MYR Group (MYRG) Q2 2025 Earnings Call July 31, 2025 10:00 AM ET Company ParticipantsJennifer Harper - VP - IR & TreasurerRichard Swartz - President, CEO & DirectorKelly Huntington - SVP & CFOBrian Stern - SVP & COO - Transmission & DistributionDon Egan - SVP & COO - Commercial and IndustrialAtidrip Modak - Vice President - Energy Services & E&PsJustin Hauke - Senior Equity Research AssociateJonathan Braatz - PartnerBrian Brophy - AVPConference Call ParticipantsSangita Jain - Director & Equity Research Anal ...

Financial Performance - MYR Group achieved record revenue of $3.64 billion in 2023, a 21% increase from $3.01 billion in 2022[14, 15] - The company's net income for the full year 2023 was $91 million, or $5.40 per diluted share, also a record high[19, 65] - MYR Group's EBITDA for 2023 reached $188.2 million, another record high[19, 65] - The company's backlog stood at $2.51 billion[62] Segment Performance - Transmission & Distribution (T&D) revenue reached a record $2.09 billion in 2023[21, 23] - Commercial & Industrial (C&I) revenue also hit a record of $1.55 billion in 2023[31, 34] - T&D segment backlog was $960 million as of December 31, 2023[23] - C&I segment backlog was $1.55 billion as of December 31, 2023[34] Market Outlook - Investor-owned electric companies plan to invest approximately $121 billion in transmission construction between 2023 and 2026[26] - The Infrastructure Investment and Jobs Act (IIJA) includes $73 billion for the electric grid and energy infrastructure[29] - Combined federal spending planned for energy between the IIJA and Inflation Reduction Act (IRA) is over $300 billion over the next 5-10 years[29]

Financial Performance - MYR Group's total revenue for 2024 was $336 billion[72] - The Transmission & Distribution (T&D) segment contributed $188 billion to the total revenue in 2024[72] - The Commercial & Industrial (C&I) segment generated $148 billion in revenue for 2024[72] - The company's backlog stood at $258 billion[70] - Net income for the full year 2024 was $303 million, resulting in earnings per diluted share of $183[73] - EBITDA for 2024 reached $1178 million[73] Growth and Market Outlook - The T&D segment experienced a revenue Compound Annual Growth Rate (CAGR) of 106%[24] - The C&I segment saw a revenue CAGR of 96%[35] - Investor-owned utilities (IOUs) plan to invest approximately $158 billion on transmission construction between 2024 and 2027[30] - The Dodge Momentum Index grew 56% in January, reaching 2257 (2000=100), driven by diversified growth in nonresidential planning[43]

Core Insights - Shimmick Corporation has launched Axia Electric LLC, a dedicated electrical subsidiary to address the increasing market demand for specialized electrical and power distribution solutions [1][3] - The company has secured electrical contracts totaling $42 million, with over $380 million in active electrical construction projects under contract [1][4] Company Overview - Axia Electric builds on Shimmick's 20 years of experience in delivering complex electrical systems across various sectors, including public and private entities [2] - The new subsidiary will focus on low- and medium-voltage markets, as well as commissioning and operations and maintenance (O&M) services [2] Market Positioning - Axia Electric aims to enhance Shimmick's capabilities in critical infrastructure markets such as water, industrial, aviation, transportation, transit, and energy [3] - The subsidiary's self-perform model and strong safety culture are designed to provide clients with optimal budget and schedule outcomes [3][4] Leadership and Growth - Under the leadership of President Fernando DeLeon, Axia Electric is positioned for growth with a skilled workforce of over 150 employees [4] - The company is prepared to meet the increasing demands from clients for specialized electrical expertise and agile service delivery [4]

Group 1: Stocks with Increased Earnings Estimates - E.W. Scripps Company (SSP) has seen a 14.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - MYR Group Inc. (MYRG) has experienced a nearly 6% increase in the Zacks Consensus Estimate for its next year earnings over the last 60 days [1] - Swedbank AB (publ) (SWDBY) has had a 9.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Postal Realty Trust, Inc. (PSTL) has seen a 5.2% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Peakstone Realty Trust (PKST) has experienced a 14.7% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3]

Financial Data and Key Metrics Changes - The company's first quarter 2025 revenues were $834 million, an increase of $18 million or 2.2% compared to the same period last year [10] - Net income for the first quarter was $23 million, compared to $19 million for the same period last year, with net income per diluted share increasing by 29% to $1.45 [15] - EBITDA for the first quarter was $50 million, up from $40 million in the same period last year [15] - Operating cash flow was $83 million, significantly higher than $8 million for the same period last year [16] - Free cash flow was $70 million, compared to negative free cash flow of $18 million for the same period last year [16] Business Segment Data and Key Metrics Changes - Transmission and Distribution (T&D) revenues were $462 million, a decrease of 5.8% year-over-year, with transmission revenues at $270 million and distribution revenues at $192 million [10] - Commercial and Industrial (C&I) revenues were $372 million, an increase of 14.4% year-over-year, driven by fixed price contracts and T&E contracts [11] - T&D operating income margin improved to 7.8% from 6.1% year-over-year, while C&I operating income margin increased to 4.7% from 3.5% [12] Market Data and Key Metrics Changes - Total backlog as of March 31, 2025, was $2.64 billion, a 9% increase from the previous year, with T&D segment backlog at $873 million and C&I segment backlog at $1.77 billion [15] - The utility market is seeing significant investments, with new transmission projects approved amounting to $5.9 billion and additional plans of $6.7 billion [18][19] Company Strategy and Development Direction - The company aims to remain a strong partner by executing projects with superior quality and strategically pursuing new opportunities [8] - There is a commitment to operational consistency and long-term growth, with a focus on maintaining strong customer relationships [8][26] - The company is monitoring and pursuing project opportunities related to electrical infrastructure expansion in the U.S. and Canada [19] Management's Comments on Operating Environment and Future Outlook - Management noted that there have been no significant pullbacks from clients despite discussions around tariffs and inflation [30] - The company remains optimistic about the market, expecting continued growth in core segments, particularly in data centers and clean energy [23][24] - Management emphasized the importance of balancing organic growth, acquisitions, and share repurchase strategies [31][39] Other Important Information - The effective tax rate for the first quarter was 28.9%, up from 18% in the same period last year, primarily due to the absence of stock compensation excess tax benefits [14] - The company has a strong funded debt to EBITDA leverage ratio of 0.68 times as of March 31, 2025, indicating a solid financial position [17] Q&A Session Summary Question: How is the backlog and pipeline of opportunities on the C&I side? - Management reported active conversations with clients and no signs of pullback, indicating a positive outlook for the market [30] Question: What are the capital allocation priorities for the rest of the year? - The focus remains on supporting organic growth and being positioned for potential acquisitions, with no new share repurchase program announced at this time [31][32] Question: Can you confirm the margin targets for the year? - Management expects to maintain margins in the mid-range of their target of 7% to 10.5% [42] Question: How are tariffs impacting the cost profile, particularly on the C&I side? - Management acknowledged potential impacts from tariffs but emphasized that they are monitoring the situation closely [66] Question: What is the outlook for revenue growth in the T&D segment? - Management anticipates higher single-digit growth for the core T&D segment, excluding solar projects, which are expected to be a headwind [57][58]

Financial Data and Key Metrics Changes - The company's first quarter 2025 revenues were $834 million, an increase of $18 million or 2.2% compared to the same period last year [10] - Net income for the first quarter was $23 million, compared to $19 million for the same period last year, with net income per diluted share increasing by 29% to $1.45 [15] - EBITDA for the first quarter was $50 million, up from $40 million year-over-year [15] - Operating cash flow was $83 million, significantly higher than $8 million for the same period last year [16] - Free cash flow was $70 million, compared to negative free cash flow of $18 million for the same period last year [16] Business Segment Data and Key Metrics Changes - Transmission and Distribution (T&D) revenues were $462 million, a decrease of 5.8% year-over-year, with transmission revenues at $270 million and distribution revenues at $192 million [10] - Commercial and Industrial (C&I) revenues were $372 million, an increase of 14.4% year-over-year, driven by fixed price contracts and T&E contracts [11] - T&D operating income margin improved to 7.8% from 6.1% year-over-year, while C&I operating income margin increased to 4.7% from 3.5% [12] Market Data and Key Metrics Changes - Total backlog as of March 31, 2025, was $2.64 billion, a 9% increase from the previous year, with T&D segment backlog at $873 million and C&I segment backlog at $1.77 billion [15] - The utility market is seeing significant investments, with new transmission projects approved amounting to $5.9 billion and additional plans of $6.7 billion [18][19] Company Strategy and Development Direction - The company aims to remain a strong partner while executing projects with superior quality, focusing on operational consistency and long-term growth [8][9] - There is a commitment to strategically pursue new opportunities in response to growing electrification demand [8] - The company plans to continue investing in the safety and development of its teams, which are seen as critical to success [26] Management's Comments on Operating Environment and Future Outlook - Management noted that conversations with clients remain active, with no significant pullback observed despite discussions around tariffs and inflation [31] - The company expects to maintain a mid-range margin profile for the year, targeting 7% to 10.5% [43] - Management remains optimistic about growth opportunities in core markets, particularly in data centers and clean energy [23][24] Other Important Information - The company has a strong funded debt to EBITDA leverage ratio of 0.68 times as of March 31, 2025, indicating a solid financial position [17] - The company has exhausted its current share repurchase program, with no new program announced at this time, focusing instead on organic growth and potential acquisitions [32][33] Q&A Session Summary Question: Inquiry about C&I backlog and pipeline of opportunities - Management indicated active conversations with clients and no observed pullback in the market, maintaining a positive outlook [31] Question: Capital allocation priorities and share repurchase plans - The company prioritizes growth and is open to share repurchase if market conditions allow, but no new program is currently in place [32][33] Question: Impact of tariffs on cost profile and margins - Management acknowledged potential impacts from tariffs but emphasized that current contracts have stronger language to mitigate risks [67][68] Question: Future revenue growth expectations - Management expects higher single-digit growth for the core T&D segment, excluding solar, with a focus on maintaining margin profiles [57][58] Question: Details on a sizable transmission project in Virginia - The project is classified as midsized, with revenue expected to be recognized by the end of the year or early next year [66]

Financial Data and Key Metrics Changes - The company's first quarter 2025 revenues were $834 million, an increase of $18 million or 2.2% compared to the same period last year [8] - First quarter net income was $23 million, compared to $19 million for the same period last year, with net income per diluted share increasing 29% to $1.45 from $1.12 [14] - EBITDA for the first quarter was $50 million, up from $40 million year-over-year [14] - Operating cash flow was $83 million, significantly higher than $8 million for the same period last year [15] - Free cash flow was $70 million, compared to negative free cash flow of $18 million for the same period last year [15] Business Line Data and Key Metrics Changes - Transmission and Distribution (T&D) revenues were $462 million, a decrease of 5.8% year-over-year, with transmission revenues at $270 million and distribution revenues at $192 million [9] - Commercial and Industrial (C&I) revenues were $372 million, an increase of 14.4% year-over-year, driven by fixed price contracts and T&E contracts [10] - T&D operating income margin improved to 7.8% from 6.1% year-over-year, while C&I operating income margin increased to 4.7% from 3.5% [11][12] Market Data and Key Metrics Changes - Total backlog as of March 31, 2025, was $2.64 billion, a 9% increase from the previous year, with T&D segment backlog at $873 million and C&I segment backlog at $1.77 billion [14] - The utility market is seeing significant opportunities, including $5.9 billion in new transmission projects approved by PJM and $6.7 billion in MISO transmission planning [17][18] Company Strategy and Development Direction - The company remains committed to operational consistency and expanding customer relationships through master service agreements and strategic pursuits [6] - There is a focus on capturing growth opportunities in electrical infrastructure due to increasing demand for electrification [6] - The company plans to continue investing in the development and safety of its teams, which are seen as critical to success [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the active market and ongoing conversations with clients, indicating no current pullback in project commitments [31] - The company is monitoring macroeconomic factors such as tariffs and inflation but has not seen significant impacts on its core business [50] - Future growth is anticipated in core markets, particularly in data centers, healthcare, and clean energy, with positive forecasts for 2025 [22] Other Important Information - The company has maintained a strong funded debt to EBITDA leverage ratio of 0.68 times as of March 31, 2025 [16] - SG&A expenses increased to $62.5 million, primarily due to higher employee-related expenses [12] Q&A Session Summary Question: Inquiry about C&I backlog and pipeline of opportunities - Management noted active conversations with clients and no signs of pullback, indicating a positive outlook for the market [31] Question: Capital allocation priorities and share repurchase plans - The company is prioritizing growth and is not announcing another share repurchase program at this time, but remains flexible to market conditions [32][33] Question: Impact of tariffs on clean energy projects - Management acknowledged potential pauses in some geographic areas but emphasized that the core business remains strong [50] Question: Free cash flow expectations for the rest of the year - Management highlighted a strong financial position but noted variability in free cash flow conversion due to project timing and payment terms [36] Question: CapEx decisions and purchasing strategies - The company indicated that lower CapEx in the first quarter was due to timing and that they continue to use a mix of purchasing and rental strategies for equipment [55] Question: Expectations for T&D revenue growth and solar project impacts - Management confirmed expectations for mid-single-digit growth in the core T&D segment, with solar projects presenting a headwind [58][61]