Everus Construction Group, Inc. (ECG) Q4 FY2025 Earnings Call Transcript & Summary

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Everus Construction Group Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Paul Bartolai. Please go ahead.

Thank you. Good morning, everyone, and welcome to Everus Construction Group's Fourth Quarter 2025 Results Conference Call. Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy. We issued a news release yesterday detailing our fourth quarter and full year 2025 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 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 on the call today. We are very excited to talk to you today about our record full year results in our first year as a stand-alone public company. It has been a transformational year for Everus, which is a direct reflection of our highly skilled and dedicated team members across the organization. Through disciplined focus on our 4EVER strategy, we established our structure as an independent public company, generated tremendous financial results and positioned Everus for continued success in the years ahead. I'm so proud of everything we accomplished during the year and I'm even more excited about our future opportunities. During our call today, I will provide a brief overview of our results, highlight some of our key accomplishments towards our strategic initiatives and detail some of our key priorities for this year, before I turn it over to Max for his financial review. Turning to our quarterly highlights, beginning with Slide 4. Much like the first 3 quarters of 2025, I'm pleased to report that we delivered another quarter of exceptional financial performance, reflecting the robust opportunities across our end markets and our outstanding execution capabilities. We delivered fourth quarter revenues in excess of $1 billion for the first time in our history, up 33% from the prior year period, driven by growth across both our E&M and T&D segments. Our strong revenue growth was complemented by another quarter of strong execution as fourth quarter EBITDA increased 45% from the prior year period, and our EBITDA margin was up 70 basis points. Our ability to execute complex projects safely, on time and on budget is critical to our clients and is a driving factor in helping us build the deep relationships that are key to our long-term growth strategy. Looking at the full year, our revenues increased 32%, primarily from the continued momentum in our E&M business. While our E&M segment was the key driver in 2025, we remain optimistic about the growth outlook for our T&D business with our recent backlog momentum and favorable industry trends. Due to our strong execution throughout 2025, our full year EBITDA was $320 million, up 52% compared to 2024 after adjusting for incremental stand-alone operating costs. Our strong performance is a direct reflection of the continued focus on our strategic priorities by all our employees across 15 operating companies around the country. Our backlog at the end of 2025 was $3.2 billion, up 16% from the same period last year, with strong growth across both T&D and E&M. While we're benefiting from favorable end-market trends, our backlog growth also reflects our strong execution, our deep client relationships and the value our employees bring to our customers: the key pillars of our 4EVER strategy. Our healthy backlog gives us confidence in our growth outlook for 2026. Importantly, we continue to see a robust project pipeline across diverse markets, including data center, hospitality, semiconductor, transmission and undergrounding. While we will certainly remain disciplined in our approach to project selection, ensuring we choose projects with the right risk-reward, we expect the favorable market trends and our strong competitive positioning to allow for continued backlog growth. As I reflect on 2025, we made tremendous progress against our strategic priorities, which enabled us to generate record financial results and, importantly, has positioned us for continued success in the years to come. I would like to take this opportunity to highlight some of our key accomplishments during the year and provide an update on some of our strategic priorities as we look ahead. As I already mentioned, the foundation of our operational framework is our 4EVER strategic priorities. You can see on Slide 6 that our 4EVER priorities are focused on attracting, retaining and training our most critical asset, our employees; creating value for our customers and shareholders; delivering safe and high-quality execution; and maintaining and growing our customer relationships. Our 4EVER strategic priorities are the basis for everything we do and are designed to deliver value creation through sustained profitable growth, operational excellence and disciplined capital allocation. Our value creation framework is highlighted on Slide 7 in today's presentation. We clearly generated strong growth during 2025, with full year revenues increasing 32% compared to 2024 results. Our strong growth reflects our expertise discipline and long track record of success in critical markets that provide data center, hospitality and undergrounding work. These are markets where we have developed project management expertise, skills and relationships over the course of decades. An important aspect of our growth strategy is to expand geographically through satellite projects, which was how we entered the Southwest. More recently, as discussed on our last earnings call, we entered a new geography in support of a large semiconductor company. The initial large project is helping us scale up to this new location, which we expect will allow us to follow our previous blueprint to make this a permanent new geography for Everus. Of course, our organic growth initiatives are contingent on our ability to attract and retain skilled labor to execute our projects. We have a long track record of effectively scaling our business, having tripled our workforce over the past 13 years. We ended 2025 with approximately 9,400 employees, up from 8,700 at the end of 2024. Through our strategic focus on attracting, developing, training and retaining employees, we're continuing to efficiently grow our workforce by leveraging our union partnerships, our industry relationships and internal initiatives. While we remain committed to our organic growth strategies, an important part of our growth playbook going forward will be strategic acquisitions. We have strengthened our corporate development team and have a broad and deep pipeline of potential deals we are evaluating. We look forward to updating you on our progress. As a reminder, our acquisition strategy is focused on finding accretive transactions that expand our geographic footprint, diversify our business or deepen our market presence. We are well below our leverage targets and have ample capacity under our credit facility and cash on hand, giving us significant financial flexibility to execute on growth initiatives. Now turning to operational excellence. 2025 was certainly a year of strong execution, with our full year EBITDA margin up 40 basis points as reported and up 110 basis points when adjusting for incremental stand-alone operating costs. Our strong execution is thanks to our people and our strict adherence to our Everus operational playbook which focuses on project selection, bidding discipline, safety, training and sharing of lessons learned. We continually look for opportunities to drive execution upside on every project and experienced exceptionally strong execution in 2025. Another important area of focus for us is our prefabrication and modular construction strategy. As we discussed earlier in 2025, we are consolidating and expanding our prefab and modular construction across the country. Notable investments have been made in the Pacific Northwest and Southwest and our latest expansion in Kansas City, which is now operational. We constantly evaluate and expand our capabilities where possible. Prefab and modularization helps improve safety, increases labor efficiency, lowers costs, improves project time lines, that makes project outcomes more predictable. This allows us to enhance margins, create savings for our customers and strengthen relationships. And finally, we've maintained our focus on disciplined capital allocation. Our priorities are investments in organic growth, acquisitions and maintaining financial flexibility. As Max will discuss, we increased our capital spending in 2025 to support our growth initiatives and remain committed to our long-term expectation of investing 2% to 2.5% of our revenues. While we have not yet completed an acquisition, our strong balance sheet positions us to execute on growth strategies. We do not currently have any return-of-capital programs in place, which reflects our optimism and our growth opportunities and our belief that this is the best use of capital at this time. Our management team, together with our Board, will continue to evaluate the highest and best uses of capital over time, consistent with our ongoing focus on driving stockholder value. And finally, Slide 8 details our long-term financial expectations. We outperformed these targets in 2025, which again reflects strong market trends, execution upside and our focus on our 4EVER strategic priorities. We entered 2026 with strong momentum and remain committed to delivering on these long-term targets to provide value to our stockholders. 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 guidance. Beginning on Slide 10 of the presentation, revenues for the fourth quarter were $1.01 billion, an increase of 33% compared to the same period last year. The increase was driven by growth in both our E&M and T&D segments. Total EBITDA was $84.8 million during the fourth quarter, an increase of 45% from the same period in 2024, driven by solid revenue growth and continued strong project execution. We ended the year with incremental stand-alone operating costs in line with our expectations, with full year annualized costs of $28 million. As a result, our fourth quarter EBITDA margin was 8.4%, up 70 basis points from 7.7% in the prior year period. As for our full year 2025 results, total revenues increased 31.5% to $3.75 billion, driven by 44% growth in our E&M revenues. Our full year EBITDA increased 37.7% to $319.8 million, due to our revenue growth and strong project execution, partially offset by the full year impact of incremental stand-alone operating costs. At December 31, total record backlog was $3.23 billion, up 16% from December 31, 2024, even while we delivered record revenue during the fourth quarter. Our T&D backlog was up 41% compared to 2024 due to increases in the utility end market, specifically undergrounding and transmission work; while our E&M backlog was up 13%, reflecting growth in data center, hospitality and high-tech. We remain encouraged by the favorable trends in several of our key end markets, and we remain confident in our ability to generate continued backlog growth. Now turning to our segment results. Let's first look at E&M, where our fourth quarter revenues increased 44% to $791.6 million. The increase was primarily driven by growth in our commercial and renewables markets, with continued strength in our data center submarket a key driver. Our E&M EBITDA was $67.1 million in the fourth quarter, an increase of 57% compared to fourth quarter 2024. The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficient project execution, partially offset by higher SG&A expense. As a result, our E&M segment EBITDA margin was 8.5%, up 70 basis points compared to 7.8% in the fourth quarter of 2024. Our fourth quarter T&D revenues were $227.7 million, up 6.8% from fourth quarter 2024, driven by growth in both our transportation and utility segment end markets. We remain encouraged by the broader demand trends in our T&D business and continue to see growth opportunities. T&D segment EBITDA was essentially flat at $30.5 million in the fourth quarter, as higher revenues were offset by project mix and higher SG&A expenses. As a result, T&D segment EBITDA margin was 13.4% during the fourth quarter, compared to 14.3% in the same period in 2024. Turning to our balance sheet and liquidity. As of December 31, we had $152.7 million of unrestricted cash and cash equivalents, $285 million of gross debt and $222.8 million available under the credit facility. Net leverage, defined as net debt to trailing 12-month EBITDA, was approximately 0.4x. Operating cash flows were $156.8 million for the full year 2025, compared to $163.4 million in 2024, as changes in working capital to support our revenue growth offset our increased operating results. CapEx was $66.8 million for 2025, up from $43.8 million in 2024, consistent with our strategy to increase investments that support our organic growth strategy. The increase in CapEx during the year included the purchase of the new Kansas City prefab facility, which we discussed in the first quarter, as well as additional vehicle and equipment purchases in T&D to support growth. We generated free cash flow of $100 million for 2025, down from $128.8 million in 2024, reflecting our increased investments in working capital and CapEx in support of growth. Now wrapping up with guidance. We were very pleased with our strong 2025 results. Based on the attractive demand drivers in our business and our elevated backlog position entering 2026, we expect the momentum to continue this year. As a result of these factors, we are providing initial 2026 guidance as follows. We are forecasting revenues in the range of $4.1 billion to $4.2 billion and EBITDA in the range of $320 million to $335 million. At the midpoint of our range, our revenue and EBITDA forecasts represent growth of 11% and 2%, respectively. Our revenue guidance range is above our long-term target of 5% to 7%, reflecting our strong backlog position and the favorable outlook in several of our key markets, including data center, hospitality, semiconductor, transmission and underground. Our EBITDA guidance is slightly below our long-term model, reflecting a difficult comparison given the extremely strong project execution we delivered during 2025. However, we think it is worth noting that the midpoint of our EBITDA guidance range reflects growth of 25% on a 2-year CAGR basis after adjusting for incremental stand-alone operating costs. Additionally, our 2026 guidance assumes an EBITDA margin of just under 8% at the midpoint of the range, higher than our historical core margins in the mid-7% range, reflecting incremental scale benefits as we grow, consistent with our long-term strategy, as well as good visibility into continued execution upside. Overall, we are very proud of our strong performance during 2025 and we remain extremely excited by the continued momentum in our business. Our backlog remains at elevated levels, which provides a high degree of visibility into revenue expectations for 2026, and we feel confident in our ability to deliver on our long-term financial targets. That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

[Operator Instructions] Our first question will come from the line of Ian Zaffino with Oppenheimer.

Really good quarter. Question would be on the guidance and the margins. Was there anything in particular this year where you had extremely great execution that you don't expect to repeat into next year? Are you seeing anything different or are you just being naturally conservative?

Ian, this is Jeff. We had exceptional margin upside in 2025, and those were diversified contributions from a number of projects. And the 4 most notable ones are from 4 different markets: data center, institutional, transportation, industrial. So yes, data centers are a big part of our business and we continue to be anticipatory and looking at other markets to achieve meaningful contributions from those multiple markets. We're going through all of our planning to set the guidance to look at our margins where we're forecasting in 2026, you go back to 2024, and that is a reflection of our ability to execute better. So we have a very strong focus on operational excellence, and that is reflected in our results and are confident in our ability to be able to hit the 8% -- 7.9% to 8% in 2026.

Okay. And then if I could just address the elephant in the room here. Leverage is very, very low. How are you thinking about this? Because when you talk about M&A, it doesn't seem like everything is large on the horizon. So how are you thinking about kind of what the optimal leverage is for this company, and how are you thinking about it? And then if I was to add another question in here, is on the free cash flow side, I know there's some working capital this year, how do we think about free cash flow conversion going forward? So just thinking about how you're going to levered, call it, in 12 months from now?

Yes. Having a strong balance sheet is very important to us, and not only to support our organic growth, as we see in our CapEx numbers, increase for our operating companies on organic growth, and also positions us for strategic M&A, that we are actively looking for opportunities for M&A. And we see the range of multiples from other public announced deals, which is not a surprise to us. It does fit our expectations. We're looking for the right company at the right price, in targeted markets, for both E&M and T&D businesses. And as far as our M&A pipeline, it's much broader and deeper. And our balance sheet is going to support M&A in the future.

Yes. Ian, this is Max. So the question -- part of that question was, what's the right leverage, right? I don't think we've changed our tune, right? I think 1.5x to 2x net leverage is still the right long-term place leverage levels for this company. But we want to make sure we're smart in investing the capital, at the right time, in the right place. We don't just want to spend your money; we want to invest at the right time and the right place. So when and if we get a deal, that will happen. And I still think 1.5x to 2x is the right place. The second part of your question was about kind of free cash flow conversion. And obviously, we had some pretty significant revenue growth this year, and to support that, obviously, we have some increases in some of our working capital. I think they're pretty much in line on a percentage basis with where we have been historically. So with revenue growing next year, I think there'll be less of an investment in some of that working capital needs. So we should continue to have good free cash flow conversion, albeit with the step-up in CapEx that we've expected. So on a net-net-net basis, where we delivered this year is probably pretty consistent with where we're going to be in the next year.

Our next question will come from the line of Brent Thielman with D.A. Davidson.

Great quarter as well. Jeff, you're sitting at record backlog entering 2026. I'm wondering if we should think there are any capacity constraints for you just in terms of your ability to continue to build the book of business for execution this year. And maybe if you could just talk about the lead times on that backlog relative to recent history. Are you booking into '27 at this point? Maybe just some color there.

Brent, our record backlog really provides us a clear line of sight for 2026, and some of those projects go into 2027. And if you look at where those backlog contributions are coming from sequentially, it's not just data centers. It is largely data centers, but it's also hospitality and high-tech, it's substation and transmission as well. So the diversification story does ring true when it comes to the contributions from our backlog. As far as project scheduling and ramping, we pay a very close attention to that to see when does the backlog get converted. What we're continuing to see over the last many years is about 80% of our backlog burns off in 12 months. So clear line of sight in 2026, could give us some momentum into 2027, and is coming from multiple markets that we are -- where we pursue work.

Yes. So Brent, you asked about constraints, right? I mean I think the reality is we've done a good job of being able to add skilled labor to complete the projects that we have in backlog. And I think we're confident that we have the available labor to complete the numbers that we're giving you in guidance today. And I think we feel pretty good about that.

And Brent, just want to add to what Max said, is we increased our employee count by 8.5%. And I always believe that we're going to be able to plan and bring in the resources to be able to support our financial goals. Constraints on labor is real for our whole industry, but it's been an area that we excel in, because we treat our people with respect, we're doing much more outreach over the last 3 to 4 years than we ever have. And we're bringing in good-quality people, not just for our field professionals craft, but also our support staff and our management and our leadership as well.

Okay. If I could just follow on that, Jeff or Max. I mean if you potentially pick up more work here in the next few quarters, should we think that's more of a 2027 event? Or do you look at the sort of initial guidance range for revenue is reflective of what you have in the book of business today?

Yes. I think it's reflective of the book of business. I mean some of the backlog does extend into 2027, right? I mean with 80% burn, naturally, you have some that carries over. If you just do the math on that 80%, Brent, right, that implies we still need to pick up a good amount of book-and-burn work for this year. So that's already implied within our guidance. And then we'll continue to start -- continue booking backlog for the remainder of the year that should start building up that pipeline nicely into 2027.

Our next question comes from the line of Brian Brophy with Stifel.

Yes. I guess you mentioned some of the satellite expansions in your opening comments. How are you thinking about additional opportunities there in 2026? And is there any geographies in particular that kind of jump out to you in terms of opportunities to expand into?

Yes. We've got good playbook on how to do satellite operations, and we have to be very selective when we do that. We always want to make sure that we could have good contract negotiations. We want to be able to make sure we bring good core people. And we also assess the market locally as we build up into the one area I've mentioned earlier in previous quarters last year, we're building some momentum in a new market. And we're [ following up with key ] management and key field supervisors, and we're starting to see some positive impacts into our financials. We didn't see a lot of it in 2025, but we plan on having contribution from that new satellite operation for us in 2026.

Yes. And then just to add on to that, Brian, I mean, obviously, if you look at where our footprint is, there's opportunities across the country, particularly as you kind of get down to the South and Southeast. I'm not saying that that's where we're headed, but those are opportunities if we find the right work and the right set of jobs to expand on there.

That's helpful. And then just big picture kind of large transmission projects. We've seen an acceleration there. You guys have participated in some in the past, maybe a little bit less so recently. But just curious how you guys are thinking about pursuing some of these opportunities that are coming.

Yes. We are pursuing large transmission projects. And we are very selective on the type of transmission and distribution projects that we pursue. We have the successful track record on large transmission. And of course, it all comes down to resource availability, timing and terms of conditions that are going to factor into our disciplined approach on project selection. But T&D is a really important part of our business. Our margins are really strong. We're proud of our leadership and our field professionals that help contribute to our success in T&D. So we'll continue to assess those opportunities, be selective to ensure good project execution.

And then just one last one for me. Obviously, this looks like it's going to be another heavier investment year, which, as you guys alluded to, you've talked about needing to invest in prefab and fleet. But I guess as we kind of move forward, to what extent do you guys have visibility on how many additional years of heavier investment do we need from this point?

Yes, we look at our 3-year strategic planning process with our operating companies, of course, at Everus corporate. We're always looking for means and methods to expand prefab, that's one area, in addition to equipment, in addition to M&A. How do we deploy that capital responsibly? So if you look at our success with prefab and modular construction, it's helped us get work. It's helped us contribute to our safety goals, which we had record safety results in 2025. And also production. And when our customers see how we prefab, it does put us in a really good position to secure the work and then execute it successfully.

And then, Brian, I mean, this is our normal right now, right? So I think this is -- how we're planning is to kind of invest this 2% to 2.5% of revenue in CapEx, to continue to support what we feel is a good growth environment across the business.

Our next question will come from the line of Joseph Osha with Guggenheim.

My compliments. It's always nice to have a stock go up 20% after you announce. A couple of questions. You alluded to craft labor availability. I'm wondering if you could comment on labor costs. We hear a lot about that, and whether you're having reasonable success wrapping higher labor costs, if they do exist, into pricing for your jobs?

Labor is crucial for our success. And many of our operating company presidents have experience coming from the field, but as leaders of our operating companies, they have experience in contract negotiations. Many of them sit on labor management committees to negotiate contract terms and conditions. So we have clear line of sight on what those potential increases are. So whether it's a cost-plus job or a fixed-price job, we are forecasting those costs into the pricing for those opportunities. And we don't see that as any risk at all as far as any sort of price increases for labor.

Okay. Moving on, obviously, you're under-levered, which is a good place to be. Kind of 2 questions there. First, in general, we hear that deals are generally still getting done below 10x. Wondering if you could comment on that and whether there's a red line there for you. And then I'm also curious, as you think about it, is the bias towards perhaps trying to do 1 or 2 larger transactions or maybe a larger number of onesie-twosies?

So we're looking for both. Our preferred is to have an independent stand-alone company to bring into Everus. And our strategic priorities for M&A is to provide -- to add a company that provides the same or similar type of services to what we provide today, such as electric, gas, communications, underground, and of course, electrical, HVAC, plumbing, fire protection. Those are the type of companies we're looking for. And what's high on the list is geographic expansion, so locations that strategically fit our growth goals. Companies that, of course, have high integrity and are awarded work due to best value, not just price, price is always important, but also have a commitment to safety and operational excellence, and they're respected within their communities. Those are the list of items that we consider. There is more, of course, we can add to that, but those are the high-level strategic priorities when it comes to M&A.

Yes. Obviously, Joe -- this is Max -- I mean, as our leverage continues to tick down, I mean, it just continues to broaden, deepen that funnel that Jeff talked about earlier and creates different opportunities. But I think we really want to make sure we're looking at the right deal, looking at the right leverage targets and looking at the right opportunity for us and for our shareholders.

Can I get you guys to comment on my multiple question there? Is the market generally around kind of 9x, 10x? That's what I'm hearing.

I mean that's what we've seen deals transact for in this space, right, around those multiples. That's correct.

Okay. And then I'm sorry, one more. And I should know this, my apologies. On the T&D side, would we see you guys potentially try and go after any 765 business? Or is it going to be perhaps slightly smaller? I'm wondering if you can comment there.

On the large transmission, as I mentioned earlier, we're very selective. And there are hundreds of miles of type of transmission projects that are available. And there's also some interconnect. We look at where our sweet spot is and then the availability of those resources, and timing. Meanwhile, we really like our MSA work. And we don't want to abandon our customers. And if you take on one of those large, very, very large projects, you're bringing a lot of new people into the organization. So as I mentioned, we grew our employment by 8.5%. So when we get a big job, we bring new people in the organization. We're very thorough on orientation and who we bring into the company. So those large, very, very large transmission jobs are not anything we can't do. But when you look at the available resources, the current work that we have in our backlog, we take all that into account when we pursue selected projects.

Again, congratulations on the outcome today.

Our next question will come from the line of Manish Somaiya with Cantor.

Jeff, Max, Paul, many, many congratulations on the quarter and, obviously, also the outlook. Just a couple of questions for me. Maybe this is for Jeff, maybe for Max. But when I think about the E&M and T&D segments, how should I think about margins through a cycle?

Yes. So I think it's maybe a little bit less about margins through a cycle and more just about us making sure that we continue to grow, do what we can to thin out our fixed-cost base and continue to deliver. So again, if you think about the way our contracts are, Manish, when you have half your contracts kind of cost-plus, the other half fixed, I mean I don't think margins really necessarily contract on the cost-plus through a cycle because you're still doing the work, so I don't think it's necessarily a cycle. For us, it's more just about how much leverage can we put on our fixed-cost base.

And if I could add to that, we're very deliberate on the type of work we pursue. About half of our work is cost-plus. And we like that. Those are typically very large, very complex projects, which puts us in a position for some fixed-price work as those buildings get completed. We pursue the service work or some of the other smaller projects to keep us in connection with those customers. Now if you look at our T&D segment, 55%, 60% is MSA work. And we like the stability there. We also like the margin uplift opportunities on fixed-price. So we look at this regularly and strategically align our resources and our pursuits towards those goals.

Okay. That's super helpful. And then you guys mentioned data center and semiconductor exposure is increasing. Can you give us a sense as to what is the composition of those 2 things in the backlog?

Really don't go to that level of detail in our backlog of breaking it down. But I'll tell you, they've increased, as I mentioned earlier. And they're not the only ones that have increased on our sequential backlog in Q4 versus Q3. Data centers, hospitality and high-tech, in addition to our transportation, substation and transmission.

Yes. And just to reiterate, data center is the largest market of our '27 in our backlog, and semiconductor is growing.

Okay. And then just finally, you talked about target leverage of 1.5x, 2x. Obviously, you're significantly under-levered. So how should we kind of think of you getting to that threshold? Is it a combination of a lot of tuck-ins or is it going to be like a blockbuster transaction based on where multiples are? And then related to that, how should we think about free cash flow in '26?

Yes. So I think the reality is it's got to be the right deal. I mean I don't think we're targeting multiples or 1. I think when we find the right transaction, so long as it sticks within our stated leverage targets, I think that would be the right deal, right? It could be multiple, it could be a larger one. But we're also looking at a risk profile and management's time and our ability to do deals. So it could be across the board, right? But I think we are committed to finding good transactions and investing. In terms of free cash flow, Manish, we kind of addressed it a little bit earlier on the call, but again, there is probably more of a usage of cash and working capital in 2025 given the really strong revenue growth, we have natural increases in some of our receivables. With the good growth we see next year, it's not as high as '25, that number should not be as much of a use of cash. But then if you look at our step-up in capital spending, on a net-net-net basis, free cash flow should be probably pretty consistent with 2025, is the way we're currently thinking about it.

And this concludes our question-and-answer session. I will now hand the call back over to Jeff for any closing comments.

Thank you, operator, and thank you all again for joining us today. We are very excited about the opportunities ahead for Everus and are confident that we have the right strategy in place and the right team to execute on our plan. We will be attending several upcoming investor events, including the Jefferies Energy Conference 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 interest in Everus. This concludes today's call.

This does conclude today's call. Thank you all for joining, and you may now disconnect.