Everus Construction Group Stock

Hello, everyone. Thank you for joining us, and welcome to the Everus Second Quarter 2026 Earnings Call.

[Operator Instructions]

I will now hand over the conference to Paul Bartolai. Please go ahead.

Thank you. Good morning, everyone, and welcome to Everus Construction Group's Second Quarter 2026 Results Conference Call. Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy. We issued a news release yesterday detailing our second quarter 2026 operational and financial results. This release and the accompanying presentation materials are available on our website at investors.everus.com.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday, and in the appendix of today's presentation.

Today's call will begin with prepared remarks from Jeff, who will provide a review of our recent business performance, and an update on the progress against our strategic priorities. Followed by Max, who will provide a more detailed financial update before wrapping up with our guidance. At the conclusion of these prepared remarks, we will open the line for your questions. And with that, I'll turn the call over to Jeff.

Thank you, Paul, and good morning to everyone joining us today. Our positive momentum continued during the second quarter as sustained market demand and strong project execution resulted in another quarter of record revenues, meaningful margin expansion and robust backlog growth. We also made important progress against our key strategic priorities during the quarter. In April, we announced the acquisition of SE&M Constructors and the integration is progressing as planned.

We followed this transaction up with the announcement this past Friday that we expect to acquire Epsilon Industries, a leading provider of off-site modular construction solutions. We are very excited about the transaction, which we expect will provide a meaningful expansion of our off-site construction capabilities. I will give more details on the transaction later in my comments. Our robust organic growth and strong project execution directly reflect the diligent efforts of our talent team across the company and our unwavering focus on our strategic priorities. Our people are what drive our business, and I am extremely proud and grateful for their hard work and dedication.

Turning to our quarterly highlights, beginning with Slide 4. We delivered record second quarter revenues of $1.23 billion, up 34% from the prior year with growth across both our E&M and T&D segments, and the contribution from SE&M. Once again, our strong top line performance was complemented by another quarter of excellent execution. As a result, record second quarter EBITDA increased 53% from the prior year period, and our EBITDA margin was up 130 basis points. Our team's ability to deliver this level of strong project execution reflects their diligent use of our operational playbook. We are extremely proud of our track record of successful execution and will not get complacent. We remain focused on executing jobs safely, on time and on budget. Our backlog at the end of the second quarter was $4.55 billion, up 53% from the same period last year, driven by continued strength in E&M. The favorable demand trends are broad-based, and we continue to benefit from positive momentum across diverse markets with growth in nearly all submarkets sequentially.

Demand for our services remains strong as evidenced by our recent bookings. We always stay close to our customers, monitor market trends and track project activity. We have not experienced any project cancellations or notable changes in activity with our customers or projects. We remain encouraged by what we are seeing in our markets and remain confident in the growth outlook. The potential for change in any end market is why we remain committed to our diversified growth strategy, demand trends vary and we diligently position ourselves to take advantage of changing market dynamics. 10 years ago, it might have been health care that was a key growth driver. 5 years ago, it was hospitality, and now it is data centers and other markets like semiconductor.

Our focus is on making sure we have the people, capabilities and geographic exposure to take advantage of each phase of growth. Our recent expansion into a new geography and the announced acquisitions of SE&M and Epsilon are evidence of this strategy. We will continue to evaluate new geographies and strategic acquisitions that advance our growth strategy and keep us positioned to achieve our long-term financial targets. Now I'd like to shift gears and highlight our recent progress on our key strategic initiatives. As a reminder, our value creation framework is based on targeted growth, operational excellence and disciplined capital allocation. In terms of growth, we continue to benefit from strong end market trends, notably in the commercial and industrial markets. As I already discussed, we continue to see strong momentum across our markets.

Our data center work tends to be focused on several hyperscale customers. We continue to be very involved in long-term planning with these customers and demand remains strong. The project in our new geography for a semiconductor customer continues to ramp as expected, and we remain encouraged by opportunities we are seeing in this market. We will continue to focus on our diversified approach to growth and believe we are very well positioned to benefit from a broad set of favorable market trends given our strong relationships, track record of execution, and our highly skilled workforce across the country. Now turning to operational excellence. Our operating results continue to benefit from efficient project execution, including the advantages of our modular construction and prefabrication services. Off-site construction has long been an operational focus for our operating companies.

Off-site construction and controlled shop environment supports safer work conditions, helps us use labor and materials more efficiently and creates more predictable project outcomes. This more predictable project planning results in a strong customer relationships, which helps us grow our business. We have quarterly meetings with our modular prefabrication teams during which we share best practices, and explore ways to increase usage of off-site construction across the organization. The expected acquisition of Epsilon will further expand our capabilities. Epsilon has more than 25 years of experience in providing off-site construction solutions across North America. They are recognized for their innovation, proprietary capabilities and highly refined execution processes that provide consistent, and efficient delivery of complex custom solutions. Epsilon offers a full range of services, including design assist, custom fabrication and turnkey field installation that support diverse project types like data centers, advanced manufacturing and health care.

Epsilon has multiple strategic facilities in the U.S. and Canada, enabling nationwide distribution. In addition to integrating with our existing footprint, we expect that Epsilon's footprint will enhance growth in key geographic areas, including Florida, Texas, the Mid-Atlantic and the Northeast. Epsilon is led by a strong leadership team with extensive technical and operational expertise, and has an experienced labor force that includes more than 50 engineers and 120 skilled trace people. We are excited to welcome Epsilon to the Everus team and look forward to another successful integration after the transaction closes later this year. And finally, our focus on disciplined capital allocation. While it took some time, and I know everyone was eagerly waiting for us to begin executing on our inorganic growth strategy, we are very excited we acquired SE&M in April. Our first transaction as a stand-alone public company, and we are thrilled with our recent announcement of the pending Epsilon acquisition.

As I already mentioned, the integration of SE&M is on track, and we are already exploring expanded opportunities. They have a fantastic team, and we are grateful to have them be part of the Everus family of companies. We think both SE&M and Epsilon align with the acquisition strategy we previously described which is to expand our geographic footprint, diversify our business and deepen our market presence. Our net leverage is well below our 1.5x to 2x target range which gives us continued flexibility to execute on our growth strategy. Our acquisition pipeline remains active. In summary, we remain encouraged by the sustained market demand trends and are very proud of our continued strong execution. We are performing at a very high level across the organization, both strategically and operationally. Based on our robust first half of the year, we are pleased to be raising our 2026 guidance which Max will discuss in more detail.

We remain committed to our 4 EVER strategic priorities and are highly confident in our ability to deliver on our long-term financial goals. With that, I'll turn it over to Max.

Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter to give an update on our liquidity and balance sheet and wrap up with our updated guidance. Beginning on Slide 11 of the presentation. Record revenues for the second quarter were $1.23 billion, an increase of 34% compared to the same period last year. The increase was driven by growth in both our E&M and T&D segments, including contributions from the recently acquired SE&M. Excluding the contribution from SE&M, revenues were up 30% on an organic basis. Total EBITDA was $128.6 million during the second quarter, an increase of 53% from the same period in 2025 driven by solid revenue growth and continued strong project execution. As a result, our second quarter EBITDA margin was 10.4%, up 130 basis points from 9.1% in the prior year period.

On June 30, total backlog was $4.55 billion, up 53% from June 30 of last year. The increase was driven by strong growth in our E&M backlog, which was up 62%, reflecting organic growth across all E&M markets, as well as contributions from SE&M which contributed roughly $100 million to backlog at quarter end. Now turning to segment results. Let's first look at E&M, where our second quarter revenues increased 42% to $1.01 billion. The increase was driven primarily by growth in our commercial and industrial end markets, as well as the addition of SE&M. Excluding SE&M, our E&M revenue was up 37% organically. Our E&M EBITDA was $109.3 million in the second quarter, an increase of 72% compared to second quarter of 2025. The increase was driven by our strong revenue growth and higher gross margin due to project timing and strong project execution. As a result, our E&M segment EBITDA margin was 10.8%, up 190 basis points compared to 8.9% in the second quarter of 2025.

Our second quarter T&D revenues were $227.5 million, up 7.1% from second quarter of last year, driven by growth in our utility end market. T&D segment EBITDA was $32.8 million in the second quarter, up 7.9% from the prior year period due to the higher revenues. As a result, T&D segment EBITDA margin was 14.4% during the second quarter compared to 14.3% in the same period last year. Turning to our balance sheet and liquidity. As of June 30, we had $157 million of unrestricted cash and cash equivalents, $278 million of gross debt and $223 million available under the credit facility. Our net debt increased sequentially, reflecting the acquisition of SE&M, partially offset by our strong operating results. Net leverage defined as net debt to trailing 12-month EBITDA was 0.3x as of June 30, well below our 1.5x to 2x targeted range, providing ample flexibility to continue investing in our strategic growth initiatives. Operating cash flows were $196.8 million for the first 6 months of 2026, compared to $32.5 million in the same period last year, due to the strong operating results and favorable working capital timing.

CapEx was $35.6 million for the first 6 months of 2026, up modestly from $31.6 million in the prior year period. We generated free cash flow of $167 million for the first 6 months of 2026, up from $6.5 million in the first half of 2025. While our first half free cash flow had some timing benefits, we still expect a more normalized free cash flow conversion through the remainder of the year with our forecasted growth in operating results, largely offset by our higher levels of growth investments. Wrapping up with guidance. Based on our strong first half results, combined with the continued momentum we see across our business, we are raising full year 2026 guidance. We are now forecasting revenues in the range of $4.5 billion to $4.7 billion, and EBITDA in the range of $410 million to $425 million. Our guidance does not include any contribution from the Epsilon acquisition, which we expect to close later this year.

At the midpoint of our range, our guidance implies EBITDA margins of around 9% for the year, which reflects the execution upside from the first half, as well as the margin accretion from SE&M. For the balance of the year, our guidance assumes EBITDA margins of around 8.5%. That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

[Operator Instructions]

Your first question from the line of Brent Thielman with Oppenheimer.

Thanks. Great quarter. I guess first question, Jeff or Max, just on Epsilon. Could you just talk about whether there's a previous relationship there? Maybe the synergies you foresee with the transaction with your existing operations, whether that's from an integration with your field services people or sort of new customer opportunities?

Thanks for the question, Brent. We're really excited about Epsilon. They are an excellent upside construction business, and they have a very well-known customer list, and it's grown primarily in the mechanical space. They're going to provide access for us in new geographies through their modular solutions, and there's also going to be potential to add satellite locations to support their business.

We're going to see continued growth in the mechanical and cross-selling opportunities in electrical as well, introducing Epsilon and their leadership team into the rest of our company is going to also help us leverage customer list from our current customers and also with theirs.

So we see this as a great opportunity for collaboration and to be able to leverage what they do also coupling that with whatever consistently has done to be able to build upon our modular expertise.

Great. And I guess my follow-on is just on the solid E&M margin performance. I know there's a portion of the business that you approach more on a cost-plus basis, but Jeff, what specifically is driving the higher margins here? Is it more effective leverage of your workforce? Is it performance bonuses? Anything else that you can kind of talk through as we think about kind of margin performance going forward for that segment?

Yes. We're always striving to be able to have margin uplift. And our goal, of course, is the 20 to 30 basis points gross margin expansion. And we attribute our margin results to planning the work, making sure we have good deals upfront, contract reviews, good estimates, all of these processes that we put in place and what we call a repeatable playbook.

Then the execution safely and productively and building those relationships with the customers really helps us get that repeat business work on similar type projects and improve those margins. And then when you think about the available labor and making sure that we're emphasizing access to labor, training our people, providing the tools and equipment, and information they need that all contributes to the margin performance that we've had for the first half of the year.

Your next question is from Manish Somaiya with Cantor Fitzgerald.

Congratulations on a strong quarter as well as the acquisitions so far this year. I had a question, Jeff, Max, specifically on the backlog conversion. The $4.5 billion of backlog, how should we think about the conversion of that in second half '26, '27? How should we think about the margins in that backlog? If you can just give us some sense of how we should think about those things.

Yes. Great question, Manish. When we look at our backlog and how much burns off in 12 months, and we look least every quarter. And we're still about that 80% range of backlog that burns up in 12 months. And we look at the work that we're getting and the margins are comparable in what we've seen over prior periods. We'll again focus on our execution to be able to take those backlog numbers and improve upon what we have when we start these projects.

And Jeff, on that, have you talked about the data center concentration within E&M backlog? Maybe if you can just kind of give us some sense as to how diversified the backlog is across customers' geography?

Sure. Data centers, as we've said before in previous quarters, and it still is the case. It's the largest part of our backlog. And we're executing, and we're doing a great job with data centers. Our goal is to become indispensable to our customers. We do look at customer concentration. But when we look at our largest customer, we're serving them in multiple regions. So we want to make sure that we're still getting the work, negotiating or semi-negotiating the work and serving our current customers but expanding our customer base.

When I look at our backlog, sequentially, we have increased backlog in almost every single one of our end markets, which is exciting to me because we talk about diversification, looking at where the best markets are but also the industrial, the institutional renewables, our service work and of course, a utility where all we have seen sequential increases in our backlog.

Yes. I would just add also that the majority of the sequential backlog increase was not in the commercial market.

Good point.

So I guess, Jeff and Max, just based on everything that you just said, when I look at the long-term expectations that you have on Slide 9, organic revenue growth of 5% to 7%, EBITDA CAGR, 7% to 9%. It just looks way too conservative based on what we're discussing today. I guess, how do you think about potentially revising those or making it a little bit more in line with the outlook?

We're experiencing tremendous opportunities in the markets today. And we set our long-term growth targets, that's what they are, is long-term growth targets. We're going to look at those again. Meanwhile, we're going to try to capitalize on the great market conditions we have with our very strategic approach to focus on diversification and execution.

Yes. I mean, that's right, Manish. I mean these are long-term targets, right? This can be a cyclical market, and we're looking at what we can deliver over the long term here. I mean the way we address it in the short term as we provide you kind of annual guidance from where we think the business can do on an annual basis. But then from a long-term perspective, some years will be higher, some years will be lower in the last couple of years. I mean we've only been public for 6 quarters, right? So I think we're delivering in the short term above that right now. But I think over the long term, that's still our targeted framework.

And just Max on that is, when you say long term, is it 3 years? Is it 5 years? I mean how are you defining long term?

Yes. It's definitely more than 3 years, right? I mean, it's a cycle, right? So it's probably more than 5 years.

Your next question comes from Brian Brophy with Stifel.

Congrats on the great quarter. Nice execution, obviously, here in the first half. Curious, the level of visibility you have into healthy project execution in the back half at this point?

We look at our projects that we have in our WIP and stay very close to our operating companies, and understanding the forecast of how these projects can function, and how they can provide us results for the back half. And we believe that 8.5% level is more sustainable than we have achieved in the first half. We're always striving for margin uplift through execution, and we'll take that repeatable playbook and continue to reach for those goals.

Yes. And Brian, we did take up the margin percentage guidance in the back half of the year slightly, and that's reflective of visibility we have to project execution.

Understood. That's helpful. And then maybe just touch on the hospitality end market. How are you thinking about the outlook there in the back half?

We've got 4 great companies in Las Vegas. That's primarily where our hospitality work is, and we're involved in a lot of the large projects that are occurring in Las Vegas. We're very well positioned to be able to get future work. And we've got diversification of not just hospitality in Las Vegas, but we're also doing data center work there. We're doing some institutional work along the lines of our electrical, mechanical, fire protection and underground utilities.

Your next comes from the line of Joseph Osha with Guggenheim Securities.

Thanks for taking my question, there's 2. First, I'm wondering if you can talk a little bit about the semiconductor end market. It seems like your skill set is well suited to fab construction. And then the second question I have, we've talked a lot about acquisitions on the E&M side. What opportunities are there, if any, for inorganic growth on the T&D side?

Okay. Super. Yes, the semiconductor market is a market we participated in for 30-plus years. Today, we are serving more customers in more geographies, and we've talked about our additional location satellite office that we have in the Mountain States. That project is ramping. It's going to provide some contribution this year and even through next year. So very pleased with our outlook on semi fab, and we're well positioned to continue having that contribute to our success.

As far as the acquisitions on both E&M and T&D, we are looking at both segments to be able to add companies to help diversify our business. And of course, E&M is the largest part of our revenue. But we do support and we are very optimistic on the T&D segment. We'll continue to support our organic growth with capital and look for T&D companies that are going to help us expand through selective and disciplined M&A.

Just as a quick follow-on, Max. What -- can we assume that ceiling on the leverage here is somewhere between 2.5% to 3%. Is that a fair assumption?

Well, I don't -- I mean, I guess, in our credit agreement, it would be that. But I mean I think we really do want to kind of operate that 1.5% to 2%. I mean even with breast transaction, right? I mean, our leverage will still be in a pretty good place. So I think we -- there's a lot of opportunity to kind of operate and to transact and still stay within that targeted range of 1.5% to 2%.

There are no further questions at this time. I will now turn the call back to Jeff Thiede for closing remarks.

Thank you, operator, and thank you all again for joining us today. We will be attending several upcoming investor events, including the Jefferies Conference in New York and the D.A. Davidson Industrials Conference in Nashville. If we are not able to connect during the next few months, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and your interest in Everus. This concludes today's call.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Everus Construction Group First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Paul Bartolai. Please go ahead.

Thank you. Good morning, everyone, and welcome to Everus Construction Group's First Quarter 2026 Results Conference Call. Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy. We issued a news release yesterday detailing our first quarter 2026 operational and financial results. This release and the accompanying presentation materials are available on our website at investors.everus.com.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC.

Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday and in the appendix of today's presentation. Today's call will begin with prepared remarks from Jeff, who will provide a review of our recent business performance, and an update on the progress against our strategic priorities, followed by Max who will provide a more detailed financial update before wrapping up with guidance. At the conclusion of these prepared remarks, we will open the line for your questions.

And with that, I'll turn the call over to Jeff.

Thank you, Paul, and good morning to everyone joining us today. We are very pleased with our strong start to the year as we delivered another quarter of record revenues, maintained our strong execution and made important progress against our strategic priorities, highlighted by the acquisition of SE&M, our first transaction as a stand-alone public company.

Turning to our quarterly highlights, beginning with Slide 4. We delivered first quarter revenues of $1 billion, up 25% from the prior year period driven by growth across both our E&M and T&D segments. Our strong top line performance was complemented by another quarter of solid execution as first quarter EBITDA increased 44% from the prior year period and EBITDA margin was up 110 basis points. I'm extremely proud of our track record of strong project execution. It is a direct reflection of our commitment to our operational playbook and our team's focus on executing jobs safely, on time and on budget.

I would like to thank all of our team members across the organization. None of this would be possible without their hard work and dedication. Our backlog at the end of the first quarter was a record $3.7 billion, up 20% from the same period last year, with strong growth across both T&D and E&M. We continue to benefit from favorable end market trends across diverse markets, including data center, hospitality, high-tech, transmission and undergrounding.

I'm also excited to report that our backlog included the first award related to the new geography we recently entered in support of a new high-tech client. This is a perfect example of what we look for when we decided to move forward into a new geographic location. We see strong long-term opportunities in this region, have an exciting anchor project to build from and are working alongside a general contractor with whom we have a successful long-term partnership.

We are excited by the opportunities in this market and will look to repeat this type of growth as we focus on expanding our geographic reach through both acquisitions and organic expansion.

Our strong financial results reflect our disciplined focus on our strategic priorities, and I'd like to highlight some of our recent progress on our key initiatives. As a reminder, our value creation framework is based on targeted commercial growth, operational excellence and disciplined capital allocation.

In terms of commercial growth, we have clearly benefited from strong end market trends, notably in the data center submarket. However, our growth isn't just data center work as we continue to benefit from our diversified end markets with solid trends in hospitality, high-tech and utility. I just mentioned the high-tech project award in our new geography, which is another example of our diversification and highlights our position in the attractive high-tech market.

In addition to our organic growth, a key aspect of our acquisition of SE&M is their expertise in pharma and health care, which are areas we expect to be strong growth drivers for years to come. We remain committed to a diversified approach to growth and believe we are very well positioned to benefit from favorable trends across our end markets given our strong customer relationships, track record of execution, and our highly skilled workforce.

Now turning to operational excellence. We continue to benefit from execution upside with our first quarter performance further building on our strong 2025 results. While the positive project closeouts get attention, it is our broader execution across all 40,000-plus projects we do in a year that enables us to deliver execution upside. This means it is just to support, if not more important, to avoid problem contracts as it is to deliver closeout benefits.

We take great pride in our ability to exercise disciplined project selection and successful execution represented by the stability in our margins over time. There are a lot of factors that go into our ability to deliver consistent execution over the long term, such as our focus on our operational playbook and the dedication of our team.

Another key factor driving our performance is our diversified and balanced approach to project size and type. As we have discussed in the past, we are evenly balanced across project sizes and by contract type, with about half of our projects being fixed price and about half being cost plus. We like to maintain this balance throughout our company.

We often get asked, why don't we do more fixed price work to enable margin upside? When we have an opportunity to do a project on a fixed price basis, that is in the area of our expertise with a customer we know and where we are confident in the details of the contract, we will certainly look to pursue and win additional fixed price work. But in general, we like to maintain a balance between fixed price and cost-plus because on large complex projects, there could be more risk. Cost-plus contracts, especially on very large complex projects help mitigate that risk.

Also, as we have discussed in recent quarters, we are often being brought into project discussions very early before the ultimate scope and design of the project is fully known, which makes it difficult to bid at a fixed price. Being selected early on a project before design is completed, provides a great opportunity to execute work at a high level and build relationships. We will always look to convert cost-plus projects to fixed price when it makes sense. But generally, we will look to execute large complex projects on a cost-plus basis.

We have a long track record of delivering stable margins that increase modestly over time. We are always looking to deliver execution upside, but our primary focus is steady margin improvement and no surprises. End markets are strong right now, and perhaps there are opportunities to be more aggressive with customers in the near term to drive margins. That is not our objective. Our strategy is to build long-term relationships, win the next project and the next one and deliver steady, modestly higher margins over time. This is what we have done successfully, and we remain confident in our ability to continue going forward.

And finally, our focus on disciplined capital allocation. Clearly, the highlights so far this year has been our acquisition of SE&M. Acquisitions are a critical part of our capital allocation and growth strategy. So we are very excited to have completed our first transaction as a stand-alone company. As we have detailed, our acquisition strategy is focused on expanding our geographic footprint, diversifying our business and deepening our market presence. We think SE&M checks all these boxes.

SE&M headquartered in North Carolina and expands our footprint in the very attractive Southeast region. This is a geography that is experiencing strong growth across a wide range of end markets that SE&M serves, including pharma, health care and complex industrial.

SE&M is a leading provider of mechanical, electrical and plumbing services with about 2/3 of its revenue is coming from mechanical services. Additionally, the company generates more than 60% of its revenue from service work and renovation and retrofit work, which provides a stable and profitable revenue stream.

SE&M is led by an experienced management team and importantly, their current leaders, Zach Bynum, Patrick Rogers and Alex Bynum as well as other team members of their team are remaining with the company. We are very excited to have SE&M as part of the Everus family. While it has only been a few weeks since the deal closed, integration is on track, and they are fitting in nicely with our team.

After the SE&M transaction, our pro forma net leverage as of April 2 was approximately 0.5x, which gives us ample flexibility to continue executing on our growth strategy. Our acquisition pipeline remains active, and we are hard at work looking for the next company to add to the Everus family. In summary, we are encouraged to see the strong momentum from 2025 carrying into this year, and we are certainly very excited to get our first acquisition completed.

Based on our strong start to the year and with the inclusion of SE&M, we are pleased to be raising our 2026 guidance which Max will discuss in more detail. We remain committed to our 4EVER strategic priorities and remain highly confident in our ability to deliver on our long-term financial goals.

With that, I'll turn it over to Max.

Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter, give an update on liquidity and balance sheet and wrap up with our updated guidance.

Beginning on Slide 11 of the presentation. Revenues for the first quarter were $1.04 billion, an increase of 25% compared to the same period last year. The increase was driven by growth in both E&M and T&D segments.

Total EBITDA was $88.9 million during the first quarter, an increase of 44% from the same period in 2025 driven by solid revenue growth, continued strong project execution and some favorable weather. As a result, our first quarter EBITDA margin was 8.6%, up 110 basis points from 7.5% in the prior year period.

At March 31, total backlog was $3.68 billion, up 20% from March 31st of last year. Our T&D backlog was up 10% compared to last year, due to increases in the utility end markets, specifically transmission and undergrounding work. While our E&M backlog was up 22%, reflecting growth in data center and hospitality as well as the first large award relating to the new geography we entered last year. We remain encouraged by the favorable trends in several of our key end markets, and we remain confident in our ability to generate continued backlog growth.

Now turning to our segment results. Let's first look at E&M, where our first quarter revenues increased 29% to $835.1 million. The increase was driven primarily by growth in our commercial market with continued strength in our data center submarket. Our E&M EBITDA was $75.3 million in the first quarter, an increase of 52% compared to the first quarter of 2025. The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficient project execution. As a result, our E&M segment EBITDA margin was 9% up 140 basis points compared to 7.6% in the first quarter of 2025.

Our first quarter T&D revenues were $204.4 million, up 10.5% from the first quarter of last year, driven by growth in utility end market and more favorable weather as we had a limited weather disruptions in the early part of the year. T&D segment EBITDA was $27.1 million in the first quarter, up 35% from the prior year period due to the higher revenues and strong execution. As a result, T&D segment EBITDA margin was 13.3%, up 240 basis points compared to 10.9% in the same period last year.

Turning to our balance sheet and liquidity. As of March 31, we had $275 million of unrestricted cash and cash equivalents, $281.2 million of gross debt and $222.8 million available under the credit facility. We had virtually no net debt at the end of the first quarter. However, our pro forma net leverage, defined as net debt to trailing 12-month EBITDA as of April 2, after completing the SE&M transaction was approximately 0.5x.

Operating cash flows were $143.7 million for the first quarter of 2026, compared to $7.1 million in the same period last year due to the strong operating results and favorable working capital timing. CapEx was $15.5 million for the first quarter down slightly from $18.5 million in the prior year period. While we continue to expect higher capital spending to support our organic growth strategy for the full year, the comparison during the first quarter reflects the purchase of the new Kansas City prefab facility in the first quarter of last year.

We generated free cash flow of $131.9 million in the first quarter of 2026, up from a use of cash of $8.1 million in the first quarter of 2025. Our first quarter free cash flow reflects some timing benefits. We still expect a more normalized free cash flow conversion for the full year with our forecasted growth in operating results, largely offset by our higher levels of growth investments.

Now wrapping up with guidance. We are encouraged by the solid start to the year, which included another quarter of strong execution and some favorable weather. It is also worth highlighting that given our shift in revenue mix due to the strong growth in E&M, we should see more muted seasonal patterns to operating results in 2026. We did not really see any seasonal dip in the first quarter, so we don't really expect much of a seasonal step-up through the year.

Based on our strong first quarter results as well as the inclusion of SE&M, which closed in the second quarter, we are raising our full year 2026 guidance. We are not providing explicit guidance on SE&M. But as a reminder, in 2025, the business generated $109 million of revenues with high teens EBITDA margin.

As a whole for Everus, we are now forecasting 2026 revenues in the range of $4.3 billion to $4.4 billion and EBITDA in the range of $345 million to $360 million. At the midpoint of our range, our guidance implies EBITDA margins of 8.1%, which reflects the execution upside from Q1 as well as the margin accretion from SE&M. For the balance of the year, our guidance continues to assume EBITDA margins of right around 8% for the legacy business.

That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

[Operator Instructions] Your first question comes from Brian Brophy with Stifel.

Nice margin this quarter. Jeff, you mentioned in your opening comments that this was the first award associated with the new geographic expansion. Does that imply some visibility into additional awards with this high-tech customer that you're referencing or are you just kind of expecting more awards in that new geographic region with other customers?

Brian, we're expecting more awards as the project continues to develop and design develops. The key is, is that we had line of sight in working with a long-term general contractor customer in a new geography with a new end user. This is exciting to us. We were able to plan for core resources to be able to mobilize and to be able to take on and ramp up slowly, so we could execute successfully.

So we continue to see more opportunity on that site as we focus on that project and the backlog that we've generated and the backlog that we see in the near future. In addition, we're looking for additional businesses as it becomes available in that new geography.

Got it. That's helpful. And then just on the strong cash flow, curious to what extent better payment terms here are driving some of the strength? And I guess just outside of the quarter in bigger picture, to the extent you're seeing better payment terms generally and the extent we should expect that to sustain itself into the future.

Yes. So through our contract reviews and our selection of projects and contract terms and conditions, those are the top of the list items for us to be able to negotiate good payment terms. In addition to other Ts and Cs, we've seen improvement on and movement on from our customers over the last several years. So building ahead on cost-plus jobs, making sure that we're anticipating when those costs hit our books is something that we have focused on through operational excellence initiative, and we're seeing the results on that.

Yes. And Brian, I would just add, obviously, it's a very, very strong cash flow quarter. I think it's a lot due to timing rather than a persistent result like that in every single quarter. So more timing this quarter and maybe more normalized as the year progresses.

Your next question comes from Joseph Osha with Guggenheim.

This is Mike Stratoti on for Joe. Just a question on the backlog. Obviously, it grew pretty nicely. Are you able to provide a little bit more color on the composition in terms of the percent for data centers versus hospitality and high-tech?

Yes. Thanks for the question. The delivery of our services and the ability to be able to execute at a high level puts us in a great position for future work. We're still seeing a similar level of competition that we've seen over the last couple of years and our ability to target and select projects in a disciplined manner, so we could deploy those resources and bring those returns and that success of our safety and production metrics is something that we've gotten better and better at.

So the competition is still about the same. It has been for the last couple of years, but as we continue to get better and build and strengthen our relationships through execution, we see a lot of opportunity to be able to achieve the backlog that we need to be able to support the growth of our business.

Yes. And it was -- so we don't break out the percentage of data center in the backlog. But the growth did come across a number of markets, right? It wasn't just data center. It was across our Commercial segment and our Industrial segment. So we have -- we have good growth in our backlog across our business.

Your next question comes from Swetha Rakhecha with Cantor.

This is Swetha here on behalf of Manish Somaiya. Congrats on a very strong quarter and the very first acquisition. Jeff, a question for you on the contract mix and the risk discipline as customers bring Everus in earlier on large complex work, should we now expect cost plus to remain a larger share of major projects? And does that cap margin sort of upside improve margin consistency?

Yes. Well, I think, Swetha, we really appreciate our mix of contract type, right? I think we really want to manage that cost plus versus fixed price. As Jeff said in his comments, I think it helps us manage the downside that along with project selection. And I think really helps to manage our margins incrementally up as we go forward. So I don't think -- our goal isn't to really change that mix. Our goal is to grow with our customers and continue to balance that mix.

Yes. And I'd like to add that if you think about the medium and small-sized projects, which have generally speaking, a higher margin, those are incredibly important to us. And sequentially, our service group, which is a smaller part of our business, yet a very important part of our business, that backlog has increased from this past quarter to the previous quarter.

Right. That makes sense. Just one more question. I know you're not giving explicit guidance in regards to SE&M, but the business generated $109 million of revenue in '25 at a high-teen EBITDA margin. Should investors now assume a similar annualized revenue base post close? And sort of wanted to ask you about the integration cost and sort of seasonality that you should consider for 2026 contribution?

Yes. So the SE&M is forecasted to contribute between mid-teens and high-teens of EBITDA for 2026, and that covers most of our guidance lift, our stronger core performance and confidence in our ability to build upon our operational excellence to complete the balance of our updated guide.

Right. Sorry Max.

No, I was just going to say, yes, so the other part you asked about was seasonality, right? I don't think there's no seasonality factors that we're thinking of there. So we kind of gave you 2025 revenue when we did the deal. And you could assume probably some mid- to high percentage growth rate on their revenue. And then as Jeff said, maintaining those margins that we disclosed earlier.

[Operator Instructions] Our next question comes from Chris Senyek with Wolfe Research.

Great quarter again. Questions -- a couple of questions. Given the very strong E&M backlog and strong data center end market, I was surprised you didn't raise yearly EBITDA guidance beyond the actuals and the acquisition. Is that just a matter of we're early in the year conservativeness? Or is there anything else we should be thinking about as we model it for the remainder of the year?

Yes, it's early in the year. And when you look at our line of sight of some of these projects and our record backlog and the timing of that, we're going to take another close look throughout the quarter and be able to report on that in future quarters. Our record backlog includes jobs that we were just awarded. And so for us to be able to make sure we've got the right profile, the right model very, very important, and we get more information as the quarter proceeds.

Yes. And just yes -- just as a reminder, too, Chris, right? So as we said in the last quarter's conference call and our prepared remarks, right, we had some good visibility to some execution early on in the year. I think you can see, especially with our cash flow and the timing of that, some projects coming to a close and we had some of that good execution did come forward. So that's why when you look at the remainder of the year and then our guidance for margins kind of reverting back towards kind of more our core margins for the remainder of the year. So more timing, I think, than anything, not a step change in profitability.

Got you. Okay. And then another question. Are you seeing incremental transmission and utility investment tied specifically to power and large data centers? In other words, is there a meaningful pull-through demand benefiting the T&D segment from the same AI infrastructure trends that are driving E&M growth?

We are seeing increased opportunities in those areas. And in fact, our transmission backlog has increased sequentially for the quarter. We're really confident in our ability to be able to pursue medium and large-sized transmission projects. We're going to be very selective. It has to be in our core geographies. And also, we have to have the available resources. We also don't want to abandon our customers on the MSA work, which is between 55% and 60% of our T&D revenue, a very important part of our business. So we do see increased opportunities, we're going to be selective, so we can execute and continue with the success on our really strong margins in our T&D segment.

Okay, great. And then if I'll sneak one more in. In terms of labor availability, your revenue growth rates are exceptional. There's strong end demand in E&M. How are you seeing -- are you coming across labor availability issues as you sort of just keep scaling that business? Or how are you managing that specifically given the significant growth rates you had here over the last -- since you came out of the spin?

Qualified available labor has always been a challenge for us, and we put more and more emphasis on outreach. And once we are able to bring people into our record employment levels, we focus on thorough orientation, training and development so we can continue to attract, retain and build upon our record employment, and we put more emphasis on it. We are really good at it, and we don't take this lightly. We want to make sure that we have high performers being able to build upon and support our growth projections.

I guess, is there a point at which that just becomes a constraint in terms of how fast you can grow? Or are you confident you can continue to kind of leverage that and scale that given what you said earlier?

I'm confident that we can scale it because of our team of people that focus on our operations and our people business.

[Operator Instructions] There are no further questions at this time. I will now turn the call back to Jeff Thiede for closing remarks.

Thank you, operator, and thank you all again for joining us today. We will be attending several upcoming investor events, including the Oppenheimer Industrial Growth Conference as well as the Stifel and KeyBanc conferences in Boston. If we are not able to connect during the next few months, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and interest in Everus. This concludes today's call.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Everus Construction Group Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Paul Bartolai. Please go ahead.

Thank you. Good morning, everyone, and welcome to Everus Construction Group's Fourth Quarter 2025 Results Conference Call. Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy.

We issued a news release yesterday detailing our fourth quarter and full year 2025 operational and financial results. This release and the accompanying presentation materials are available on our website at investors.everus.com.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of their latest filings with the SEC.

Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday and in the appendix of today's presentation.

Today's call will begin with prepared remarks from Jeff, who will provide a review of our recent business performance and an update on the progress against our strategic priorities; followed by Max, who will provide a more detailed financial update, before wrapping up with guidance. At the conclusion of these prepared remarks, we will open the line for your questions.

With that, I'll turn the call over to Jeff.

Thank you, Paul, and good morning to everyone joining us on the call today. We are very excited to talk to you today about our record full year results in our first year as a stand-alone public company. It has been a transformational year for Everus, which is a direct reflection of our highly skilled and dedicated team members across the organization. Through disciplined focus on our 4EVER strategy, we established our structure as an independent public company, generated tremendous financial results and positioned Everus for continued success in the years ahead. I'm so proud of everything we accomplished during the year and I'm even more excited about our future opportunities.

During our call today, I will provide a brief overview of our results, highlight some of our key accomplishments towards our strategic initiatives and detail some of our key priorities for this year, before I turn it over to Max for his financial review.

Turning to our quarterly highlights, beginning with Slide 4. Much like the first 3 quarters of 2025, I'm pleased to report that we delivered another quarter of exceptional financial performance, reflecting the robust opportunities across our end markets and our outstanding execution capabilities. We delivered fourth quarter revenues in excess of $1 billion for the first time in our history, up 33% from the prior-year period, driven by growth across both our E&M and T&D segments. Our strong revenue growth was complemented by another quarter of strong execution as fourth quarter EBITDA increased 45% from the prior-year period, and our EBITDA margin was up 70 basis points. Our ability to execute complex projects safely, on time and on budget is critical to our clients and is a driving factor in helping us build the deep relationships that are key to our long-term growth strategy.

Looking at the full year, our revenues increased 32%, primarily from the continued momentum in our E&M business. While our E&M segment was the key driver in 2025, we remain optimistic about the growth outlook for our T&D business with our recent backlog momentum and favorable industry trends. Due to our strong execution throughout 2025, our full year EBITDA was $320 million, up 52% compared to 2024 after adjusting for incremental stand-alone operating costs. Our strong performance is a direct reflection of the continued focus on our strategic priorities by all our employees across 15 operating companies around the country.

Our backlog at the end of 2025 was $3.2 billion, up 16% from the same period last year, with strong growth across both T&D and E&M. While we're benefiting from favorable end-market trends, our backlog growth also reflects our strong execution, our deep client relationships and the value our employees bring to our customers: the key pillars of our 4EVER strategy.

Our healthy backlog gives us confidence in our growth outlook for 2026. Importantly, we continue to see a robust project pipeline across diverse markets, including data center, hospitality, semiconductor, transmission and undergrounding. While we will certainly remain disciplined in our approach to project selection, ensuring we choose projects with the right risk-reward, we expect the favorable market trends and our strong competitive positioning to allow for continued backlog growth.

As I reflect on 2025, we made tremendous progress against our strategic priorities, which enabled us to generate record financial results and, importantly, has positioned us for continued success in the years to come. I would like to take this opportunity to highlight some of our key accomplishments during the year and provide an update on some of our strategic priorities as we look ahead.

As I already mentioned, the foundation of our operational framework is our 4EVER strategic priorities. You can see on Slide 6 that our 4EVER priorities are focused on attracting, retaining and training our most critical asset, our employees, creating value for our customers and shareholders, delivering safe and high-quality execution, and maintaining and growing our customer relationships. Our 4EVER strategic priorities are the basis for everything we do and are designed to deliver value creation through sustained profitable growth, operational excellence and disciplined capital allocation.

Our value creation framework is highlighted on Slide 7 in today's presentation. We clearly generated strong growth during 2025, with full year revenues increasing 32% compared to 2024 results. Our strong growth reflects our expertise discipline and long track record of success in critical markets that provide data center, hospitality and undergrounding work. These are markets where we have developed project management expertise, skills and relationships over the course of decades.

An important aspect of our growth strategy is to expand geographically through satellite projects, which was how we entered the Southwest. More recently, as discussed on our last earnings call, we entered a new geography in support of a large semiconductor company. The initial large project is helping us scale up to this new location, which we expect will allow us to follow our previous blueprint to make this a permanent new geography for Everus.

Of course, our organic growth initiatives are contingent on our ability to attract and retain skilled labor to execute our projects. We have a long track record of effectively scaling our business having tripled our workforce over the past 13 years. We ended 2025 with approximately 9,400 employees, up from 8,700 at the end of 2024. Through our strategic focus on attracting, developing, training and retaining employees, we're continuing to efficiently grow our workforce by leveraging our union partnerships, our industry relationships and internal initiatives.

While we remain committed to our organic growth strategies, an important part of our growth playbook going forward will be strategic acquisitions. We have strengthened our corporate development team and have a broad and deep pipeline of potential deals we are evaluating. We look forward to updating you on our progress.

As a reminder, our acquisition strategy is focused on finding accretive transactions that expand our geographic footprint, diversify our business or deepen our market presence. We are well below our leverage targets and have ample capacity under our credit facility and cash on hand, giving us significant financial flexibility to execute our growth initiatives.

Now turning to operational excellence. 2025 was certainly a year of strong execution with our full year EBITDA margin up 40 basis points as reported and up 110 basis points when adjusting for incremental stand-alone operating costs. Our strong execution is thanks to our people and our strict adherence to our Everus operational playbook, which focuses on project selection, bidding discipline, safety, training and sharing of lessons learned. We continually look for opportunities to drive execution upside on every project and experienced exceptionally strong execution in 2025.

Another important area of focus for us is our prefabrication and modular construction strategy. As we discussed earlier in 2025, we are consolidating and expanding our prefab and modular construction across the country. Notable investments have been made in the Pacific Northwest and Southwest and our latest expansion in Kansas City, which is now operational. We constantly evaluate and expand our capabilities where possible. Prefab and modularization helps improve safety, increases labor efficiency, lowers costs, improves project time lines that makes project outcomes more predictable. This allows us to enhance margins, [ create ] savings for our customers and strengthen relationships.

And finally, we've maintained our focus on disciplined capital allocation. Our priorities are investments in organic growth, acquisitions and maintaining financial flexibility. As Max will discuss, we increased our capital spending in 2025 to support our growth initiatives and remain committed to our long-term expectation of investing 2% to 2.5% of our revenues. While we have not yet completed an acquisition, our strong balance sheet positions us to execute on growth strategies.

We do not currently have any return-of-capital programs in place, which reflects our optimism and our growth opportunities and our belief that this is the best use of capital at this time. Our management team, together with our Board, will continue to evaluate the highest and best uses of capital over time, consistent with our ongoing focus on driving stockholder value.

And finally, Slide 8 details our long-term financial expectations. We outperformed these targets in 2025, which again reflects strong market trends, execution upside and our focus on our 4EVER strategic priorities. We entered 2026 with strong momentum and remain committed to delivering on these long-term targets to provide value to our stockholders.

With that, I'll turn it over to Max.

Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter, give an update on liquidity and balance sheet, and wrap up with our guidance.

Beginning on Slide 10 of the presentation, revenues for the fourth quarter were $1.01 billion, an increase of 33% compared to the same period last year. The increase was driven by growth in both our E&M and T&D segments.

Total EBITDA was $84.8 million during the fourth quarter, an increase of 45% from the same period in 2024, driven by solid revenue growth and continued strong project execution. We ended the year with incremental stand-alone operating costs in line with our expectations, with full year annualized costs of $28 million. As a result, our fourth quarter EBITDA margin was 8.4%, up 70 basis points from 7.7% in the prior-year period.

As for our full year 2025 results, total revenues increased 31.5% to $3.75 billion, driven by 44% growth in our E&M revenues. Our full year EBITDA increased 37.7% to $319.8 million, due to our revenue growth and strong project execution, partially offset by the full year impact of incremental stand-alone operating costs.

At December 31, total record backlog was $3.23 billion, up 16% from December 31, 2024, even while we delivered record revenue during the fourth quarter. Our T&D backlog was up 41% compared to 2024 due to increases in the utility end market, specifically undergrounding and transmission work; while our E&M backlog was up 13%, reflecting growth in data center, hospitality and high tech. We remain encouraged by the favorable trends in several of our key end markets, and we remain confident in our ability to generate continued backlog growth.

Now turning to our segment results. Let's first look at E&M, where our fourth quarter revenues increased 44% to $791.6 million. The increase was primarily driven by growth in our commercial and renewables markets, with continued strength in our data center submarket a key driver. Our E&M EBITDA was $67.1 million in the fourth quarter, an increase of 57% compared to fourth quarter 2024. The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficient project execution, partially offset by higher SG&A expense. As a result, our E&M segment EBITDA margin was 8.5%, up 70 basis points compared to 7.8% in the fourth quarter of 2024.

Our fourth quarter T&D revenues were $227.7 million, up 6.8% from fourth quarter 2024, driven by growth in both our transportation and utility segment end markets. We remain encouraged by the broader demand trends in our T&D business and continue to see growth opportunities. T&D segment EBITDA was essentially flat at $30.5 million in the fourth quarter, as higher revenues were offset by project mix and higher SG&A expenses. As a result, T&D segment EBITDA margin was 13.4% during the fourth quarter, compared to 14.3% in the same period in 2024.

Turning to our balance sheet and liquidity. As of December 31, we had $152.7 million of unrestricted cash and cash equivalents, $285 million of gross debt and $222.8 million available under the credit facility. Net leverage, defined as net debt to trailing 12-month EBITDA, was approximately 0.4x.

Operating cash flows were $156.8 million for the full year 2025, compared to $163.4 million in 2024, as changes in working capital to support our revenue growth offset our increased operating results. CapEx was $66.8 million for 2025, up from $43.8 million in 2024, consistent with our strategy to increase investments that support our organic growth strategy. The increase in CapEx during the year included the purchase of the new Kansas City prefab facility, which we discussed in the first quarter, as well as additional vehicle and equipment purchases in T&D to support growth.

We generated free cash flow of $100 million for 2025, down from $128.8 million in 2024, reflecting our increased investments in working capital and CapEx in support of growth.

Now wrapping up with guidance. We were very pleased with our strong 2025 results. Based on the attractive demand drivers in our business and our elevated backlog position entering 2026, we expect the momentum to continue this year. As a result of these factors, we are providing initial 2026 guidance as follows.

We are forecasting revenues in the range of $4.1 billion to $4.2 billion and EBITDA in the range of $320 million to $335 million. At the midpoint of our range, our revenue and EBITDA forecasts represent growth of 11% and 2%, respectively. Our revenue guidance range is above our long-term target of 5% to 7%, reflecting our strong backlog position and the favorable outlook in several of our key markets, including data center, hospitality, semiconductor, transmission and underground.

Our EBITDA guidance is slightly below our long-term model, reflecting a difficult comparison given the extremely strong project execution we delivered during 2025. However, we think it is worth noting that the midpoint of our EBITDA guidance range reflects growth of 25% on a 2-year CAGR basis after adjusting for incremental stand-alone operating costs. Additionally, our 2026 guidance assumes an EBITDA margin of just under 8% at the midpoint of the range, higher than our historical core margins in the mid-7% range, reflecting incremental scale benefits as we grow, consistent with our long-term strategy, as well as good visibility into continued execution upside.

Overall, we are very proud of our strong performance during 2025 and we remain extremely excited by the continued momentum in our business. Our backlog remains at elevated levels, which provides a high degree of visibility into revenue expectations for 2026 and we feel confident in our ability to deliver on our long-term financial targets.

That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

[Operator Instructions] Our first question will come from the line of Ian Zaffino with Oppenheimer.

Really good quarter. Question would be on the guidance and the margins. Was there anything in particular this year where you had extremely great execution that you don't expect to repeat into next year? Are you seeing anything different? Or are you just being naturally conservative?

Ian, this is Jeff. We had exceptional margin up in 2025. And those were diversified contributions from a number of projects. And the 4 most notable ones are from 4 different markets: data center, institutional, transportation, industrial. So yes, data centers are a big part of our business and we continue to be anticipatory and look at other markets to achieve meaningful contributions from those multiple markets. We're going through all of our planning to set the guidance to look at our margins where we're forecasting in 2026, back to 2024. And that is a reflection of our ability to execute better.

So we have a very strong focus on operational excellence, and that is reflected in our results and are confident in our ability to be able to hit the 8% -- 7.9% to 8% in 2026.

Okay. And then if I could just address the elephant in the room here. Leverage is very, very low. How are you thinking about this? Because when you talk about M&A, it doesn't seem like everything is large on the horizon. So how are you thinking about kind of what the optimal leverage is for this company? And how do you think about it? And then if I was to add another question in there is on the free cash flow side, I know there's some working capital this year. How do we think about free cash flow conversion going forward? So just thinking about how you're going to leverage, call it, in 12 months from that?

Yes. Having a strong balance sheet is very important to us, and not only support our organic growth as we see our CapEx numbers increase for our operating companies and organic growth. It also positions us for strategic M&A. We are actively looking for opportunities for M&A. And we see the range of multiples from other public announced deals, which is not a surprise to us. It does fit our expectations. We're looking for the right company at the right price in targeted markets for both E&M and T&D businesses.

And as far as our M&A pipeline, it's much broader and deeper. And our balance sheet is going to support M&A in the future.

Yes, Ian, this is Max. So the question -- part of that question was: what's the right leverage, right? I don't think we've changed our tune, right? I think 1.5 to 2x net leverage is still the right long-term place leverage levels for this company. But we want to make sure we're smart in investing the capital, at the right time in the right place. We don't just want to spend your money. We want to invest at the right time, in the right place.

So when and if we get a deal, that will happen. And I still think 1.5 to 2x is the right place.

The second part of your question was about kind of free cash flow conversion. And obviously, we had some pretty significant revenue growth this year, and to support that, obviously, we have some increases in some of our working capital. I think they're pretty much in line on a percentage basis with where we have been historically. So with revenue growing next year, I think there'll be less of an investment in some of that working capital needs. So we should continue to have good free cash flow conversion, albeit with the step-up in CapEx that we've expected.

So on a net-net-net basis, where we delivered this year is probably pretty consistent with where we're going to be in the next year.

Our next question will come from the line of Brent Thielman with D.A. Davidson.

Great quarter as well. Jeff, you're sitting at record backlog entering 2026. I'm wondering if we should think there are any capacity constraints for you and just in terms of your ability to continue to build the book of business for execution this year. And maybe if you could just talk about the lead times on that backlog relative to recent history. Are you booking into '27 at this point? Maybe just some color there.

Brent, our record backlog really provides us a clear line of sight for 2026 and some of those projects go into 2027. And if you look at where those backlog contributions are coming from sequentially, it's not just data centers. It is largely data centers, but it's also hospitality and high tech and substation and transmission as well. So the diversification story does ring true when it comes to the contributions from our backlog.

As far as project scheduling and ramping, we pay a very close attention to that to see when does the backlog get converted. What we're continuing to see over the last many years is about 80% of our backlog burns off in 12 months. So clear line of sight in 2026, could give us some momentum into 2027, and is coming from multiple markets that we are -- where we pursue work.

Yes. So Brent, you asked about constraints, right? I mean I think the reality is we've done a good job of being able to add skilled labor to complete the projects that we have in backlog. And I think we're confident that we have the available labor to complete the numbers that we're giving you in guidance today. And I think we feel pretty good about that.

And Brent, just want to add to what Max said, is we increased our employee count by 8.5%. And I always believe that we're going to be able to plan and bring in the resources to be able to support our financial goals. Constraints on labor is real for our whole industry, but it's been an area that we excel in, because we treat our people with respect, we're doing much more outreach over the last 3 to 4 years than we ever have. And we're bringing in good quality people, not just for our field professionals craft, but also our support staff and our management and our leadership as well.

Okay. If I could just follow on that, Jeff or Max. I mean if you potentially pick up more work here in the next few quarters, should we think that's more of a 2027 event? Or do you look at the sort of initial guidance range for revenue is reflective of what you have in the book of business today?

Yes. I think it's reflective of the book of business. I mean some of the backlog does extend into 2027, right? I mean with 80% burn, naturally, you have some that carries over. If you just do the math on that 80%, Brent, right, that implies we still need to pick up a good amount of book and burn work for this year. So that's already implied within our guidance. And then we'll continue to start -- continue booking backlog for the remainder of the year that should start building up that pipeline nicely into 2027.

Our next question comes from the line of Brian Brophy with Stifel.

Yes. I guess you mentioned some of the satellite expansions in your opening comments. How are you thinking about additional opportunities there in 2026? And is there any geographies in particular that kind of jump out to you in terms of opportunities to expand into?

Yes. Thanks for the question. We've got good playbook on how to do satellite operations, and we have to be very selective when we do that. We always want to make sure that we could have good contract negotiations. We want to be able to make sure we bring good core people. And we also assess the market locally as we build up into the one area I've mentioned earlier in previous quarters last year, we're building some momentum in a new market. And we're following up [indiscernible] management and key sales supervisors, and we're starting to see some positive impacts into our financials. We didn't see a lot of it in 2025, but we plan on having a contribution from that new satellite operation for us.

Yes. And then just to add on to that, Brian. I mean, obviously, if you look at where our footprint is, there's opportunities across the country, particularly as you kind of get down to the South and Southeast. I'm not saying that that's where we're headed, but those are opportunities if we find the right work and the right set of jobs to expand on there.

That's helpful. And then just big picture, kind of large transmission projects. We've seen an acceleration there. You guys have participated in some in the past, maybe a little bit less so recently. But just curious how you guys are thinking about pursuing some of these opportunities that are coming.

Yes. We are pursuing the large transmission projects. And we are very selective on the type of transmission and distribution projects that we pursue. We have the successful track record on large transmission. And of course, it all comes down to resource availability, timing and terms of conditions that are going to factor into our disciplined approach on project selection.

But T&D is a really important part of our business. Our margins are really strong. We're proud of our leadership and our field professionals that help contribute to our success in T&D. So we'll continue to assess those opportunities, be selective to ensure good project execution.

And then just one last one for me. Obviously, this looks like it's going to be another heavier investment year, which, as you guys alluded to, you've talked about needing to invest in prefab and fleet. But I guess as we kind of move forward, to what extent do you guys have visibility on how many additional years of heavier investment do we need from this point?

Yes, we look at our 3-year strategic planning process with our operating companies, of course, at Everus corporate. We're always looking for means of methods to expand prefab, that's one area, in addition to equipment, in addition to M&A, how do we deploy that capital responsible? So if you look at our success with prefab and modular construction, it's helped us get work. It's helped us contribute to our safety goals, which we had record safety results in 2025. And also production, and when our customers see how we prefab, it does put us in a really good position to secure the work and then execute it successfully.

And then, Brian, I mean, this is our normal right now, right? So I think this is -- how we're planning is to kind of invest this 2% to 2.5% of revenue in CapEx, to continue to support what we feel is a good growth environment across the business.

Our next question will come from the line of Joseph Osha with Guggenheim.

My compliments. It's always nice to have a stock go up 20% after you announced. A couple of questions. You alluded to craft labor availability. I'm wondering if you could comment on labor cost. We hear a lot about that and whether you're having reasonable success wrapping higher labor costs if they do exist into pricing for your jobs.

Labor is crucial for our success. And many of our operating company presidents have experience coming from the field. But as leaders of our operating companies, they have experience in contract negotiations. Many of them sit on labor management committees to negotiate contract terms and conditions. So we have clear line of sight on what those potential increases are. So whether it's a cost-plus job or a fixed-price job, we are forecasting those costs into the pricing for those opportunities. And we don't see that as any risk at all as far as any sort of price increases for labor.

Okay. Moving on, obviously, you're under-leveraged, which is a good place to be. Kind of 2 questions there. First, in general, we hear that deals are generally still getting done below 10x. Wondering if you could comment on that and whether there's a red line there for you. And then I'm also curious, as you think about it, is the bias towards perhaps trying to do 1 or 2 larger transactions or maybe a larger number of onesie-twosies?

We're looking for both. Our preferred is to have an independent stand-alone company to bring into Everus. And our strategic priorities for M&A is to provide to add a company that provides the same or similar type of services to what we provide today, such as electric, gas, communications, underground and, of course, electrical, HVAC, plumbing, fire protection. Those are the type of companies we're looking for.

And what's high on the list is geographic expansion, so locations that strategically fit our growth goals. Companies that, of course, have high integrity and are awarded work due to best value, not just price, price is always important, but also have a commitment to safety and operational excellence and they're respected within their communities. Those are the list of items that we consider. There is more, of course, we can add to that, but those are the high-level strategic priorities when it comes to M&A.

Yes. Obviously, Joe, this is Max, I mean, as our leverage continues to tick down, I mean, it just continues to broaden, deepen that funnel that Jeff talked about earlier and creates different opportunities. But I think we really want to make sure we're looking at the right deal, looking at the right leverage targets and looking at the right opportunity for us and for our shareholders.

Can I get you guys to comment on my multiple question there? Is the market generally around kind of 9x, 10x? That's what I'm hearing.

I mean that's what we've seen deals transact for in this space, right, around those multiples. That's correct.

Okay. And then I'm sorry, one more. And I should know this, my apologies. On the T&D side, would we see you guys potentially try and go after any [ 765 ] business? Or is it going to be perhaps slightly small? I'm wondering if you can comment there.

On the large transmission, as I mentioned earlier, we're very selective. And there are hundreds of miles of type of transmission projects that are available. There's also some interconnect. We look at where our sweet spot is and then the availability of those resources and timing. Meanwhile, we really like our MSA work. And we don't want to abandon our customers. And if you take on one of those large, very, very large projects, you're bringing a lot of new people into the organization.

So as I mentioned, we grew our employment by 8.5%. So when we get a big job, we bring new people in the organization, we're very thorough on orientation and who we bring into the company. So those large, very, very large transmission jobs are not anything we can't do. But when you look at the available resources, the current work that we have in our backlog, we take all that into account when we pursue selected projects.

Again, congratulations on the outcome today.

Our next question will come from the line of Manish Somaiya with Cantor.

Jeff, Max, Paul, many, many congratulations on the quarter and obviously also the outlook. Just a couple of questions for me. Maybe this is for Jeff, maybe for Max. But when I think about the E&M and T&D segments, how should I think about margins through a cycle?

Yes. So I think it's maybe a little bit less about margins through a cycle and more just about us making sure that we continue to grow, do what we can to thin out our fixed cost base and continue to deliver. So again, if you think about the way our contracts are, Manish, when you have half your contracts kind of cost-plus, the other half fixed, I mean I don't think margins really necessarily contract on the cost-plus through a cycle because you're still doing the work. So I don't think it's necessarily a cycle. For us, it's more just about how much leverage can we put on our fixed cost base.

And if I could add to that, we're very deliberate on the type of work we pursue. About half of our work is cost-plus. And we like that. Those are typically very large, very complex projects, which puts us in a position for some fixed-price work as those buildings get completed. We pursue the service work or some of the other smaller projects to keep us in connection with those customers.

Now if you look at our T&D segment, 55%, 60% is MSA work. And we like the stability there. We also like the margin uplift opportunities on fixed price. So we look at this regularly and strategically align our resources and our pursuits towards those goals.

Okay. That's super helpful. And then you guys mentioned data center and semiconductor exposure is increasing. Can you give us a sense as to what is the composition of those 2 things in the backlog?

Really don't go to that level of detail in our backlog of breaking it down. But I'll tell you, they've increased, as I mentioned earlier. And they're not the only ones that have increased on our sequential backlog in Q4 versus Q3. Data centers, hospitality and high-tech, in addition to our transportation substation and transmission.

Yes. And just to reiterate, data center is the largest market of our '27 in our backlog and semiconductor is growing.

Okay. And then just finally, you talked about target leverage of 1.5x, 2x. Obviously, you're significantly under-levered. So how should we kind of think of you getting to that threshold? Is it a combination of a lot of tuck-ins? Or is it going to be like a blockbuster transaction based on where multiples are? And then related to that, how should we think about free cash flow in '26?

Yes. So I think the reality is it's got to be the right deal. I mean I don't think we're targeting multiples or one. I think when we find the right transaction, so long as it's fit within our stated leverage targets, I think that would be the right deal, right? It could be multiple, it could be a larger one. But we're also looking at a risk profile and management's time and our ability to do deals. So it could be across the board, right? But I think we are committed to finding good transactions and investing.

In terms of free cash flow, Manish, we kind of addressed it a little bit earlier on the call, but again, there is probably more of a usage of cash and working capital in 2025, given the really strong revenue growth, we have natural increases in some of our receivables. With the good growth we see next year, it's not as high as '25, that number should not be as much of a use of cash. But then if you look at our step-up in capital spending, on a net-net-net basis, free cash flow should be probably pretty consistent with 2025, is the way we're currently thinking about it.

And this concludes our question-and-answer session. I will now hand the call back over to Jeff for any closing comments.

Thank you, operator, and thank you all again for joining us today. We are very excited about the opportunities ahead for Everus and are confident that we have the right strategy in place and the right team to execute on our plan.

We will be attending several upcoming investor events, including the Jefferies Energy Conference in New York. If we are not able to connect during the next few months, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and interest in Everus. This concludes today's call.

This does conclude today's call. Thank you all for joining, and you may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Everus Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Paul Bartolai. Please go ahead.

Thank you. Good morning, everyone, and welcome to Everus Construction Group's third quarter 2025 results conference call.

Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy.

We issued a news release yesterday detailing our third quarter 2025 operational and financial results. This release and the accompanying presentation materials are publicly available on the website at investors.everus.com.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC.

Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday in the appendix of today's presentation.

Today's call will begin with prepared remarks from Jeff, who will provide a brief review of our recent business performance, followed by a financial update for Max. At the conclusion of these prepared remarks, we will open the line for your questions.

With that, I'll turn the call over to Jeff.

Thank you, Paul, and good morning to everyone joining us today.

We are very excited to be here with you all as we report our third quarter 2025 results. It is hard to believe it has been almost exactly one year since we reported our first quarterly results as a stand-alone public company. It has been a tremendous year, and I'm extremely proud of our team and everything we have accomplished. We have a team of top industry talent, and Everus is well positioned for many more years of success.

During our call today, I will provide a brief overview of our results and highlight some of our key accomplishments against our strategic priorities before I turn it over to Max for his financial review.

Beginning with Slide 4, I'm pleased to report that we delivered another quarter of exceptional financial performance, demonstrating the strength of our business model and our outstanding execution capabilities. I'm incredibly proud of our employees across the organization whose dedication, skill and hard work enabled us to generate record quarterly revenue, net income and EBITDA.

For the third quarter, revenue increased 30% from the prior year period, driven by continued strength in our Electrical and Mechanical segment, including sustained momentum in our data center submarket. Our strong revenue growth was complemented by excellent margin performance. Third quarter EBITDA increased 37% from the prior year period, driven by our revenue growth and solid execution. As a result, our EBITDA margin was up 50 basis points. Our team's ability to execute complex projects while maintaining our high standards of safety and quality continues to set us apart in the marketplace. Our total backlog at the end of the third quarter was $2.95 billion, up 2% from the same period last year and up 6% from the end of 2024. This is solid growth given our record third quarter revenue performance. The strength of our backlog reflects our established reputation as a trusted partner for the most complex and demanding projects in our industry. Our clients continue to turn to us because they know we have the expertise, resources and track record to deliver exceptional results on schedule and within budget. This trust translates into repeat business and long-term relationships that form the foundation of our sustained growth. Looking ahead, I'm confident in our ability to continue building this backlog momentum.

The underlying demand drivers across our key markets remain robust, and our competitive positioning has never been stronger. We're seeing healthy pipeline activity, and we will remain disciplined in our approach to project selection, focusing on opportunities that align with our strategic objectives and offer attractive returns.

I would now like to spend a few minutes discussing some of the trends in our key markets. We remain encouraged by the favorable trends in our T&D business, where strong spending plans by many of our key customers continues to drive our momentum. We think our recent revenue results are largely a timing issue as evidenced by our year-to-date backlog growth. Our utility customers are accelerating their infrastructure programs, and we're actively evaluating a healthy pipeline of opportunities that positions us for continued growth in this segment. The broader context driving this momentum cannot be overstated. The United States faces an unprecedented need for power transmission infrastructure upgrades, driven by projected loan growth from multiple sources, including data centers, electric vehicle adoption, industrial reshoring, undergrounding and the ongoing energy transition. This creates a multiyear tailwind that we believe will sustain demand for our specialized T&D services well into the future. As we evaluate larger projects, we will remain disciplined in our approach, carefully considering each opportunity against our strategic criteria and risk parameters. This measured approach ensures we're selecting projects that align with both our growth objectives and our commitment to operational excellence.

Looking at our data center submarket, we continue to experience very strong demand with no signs of weakening and urgency around data center infrastructure development seems to only have intensified. Our deep involvement in long-term planning with key customers provides us with visibility into future projects and revenue opportunities. From a competitive standpoint, we've strategically positioned ourselves in key geographic locations where data center development is active. We've established ourselves as one of the select few service providers in the industry with the proven track record, technical expertise and skilled workforce necessary to successfully execute these increasingly complex jobs. Data center projects demand precision, reliability and the ability to work with an extreme tight tolerances, requirements that play directly into our core strengths. Additionally, opportunities in our industrial end market continue to provide work opportunities for us. We are expanding our offering into other regions of the country to build upon our expertise. We have recently started work outside of our core geography at a semiconductor manufacturing facility. We believe more opportunities like this will come as we execute successfully.

Now let me shift gears a bit and provide a quick update on some of our key accomplishments during the quarter regarding our 4EVER strategy, which continues to serve as the foundation for our sustainable growth and competitive differentiation. The cornerstone of our long-term success is our people. During the third quarter, we maintained our focus on attracting and retaining key talent, and I'm proud of our ability to secure and develop qualified labor in support of our strong top line results. Our ability to grow our employee base is critical to supporting our growth objectives and enabled us to generate nearly $1 billion in revenue during the third quarter. What makes me particularly proud is not just our success in attracting new talent, but our continued focus on developing and retaining our existing workforce. We've invested significantly in training programs, career development pathways and competitive compensation packages that recognize the value our skilled craft people bring to our organization. In an industry where skilled labor is increasingly scarce and competition for top talent is intense, our ability to both attract and retain the best people in the business gives us a sustainable competitive advantage.

We had another quarter of efficient execution, which, once again, positively impacted results during the quarter. This is a direct reflection of our tremendous team throughout the organization. We had favorable variances and project pull forward across certain large projects that were spread across multiple end markets, highlighting the strength and depth of our team. Our focus on project selection, bidding discipline, training, safety and execution are core to everything that we do. We are extremely proud of our track record of superior execution and work every day to maintain our success.

In summary, I'm extremely proud of our third quarter results and everything we have accomplished in our first year as a stand-alone company. We are excited about the opportunities ahead and expect ongoing strong momentum into 2026, while we continue to execute on our 4EVER strategic priorities with a focus on providing long-term value to our shareholders.

With that, I'll turn it over to Max.

Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter and give an update on our liquidity and balance sheet and wrap up with our guidance.

Beginning on Slide 10 in today's presentation, revenues for the third quarter were $986.8 million, an increase of 30% compared to the same period last year. The increase was driven by strong growth in E&M, where revenue increased 43% versus last year. Total EBITDA was $89 million during the third quarter, an increase of 37% from the same period last year. That was driven by solid revenue growth and increases in segment level margins in both E&M and T&D, including continued strong project execution. Our stand-up costs continue to trend in line with our expectation for full year run rate incremental costs of $28 million. As a result, our third quarter EBITDA margin was 9%, up 50 basis points from 8.5% in the prior year period. At September 30th, total backlog was $2.95 billion, up 2% from September 30, 2024, even while we had a strong revenue burn during this current quarter. Our T&D backlog was up 19% from last year due to increases in the utility end market, specifically undergrounding and substation work. While our E&M backlog was relatively consistent, reflecting the strong revenue burn during the quarter. We remain confident in our ability to generate continued backlog growth. Our orders during the quarter were strong and bidding activity remains healthy across most of our key markets, including commercial, industrial and utility.

Now turning to our segment results. Let's first look at E&M, where our third quarter revenues increased 43% to $767.3 million. The increase was driven primarily by growth in our commercial and renewables markets, with the continued strength in our data center submarket, once again a key driver. Our E&M EBITDA was $66.9 million in the third quarter, an increase of 64% compared to last year. The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficiency gains on certain projects across several end markets, partially offset by higher SG&A expenses. As a result, our E&M segment EBITDA margin was 8.7%, up 110 basis points compared to 7.6% in the third quarter of 2024.

Our third quarter T&D revenues were $223.4 million, down modestly from $228.5 million last year, driven by growth in the transportation market, offset by a modest decline in utility. While our T&D revenues were down nominally, we attribute this mostly to timing and less storm work. We remain encouraged by the broader demand trends as evidenced by the recent momentum in our T&D backlog. We continue to see strong opportunities across our long-term customer relationships and are confident in the growth outlook heading into 2026. T&D segment EBITDA increased 11% to $33.8 million in the third quarter, driven primarily by a higher gross margin due to solid project execution and more favorable project mix. As a result, T&D segment EBITDA margin was 15.1%, up 180 basis points compared to 13.3% in the same period last year.

Turning now to our balance sheet and liquidity. As of September 30th, we had $129.9 million of unrestricted cash and cash equivalents, $288.7 million of gross debt and $207.4 million available under the credit facility, net of $17.6 million of standby letters of credit. Net leverage, defined as net debt to trailing 12-month EBITDA, was approximately 0.5x. Operating cash flows were $108.6 million for the first 9 months of 2025, up from $82.7 million in the same paid last year, driven by our strong operating results, partially offset by changes in working capital to support our revenue growth. CapEx was $42.1 million for the first 9 months of 2025, up from $34.5 million in the first 9 months of last year. The increase in CapEx reflects our strategy to increase investments that support our organic growth including the purchase of our new prefab facility we discussed in the first quarter as well as additional vehicle and equipment purchases in TV to support the growth of our business. We continue to expect CapEx for 2025 to be in the range of $65 million to $70 million. We generated free cash flow of $74.8 million for the 9 months ended September 30, 2025, up from $57.8 million last year.

Wrapping up with guidance. We are very pleased with our strong results for the first 9 months of the year, which reflect the attractive demand drivers in our business, excellent project execution and the pull forward of revenues and profits on certain projects. Based on our elevated backlog position and strong business momentum balanced against our typical fourth quarter seasonality, we expect a solid finish to the year. As a result of these factors, we are raising our 2025 guidance. We are now forecasting revenues for the full year in the range of $3.55 billion to $3.65 billion, which is up from our prior range of $3.3 billion to $3.4 billion. And we now expect EBITDA in the range of $290 million to $300 million, up from $240 million to $255 million previously. At the midpoint of our updated range, our revenue and EBITDA forecast represent growth of 26% and 40% adjusted for the incremental standalone costs versus the prior fiscal year.

Our revised guidance implies a fourth quarter EBITDA margin below our year-to-date EBITDA margin. As we have discussed in recent calls and again this quarter, we have benefited from some very strong execution during fiscal 2025 with a few jobs where we recognize meaningful upside. At this point, we believe our fourth quarter projected margin is a good starting point for our 2026 outlook. We will, of course, continue to strive for execution upside, but that is not our based on assumption as we start a year.

Overall, we are very proud of our strong performance through the first 3 quarters of the year, and we are extremely excited by the trends in our core markets and the momentum in our business. Our backlog remains at elevated levels, which provides a degree of visibility into revenue expectations for 2026, and we feel confident in our ability to deliver on our long-term financial targets.

That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of the call.

[Operator Instructions] Your first question comes from Ian Zaffino with Oppenheimer.

Very good quarter, congratulations. Question would be on margins, and how do we think about margins going forward? I know initially, there was talk about not getting so much margin expansion going forward or maybe just kind of leveraging some of the cost structure. But we're actually seeing some really nice margin improvement in this quarter. How sustainable is this? And how do you kind of rethought maybe the potential margins that you guys could eventually reach?

Thanks for the question, Ian. Our execution upside is really hard to forecast. And when things go right, most things on projects that we do, we have that uplift. We certainly strive to execute well as we have for many years through our repeatable playbook. And in this fiscal year, we saw really strong execution benefits more than in previous years. The upside in margins is not always possible. But when we've got labor materials and schedules, all lining up for us to be able to perform, we'll continue to focus on margin uplift on our projects going forward.

Okay. And then maybe as a follow-up on the data center side. But can you maybe talk about what regions or where you're seeing particular strength, because also as far as your inbound, you're getting. And then also maybe can you talk about like the time line for delivering some of these larger projects? I mean are you still kind of seeing them come into the backlog earlier? And how do you think about that just in general?

We've got quite a few data center projects in the Upper Midwest part of the country, also in the Midwest and the Southwest and Pacific Northwest, those are our primary regions, where we're doing data center work, and we've been asked to go to other regions as well. The data center work is a real important part of our business. As you've seen, it's grown in our revenue, but also in our backlog.

Your next question comes from the line of Brent Thielman with DA Davidson.

Jeff or Max, I mean, look, you've got a year here of pretty tremendous organic growth kind of 25% or more. And on the other side, bookings a bit are inherently lumpy, but year-to-date, you're sort of pacing. What you did last year, backlog kind of more flattish, albeit at elevated levels. And I guess in that context, and to the extent that you can provide maybe some high-level views around next year, I mean, can you -- do you still expect to be able to grow the business organically off this really great year with all that you see in front of you, I think, would be just kind of help with -- give us a sense what the starting point could be?

Yes. Thanks for the question, Brent. We're still seeing a very strong demand for the services that we provide. And as you know, backlog in our business could be lumpy. Now our ability to secure the backlog is strong. And we'll continue to get the backlog that's going to support growth of our business. So we're looking at our diversified end markets and our submarkets and try to navigate through any cyclicality. We do that by being anticipatory, close communication with our operating companies and, of course, being disciplined in our project selection.

Your next question comes from the line of Brian Brophy with Stifel.

Congrats on the nice quarter. Last quarter, you guys talked about having several projects in the preconstruction phase in Electromechanical. Is that still the case, or did many of those projects convert into backlog this quarter?

Yes. We've seen an increase in large-scale projects. We talked about previously that our revenue is divided up into the 1/3, 1/3 and 1/3. But if you take a look at the large and mega projects, that has increased. So the projects that we have in preconstruction, they sometimes extend as we've seen in the past, but also we had some projects that came forward where the material, the labor and all the decisions and constructability reviews were completed earlier. So that contributed to our pull forward. So we're very excited about our ability to position ourselves for additional work and create the backlog to support our growth. Max, do you want to add to that?

Yes. So Brian, I would say, yes, some of those projects that we're in early phases did accelerate and help us deliver some solid revenue this quarter. So some of those convertible we also still have a lot of projects in the kind of preconstruction or early construction phases, which help us get some visibility into next year.

Yes, that's great. I appreciate it. And then, I guess, one other one for me. Obviously, there's been headlines around foot traffic slowing down in Vegas. I guess, can you talk about what you're seeing in that local market? How have conversations with some of your customer base been going there as it relates to activity over the next year or so? And then I guess related, assuming there was some sort of seasonal or theoretical slowdown there, can you help us understand your ability to work through that given the fungibility of the workforce and obviously, the strength we're seeing in other end markets like data centers? Or is a slowdown kind of like late '23, early '24 possibility, or how do you feel about your ability to move around resources if needed?

Thanks for the question. We've got 4 great companies in the Las Vegas market, and we're very well positioned to do hospitality work. Nevertheless, we've diversified those businesses. We're doing data center work in Las Vegas. We're also doing correctional institutional work. And we've pivoted with some of our resources to other parts of the country. And we moved data center talent down to Arizona and also to the northern part of Nevada to be able to capitalize on our expertise in building data centers. So we're diversified. We're in a really good position for the projects that are available. And our work that we have this year 2025 for Las Vegas is up over the prior year. And if you look at our backlog in hospitality and, of course, data center, those are up since the end of last year.

Yes. So Brian, I'd just add, I mean, we are a premier operator in that Vegas market, right? And we will continue to be a premier operator. I think we saw the slowdown from like '22 to '24, and now we're seeing some opportunities in '25, as we've been talking about. But the important part, which you asked is the diversification, right? So we're a premier operator in the hospitality space, but we'll also be a premier operator outside of that data centers and other markets. So we feel good about our positioning there.

[Operator Instructions] Your next question comes from the line of Chris Senyek with Wolfe Research.

Great quarter. Within E&M, could we unpack some of the data center end market revenue in terms of thinking about how that's progressed over the years -- over the year, I guess, meaning, has anything changed in terms of the mix or size or length or timing of the contracts or customer demands or even potentially geography that might change how we should model this business in E&M as we think about things forward.

I appreciate the question. Data centers have become a very big part of our business. It's in our commercial end market, and it's also the largest part of our backlog. And we're getting that work because of our relationships that are based upon our execution and the available labor and management to be able to accomplish those jobs. So we're still seeing a very strong demand in that market. Nevertheless, we're trying to keep ourselves diversified and capitalize on the hot markets, but also to be anticipatory and cross-train our people so we can capture additional work should that market cool, but we're not seeing that. We're seeing very long runway on data center opportunities, and we're very well positioned in the markets that we serve. And when it makes sense, we will travel and meet the demands of our customer request to do projects outside of our core markets.

And then in terms of where that businesses today versus, let's say, the start of the year, is it -- that's been a gradual acceleration of conversations and bidding and things of that nature, or has it sort of been up and to the right like many of the stocks in the space, or has that been more lumpier than what we might think in terms of the pace in that business in terms of conversation.

It's grown for us, and we continue to see that as an opportunity going into next year.

Got you. And then totally separately, leverage is down around 0.5 net leverage. I know Tim is now on board leading corporate strategy. Can you remind us and update us on how you're evaluating M&A opportunities, what the opportunities look like out there, areas that would be adjacent, or how to think about the pace and scale of potential deployment of the excess capital, if you will.

The strength of our balance sheet is putting us in a good position to be able to do a meaningful acquisition. And earlier this year, we added to our corporate development team. So we're really excited about continuing to be very active in the M&A space, but we see more opportunities than we did a year ago. Our funnel is broader and deeper. And if you think about our strategic priorities to be able to get the right company in the right location for the right price, that is something that we're spending a lot of time and effort in working on. We want a company that's going to have high integrity, of course, also provide the same or similar services to what we currently do and provide that geographical expansion in both the T&D segment and also the Electrical and Mechanical segment.

That does conclude our question-and-answer session. I will now turn the conference back over to Jeff Thiede for closing comments.

Thank you, operator, and thank you all again for joining us today. We are very excited about the opportunities ahead for Everus, and we are confident that we have the right strategy in place and the right team to execute on our plan. We will be attending several investor events during this quarter, including the Baird Industrial Conference in Chicago, the Oppenheimer Industrial Summit, the Jefferies E&C Conference and the Goldman Sachs Energy Conference in Miami. If we are not able to connect during the quarter, we look forward to speaking with you on our next quarterly earnings call.

Thank you for your time and interest in Everus. This concludes today's call.

Ladies and gentlemen, you may now disconnect.