Centuri (CTRI) Q1 2026 earnings review
Record Backlog and Reduced Seasonality Drive Strong Q1
Centuri delivered a robust start to 2026, shaking off the typical Q1 winter doldrums that historically plague its business. Revenue accelerated 31% YoY to $723.2M, significantly outpacing the historical trend. More importantly, management's stated initiatives to mitigate U.S. Gas seasonality are bearing fruit: gross profit surged 76% to $35.8M. While the company still posted a Net Loss of $9.5M, this represents an $8.4M improvement YoY. Armed with a record $6.5B backlog and introducing highly confident long-term targets to 2029, Centuri has cemented excellent visibility, though working capital consumption and isolated margin compression in the Non-Union Electric segment require monitoring.
🐂 Bull Case
The backlog expanded to a record $6.5B (up 44% YoY) fueled by $1.3B in Q1 bookings (1.8x book-to-bill). 67% of this came from highly stable Master Service Agreement (MSA) renewals, locking in durable baseload revenue.
A massive historical overhang has been Q1 margin collapse in U.S. Gas due to winter weather. In 26Q1, U.S. Gas revenue grew 44% and gross loss was cut by more than half (to $6.3M from $14.9M), proving the strategy is viable.
🐻 Bear Case
Despite Non-Union Electric revenue growing 24%, gross profit actually fell 9%. Ramping up new MSAs continues to drag on profitability, contradicting the broader margin expansion narrative.
Operating cash flow reversed to a negative $35.0M, down sharply from a positive $16.7M in the prior year quarter. High growth is consuming heavy working capital.
⚖️ Verdict: 🟢
Bullish. The 31% top-line acceleration and progress on structural Q1 profitability issues far outweigh the working capital growing pains. The $6.5B backlog provides incredible downside protection.
Key Themes
Explosive Backlog Momentum
Accelerating. The backlog trajectory is the most powerful fundamental driver for Centuri. Growing sequentially from $5.9B in 25Q4 to $6.5B in 26Q1, it represents a 44% YoY increase. With a 1.8x book-to-bill ratio in the quarter and a $13B opportunity pipeline, the company has effectively de-risked its 2026 and early 2027 base revenue targets.
Taming U.S. Gas Seasonality
Accelerating. Historically, the U.S. Gas segment bleeds cash in Q1 due to winter work stoppages. Management's 3-year plan to push for year-round geographic diversification is showing tangible results. U.S. Gas revenue jumped 44% to $284.5M, and while gross profit remained negative at -$6.3M, it is a massive improvement from the -$14.9M hole dug in 25Q1.
Canadian Operations Breakout
Accelerating. Canadian Operations emerged as the fastest-growing segment in Q1, with revenue surging 51% YoY to $60.0M and gross profit increasing 28% to $9.1M. This growth was largely unlocked by the inclusion of the recently acquired Connect Atlantic Utility Services, proving management's M&A integration is delivering immediate top-line results.
Non-Union Electric Margin Contraction
Reversing. A glaring red flag in an otherwise stellar quarter: Non-Union Electric gross profit fell 9.4% to $14.8M, despite revenue expanding 24.1% to $174.6M. The gross margin compressed severely from 11.9% in 25Q1 to 8.5% in 26Q1. Rapid crew deployment and the costs of ramping up new MSAs are destroying near-term operating leverage.
Operating Cash Flow Drain
Reversing. Fast growth is expensive. Net cash used in operating activities swung to a negative $35.0M, compared to a positive $16.7M in the same period last year. Accounts Receivable jumped to $353M, signaling that billing and collection cycles (DSO) are struggling to keep pace with the 31% revenue surge.
Leverage Remains Elevated
Stable. Net Debt to Adjusted EBITDA sits at 2.7x. While this is a marked improvement from the 3.5x recorded in 25Q1, it highlights that the balance sheet is still relatively burdened. Management established a 2029 target of 1.0x - 2.0x, but achieving this requires converting current backlog into actual free cash flow, which was negative this quarter.
Macro Tailwinds in Energy Infrastructure
Management continues to emphasize the durability of its end markets, supported by long-term grid modernization and pipeline replacement mandates. These systemic tailwinds limit the risk of cyclical downturns disrupting the MSA renewal cycle.
Other KPIs
Accelerating. Up 34% YoY from $24.2M. The margin expanded slightly from 4.4% to 4.5%. This demonstrates that the severe Q1 profitability cliff is being smoothed out, even if isolated segment-level friction remains.
Accelerating. Up a staggering 54% YoY on 16% revenue growth. Unlike its Non-Union counterpart, this segment demonstrated exceptional operating leverage, driven by an influx of higher-margin bid work.
Stable to improving. Down sequentially from $395.1M at the end of FY25, providing a minor offset to the spike in Accounts Receivable and indicating the company is successfully invoicing unbilled work from the prior quarter.
Guidance
Accelerating. Management reiterated guidance, implying 13.6% YoY growth at the $3.39B midpoint over FY25's $2.98B. Given the $6.5B backlog and $723M already delivered in Q1 (historically the weakest quarter), this target appears highly conservative and easily achievable.
Accelerating. At the $295M midpoint, this represents ~18% YoY growth over FY25's $249M. This implies margin expansion through the remainder of the year as the drag from winter seasonality falls away.
Stable. The introduction of specific 2029 targets projects immense confidence. Compounding 10-15% growth over four years implies Centuri expects to sustainably bypass cyclical economic risks through grid hardening and pipeline regulation mandates.
Stable. Reiterated range. Reflects the strategic shift to a 50/50 buy/lease model for the equipment fleet to limit cash drain while still supporting double-digit top-line expansion.
Key Questions
Non-Union Margin Collapse
Despite 24% revenue growth in the Non-Union Electric segment, gross profit fell 9%. Are these purely temporary friction costs from ramping up new MSAs, or is there structural pricing pressure in this segment?
Working Capital & DSO
Operating cash flow swung to a negative $35M this quarter, driven by climbing receivables. When do you expect Days Sales Outstanding (DSO) to normalize, and what specific billing improvements are being implemented to prevent growth from bleeding cash?
Data Center Conversion Timeline
In Q4, management highlighted a $1.4B data center pipeline and noted the first share of bookings was expected in the first half of 2026. How much of the Q1 $1.3B in bookings was explicitly tied to data centers?
Storm Revenue Baseline
Base revenue grew 29%, but gross margin was diluted slightly by a lack of high-margin storm work compared to historical averages. Are you adjusting crew availability for the remainder of 2026 to capture pop-up storm events, or staying fully focused on MSA execution?