Everus (ECG) Q4 2025 earnings review
Record Top-Line Obscures Approaching Margin Squeeze
Everus finished its first full year as an independent public company with exceptional top-line momentum, crossing $1 billion in quarterly revenue (+33% YoY) fueled by a 44% surge in its Electrical and Mechanical (E&M) segment. However, looking ahead to 2026, the narrative shifts sharply from explosive profitability to margin contraction. While FY26 revenue guidance implies a solid ~11% growth at the midpoint, EBITDA is guided to grow just ~2.4%. This indicates that the execution efficiencies and project pull-forwards that defined 2025 will not repeat, causing margins to compress as the company absorbs a higher mix of early-stage, complex projects and public company stand-up costs.
🐂 Bull Case
E&M segment revenues accelerated to 44% YoY growth in Q4, driven heavily by commercial and renewables end markets, particularly data centers. Total backlog reached a record $3.23 billion.
Net leverage sits at just 0.4x with $375.5 million in total liquidity. Everus has massive capacity to fund its organic prefabrication investments and pursue strategic M&A.
🐻 Bear Case
FY26 EBITDA guidance of $320M-$335M implies an EBITDA margin of ~7.9% at the midpoint, reversing the expansion seen in FY25 (8.5%). Growth is slowing drastically on the bottom line.
Despite a 41% surge in Net Income for FY25, Operating Cash Flow actually fell 4% YoY to $156.8M as unbilled contract assets and receivables ballooned.
⚖️ Verdict: ⚪
Neutral. The volume and backlog growth are undeniably strong, validating the company's positioning in the data center and utility markets. However, the 2026 guidance explicitly forecasts a sharp deceleration in profit growth and margin compression, capping near-term upside.
Key Themes
Data Center Boom Powers E&M Segment
The E&M segment continues accelerating, driving nearly 80% of total company top-line. Revenue jumped 44% YoY in Q4 to $791.6M, with EBITDA margins expanding 70 bps to 8.5%. Management explicitly cited the data center submarket as the primary growth engine. To support this, Everus is leaning into specific operational technologies, rolling out prefabrication facilities (like the recent 128,000 sq ft Kansas City expansion) to improve site safety, speed, and margin capture on these complex builds.
FY26 Margin Contraction
A critical data point contradicting the positive top-line narrative is the FY26 EBITDA guidance. Management expects $327.5M EBITDA at the midpoint on $4.15B revenue. This implies a 7.9% margin, decelerating from 2025's 8.5% and 2024's 8.1%. This contraction reflects a normalization of project execution (H1 2025 saw unusual upside from project pull-forwards), higher early-stage project mix, and the full run-rate impact of public company stand-up costs.
T&D Profitability Reversing
While E&M shines, T&D operating dynamics are weakening. Q4 EBITDA for the segment was flat (-0.3%) at $30.5M despite a 6.8% increase in revenue. The resulting margin compression (down 90 bps YoY to 13.4%) was driven by project mix, timing, and higher professional service-related expenses. The segment is securing work, but struggling to drop it to the bottom line.
Grid Modernization Backlog Surge
Despite Q4 margin issues, the Macro tailwinds for the T&D segment are translating into massive future visibility. T&D backlog jumped 40.5% YoY to $384.5M, reversing the stagnant backlog trends seen earlier in the year. The primary macro drivers remain robust U.S. power infrastructure needs, specifically grid hardening, undergrounding (driven by wildfire mitigation), and infrastructure upgrades to support EV and data center load growth.
Working Capital Drain on Cash Flow
Operating Cash Flow moved opposite to Net Income in 2025. While Net Income grew 41% to $201.8M, OCF fell 4% to $156.8M. The culprit is working capital tied up in large, complex projects: unbilled contract assets spiked 53% to $255.8M and accounts receivable grew 30% to $769.8M. Management noted that the shift to larger multi-year projects extends the historical backlog conversion cycle, delaying cash realization.
Strategic M&A Capacity Unlocked
Everus ended 2025 with an exceptionally clean balance sheet. Net leverage sits at 0.4x (well below the 1.5x-2.0x target range) with $152.7M in unrestricted cash. The company is actively building its corporate development team to pursue M&A, specifically targeting geographic expansion in both E&M and T&D segments to follow key customers into new regions.
Other KPIs
Accelerating. Up 16.1% YoY from $2.78B at the end of 2024. The mix is heavily weighted toward E&M ($2.84B), but T&D backlog showed the highest relative growth rate (+40.5%). This provides excellent visibility into 2026, though execution timelines are lengthening.
Up 26.6% YoY from $149.5M. This outsized increase reflects incremental stand-alone operating costs post-spinoff (insurance, IT, corporate overhead) and higher labor costs required to support the operational growth of the business.
Stable and improving. Down from 1.0x at the end of 2024. Driven by strong EBITDA generation and cash accumulation, giving management immense flexibility for the stated $90M-$100M CapEx budget and future acquisitions.
Guidance
Decelerating. At the midpoint ($4.15B), this implies YoY growth of ~10.7%. While a healthy double-digit rate, it is a significant step down from the 31.5% growth achieved in 2025. It reflects a normalization of project timelines and the mathematical reality of tougher comparables.
Decelerating sharply. The midpoint of $327.5M implies a meager 2.4% YoY growth compared to the 37.7% growth delivered in 2025. This confirms that revenue growth will largely be offset by margin compression due to project mix and fixed stand-up costs.
Accelerating. Up significantly from $66.8M in 2025. Represents 2.1% to 2.4% of forecasted revenues. This heavy investment is targeted at vehicles, equipment, and expanding prefabrication capabilities to support organic growth.
Key Questions
Margin Contraction Drivers
Your FY26 guidance implies an EBITDA margin of roughly 7.9%, down from 8.5% in 2025. Exactly how much of this 60 bps contraction is driven by structural public company costs versus lower expected project execution efficiencies?
T&D Profitability Issues
T&D margins compressed by 90 bps in Q4 despite healthy revenue and backlog growth. Is this a structural shift in competitive contract pricing, or purely temporary project mix and timing?
Working Capital Normalization
Unbilled contract assets and receivables consumed significant cash in 2025, driving Operating Cash Flow down despite a 40% jump in Net Income. When do you expect the conversion cycle to normalize and generate cash from these large projects?