Centuri Holdings, Inc.(CTRI) - 2024 Q2 - Quarterly Report

IPO and Financial Position - Centuri Holdings completed its IPO on April 22, 2024, selling 14,260,000 shares at an initial price of $21.00 per share, resulting in net proceeds of approximately$ 328.0 million after expenses[107]. - As of June 30, 2024, cash and cash equivalents were $30.9 million, down from$ 33.4 million on December 31, 2023[160]. - Net cash used in operating activities for the six months ended June 30, 2024 was $76.4 million, a decrease of$ 56.9 million compared to $19.5 million for the same period in 2023[164]. - Net cash provided by financing activities increased by$ 92.3 million during the six months ended June 30, 2024, primarily due to net proceeds from the Centuri IPO and private placement totaling $330.3 million[166]. - The company has a senior secured revolving credit and term loan facility with a total capacity of$ 400 million, with $143.6 million outstanding on the revolving credit facility as of June 30, 2024[168]. - The maximum amount outstanding on the combined credit facility was$ 1.117 billion during the six months ended June 30, 2024[168]. - The company is required to maintain a net leverage ratio of less than 5.00 to 1.00 from April 18, 2024 through June 30, 2024, following the completion of the Qualified IPO[170]. - Contractually obligated principal payments on long-term debt total approximately $1.056 billion, with$ 831.4 million due in 2028[171]. Revenue and Segment Performance - Consolidated revenue for the three months ended June 30, 2024, was $672.1 million, a decrease of$ 133.7 million or 16.6% compared to $805.8 million in the prior year[130]. - U.S. Gas segment revenue totaled$ 340.7 million, a decrease of $51.2 million or 13.1% compared to the prior year, with gross profit margin dropping to 7.4% from 11.2%[130][131]. - Canadian Gas segment revenue was$ 41.0 million, down $7.1 million or 14.8%, but gross profit margin increased to 22.8% from 15.8%[131]. - Union Electric segment revenue decreased by$ 54.0 million or 24.8% to $164.2 million, with gross profit margin declining to 7.4% from 7.8%[132]. - Non-Union Electric segment revenue was$ 120.5 million, a decrease of $13.0 million or 9.8%, with gross profit margin dropping to 13.5% from 15.4%[133]. - Consolidated revenue dropped by$ 258.9 million, or 17.7%, to $1,200.1 million, with consolidated gross profit decreasing to$ 73.8 million[142]. Profitability and Expenses - Gross profit for the same period was $60.5 million, representing a gross margin of 9.0%, down from 11.2% in the prior year, reflecting a decrease of$ 29.5 million or 32.8%[130]. - Selling, general and administrative expenses decreased by $9.4 million or 31.2% compared to the prior year, primarily due to lower incentive compensation and reductions in corporate salary and benefit costs[135]. - Selling, general and administrative expenses decreased by$ 4.4 million, or 8.2%, primarily due to lower incentive compensation and corporate salary reductions[147]. - Interest expense decreased due to a reduction in average debt balance, with $156.0 million paid down under the revolving credit facility and$ 160.0 million under the term loan facility[137]. - The effective tax rate for the fiscal three months ended June 30, 2024, was (4.2%), significantly impacted by nondeductible expenses in relation to income before income taxes[138]. - The effective tax rate increased to 61.1% from 37.4%, significantly impacted by nondeductible expenses[150]. - Net income for the three months ended June 30, 2024, was $11.7 million, a decrease of$ 6.8 million or 36.9% compared to $18.5 million in the prior year[130]. - Adjusted Net Income for the fiscal six months ended June 30, 2024, was$ 2.6 million, compared to $23.1 million for the same period in the prior year[158]. Operational Challenges and Market Conditions - Rising fuel, labor, and material costs have negatively impacted operations, with the company unable to fully pass these costs to customers[112]. - Inflation and rising interest rates could negatively affect the company's financial condition and results of operations[123]. - Seasonal demand affects revenue, typically lowest in the first quarter due to winter conditions, with higher revenue expected in summer and fall[121]. - The company has taken steps to secure equipment availability and does not anticipate significant disruptions in the near term[114]. - The company is well-positioned to benefit from increased demand for utility infrastructure services due to aging infrastructure and regulatory requirements[111]. Strategic Initiatives - The company aims to support customers' environmental goals, including reducing methane emissions and enhancing renewable energy infrastructure[118]. - The company reported a reorganization of its reportable segments from two to four, now including U.S. Gas, Canadian Gas, Union Electric, and Non-Union Electric[109]. - The company expects separation-related costs to continue through at least fiscal year 2025 as it establishes itself as a standalone public entity[108].