Q3 2021 MYR Group Inc Earnings Call

October 28, 2021

Good morning, everyone and welcome to the MYR group third quarter 2021 earnings result conference call.

Today's conference is being recorded.

At this time for opening remarks.

With introductions I would like to turn the conference over to David Gutierrez of Dresner Corporate services. Please go ahead David.

Thank you and good morning, everyone.

Like to welcome you to the MYR Group conference call to discuss the company's third quarter results for 2021, 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 Todd.

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 312.

Adam to 630 600.

We will send you a copy.

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 November 4th 2021 at 11, a M Mountain time by dialing 850, 5859205 ships or 404, 537, 3406 and entering conference I'd.

For Q4, nine Q3 one.

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 of this date and MYR group assumes no obligation to update any such forward looking statements. These forward looking statements involve risks and <unk>.

Certainties that could cause actual results to differ materially from the forward looking statements.

Accordingly. These statements are no guarantee of future performance.

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, a reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in Yesterdays press release.

With that said, let me turn the call over to Rick Swartz.

Thanks, David Good morning, everyone welcome to our third quarter 2021 conference call to discuss financial and operational results.

I will begin by providing a brief summary of our third quarter results and then we'll turn the call over to Betty Johnson, Our Chief Financial Officer for a more detailed financial review following Betty's overview, Tod Cooper and Jeff Warnicke, Chief operating officers for our T&D and C&I segments will provide a summary of our segment activity and discuss some of.

MYR groups' opportunities going forward I will then conclude today's call with some closing remarks and open the call up for your questions.

Our strong market position diverse geographic reach and operational excellence have resulted in a solid third quarter 2021 performance.

Results. This quarter included record high net income of $23 2 million.

A 34% increase over our third quarter 2020, net income along with quarterly revenues of $610 2 million.

Our backlog at the end of the third quarter was $163 billion.

Indicating our competitive strength in the market and our strong customer relationships.

We are experiencing continued bidding and project activity throughout our T&D segment.

The long term relationships, we hold with utility customers and expanding relationships, we are creating with energy developers position us well for future growth and opportunities.

Renewable energy system hardening and anticipated upgrades of aging infrastructure are expected to be the major drivers of this growth.

Our C&I segment continues to maintain a strong market presence and we have achieved a solid backlog of work.

Market indicators remain positive with continued growth opportunities in the majority of our C&I market.

We continue to focus on securing work in our core markets, while expanding our capabilities in renewable energy and electric vehicle infrastructure.

Our greatest strength lies within our talented and dedicated employees, we continue to develop and empower our teams to reach their highest potential as we grow our company.

Our team members are committed to providing customers with excellence in safety and project delivery, while helping them achieve their business goals.

The current and proposed COVID-19 safety protocols and vaccine requirements are being monitored closely on both the federal and individual customer basis.

While we are incurred while we encourage our employees to receive the vaccine increased protocols could affect future labor availability for the majority of contractors.

We are excited about our third quarter performance and we look forward to continued growth and producing strong financial results now Betty will provide details on our third quarter 2021 financial results.

Thank you Rick and good morning, everyone on today's call I will be reviewing our quarter over quarter results for the third quarter of 2021 as compared to the third quarter of 2020.

Our third quarter 2021 revenues were $610 2 million this represents.

An increase of $2 $3 million.

4% compared to the same period last year.

Our third quarter T&D revenues were $306 5 million and.

An increase of two 3% compared to the same period last year.

The breakdown of T&D revenues.

$166 million for transmission and $146 million for distribution.

T&D segment revenues increased primarily due to an increase in revenue and distribution parts projects, partially offset by a decrease in revenue and transmission projects.

Approximately 50% of our third quarter T&D revenues related to work performed under Master services agreements.

C&I revenues were $303 $6 million, a decrease of one 5% compared to the same period last year.

<unk> segment revenues decreased primarily due to a slight decrease in volume through various sized projects in certain geographic areas.

Our gross margin was 13, 8%.

<unk> third quarter 2021, compared to 12, 6% for the same period last year.

The increase in gross margin was primarily due to better than anticipated productivity on certain projects.

Favorable job Closeouts and favorable change orders on certain projects.

These improvements were partially offset by labor and equipment inefficiencies.

Certain projects.

Third quarter 2021, SG&A expenses were $53 1 million, an increase of $1 $7 million compared to the same period last year.

The increase was primarily due to increase in employee related expenses to support the growth in our operations.

Third quarter 2021, net income was $23 $2 million or $1 35.

For diluted share both were record highs for MYR.

Compared to $17 $3 million or $1 <unk> per diluted share for the same period last year.

Total backlog as of September 32021 of $163 billion remained consistent with the prior year.

Total backlog as of September 32021 consisted of $652 $2 million for our T&D segment.

$981 $3 million for our C&I segment.

Turning to the September 32021 balance sheet, we had approximately $244 $9 million of working capital.

$5 million of funded debt and $362 7 million in borrowings availability under our credit facility.

Our funded debt to EBITDA leverage has continued to stay strong point, all three times leverage as of September 32021.

And 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.

I'll now turn the call over to Tod Cooper, who will provide an overview of our transmission and distribution segment.

Thanks, Betty and good morning, everyone.

The third quarter of 2020 was solid solid performance from our T&D segment.

While revenue was slightly impacted due to summer outage restrictions in a few areas.

Our continued focus on execution resulted in strong margins for the quarter.

Our team steadily performed work on a variety of projects, including small to mid sized projects worked under established alliance agreements and large scale projects, resulting in effective resource utilization.

Bidding activity remains solid on the small to medium sized projects a couple of larger transmission jobs.

Multiple utility scale solar projects.

We remain focused on supporting our customers and navigating the ongoing changes and challenges in the energy industry.

Regulatory hurdles remain on some projects across the country and the current and proposed COVID-19 safety protocols and vaccine requirements are being monitored closely.

At MYR, we are encouraging all of our workers to receive the vaccine in an effort to provide a safe workplace for all of our employees.

And in preparation for any such further developments.

Throughout the eastern region of our business, we are seeing steady bidding activity with recent project Awards in Indiana, Connecticut, New Hampshire, Pennsylvania and made with.

We continue to perform ongoing work under multiple alliance contract.

We've expanded our energized work capabilities to meet the growing need for these highly technical services.

Additionally, our team is engaged in delivering multiple solar projects for renewable energy developers.

Our Western region is experiencing continued growth with recent project wins in the northwest, Utah and Arizona.

We see steady proposal activity in small to medium projects with some large project opportunities.

Ongoing work with customers, including Excel energy, Southern California, Edison Pacificorp, Arizona Public service and Tucson Electric power remained strong as we move towards 2022.

Industry resource challenges in the Western region.

<unk> opportunities for MYR group subsidiary companies can come together and work collaboratively to achieve customer needs.

Teams in our Midwest region continue to foster long term relationships with clients such as Centerpoint energy Ameren Encore and Midamerican energy to name a few.

We remain focused on delivering consistent reliable service.

Utility scale solar in large projects continue to represent growth opportunities for MYR energy services business.

We are presently in negotiations on several solar projects across the U S.

The impacts of increased commodity and transportation costs are beginning to affect some near term project decision some time lines.

But we remain confident in the overall solar industry outlook.

Just blood despite supply chain delays the current outlook remains strong and our dedication to our clients.

Health and safety of our employees, it's strict adherence to our operating principles continues to position us well for success.

We believe we are well equipped to remain an industry leader, while addressing the ever changing industry and market needs.

I'll now turn the call over to Jeff wanted to who will provide an overview of our commercial and industrial segment.

Thanks, Todd and good morning, everyone.

Our C&I segment performed well in the third quarter, achieving steady results in our construction environment with notable disruptions.

<unk> revenues declined slightly when compared to the third quarter of 2020. We are pleased to report improvements in our segments operating income when compared to the same period last year our.

Our portfolio of work includes a substantial amount of repeat work with existing clients across many of our district offices and work continues at a steady pace across the U S and Western Canada.

We are encouraged by the volume and diversity of opportunities on the horizon and expect to generate steady results moving forward.

Last quarter, we stated that many of our district offices were unfavorable position to receive potential awards should owners choose to advance their projects. We are pleased to announce that since then we have gone under contract on a number of those tentative projects to perform the initial phases of the construction process, including assisting our clients.

It's in the development of scope schedule and final pricing.

This quarter's awards for new contracts and for Phase one design services generated a positive book to bill ratio for the quarter and added to a positive growth trend since the start of 2021.

One of our long term strategies has been to establish exceptional preconstruction service expertise to aid our clients in the early development of their projects are.

Our clients are finding our services, even more valuable during a time of heightened economic uncertainty our greater collaboration and trust is being utilized to mitigate risk and drive consistent results.

Last week, we announced a notable award and EPC utility scale Solar project in California, which consists of 110 megawatt DC photovoltaic solar plant with a 280 megawatt hour battery energy storage system.

The contract was awarded to MYR subsidiary CSI electrical contractors Preconstruction.

Preconstruction activities have begun and the project is slated to break ground in the spring of 2022.

To be involved with this critical project, which will leverage our extensive EPC experience to deliver another utility scale project and interconnection.

In addition to this large strategic pursuit, we are under contract on several other small to midsized projects, including solar plants vehicle charging stations and distribution facilities at various locations across the nation.

In addition to our recent awards, we continue to collaborate with our MYR energy services business on the development of several solid pursuits across the country.

We're also engaged in exciting opportunities in several other markets, including manufacturing transportation health care pharmaceutical and energy development as.

As mentioned earlier the majority of our pursuits include an element of early design development and these opportunities are providing greater insight into the owners' objectives, allowing the entire team to understand and leverage risk mitigation factors. We believe these early collaborative relationships will be the greatest defense against month to month volatility.

<unk> facing the entire industry.

We're also pleased to see the generally positive trends in the major indices.

The Dodge momentum index continues its soft tooth upward momentum through the third quarter and on a year over year basis, the momentum index was 30% higher.

In September of 2020.

The gain and the momentum index is certainly good news and assign that owners and developers are looking past current concerns and moving forward with projects to meet demand.

To ensure our continued success in a volatile economy, we are focusing our efforts on core markets and key relationships. We believe our diligent measured approach will continue to deliver consistent steady and manageable growth.

We're excited about the momentum we experienced in the third quarter and are proud of how our employees continue to adapt to a rapidly changing environment.

We look forward to working closely with our valued clients to help them navigate the challenges ahead and supporting their business goals.

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 third quarter 2021 performance illustrates the strength of our core markets.

Clean energy transformation, and our ability to maintain strong customer relationships, we recognize the importance of adapting to market conditions and being a strong partner to customers as we respond to industry changes.

We continue to focus on customers and project opportunities that closely align with our operating principles and diverse capabilities.

As I previously mentioned, we believe MYR group is strategically positioned to generate growth while delivering shareholder value.

Want to thank each of you for your continued support of MYR group, we look forward to progressing our business strategy, while emphasizing our values and client relationships. Operator, we're now ready to open the call up for comments and questions.

Thank you.

Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Your first response is from Justin Hauke of Robert W. Baird. Please go ahead.

Hi, good morning, everyone.

Morning, Justin.

Hi, I guess I wanted to ask my first question just the solar commentary.

You guys have started talking about that last quarter and a lot of emphasis here and this big contract wins so.

Yes.

<unk> is on these utility scale solar projects first of all.

Is the work all in the C&I segment, and whats kind of the margin profile of them as it is it more typical of the C&I segment, where it's mid single digit or does it look more like the T&D double digit type margins.

We do we do solar work in both our market, so T&D and C&I and it's really customer relationships and thats, how its driven if you remember back when we did the CSI acquisition, 30% of their business was was solar at the time.

And we have continued to push that in all our areas. We started doing solar work really back in I'd say 2011, or so and we've continued to expand that on both sides of our business. So it comes down to customer relationships and who drive that on both sides and I would say say the margins are similar to probably the T&D margins.

A little bit higher than the C&I margins.

Okay. That's helpful.

I guess, just moving to the quarter itself.

Kind of two questions. So first on on the margin you guys called out a favorable change orders in the gross margin I was hoping maybe you could clarify a comment on the size of that and then the other question I had was just in the broader context of revenue kind of being flat.

<unk> and down sequentially in the third quarter.

Usually you have a seasonal uptick.

Was there anything specific that.

Kind of weighed on on the revenue productivity, whether or something like that just any comments you can get momentum.

I think a couple of things there one is we did talk about.

The excessively the excessive heat during that period of time and that utilities did have shut out of some right of ways.

So with that being said.

We did our revenue was a little lower than I think we said that during our last call that that was a <unk>.

<unk> ability so when we look at that side.

I think we forecast that and we knew it.

During that period of time.

And your other question was.

Just to the extent you could comment or give any any context around the change order benefit to gross margin.

Okay.

Have a discrete item.

We had some strong project Closeouts and we had some favorable adjustments one by themselves wasn't enough to move the needle we had a couple of them.

And it was a.

It was positive net net it was positive and we identified it.

Thank you very much.

Thanks.

Your next response is from Sean Eastman of Keybanc capital. Please go ahead.

Hi, This is Alex on for Sean This morning, Thanks for taking our questions.

Good morning.

So first question is.

Given that the transmission versus distribution mix was was much more evenly distributed this quarter compared to past quarters, where transmission drives the revenue mix.

Does that have something to do with the strong margin performance in this segment I guess I'm asking if there is a major difference in the margin profile between the work you're doing.

<unk> mission versus distribution.

There's not a big margin profile.

There isn't a big margin difference in the profile between the two.

It was really just good execution on both sides of the business on both sides of the touch business to both distribution and transmission.

Got anything you want to add on.

No Rick it was.

Talked to as Rick had mentioned on the previous question.

About.

The summer outage restrictions that we faced in some areas we were able to.

To move some of those individuals' into areas, where theres a higher distribution demand.

For the quarter that had an adjustment on that.

What was that storm work related.

There was some storm work associated with it but I'm not sure. It was really enough to move the needle we took existing crews as we mentioned before we do not add crews to go. These storm work, we essentially take those crews off of existing properties and existing clients. So there was a slight uptick in that but it's.

It moved the needle much it wasn't it wasn't really that much.

And Justin just to add as.

As we talked about.

Coverage for the T&D side, and we've had the <unk>.

Favorable job Closeouts and change orders.

Dissipated productivity et cetera.

We quote in our Q about margin adjustments in kind of call out.

The T&D side.

From that.

<unk>.

Just to go on record that we're not.

Anticipating the 11 five cents.

Our norm.

Those were called out because they were.

Nothing individually.

To move the needle.

Either upside or the downside.

But net net on the T&D the T&D did benefit.

From the collection of those items that we've called out in our scripts.

And so.

So as we think about the T&D margin comp next year is it possible, we won't see as much juice coming from these closeouts or change orders next year that that could make it more difficult to achieve like this.

Certainly not at these levels.

The historical level or is the <unk>.

Markets are so strong where you can.

Well I would say that market strong and we're excited about it but again, we've had some really good closeouts and we've had some good execution out there and we've had good weather on top of it for.

For the most part.

Against the majority of our areas. So when you take all those and you combine them. We've had very good results and I think we've always said, our operating margins and we upped it last quarter. It is say it should be on the T&D with that 7% to 10 five.

First half and we're operating a little above that so would love to operate where we're at today or a little higher I mean, thats always our goal to exceed it.

But we did have some things that we benefited from this last quarter.

Thank you.

Thank you. Your next response is from Brian Russo with Sidoti. Please go ahead.

Hi, good morning.

Morning, Brian.

Hey, I was wondering if we could.

Discuss the.

All of our contract announcement.

Last week.

<unk> in excess of $100 million does that imply it's more than 100, but less than $200 million.

Just curious why.

Characterizes within excess of country, yes.

It's slightly over $100 million.

We try to do the best we can working with the customer to be able to release.

As much data as we can on it that one slightly above $100 million.

Okay.

Okay, Great and correct me, if I'm wrong, but is this the first large.

Large utility scale solar contract.

Announcement from CSI electrical since you made the acquisition in July of 2019.

Yes, so first one when they've done they do a lot of solar work. This was the first one that totaled over $100 million. So we don't do any project awards, if its announcement of its under $100 million in any of our businesses. So this was one that that affected them and at what could happen to be over $100 million, but they've had some that are close to that.

Alright, great.

The most.

I'm sorry go ahead.

Okay.

So given the.

The run rate that you disclosed at the time of the acquisition, which was $265 million in revenue.

On average annually.

100 <unk>.

Dollar contracts certainly is a pretty big accomplishment for CSI.

Is that a fair statement.

It's a good.

Accomplishment form yet we're excited about that opportunity they are positioned well to execute that project.

I would say they have done similar sized projects in the past, maybe a little smaller slightly under $100 million, but.

This one has grown a little bigger.

And the.

The contract with the developer.

It's a developer or not.

Not directly with the utility.

If a developer.

Jeff anything you want to add.

Is it an existing.

Is it an existing customer or a new customer.

We worked with this customer before.

Okay.

Yeah.

Okay great.

And then.

Can you just talk about the backlog because if we look since September of last year. It seems like T&D has been trending down even with the.

<unk> power contract, whereas C&I has demonstrated more or less a steady increase in that I understand.

The dynamics of each market are different but maybe just shed some light on that.

The trends.

We're seeing it.

Which segment in terms of the backlog.

I would say I am excited about the opportunities that are out there I am positive I'll, let Todd and Jeff add in a second here I'll just give my overview of it when I look at both our C&I and T&D markets I'm excited about the opportunities I think we've grown our backlog well again, we don't control the timing of the words when I look at the activity in the market.

Very positive I think there's lots of opportunities out there and a lot of projects, we're working with budgeting construction.

Construct ability on those projects and really working with the owners to budget those projects and I think out of it we will receive some good work. It just really the timing of those awards.

So I wouldn't say that just because C&I has climbed a little bit more.

Todd did have the.

The <unk> power project last year that added a lot at one time.

And we see some opportunities on large project side there too.

Hopefully add some new projects in the next I'd say six months or so.

I'll, let you go first anything you want to add on your market and then Jeff.

No just just Rick Rick that we always talk about the Lumpiness.

Of the awards and we are seeing that right now.

There are a couple of nice opportunities as Rick mentioned that.

<unk> had been had been impacted by some regulatory delays out there.

We are hopeful will.

Essentially gets straightened out but outside of that also as our as our.

No.

Alliance work continues to grow I think it's always good to remind folks that.

We only include three months of backlog.

For all of our alliance work that we do so as that continues to grow we're not picking up a year two years or three years, we're picking up three months at a time so.

That keeps it keeps us somewhat level is to a certain degree.

Okay, Great and then just a clarification.

Hmm.

Sorry, sorry.

What Todd said, if you just look at the timing of the awards. It can be lumpy. So we do spend a lot of time analyzing the work that we're doing with our clients and the likelihood of those contracts coming in and as we said in the script.

It's been a lot more active this last quarter.

Looking like projects that we were concerned we are pushing out are actually coming to the contract stage. So that's where we're feeling fairly good.

Okay, Great and lastly, just to clarify the <unk>.

<unk> plus million contract award.

That you announced last week is that included in this 163 billion.

Backlog on the C&I side or.

Okay.

It include is it three months included or the entire contract the entire contracted to lump sum contracts. So again. It starts mid next year I mean, we'll start Preconstruction services, but really the spend starts mid next year and then continues basically for a year after that.

For the build cycle so it's in.

In the second half next year build cycle takes place.

Okay. Thank you very much.

Thank you.

Again to ask a question. Please press star one on your telephone keypad.

My question has been answered or you wish to withdraw yourself from the queue. Please press the pound key.

Your next response is from Jon Braatz of Kansas City Capital. Please go ahead, good morning, excuse me and good morning, everyone.

Yes.

You mentioned a couple of things couple of times, both Covid protocols are your clients.

Have they established the protocols yet are they in the process.

Sure.

So where do they stand if they where does it stand if they require full vaccination of all contractors, what kind of impact could that have.

There is very we don't really have any clients right now that require full vaccination we.

We do.

With the exception of if we have a federal project, which we have very little straight federal work, where we're working directly for the federal government, so very little of that.

Within our company.

I would say all of our customers are trying to figure out what protocols are going to follow it changes daily it probably changes hourly on the conversations we're having with them.

We closely monitor were in tight contact with our customers.

We're sharing information when we can with what other customers are doing.

So I would say we're on the forefront of kind of.

Pushing those helping push those decisions and where it's going ahead.

I do think when you look at the overall construction industry.

It's like anyone any other place it vary state to state or area to area.

The number of people that are vaccinated or not vaccinated.

It could have an effect on the entire construction population. If there was let's say, 100% mandate of vaccination that came down and more closely monitoring that working with our clients, but we're not the only one thats every contractor out there addressing the same issues sure at this point have you had to.

Move any anybody any of your personnel because of co.

Covid protocols.

Not that I'm aware of we haven't at all.

Because of that okay. Okay. Thank you.

The other question is in the past there have been times, where you've.

<unk> had this.

Spend money in advance of the revenues, where the expense ratio expense expenses were rising faster than revenues.

Given the outlook.

It looks pretty positive and so on so forth.

How do you see let's say over the next 12 to 18 months.

What I would call infrastructure spending to meet that demand how do you see that in comparison to maybe.

The revenue outlook or youre going to have to.

Accelerate spending a little bit in terms of people and technologies and so on.

Not by a large amount I think we continue to look at our capex spend on equipment and make sure. We're out in front of that when we look at the market and the conversations we're having with our clients in the amount of work that could be available to us we want to make sure we have the right equipment in place.

And kind of with those restrictions on equipment and some of those delays were making sure we have the right commitments in place to buy that to support our business.

And we look at I'll say, it's a growing market for us so with those opportunities or capex.

We will continue to climb a little bit.

It's not going to double or anything like that but we see a great future out there. So we will continue to invest in advances as needed to make sure. We can take care of our customers and grow with them.

How about how about personnel levels.

Personnel levels I'd say, we continue to invest it is one of those are not the field of dreams for us. So we don't capture a bunch of people and then go capture the work.

We really make sure that we have the right people in place as we need them for the project.

And I would say between Todd and Jeff and their teams they do a very good job and even better with the financial side of making sure. It's they have the people in place as needed not well in advance okay. Okay alright. Thank you.

Thank you there are no further questions in the queue at this time I would like to turn the conference back over to Rick Swartz.

To conclude on behalf of Betty Tod, Jeff and myself I sincerely. Thank you for joining us on the call that 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 conference call. Thank you for participating and have a wonderful day you may all disconnect.

[music].

Okay.

[music].

Good morning, everyone and welcome to the M. A Y our group third quarter 2021 earnings result conference call.

Today's conference is being recorded.

At this time for opening remarks.

With introductions I would like to turn the conference over to David Gutierrez of Dresner Corporate services. Please go ahead David.

Thank you and good morning, everyone.

Welcome to you that the MYR Group conference call to discuss the company's third quarter results for 2021, 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 Todd.

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 312.

Two 630 600.

We will send you a copy or go.

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 November 4th 2021 at 11, a M Mountain time by dialing 850, 580, 59205 ships or 4045373406 and entering conference I D.

For Q4, nine Q3 one.

Certainties 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, a reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in Yesterdays press release with that said, let me turn the call over to Rick Swartz.

Thanks, David Good morning, everyone welcome to our third quarter 2021 conference call to discuss financial and operational results.

I will begin by providing a brief summary of our third quarter results and then we'll turn the call over to Betty Johnson, Our Chief Financial Officer for a more detailed financial review following Betty's overview, Tod Cooper and Jeff <unk>, Chief operating officers for our T&D and C&I segments will provide a summary of our segment activity and discuss some of.

MYR groups' opportunities going forward I will then conclude today's call with some closing remarks and open the call up for your questions.

Our strong market position diverse geographic reach and operational excellence have resulted in a solid third quarter 2021 performance Reis.

Results. This quarter included record high net income of $23 2 million.

A 34% increase over our third quarter 2020, net income along with quarterly revenues of $610 $2 million our backlog at the end of the third quarter was $1 63 billion.

Indicating our competitive strength in the market and our strong customer relationships.

We are experiencing continued bidding and project activity throughout our T&D segment. The long term relationships, we hold with utility customers and expanding relationships, we are creating with energy developers position us well for future growth and opportunities.

<unk> Energy's system hardening and anticipated upgrades of aging infrastructure are expected to be the major drivers of this growth.

Our C&I segment continues to maintain a strong market presence and we have achieved a solid backlog of work market indicators remain positive with continued growth opportunities in the majority of our C&I markets.

We continue to focus on securing work in our core markets, while expanding our capabilities in renewable energy and electric vehicle infrastructure.

Our greatest strength lies within our talented and dedicated employees, we continue to develop and empower our teams to reach their highest potential as we grow our company.

Our team members are committed to providing customers with excellence in safety and project delivery, while helping them achieve their business goals.

The current and proposed COVID-19 safety protocols and vaccine requirements are being monitored closely on both the federal and individual customer basis.

While we are incurred while we encourage our employees to receive the vaccine increased protocols could affect future labor availability for the majority of contractors.

Thank you Rick and good.

Good morning, everyone on today's call I'll be reviewing our quarter over quarter results for the third quarter of 2021 as compared to the third quarter of 2020.

Our third quarter 2021 revenues were $610 $2 million. This represents an increase of $2 $3 million or 4% compared to the same period last year.

Our third quarter T&D revenues were $306 5 million and.

An increase of two 3% compared to the same period last year.

The breakdown of T&D revenues was.

$166 million for transmission and $146 million for distribution.

T&D segment revenues increased primarily due to an increase in revenue and distribution partnership projects, partially offset by a decrease in revenue on transmission projects.

Approximately 50% of our third quarter T&D revenues related to work performed under Master services agreements.

C&I revenues were $303 $6 million, a decrease of one 5% compared to the same period last year.

<unk> segment revenues decreased primarily due to a slight decrease in volume through various sized projects in certain geographic areas.

Our gross margin was 13, 8% for the third quarter 2021, compared to 12, 6% for the same period last year.

The increase in gross margin was primarily due to better than anticipated productivity on certain projects.

Favorable job Closeouts and favorable change orders on certain projects. These improvements were partially offset by labor and equipment inefficiencies on certain projects.

Third quarter 2021, SG&A expenses were $53 1 million, an increase of $1 $7 million compared to the same period last year.

The increase was primarily due to increase in employee related expenses to support the growth in our operations.

Third quarter 2021, net income was $23 $2 million or $1 35.

Our diluted share both were record highs for MYR.

Compared to $17 $3 million or $1 <unk> per diluted share for the same period last year.

Total backlog as of September 32021 of $163 billion remained consistent with the prior year.

Total backlog as of September 32021 consisted of $652 $2 million for our T&D segment.

$981 $3 million for our C&I segment.

Turning to the September 32021 balance sheet, we had approximately $244 $9 million of working capital.

$5 million of funded debt and $362 $7 million.

And borrowings availability under our credit facility.

Our funded debt to EBITDA leverage has continued to stay strong point over three times leverage as of September 32021.

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.

Ill now turn the call over to Tod Cooper, who will provide an overview of our transmission and distribution segment.

Thanks, Patty and good morning, everyone.

The third quarter of 2020 was solid solid performance from our T&D segment.

While revenue was slightly impacted due to summer outage restrictions in a few areas.

Our continued focus on execution resulted in strong margins for the quarter.

Yes.

Our team steadily performed work on a variety of projects, including small to midsized projects worked under established alliance agreements and large scale projects, resulting in effective resource utilization.

Bidding activity remains solid on the small to medium sized projects a couple of larger transmission jobs.

Multiple utility scale solar projects.

We remain focused on supporting our customers and navigating the ongoing changes and challenges in the energy industry.

Latoya hurdles remain on some projects across the country and the current and proposed COVID-19 safety protocols and vaccine requirements are being monitored closely.

At MYR, we are encouraging all of our workers to receive the vaccine in an effort to provide a safe workplace for all of our employees and in preparation for any such further developments.

Throughout the eastern region of our business, we are seeing steady bidding activity with recent project Awards in Indiana, Connecticut, New Hampshire, Pennsylvania and Maine.

We continue to perform ongoing work under multiple alliance contract.

<unk> expanded our energized work capabilities to meet the growing need for these highly technical services.

Additionally, our team is engaged in delivering multiple solar projects for renewable energy developers.

Our Western region is experiencing continued growth with recent project wins in the northwest, Utah and Arizona.

We see steady proposal activity in small to medium projects with some large project opportunities.

Ongoing work with customers, including Excel energy, Southern California, Edison Pacificorp, Arizona Public service and Tucson Electric power remained strong as we move towards 2022.

Industry resource challenges in the Western region.

Scenting opportunities for MYR group subsidiary companies to come together and work collaboratively to achieve customer needs.

Teams in our Midwest region continue to foster long term relationships with clients such as Centerpoint energy Ameren Encore and Midamerican energy to name a few.

We remain focused on delivering consistent reliable service.

Utility scale solar in large projects continue to represent growth opportunities for MYR energy services business.

We are presently in negotiations on several solar projects across the U S.

The impacts of increased commodity and transportation costs are beginning to affect some near term project decision some time wise.

But we remain confident in the overall solar industry outlook.

Despite despite supply chain delays the current outlook remains strong and our dedication to our clients.

Health and safety of our employees, it's strict adherence to our operating principles continues to position us well for success.

We believe we are well equipped to remain an industry leader, while addressing the ever changing industry and market needs.

I'll now turn the call over to Jeff <unk>, who will provide an overview of our commercial and industrial segment.

Thanks, Todd and good morning, everyone.

Our C&I segment performed well in the third quarter, achieving steady results in our construction environment with notable disruptions.

<unk> revenues declined slightly when compared to the third quarter of 2020. We are pleased to report improvements in our segments operating income when compared to the same period last year our.

Our portfolio of work includes a substantial amount of repeat work with existing clients across many of our district offices and work continues at a steady pace across the U S and Western Canada.

We are encouraged by the volume and diversity of opportunities on the horizon and expect to generate steady results moving forward.

It's in the development of scope schedule and final pricing.

This quarter's awards for new contracts and for Phase one design services generated a positive book to bill ratio for the quarter and added to a positive growth trend since the start of 2021.

One of our long term strategy has been to establish exceptional preconstruction service expertise to aid our clients in the early development of their projects are.

The contract was awarded to MYR subsidiary CSI electrical contractors Preconstruction.

Preconstruction activities have begun and the project is slated to break ground in the spring of 2022, we're proud to be involved with this critical project, which will leverage our extensive EPC experience to deliver another utility scale project and interconnection.

In addition to our recent awards, we continue to collaborate with our MYR energy services business on the development of several solar pursuits across the country.

We're also engaged in exciting opportunities in several other markets, including manufacturing transportation health care pharmaceutical and energy development as.

<unk> facing the entire industry.

We're also pleased to see the generally positive trends in the major indices.

The Dodge momentum index continues its soft tooth upward momentum through the third quarter and on a year over year basis, the momentum index was 30% higher.

In September of 2020.

The gain and the momentum index is certainly good news and assign that owners and developers are looking past current concerns and moving forward with projects to meet demand.

We're excited about the momentum we experienced in the third quarter and are proud of how our employees continue to adapt to a rapidly changing environment.

We look forward to working closely with our valued clients to help them navigate the challenges ahead and supporting their business goals.

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 third quarter 2021 performance illustrates the strength of our core markets.

We continue to focus on customers and project opportunities that closely align with our operating principles and diverse capabilities.

As I previously mentioned, we believe MYR group is strategically positioned to generate growth while delivering shareholder value.

Thank you.

Your first response is from Justin Hauke of Robert W. Baird. Please go ahead.

Oh, hi, good morning, everyone.

Morning, Justin.

Hi, I guess I wanted to ask my first question just the solar commentary.

You guys have started talking about that last quarter and a lot of emphasis here and this big contract wins so.

Yes. The question is on these utility scale solar projects first of all.

Is the work all in the C&I segment, and what's kind of the margin profile of them as it is it more typical of the C&I segment, where it's mid single digit or does it look more like the T&D double digit type margins.

And we have continued to push that in all our areas. We started doing solar work really back in I'd say 2011, or so and we've continued to expand that on both sides of our business. So it comes down to customer relationships and who drive that on both sides and I would say I'd say the margins are similar to probably the T&D margins.

A little bit higher than the C&I margins.

Okay. That's helpful.

I guess, just moving to the quarter itself.

Can I have two questions. So first on on the margin you guys called out a favorable change orders in the gross margin I was hoping maybe you could clarify a comment on the size of that and then the other question I had was just in the broader context of revenue kind of being flat.

<unk> and down sequentially in the third quarter.

Usually you have a seasonal uptick.

Was there anything specific that.

Kind of weighed on on the revenue of our productivity, whether or something like that just any comments you can give on that.

I think a couple of things there one is we did talk about the.

Excessively the excessive heat during that period of time and that utilities did have a shut out of some right of ways.

So with that being said.

We did our revenue was a little lower than I think we said that during our last call that that was a.

Possibility so when we look at that side.

I think we forecast that and we knew it.

During that period of time.

And your other question was.

Just to the extent you could comment or give any context around the change order benefit to gross margin.

<unk> kind of a discrete item.

We have some strong project Closeouts and we had some favorable adjustments one by themselves wasn't enough to move the needle we had a couple of them.

And it was.

It was positive net net it was positive and we identified it.

Thank you very much.

Thanks.

Your next response is from Sean Eastman of Keybanc capital. Please go ahead.

Hi, This is Alex on for Sean This morning, Thanks for taking my questions.

Good morning.

So first question is.

Given that the transmission versus distribution mix was was much more evenly distributed this quarter compared to past quarters, where transmission drives the revenue mix.

Did that have something to do with the strong margin performance in the segment I guess I'm asking if there is a major difference in the margin profiles between the work you're doing.

Mission versus distribution.

There's not a big margin profile.

There isn't a big margin difference in the profile between the two.

It was really just good execution on both sides of the business on both sides of the touch business for both distribution and transmission.

Got anything you want to add on.

No Rick It was we talked to as Rick had mentioned on the previous question.

About.

The summer outage restrictions that we faced in some areas we were able to.

To move some of those individuals' into areas, where there is a higher distribution demand.

For the quarter that had an adjustment on that.

What was that storm work related.

There was some storm work associated with it but not sure. It was really enough to move the needle we took existing crews as we mentioned before we did not add crews to go to the storm work, we essentially take those crews off of existing properties and existing clients. So there was a slight uptick in that but.

Move the needle much it wasn't that wasn't really that much.

And Justin just to add as.

As we talked about.

Coverage for the T&D side, and we've had the <unk>.

Favorable job Closeouts and change orders.

Dissipated productivity et cetera.

We quote in our Q about the margin adjustments in kind of call out.

The T&D side.

From that.

<unk>.

Just to go on record that we're not anticipating the 11 five.

Our norm.

Those were called out because they were.

Nothing individually.

To move the needle.

Either on the upside or the downside.

Net net on the T&D the T&D did benefit.

Hum.

Collection of those items that we've called out in our scripts.

And so.

Certainly not at these levels.

The historical level.

Markets are so strong where you can.

Well I would say that market strong and we're excited about it but again, we've had some really good closeouts and we've had some good execution out there and we've had good weather on top of it for.

For the most part.

Against the majority of our areas. So when you take all those and you combine them. We've had very good results and I think we've always said, our operating margins and we upped it last quarter to say it should be on the T&D with that 7% to 10 five.

First half and we're operating a little above that so would love to operate where we're at today or a little higher I mean, thats always our goal to exceed it.

But we did have some things that we benefited from this last quarter.

Thank you.

Thank you. Your next response is from Brian Russo with Sidoti. Please go ahead.

Hi, good morning.

Morning, Brian.

Hey, I was wondering if we could.

Discuss the solar contract announcement.

Last week.

In excess of $100 million does that imply it's more than 100, but less than $200 million.

Just curious why.

Characterizes in excess of 100.

Yes.

It's slightly over $100 million.

We try to do the best we can working with the customer to be able to release.

As much data as we can on it that one slightly above $100 million.

Mhm.

Okay, Great and correct me, if I'm wrong, but is this the first large.

Large utility scale solar contract.

Announcements from CSI electrical since you made the acquisition in July of 2019.

Yes, so first one when they've done they do a lot of solar work. This was the first one that totaled over $100 million. So we don't do any project awards, if its announcement of its under $100 million in any of our businesses. So this was one that that affected them and it will it happen to be over $100 million, but they've had some that are close to that.

Alright, great.

No.

I'm sorry go ahead.

Okay.

So given the.

The run rate that you disclosed at the time of the acquisition, which was $265 million in revenue.

On average annually.

100 <unk>.

Dollar contract certainly is a pretty big accomplishment for CSI.

Is that a fair statement.

It's a good cut.

Accomplishment form yes, we're excited about that opportunity they are positioned well to execute that project.

I would say they have done similar sized projects in the past, maybe a little smaller slightly under $100 million, but.

This one has grown a little bigger.

And the.

The contract with the developer.

It's a developer or not.

Not directly with the utility right.

If a developer.

Jeff anything you want to add.

Is it an existing.

Is it an existing customer or a new customer.

We've worked with this customer before mhm.

Okay great.

And then can you just talk about the backlog because if we look since September of last year. It seems like T&D has been trending down even with.

<unk> power contract, whereas C&I has demonstrated more or less a steady increase in that I understand.

The dynamics of each market are different but maybe.

Just shed some light on.

The trends that we're seeing.

Each segment in terms of the backlog.

<unk> positive I think there's lots of opportunities out there and a lot of projects, we're working with budgeting construction.

<unk>.

Construct ability on those projects and really working with the owners to budget those projects and I think out of it we will receive some good work. It just really the timing of those awards.

I wouldn't say that just because C&I has climbed a little bit more.

Todd did have.

The <unk> power project last year that added a lot at one time.

And we see some opportunities on large project side there too.

Hopefully add some new projects in the next I'd say six months or so.

Todd I'll, let you go first anything you want to add on your market and then Jeff.

No just just Rick Rick and we always talk about the Lumpiness.

Of the awards and we are seeing that right now.

There are a couple of nice opportunities as Rick mentioned that.

<unk> had been had been impacted by some regulatory delays out there.

We're hopeful will.

Essentially gets straightened out but outside of that also as our as our.

No.

Alliance work continues to grow I think it's always good to remind folks that.

We only include three months of backlog.

For all of our alliance work that we do so as that continues to grow we're not picking up a year or two years or three years, we're picking up three months at a time so.

That keeps it keeps us somewhat level is to a certain degree.

Okay, Great and then just to clarify.

Hmm.

Sorry, sorry.

It's been a lot more active this last quarter.

Looking like projects that we were concerned we are pushing out are actually coming to the contract stage. So that's where we're feeling fairly good.

Okay, Great and lastly, just to clarify.

Wondered plus million contract award.

That you announced last week is that included in this 163 billion.

Backlog on the C&I side or.

Okay.

For the build cycle. Okay. So its in the second half of next year build cycle takes place.

Okay. Thank you very much thank.

Thank you.

Again to ask a question. Please press star one on your telephone keypad. If your question has been answered or you wish to withdraw yourself from the queue. Please press the pound key.

Your next response is from Jon Braatz of Kansas City Capital. Please go ahead, good morning, excuse me and good morning, everyone.

Rick You mentioned a couple of things couple of times, both Covid protocols are your clients.

Have they established the protocols yet are they in the process and and.

So where do they stand.

Where does it stand if they require full vaccination of all contractors.

Kind of impact could that have.

There is very we don't really have any clients right now that require full vaccination we.

We do.

With the exception of if we have a federal project, which we have very little straight federal work, where we're working directly for the federal government, so very little of that.

Within our company.

I would say all of our customers are trying to figure out what protocols are going to follow it changes daily it probably changes hourly on the conversations we're having with them.

We closely monitor were in tight contact with our customers.

We're sharing information when we can with what other customers are doing.

So I would say we're on the forefront of kind of.

Pushing those helping push those decisions and where it's going ahead.

I do think when you look at the overall construction industry.

It's like anyone any other place it vary state to state or area to area.

The number of people that are vaccinated or not vaccinated.

It could have an effect on the entire construction population. If there was let's say a 100% mandate of vaccination that came down and more closely monitoring that working with our clients, but we're not the only one thats every contractor out there addressing the same issues sure at this point have you had to.

Move any anybody any of your personnel because of co.

Covid protocols.

Not that I'm aware of we haven't at all.

Because of that okay. Okay. Thank you.

The other question is in the past there have been times, where you've.

<unk> had this.

Spend money in advance of the revenue is where the expense ratio expense expenses were rising faster than revenues.

Given the outlook.

It looks pretty positive and so on so forth.

How do you see let's say over the next 12 to 18 months your Europe.

What I would call infrastructure spending to meet that demand how do you see that in comparison to maybe.

The revenue outlook are you going to have to.

Accelerate spending a little bit in terms of people and technologies and so on.

And kind of with those restrictions on equipment and some of those delays were making sure we have the right commitments in place to buy that to support our business.

And we look at I'll say, it's a growing market for us so with those opportunities or capex.

We will continue to climb a little bit.

How about how about personnel levels.

Personnel levels I would say we continue to invest it is one of those are not the field of dreams for us. So we don't capture a bunch of people in them to capture the work.

We really make sure that we have the right people in place as we need them for the projects.

Thank you there are no further questions in the queue at this time I would like to turn the conference back over to Rick Swartz.

To conclude on behalf of Betty Tod, 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 conference call. Thank you for participating and have a wonderful day you may all disconnect.

Q3 2021 MYR Group Inc Earnings Call

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