Hello, everyone. Thank you for joining us, and welcome to Everus's third quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Paul Bartolai. Please go ahead.
Thank you. Good morning, everyone, and welcome to Everus Construction Group's third quarter 2026 results conference call. Leading the call today are CEO Jeff Thiede and CFO Max Marcy. We issued a news release yesterday detailing our third 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 factors 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 and 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, and good morning to everyone joining us today. Everus delivered another quarter of strong financial results, achieving new quarterly revenue, earnings, and backlog records. Our results reflect the robust demand we are seeing across our diverse end markets, as well as our team's disciplined execution and ongoing focus on our 4EVER strategic priorities. We continue to see sustained demand across our business, as demonstrated by our strong backlog growth. The trends are broad-based, with growth across each of our E&M markets. We are experiencing robust bidding activity, strong order patterns, and continued positive tone from our customers, keeping us on pace for a strong finish to the year and continued momentum into 2027. Turning to our quarterly highlights, beginning with slide four.
We delivered record third quarter revenues of $1.4 billion, up 40% from the prior year, with growth across both our E&M and T&D segments. Our strong top-line performance was complemented by another quarter of excellent execution, resulting in a 58% increase in third quarter EBITDA compared to last year, with EBITDA margin up 110 basis points. Our record results underscore the strength of our position in the industry, our disciplined focus on our operational playbook, and the deep, longstanding relationships we have with our customers. Our backlog at the end of the third quarter was $5.5 billion, up 86% from the same period last year, driven by continued strength in E&M and including contributions from our recent acquisitions of SE&M and Epsilon. The outlook for our data center business remains robust, and this was a key driver of our backlog growth in the quarter.
Our data center end customers tend to be large hyperscalers, and we remain deeply involved in the project planning process for these customers. These plans can extend beyond our backlog burn, giving us good visibility into the continued momentum in the industry. Our long track record of successful project execution, our deeply talented and experienced workforce, and our geographic footprint positions us very well for these attractive industry trends. That said, we also continue to see strong demand trends across other areas of our business, and we are strategically positioned to benefit from our diverse end markets. Within industrial, we continue to see strong trends in the high-tech submarket, mainly semiconductor, including the ongoing ramp-up of work in the new geography we entered around this time last year.
The initial project for this new customer is progressing nicely, and we remain encouraged by the multi-year opportunity we see in this geographic region. The institutional market also generated solid backlog growth, building on momentum we saw during the second quarter. We've seen strong growth in our government and healthcare submarkets, two industries where we have a long history of success. After having some large projects finish up in 2025, we are excited to see the renewed activity in these two key submarkets. Our recent acquisitions of SE&M and Epsilon are also contributing to the diversity of our growth drivers. SE&M significantly expanded our presence in the pharma and healthcare submarkets and increased our volume of mechanical work. Momentum remains strong in SE&M's business, and the integration process is progressing extremely well. We remain excited by the opportunities in the attractive Mid-Atlantic market.
We are very pleased to welcome the Epsilon team to Everus, with the acquisition closing on September 1st. Offsite construction is clearly a critical driver of success in our business, so we are excited by the expanded modular construction capabilities that Epsilon brings to our company. It also enhances our business diversification by broadening our geographic footprint into several attractive regions, and we expect to have meaningful cross-selling opportunities with the customer relationships that Epsilon has. We look forward to keeping you updated as we make progress on integrating Epsilon into our operations. Epsilon has strong business momentum, and we are excited about the contributions it will make to our growth strategy. I'd like to wrap up my comments with an update 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, I already highlighted the sustained momentum we are experiencing across our E&M business. While E&M has been the primary growth driver recently, we remain encouraged by the favorable outlook in our T&D business. We are experiencing solid backlog momentum across our utility sub-markets, and we are optimistic about the growth outlook for our T&D business in the coming years. Utility investment to address aging infrastructure and support projected load growth will provide opportunities in the coming years. We have long-term relationships with utility customers in our key geographies, and we are well-positioned through our long-standing master service agreements to benefit from the expected ramp in transmission and distribution spending. Now turning to operational excellence. Efficient project execution is contributing to our outstanding results, including EBITDA margin of 9.8% for the first nine months of 2026, which is up 120 basis points compared to last year.
Our strong performance is a direct result of our disciplined focus on the Everus operational playbook, the use of modular construction and prefabrication services, and the hard work and dedication of our team members across the company. Our commitment to our 4EVER strategic framework that focuses on employees, value, execution, and relationships remains a driving force behind our continued success. The last initiative I wanted to update you on is our disciplined capital allocation. As we have stated since our spin-off almost exactly two years ago, our capital allocation framework prioritizes investments that support our growth, both organic opportunities and through acquisitions. Our two acquisitions this year align with the acquisition strategy that we've described, which is to expand our geographic footprint, diversify our business, and deepen our market presence.
Our corporate development team remains busy, and we are excited about the opportunities we are evaluating in our acquisition pipeline. Even with the recent transactions, our net leverage is well below our 1.5-2 x targeted range, so we have continued flexibility to execute on our growth strategy. In summary, we remain committed to our strategic priorities and are encouraged by the continued momentum across our business. We expect a strong finish to the year and are pleased to once again be raising our full-year outlook, which Max will discuss in more detail. I would like to thank our stockholders for their ongoing support, our employees for their dedication to safely building America's future, and our customers for their trust and ongoing partnership. 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 10 in the presentation, revenues for the third quarter were $1.38 billion, an increase of 40% compared to the same period last year. The increase was driven by growth in both E&M and T&D segments, including contributions from the acquisitions of SE&M and Epsilon. Excluding the acquisitions, third-quarter revenues were up 36% on an organic basis. Total EBITDA was $140.2 million during the third quarter, an increase of 57.5% from the same period in 2025, driven by robust revenue growth and continued excellent project execution. In addition, results included a one-time net gain of $7.6 million related to the settlement of outstanding billings on a past project.
Our third-quarter EBITDA margin was 10.1%, up 110 basis points from 9.0% in the prior year period. At September 30th, total backlog was $5.48 billion, up 86% from September 30th of last year. The increase was driven by strong growth in our E&M backlog, which was up about 100%. As Jeff detailed, the robust backlog growth reflects increases across each of our E&M markets, as well as roughly $742 million in contributions from SE&M and Epsilon at quarter end versus the prior year. Now turning to our segment results. Let's first look at E&M, where our third-quarter revenues increased 48% to $1.14 billion. The increase was driven primarily by growth in our commercial and industrial end markets, as well as contributions from our recent acquisitions. Excluding acquisition revenue, our E&M revenue was up 42% organically.
Our E&M EBITDA was $119.8 million in the third quarter, an increase of 79% compared to the third quarter of 2025. The increase was driven by our strong revenue growth and higher gross margin due to strong project execution. As a result, our E&M segment EBITDA margin was 10.5%, up 180 basis points compared to 8.7% in the third quarter of 2025. Our third quarter T&D revenues were $255.6 million, up 14% from third quarter of last year, driven by growth in our utility end market. T&D segment EBITDA was $38.3 million in the third quarter, up 13.3% from the prior year period due to higher revenues. T&D segment EBITDA margin was 15% during the third quarter, on par with the same period last year. Turning now to our balance sheet and liquidity.
As of September 30th, we had $245 million of unrestricted cash and cash equivalents, $572 million of gross debt, and $248 million available under the credit facility. Our net debt increased sequentially, reflecting the closing of the Epsilon acquisition, partially offset by our strong operating results. Net leverage, defined as net debt to trailing 12-month EBITDA, was 0.7x as of September 30th, well below our 1.5 - 2x targeted range. Operating cash flows were $267.3 million for the first nine months of 2026, compared to $108.6 million in the same period last year, due to our strong operating results and favorable working capital timing. Capital expenditures were $53.4 million for the first nine months of 2026, up modestly from $42.1 million in the prior year period.
Our capital expenditures for the first nine months represented 1.5% of revenues, below our targeted 2%-2.5% of revenues, due in part to our strong revenue growth and timing of investments. We continue to see significant opportunities to invest in our business to support our organic growth initiatives, and we remain committed to our long-term capital spending targeted range. For the 2026 fiscal year, we continue to expect that we will invest $90 million-$100 million in capital expenditures. Combined with the acquisitions of Epsilon and SE&M, we have deployed over $500 million of capital in support of our growth initiatives thus far in 2026. Even with these investments, our net leverage remains modest, giving us significant balance sheet capacity and ample flexibility to continue investing in our strategic growth initiatives.
We generated free cash flow of $221.2 million for the first nine months of 2026, up from $74.8 million in the same period last year. While our 2026 free cash flow had some timing benefits, our teams are managing the working capital dynamics very effectively as we grow with customers. Wrapping up with guidance. Based on our strong results and the inclusion of Epsilon, combined with the continued momentum we see across our business, we are raising our full-year 2026 guidance.
We are now forecasting revenues in the range of $5 billion-$5.1 billion and EBITDA in the range of $485 million-$495 million. At the midpoint of our range, our guidance implies EBITDA margins of around 9.7% for the year, essentially in line with our year-to-date performance, which reflects the execution upside as well as the margin accretion from SE&M and Epsilon. That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of Brent Thielman with Oppenheimer & Co. Brent, your line is open. Please go ahead.
Thanks. Good morning. Great quarter.
Thanks, Brent.
Jeff, I guess just the first question, any anecdotes or visibility you can share into potential new business and the overall pipeline that maybe goes beyond the robust backlog you reported this quarter, and I guess any risks that you see as a result of the outcome of the elections?
Yeah. If you think about the history of our company, over 30 years, we've been able to navigate successfully through a strategy to take advantage of opportunities in the current market, but also looking ahead in the future. We're really proud of our team to be able to grow our record backlog, and our backlog increases in many of our markets and sub-markets is encouraging to us to be able to further diversify our business and capture the opportunities today, but meanwhile, looking ahead. I think that's also demonstrated by our most recent acquisitions from SE&M closed in April, and also Epsilon closed in September.
Okay. Then, yeah, it looks like Epsilon added pretty significant backlog here in the quarter. I think you have some capacity plans underway for that business. Just your thoughts on ability to convert that in 2027. Does some of that work extend beyond next year? Just how we should think about that.
Yeah. Hey, Brent.
Go ahead, Max.
It's Max. The modular activity that Epsilon has typically has a longer backlog burn than we see in our business. We feel very confident in their ability to continue to generate good opportunities and solid backlog, but it will convert at a slower pace, just given the nature of the business.
Adding to that, Brent, we look at this at least every quarter, every month. Our backlog burn, as we've reported previously, is about 80% over a 12-month period.
Got it. Okay. I'll pass it on. Thank you.
Your next question from the line of Brian Brophy with Stifel. Brian, your line is open. Please go ahead. Brian, your line is open. Please go ahead. Your next question from the line of Kurt Yinger with D.A. Davidson. Kurt, your line is open. Please go ahead.
Great. Thanks, and good morning, everyone.
Morning.
I just wanted to go, I guess, high level. Obviously, pretty fresh news from an election perspective, but would just love to kind of hear high-level thoughts, just less data center-friendly rhetoric, talking about potential moratoriums or new construction pauses. I guess, how do you think big picture around that may be impacting your business, and maybe sports specifically, whether that has any impact in terms of things you have in backlog? Just high-level thoughts would be much appreciated.
Yeah, thanks for the question. We haven't seen any change of behavior from our customers. Our outlook for data centers is strong. It's, as we've reported previously, and the same for this quarter, it's the largest part of our backlog. If you look at the increases in the other sub-markets we have in our backlog, we have an increase in hospitality and warehouse. Our industrial work, semiconductor work within industrial, in addition to manufacturing, is also up on a year-over-year basis for backlog.
Our institutional work, government and healthcare, which also includes pharmaceutical, is up year-over-year. And even renewables and our special projects and service work is up on a year-over-year backlog basis. Our utility work is up as well, most notably in the substation, transmission, and utility work. The diversification strategy of our business is working. Today, we have a lot of data center work, and we're executing that work incredibly well, which is reflected in some of the margin uplift that we've had in this quarter and year-to-date.
Okay, that's helpful. I guess maybe sticking to that kind of diversification theme and looking ahead at future opportunities. If we were to kind of take today as a representation of maybe greater project risk or more uncertainty around how certain projects might progress, I guess, does that change your appetite to continue to pursue more opportunities in that data center area if that strength continues? I guess, I get it's a knee-jerk reaction, but would just love any thoughts there. Thank you.
We're very involved in the planning stages with the hyperscalers, which we're working mostly for, and we're confident that we're going to continue to see opportunities with data centers. And then throughout our organization, to be able to exercise a diversification strategy, we're anticipatory on making sure that we're looking ahead to be able to optimize the opportunities that we see coming up, like pharmaceutical, like manufacturing, industrial, and healthcare, and some of our institutional work.
Okay. Appreciate that. Maybe just lastly on Epsilon, you mentioned some opportunities for cross-sell. I was hoping, having owned that business for two months now, if there are maybe any specific examples or specific areas where you really see an opportunity to scale that business or areas where you've been able to kind of leverage it to a greater extent as part of your larger platform.
Yeah. We see a lot of opportunity for cross-selling. Epsilon had its own customers before we acquired them, and of course, Everus, we had our own customers as well. We have visited their plant and got our presidents together, and we have got the discussions moving forward with being able to cross-sell. Epsilon is pretty well diversified too. They, of course, do data center work, but they also have experience in automotive and in the healthcare industry. So, we think it's a great complement to our business. We think that the cross-selling opportunities are going to provide an expansion, and then we're going to support that business through capital in our CapEx program.
Your next question from the line of Michael Stratoti with Guggenheim Securities. Michael, your line is open. Please go ahead.
Morning, Michael.
Hi. Thanks for taking the question. Sorry, my connection was cutting out a bit, so I hope this wasn't asked already. Looking past integration with Epsilon, how much of the E&M backlog do you think could realistically shift to off-site prefab work? If that is the case, would that potentially increase the CapEx going forward in the out years? Thanks.
Yes, we see a continued growth in the opportunities to be able to do off-site construction. We've had an initiative within our company for many years, and organically, we've been able to grow both on prefabrication and modular. If you take a look at what Epsilon brings to our company as well, they're 100% off-site construction. The lessons learned from what we've done in the past successfully, and you complement that with Epsilon, we are going to continue to expand that part of our business, and it's going to continue to grow.
Our customers also have a big part in this, because they make those early commitments for us to be able to secure the engineering and the equipment and the tools that are necessary in order for us to be able to build upon our success. We're really excited about Epsilon. It's a great part of our business today, and we see tremendous opportunity in the future.
I would just add to that, Michael. Obviously, we had lots of capital plans ahead of buying Epsilon that focused both on equipment and trucks for our businesses, but also on prefab and modular opportunities, right? I think this just supplements that. I don't think it changes the long-term dynamic of our kind of 2%-2.5% of revenue in CapEx. I think with what we want to do with Epsilon, and then, of course, internally, our prefab and modular still fits into that rubric, and we still feel confident that we can deliver lots of opportunity and continue to convert backlog to modular within that framework.
Great. Thank you.
Your next question from the line of Brian Brophy with Stifel. Brian, your line is open. Please go ahead.
Thanks. Good morning. Can you guys hear me?
Yes. Morning, Brian.
A wesome, appreciate it. Thanks for taking the question. I guess just to kind of pile onto the Epsilon conversation here, can you give us a sense for how fast Epsilon has grown in the past, and how we should think about the pace of growth there relative to your stick-built business? Thanks.
Yeah. I will start, and I would like to have Max comment on that. But, of course, we built a model and dove into the details very thoroughly to be able to track against what we originally planned. And Epsilon was closed September 1st, as you know, and we are tracking very well on a business that we see as a great complement to our company.
Yeah. Brian, obviously, modular construction has a little different cadence. It is not maybe as smooth as what you see in our typical E&M on site. They have had good growth. Maybe it has not been quite as fast as where we have grown, but it has held in there with kind of market growth rates over the last several years. But it is just a little bit lumpier. But we feel good about our ability to continue to convert what they are doing into good revenue in the future.
Okay. And yeah, just a follow-up to that. You may have just answered my next question, but the acquisition contribution for electrical and mechanical, I think, was a little bit less than some of the annual run rates would imply for SE&M and Epsilon. Just curious what the driver is. Is some of that the lumpiness and timing of deliveries at Epsilon, as you were kind of alluding to, and the business only being in the quarter for one month? Or is there something else driving it?
Yeah. Brian, it's a little bit the former that you were talking about. I mean, this is maybe a little bit lumpy, first month, purchase accounting, all that stuff, and getting the business integrated into our financials. We feel very, very confident in the long-term run rates of the business.
Appreciate it. I'll pass it on.
Thanks, Brian.
Your next call from the line of Swetha Rakhecha with Cantor Fitzgerald. Swetha, your line is open. Please go ahead.
Hi, Jeff and Max. Congrats on another solid quarter. Having a few connectivity issues, so excuse me if this has been already answered. But Jeff, with E&M organic revenue up more than 40% and the acceleration that you mentioned in data center activity, which is still ongoing, how are you thinking about skilled labor availability heading into 2027?
Yeah, I think I got most of that. Apologize for probably on our end, but I think the growth of our business is going to be, of course, reflected in our backlog. And our record backlog comes across many of our end markets and sub-markets, as I previously stated.
Yeah, and so-
Right. Can I-
Sorry. Labor availability, I think obviously we've done a very, very good job of growing our labor force to support the long-term backlog conversion in our business. I think we've probably grown revenue faster, and I think that's probably the continued goal is we will continue to get access to labor as we need it to complete the projects that we're taking on our backlog. We also are using prefabrication and modular to continue to do more with less. Obviously, long term in this space, there is a labor challenge, but we've been successful in quadrupling our labor over the last 10 - 12 years. Of course, by using prefab and modular, we continue to support further growth even faster than we can grow our labor force.
Yeah, we're at record employment, and we've got a strong history of developing our people technically, but even soft skills to have good, solid succession planning to be able to continue our growth and support our goals for the future.
Right. Thank you for giving that color. Max, I had another question on margin normalization. Q3 EBITDA margin was 10.1%, but accounting for the benefit that you had from the dispute resolution of 55 basis points, it comes down to 9.6%. Should we think of that as the new starting point for 2027?
Yeah. Well, we're not quite ready to provide 2027 guidance yet. We'll give that in February. I think if you think about the benefits that we've had, I think some of it is through execution, right? So there is still some execution benefits that we saw during the third quarter. So I wouldn't call execution benefits normalized margin. We also have seen some upticks, continued upticks in our core margins as well. The guidance in Q4, as you kind of did the math already in Q3, our Q4 guidance kind of suggests that we continue upon that similar margin trend in the fourth quarter based on the visibility to the projects we have and some execution benefits in the fourth quarter.
Okay. Thank you. That's awesome.
There are no further questions at this time. I will now turn the call back to Jeff Thiede for closing remarks.
Thank you, operator. I want to thank you all again for joining us today. We will be attending several upcoming investor events, including the Baird Industrial Conference in Chicago, the Wolfe Virtual Small and Mid-Cap Conference, the Oppenheimer Winter Industrial Summit, and the Stifel Frontier Tech 2.0 Energy Summit in New York. If we are not able to connect during the next few months, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and your interest in Everus. This concludes today's call.