Centuri Holdings Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and corresponding notes, and our final IPO prospectus (the “IPO Prospectus”) filed on April 18, 2024 with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities act of 1933, as amended relating to our Registration Statement on Form S-1. Unless the context otherwise requires, references to “we,” “is,” “our,” and “our company” refer to Centuri Holdings, Inc. and its consolidated subsidiaries. As discussed in “Note 1 — Description of Business” to the condensed consolidated financial statements, all financial information presented herein is the financial information of Centuri Holdings, Inc. and its subsidiaries, including Centuri Group, Inc. (“the Operating Company”). This discussion contains 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 the results contemplated by these forward-looking statements due to a number of factors, including those discussed within the IPO Prospectus, particularly in the section titled “Risk Factors.”Actual results may differ materially from these expectations. See “Cautionary Note Regarding Forward-Looking Statements.”

Current wording

Unless the context otherwise requires, references to “we,” “is,” “our,” and “our company” refer to Centuri Holdings, Inc. and its consolidated subsidiaries. As discussed in “Note 1 — Description of Business” to the condensed consolidated financial statements, all financial information presented herein is the financial information of Centuri Holdings, Inc. and its subsidiaries, including Centuri Group, Inc. (“the Operating Company”). This discussion contains 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 the results contemplated by these forward-looking statements due to a number of factors, including those discussed within Item 1A. Risk Factors in our 2024 Annual Report. See “Cautionary Note Regarding Forward-Looking Statements.”

Previous wording

We use a 52/53-week fiscal year that ends on the Sunday closest to the end of the calendar year. Unless otherwise stated, references to months and years throughout relate to fiscal months and years rather than calendar months and years. The first fiscal nine months of 2024 and 2023 ended on September 29, 2024 and October 1, 2023, respectively, and each period had 39 weeks. The third fiscal quarters of 2024 and 2023 each had 13 weeks.

Current wording

We use a 52/53-week fiscal year that ends on the Sunday closest to the end of the calendar year. Unless otherwise stated, references to months and quarters throughout relate to fiscal months and quarters rather than calendar months and quarters. The first fiscal three months of 2025 and 2024 ended on March 30, 2025 and March 31, 2024, respectively, and each period had 13 weeks.

Previous wording

We are a leading, pure-play North American utility infrastructure services company that partners with regulated utilities to maintain, upgrade and expand the energy network that powers millions of homes and businesses. We serve as long-term strategic partners to, and an extension of, North America’s electric, gas and combination utility providers, delivering a wide range of infrastructure solutions. Our service offerings primarily consist of the modernization of utility infrastructure through the maintenance, retrofitting and installation of electric and natural gas distribution networks, and building capacity to meet current and future demands. We also serve complementary, attractive and growing end markets such as renewable energy associated with the expected energy transition and 5G datacom. Our essential services enable our customers to enhance the safety, reliability and environmental sustainability of the electric and natural gas networks that consumers rely upon to meet their essential and evolving energy needs.

Current wording

We are a leading North American utility infrastructure services company, and we partner with regulated utilities to maintain, upgrade and expand the energy network that powers millions of homes and businesses. We serve as long-term strategic partners to, and an extension of, North America’s electric, gas and combination utility providers, delivering a wide range of infrastructure solutions. Our service offerings primarily consist of the modernization of utility infrastructure through the replacement, maintenance, retrofitting and installation of electric and natural gas distribution and utility-scale transmission networks, and building capacity to meet current and future demands. We also serve complementary, attractive and growing end markets such as renewable energy associated with the expected energy transition, data centers and 5G datacom. Our essential services enable our customers to enhance the safety, reliability and environmental sustainability of the electric and natural gas networks that consumers rely upon to meet their essential and evolving energy needs. Guided by our values and our unwavering commitment to serve as long-term partners to customers and communities, our employees enable our customers to safely and reliably deliver electricity and natural gas and achieve their goals for environmental sustainability.

Previous wording

We were incorporated in Delaware in June 2023 as a wholly owned subsidiary of Southwest Gas Holdings, Inc. (“Southwest Gas Holdings”). We were formed for the purpose of completing an initial public offering, facilitating the separation of the Operating Company from Southwest Gas Holdings and other related transactions in order to carry on the business of the Operating Company, our predecessor for financial reporting purposes. Prior to April 13, 2024, Southwest Gas Holdings owned 1,000 shares of our common stock, representing 100% of the issued and outstanding shares of our common stock. On April 13, 2024, we issued 71,664,592 shares of common stock to Southwest Gas Holdings as consideration for the transfer of assets and assumption of liabilities of the Operating Company (the “Separation”). Following the completion of the Separation, the Operating Company became our wholly owned subsidiary, and all of our operations are conducted through the Operating Company. On April 17, 2024, the registration statement related to the initial public offering of our common stock was declared effective, and our common stock began trading on the New York Stock Exchange under the ticker “CTRI” (the “Centuri IPO”) on April 18, 2024.

Current wording

We were incorporated in Delaware in June 2023 as a wholly owned subsidiary of Southwest Gas Holdings, Inc. (“Southwest Gas Holdings”). We were formed for the purpose of completing an initial public offering, facilitating the separation of the Operating Company from Southwest Gas Holdings and other related transactions in order to carry on the business of the Operating Company, our predecessor for financial reporting purposes. Prior to April 13, 2024, Southwest Gas Holdings owned 1,000 shares of our common stock, representing 100% of the issued and outstanding shares of our common stock. On April 13, 2024, we issued 71,664,592 shares of common stock to Southwest Gas Holdings as consideration for the transfer of assets and assumption of liabilities of the Operating Company (the “Separation”). Following the completion of the Separation, the Operating Company became our wholly owned subsidiary, and all of our operations are conducted through the Operating Company.

Previous wording

As of and prior to December 31, 2023, we reported our results under the following two reportable segments: Gas Utility Services and Electric Utility Services. In January 2024, we appointed a new Chief Executive Officer, who we determined to be our chief operating decision maker (“CODM”). Following this appointment, we underwent an internal personnel reorganization, causing us to re-evaluate our reportable segments based on the information reviewed by the new CODM. We determined that it was appropriate to re-align our reporting structure from the following two reportable segments: (i) Gas Utility Services; and (ii) Electric Utility Services, to the following four reportable segments: (i) U.S. Gas Utility Services (“U.S. Gas”); (ii) Canadian Gas Utility Services (“Canadian Gas”); (iii) Union Electric Utility Services (“Union Electric”); and (iv) Non-Union Electric Utility Services (“Non-Union Electric”). The U.S. Gas and Canadian Gas businesses have historically been part of our Gas Utility Services segment, and the Union Electric and Non-Union Electric businesses have historically been part of our Electric Utility Services segment. All prior year segment financial information has been recast to reflect the new segment structure. Effective July 31, 2024, we appointed an interim Chief Executive Officer who currently acts as the Company’s CODM. However, there has been no change in the information reviewed by the CODM.

Current wording

We report our results under the following four reportable segments: (i) U.S. Gas Utility Services (“U.S. Gas”); (ii) Canadian Gas Utility Services (“Canadian Gas”); (iii) Union Electric Utility Services (“Union Electric”); and (iv) Non-Union Electric Utility Services (“Non-Union Electric”).

Previous wording

North America relies on electric and natural gas delivery infrastructure to maintain its dynamic economy, but existing infrastructure is subject to degradation and is often decades old. Governments have increased regulatory stringency and enacted legislation to support the necessary infrastructure investments in the sector, aimed at preventing disruption, enhancing safety and readying to meet current and future demands. Additionally, labor market constraints and a changing utility workforce have led utilities to become increasingly reliant on external outsourced utility service providers, creating an overall growing market well positioned for consolidation. We believe these trends represent a significant challenge for utilities, but also an opportunity for outsourced utility infrastructure services companies to build and maintain more efficient, sustainable infrastructure that can meet the energy needs of future generations.

Current wording

North America relies on electric and natural gas delivery infrastructure to maintain its dynamic economy, but existing infrastructure is subject to degradation and is often decades old. Governments have increased regulatory stringency and enacted legislation to support the necessary infrastructure investments in the sector, aimed at preventing disruption, enhancing safety and readying to meet current and future demands. Additionally, labor market constraints and a changing utility workforce have led utilities to become increasingly reliant on external outsourced utility infrastructure service providers, creating an overall growing market well-positioned for consolidation. We believe these trends represent a significant challenge for utilities, but also an opportunity for outsourced utility infrastructure services companies to build and maintain more efficient, sustainable infrastructure that can meet the energy needs of future generations.

Previous wording

Rising fuel, labor and material costs have had, and could continue to have, a negative effect on our results of operations, to the extent we cannot pass these costs through to our customers. While we actively monitor economic, industry and market factors that could adversely impact our business, we cannot predict the effect that changes in such factors could have on our future results of operations, financial position and cash flows.

Current wording

Rising fuel, labor and material costs have in the past had, and could in the future have, a negative effect on our results of operations, to the extent we cannot pass these costs through to our customers. While we actively monitor economic, industry and market factors that could adversely impact our business, we cannot predict the effect that changes in such factors could have on our future results of operations, financial position and cash flows.

Previous wording

Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S., and we believe that we are well-positioned to serve the increased demand resulting from these programs.

Current wording

Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S., andwe believe that we are well-positioned to serve the increased demand resulting from these programs.

Previous wording

Our services support customers’ environmental goals, such as reducing methane emissions from pipeline leaks through pipe repair and replacement, hardening electric infrastructure to prevent damage from storms or otherwise, and assisting gas and electric customers with their renewable and sustainable energy infrastructure initiatives. We believe that we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance. Additionally, our acquisition of Riggs Distler in 2021 positions us to benefit from the necessary development of onshore infrastructure to support offshore wind and power development. We believe we are particularly well-positioned to capture incremental demand in the offshore wind space given the rapid and continuing expansion of projects in our core geographies, as North America looks to renewable energy sources that can sustain all-time high grid demands.

Current wording

Our services support customers’ environmental goals, such as reducing methane emissions from pipeline leaks through pipe repair and replacement, hardening electric infrastructure to prevent damage from storms or otherwise, and assisting gas and electric customers with their renewable and sustainable energy infrastructure initiatives. We believe that we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance.

Previous wording

Our operations are affected by increases in prices, whether caused by inflation, rising interest rates or other economic factors. We attempt to recover anticipated increases in the cost of labor, equipment, fuel and materials through price escalation provisions that allow us to adjust billing rates for certain major contracts annually; by considering the estimated effect of such increases when bidding or pricing new work; or by entering into back-to-back contracts with suppliers and subcontractors. However, the annual adjustment provided by certain contracts is typically subject to a cap and there can be an extended period of time between the impact of inflation on our costs and when billing rates are adjusted. Our actual costs at times can exceed the contractual caps, and therefore negatively impact our operations. Additionally, rising interest rates on our variable-rate debt could have a negative effect on our business, financial condition and results of operations. Overall, the third quarter of 2024 was not significantly impacted by inflation when compared to the same quarter in the prior year, as we have begun to see slower growth in prices in recent periods.

Current wording

Under the terms of a majority of our MSAs, materials used in our utility infrastructure service activities are specified, purchased and supplied by customers. However, our operations are affected by increases in prices, whether caused by inflation, tariffs, rising interest rates or other economic factors. We attempt to recover anticipated increases in the cost of labor, equipment, fuel and materials not purchased by customers through price escalation provisions that allow us to adjust billing rates for certain major contracts annually; by considering the estimated effect of such increases when bidding or pricing new work; or by entering into back-to-back contracts with suppliers and subcontractors. However, the annual adjustment provided by certain contracts is typically subject to a cap and there can be an extended period of time between the impact of inflation on our costs and when billing rates are adjusted. Our actual costs at times can exceed the contractual caps, and therefore negatively impact our operations. Additionally, rising interest rates on our variable-rate debt could have a negative effect on our business, financial condition and results of operations. Overall, our results for the first quarter of 2025 were not significantly impacted by increases in prices, including due to recently implemented tariffs. We are currently monitoring the impacts of tariffs on the price and availability of our equipment as well as any potential impacts to project scheduling, but we do not currently expect a material effect on our results of operations.

Previous wording

Backlog represents estimates of revenue to be realized under long-term master service agreements (“MSAs”) and bid agreements. Backlog differs from remaining performance obligations disclosed in “Note 3 — Revenue and Related Balance Sheet Accounts” to the condensed consolidated financial statements, as remaining performance obligations are limited to contractually obligated revenue on our contracts that exceed one year, which is typically only bid projects, whereas backlog is inclusive of all contracts regardless of length and includes estimated future work under MSAs. Generally, customers are not contractually committed to specific volumes of work under MSAs, and MSAs may be terminated by either party upon notice. Revenue estimates for MSAs are based on historical customer trends. Projects included in backlog can be subject to delays or cancellation as a result of regulatory requirements, adverse weather conditions, customer requirements and other factors that could cause actual revenue to differ significantly from the estimates, or cause revenue to be realized in periods other than originally expected. Backlog as of September 29, 2024 was approximately $4.3 billion, approximately 87% of which related to MSAs, and backlog as of December 31, 2023 was approximately $5.1 billion, approximately 90% of which related to MSAs.

Current wording

Backlog differs from remaining performance obligations disclosed in “Note 3 — Revenue and Related Balance Sheet Accounts” to the condensed consolidated financial statements, as remaining performance obligations are limited to contractually obligated revenue on our contracts that exceed one year, which is typically only bid projects, whereas backlog is inclusive of all contracts regardless of length and includes estimated future work over the contractual life of MSAs. Generally, customers are not contractually committed to specific volumes of work under MSAs, and MSAs may be terminated by either party upon notice. Revenue estimates for MSAs are based on historical customer trends. As backlog only includes revenue estimates over the contractual life of MSAs, backlog tends to fluctuate based on the timing of MSA renewals.

Previous wording

Our results of operations, on a consolidated basis and by segment, for the fiscal three and nine months ended September 29, 2024 and October 1, 2023 are set forth below.

Current wording

Our results of operations, on a consolidated basis and by segment, for the fiscal three month periods ended March 30, 2025 and March 31, 2024 are set forth and compared below.

Previous wording

Net cash used in financing activities increased by $2.7 million during the fiscal nine months ended September 29, 2024 compared to the fiscal nine months ended October 1, 2023. Significant changes in financing activities during the current fiscal year include cash inflows from net proceeds from the Centuri IPO and private placement of $328.0 million, and cash flow outflows for the $160.0 million payment on our term loan and $156.0 million payment on our revolving credit facility with IPO proceeds, $100.0 million payment on our term loan with proceeds from the Securitization Facility, and our redemption of redeemable noncontrolling interest for $92.8 million.

Current wording

Fiscal three months ended March 30, 2025 compared to the fiscal three months ended March 31, 2024

Previous wording

The following table summarizes our consolidated results of operations for the fiscal three months ended September 29, 2024, and October 1, 2023 including as a percentage of revenue, as well as the dollar and percentage change from the prior year period.

Current wording

The following table summarizes our consolidated results of operations for the fiscal three months ended March 30, 2025, and March 31, 2024 including as a percentage of revenue, as well as the dollar and percentage change period-over-period.

Previous wording

•Revenue from non-reportable segments decreased due to timing of bid projects, and profitability was negatively impacted by performance issues on certain bid projects.

Current wording

•Revenue from our Canadian Gas segment totaled $39.8 million, reflecting a decrease of $1.2 million, or 2.9%, compared to the prior year period. As a percentage of revenue, gross profit increased to 17.8% in the current period as compared to 7.5% in the same period from the prior year. This increase was primarily attributable to improvements on bid margins, as the prior year period was negatively impacted by performance issues on certain bid projects which did not recur in the current year period. Additionally, in the current year period the segment benefited from a $1.0 million government rebate related to surplus Workplace Safety and Insurance Board premiums paid in previous years.

Previous wording

•Revenue from our Union Electric segment totaled $171.7 million, reflecting a decrease of $32.5 million, or 15.9%, compared to the prior year period. This decrease was driven by a decline in offshore wind revenue of $38.0 million due to timing of projects, partially offset by increased revenue on bid projects. Storm restoration services revenue for the Union Electric segment was $6.7 million for the current period compared to $10.8 million for the prior year period. As a percentage of revenue, gross profit increased to 9.0% in the current period as compared to 5.7% in the prior year period as the segment experienced higher margins on their increased bid volumes.

Current wording

•Revenue from our Union Electric segment totaled $175.5 million, reflecting an increase of $11.6 million, or 7.1%, compared to the prior year period. This increase was driven by incremental bid work, which was partially offset by a planned decline in offshore wind revenue of $22.3 million due to timing of projects. Emergency restoration services revenue for the Union Electric segment was $1.6 million for the current period compared to $7.5 million for the prior year period. As a percentage of revenue, gross profit decreased to 6.7% in the current period as compared to 6.9% in the prior year period.

Previous wording

•Revenue from our Non-Union Electric segment totaled $128.8 million, reflecting an increase of $18.1 million, or 16.4%, compared to the prior year period. This increase was primarily due to revenue from storm restoration services which accounted for $34.7 million of the segment’s revenue for the current period, compared to $8.1 million for the prior year period. As a percentage of revenue, gross profit increased to 16.6% in the current period compared to 11.6% in the prior year period, primarily due to the higher profitability of storm work, mainly resulting from the impacts of Hurricane Beryl early in the quarter and Hurricane Helene in the last few days of the period.

Current wording

•Revenue from our Non-Union Electric segment totaled $137.1 million, reflecting an increase of $40.5 million, or 41.9%, compared to the prior year period. This increase was primarily due to an increase in volumes on existing MSAs. Additionally, emergency restoration services increased $14.8 million, accounting for $16.6 million of the segment’s revenue for the current period compared to just $1.8 million for the prior year period. As a percentage of revenue, gross profit increased to 11.9% in the current period compared to 2.9% in the prior year period due to the higher profitability of storm work and more efficient utilization of fixed costs due to an increase in crew counts and weekly hours worked per crew under existing MSAs.

Previous wording

The decrease in interest expense, net in the current period compared to the prior year period was primarily due to a reduction in average debt balance as we paid down $156.0 million of debt under our revolving credit facility and $160.0 million of debt under our term loan facility with proceeds from our IPO and private placement on April 22, 2024. This decrease was partially offset by $1.7 million recorded in interest expense in the current quarter related to a write-off of debt issuance costs associated with our term loan which was partially paid down using proceeds from the Securitization Facility.

Current wording

The decrease in interest expense, net in the current period compared to the prior year period was primarily due to a reduction in average debt balance and a reduction in interest rates on outstanding variable-rate borrowings.

Previous wording

The Company’s effective tax rate for the fiscal nine months ended September 29, 2024 and October 1, 2023 was (3.1)% and 37.3%, respectively. The effective tax rate for the current period was impacted by the disproportionate amount of non-deductible expenses in relation to income before income taxes as well our use of the actual effective tax rate instead of the estimated annual effective tax rate method used in prior interim periods (refer to “Note 12 — Income Taxes” to the condensed consolidated financial statements for further discussion).

Current wording

The Company’s effective tax rate for the fiscal three months ended March 30, 2025 and March 31, 2024 was relatively consistent, at 42.3% and 45.2%, respectively. The tax rates for both periods were unfavorably impacted by the disproportionate amount of non-deductible expenses in relation to income before income taxes.

Previous wording

We prepare and present our financial statements in accordance with GAAP. However, management believes that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income, all of which are measures not presented in accordance with GAAP, provide investors with additional useful information in evaluating our performance. We use these non-GAAP measures internally to evaluate performance and to make financial, investment and operational decisions. We believe that presentation of these non-GAAP measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparisons of results. Management also believes that providing these non-GAAP measures helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such matters.

Current wording

We prepare and present our financial statements in accordance with GAAP. However, management believes that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Loss, all of which are measures not presented in accordance with GAAP, provide investors with additional useful information in evaluating our performance. We use these non-GAAP measures internally to evaluate performance and to make financial, investment and operational decisions. We believe that presentation of these non-GAAP measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparisons of results. Management also believes that providing these non-GAAP measures helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such matters.

Previous wording

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (i) non-cash stock-based compensation expense, (ii) strategic review costs, (iii) severance costs, (iv) securitization facility transaction fees, (v) CEO transition costs. Adjusted EBITDA Margin is defined as the percentage derived from dividing Adjusted EBITDA by revenue.

Current wording

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (i) non-cash stock-based compensation expense, (ii) separation-related costs, (iii) strategic review costs, and (iv) severance costs. Adjusted EBITDA Margin is defined as the percentage derived from dividing Adjusted EBITDA by revenue. Management believes that EBITDA helps investors gain an understanding of the factors affecting our ongoing cash earnings from which capital investments are made and debt is serviced, and that Adjusted EBITDA provides additional insight by removing certain expenses that are non-recurring and/or non-operational in nature. Management believes that Adjusted EBITDA Margin is useful for the same reason as Adjusted EBITDA, and also provides an additional understanding of how Adjusted EBITDA is impacted by factors other than changes in revenue. Because these non-GAAP metrics, as defined, exclude some, but not all, items that affect comparable GAAP financial measures, these non-GAAP metrics may not be comparable to similarly titled measures of other companies.

Previous wording

Adjusted Net Income is defined as net (loss) income adjusted for (i) strategic review costs, (ii) severance costs, (iii) amortization of intangible assets, (iv) securitization facility transaction fees, (v) CEO transition costs, (vi) loss on debt extinguishment, (vii) non-cash stock-based compensation expense, and (viii) the income tax impact of adjustments that are subject to tax, which is determined using the incremental statutory tax rates of the jurisdictions to which each adjustment relates for the respective periods.

Current wording

Adjusted Net Loss is defined as net loss adjusted for (i) separation-related costs, (ii) strategic review costs, (iii) severance costs, (iv) amortization of intangible assets, (v) non-cash stock-based compensation expense, and (vi) the income tax impact of adjustments that are subject to tax, which is determined using the incremental statutory tax rates of the jurisdictions to which each adjustment relates for the respective periods. Management believes that Adjusted Net Loss helps investors understand the profitability of our business when excluding certain expenses that are non-recurring and/or non-operational in nature.

Previous wording

Using EBITDA as a performance measure has material limitations as compared to net (loss) income, or other financial measures as defined under GAAP, as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenue, depreciation and amortization are necessary elements of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net income (loss). When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net income/loss in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the Company on a full-cost, after-tax basis.

Current wording

Using EBITDA as a performance measure has material limitations as compared to net loss, or other financial measures as defined under GAAP, as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenue, depreciation and amortization are necessary elements of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net loss. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net loss in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the Company on a full-cost, after-tax basis.

Previous wording

As to certain of the items related to Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income: (i) non-cash stock-based compensation expense varies from period to period due to changes in the estimated fair value of performance-based awards, forfeitures and amounts granted; (ii) strategic review and related costs incurred in connection with the separation and stand up of Centuri as its own public company are non-recurring; (iii) severance costs relate to non-recurring restructuring activities, (iv) securitization facility transaction fees represent legal and other professional fees incurred to establish our Securitization Facility, (v) CEO transition costs represent incremental costs incurred to find and hire a replacement CEO, and (vi) loss on debt extinguishment relates to the write-off of debt issuance costs on the Company’s term loan. Because EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income, as defined, exclude some, but not all, items that affect net (loss) income, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net (loss) income, and information reconciling the GAAP and non-GAAP financial measures, are set forth below.

Current wording

As to certain of the items related to these non-GAAP metrics: (i) non-cash stock-based compensation expense varies from period to period due to changes in the estimated fair value of performance-based awards, forfeitures and amounts granted; (ii) separation-related costs represent expenses incurred post-Centuri IPO in connection with the separation and stand up of Centuri as its own public company, including costs incurred in connection with the establishment of Centuri’s Unutilized Tax Assets Agreement with Southwest Gas Holdings and under other separation-related agreements, which are not reflective of our ongoing operations and will not recur following the full separation from Southwest Gas Holdings; (iii) strategic review costs represent costs incurred during the Centuri IPO and related costs incurred to establish Centuri as a public company leading up to the IPO; and (iv) severance costs relate to non-recurring restructuring activities. The most comparable GAAP financial measure and information reconciling the GAAP and non-GAAP financial measures are set forth below.

Previous wording

The following table presents reconciliations of net (loss) income to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the specified periods:

Current wording

The following table presents reconciliations of net loss to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the specified periods:

Previous wording

The following table presents reconciliations of net (loss) income to Adjusted Net Income for the specified periods:

Current wording

The following table presents reconciliations of net loss to Adjusted Net Loss for the specified periods:

Previous wording

As of September 29, 2024 and December 31, 2023, cash and cash equivalents were $52.5 million and $33.4 million, respectively. Historically, our primary sources of liquidity have been cash flows from operations and debt financing. As discussed in “Note 1 — Description of Business” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and “The Offering” within the IPO Prospectus, the Centuri IPO and concurrent private placement have led to changes in our capital structure and sources of liquidity. As part of the Centuri IPO and concurrent private placement which closed on April 22, 2024, we received total net proceeds of $328.0 million in exchange for 16,851,929 shares of our common stock, with $316.0 million of the proceeds being used to pay down our existing debt. In September 2024, we entered into our Securitization Facility with PNC Bank, National Association ("PNC") to improve cash flows from trade accounts receivable and used a majority of the proceeds to pay down our existing debt. Under the Securitization Facility, certain designated subsidiaries of the Company have sold and/or contributed, and will continue to sell and/or contribute, their accounts receivable and contract assets generated in the ordinary course of their business and certain related assets to an indirect wholly owned bankruptcy-remote Special Purpose Entity (“SPE”) of the Company created specifically for this purpose. The SPE transfers ownership and control of accounts receivable to PNC for payments as set forth in the agreement. The Company accounts for accounts receivable sold to the banking counterparty as a sale of financial assets and has derecognized the accounts receivable from the condensed consolidated balance sheet for the current period. The total outstanding balance of accounts receivable that have been sold and derecognized is $125.0 million as of September 29, 2024. As of September 29, 2024, we had no available capacity under the Securitization Facility. We believe our capital resources, including existing cash balances, together with our operating cash flows and borrowings under our credit facilities, are sufficient to meet our financial obligations for at least the next 12 months.

Current wording

Our primary liquidity needs have historically related to supporting working capital requirements, funding capital expenditures and servicing our debt. As of March 30, 2025 and December 29, 2024, cash and cash equivalents were $15.3 million and $49.0 million, respectively. We believe our capital resources, including existing cash balances, together with our operating cash flows and borrowings under our credit facilities, are sufficient to meet our financial obligations for at least the next 12 months.

Previous wording

Net cash used in investing activities was $59.3 million in the period ended September 29, 2024 compared to $71.9 million for October 1, 2023, a decrease of $12.6 million.

Current wording

Net cash used in investing activities was $23.2 million in the fiscal three months ended March 30, 2025 compared to $24.6 million for the fiscal three months ended March 31, 2024, a decrease of $1.4 million.

Previous wording

The construction industry is capital intensive, and we expect to continue to incur capital expenditures to meet anticipated needs for our services. For the fiscal nine months ended September 29, 2024 and October 1, 2023, we had capital expenditures of $66.1 million and $79.6 million, respectively.

Current wording

The construction industry is capital intensive, andwe expect to continue to incur capital expenditures to meet anticipated needs for our services. For the fiscal three months ended March 30, 2025 and March 31, 2024, we had capital expenditures of $24.4 million and $26.3 million, respectively.

Previous wording

These items were partially offset by proceeds from the sale of property and equipment of $6.8 million and $7.7 million for the fiscal nine months ended September 29, 2024 and October 1, 2023, respectively.

Current wording

These items were partially offset by proceeds from the sale of property and equipment of $1.2 million and $1.6 million for the fiscal three month periods ended March 30, 2025 and March 31, 2024, respectively.

Previous wording

While we primarily operate in the United States, we also have operations in Canada. Therefore, changes in the value of Canadian dollars affect our financial statements when translated into U.S. dollars. The revenue from our Canadian operations was approximately 7% and 8% of total revenue, for the fiscal nine months ended September 29, 2024, and October 1, 2023, respectively. At times, we also enter into transactions in foreign currencies, primarily in Canadian dollars, that subject us to currency risks. We regularly monitor our foreign currency exposure to determine the most effective foreign currency risk mitigation strategies. Currently, we are not party to any foreign currency exchange contracts.

Current wording

While we primarily operate in the United States, we also have operations in Canada. Therefore, changes in the value of Canadian dollars affect our financial statements when translated into U.S. dollars. The revenue from our Canadian operations was approximately 7% and 8% of total revenue for the fiscal three month periods ended March 30, 2025 and March 31, 2024, respectively. At times, we also enter into transactions in foreign currencies, primarily in Canadian dollars, that subject us to currency risks. We regularly monitor our foreign currency exposure to determine the most effective foreign currency risk mitigation strategies. Currently, we are not party to any foreign currency exchange contracts.

Previous wording

We have a senior secured revolving credit and term loan multi-currency facility. The line of credit portion comprises $400 million, and associated amounts borrowed and repaid are available to be re-borrowed. The term loan facility portion provided approximately $1.145 billion in financing as of August 27, 2021. The term loan facility expires on August 27, 2028, and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows us to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all of our direct and indirect subsidiaries, substantially all of our tangible and intangible personal property, and all products, profits and proceeds of the foregoing. Assets securing the facility totaled $2.0 billion as of September 29, 2024 and $2.1 billion as of December 31, 2023. During the fiscal nine month period ended September 29, 2024, the maximum amount outstanding on the combined facility was $1.117 billion, at which point $991.4 million was outstanding on the term loan portion of the facility. As of September 29, 2024 and December 31, 2023, $116.4 million and $77.1 million, respectively, was outstanding on the revolving credit facility, in addition to $731.4 million and $994.2 million, respectively, that was outstanding on the term loan portion of the facility. Also as of September 29, 2024 and December 31, 2023, there was approximately $218.4 million and $246.5 million, respectively, net of outstanding letters of credit, of unused capacity under the line of credit. We had $59.8 million and $48.6 million of unused letters of credit available as of September 29, 2024 and December 31, 2023, respectively.

Current wording

We have a senior secured revolving credit and term loan multi-currency facility. The line of credit portion comprises $400 million, and associated amounts borrowed and repaid are available to be re-borrowed. The term loan facility portion provided approximately $1.145 billion in financing as of August 27, 2021. The term loan facility expires on August 27, 2028, and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows us to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all of our direct and indirect subsidiaries, substantially all of our tangible and intangible personal property, and all products, profits and proceeds of the foregoing. Assets securing the facility totaled $1.9 billion as of March 30, 2025 and $2.0 billion as of December 29, 2024. During the fiscal three months ended March 30, 2025, the maximum amount outstanding on the combined facility was $804.2 million, at which point $706.4 million was outstanding on the term loan portion of the facility. As of March 30, 2025 and December 29, 2024, $97.8 million and $113.5 million, respectively, was outstanding on the revolving credit facility, in addition to $706.4 million that was outstanding on the term loan portion of the facility during both periods. Also, as of March 30, 2025 and December 29, 2024, there was approximately $241.8 million and $226.1 million, respectively, net of outstanding letters of credit, of unused capacity under the line of credit. We had $64.6 million of unused letters of credit available as of both March 30, 2025 and December 29, 2024.

Previous wording

On March 22, 2024, we amended the financial covenants of the revolving credit facility (the “2024 Credit Facility Amendment”) to increase the maximum net leverage ratio. The terms of the amended revolving credit facility required us to maintain certain net leverage ratios, which have since been superseded as noted in the paragraph below.

Current wording

On March 22, 2024, we amended the financial covenants of the revolving credit facility (the “2024 Credit Facility Amendment”) to increase the maximum net leverage ratio. The terms of the amended revolving credit facility require us to maintain a net leverage ratio of less than 4.00 to 1.00 and an interest coverage ratio of 2.50 to 1.00.

Previous wording

We currently have seven equipment term loans with initial amounts totaling approximately $170 million, with certain owned equipment used as collateral. The loans are serviced in U.S. dollars. These term loans have prepayment penalties for the first three years of the agreements. We did not incur any material prepayment penalties on any of our equipment loans during the first fiscal nine months of 2024 or 2023.

Current wording

We currently have seven equipment term loans with initial amounts totaling approximately $170 million, with certain owned equipment used as collateral. The loans are serviced in U.S. dollars.

Previous wording

Refer to “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” to our condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.

Current wording

Refer to “Note 2 — Basis of Presentation and Recent Accounting Pronouncements” to our condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.

Previous wording

This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires the use of estimates and assumptions. A summary of our critical accounting policies and estimates is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the IPO Prospectus. We are required to make estimates and judgments in the preparation of our condensed consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the fiscal nine months ended September 29, 2024, there were no material changes in our critical accounting estimates or policies.

Current wording

This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires the use of estimates and assumptions. A summary of our critical accounting policies and estimates is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our 2024 Annual Report. We are required to make estimates and judgments in the preparation of our condensed consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the fiscal three months ended March 30, 2025, there were no material changes in our critical accounting estimates or policies.