A, and what are your plans for prefabrication investments?
A: Jeffrey S. Thiede, CEO: We're excited about M&A, focusing on companies with strong leadership and culture. Prefabrication is a key area, reducing project congestion and improving efficiency. Maximillian J. Marcy, CFO: We have financial flexibility for M&A, and our prefab investments are a multi-year opportunity to enhance project execution.
Q: Regarding the $28 million dis-synergy cost, should we expect this to continue, or will there be synergies over time?
A: Maximillian J. Marcy, CFO: The $28 million is more of a stand-up cost that will persist. Insurance is a significant component, and while we hope to improve, current market conditions suggest costs won't decrease soon. As we grow, these costs will become a smaller percentage of revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
