Q4 2020 MYR Group Inc Earnings Call
Good morning, everyone and welcome to the MYR group fourth quarter and full year 2020 earnings results Conference call. Today's conference is being recorded at this time for opening remarks, and introductions I would like to turn the conference over to David Gutierrez of Dresdner Corporate services. Please go ahead David.
Thank you Michelle and good morning, everyone I'd like to welcome you to the MYR Group conference call to discuss the company's fourth quarter and full year results for 'twenty, and 'twenty, which were reported yesterday.
Joining us on today's call are Rick Swartz, President and Chief Executive Officer.
Betty Johnson, Senior Vice President and Chief Financial Officer Tod.
Tod Cooper Senior Vice President and Chief operating officer of MYR groups' transmission and distribution segment.
And Jeff <unk>, Senior Vice President and Chief operating officer of MYR group's commercial and industrial segment.
If you did not receive yesterday's press release, please contact dresner corporate services at 3127 to 630 600, and we will send you a copy or go to the MYR group website, where a copy is available under the Investor Relations tab.
Also a replay of today's call will be available until Thursday March 11, 2021 at one P. M. Eastern time by dialing 85859, 2056, or 4045373, 406 and entering conference I D.
Nine one 901 and four five.
Before we begin I want to remind you that this discussion may contain forward looking statements any such statements are based upon information available to MYR groups' management as at this day.
And MYR group assumes no obligation to update any such forward looking statements.
These forward looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward looking statements.
Accordingly. These statements are no guarantee of future performance.
These risks and uncertainties are discussed in the company's annual report on form 10-K for the year ended December 31, 2020 and in yesterday's press release.
Certain non-GAAP financial information will be discussed on the call today and.
A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release.
With that said, let me turn the call over to Rick Swartz.
Thanks, David Good morning, everyone welcome to our fourth quarter and full year 2000, and 'twenty conference call to discuss financial and operational results I will begin by burrito and providing a brief summary of the fourth quarter and full year results and then turn the call over to Betty Johnson, Our Chief Financial Officer for a more detailed financial review.
And Betty's overview, Tod Cooper and Jeff wanted to Chief operating officers for our T&D and C&I segments will provide a summary of our segment performance and discuss some of MYR group's opportunities going forward.
I will conclude today's call with some closing remarks and open the call up for your questions. We finished 2020 with strong financial performance and the fourth quarter and full year revenue of 2.25 billion setting a record high for the sixth consecutive year.
Our backlog of $1.65 billion at the end of 2020 reflects continued investment and energy and infrastructure projects and positions us well for success in 2021.
In 2000, and 'twenty, our T&D and C&I segments experienced strong bidding and project activity amid unique market conditions.
Our 2020, we emphasized our ability to adapt while meeting client needs and keeping our team members safe and response to the COVID-19 pandemic.
As we look at market trends and some utilities are committed to transitioning to a 100 per cent clean energy or setting net zero carbon emission goals.
This clean energy transformation should result in change within our customers' business models and will require significant infrastructure investments to meet these goals are.
Our strategic investments and growing our renewable energy capabilities positions us well today and in the future to support the changing needs of our customers.
Our C&I segment continues to be fueled by investments and infrastructure to support health care data centers warehousing and water projects and the expansion of E. Commerce and response to the COVID-19 has resulted in continued investments and warehouse and distribution facilities.
Our ability to conduct complex critical infrastructure facilities creates an opportunity for us to capitalize on these market trends.
Our T&D and C&I segments continue to build on our strong capabilities to meet the diverse needs of our clients in these areas and position us favorably for significant opportunities in 2021 and beyond.
And why our groups consistent performance is build lasting customer relationships across the industry.
We are focused on gaining deeper insights into our customers business to strengthen relationships develop innovative solutions and differentiate our services.
We continually leverage the ingenuity and passion of our team members to elevate the safety quality and cost competitive administered and competitiveness of our project delivery.
We believe MYR group is well positioned to maintain our status as a leading company and the industry and we are proud of our fourth quarter and 2020 full year performance, which we expect to serve as a solid foundation to future growth opportunities and continued stockholder value now Betty will provide details on our fourth quarter.
And full year 2020 financial results.
Thank you Rick and good morning, everyone on today's call I will be reviewing our quarter over quarter results for the fourth quarter of 2000, and 'twenty as compared to the fourth quarter of 2019.
Our fourth quarter 2020 revenues were $608 million a record high.
This represents an increase of $36 $9 million or $6 five per cent compared to the same period last year.
Our fourth quarter T&D revenues were $318 $6 million a record high for our C&I segment with an increase of 2.4 per cent compared to the same period last year.
The breakdown of T&D revenues was $207 $8 million for transmission and I hadn't.
$110 $8 million for distribution.
And the T&D segment revenues increased primarily due to an increase in revenue and distribution project, which include an increase and store mark partially offset by a decrease in revenue and transmission projects.
Approximately 50 percentage of our fourth quarter T&D revenues related to work performed under Master services agreement.
C&I revenues were $289 $4 million with an increase of 11, 3% compared to the same period last year.
The C&I segment revenues increased primarily due to increases in volume associated with the CSI acquisition, partially offset by slow downs associated with the COVID-19 pandemic.
Our gross margin was $12 six per cent for the fourth quarter of 2020 compared to 12, 1% from the same period last year.
The increase in gross margin was primarily due to increased and higher margin and storm related work.
That's full change order and negotiations and better than anticipated productivity and certain projects.
These improvements were partially offset by labor inefficiencies as well as unfavorable settlements and certain projects.
SG&A expenses were $58 million and increase of $2 $7 million compared to the same period last year.
The increase was primarily due to higher.
Incentive compensation costs and <unk>.
Other employee related expenses to support the growth and our operations.
Fourth quarter 2020, and net income attributable to MYR group was.
$18 $2 million or $1.07 per diluted share Paul.
With record highs for MYR.
Compared to $12 $8 million or 76 cents per diluted share for the same period last year.
Fourth quarter, 2020, EBITDA was $37 $2 million, representing a quarterly record high for MYR.
Total backlog as of December 31, 2020 was $1.65 billion and was 10% higher than a year ago.
Total backlog as of December 31, 2020 consisted up a record high for our T&D segment of $753 $9 million.
And $895.5 million per our C&I segment.
Moving to liquidity and our balance sheet, we had approximately $193.3 million of working capital.
$29 $4 million of funded debt.
And $364 $6 million and borrowing availability under our credit facility as of December 31, 2020.
We had.
We have continued to focus our strengthening our balance sheet and improving our free cash flow.
Free cash flow came in strong for the period at $29 $7 million and was a record high $138 million for the trailing 12 months.
Our funded debt to EBITDA leverage has improved since our CSI acquisition and improving from 185 as of September 32000, 19.2 times leverage as of December 31, 2020.
We believe that our credit facility strong balance sheet and future cash flows from operations will enable us to meet our working capital needs equipment investments overall growth initiatives and bonding requirements.
In summary, we had improvements this quarter and revenue gross profit net income earnings per share EBITDA free cash flow funded debt to EBITDA leverage and backlog compared to the prior year.
Additionally, and our fourth quarter 2020, we set a new record high for revenues net income earnings per share and EBITDA.
This strong quarter also enabled us to reach record annual revenue of over $2.2 billion with record highs and both our T&D and C&I segments.
For the year ended December 31, 2000, and 'twenty. We also reached record EBITDA of over $132 million and as previously mentioned our record high free cash flow of over $130 million.
Our 2020 earnings per diluted share also reached a record of $3.48 an increase of 54 per cent from the full prior year.
And I'll now turn the call over to Tod Cooper, who will provide an overview of our transmission and distribution segment.
Okay.
Thanks, Betty and good morning, everyone.
And our T&D segment performed well and 2020, and we maintain a positive outlook for 2021 and beyond.
In 2020, we executed on a range of smaller to mid sized projects with some notable larger projects included in our portfolio.
Our bidding activity and success rate resulted in a strong backlog.
<unk> growth and EPC Master service agreement and renewable energy opportunities, which remains a focus area for growth and MYR group.
And the annual energy outlook 2021 U S energy information administration projects that the share of renewables and the U S. Electricity generation mix will increase from the current 21% from 42% from 2050.
MYR group recently surveyed executive leaders from more than 20 of our top tier E&P customers and our annual strategic insights survey.
80% of those survey set and renewable energy would have the greatest impact on the strategic direction of their business over the next three to five years.
MYR group is uniquely positioned to offer customers a full range of capabilities to build renewable energy generation facilities and the associated infrastructure needed to deliver to the grid.
Our MYR group Energy services team is currently constructing the Battle Mountain and solar project in Nevada.
Idle Mountain is a 132 megawatt solar facility, coupled with a 100 megawatt hours of battery storage.
M Y R E, providing EPC services and self performing nearly all scopes of work and the field.
Project is being constructed for consolidated Edison incorporated.
<unk> to be completed midyear 2021.
Aging grid infrastructure also remains an industry issue that presents opportunities to support critical customer needs.
The demand to modernize the system being driven by goals to achieve a clean energy future integrate innovative technologies are.
And systems for storms and improve overall system reliability.
As a result, the industry has seen significant construction investments, including pole replacement equipment automation line and substation upgrades and system hardening.
This is evident and that Aps five year capital expenditure forecast includes more than $10 billion for distribution grid modernization and.
And excel Energy's five year capital plan calls for more than $7 billion and transmission and distribution investments.
According to our insights survey.
This represents only a fraction of the system upgrades that will need to take place in order to completely modernize the grid and.
M Y our group is well positioned to be a strong partner to help customers plan and execute system wide improvements in the coming years.
Across the United States MYR group that had significant impact through our projects and opportunities and.
And we continue to work on multiple long term alliance agreement and several small to medium sized projects.
During the fourth quarter, our subsidiaries Harlan electric successfully completed the Rochester area reliability project and upstate New York.
And the Hartford reliability project and Connecticut.
Bidding remains strong and won't be small to medium sized projects and we continue to work with our clients and their efforts to develop larger project.
In summary, we continue to invest and our market leadership position to expand and develop our customer base. Because we believe there are other opportunities for sustained growth and the G. M D market.
We will continue to raise the bar by devoting our energy and resources to doing what it takes for the successful future of MYR group.
I will now turn the call over to Jeff Monica, who will provide an outlook of our commercial and industrial segment.
Thanks, Tod and good morning, everyone.
2020 proved to be and interesting year and the C&I segment as we adapted to the myriad of Covid related disruptions and project re sequencing.
Our C&I fourth quarter and full year results, mostly mirrored the general economic conditions, we faced as we worked through work with our clients through a bumpy business climate.
As we enter a new year, we will continue to monitor and adapt project protocols that vary from project to project and state to state with a heightened focus on teamwork and increased operational efficiency.
Throughout 2020, we provided our clients with exceptional customer service and are now seeing some exciting pockets of opportunity and the markets we serve.
Early in the pandemic, we anticipated that our primary markets may be somewhat less vulnerable to economic slowing including health care data centers transportation renewable energy and water projects today. Our view has been confirmed as we pursue multiple opportunities and each of these market sectors.
Large health care projects typically involve a long time line from concept to a completely operational facility and we believe that based on the number of opportunities, we see and the pipeline the fundamental need for new facilities is not changed.
Our district offices across the country are engaged and pursuits of all sizes from small medium and large expansions to new greenfield facilities.
We're currently under phase one contracts on several projects to assist our clients through the design process, which typically leads to the receipt of phase two contract a few months later for construction of the project.
Health care facilities are complex and require a highly skilled and trusted professionals to coordinate hi Tech solutions and tight spaces. The same holds true for commercial and institutional facilities dedicated to research and development.
MYR group provides a trusted proven group of skilled labor and management experts to serve the demands of this sector.
Recent awards to assist our clients on the design development for New research facilities leads us to believe that the health care and research industries, we will continue to provide growth opportunity for years to come.
Hi Tech data centers remain a major focus for many of our district offices with notable opportunities and Arizona and Colorado.
Good relationships with longstanding clients lead to early engagement many times before the project hits the open market, thus, allowing our project team to develop collaborative solutions that benefit owner during the early stages and design and project planning.
Once these projects are built we typically establish long term maintenance contracts and remain onsite for nearly constant upgrades and expansions.
Pandemic has changed a lot about how we interact with each other and the nation's increasing demand for computing power data security and E. Commerce should continue to provide significant opportunity in 2021 and beyond.
Much like the health care industry civil projects, including roadway airports tunnels rail and water projects have long lead times with a well established funding mechanisms, commonly through multiyear capital improvement plans and dedicated bonds.
Many of the large civil projects, we have tracked across the country continue to advance toward procurement.
For Us this is especially true along the Pacific Coast and both the U S and Canada, where new modes of transportation have been in development for many years.
Our efforts to share the collective experience of our subsidiary companies is expanding our opportunity and increasing our efficiency and executing these projects. The central 70 project and Colorado awarded in early 2018 is a very complex multi phased project is progressing as planned.
And as one example of the highly collaborative effort required to successfully complete these massive public projects.
In addition to the transportation projects already and the pipeline, we anticipate that the changes and Congress and president and increase the likelihood of a meaningful transportation and infrastructure Bill.
We are encouraged to see the major indices, such as the architectural billing index and the Dodge momentum index slowly training back upward throughout the year. Our pipeline remains intact bidding remains active and we continue to see attractive opportunities and the markets we serve.
To conclude the performance achieved by our employees throughout a unique and challenging year was admirable.
And their continued dedication and outstanding efforts provided.
Consistent results, while improving the services, we provide and numerous ways.
The headwinds from the pandemic continue to fade, our efforts to strengthen our capabilities will provide greater opportunity for years to come.
Thanks, everyone for your time today I'll now turn the call back over to Rick who will provide us with some closing comments.
Thank you for those updates Betty Tod and Jeff our fourth quarter and full year 2020 performance demonstrates our agility and the strength of our business strategies and more.
And our group is recognized as an industry, leading partner, which provides us a strong foundation to capture new opportunities and grow our business.
And I am confident and our ability to successfully navigate the ever changing landscape of this industry.
Our success in 2020 is the result of our team of dedicated and talented people who might like to sincerely. Thank I would also like to extend a thank you to our customers for their continued trust and our stockholders for your ongoing support and I look forward to working with you to continue our success in 2000 and.
'twenty, one and beyond operator, we're now ready to open the call up for your comments and questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone and ask your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And any background noise, we ask that you. Please place your line on mute. Once your question has been stated.
Our first question comes from the line of Andrew Wittmann with Baird. Your line is open. Please go ahead.
Great. Thank you.
And thanks for taking my questions.
I was just wondering Rick if you could talk a little bit more about the renewable energy opportunities.
Sounds like MYR is capitalizing on them pretty well.
And the marketplace today, but you mentioned and your scripts that you're continuing to make some investments. There I was wondering if you could elaborate a little bit on the types of investments that you are making or maybe need to make.
And to take advantage of the renewable opportunities.
And the future.
Sure. So since the early two thousands we have been investing in and resources to chase. This work so putting teams together various divisions across our company have chased renewable work, whether it would be wind and solar or geothermal or anything associated with it.
And then as we've done our acquisitions, whether it's ESB UN CSI, they've all had a renewable or a solar component to them. So that just additive to what we've already been building and our company and then this year, we rebranded MYR transmission services to be MYR energy services, which is really our.
Our leg that changes that chases renewable.
Both on the transmission front and project specific delivery front. So it's something that we continue to invest we brought some great talent and over the last few years and we see this as a really a growing market for our company.
Great. Thanks for that Betty I wanted to see if I could get you to help us a little bit on on the quarter and understanding it a little better as always you have some good projects you have some projects that are have some inefficiencies and you're always kind of mentioned that but I was wondering if I just looking at the segment performance this quarter on the March.
And we're obviously very good and the transmission side, they were down sequentially, a little bit and C&I I was hoping could you maybe confirm or comment a little bit on did you have some inefficiencies more heavily on the C&I side of the business that led to that margin performance and then.
Can you talk about if there were any positive benefits on.
And our percentage of completion accounting adjustments on the T&D side and how much.
The storm revenues and then the margin from those revenues contributed to the strong margin performance and T&D anything to help context. The performance from the relative segments I think it would be helpful for us all to understand.
Yes, I can I can do that.
Yeah when it comes to the first part of the inefficiencies and then.
C&I side, yes, there were.
There were a couple of jobs that we've talked about and.
Earlier, you know throughout 2020.
We've been working to close out and where we were impacted and.
This quarter, there was and as we were closing the announced there was some.
Adjustments.
And like including a job that had final closeout settlements and things.
Good news and at least for that job and it was.
It's closed out so that did bring our.
Margins down to the two 5% level that and.
Lower than typical.
But when we take those those away we get us back into our 4% to six per cent range that we've quoted.
Just as a result of those couple of.
<unk>, we're referring to and our overall commentary.
And when it comes to T&D.
And although there, there's always pluses and minuses and March adjustments and T&D and.
The majority of those adjustments zone.
I'd say, we're closer to and netting.
And we did have some benefit from as we mentioned the storm work and then some.
And some negotiation with clients and M.
And we had some jobs that throughout 'twenty 2020.
Had a higher margin.
And just overall higher margin work.
Having said that we're not saying that there are 11% our quarterly.
Segment margins as something to rely on going forward as we always strive to to get into that level, but theyre definitely items in the quarter.
That led us to a higher percentage growth.
And if anything else to add to that.
I'd say when you.
Betty you summed it up well I think when you look at the the storm revenue revenue the execution pickup and the change orders side on this day in and around the T&D side is it really that taken us above that 9% to 10% that is kind of split between those three groups pretty even and so if I look at those three areas a pickup that was pretty even there is not one that stands out.
Really above the others and then as you said on the C&I front. It was really coming to final negotiation on a couple of change orders on some projects and negative negatively affected us and carry and those projects at slightly lower margins until they are completed.
Okay, Great. That's helpful I'll do it there and youll before thanks a lot.
Thank you.
Thank you and our next question comes from the line of Sean Eastman with Keybanc capital markets. Your line is open. Please go ahead.
Hi, This is Alex on for Sean Thanks for taking our questions.
We're in Ireland and.
Good morning, so so so we picked up on some commentary around large transmission projects.
And your 10-K, saying that large projects awarded and the second half of the year.
And start construction in 2022 I.
I guess, what's your level of confidence that these larger sized projects get awarded and the second half of this year or do you think there is still risk that these continued to push out further.
I think there's always a risk that they continue to push out I mean every time, we think <unk> think some of them are there and theyre finalized permitting and gets delayed a little bit to starts might get pushed out but again, we're seeing activity. There. We're seeing good movement. It's really just do those little nits and nats get it held up and permitting or that final approval.
And for the most part, though I'm happy to see the projects moving forward.
And at least budgeting and and pricing going out so Todd anything to add on that.
No Rick you know, we did announce and previous quarters, the MRC, New Scotland Award and that one is getting underway now.
And we continue to monitor and work with clients as I mentioned Bill and.
Several other projects that are in development.
It's most likely that they will remain and development throughout two.
2021, and we're hoping to see some construction activity there.
And thereafter.
Got it that's helpful and.
And then.
And with the C&I backlog being down double digit year over year is that a good way to think about C&I revenues next year or does the bid pipeline kind of support from back billing and the coming quarters.
And we certainly hope it supports some backfill and you know it's really.
Does the economy pause a little bit and see some of these developers pull back a little bit we're still seeing and active bid market.
And Jeff talked a lot about some of the opportunities out there that theyre seeing whether it be health care data centers E Commerce type stuff.
Lots of opportunities, but to somebody pulled back a little bit.
Pump the brakes, a little bit based on what's going on and we haven't seen it yet but could it happen, yes, and then again I want to remind everyone that we always talk about backlog as being lumpy.
And we don't control when and contractor when we're going to receive a contract and we're going to do everything we can to make sure. We have the right contract in place. So it may take us longer and negotiate it.
And we're not worried about getting it in their per quarter, and we're worried about having the right contract that's beneficial to us. So again, it's going to be lumpy. So I really don't weigh our backlog and too much into future quarter.
Orders its really the active bid market and what were being awarded out there and.
And we're still seeing that as active today, Jeff anything to add on that.
Rick I think Thats a good summary.
Nine straight quarters of strong backlog growth prior to the Covid pandemic. So there has been no doubt some leveling, but still feel good about what's in our backlog and field.
There are things that are remaining active so.
Hoping that debt.
Things continue to pick up.
Thanks, I'll hop back into queue.
Thank you and our next question comes from the line of Noelle Dilts with Stifel. Your line is open. Please go ahead.
Hi, guys and.
Congrats on good performance and the tough environment.
And I have a sure thing.
And I have a couple of questions first on unsold work, a little bit multipart, but I was hoping you could.
Qatar and just because there have been I think a lot of new new entrants and talked about the opportunity and that market could you speak to what you believe are key.
And it is advantages you have and the solar market and second I was hoping you could kind of talk about how we should think about the margin profile of that type of work relative to some of the more legacy T&D work that you do and.
And finally like what you think is really important in terms of being able to achieve success, there and and hitting margin targets. Thanks.
Todd do you want to take that.
Youre on mute.
Tod.
Okay, sorry about that.
Oh, and Todd's talking but something happened to his phone here. So I'll go ahead and take that one route and you look at when you look at the opportunities we have and we have out there. It's just continues to grow and I think as you said all our competitors are saying the same thing.
Our competitive side as we work for a lot of this is utility grade solar so a lot of it has to do with either our clients' changing or.
Our developers coming in and trying to do that level, which gives us that connection back to the utilities that they are doing the work force.
And we're seeing those margins be on the upper side right now of what our T&D expectations are so we always talk about that 6% to 9% we see that on the upper end of the availability availability for what we can make there.
So we see it as a positive market, we've been growing that market out and we pick some talent up over the years.
That had been doing solar for a long time to add to our current resources and have always done solar and renewable energy. So again, it's a good growth market for us we're going to continue to invest in it and the opportunities are really strong I mean, when we look at and projects that we're chasing out there. They don't just go into 2022 there were.
Budgeting and projects that are 2023 2024.
And we see it as a growing market for us.
Yeah, Richard also.
And I believe it.
And our ability to provide that full service is really a key from a from the generate new utility scale generation two.
Just the battery storage to the infrastructure required to get that stuff to the grid. So we're able to provide that service to our customers as well.
Okay great.
And then second just looking at your.
Your TNT margins.
If you kind of look through some of the adjustments I would say that if you look at 'twenty 'twenty and even late.
2019, it just it feels like things are sort of stepped up a level.
Could you speak to maybe some of the changes or efficiencies that you've implemented that has kind of helped you move that margins in that division and.
And how we should think about the sustainability of these higher margins moving forward. Thanks.
Well first off as Rick mentioned, you know what there was kind of a three.
Repo would increase to the margins that resulted from the.
The efficiencies the and <unk>.
The storm work as well as the.
And then you get the favorable settlements and some change orders there that did drive it up slightly higher than.
And what we consider.
The acceptable numbers.
But overall you know we've worked really hard on the T&D side, and the CNI side or on project management, and we brought a lot of talent into the organization.
Senator Rail project management and we.
Develop some internal programs for per training.
Not only from project management, and the technical training and the field and will improve and the skills of their employees.
At all levels. So we think we're seeing the benefit of that that typically takes a couple of years to get that into place to get it running and and seeing the results of it and I think and 2020, we started to see the results of those programs that we put in place as well as the talent that we brought in and.
And utilizing the best practices across the country.
I think the improvement and the technology and itself and.
And almost of the force. The fact that we had the force the use of technology through this through this COVID-19 crisis enabled us to strengthen our communication skills across the country and I think that's another added benefit that helped drive the margins in 2020.
Great. Thank you and I appreciate that.
Thank you and again, ladies and gentlemen, if you have a question and at this time. Please press Star then one.
And our next question comes from the line of Brian Russo with Sidoti. Your line is open. Please go ahead.
Hi, good morning.
Good morning.
Should we have to.
And I spent a lot of discussion around Texas.
And it's so cold weather recently and the need to.
Grid infrastructure, whether it's generation from our T&D batteries and energy storage has been brought up as one solution can you just discuss what your presence is like and Texas May be example of projects worked on.
In the past.
And any customer relationships you might have and then maybe just some general do it your competitive advantages and.
That market opportunity, which may be more near term and say some of the longer development type transmission projects that you're involved with.
Our presence and tech.
And that is.
Representative of our presence throughout the United States and in Asia.
And why contractor Inc.
Texas, obviously, a big state a lot of people and part of utilities and we.
And do have a couple of <unk>.
<unk> service agreements in Texas, with some key clients that'd be and set.
Centerpoint and noncore and.
And our long standing relationships that we work on every day.
They're important to us and we say, we stay very close to those clients and.
And we are performing we're pretty diverse with each and every one of them doing distribution transmission and substation work.
So and in addition.
And to that there is there's always going to be some some renewable energy opportunities.
And those in the past.
And West, Texas, and there is a lot of discussion right now.
And actually right around solar and generation all of these discussions as a result of what took place a few weeks ago and we're monitoring that.
And sort of is extremely recent event right now to really make any projections on but.
And resolve that could be is certainly going to be some some grid reliability and some good strengthening.
Okay, Great and also on the T&D side.
But.
And what's your thoughts on offshore wind, we have seen some extremely large.
And project announcements in the mid Atlantic off the coast, there as well as up and the New England area.
We see that as a growing opportunity for our company I think it's more of the bringing the stuff onshore than it is doing the specialized cable placement and the ocean or that kind of stuff thats usually.
So there is companies that specialize in that side of it and do that for us, it's really getting that infrastructure.
The cables and and onshore and everything thats associated that whether it be substations or whatever so we've done that side and we see that as a growing business but.
So thats I think part of what gets US excited about the T&D market overall and there's all these kind of new additions that are coming in whether it's just solar sites batteries or offshore.
Wind.
Okay, Great and then just back on the fourth quarter. The CNI revenues to 11, 3% you mentioned.
Higher volume from the C S.
And it's my understanding that acquisition closed before the fourth quarter. So it was a lot of that volume growth organic and what's driving that.
I'll start and let Jeff add to it.
I think when we look at that yes, we did that acquisition halfway through 19.
That was completed in July so it did have that revenue last year and our numbers.
But they continue to grow they continue to execute and I was I've kind of been shocked with where their revenue has been a little bit because I thought COVID-19 as much as they were shut down would have a huge effect on their business and it had a slight negative effect, but nothing major and they continue to perform.
With opportunities coming forward, so the California market is a good market for us Jeff.
Yeah and.
I think theres been a lot of variation across all of our districts.
With Covid and some have performed with very little impact and others have seen a larger impact so.
All in all we're pleased with the revenue and believe that.
Some of those areas that have been down there showing some opportunity. So we're looking forward to that.
Okay, and then just lastly on capital allocation you have the 50 million share buyback ongoing it doesn't look like you bought much stock back in the fourth quarter and just how do you bounce.
Buybacks versus any M&A.
M&A.
Right opportunities, especially with your <unk>.
Average ratio now at around two times, and whats kind of your capacity or.
Max leverage ratio.
And <unk>.
Acquisitions.
Betty you want to take that one yes.
And we've talked about are.
Allocation and and tolerance for leverage being.
And our norm and the past had been and you know like day, one times EBITDA leverage one one and a quarter and that but that we would definitely and go up to two maybe slightly higher and that's right after and acquisition given that acquisition holiday when all of the EBITDA results aren't in.
So that's that and we saw that.
And range when we acquired CSI.
And our point to leverage that we have today.
Right.
And much lower we put the stock buyback program in place and that's correct. This quarter, we did not.
Purchased anything.
And just based upon the current change and the stock price per lead.
Recently.
But that's still in place.
It was put in place for a full year.
And as well as acquisitions and.
Talked about our interest.
I'm looking and the market definitely our capital allocation program to go out.
Mark.
Our team and day.
Daily and looking at transaction. However, at the same time that I've been talking about for the.
And last six months or so not sure what in 2021 with the pent up demand.
And what companies are going to come on the market, whether something will come through and 21.
But we are definitely interest and ricki want to add anything to that yes.
Yeah, I think when we look at it overall, we have these conversations not just just internal with our management group growth with our board and where we allocate our capital.
Capital too and I think it's something we don't have to do anything we're going to grow our company. There is a lot of opportunities to grow our company organically and we will continue to invest in that.
And when necessary and as necessary to grow our company. We don't have to do an acquisition, we want to do acquisitions, we're an acquisitive company, but we want to do it for the right company at the right price. So again, even with our stock buybacks or acquisitions, we are opportunistic buyers.
But we're going to do it at the right price. So we're not going to leverage ourself heavy just for the sake of buying something we're going to make sure. We make the right business decisions and if we have to be a little patients and patient on some of this stuff we're going to be in order to have the right portfolio and the and.
Alright, great. Thank you very much.
Thank you and we do have a follow up question from the line of Andrew Wittmann with Baird. Your line is open. Please go ahead.
Great. Thank you I wanted to talk about cash flow because it was actually quite remarkable and the year and so I look at the year over year change and the working capital most of your accounts work to the positive culture receivable contract assets down contract liabilities.
Up a little bit so it seems like working capital was mostly favorable and the year.
This is all to ask the question Betty.
Some of this need to reverse in 2021 do you think because of just the positions where you finished on December 31.
Could you talk about that.
Talking about the capital budget outlook and could you also just quantify for us the benefit from the cares Act and the payroll tax holiday that you were given a 2020. So we just know how much that contributed to the very good cash flow this year.
Yes, I can.
I'll start with the last part of that question the cares Act and so for.
Deferring taxes and other items is $26 million.
And that was through the end of 'twenty 2000, and 'twenty and it gets paid back over a 10 year period.
So that definitely benefited us in and 2020 like other companies and.
When it comes and thanks for recognizing that.
And the.
Huge change.
Change for us to flip from a net under build to our overall AR and net overbill showing both on your billing day.
<unk> and all of our billings, increasing that has been a huge focus for our team and four.
For several years, just to Tod talked about training and things taking place and it takes awhile for four and momentum.
And to pick up and showing the results.
We've been working on that for a while and I think and 2000 and 'twenty. We definitely saw from benefit having said that there is always timing that comes into play.
And and there was a mix of job and right now are or the mix of jobs that we have.
And then a nice paper Paul.
Change and that overall working capital so we continue to strive to hit.
Work on those terms and billing and collections and and you name it and.
And I'm proud of the team for everything that they've been able to get him to get us to that and what if any.
William book here.
Some of that I would not rely on them.
2008 and 21.
But you know.
Clearly.
And that's our focus and well.
<unk>.
Yes.
And it got it and just sorry.
That's helpful. I'm, sorry, maybe you mentioned and the script or maybe you mentioned, but can you just give what you think about sort of the capital budget here in 'twenty, one because I missed it.
And we don't have that.
Trusts will typically but our capital is fairly clean.
Systems with our previous years and.
2020.
Our capital, that's probably a little bit less than.
And then we and even plan just as we held back earlier in the year relating to the Covid and all of that uncertainty.
But if you just take a look at our.
And certainly in recent years.
2021 would be much different.
Thank you.
Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to Mr. Schwartz for any further remarks.
To conclude on behalf of Betty Tod, and Jeff and myself I sincerely. Thank you for joining us on the call today I don't have anything further and we look forward to working with you going forward and speaking with you again on our next conference call until then stay safe.
Ladies and gentlemen. This concludes today's program you may now disconnect everyone have a great day.
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