Centuri Holdings, Inc. · NYSE:CTRI
Centuri — Debt Investor Presentation (August 2021)
49 slides from Centuri's debt investor presentation, Aug 9, 2021
Slide 1: Lender Presentation
LENDER PRESENTATION AUGUST 9, 2021 1
Slide 2: Disclosure
DISCLOSURE This document contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated by reference in this document are for
Slide 3: Executive Summary
EXECUTIVE SUMMARY » Centuri Group, Inc. (“Centuri” or the “Company”) is a comprehensive utility services enterprise dedicated to delivering a diverse array of solutions to North America’s gas and electric providers – The Company generated LTM 6/30/21 revenue and compliance EBITDA of $2,013 million a
Slide 4: Centuri Overview
CENTURI OVERVIEW THINK AHFAN »
Slide 5: Centuri Owned by Investment-Grade Rated SWX
CENTURI OWNED BY INVESTMENT-GRADE RATED SWX » Southwest Gas Holdings, Inc. (traded on NYSE:SWX) is a holding company that owns all of the shares of common stock of Centuri and Southwest Gas Corporation (“Southwest Gas”) Baa2 / BBB+ / BBB+ » Centuri represents SWX’s “utility infrastructure services”
Slide 6: SWX and Centuri: An Aligned Partnership
SWX AND CENTURI: AN ALIGNED PARTNERSHIP “SWX and Centuri continue to provide a well-aligned partnership. Our shared vision includes a regulated utility cost of service focus and appreciation of the nuances of regulated utility models, a common cultural focus on safety, quality, infrastructure spendi
Slide 7: Company History
COMPANY HISTORY 1967 1987 1996 2000 2014 2017 2018 2020 2021 NPL Phoenix Southwest Strategic Industry Record Riggs Founded Move Gas Strategic Alliances Growth Neuco Acquisition Leadership Achievements Acquisition NPL was founded in With a focus on NPL becomes a wholly- Strategic Alliances With a 100
Slide 8: Centuri at a Glance
CENTURI AT A GLANCE Overview End Market Breakdown » Comprehensive utility services enterprise dedicated to delivering a diverse Revenue1 Gross Profit1 array of solutions, including replacement and installation work, to North Other Utility Other Utility America’s gas and electric providers Services S
Slide 9: Company Overview
COMPANY OVERVIEW Gas Utility Business Headquarters Phoenix, Arizona Lawrence, Massachusetts Salt Lake City, Utah Year Founded 1967 1972 2016 » Distribution and urban pipeline construction » Distribution and urban pipeline construction » Urban pipeline construction Primary Services » Pipeline integri
Slide 10: Company Overview (Cont'd)
COMPANY OVERVIEW (CONT’D) Electric Utility Canada Group Business Headquarters Alexandria, Louisiana Phoenix, Arizona Vaughan, Ontario Cambridge, Ontario Year Founded 2014 2019 1994 1996 » Distribution and urban pipeline construction » Utility pole wire maintenance » Pipeline integrity management Pri
Slide 11: Broad Existing Geographic Footprint
BROAD EXISTING GEOGRAPHIC FOOTPRINT Centuri’s Significant North American Presence Across Key Business Units Centuri Corporate Headquarters » Operations in 55 primary locations across 40 states and >9,000 Canyon Pipeline provinces in the U.S. and Canada employees supporting Linetec Services Nor
Slide 12: Diverse, Blue-Chip Customers
DIVERSE, BLUE-CHIP CUSTOMERS Top 20 Customers1 | >89% of Revenue from Regulated Utilities Customer # Credit Rating Revenue Relationship Contract Revenue as % of Total ($ in Millions) Length (Yrs) Length (Yrs) 1 A2/A 12% $244 43 5 2 Baa1/A-2 6% 18% 119 25 7 3 A2/A 6% 24% 113 20 5 4 Baa1/A- 6% 29% 113
Slide 13: Diverse Revenue Streams Underpinned by Stable MSA Agreements
DIVERSE REVENUE STREAMS UNDERPINNED BY STABLE MSA AGREEMENTS Contract Overview Diverse Service Offerings… » Centuri has two types of agreements with its customers: master Work Type 1 service agreements (“MSAs”) and bid contracts Electric 22% – Under MSAs, customers issue work authorizations that des
Slide 14: Proven Business Strategy and Track Record of Successful Acquisition Integrations
PROVEN BUSINESS STRATEGY AND TRACK RECORD OF SUCCESSFUL ACQUISITION INTEGRATIONS » Acquisition strategy has allowed Centuri to diversify its utility services platform and expand its geographic footprint » Disciplined and targeted approach to evaluating opportunities, including strategic fit and syne
Slide 15: Riggs Distler Overview
RIGGS DISTLER OVERVIEW THINK AHFAN »
Slide 16: Riggs at a Glance
RIGGS AT A GLANCE Overview Segment Breakdown1 » Leading utility services contractor (electric & gas) in the Mid-Atlantic and Revenue Adjusted EBITDA Northeast U.S. Other Other Infrastructure Infrastructure Services Services » Headquartered in Cherry Hill, NJ with ~1,500+ employees 33% 13% » 110+ yea
Slide 17: Market Leader in Northeast & Mid-Atlantic
MARKET LEADER IN NORTHEAST & MID-ATLANTIC Riggs By the Numbers Geographic Footprint 20 200+ Riggs Location States Annual Current Riggs Market Served Customers Expansion Opportunity Riggs Storm Work Coverage1 ~120 19 Customer Company MSAs Facilities 1,200+ 800+ >1,500 Company Operating employees Vehi
Slide 18: Ability to Serve the Entire Utility and Infrastructure Value Chain
ABILITY TO SERVE THE ENTIRE UTILITY AND INFRASTRUCTURE VALUE CHAIN Turnkey capabilities equip Riggs to serve as a one-stop shop for customers, resulting in revenue opportunities across the utility and infrastructure landscape Unique Ability to Serve All Customer Needs Why it Matters to Customers » P
Slide 19: Long-Standing Relationships with Blue-Chip Customers
LONG-STANDING RELATIONSHIPS WITH BLUE-CHIP CUSTOMERS » Average relationships with top utility customers approaching 25 years » Complementary to Centuri’s 23-year average tenure for top 20 customers No material overlap between Riggs’ top » Extensive relationship and long-term contracts with major inv
Slide 20: Highly Recurring Revenue Underpinned by Long-Term MSAs and Stable Contracts
HIGHLY RECURRING REVENUE UNDERPINNED BY LONG-TERM MSAs AND STABLE CONTRACTS » Riggs has 60 unique utility MSAs and 59 non-utility MSAs across multiple geographies − Annual volumes consistent given steady rate base driven nature of utility spending programs − Work across both segments is predominantl
Slide 21: Riggs Adds Significant Cross-Sell and Growth Opportunities
RIGGS ADDS SIGNIFICANT CROSS-SELL AND GROWTH OPPORTUNITIES Compelling, Multi-Pronged Growth Avenues Proven Integration Strategy » Growth under existing contract vehicles driven by favorable industry tailwinds of » Centuri intends to follow integration playbook from prior successful acquisitions elec
Slide 22: Centuri Intends to Retain Key Members of Riggs Management
CENTURI INTENDS TO RETAIN KEY MEMBERS OF RIGGS MANAGEMENT » Post acquisition, the Riggs management team will continue to manage the Riggs business as a standalone operating company » Similar to the Neuco and Linetec acquisitions, Centuri intends to retain key members of management via multi-year emp
Slide 23: Acquisition Rationale
ACQUISITION RATIONALE THINK AHFAN »
Slide 24: Riggs Is the Perfect Fit for Centuri
RIGGS IS THE PERFECT FIT FOR CENTURI… Combining our existing industry-leading utility services platform with a scaled, union electric utility distribution focused provider A Balanced Service Provider A Perfect Complementary Fit » Enhances electric utility distribution service capabilities, with abil
Slide 25: Complements Centuri's Existing Business
…COMPLEMENTS CENTURI’S EXISTING BUSINESS… Centuri Riggs » Utility services enterprise dedicated to delivering a diverse and » Utility infrastructure services contractor with a primary focus on Business Overview comprehensive array of solutions to North America’s gas and electric union electric and s
Slide 26: Enhances Scale & Diversification
…ENHANCES SCALE & DIVERSIFICATION… 2017 Centuri Transformation 2021E Pro Forma Centuri1 Addition of electric utility creates comprehensive "pure- Business Units play" utility distribution services platform Revenue $1,246 2x+ increase in revenue $2,500 ($ in millions) Adjusted EBITDA Margin ~8% ~340
Slide 27: Adds ESG Opportunities
…ADDS ESG OPPORTUNITIES… » Provides real ESG market messaging opportunity for SWX and Centuri with renewable projects Riggs has accomplished so far » Riggs has experience building several of the renewable opportunities Centuri has been assessing – Solar Projects – Anaerobic Digester Facilities – Bat
Slide 28: And Reinforces Centuri's Business Profile
…AND REINFORCES CENTURI’S BUSINESS PROFILE Centuri + Riggs creates a premier diversified utility services company with balanced growth optionality Low Risk… …Drives Highest Growth and Least Volatility Revenue by Contract Structure 1 Revenue by Contract Type 1 Rank 10Y EBITDA CAGR2 10Y EBITDA Volatil
Slide 29: Key Credit Highlights
KEY CREDIT HIGHLIGHTS THINK AHFAN »
Slide 30: Key Credit Highlights
KEY CREDIT HIGHLIGHTS 1 Leading Utility Services Company 2 Consistent Free Cash Flow Generation 3 Commitment to a Conservative Credit Profile 4 Recurring and Stable Revenue from MSAs 5 Blue Chip Customer Base with Longstanding Relationships 6 Favorable Industry Tailwinds 7 Highly Experienced Managem
Slide 31: Enhanced Scale & Diversification
1 ENHANCED SCALE & DIVERSIFICATION… $2,492 million of Revenue1 $294 million of Adjusted EBITDA1 Solidified North American Leader Diverse Earnings Composition2 Over End Market Geography 10,500 employees Other Utility Top State supporting North Services 15% American gas 17% and electric All Other Gas
Slide 32: Creates Top Player in Utility Services Sector
…CREATES TOP PLAYER IN UTILITY SERVICES 1 SECTOR Top 10 Utility Services Firms1 ($ in millions) $4,966 $4,487 $1,620 $1,610 $1,547 $1,467 $731 $505 $350 Fourth largest utility services provider by total revenue 1 By 2019 Utility Revenue; includes Centuri + Riggs utility only pro forma FY 2019 revenu
Slide 33: Consistent Free Cash Flow Generation
2 CONSISTENT FREE CASH FLOW GENERATION » $400+ million of Free Cash Flow generation since 2018 » $100+ million in Free Cash Flow generation since 2018 » Key cash flow drivers: » Key cash flow drivers: – Stable, recurring revenue supported by majority MSA contract structure – Accelerated growth from
Slide 34: Commitment to Conservative Credit Profile with Proven De-Leveraging
COMMITMENT TO CONSERVATIVE CREDIT 3 PROFILE WITH PROVEN DE-LEVERAGING » Centuri has a demonstrated history of prudence and discipline when managing its balance sheet, despite being acquisitive » Significant cash flow generation has allowed Centuri to consistently and quickly delever below its total
Slide 35: Highly Visible, Recurring Revenue from Customer Contracts
HIGHLY VISIBLE, RECURRING REVENUE FROM 4 CUSTOMER CONTRACTS Growing Utility MSA Count1 Sticky, multi-year MSAs with 207 high renewal rates ensure 175 183 60 consistent volume and create 42 44 a stable revenue base 133 139 147 Low-single digit built-in price escalators in MSAs to drive 2019 2020
Slide 36: Well-Tenured, Blue-Chip Utility Customer Base
WELL-TENURED, BLUE-CHIP UTILITY CUSTOMER 5 BASE Key Blue Chip Customers Key Statistics Gas Electric Combination ~25 Years Weighted Average Customer Tenure1 ~5 Years Weighted Average Contract Length1 Top Customer 10% All other 52% Top 10 Customers 47% Denotes new Centuri customers from Riggs acquisit
Slide 37: Favorable Industry Tailwinds: Aging Utility Infrastructure
FAVORABLE INDUSTRY TAILWINDS: 6 AGING UTILITY INFRASTRUCTURE Strong tailwinds across utility end markets support long-term growth Utility Capital Expenditures: History and Forecast » 2020 utility capital expenditures increase to $130 billion (7.75% increase from the previous year) RRA Financial Focu
Slide 38: Favorable Industry Tailwinds: Aging Utility Infrastructure
FAVORABLE INDUSTRY TAILWINDS: 6 AGING UTILITY INFRASTRUCTURE Strong tailwinds across utility distribution end markets support long-term growth Utility Distribution Outlook Electric Utility Distribution Gas Utility Distribution » Aging infrastructure will demand significant replacements and upgrades
Slide 39: Favorable Industry Tailwinds: New High-Growth Infrastructure End Markets
6 FAVORABLE INDUSTRY TAILWINDS: NEW HIGH-GROWTH INFRASTRUCTURE END MARKETS Strong tailwinds across related infrastructure end markets support long-term growth Wireless and Renewable Energy 5G Datacom Energy Transition » Small cell wireless density requires significant buildout, and existing utility
Slide 40: Highly Experienced Management Team
7 HIGHLY EXPERIENCED MANAGEMENT TEAM Executive Leadership Paul Daily Kevin Neill Richard Delaney Rob Lyons Michael Cicchella, Jr. James Connell, Jr. Steve Adams President & Chief Executive Vice Executive Vice President, Centuri Executive Vice Executive Vice Senior Vice Executive Officer President, C
Slide 41: Historical Financial Summary
HISTORICAL FINANCIAL SUMMARY 41 41
Slide 42: Centuri Historical Financial Performance
CENTURI HISTORICAL FINANCIAL PERFORMANCE Revenue Compliance EBITDA and Margin ($ in millions) ($ in millions) 50 $1,948 $2,013 240 $219 $218 $1,751 $1,522 $178 00 160 $141 50 11% $80 11% 10% 9% $0 $0 2018 2019 2020 LTM 6/30/21 2018 2019 2020 LTM 6/30/21 Compliance EBITDA EBITDA Margin Capital Expend
Slide 43: Riggs Historical Financial Performance
RIGGS HISTORICAL FINANCIAL PERFORMANCE Revenue Adjusted EBITDA and Margin ($ in millions) ($ in millions) >300 bps of margin expansion from 2019- 2020 due to improved performance across $479 $80 both business segments, largely driven by $440 Project Controls Group initiatives $401 $61 $383 $55 $41 $
Slide 44: Recent Performance Update
RECENT PERFORMANCE UPDATE Centuri Financial Summary Centuri Commentary ($ in Millions) Actual Performance » YTD revenues increased $64 million y/y attributable to $24 million of FYE YTD YTD LTM incremental electric utility services w ork from expansion w ith existing 2020 6/30/20 6/30/21 6/30/21 cus
Slide 45: Conservative Financial Policies
CONSERVATIVE FINANCIAL POLICIES Operating » Lower risk contract profile, focusing on recurring services MSA contracts with blue-chip utility operators; contract Philosophy pricing structures heavily weighted towards unit price and time & materials vs. lump-sum fixed price » Target total leverage pro
Slide 46: Appendix
APPENDIX THINK AHFAN »
Slide 47: Centuri Compliance EBITDA Reconciliation
CENTURI COMPLIANCE EBITDA RECONCILIATION Centuri Compliance EBITDA Reconciliation ($ in millions) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 LTM 6/30/21 Centuri Standalone Audited Net Income $24.3 $14.6 $20.5 $23.7 $26.9 $26.7 $53.6 $51.8 Goodwill Amortization, Net of Taxes and NCI1 - 1
Slide 48: Riggs Adjusted EBITDA Reconciliation
RIGGS ADJUSTED EBITDA RECONCILIATION Riggs Distler Adjusted EBITDA Reconciliation ($ in millions) FY 2018 FY 2019 FY 2020 LTM 6/30/21 Net Income $10.2 ($0.4) $14.0 $17.6 Interest Expense 2.6 3.6 2.1 2.2 Income Taxes (6.8) 5.5 5.0 6.4 Depreciation & Amortization 18.3 25.4 28.9 29.0 Reported EBITDA $2
Slide 49: Pro Forma Legal Structure
PRO FORMA LEGAL STRUCTURE U.S. Borrower Canadian Borrower Centuri Group, Inc. Centuri U.S. Centuri Canada Division, Inc. Division Inc. Centuri Centuri Oil & Gas Group LLC Power Group LLC Union Non-Union Non-Union Non-Union Union Union Union Union Canyon New England NPL Linetec National Riggs W.S. Ni
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