Everus Construction’s 2026 Q2 Call: Backlog Conversion, Margin Guidance, and Diversification Claims Don’t Match

Date of Call: Aug 5, 2026

Financials Results

• Revenue: $1.23B, up 34% YOY
• Operating Margin: EBITDA margin of 9.1%, up 130 basis points YOY

Guidance:

• Revenue for 2026 forecasted in the range of $4.5B to $4.7B.
• EBITDA for 2026 forecasted in the range of $410M to $425M.
• Guidance does not include any contribution from the pending Epsilon acquisition.
• EBITDA margin at the midpoint of the range implies EBITDA margins up from the first half and margin accretion from SC&M.
• For the balance of the year, guidance assumes EBITDA margins of around 8% to 8.5%.

Business Commentary:

Revenue and EBITDA Growth:

• Everest reported record second quarter revenues of $1.23 billion, up 34% from the prior year.
• The growth was driven by robust performance across both E&M and T&D segments, complemented by contributions from SENS, reflecting strong project execution.

Backlog Expansion:

• The company's backlog at the end of the second quarter was $4.55 billion, up 53% from the same period last year.
• The increase was driven by continued strength in E&M, with favorable demand trends across diverse markets.

E&M Segment Performance:

• E&M segment revenues increased 42% to $1.01 billion, with an organic increase of 37%.
• Growth was primarily driven by strong demand in commercial markets, particularly in industrial end markets.

Margin Improvement:

• Everest's second quarter EBITDA margin was 10.4%, up 130 basis points from the prior year period.
• The improvement was attributed to strong project execution and efficient project planning processes.

Strategic Acquisitions:

• The acquisition of SCNM and the planned acquisition of Epsilon are part of Everest's strategy to expand its geographic footprint and diversify its business.
• These acquisitions are expected to enhance capabilities in offsite construction and expand market presence in key geographic areas.

Sentiment Analysis:

Overall Tone: Positive

• Management reported record Q2 revenues and EBITDA, up 34% and 53% YOY respectively. They noted 'strong project execution,' 'positive momentum across diverse markets,' and 'demand for our services remains strong.' They are 'raising our 2026 guidance' and expressed being 'very excited' about acquisitions. The tone is confident: 'we are highly confident in our ability to deliver on our long-term financial goals.'

Q&A:

• Question from Brent: ...on Epsilon, to just talk about whether there's a previous relationship there...synergies you foresee with the transaction with your existing office?
  Response: Epsilon is an excellent offsite construction business with a known customer list; the acquisition will provide new geographies, enable cross-selling, and allow leveraging of customer lists and modular expertise.

• Question from Brent: ...on the solid E&M margin performance...what specifically is driving the higher margins?
  Response: Margin uplift is driven by disciplined processes like contract reviews and estimates, and effective labor management including training and providing tools/equipment.

• Question from Manisha Maya (Cantor Fitzgerald): ...on the backlog conversion. The $4.5B of backlog, how should we think about the conversion of that in second half, 26, 27? How should we think about the margins in that backlog?
  Response: Backlog burn-off over 12 months is around 80%, with margins comparable to prior periods; focus remains on execution to improve upon those numbers.

• Question from Manisha Maya (Cantor Fitzgerald): ...on that, have you talked about the data center concentration within E&M backlog? Maybe if you can just kind of give us some sense as to how diversified the backlog is across.
  Response: Data centers are the largest part of backlog, but backlog has increased sequentially in almost every end market, indicating diversification; largest customer is served in multiple regions to mitigate concentration risk.

• Question from Manisha Maya (Cantor Fitzgerald): ...just based on everything that you just said, you know, when I look at the long-term expectations that you have...it just looks way too conservative...how do you think about, you know, potentially revising those?
  Response: Long-term targets (5-7% organic revenue growth, 7-9% EBITDA CAGR) are still valid; current strong market conditions are being capitalized on, but targets are for the long term (more than 5 years).

• Question from Brian Brophy (Stifel): ...the level of visibility you have into healthy project execution um in the back half at this point.
  Response: Visibility into project execution is maintained through close collaboration with operating companies; margin guidance for the back half was slightly raised, reflecting this visibility.

• Question from Brian Brophy (Stifel): ...how are you thinking about the outlook there and the back half...for hospitality and mark.
  Response: Hospitality work is concentrated in Las Vegas, where they are well positioned for future work, but also diversified into data centers and other non-traditional work there.

• Question from Joseph (Guggenheim Securities): ...can you talk a little bit about the semiconductor end market...? And then...for inorganic growth on the T&D side?
  Response: Semiconductor project is ramping and will contribute this year; the company participates in this market for 30+ years. Acquisition pipeline is active for both E&M and T&D to expand revenue and diversify.

• Question from Joseph (Guggenheim Securities): ...can we assume that the ceiling and the leverage here is somewhere between two and a half to three? Is that a fair assumption?
  Response: Target leverage is 1.5 to 2 times; even with transactions, there is opportunity to operate and transact while staying within that range.

Contradiction Point 1

Backlog Conversion Rate and Margin Outlook

Contradiction on the expected conversion of backlog and its associated margins.

Manisha Maya (Cantor Fitzgerald) - Manisha Maya (Cantor Fitzgerald)

2026Q2: Approximately 80% of backlog typically converts within [12 months], with margins comparable to prior periods. - Jeff Thede(CEO)

How will the $4.5B backlog conversion in H2 2026 and 2027 be structured, and what are the expected margin rates? - Christopher Senyek (Wolfe Research, LLC)

2026Q1: The strong Q1 margins and cash flow were partly due to timing benefits from project closes. The full-year guidance assumes margins revert to more normalized, core levels for the remainder of the year. - Maximillian Marcy(CFO)

Contradiction Point 2

Backlog Diversification

Contradiction on the concentration of the backlog in specific markets.

Manisha Maya (Cantor Fitzgerald) - Manisha Maya (Cantor Fitzgerald)

2026Q2: Data centers remain the largest part of the backlog, but the company is working to diversify. Sequentially, backlog increased in nearly all end markets... the majority of the recent sequential increase was **not** in the commercial market. - Jeff Thede(CEO)

What is the data center concentration within the E&M backlog and how diversified is it across markets? - Michael Stratoti (Guggenheim Securities, LLC)

2026Q1: The backlog growth was not concentrated in a single market like data centers. It came from across the Commercial and Industrial segments... - Maximillian Marcy(CFO)

Contradiction Point 3

Expectations for Future Margin Performance

Conflicting signals on margin stability versus potential for improvement.

Brian Brophy (Stifel) - Brian Brophy (Stifel)

2026Q2: The company is striving for sustained margin improvement, targeting the 8.5% level achieved in the first half. - Jeff Thede(CEO) & Max(CFO)

What is the outlook for the second half of the year based on project execution visibility? - Ian Zaffino (Oppenheimer & Co. Inc.)

2025Q4: The company is confident in hitting 2026 margins of 7.9% to 8% through strong operational excellence. - Jeff Thiede(CEO)

Contradiction Point 4

Outlook for Backlog Conversion and Its Drivers

Inconsistent emphasis on the predictability and drivers of backlog burn-off.

Manisha Maya (Cantor Fitzgerald) - Manisha Maya (Cantor Fitzgerald)

2026Q2: Approximately 80% of backlog typically converts within [12 months], with margins comparable to prior periods. Focus remains on execution to improve upon those margins as projects start. - Jeff Thede(CEO) & Max(CFO)

What is the expected conversion rate and margin for the $4.5B backlog in the second half of 2026 and 2027? - Brent Thielman (D.A. Davidson & Co.)

2025Q4: Record backlog provides clear line of sight for 2026, with about 80% typically burning off in 12 months. - Jeff Thiede(CEO)

Contradiction Point 5

Strategic Approach to Managing Leverage

Shift in framing the leverage target range between a strategic goal and a transaction-dependent outcome.

Joseph (Guggenheim Securities) - Joseph (Guggenheim Securities)

2026Q2: The company aims to maintain leverage within the 1.5x to 2x target range, even with potential future transactions. - Max(CFO)

Is the leverage ceiling between 2.5x and 3x? - Manish Somaiya (Cantor Fitzgerald & Co.)

2025Q4: Reaching the target leverage depends on finding the right transaction, which could be one or multiple deals. - Max(CFO)