Everus Construction Group, Inc. 2026 Q2 Earnings Call

Good morning, everyone, welcome to Everus Construction Group's second quarter 2026 results conference call. Leading the call today are CEO, Jeff Thiede, and CFO, Max Mercy. 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 Factor 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 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. With that, I'll turn the call over to Jeff.

Thank you, Paul, 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, 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 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 talented 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 four. 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 a 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 healthcare 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 hyperscaler 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.

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 in controlled shop environments 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 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 healthcare. 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 tradespeople. We are excited to welcome Epsilon to the Everus team and look forward to another successful integration after the transaction closes later this year.

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 standalone 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 1.5 to two times 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 forever 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, 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 ending. 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.