Executive Summary / Key Takeaways

• Everus Construction Group (ECG) is capitalizing on strong secular tailwinds in key end markets, particularly data centers, high-tech reshoring, and utility infrastructure modernization, driving significant backlog growth and revenue momentum.
• The company reported a robust Q1 2025, with total revenue up 32.1% year-over-year, led by a 47.0% surge in the Electrical Mechanical (EM) segment, while the Transmission Distribution (TD) segment saw a modest 1.9% decline due to weather impacts.
• Backlog remains at a healthy $3.1 billion as of March 31, 2025, up 41% year-over-year and 10% sequentially, providing strong visibility, although a shift towards larger, more complex projects is extending the conversion cycle.
• ECG affirmed its 2025 guidance of $3.0 billion to $3.1 billion in revenue and $210 million to $225 million in EBITDA, reflecting confidence in market trends and execution, while prudently modeling "normal" project efficiency levels after a strong 2024.
• Post-spin financial flexibility, highlighted by approximately 1x net leverage, is enabling increased investment in organic growth (e.g., new prefab facility) and strategic M&A to expand geographic reach and service offerings.

A New Chapter: Capitalizing on Infrastructure Demand

Everus Construction Group, Inc. (ECG) stands as a leading specialty construction solutions provider, operating across a diverse set of end markets throughout most of the United States. For over 28 years, the company has built a reputation for expertise and execution, culminating in a significant transformation on October 31, 2024, when it successfully spun off from MDU Resources Group, Inc. (MDU). This separation marked ECG's debut as an independent publicly traded entity, granting it direct control over its strategic direction and capital allocation.

The company operates through two primary segments: Electrical Mechanical (EM) and Transmission Distribution (TD). The EM segment focuses on construction and maintenance for electrical, communication, fire suppression, and mechanical systems across commercial, industrial, institutional, and renewables sectors. The TD segment specializes in building and maintaining overhead and underground electrical, gas, and communication infrastructure, alongside manufacturing and distributing related equipment. This dual focus positions ECG to benefit from broad infrastructure spending trends.

In a highly fragmented U.S. construction services industry, competition is intense, driven by factors including technical expertise, pricing, resources, safety records, and reputation. ECG competes with a wide spectrum of players, from small regional firms to larger national counterparts like Quanta Services (PWR), MasTec (MTZ), and EMCOR Group (EME). While precise, directly comparable market share figures for all niche competitors are not publicly detailed, ECG holds an estimated 5-8% aggregate share in its primary markets, trailing larger peers like PWR (15-20%) and MTZ (10-15%). ECG differentiates itself through its regional expertise, deep, long-standing customer relationships (some spanning over 30 years), and a focus on complex, high-specification projects where its track record for safety and quality execution provides a competitive edge.

A key operational differentiator for ECG lies in its investment in prefabrication facilities. While specific quantifiable performance metrics for all core construction methods are not detailed, the company highlights that prefab facilities are critical for reducing congestion on project sites, which is beneficial for ECG and other trades, and contributes to efficiency. The recent purchase of a new, larger prefab facility in Kansas City, consolidating existing operations and expanding the footprint by approximately 128,000 square feet, underscores the strategic importance of this capability. Management views this investment as a multiyear opportunity to enhance efficiency and execution, particularly on larger projects, which should translate into improved results over time. While direct competitors like PWR and MTZ may leverage scale and broader technological integration for efficiency, ECG's focused investment in prefab aims to provide a tangible operational advantage in its specific project types. The company's R&D efforts, while not detailed with specific programs or target metrics, are implicitly tied to maintaining its technical expertise and operational efficiency, particularly in specialized areas like undergrounding and complex mechanical/electrical installations.

ECG's overarching strategy, dubbed "4EVER," centers on attracting, retaining, and training its workforce, creating value for stakeholders, ensuring safe and high-quality execution, and nurturing customer relationships. This framework is designed to drive sustained profitable growth, operational excellence, and disciplined capital allocation, forming the bedrock of its value creation thesis as a standalone company.

Performance Reflecting Strategic Positioning

The early results as an independent company demonstrate ECG's ability to leverage its market position and strategic focus. The first quarter of 2025 saw total operating revenues climb to $826.6 million, a significant 32.1% increase from $625.7 million in the prior-year period. This growth was primarily fueled by the EM segment, which saw revenues surge by 47.0% to $648.2 million. This broad-based strength in EM was driven by increased activity across all its end markets, notably commercial (boosted by data center and hospitality submarkets), institutional (government and education), renewables (generation), and industrial (manufacturing and oil & gas).

The TD segment, while facing a modest 1.9% revenue decline to $185.0 million in Q1 2025, demonstrated solid execution. The revenue decrease was attributed mainly to lower utility workloads impacted by weather delays and project timing in certain submarkets (storm, distribution, transmission, substation), partially offset by growth in transportation (traffic signalization). Despite the slight revenue dip, the TD segment improved its operating income margin to 7.8% from 7.5% in the prior year, and its EBITDA margin to 10.9% from 10.1%, reflecting efficient project management and lower SG&A costs.

Consolidated operating income for Q1 2025 rose 31.1% to $51.0 million, maintaining an operating margin of 6.2%, consistent with Q1 2024. Gross profit margin, however, slightly decreased to 11.2% from 11.9%, influenced by changes in project mix despite efficiency gains on some jobs. Selling, general, and administrative expenses increased by 15.9% to $41.5 million, partly due to incremental standalone public company operating costs, which are expected to total approximately $28 million for the full year 2025. Net income for the quarter was $36.7 million, up 30.1%, resulting in diluted earnings per share of $0.72. EBITDA increased 31.8% to $61.8 million, with the EBITDA margin holding steady at 7.5%.

Looking back at the full year 2024, total revenue was $2.85 billion, on par with 2023. While EM revenues softened by 5%, T&D revenues rose by 14%. Full year 2024 EBITDA was $232 million, up from $223 million in 2023, with an EBITDA margin of 8.1%, up 30 basis points. This margin expansion, despite flat revenue and the impact of $6.3 million in Q4 standalone costs, was attributed to increased income from joint ventures and particularly strong project execution and efficiency gains throughout the year.

Backlog provides significant visibility into future revenue. As of March 31, 2025, total backlog stood at $3.1 billion, a robust 41% increase from $2.2 billion a year prior and a 10% sequential increase from $2.8 billion at the end of 2024. The EM segment drove this growth, with backlog up 46% year-over-year, fueled by data center, manufacturing, government, and hospitality projects. TD backlog also grew 8% year-over-year. Management noted that the increasing size and complexity of projects, particularly in EM, are leading to a slightly longer backlog conversion cycle compared to historical patterns. While this extends the timeline for revenue recognition on specific projects, it also provides increased long-term visibility.

Financial Strength and Strategic Investments

ECG's financial position post-Separation appears solid. As of March 31, 2025, the company had $74.0 million in cash, cash equivalents, and restricted cash. It has established its own financing structure, including a $300 million term loan and a $225 million revolving credit facility entered into on October 31, 2024. As of March 31, 2025, $296.2 million was outstanding on the term loan, with $209.4 million available under the revolver (net of $15.6 million in letters of credit). Net leverage (net debt to trailing 12-month EBITDA) was approximately 1x, comfortably below the company's long-term target range of 1.5x to 2x. This low leverage provides significant financial flexibility to pursue strategic growth initiatives.

Capital allocation priorities for the standalone company include investing in organic growth, pursuing strategic acquisitions, and maintaining financial flexibility. Capital expenditures increased to $18.5 million in Q1 2025 from $9.2 million in Q1 2024, reflecting the planned step-up in investment, including the new prefab facility and equipment purchases. Full-year 2025 gross capital expenditures are projected to be in the range of $65 million to $70 million. The company is also actively building out its M&A capabilities, recently hiring a Vice President of Corporate Development and Strategy, signaling a clear intent to pursue inorganic growth opportunities that offer geographic expansion or entry into attractive new markets like biopharmaceutical manufacturing. Currently, ECG does not have a dividend policy or share repurchase authorization, prioritizing reinvestment in the business to drive shareholder value.

Outlook and Key Considerations

Based on its strong start to the year, healthy backlog, and favorable market trends, ECG affirmed its 2025 financial guidance. The company expects revenues between $3.0 billion and $3.1 billion and EBITDA between $210 million and $225 million. This outlook assumes continued strong demand in key markets, incorporates the anticipated $28 million in standalone operating costs, and prudently models "more normal levels of project execution" compared to the exceptional efficiency gains realized in 2024. Management acknowledged that project timing, particularly for larger jobs, remains a factor that could influence quarterly results.

The investment thesis for ECG is underpinned by its exposure to powerful secular tailwinds. Demand for data centers remains robust, driven by the increasing need for digital infrastructure. High-tech reshoring initiatives are creating opportunities in industrial construction. Furthermore, the aging U.S. utility grid requires significant investment for modernization, reliability, and capacity expansion to support electrification trends (EVs, industrial) and increased power demands from data centers. ECG's expertise in both EM and TD segments, including specialized areas like undergrounding, positions it well to capture a share of this substantial market opportunity.

However, investors should be mindful of potential risks. Increased insurance costs, particularly post-Separation as a standalone entity, are a headwind that the company is working to mitigate through pricing and strategy. Tariff and trade uncertainties introduce volatility in material costs, although ECG employs proactive procurement and contractual strategies to manage this exposure. Project execution risk is inherent in the construction industry, and while 2024 saw exceptional performance, 2025 guidance assumes more typical outcomes. The company is also involved in litigation, including a securities class action lawsuit related to backlog conversion disclosures and a customer dispute over a $31.3 million payment, adding a layer of uncertainty, though management believes collection is probable in the latter case and intends to vigorously defend the former. Competition from larger, more diversified players like PWR and MTZ, who may have advantages in scale, access to capital, or technological investment, could pressure margins or limit market share gains, particularly in large-scale or highly technologically advanced projects.

Conclusion

Everus Construction Group has successfully transitioned into an independent public company, armed with a clear strategy and positioned to benefit from compelling secular growth drivers in critical infrastructure markets. Its strong Q1 2025 performance and growing backlog underscore the demand for its specialized services, particularly in the booming data center and resilient utility sectors. While challenges such as macroeconomic uncertainty, cost pressures, and intense competition persist, ECG's focus on operational excellence, strategic investments in organic capabilities like prefabrication, and a disciplined approach to M&A provide avenues for continued growth. The company's healthy balance sheet offers the flexibility needed to pursue these initiatives. For investors, ECG represents an opportunity to gain exposure to essential infrastructure development, supported by a management team focused on leveraging its core strengths and navigating the complexities of the market to deliver long-term value, provided it can effectively execute its strategy and manage inherent industry risks.