Centuri Holdings Inc (CTRI) 2026 Q2 法說會逐字稿

Hello everyone. Thank you for joining us and welcome to the Century second quarter 2026 Earnings Conference Call. (Operator Instructions)

I will now hand the conference over to Nathan Tetlow, Vice President, Investor Relations. Nathan, please go ahead.

Thank you, and good morning, everyone.

Today, we issued and posted to Century earnings website our second quarter earnings release and investor presentation. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer term guidance.

Some of the information that will be discussed today contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are as of today's date and based on management's assumptions and are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals.

A cautionary note as well as a note regarding non-GAAP measures is included in today's press release, in the investor presentation and in our filings with the Securities and Exchange Commission, which we encourage you to review.

Also provided are reconciliations of our non-GAAP measures to related GAAP measures. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements and we assume no obligation to update any such statement except as required by law.

Today's call is also being webcast live and will be available for replay in the Investor Relations section of our website shortly after the completion of this call.

On today's call, we have Chris Brown; President and Chief Executive Officer and Greg Izenstark; Chief Financial Officer.

I will now turn the call over to Chris.

Thank you, and thank you everyone for joining our second quarter earnings call.

We're proud to have delivered $962 million of revenue for the quarter, a new quarterly record for Century. Adjusted net income for the quarter was $24.4 million. An increase of 44% from the same quarter last year.

In terms of our base measures, which excludes storm works, and for this quarter, a one-time pre-IPO receivable write-off, second quarter base revenue was 36% higher than last year and base gross profit was 21% higher.

For the first half of the year, base revenue was 33% higher than last year, and base gross profit was 35% higher than last year. This is remarkable growth and reflects the dedication of our teams across the US and across Canada.

I'll start with the recently announced acquisition of JJ White, a leading provider of union industrial, mechanical, and electrical maintenance and construction services. JJ White has about 1,000 employees and will be integrated into our [rec distiller] business, adding scale and implant construction expertise across several end markets, including data centers.

This [took] in acquisition is consistent with our strategy that we laid out earlier this year. We increased scale in the Northeast and Midwest, expanded our core business, and added new customers in the electric end markets. We expect JJ White to add more than $20 million of gross profit on a full year annualized basis.

The total cash consideration paid was approximately $62 million, funded from existing balance sheet liquidity. We therefore see no change to our year-end leverage target of two times. And we're very much excited to welcome the JJ White team and look forward to the growth and their execution ahead.

Now for commercial update, where we continue to see strength in our core and adjacent end markets and more than ample opportunity to deliver sustainable growth at double-digit levels. Second quarter bookings were nearly $850 million, bringing our year-to-date bookings to over $2.2 billion. Our book-to-bill ratio year-to-date is 1.3 times. And on an organic basis for the full year, we are targeting a 1.2 times book-to-bill or approximately $4.4 billion of total bookings for 2026.

The successful negotiation and award of our largest data center project has demonstrated our ability to differentiate and secure complex value-added contracts into our portfolio. The $125 million award covers electrical infrastructure and utility for a multi-building data center campus. We continue to view the data center demand as robust, attractive, and growing. And with the addition of JJ White, we will further increase data center backlog and the pipeline of opportunities for our company.

At quarter end, we had about $2 billion of data center opportunities in our pipeline.

Other big works in the quarter include the construction of an electrical transmission and substation project for Atlantic Canada, which was a very nice award for the Connect team. And also the assembly and installation of key components for gas infrastructure company, and finally, a large significant electrical high voltage transmission project in the Northeast of the US.

On the MSA side, we booked approximately $250 million in renewals, which included gas distribution, infrastructure upgrades, and expanded scopes of work for a longstanding utility customer. We also booked approximately $200 million between new MSAs and growth from existing MSAs. Demand for our core MSA work, including expanded scopes of work, remains very strong. Our current backlog stands at approximately $6.4 billion, which is up 21% year-over-year.

Even more notable is the opportunity pipeline has increased to approximately $16 billion, which is up 23% from the first quarter, which demonstrates the strength of our end markets and our ability to present centrally for backward growth.

We have nearly 700 differentiated bid opportunities in the pipeline, which collectively represents 60% of the $16 billion. And in the very near term, we have $2.5 billion of outstanding bids pending at the end of Q2, which represents a 15% increase from the first quarter. This number has further increased as we've moved into Q3, another positive indicator of the strength we are seeing across our end markets. But only two-thirds of these pending bids are from our electrical segment.

It should also be noted that as we bid and increased our volumes, our bid margins year-over-year have increased by more than 10%, which is fully in line with our long-term margin targets that we communicated earlier in February this year. As we've discussed over the recent months, we are focused on driving longer term sustainability into our business through margin expansion, backlog, and greater coverage for the subsequent years.

Coming into 2026, we had about $3 billion of coverage for 2026 revenue, and we are now forecasting to exit 2026 with more than $3.6 billion of revenue coverage for 2027. This is a 20% in organic increase. This visibility and predictability provide the foundation for sustainable growth, allowing us to plan and execute for the future.

Lastly, to support customer [demand] and build for sustained growth, over the first six months of this year, we have organically added approximately 1,700 employees, representing an 18% growth in headcount so far this year. In the US gas business alone, we've added over 1,200 employees, a 25% increase to support client demand emanating from our strategy to mitigate seasonality in our business and expand our gross margins.

This significant capacity increase added near-term costs, which we estimate reduced second quarter gross profit by approximately $3 million. We fully expect these capacity investments to benefit Q3 2026 and the subsequent quarters as our resources generate revenue and margin expansion.

We forecast approximately 7.5% gross margin for our US gas business in the second half of this year 2026. We were also affected by electric fuel prices in the quarter relating to the ongoing conflicts in the Middle East. The average per gallon cost was at 48% year-over-year, and the estimated cost impact within the second quarter was approximately $6 million.

Higher fuel prices and the investment associated with the additional gas resources together had a combined 95 basic point impact on the second quarter base gross profit margin. The fundamentals of our business remain strong and we continue to invest in the future, gathered by the priorities outlined within our Vision One Century strategy.

I'll now turn it over to Greg to discuss the financial results.

Second quarter 2026 consolidated revenues totaled $962 million, a new quarterly record and was a 33% increase from Q2 2025. Consolidated gross profit was $69 million and gross profit margin was 7.2% in the quarter.

In terms of base results, which exclude the impact of storm work, and for this quarter, a one-time write-off I'll discuss shortly, base revenue was up 36% and base gross profit was up 21% compared to last year. Base gross profit margin was 7.9% in the quarter versus 8.9% last year. And on a trailing 12-month basis, base gross profit margin was 7.8% versus 7.4% a year ago.

Net income attributable to common stock in the second quarter was $6.1 billion (sic - see investor presentation slide 23, "6.1 million") or $0.06 per share, compared to a net income attributable to common stock of $8.1 million or $0.09 on a per share basis in the same period last year.

In the second quarter, adjusted EBIT was $40.5 million, 8% higher year-over-year and adjusted EBITDA was $75.7 million, a 5% increase over the same period last year. Adjusted net income in the second quarter came in at $24.4 million or $0.24 on a per share basis, compared to $16.9 million or $0.19 per share in the same period last year.

As Chris mentioned, second quarter results were impacted by elevated fuel prices from the ongoing conflict in the Middle East. We estimate that the higher fuel prices in the quarter amounted to an additional cost of approximately $6 million or approximately 60 basis point impact on margins.

In the second quarter, the company wrote down all of its remaining accounts receivable and contract assets related to work that was completed prior to 2020 for the city of Chicago. The write-down reduced US gas revenue by $9 million in the quarter. We did not budget collection of this receivable in 2026, so the write-down has no impact on our cash flow expectations. We have excluded this one-time item from our non-GAAP measures, including our base measures.

Now to our segments. US Gas revenue was $489.5 million, an increase of 45% compared to the prior year. The growth was driven by increased bid work and MSA volumes, demonstrating the underlying strength of our customer relationships and market position.

Gross profit margin was 4.2% in the quarter, down from 7.8% last year. Base gross profit margin for US Gas was 5.9%. As previously mentioned, second quarter margins for US Gas were impacted by approximately $3 million or 60 basis points from capacity added in the second quarter.

While the timing of these additions impacted Q2 costs, we expect the results scale benefits to support stronger performance in the second half of 2026 and further improve seasonality during the first quarter of 2027.

On a year-to-date basis, we've seen significant growth and improvement in profitability of US Gas. Base gross profit has more than doubled from last year and base gross profit margin improved by 36% over the same period last year.

Canadian operations revenue was $81.4 million, up nearly 48% from the prior year period, primarily from the inclusion of Connect. Operational performance in this segment remains strong against the backdrop of sustained favorable demand as evidenced by the 16% gross profit margin in the quarter.

Union Electric revenue was $224.2 million, an increase of 23% year-over-year. Growth has been fueled by robust activity and projects serving industrial end-user segments. Gross profit margin for the Union Electric segment was 9% in the second quarter, ahead of the 8.4% recorded in the same period last year.

Non-union Electric revenue in the second quarter was $166.9 million, an increase of 11% year-over-year. Base revenues in the non-union electric was $157.1 million in the quarter, which is a 15% increase from last year. This growth reflects the significant expansion we've seen in MSA activity, building on the momentum we've discussed in recent quarters.

Gross profit margin in the non-union electric segment was 9.1% in the current period compared to 11% in the prior year period and base gross profit margin was 8.4% compared to 8.9% in the prior year.

Turning to cash flow and balance sheet. Net cash provided in operating activities for the second quarter was $20 million and free cash flow was negative $7 million, consistent with our expectations. For the full year, we expect free cash flow to exceed $75 million, a 25% improvement over initial expectations.

We ended the quarter with a net debt to adjust the EBITDA ratio of 2.6 times, which was down from 3.7 times a year ago. We continue to forecast net debt to adjust EBITDA of around two times by year-end.

Finally, turning to our 2026 outlook, we have increased our full-year guidance and have included expected contributions from JJ White. The full-year guidance also includes approximately $5 million of forecasted incremental fuel expenses based on an assumption that higher fuel prices persist through the third quarter.

As a reminder. Base revenue and base gross profit are non-GAAP measures that exclude the impact of storm restoration services and the one-time breakdown related to the City of Chicago.

For 2026, we expect base revenue of $3.5 billion to $3.7 billion and base gross profit of $270 million to $290 million.

Revenue, adjusted EBITDA, and adjusted net income are measures that include storm restoration services. Status for these measures include storm restoration services using a three-year average of $88 million in revenue and $28 million in gross profit. For 2026, we expect revenue of $3.59 billion to $3.79 billion, adjusted EBITDA of $285 million to $310 million, and adjusted net income of $60 million to $75 million. And lastly, we are reducing our net Capital Expenditure outlook to a range of $60 million to $75 million following the sale and leaseback of select equipment early in the third quarter.

I will now turn it back to Chris to wrap up our prepared remarks.

As we wrap up today's call, I'd like to leave you with a few key thoughts.

We've demonstrated our ability to capture market demand and deliver growth. Over the course of the last year and again in the first half of this year, we have successfully identified and secured opportunities across our own markets, expanded our workforce to meet our customer demand, and continue to grow revenue backlog and the opportunity pipeline.

The focus now is not on only sustaining that growth, but leveraging the scale we are building to expand margins and drive stronger profitability over time. We're very pleased with our first half performance and more importantly, encouraged by the trajectory of our business.

As we outlined last quarter in our Vision One Century strategy, the path to achieving our 29 base gross profit margin target of 9.7% is built on three primary drivers: reducing the seasonality of our business, increasing the mix of higher-margin big work, and delivering operational excellence. We've already begun to see these initiatives gain traction.

Our first quarter results demonstrated meaningful progress in seasonality. Our opportunity pipelines and bookings continue to support growth in big work, and we are now advancing several operational excellence initiatives that believe will bring lasting value over time.

We are increasingly confident that the right toolsm processes, and leadership are in place to drive sustained progress. Initiatives like our newly established PMO organization, fleet optimization efforts, working capital management, and enhanced job level performance attribution and analytics are in early stages. These initiatives represent important building blocks in creating a more efficient, scalable one century model.

We are investing with intention, executing against our clear strategy, and are encouraged by the momentum we are seeing across the business. In short, the implementation of our margin improvement plan to deliver the 2029 targets continues in line with our expectation.

As we look ahead, we remain confident in our ability to deliver sustainable growth, achieve our long-term margin objectives, generate free cash flow, and create significant value for all our shareholders.

We truly appreciate everyone's time today and the interest that you've shown.

Operator, let's begin the Q&A.

(Operators Instructions)

Sangita Jain, KeyBanc Capital Markets.

Can I start with the JJ White acquisition and maybe you can discuss what your key goals are with this acquisition and what type of synergies are you hoping to achieve?

Yeah, I can cover that. But first of all, we've known JJ White as an organization for a number of years. So, the cultural fit, the capability, and the relationship between our respective businesses were long established. So this wasn't finding a business we did not know well. So, that was number one.

What JJ White brings us is more scale, more capacity to be able to deliver on growth in the Midwest and the Northeast, primarily focused on implant power data center related activities. The business has got a massive track record in developing talent within the business. It's currently 1,000 people. We believe it can flex easy to 2,000 people, so it brings capacity for us.

Your question on synergy, we don't see cost synergy at all in the transaction. JJ White is currently mobilizing into our overall riggs offices in the New Jersey area. We see the synergy coming from their operational capability combined with ours to do more work for our customers.

That's where we see the synergy in the supply chain of people they have, supervisors, as well as craft, giving us more capacity in that Northeast Midwest to deliver for customers in both data centers and energy.

That's very helpful. And then maybe I can follow-up for Greg. You gave us a look into second half. You said you're factoring in $5 million on higher fuel costs. Can you give us a sensitivity on how many basis points of margin that should mean for the second half?

And so overall for the full year, fuel from the $7.5 million or $7 million in the first half and then the $5 million that I noted in the second quarter or in the third quarter, excuse me, it's about 35 basis points of headwind for a full-year basis.

Okay. And you're assuming just for third quarter, nothing for fourth quarter yet?

Our assumption and our guidance assume a $5 million headwind in the third quarter and then back to some level of normalized increase year-over-year. So, our guidance at the beginning of the year did assume some [not] normal increase that you would expect.

Manish Somaiya, Cantor.

Greg, I had a question for you on guidance. Looks like revenue is up about $300 million at the midpoint, EBITDA is up a little bit. Maybe if you can just help us understand the conversion, the EBITDA flow through? And then I have a follow-up.

Yeah. So, maybe taking a step back, when you look at base gross profit of the increase that we've assumed in our guidance, about two-thirds of it kind of relates to organic business. And then one-third of it kind of relates to the [BP] minimal (inaudible) of JJ White in the five or so months of contribution that we'll get here in the back half of the year.

From an adjusted EBITDA perspective, we've assumed that same level of base gross profit along with our storm activity. Obviously, you have the previously discussed kind of headwind from moving to a 50/50 split on leasing, which we're on target with. And have revised or finalized the sale and leaseback of our existing fleet. So, any future purchasing will be along those lines. So, the combination of all that gets you to adjusted EBITDA about 8.1% at the midpoint.

And Greg, I think in the slides you have fleet investments at 60% operating lease and 40% Capital Expenditure, [these are the] 50/50 split that we have talked about. So, I guess what is the incremental impact to EBITDA of that sort of 10 percentage-point increase in operating lease this year?

So, the full year impact of our leasing is about a half a percentage-point or is about 55 basis points on margin, on EBITDA margin, 55 basis points on EBITDA margin.

Justin Hauke, Robert W. Baird.

So, I've got two questions here. I'll start. I guess the first one, this one's really easy, and then I've got a question on the guidance. But the first question is just the JJ White acquisition. I think you said $315 million in backlog and a $2.8 billion pipeline increase. Is that pipeline increase already in the $16 billion number that you gave or is that something?

No. Just that it's not. We didn't close on JJ White until I think the third week in July, so it's excluded from the numbers, so it will be additively.

Okay. All right. I figured that. I just didn't know, given that the pipeline number (inaudible).

But as Greg just said, the only element you'll see of JJ White within our release is to guidance where one-third of the guidance increase came from JJ White for that five-month period. That's the other thing I would stress.

Yeah. Well, and that leads to my second question, because I guess this is what I kind of want to understand a little bit better because the organic, as you just discussed, the revenue is $200 million higher. You've got another $100 million from JJ White. You raise the EBITDA guidance by five.

You pick up nine or so from the five months that you have JJ White and you offset that with the $5 million headwind from the higher fuel costs. So, that basically just, I guess I would look at that and say that it implies organically that there's no incremental margin on any of that acquired revenue. And so, I guess I just want to understand that dynamic and also just the confidence in the second half base gross profit margin outlook, which is like roughly 9% versus just under 8% that you did here in Q2. I know there's seasonality, but just I guess help me understand some of those moving pieces a little bit better.

Let me talk about the second half and then Greg can come to the overall guidance just to help you map the numbers.

We feel second half of the year very strongly about the volume of work and also about the 9% quoted margin. We've got total visibility on pretty much everything that we need to deliver this year is under contracts. I think there's a slide within the deck that shows that to everybody.

We've added the capacity we needed to add in gas. I think everybody has said in my speaker notes, but everyone will recall, we have a massive drain on margins in our first quarter, even going into April. So, adding more volume into the gas business, needed people to win work, put it into the backlog, which we did, you then got to mobilize people, and we've added 1,200 in the quarter. Those boys and girls will stay within the headcount because we've now reached where we have to be on capacity standpoint.

We don't just look. We can't run the business just on a quarterly basis, the business is not, it's just not linear like that because of the seasonality as well as the portfolio mix, so what's the point? The point is we added the capacity we needed in the second quarter. We've got full visibility of where we're going to be for the second half of this year. We're really confident in the 9% margins as quoted. And our intent now is to drive very strongly to the end of the year.

And then if you look even into 2027, which I know we're not into 2027 yet, we've already built up the backlog for next year, which is really important when it comes to seasonality. The seasonality for the first quarter next year requires us to win work now and have resources for next year. So, the bottom line is very confident in the second half of the year. We've got pretty much all of the revenue under contracts.

We've added the capacity we need to, particularly in the gas business. So, we feel very confident that the investment in the first quarter, will have widened margins in the second half of the year. I'm confident within that overall 9% for the second half of the year across the board.

And specific to the guidance, we talked about in our release that the annualized revenue gross profit contribution from JJ White being $20 million plus with margins consistent with our Union Electric business or our business as a whole.

When you think about, they also have a bit of G&A expense and they're very capital light in there and how they operate their business. And so very little depreciation within the business as they're very efficient from that perspective. And so, taking into consideration lower depreciation within their numbers and then some level of G&A expense, you get to an EBITDA contribution that's a little bit less than what we said on the gross profit basis.

You also have to remember that our EBITDA guidance includes the fuel impact. It's about $12 million on a full year basis that we've forecasted. When you factor all that in G&A expense still being in line with what we previously said, which is 4% or better on a percentage of revenue basis.

And then the last thing I'd just point out on gross profit, I mean, gross profit margin on a full year basis is going to be in that kind of 7.8% to 8% range.

Zachary Schechtman, Wells Fargo.

I was wondering if you could give a little more color on that 9% for [second half Q3 versus Q4]. You mentioned the fuel headwind and US gas labor ramp delivers a meaningful impact. Just wondering if Q3 still hits around that mark or we're expecting to see a sizable step up in Q4?

Were you asking us about Q3 over Q4 margins in gas, was that your question?

Yes, that's correct and just total base gross margin.

So, I think we said in our prepared remarks that the back half of the year for US Gas, we expect to have gross margins in the 7.5% range. And from a total basis perspective, gross margin in the second half of the year is going to be about 9%.

Got it. And we should expect a sizable increase from Q3 to Q4 due to the headwinds you mentioned previously?

I mean, the third quarter generally is the most active quarter that we have just given weather throughout the United States and Canada. And the fourth quarter, while comparable to that, you obviously get weather and holidays in the back half that could impact productivity.

But generally speaking, the third quarter is our strongest period.

And just as a follow-up, I see really nice growth acceleration in bid work last couple of quarters. Can you just talk about how gross margins have been trending in that work, how they've been trending versus expectation and how it compares to MSA at this point?

Zach, we laid out previously our desire to grow the business and the bid mix moving from 80%, MSA 20% bid work to probably long-term 65%, 35%, get it said.

We are tracking bid margins as we are tracking now more closely as delivered margins. And bid work is between 1.1% and 1.5% higher than the MSA margin.

Avi Jaroslawicz, UBS.

I believe you already answered this, but just want to make sure the $16 billion opportunity pipeline that you noted that does not include JJ White, is that correct?

I can confirm that's the case, Avi. The $16.2 billion, to be precise, excludes any JJ White pipeline of opportunity, as does the backlog of $6.4 million plus [reported] is absolutely excludes.

So, the opportunity pipeline of about $3 billion, the mix of bid work in there is up about five percentage-points, but the number of bid opportunities that you called out is about the same as last quarter. So, should we take that to mean that you're looking at meaningfully larger bid opportunities than previously or is that just reading into it too much?

Avi, it's the same conversation on the margin as it is with the pipeline.

You can't look at it. It's not [Swiss watchmaking]. We can't look at it on a quarter-by-quarter basis. So, we look at absolute data over a longer time horizon. So, what I will tell you is at the end of last year, 31st of December, we had $13 billion in the pipeline. There's now $16.2 billion. A six-month time horizon is a fair, in my view, direction of travel for a number of things, both pipeline as well as margins. If you look at the mix of work over the same timeline, we've gone from $6.7 billion of the $13 billion at the end of December was project work, and $6.5 billion was MSA work.

At the end of June, so the quarter have just closed. The project work is 9.664, to be precise, and 6.56 is the MSA work. So, we've seen just nearly a 50% increase in the bid work, which is totally consistent with the strategy we laid out in February. I will tell you the average size of the scope of work within that project has only moved up by a couple of million dollars.

So, we're not deviating from doing the services and the projects that we've always done. There's a $2 million increase from the average contract size within the pipeline at the end of the year to where we are at the end of June. So, it's not materially different, but the amount of work that is bid work has gone up by 46.5% or so percent to be precise.

I appreciate that and I understand that we're talking in approximate terms with the exact number of opportunities in there. I want to ask also about slide note that you're evaluating opportunities to expand geographically and with electric transmission capabilities. Do you see those more as organic growth opportunities? Or would they more likely to be through acquisitions?

I think you've got to decouple sort of two things there. The primary basis of our business is organic growth and we've got the capability to do transmission work. We announced two awards in the quarter, one for Canada and one for the Northeast.

We've doubled in the sales pipeline, we have doubled the amount of transmission, electric transmission opportunities. From the December to where we are in June. So, there is an absolute desire as we communicated in February as part of our strategy to drive organic growth into our transmission business across both union and non-union. And we're doing that, we're seeing that in the pipeline, we're also seeing that in the recent awards.

Your second question around M&A, I will stick to what I think we said in February and what I've been saying for a year. We've got a very very good platform to grow our business. We've got some evolution to do as we bring us together as one strategy, as one company, as one vision, mission, and values to deliver the sustainable growth. But there are areas in the business where we would like to acquire.

We've essentially done two token acquisitions in my tenure here. One was Connect in Northern Atlantic Canada, which was electrical transmission, distribution, substation. And the recent acquisition for unions in the Northeast was Electrical Union to support the overall data center and utility clients.

As I said when we rolled out the strategy, I would anticipate as time moves on, if we see businesses that look similar in size, similar in quality that we can pay the right price for that complements our electrical business, especially our electric transmission, we would love to do those.

So, that's how I answered the question.

Manish Somaiya, Cantor.

Greg, I have one other question for you and then I'll move on to Chris.

Greg, if you could just kind of help us summarize all the puts and takes on the positive impact and the negative impact? I know we've talked about a lot of different numbers, and it's just been really hard to kind of make sure that I have what I need. And I'm sure there are folks on the call who probably feel the same way. Obviously, the revenue uptick is positive, which is, I think, Chris, you have talked about things are happening.

But we're just trying to get a better sense as to puts and takes on some of the things that we have already talked about. So maybe, Greg, if you can just help us figure out what the different line items are just so that we have a better feel for how we should be looking at the numbers. And then, Chris, I did have one other question for you.

When Greg just answers your question, I will just sort of wrap up a little bit on the margin commentary because it does get lost because it's complicated business. I would just like to summarize where we are and how we look at this so the audience can understand it. So, let's Greg answer your question, then I'll just add something towards the back end of that.

Yeah and maybe let me focus on kind of full-year gross margin, base gross margins, because that's ultimately, one of the key drivers for the management team.

So, when you think about base gross profit margin, there's the contribution of JJ White, which is about a third of the gross profit increase in the margin in the base guide that we discussed. You have fuel costs which between what's already occurred in the first-half of the year and what we had forecasted for the second half of the year is about $12 million of a full-year impact.

And then you have the ramp-up costs, which were already incurred in this first-half of the year. They're already in our full-year numbers. Obviously, that's about $3 million. So overall, gross margins are adjusted for fuel are about 8.1% on the base versus the guide of 7.8%, but that obviously doesn't add back to the fuel.

Manish, one thing I would talk specifically about on the margins. We've got a reported margin, then we've got the impact of the Chicago, which was [pre-APU] and not even operationally were involved inse it. It was just something that was on the balance sheet. We've then got the fuel costs and then the Q2 capacity increase. If you look at year-to-date where we are on the margins and how we track it, our overall group margins, [25%] to 6.2%, and we're now at 6.3%. All that is doing is just excluding the Chicago one-time events.

And if you look on a trailing 12 month basis, last year we're at 7.4%, this year we're at 7.8%. And the reason I look at the year-to-date and the trailing 12 months is not an excuse. It's just our business at the moment is not linear. We don't have 12 consecutive quarters that all look the same, mainly due to seasonality, the portfolio mix, and the type of work. So, we see our underlying margins, if you just take out one thing, which is the city of Chicago, and you keep in there the fuel costs and the mobilization for capacity in the second quarter. On a year-to-date are up from 6.2% to 6.3%, and then on [trilling 12], 7.4% to 7.8%.

I think I'm just getting lost a little bit because of the complexities of reporting. And I would say if you looked at the gas margins where most of the seasonality is, year to date last year we were at 2.2% gross profit. This year we're at 2.9%, and on a trilling 12 months, we're well over 1.5% more than we were a year ago. So, everything is moving in the right direction from a margin standpoint.

That's super helpful, Chris. And just kind of going back to our last meeting in June, Chris, we talked about maybe $3.5 billion or so of 2027 work that you expected to book by the end of 2026 and 15% plus backlog increase. If you can just give us a quick update on where that stands today, both excluding and including JJ White?

I can. We deliberately added a slide for readers, Slide 12. Greg may correct me. That basically addresses that very point, Manish.

So, as you quite rightly said, 2025, we had $3 billion of coverage coming into 2026. We are round about where we sit now with about $3.6 billion. So, we're up 20% in terms of expected coverage when we close out 2026 to 2027 revenue. So, that trajectory has continued and you'll recall 2024, we only had $2 billion going into 2025 budget, 12 months. 2025, as I said, we had $3 billion. And you'll see on the slide 12, we're at $3.6 billion is where we forecast. And that excludes JJ White.

What I will tell you on JJ White, they have a similar level of coverage for both 2026 and we are currently validating their coverage for 2027. But I suspect that the JJ White coverage for next year will look very comparable to what we have within Century. So I think the guidance that we show in slide 12 where we have $3.6 billion excluding JJ White is very accurate and we'll draft [20%] more coverage going into next year and I think JJ White will be of a similar mix.

We have reached the end of the Q&A session. I will now turn the call back to Nathan for closing remarks.

Thank you, everyone, for your questions and for participating in today's call. Please feel free to reach out to me if you have further questions. And that concludes today's call.

This concludes today's call. Thank you for attending. You may now disconnect.