Q1 2022 MYR Group Inc Earnings Call
Good morning, everyone and welcome to the MYR Group first quarter 2022 earnings results Conference call.
This conference is being recorded at this time for opening remarks, and introductions I would like to turn the conference over to David Gutierrez of Dresner Corporate services. Please go ahead David.
Thank you Hey, good morning, everyone I'd like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2022.
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 Cooper Senior Vice President and Chief operating officer of MYR groups' transmission and distribution segment.
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 301, two <unk> 6600, and we will send you a copy.
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 may five.
2022 at 11, a M mountain time.
Please call 850 585920564043.
73406, an annual conference I E.
940838.
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 added to state.
And then why our group assumes no obligation to update any such forward looking statements.
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 2021.
The company's quarterly report on Form 10-Q for the first quarter of 2022.
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 yesterday's press release.
With that let me turn the call over to Rick Swartz.
Thanks, David Good morning, everyone welcome to our first quarter 2022 conference call to discuss financial and operational results.
I'll begin by providing a summary of our first 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 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.
First quarter of 2022 was another good quarter for MYR group strong execution, coupled with topline momentum and mitigation efforts focused on the adverse effects of inflation and supply disruptions contributed to our ongoing success.
We are also proud of our ability to execute projects for our clients, while maintaining focus on the safety and wellness of our employees.
We entered 2022 with positive momentum in a complex environment.
Fueled by our 2021 record revenue.
And healthy backlog at the end of 2021.
Our first quarter results included net income of $20 7 million along with increases in revenues and graph gross profit as compared to the same period of 2021.
Our backlog at the end of the first quarter was $2 4 billion.
Reflecting our ongoing resilience and strong customer relationships.
Each year, we survey executives of our utility clients and use the data to supplement our business strategy and planning for.
For the second year in a row clean energy emerge as the most impactful trend influencing the strategic direction of their business. Our survey participants are actively participating in the clean energy transformation and predict increased spend on clean energy projects and supporting infrastructure.
Their responses also reflect a focus on electrification labor solutions and resiliency strategies.
We continually strive to understand the needs of our clients and align our capabilities and strengths to better serve them.
Our T&D segment responded to a diverse set of opportunities, including distribution transmission and clean energy projects. Our C&I segment entered the year with a solid backlog and steady bidding opportunities in their core markets, including healthcare clean energy transportation.
And data centers.
Collaborate collaborative approach to project delivery, coupled with capable and committed team members allows us to be a sturdy yet flexible partner for our clients.
Now Betty will provide details on our first quarter 2022 financial results.
Thank you Rick and good morning, everyone.
On today's call I will be reviewing our quarter over quarter results for the first quarter of 2022 as compared to the first quarter of 2021.
First quarter 2022 revenues were $636 $6 million, representing an increase of $44 $1 million or seven 4% compared to the same period last year.
Our first quarter T&D revenues were $364 9 million, an increase of 15, 9% compared to the same period last year.
The breakdown of T&D revenues was 221 6 million for transmission and $143 $3 million for distribution.
The T&D segment revenues increased primarily due to an increase in revenues on distribution projects.
Including the incremental distribution revenues from the power lines plus companies.
And an increase in revenue from transmission projects.
Consequently, 50% of our first quarter T&D revenues related to work performed under Master services agreements.
C&I revenues were $271 8 million a decrease of two 1% compared to the same period last year.
<unk> segment revenue decreased primarily due to a reduction in revenue in certain geographical areas.
Our gross margin was 12, 6% for the first quarter of 2022 compared to 13% for the same period last year.
Slight decrease in gross margin was due to cost increases associated with supply chain disruptions and impacts from the COVID-19 pandemic.
All of which also constant labor and material inefficiencies on certain projects.
As well as inclement weather experienced on certain projects.
These margin decreases were partially offset by favorable job closeouts.
Net favorable change order adjustments.
Certain projects.
First quarter 2022, SG&A expenses were $53 $6 million, an increase of $4 million compared to the same period last year.
The increase was primarily due to the acquisition of power lines plus companies.
First quarter 2022 amortization of intangible assets was $2 $8 million, an increase of $2 $2 million compared to the same period last year.
The increase was primarily due to amortization related to certain intangibles acquired with the power line plus company.
Effective income tax rate for the first quarter of 2022 represents 15, 4% of pretax income compared to 26, 2% for the first quarter of 2021.
The effective tax rate for the first quarter of 2022 decreased primarily due to a favorable impact on stock compensation excess tax benefits.
And the reduction of the impact of the global intangible low taxed income.
First quarter 2022, net income was $27 million or $1 21 per diluted share.
<unk> to $19 9 million or $1 17 per diluted share for the same period last year.
Total backlog as of March 31, 2022 was $2 $4 billion 46, 4% higher than a year ago with record highs in both our T&D and C&I segments.
Total backlog as at March 31, 2022 included backlog related to our large timberland solar project announced on April 14th of 22022.
Total backlog as of March 31, 2022 consisted of approximately $1 1 billion for our T&D segment, and approximately $1 $3 billion for our C&I segment.
Moving to liquidity on our balance sheet, we had approximately $217 $3 million of working capital.
$9 7 million of funded debt on.
$317 $5 million and borrowing availability under our credit facility at March 31, two.
2022.
Our funded debt to EBITDA leverage ratio has continued to stay strong.
Three times leverage as of March 31, 2022.
We believe that our credit facility strong balance sheet and future cash flow from operations will enable us to meet our working capital needs equipment investments and our growth strategies.
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.
Our continued focus on execution in all areas of our T&D segment, including distribution transmission and clean energy projects.
<unk> and a solid first quarter.
<unk> and expansion of our market presence led to a record backlog for this segment as we continue to focus our efforts on priorities such as aging infrastructure system hardening grid reliability and clean energy projects that are helping clients meet the carbonization goals Rick.
Rick mentioned earlier, our strategic insight survey.
<unk> indicated that greater than half of the participants question plan to spend more than a quarter of their <unk> budgets for the infrastructure to support clean energy.
An example of this can be found at MYR energy services or MYR E, which is negotiated multiple EPC projects related to clean energy as well as Myr's solar groups recently announced the award of the Timberlands Solar project for Con Edison clean energy business incorporated.
In early January we acquired the power line plus companies in Ontario, Canada.
We're continuing to integrate the company into our operations and are focusing on cultural alignment, while supporting growth in their business.
He brings strong market presence in Toronto, and the surrounding areas, which we will work to build upon in the years to come.
Our subsidiaries are very busy across the U S. Our eastern region continues to be active in all markets with lump sum unit price and several master service agreements focusing on transmission and distribution work.
Most noticeably the early Myers company continues the long held relationship with the Tennessee Valley Authority.
Being awarded a five year contract that will extend this relationship beyond 30 years.
Our western region is leveraging customer relationships and capitalizing on expansion opportunities.
Sturgeon Electric, California recently expanded services into a new region for Southern California, Edison and high country line. Construction was recently awarded a transmission project for a new client South Texas Electric co op.
Alaska surgery surgeon was recently awarded a transmission project in Seward with other opportunities to expand its presence in this market.
We continue to monitor global economic pressures that may affect the solar and transmission markets.
All our work in these markets has been minimally impacted by such pressures to date.
Sourcing material going forward could become increasingly difficult and the impacts of rising commodity and resource cost may impact certain projects.
We are also monitoring the current investigation by the department of Commerce related to the application of tariff on solar panels coming from certain countries in southeast Asia.
These tariffs imposed could impact supply to certain projects in the U S.
We are in close collaboration with customers and suppliers to help us navigate all of these market challenges.
We are also starting to engage in discussions with customers around the newly passed federal infrastructure investment and jobs that.
We know the effect to our industry will take time to realize however, we may see industry investments begin within the next few years.
This includes keeping our eye on the funding earmarked for transportation, specifically related to electric vehicle charging infrastructure.
Bill also includes funding for energy and power with the purpose of expanding transmission lines to allow for clean energy growth and support for grid hardening.
In summary, the first quarter of 2022 was strong and as a trusted partner in the T&D industry. We're looking forward to working with all of our clients.
I have again around the challenges, while maintaining a laser focus on safety and project execution.
I will now turn the call over to Jeff <unk>, who will provide an outlook of our commercial and industrial segment.
Thanks, Todd and good morning, everyone.
Our C&I segment continues to perform well amidst a wide range of continually changing economic conditions.
Through increased collaboration with our vendors and clients, we are working hard to mitigate the various supply chain and inflationary issues facing the construction industry.
We are fortunate to have established strong relationships that are promoting early proactive communication to resolve these complex issues and to date, we've seen minimal impact to our overall performance.
We entered 2022 with a record backlog in C&I and in the first quarter added meaningful projects to our book of business.
In prior quarters, we have stated that our core markets of transportation health care data centers clean energy warehousing and water treatment are remaining resilient and now our first quarter awards include projects and other desirable markets, such as pharmaceutical and food and beverage.
Demand for our services remained strong in most of our district offices, allowing for discrete.
Discretion in pursuit selection.
We are pleased to see the Dodge momentum index rebound in the first quarter.
Overall momentum index was 17% higher than March of 2022, when compared to March of 2021.
The institutional component was up 23% over the year, while the commercial component was 14% higher.
The American Institute of Architects architectural billing Index also reported notable increases.
Stating that the spike in the overall index could reflect firms desire to beat the interest rate hikes that are expected over the coming months.
First quarter's increase in both indexes suggests that the construction sector continues to weather the storm as owners seek to push their projects forward.
Clean energy projects continue to drive much of the conversation intellectual electrical construction, especially related to the infrastructure investment and jobs Act.
The Edison Electric Institute or <unk> recently announced the formation of the National Electric Highway coalition, which formed to build a coast to coast fast charging network for electric vehicles, along major U S travel corridors.
I said expects the number of battery powered evs to grow from roughly $2 million last year to at least $20 million.
By the end of the decade, therefore, the number of public fast changing charging stations around 10000 in the US Currently will also have to expand by the end of the decade.
Private funding to support the boom in electric vehicles is currently underway as car dealerships and transit centers grapple with the need to modify service and sales centers across the country.
In addition to electric vehicles being a hot topic in the clean energy movement solar projects continued to be additive to our C&I portfolio.
We added new solar projects to our backlog and believe future solar projects will represent a large part of our future growth.
We're also pleased that many of the large civil projects. We are tracking continued to advance towards procurement as Denver International Airport has grown into the third busiest airport in the World Our subsidiary company search and electrics backlog and opportunity for future work has advanced at an equally rapid pace.
Several projects to upgrade facilities and expand runways are tracking toward award in 2022.
As the public resumes its appetite for travel we believe that transit oriented projects will continue to populate our pipeline.
To conclude we are proud of our employees are responding to the unique challenges facing the industry.
We continue providing the proactive and customer focused communication that will help MYR group maintained a leading position in the markets we serve.
Thanks, everyone for your time today I will now turn the call back to Rick who will provide us with some closing comments.
Thank you for those updates Betty Tod and Jeff our first quarter performance demonstrates the stability of our core markets the strength of our operations and the depth of our client relationships. We will continue to focus on the clean energy transformation electrification and grid modernization, we take pride in the role.
All MYR group and our subsidiaries play in building efficient and resilient infrastructure across the U S and Canada.
Our clients are faced with navigating a dynamic and challenging market.
We strive to be a reliable partner for project delivery.
With extensive expertise and a highly skilled team members to maintain our position as a leader in the industry.
This fortifies our foundation to grow our business and provide our clients and prospects with a strong yet nimble partner.
I would like to extend a thank you to our employees and shareholders for their continued support of MYR group and I look forward to connecting in the year ahead. Operator, we are now ready to open the call up for comments and questions.
Ladies and gentlemen, if you have questions at this time. Please press. The Star then the number one key on your Touchtone talent talent. If your question has been answered for you wish to remove yourself from the queue. Please press the pound key your first question comes from the line of Sean Eastman with key.
Capital markets. Your line is open.
Good morning team. This is Alex on for Shaun today.
Morning, Alex.
Good morning.
So this year it seems like we have so many large projects.
All contributing at one.
<unk>.
Marci, the new Scotland and that will be a full year. We have this new east coast transmission project.
Solar award ramping up in the CSI EPC Solar award in California.
So is there any update you can provide on project start timing. If these projects are all staffed and ready to go.
And just generally any risk on being delayed due to permitting or supply chain or tariff issues.
Okay.
<unk> got a lot in that question. So I'll start answering and you'll have to remind me, which ones I didn't which one which parts I didnt answer so I would say as far as the tariffs were in constant contact with our clients and we discuss it all the time work with them to come up with solutions right now if I looked at that.
It's probably when we look at our backlog there may be $40 million worth of work in our backlog are so thats affected by that that may get pushed out to the right. So regarding tariffs that's probably as much as we see that way.
When it comes to permitting.
The CSI project that one still trying to get the final permitting that one could get pushed out a little ways, but theres projects that right now are back filling where that would take when we anticipate that starting in the second half of this year.
We've got some projects that should backfill that right now.
And then when we look at other material headwinds that kind of stuff out there I think it's just a constant.
Right, we're having and I think our team is doing a great job to address alternative suppliers different.
Different ways to build a project and figure out how to keep the projects moving but those are headwinds we're facing.
Is there any part of your question I missed.
No no.
That was a good answer I really appreciate it.
My second question.
Just kind of shifting over to the C&I segment and on the margin, but can you quantify the impacts from supply chain and labor and material inefficiencies.
Trying to get a sense of like where these margins should be running in a more normalized operating environment.
Well I think in a normalized environment, we've kind of said T&D should be on that upper end.
We did have normalized weather this quarter.
So when you look at where the T&D margins, where we had normalized weather where over the past two years, we've really had exceptional weather and we've identified that.
And then you look at the supply chain and I'll start and let Tod add.
When I look at that side, it's really small issues, it's nothing big it's ones that we cant work around but it has that daily impact to your what your trend might be missing a couple of components or youre working to get those components.
Youre working through it. So it's just a constant thing we got to be aware of our people do a very good job of managing it.
But again, it's a minor impacts.
Todd do you guys think.
Our benefit.
If you don't mind I'll just add.
On T&D before I move to C&I is the.
The margin keeping in mind that the first quarter, we now have amortization of intangibles for power line plus and if you just took power line plus amortization.
CNR.
Statements that that's in that $2 $2 million increase year over year, which is mainly power line, that's going to run an ad.
As we finalize our valuations to two to $2 $5 million per quarter for the balance of this year and then come down starting in 'twenty three.
So that impact is.
Would've been it.
Comparable actually even higher than last year's margins in T&D without the noncash amortization of the powertrain.
But then moving to C&I.
Youre asking about the C&I margins.
We talk about the C&I margins being in the 4% to 6% range and.
And Jeff has talked about this year than.
And the anticipation of that.
And the low end.
<unk>, 4%.
Overall for the year of 2022 once it being softer in the first half as it relates to working through some of those final jobs that are lower margin jobs, but then the supply chain.
Concerning timing.
I guess with that chapter.
Yeah, I'll add a little bit on the C&I side, I would say the impacts of material really haven't been on our side they've been minor to date on our side, but youre seeing some components of some of the sub contractors or or other other.
I guess.
Team members on a larger construction site, whether it's mechanical or the building contractor, having some delays on steel or other material that really affects the flow of a project and with that it's minor.
It's minor in what it causes us, but those are those little micro.
Things that add up over time and it affects your margins a little bit and we really see this material.
Shortage and some of the difficulties with getting material continuing through this year.
I don't see a solution coming anytime soon and I think we forecasted that early talking about it last year.
So we see that continuing through this year and hopefully getting better as we as we finished the year and into next year.
But again, we have a we have a good backlog our people are doing a good job managing that at all levels.
Very positive about the market out there both on our T&D and C&I side.
Thank you.
Alright. Thank you. Your next question comes from the line of Justin Hauke with Robert W. Baird. Your line is open.
Hi, good morning, everyone.
Thanks for answering my questions good morning.
I just wanted to.
I guess, maybe one more question on the supply chain, just because the way that you guys talked about it in the 10-Q was different for the T&D segment and C&I segments as the T&D.
Commentary on the margins it sounded more general macro and C&I you said.
It's causing labor and material inefficiencies on certain projects.
I guess I was just curious to better understand.
Is there something specific on the C&I and maybe its maybe some solar job I don't know, but something where that's bleeding into project inefficiencies.
Just any comment on that.
Okay.
T&D, we kind of control our own destiny, and when I say that we're working with the utility they supply a big portion of the material. We do a lot of our our clients have done a very good job of having a strong backlog to date of material. So there is some inefficiency there when it comes to that supply, but but minor I would say.
On our C&I segment.
It's.
One of those materials, a bigger component for us.
On our C&I side. So it is a we furnished more material than we would on our T&D side, but again, we're working as a component of building a building or a facility. So there is other general contractors other trades out there if they have material disruptions at all we've got to work with them to work around their issue.
In order to keep the construction going and those are those minor micro things that buy them. One by themselves. It is isn't that big a deal, but then they add up a little and that.
It's why we said we will be operating in on the lower end of our margins through this year.
On the C&I side.
That's really.
What it amounts to but I think the work we've got in the way we are mitigating any exposure we have on material as our team is doing a very good job of it.
Okay.
Helpful I get it.
It's a component of the way that you are.
Turning to more of the materials versus T&D that that makes sense.
I guess.
The only other question I had was just on that now.
The Timberland project, which I guess is going to be in the T&D segment.
And I think you said, it's already in backlog, so maybe just to confirm that but the.
Prior solar job the $100 million plus one that's in the C&I segment.
Because that one had a really compressed.
Construction window here in 'twenty, two and I guess I just wanted to see if that started on time and <unk> and should we assume that that <unk>.
<unk> here pretty materially over the next couple of quarters.
Okay.
Timberland is in the backlog and it was in first quarter backlog. So the announcement didn't come out until April but that was working with the client on when they when we could announce it. So there was some things we have to do on that side in order to announce it but it was in our first quarter backlog.
On the C&I project.
Youre talking about the one we announced last year that said it would have second half.
Exposure to it.
That's right yes.
And Thats the one I talked about earlier that that is still going through final permitting right. Now. So we anticipate that project now starting the first part of next year.
So let's start in the first quarter, but as I said, we've got other backlog that's come in that will kind of fill what was going to take place. This year in the second half.
Got it okay, alright, thank you and I appreciate you clarifying that that's all I have for now.
And your next question comes from the line of Noelle Dilts with Stifel. Your line is open.
Hi, Thanks.
I just wanted to go back to Rick your comment on.
The $40 million of solar work in backlog, that's being impacted by delays I think my first question. There is what percentage does that represent of your solar work in backlog and second when you look at this we're pushing to the right.
Are your customers sort of just waiting until they have clarity on what the initial.
The determination is in August or are they pushing into 2020 into 2023.
Okay.
We've never disclosed what our solar backlog is by itself. It's a component of our business on both sides a lot of lines. We do on our T&D side are associated with it. So we've never done it. It's a it's not 40% of our business, but it's a growing percentage of our business. So.
It's one of those overall, we like the business, where we've been in a long time and we're going to continue to grow it out.
When I look at that $40 million.
Now we talked about it's really waiting to see what happens with that August hearing and then we'll know more on those projects right now they're still slated to be built at that side of the customer is going to make their decision on those panels and whether they go to an alternate supplier or what they do come that August timeframe. So very very small part of our backlog.
It's associated with any that's going to be held up by any tariffs at this point all of the other projects that we have in our backlog have the panel secured.
And a lot of cases are already here and stored.
Right Okay.
Okay, and then just on the labor front.
Hoping you could expand a little bit on what youre seeing.
In PMT.
Around just kind of flatten and supporting folks I guess, we're hearing.
That market is tighter than it has been in quite a while so if you could maybe expand a little bit on your ability to attract.
Labor and.
What youre seeing from a wage perspective.
Yes, I'll start with Patrick.
Sure.
It is it is tight.
I think everyone is aware of that are benefit one is seeing in the.
The nationwide contractor, where we can move our resources from an area that maybe.
Less less than demand right now so we're utilizing that but as I've mentioned before we focus a lot on recruiting and take part in a lot of apprenticeship training programs as well as have our own internal program, we're constantly developing people.
We've increased the size of our recruiting staff alone over the last year tremendously so.
The challenge that that.
<unk>.
We see every day and we work hard at it but it is out there.
And.
It's not going to get easier going forward I will tell you that but right now we've met we've met the demands of our clients and finished every job that we started so.
We're going to keep doing in that direction and just doing the best we can.
And the only thing I would add to that as Noel we've talked in the past we bid everything on a regional basis. So we've got 60, some offices across the U S and Canada and those people are very well connected to the projects out there and our clients and they understand whats what projects are coming next so they know which ones, we want to chase and which ones fit us.
And they are able to put in I.
I'd say the proper amounts to attract and retain people.
So those are always conversations we have as we're bidding upcoming work is what's it going to take to attract.
People for that project and with that the majority of our backlog really burns off in 12 months.
<unk> content rebuilding of that backlog, so with that we're able to take that insight and build and did those projects.
To allow for what it's going to take to recruit and retain people.
Right. Okay. Thank you.
And your next question comes from the line of Brian Russo with Sidoti Your line is open.
Hi, good morning.
Good morning, good morning.
Just.
The year over year increase in the TMT revenue.
What was the power line contribution to that.
Yes, we've talked about power line being $80 million annual bid.
Business U S $80 million.
And so it was just shy of that one quarter of that run rate with the first quarter being a typical.
Slower cycle for them because of the weather and other events, including some a little bit of Covid.
In Canada, but.
Can use that as a typical.
Currently typical run rate because otherwise, we don't really disclose our separate.
Individual business unit revenues, but I think that's fair to us.
Okay great.
I recall without you actually issuing a press release you discussed the $150 million transmission project on the last conference call.
Located on the eastern coast towards the eastern part of the U S is that included in this.
First quarter backlog.
Yes, and yes. It is.
Okay. Good.
<unk>.
You mentioned mitigation efforts in collaboration with your customers to offset some of the supply.
Industry wide supply chain issues I mean can you specifically.
Kind of elaborate.
What these mitigation efforts are.
To preserve.
The C&I.
Yes.
Margins.
4% to 6% versus 3.7% reported in the first quarter.
Sure some of them.
I'll start and Jeff you can add some of the mitigation stuff. We do is we're working with with suppliers and vendors to procure.
Material very early and get it there and maybe Stuart in advance of a project deepen taking off.
We're working with alternate suppliers to make sure we have that backup and that planning case somebody can't deliver especially what the shipping prices and everything else that's out there so finding that ericsson it buyers.
Jeff anything else you want to add to that.
They are also our change orders I mean, if jobs get delayed we are working with our contractors to try to mitigate or recover for extended general conditions or things where schedules pushout. It is however difficult to get everything we want in those because theres pain that everybody in the team is facing but we are recovering a lot of our costs.
Through change orders as well.
But on the material front I would say we've doubled the kind of our our staff when I look at the people that are on logistics trying to make sure. Those projects are going to continue in that materials, there and it's something we've done a very good job of and reacted early and this goes back to.
When Covid started so it's not something that we're just implementing now I would say its up and running and it has helped us maintain our margins where they're at just a just a lot of headwinds that continue and I think we I'll turn the news on everyday and were amazed that there's new headwinds out there.
But along with that we've got to be creative and figure ways to build our projects.
As efficiently as we can and I am proud of our team for what they've done.
Okay.
Okay, and then just on the <unk>.
Yossi.
Investigation.
You commented on.
Current projects that Youre working on specifically the one in California, what are you sensing that developers are.
Delaying projects in the pipeline.
Until we get clarity on on the DLC.
<unk> and <unk>.
The development of solar.
I get pushed.
2020.
2023.
Versus gaining momentum this year.
When I look at that right now that hearing set for August it is not that many months away. When you look at projects now I mean, our backlog is very strong for 2022. If you really received a solar project right now it would probably be starting in 2023 anyway.
So I really don't see that holding up we're continuing working with our clients on both sides on even the ones that are some of them that may be waiting for this hearing because they were going to procure there.
<unk> material through one of those alternatives Asian suppliers I would say there.
They are anxiously waiting, but theyre doing all the budgeting, they're moving ahead, there looking at everything and I think the awards will be timely and not really held up because.
That process takes a little while to get that budgeting in place and that final pricing in place and we continue to work with them.
Okay, and then just real quickly lastly, the operating cash flow, obviously working capital.
Headwinds for the year over year decrease I was wondering if you could just maybe comment on how you see that playing out.
The remainder of the year.
I'd say first of all.
The $7 million positive free cash flow that we've had this year.
This first quarter our typical.
Low free cash flow is in the first quarter because of Santa payments that get paid out in Q1.
Otherwise.
We still see.
Free cash flow being close to the.
Whatever our net income as well as.
Okay.
Even with the higher level of capital expenditures that we expect.
Pending.
On that higher end in the mid fifties that we've been running.
With.
With volume growth there is increase in working capital.
And my typical qualifier that.
It often all depends on timing sometimes.
Awards.
The billings on various different contracts, but overall, we see a.
Our strong free cash flow.
Thank you Brian .
Brian One thing I want to clarify as I think you said the solar project in California was pushed out I just wanted to make sure if that was for permitting not for tariff reasons.
Understood. Thank you okay.
Again, ladies and gentlemen, if you have a question at this time. Please press the star and the number one key on your Touchtone telephone. If your question has been answered or you restrict move yourself from the queue. Please press the pound key. Your next question comes from the line of Jon Braatz with Kansas City.
Capital Your line is open.
Good morning, everyone.
Most of my questions regarding the solar area have been answered, but just a question on the tax rate you had a little bit of a benefit there lower tax rate in the first quarter and some of it relates to the guilty.
How do you see that going forward do you still see a little bit of a.
A benefit on the tax rate.
In the latter part of the year.
Most of that is all focused on this first quarter.
But with the stock and then guilty when it compares to the prior.
Prior year.
I would get back to a more normalized rate using our 2021 average.
Annual rates.
To look at for going forward for <unk>.
Okay, Alright, thank you very much.
Okay.
Alright, again, ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key on your Touchtone telephone. If your question has been answered or UBS to remove yourself from the queue. Please press the pound key.
Alright, I am showing no further questions at this time I would now like to turn the conference back 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. Thank you for your participation and have a wonderful day you may all disconnect.
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