ECG Q3 2026 earnings call transcript, November 4, 2026

Thank you for joining us and welcome to Everest third quarter 2026 earnings call. After today's preparing.

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 Bartoli, please go ahead.

Thank you.

Good morning, everyone, and welcome to Everest Construction Group's third quarter 2026 results conference call. Leading the call today, our CEO, Jeff Deed, and CFO, Max Mercy. 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.everest.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. to differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section for our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release.

Thank you so much for joining us today and 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. And with that, I'll turn the call over to Jeff.

Thank you, Paul.

Thank you, Jeff.

...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 1. to raise your hand. To withdraw your question, press star 1 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 to raise your hand.

Hey, thanks.

Good morning.

Sure. Jeff, I guess just the first question, you know, any anecdotes or visibility you can share in the potential new business and the overall pipeline that maybe goes beyond the robust backlog here? 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 that we're really proud of our team to be able to grow our record backlog and in 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 SC&M close in April and also Epsilon close to September and 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? How we should think about that. Yeah, hey, Brent. It's Max. So, you know, the modular activity that Epsilon has typically has a longer backlog burn than we see in our business. So we feel very confident. And their ability to continue to generate good opportunities and solid backlog, but it will convert at a slower pace, just given that the nature of the business.

And adding to that, Brent, you know, we look at this every at least every quarter, every month. backlog burn is 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 Stiefel. Brian, your line is open. Please go ahead.

Great. Thanks. And good morning, everyone. I just wanted... To go, I guess, high level, I mean, obviously, pretty fresh news from an election perspective, but would just love to kind of hear high level thoughts, you know, just less data center friendly. Rhetoric, you know, 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? 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 previous 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 health care, which include 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 sold. The diversification. 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. And I guess maybe sticking to that kind of diversification theme and looking ahead at future opportunities. I mean, if we were to kind of take today as a representation of maybe greater project risk or, you know, 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, you know, 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 health care. And some of our institutional work. Okay, appreciate that. And maybe just lastly, on Epsilon, you mentioned some opportunities for cross. So 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.

We see a lot of opportunity for cross-selling. Epsilon had its own customers before we acquired them. And of course, Everest, 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 some data center work, but they also have experience in automotive and in the health care industry. So we think it's a great complement to our business. We think that the cross-selling opportunities are. are going to provide an expansion and we're going to support that business through capital in our CapEx program.

Your next question from the line of Michael Stratotti with Guten Securities. Michael, your line is open. Please go ahead.

Good morning, Michael.

Thanks for taking the question and sorry my connection was cutting out a bit so I hope this wasn't asked already. But looking past integration with Epsilon, how much of the E&M backlog do you think could realistically shift to offsite prefab work? And if that is the case, you know, would that potentially increase the capex, you know, going forward in the out years? Thanks. Yes, we see continued growth in the opportunities to be able to do offsite construction. We've had an initiative within our company for many years. And, 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 a hundred percent offsite construction and the lessons learned from, you know, what we've done in the past. successfully and you compliment 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. That's for us to be able to 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, and I would just add to that, Michael. I mean, obviously we had lots of capital plans ahead of buying Epsilon that focus both on, you know, equipment and trucks for our businesses, but also on.

Prefab and modular opportunities, right? So I think this just supplements that. I don't think it changes the long term dynamic of our kind of two to two and a half percent of revenue in CapEx. I think, you know, with what we want to do with Epsilon and and then, of course, in. internally, our prefab and modular still fits into that rubric and 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 Stiefel. Brian, your line is open. Please go ahead.

Thanks.

Good morning.

Can you guys hear me? Yes.

Good morning, Brian.

Awesome. Appreciate it.

Thanks for taking the question.

I guess just to kind of pile on to 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 build business? Thanks. Yeah, I'll start. I'd 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 what we originally planned and and Epsilon was closed September 1st, as you know, and we're tracking very well on a business that we see is a great complement to our company. Yeah, so Brian, you know, I mean, obviously, modular construction has a little different cadence, right? It's not maybe as smooth as, as what you know, you see in our typical ENC on site. They've had good growth. Maybe it hasn't been quite as fast as is where we have grown, but it's held in there with kind of market growth rates over the last several years, but it's just a little bit lumpier. We feel good about our ability to continue to convert what they're doing into into good revenue.

Okay. And yeah, it's just a follow up to that. Uh, you may have just answered my next question, but the acquisition contribution for electromechanical, I think was a little bit less than, uh, some of the annual run rates would imply for SEMM and EPS.

One, 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, um, the business only being in the quarter for one month, um, or is there something else driving it? Yeah, yeah, Brian, it's. It's, it's a little bit the light, you know, the former that you were talking about, right? So, I mean, this is, um, you know, maybe a little bit lumpy, you know, first month purchase accounting, all that, all that stuff and getting the business integrated into our financial. So we feel very, very confident in the, in the. long-term run rates of business. Appreciate it. I'll pass it on.

Thanks Brian.

Your next call from the line of sweet, the red heat chat with Cantor. Gerald. Sweet, your line is open. Please go ahead.

Hi, Jeff and Max.

Congrats on another solid quarter. Having a few connectivity issues, so excuse me, 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 skill labor availability heading into 2027? Yeah. I think I got most of that. I 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.

I mean, I think obviously we've done a very, very good job of growing our labor force. Um, you know, to, to support the, the longterm, uh, you know, backlog conversion, our business, I think we've probably grown revenue faster. I think that's probably the continued goal is to, you know, we will continue to get access to labor as, as we need it to complete the products that we're taking on our backlog. But we also are using, you know, prefabrication and modular to continue to do more with less. So obviously long term in this space, you know, there is, you know, a labor challenge, but we've been successful in quadrupling our labor over the last, you know, 10 to 12 years. And of course, by using prefab and modular, we continue to support further growth, even faster than we can go our labor force. Yeah, we're a record employment. And we've got a strong history of developing our people. 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 call. 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. So should we think of that as the new starting point for 2027? Yeah, well, we're not quite ready to provide 2027 guidance yet. You know, we'll give that in February. But I think if you think about, you know, the benefits that we've had, I think, you know, 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, you know, normalized margin. But then we also have seen, you know, some upticks, continued upticks in our core margins as well. So we, you know, the guidance in Q4, you kind of did the math already in Q3, so 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.

There are no further questions at this time. I'll now turn the call back to Jeff Theed for closing remarks.

Thank you, operator.

This concludes today's call.