Everus's growth accelerates. Why did quarterly cash flow fall?

Everus Construction Group raised its annual outlook after growth in its existing business accelerated. Acquisitions added scale, but most of the quarter's sales increase came from work outside those new businesses.

Organic revenue, which excludes acquisitions and divestitures from the past year, grew 35.8% in the third quarter. That was faster than the already strong 30% growth reported in the second quarter. Data-center and high-tech construction helped drive its electrical and mechanical business.

Research by Ticker Byline shows that the stronger profit did not translate into more operating cash in the quarter. Subtracting the first-half cash statements from the nine-month totals puts third-quarter operating cash flow at $70.5 million, down from $76.2 million a year earlier. Reported net income rose 61%.

A bigger forecast for a bigger business

Everus now expects annual revenue of $5 billion to $5.1 billion and EBITDA of $485 million to $495 million. Its August forecast was $4.5 billion to $4.7 billion and $410 million to $425 million, respectively. EBITDA adds financing costs, tax, depreciation and amortization back to net income.

The new forecast includes Epsilon Industries, acquired on September 1 for $295 million in cash, subject to closing adjustments. When announcing completion, Everus said it would update its forecast with the third-quarter results. The increase therefore combines strong operating delivery with an enlarged business.

The distinction also matters for backlog, or work the company expects to perform. Total backlog reached $5.48 billion, up from $2.95 billion a year earlier. Everus said acquisitions completed this year contributed $742.3 million. That acquired work is part of the total, rather than all being newly won orders.

More profit, with a cash timing difference

Quarterly revenue rose to $1.38 billion and net income reached $91.9 million. Gross margin increased to 14.8% from 12.6%, helped by project execution and a $7.6 million benefit from settling a dispute over earlier billings. Removing only that benefit would leave a margin of about 14.3%, still above the prior-year reported level.

Cash generation remained strong over the full nine months: operating cash flow reached $267.3 million, versus $108.6 million a year earlier. The slower quarterly cash result came as more money went into receivables and other project balances.

The acquisition increased borrowing. Everus ended September with $571.5 million of debt principal and $244.8 million of unrestricted cash and cash equivalents. Its revolving facility had $247.8 million available after borrowings and letters of credit.

The Everus company profile tracks the earlier forecast, acquisition funding and matched quarterly cash comparison.