Q3 2022 MDU Resources Group Inc Earnings Call
The webcast can be accessed at www Dot M D U dot com under the Investor relations heading select events and presentations and click Q3, 2022 earnings conference call. After the conclusion of the webcast a replay will be available at the same location.
I would now like to turn the conference over to Jason Vollmer, Vice President and Chief Financial Officer of empty you resource group. Thank you. Mr. Vollmer you May now begin your conference.
Thank you Lisa and welcome everyone to our third quarter 2022 earnings Conference call you can find our earnings release and supplemental materials for this call on our website at Www Dot dot com under the Investor Relations tab.
Leading today's discussion along with me will be Dave Goodin, President and Chief Executive Officer of MDU resources.
Also along with US today to answer questions. Following our prepared remarks will be Dave Barney President and CEO of Knife River Corporation, Jeff.
Jeff Thiede, President and CEO of MDU construction services group.
Could restore president and CEO of our utility group.
Hastings, President and CEO of WBI energy, and Stephanie Barth, Vice President Chief Accounting Officer, and controller of MDU resources.
During our call. This morning, we will make certain forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 1934.
Although the company believes that its expectations and beliefs are based on reasonable assumptions actual results may differ materially.
More information about the risks and uncertainties that could cause actual results to differ from any forward looking statements. Please refer to our most recent SEC filings.
We may also refer to certain non-GAAP information for a reconciliation of any non-GAAP information to the appropriate GAAP metrics. Please reference our earnings release.
As a reminder, from our second quarter earnings call. We have previously announced our plan to separate knife River Corporation, which is expected to be affected through a tax free spinoff to MDU resources shareholders.
This transaction is well underway and expected to become complete in 2023.
Today, we're also announcing that MDU resources Board of directors has authorized management to commence a strategic review intended to separate MDU resources into two pure play publicly traded entities.
One being a regulated energy delivery company the other leading construction materials company.
MDU resources remains committed to managing its business to deliver best in class operating performance and value for all stakeholders.
Dave will provide additional information on our strategy during his remarks later this morning.
Prior to handing the call over to Dave for his comments on forward look I will provide an overview of the consolidated financial results for the third quarter.
This morning, we announced third quarter earnings of $147 9 million or <unk> 73 per share on a GAAP basis with adjusted earnings of $152 million or <unk> 75 per share compared to third quarter 2021 earnings of $139 3 million or <unk> 68 per share.
Due to the previously announced plan to separate knife River, we're reporting adjusted earnings excludes costs related to the anticipated separation transaction.
Our combined utility business reported earnings of $3 5 million for the quarter compared to earnings of $5 2 million in the third quarter of 2021.
The electric utility segment reported third quarter earnings of $21 6 million compared to $20 6 million for the same period in 2021.
This increase was largely the result of lower operation and maintenance expense due to lower payroll related and materials costs, partially associated with the coal fired heskett station and Lewis <unk> Clark station plant closures as well as the absence of cost from a planned outage at Big Stone station during 2021.
Higher revenues associated with North Dakota interim rate relief were offset by decreased retail sales volumes.
Our natural gas utility segment reported a third quarter seasonal loss of $18 1 million compared to a loss of $15 4 million in the third quarter of 2021.
Results were impacted by increased operating expense, including higher subcontractor costs and depreciation expense.
Also contributing to the loss was increased interest expense as a result of increased debt balances to fund capital expenditures and higher average interest rates.
Partially offsetting these higher costs was higher rate recovery through decoupling mechanisms.
The pipeline business grew $9 8 million in the third quarter compared to $10 6 million in the third quarter of 2021.
The company experienced higher transportation revenues and record transportation volumes during the quarter with growth growth largely attributed to the North Bakken expansion project that was placed in service earlier this year.
The increase in revenues was offset in part by lower allowance for funds used during construction, which is reflected in other income and higher depreciation expense associated primarily with the north Bakken project.
Further offsetting the increase was higher interest expense.
As we've noted in the past 2022 includes a delay on a portion of the north Bakken expansion projects committed volumes and we expect to see increased benefits from this project in 2023 based on contracted volume commitments.
Construction services business reported all time record quarterly revenue of $737 million and earnings of $28 million compared to revenue of $514 8 million and earnings of $23 1 million for the same period in 2021.
Record revenues were primarily driven by approximately 70% higher electrical and mechanical workloads.
Commercial workloads were favorably impacted by the progress on large hospitality projects and a number of data center projects started during the quarter.
The industrial and institutional business lines also benefited from the mix of projects during the quarter.
This business saw lower margin percentage on record revenues for the quarter attributed mostly to higher operating costs related to inflation, including material and labor costs.
Earnings for the quarter were negatively impacted by $7 5 million after tax due to adjustments made to estimates on certain construction contracts.
<unk> to a negative impact of $5 5 million after tax in Q3 of 2021 for similar adjustments.
Our construction materials business reported all time record quarterly revenue of $975 4 million and earnings of $102 8 million compared to the prior year third quarter revenue of $831 3 million and earnings of $96 3 million.
Higher contracting workloads and price increases across all product lines drove the top line revenue growth up 17% from the third quarter in 2021.
Largely as a result of strong demand in most markets and the impacts of recent acquisitions.
This business saw a slightly lower margin percentages on a record revenues for the quarter, primarily due to higher operating costs related to inflation, including higher diesel fuel materials costs labor equipment and transportation costs.
Also impacting the quarter was higher interest expense as a result of higher average debt balances and higher rates as well as higher selling general administrative costs largely due to labor related expenses.
Results at each of MDU resources businesses have been negatively impacted on a on a noncash basis by lower unrealized investment returns on nonqualified benefit plans.
Collectively the negative earnings variance in the third quarter compared to last year was approximately $2 5 million or <unk> <unk> per share.
The company attributes to this change in investment returns to significant fluctuations in the financial markets that had been experienced during 2022.
The company continues to maintain a strong balance sheet and ample access to working capital to finance our operations through their peak seasons.
That summarizes the financial highlights for the quarter and now I'd like to turn the call over to Dave for his formal remarks, Dave.
Thank you Jason and thank you everyone for spending time with US today, along with your continued interest in MDU resources.
I'd like to begin with an update regarding our announcement this morning about our goals for the future structure of MDU resources.
We announced our plan to separate the knife River Corporation, creating two publicly traded companies. Our team has continued working diligently towards completing the separation.
As a reminder, this separation of knife river is expected to be affected as a tax free spinoff to MDU resources shareholders and to be completed in 2023.
We are pleased with the progress we have made and look forward to further enhancing shareholder value with this transaction.
We were also pleased to hear a positive investor feedback to the original announcement further as the next step in our strategic planning process. The board of directors has unanimously determined the best way to optimize value would be to create two pure play public companies.
A leading construction materials company and a pure play regulated energy delivery company.
To achieve this outcome.
We will work to complete the separation of knife River and we will commence a strategic review process to explore alternatives for our construction services business we.
We believe these steps will unlock significant value for MDU shareholders and provide each company with the opportunity to execute on their respective business plans and to achieve industry leading performance.
We intend to discuss in detail our long term company strategy during analyst events in 2023, including analyst days for each entity as we near the completion of the knife River spin transaction.
More information regarding event details and presentations will be available on the company's subsidiary when these events are scheduled.
Now I'd like to turn to the discussion of our quarterly operating results.
Our construction businesses, both reported all time record quarterly revenues and combined record third quarter backlog now standing at $2 9 billion, which is up over 50% from the same time a year ago.
Our utility a natural gas pipeline businesses continued to perform well, but have been impacted negatively by higher interest costs.
And we also continue to experience and adapt to inflationary pressures across all lines of business.
To summarize activity by business segment, I would like to start off with the regulated energy delivery businesses.
At our utility business here, we have a growing customer base by one 6% on a year over year basis and this continue we expect this growth to be between 1% and 2% compounded annually over the next five years.
We expect our rate base to grow by 5% compounded annually over the next five years, driven primarily by investments in our system infrastructure upgrades and replacements to safely meet this growing customer demand.
In August it was announced that our electric utility along with Otter tail power company, we plan to jointly develop and construct and own a approximately a 95 mile 345 kv transmission line from Jamestown, North Dakota to <unk> North Dakota.
This is one of 18 transmission projects recently approved by MISO as part of its first phase of a multi year long range transmission planning initiative.
This project allows both companies to create a more resilient regional transmission grid, while continuing to provide reliable affordable electricity to its customers.
The transmission line is projected to be in service in late 2028, with a current estimated cost of $439 million.
This business continues to seek regulatory recovery for our investments associated with providing that safe and reliable electric and natural gas service to our growing customer base and.
An interim electric rate increase of five 3% was implemented here in July mid July 15th in North Dakota.
Pending a decision.
On the requested increase of 12, 3% before the state's public Service Commission.
The Washington Utilities, and Transportation Commission approved the utility's request for an approximately 4% natural gas rate increase which was effective here on September one.
And now here in the fourth quarter, the utility intends to file a request for an electric rate increase with the Montana Public Service Commission.
And our request for a natural gas rate increase with the Idaho Public Utilities Commission.
You can read them out about this and other regulatory filings in our Form 10-Q that was filed this morning.
Also the utility segment began construction here in May of 2022 on Heskett unit four.
Which is on track and expected to be in service during the first half of 2023.
At our pipeline business here, we reported earnings of $9 8 million as Jason noted this business recorded record higher higher transportation revenues and record transportation volumes, driven primarily by the North Bakken expansion project that was placed in service earlier this year.
<unk>.
This project is well positioned in the Bakken and can be readily expanded in the future for forecasted natural gas production growth.
The company continues to work on a number of expansion projects across that system that are expected to add incremental natural gas transportation capacity of more than 300 million cubic feet per day.
And they are expected to be completed throughout 2023, and 2024 pending regulatory approvals.
Now I'd like to switch gears and move on to our construction businesses.
At our construction services group, we had all time record revenue during this quarter up 43% from a year ago, we experienced strong demand for electrical and mechanical related work with an overall increase in revenues of approximately 70% specifically for hospitality.
Data center and renewable projects.
We also saw consistent demand for transmission and distribution related work, which also contributed to the quarter.
Construction services ended the quarter with all time record backlog of $2 billion up 57% from the prior year.
The company expects to complete approximately 80% of this backlog within the following 12 months, we are very well positioned to complete these projects safely and efficiently with our ability to successfully attract and retain a skilled workforce of over 9100 employees across our footprint.
Given the successful first three quarters of the year. We have also increased our 2022 revenue guidance range by 100 million to now a range of two 5% to $2 7 billion with margins expected lower than 2021, reflecting the current inflationary environment.
Now moving on to construction materials here, our construction materials business also had all time record revenues for the quarter with increases across all product lines. This business completed a significant portion of work that was delayed earlier in the year due to unfavorable weather conditions and we benefit <unk>.
By higher average material pricing across its product lines.
The company also reported a record third quarter backlog of $895 million up 37% from the same time last year and expects to complete an estimated 92% of the backlog on record within the following 12 months.
Given our strong backlog and record third quarter revenues were affirming the revenue guidance range of $2 45 to $2 65 billion with margins slightly lower than 2021, reflecting the current inflationary environment.
Looking ahead, both our construction services and construction material businesses are really very well positioned to benefit from the infrastructure investment and jobs Act.
And the inflation reduction act, which we anticipate will begin to positively impact bidding opportunities here in late 'twenty, two and particularly 2023 and going forward.
This completes our individual business unit discussion looking ahead, we are very encouraged by the opportunities for our customer growth at our utility and electric business.
A strong set of pipeline projects across our pipeline business record levels of construction backlog and our ability to record and have a skilled employee base as well.
We are affirming our 2000 to 2022 earnings guidance to a range of $1 75 to $1 90 per share with EBITDA guidance in the range of $8 $75 million to $925 million.
We have a robust capital plan of 702 million plan for 2022.
Our future capital expenditures, including line of sight opportunities such as the completion of Heskett station unit four and other infrastructure development at the utility expansion projects at the pipeline and ongoing equipment replacements at our construction businesses.
As always MDU resources is committed to operating with integrity and with a focus on safety, while creating superior shareholder value as we continue to provide essential services to our customers and delivering on our mission of building a strong America, while being a great and safe place to work.
I appreciate your interest in and commitment to MDU resources and ask now that we open the line to questions operator.
Thank you at this time I would like to remind everyone. If they would like to ask a question. Please press star and then the number one on your telephone keypad. If you would like to withdraw your question. Please press Star then the number two on the telephone keypad.
If you're on a speakerphone. Please pick up your headset before entering a request we will pause for just a moment to compile our Q&A roster.
Your first question comes from Brian Russo from Sidoti. Please go ahead, Sir your line is live for your question.
Yes, hi, good morning.
Just quickly good morning, Brian .
Good morning, just quickly on knife River.
What are the regulatory milestones that we should be.
Looking for.
As we progress into 2023 in terms of the.
Private letter ruling from the <unk>.
IRS I think and then any SEC.
Approvals needed.
Got it.
Look at the.
Olander and be talking first half <unk>.
'twenty three or second half of 2023 completion.
Sure.
I understand the question Brian .
I will start and then may be asked.
Jason to give a little more detail that we can I would say in short we are.
Strong focus internally we are on track as we've laid out our project here certainly again, a high priority internally 2023 is the I know, it's a wide window of time, but that's the that's the window that we've provided there and clearly there were some milestones I'll turn it over to Jason while net probably dip.
<unk> dates, but just to give you some more extreme.
Kind of color.
Yes, thanks, Brian its a great question and we're certainly as Dave mentioned working quickly towards this I think what you would see what you mentioned there were two items that really are some of the regulatory workflows I would consider one being a private letter ruling from the.
IRS that process is well underway here will be working with the IRS here in the coming months to work.
Worked through that process and in addition, I think of the form 10, which will be the filing with the SEC. We would expect here in the next coming.
Coming months as well it would be filing a confidential on a confidential basis that with the SEC, which we would then work with them to get that to a public document.
Some time ahead of the spin here as we get into 2023, so not real definitive on dates there, but I think those are two of the big milestones that are a little bit outside of our control as far as the timing of the review process, but certainly within our control is how quickly we can get those filed here and get working with those various groups.
Okay, Great and then on the construction services segment to strategic alternatives.
Where are those alternatives as to outright sale.
Sure.
Similar to a knife river and when do you think you might conclude.
The review.
Provide an update.
Yes, no I appreciate that question Brian .
Actually I think.
Expand on it may be just a little bit but.
I thought it might be more wider when we announced this back in August or why now why not then and it's kind of the separation.
I'll get to your question, but really I would say, we've always said that the board continually evaluates our portfolio businesses to really make sure that the company is best positioned to unlock value for our shareholders.
Going back to our August announcement at that time, we were really able to make clear to specific decisions. One that we really felt that knife river would be better positioned to create value for our shareholders really is.
I will say as a Standalone company and also we didn't feel and we voiced this that it didn't make sense, probably industrial logic to really spend knife river in CST as a combined entity. So.
Hence the announcement back in August and so.
As our board and management and working through how our shareholders are best served by keeping CSC with regulated energy or exploring other alternatives for CST.
We really felt that as we continue to analyze ESG, we felt really the most desirable outcome is to move towards this two pure play publicly traded company structure that we announced here just today when being regulated energy.
Our utility companies combined with our pipeline business, along with the construction materials being the other one and so confident of that structure going to your question, though it's really the start of the review if you will so far as the <unk>.
Strategic review and looking at the various options with our announcement today.
We will be looking at all alternatives and ways in which to maximize value here.
I feel very strongly <unk> is a very valuable business. If you look at all the financial metrics, whether it's year to date net income at record levels. If you look at employment levels at 90 to 100 employees. If you look at backlog up some 50% on a year over year basis, It's really a high.
<unk> business and so we're going to be.
Very judicious in our review as we look at alternatives to really maximize or optimize the value of <unk> of our CSD business.
Okay. Thank you one last question on the utility it seems like you have a very active.
Regulatory calendar with.
Rate cases pending.
We're expected to be filed.
I'm sensing you are under earning basically in 2022, which is why you are filing.
These cases, when we look forward.
Assuming manageable equity needs right and your rehab.
Reaffirmation of the 5% rate base CAGR.
Can we can we see the utility growing earnings.
At a consistent rate with.
The rate base growth rate of 5%.
Is that is that realistic in the near term.
Yes, Brian I mean.
As utilities.
Make investments for that safe and reliable service clearly then we look to the regulators too.
Go through that ratemaking process to make everything is reasonable and prudent but that debt that rate base growth should translate to some correlation to earnings growth certainly subject to regulatory lag subject to making sure that our investments are truly reasonable and prudent as well.
Given.
We are out spending if you will our depreciation rates at our utilities or growing rate base at that 5% compounded annual growth, there's kind of an inherent regulatory lag in that process. Because we are out spending if you will the depreciation rates. So.
What you noted for an expectation would clearly be an expectation I would have it might be.
<unk> only because rate cases come every nine to 12 months from a prosecute.
A regulatory cycle there.
But you can clearly see Nicole and her team are very focused on closing that regulatory gap.
As we think about that.
The number of cases that were just filed.
I think I, probably answered the question that I'm looking at Nicole have anything to add there, but I, probably I think I think I got at all unless you have a follow up Brian .
No. That's it thank you very much I appreciate it.
Thank you Brian .
Okay.
Your next question comes from Ryan Levine with Citibank. Please go ahead, Sir your line is live.
Good morning in terms of the strategic potential strategic review that you initiated this morning.
To the extent it is not successful.
I'd entity Wood construction service remain with and then to the extent you go forward with that potential transaction.
Curious as to how the capital structure would travel with the asset.
How you are envisioning financing.
Attributes of this package it.
This portfolio of assets.
Sure.
So both kind of future questions to be answered if you think of it that way Ryan.
Clearly the strategic review, we're going to look at all options here to look to optimize the value of the business that could be in the form of <unk>.
A number of different types of transactions.
Whether it's a sale whether it's spin whether it's a merger whether it's a combination of those or some other type of structure and so that will be part of the review.
And no doubt the results of that outcome will then lead into the second part of your question as to cap structure or use of.
Whether there'll be proceeds are ultimately shareholder value creation here and how we best deploy that for R. R. Two pure play businesses Jason.
Yes, I would just add that I think your part of your original question. Ryan was services lie here I think I just want to come back to the focus that we're diligently working towards the separation of knife river into.
Standalone company, that's really what we've been working on here for quite some time.
We will be looking through strategic alternatives for the services business here as well, but that will be kind of a separate process in that piece.
I haven't really been definitive on a timeline with that here at this point either so I think it's a little early too.
Hypothesize I guess, maybe where things would end up after the fact, but I just want to be focused on the fact that we really are seeing knife River is a standalone.
Pure play a materials company.
The future state for MDU resources will be a standalone pure play regulated energy delivery company.
Okay does that envision the possibility that there could be three standalone public companies.
Okay.
Outcome of the strategic review or is it focused more around.
Attracting third party strategic or financial buyers.
I think all options are on the table as we think about that Ryan and so I wouldn't preclude anything at this point again, our announcement today is really.
Letting the world know of what our future plans and structure as we see it and certainly we will look to again optimize the value of construction services group.
A very valuable company as it's performing today.
Okay, and given there is a number of potential transactions and network works over the next call. It 12 months.
How are you.
Looking to evolve.
M&A or transaction strategy.
In terms of bolt on acquisitions between the three key business units.
Yes, certainly that's part of our DNA Ryan as we look I mean, that's really what has grown our materials business into what it is today and what we intended to be down the road a standalone public company top performing materials business and it's also in the DNA of.
<unk> services and into the valuable business as I noted to date.
I think thats still part of what we would continue to look at clearly we have other major work streams undergo going as well.
But I wouldn't preclude that at the same time, we've been very successful at our organic growth in these businesses as well. So I think there's there's optionality we have in each of those construction lines.
Okay, and then in terms of construction services historically.
<unk> been reluctant to part ways with that asset because its tax basis issues and <unk> strategic and commercial benefits.
What's changed on that.
Are there any dis synergies that you envision with any separation of that business.
Yes, certainly that will be part of this analysis as we think about the various transactions and the types that I outlined earlier those all will be considerations. When we think about that but again, it's strong performing business today, and we think there will be.
Likely reaction to our announcement today and again, we're starting that process right now.
Okay.
And then just one on the utility I think in your prepared comments you highlighted some other funding pension or certainty.
Obligation there can you elaborate on where you sit from that standpoint.
How that could impact your outlook.
I think what you are noting as some of our our nonqualified benefit plans.
Noted in throughout the year given the markets. These this year and kind of the no place to hide kind of thing I think it's roughly $20 million or about <unk> 10 per share on a year over year basis, but.
Maybe just a little background, Jason is to that.
We just want that be known because it's a large enough number of investors should know that yes.
To your question Ryan here as far as pension. This is this is a little bit different than kind of our traditional pension here. This is really the nonqualified programs that we have in these assets as our nonqualified.
We have liabilities from our balance sheet for that we have funded some assets to offset those liabilities and those assets are actually mark to market on a monthly basis. So these are all noncash unrealized gains and losses that have been or losses. This year I guess, you would say that we've experienced.
On these assets here don't expect this to have a significant impact on ongoing future benefit expense or anything along that lines. This is really related to these nonqualified plans not getting into kind of the traditional defined benefit pension plans that we have at our various businesses and those plan just as a refresher we have frozen all of our.
Defined benefit pension plans as well across the corporation many years ago. So it really kind of been a liability reduction mode. At this point in time versus something Thats.
A large ongoing cost of the company.
Appreciate the color. Thank you.
Thank you Brian I appreciate the questions.
Thank you at this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Please press Star and then number two on your telephone keypad, if you're on a speakerphone. Please pick up the handset before entering.
Your request.
Your next question comes from Darius Larceny with Bank of America. Sir Your line is open. Please go ahead.
Yes.
Hi, good morning, and thank you for taking my questions.
Can I, just maybe start with.
Thinking about the growth rate at the remain co. After the two processes that you have ongoing are concluded I think in the past you've framed your 5% to 8% long term CAGR.
Yes.
Sort of on the low end or the utilities and the upside there towards the 8% is driven by the construction businesses.
Post these two transactions would you do you envision having any latitude to accelerate that rate base growth.
Correspondingly the EPS growth at the remain co.
Yes, Greg.
Great question areas, Yes, I mean, the 5% to 8% as our long term EPS growth.
MDU resources as we see that today I know, we've had countless meetings with you and other investors kind of walk us through how each of the businesses contribute to that 5% to 8% in how we how we think about that.
As Youre, describing this pure play regulated business, our future state as we envision.
Today, we talked about a 5% CAGR and rate base growth certainly at our utility business, that's really coming off about a 7% CAGR over the prior five years and if it went back two years before that the prior five years or more like a 12% CAGR. So it's been growing quite nicely over time certainly it's currently at a 5% I would say.
Look forward as we think about our Capex discussion with our board here in a couple of weeks and we would be expecting to let the market know what the refresh on our five year looks like probably that week of Thanksgiving or so just to give a sense there. So.
So I think that's.
Probably a contributor certainly the pipeline business would have experienced a stronger CAGR than that over the more recent years.
Which I think would tend to elevate that EPS and then if you think about the projects that I noted in my comments the multiple projects. The 300000, a day of commitments from customers that Trevor Trevor and his group have signed up if you will between.
It's 2023 2024 projects very line of sight I would expect that would be more on the high end of that range if not.
Lifting that of sorts, so but that said as we see it today I think the other part of this is the pure play. We also think we will have a certain appeal in the marketplace as a pure play regulated business as we think about that and then we'll also be really defined capital structure and also capital allocation will be very focused as we think about that.
That management team, that's dialed in that business as well and so I think those are all attributes to be thinking about as we describe the future state of MDU resources, particularly to the regulated energy business.
Okay.
Okay, great. Thank you that sorry for the long answer.
No no.
And very comprehensive I appreciate it.
One more if I can and this relates to your 'twenty two guided.
It looks like your.
Revenue guidance for the services business ticked up.
But the margin language, maybe ticked down a little bit while the materials.
Which I think had a weaker first half of the year.
Seems to be steady state as far as the composition of your guidance can you maybe talk a little bit about the dynamics there.
This services relative to the material.
And then also maybe.
The backlog growth.
Services side was very robust can you talk a little bit about the dynamics there.
What specifically drove that really strong increase in the backlog.
Absolutely Darius I'm going to just give a couple of comments, but then I think.
Well served to get more details from each of those business head start I'll start with Jeff Thiede, and then ask Dave Barney to weigh in on materials.
I mean, clearly look at a high level, where our activities have been in both of those lines of business. As you would note elevating services by $100 million in revenue guidance as we think about the year our backlog growth. There has been astounding if you think of it that way.
I'll have Jeff kind of talk about just the dynamics in that business, which I think also leads to your margin question, a little bit as well Jeff.
Thanks, Dave.
Pressure from inflation labor materials subcontractors that's contributed to.
The margin impact that supply chain issues, which affects productivity and as noted in our release.
Had a couple of write downs, given the nature of our work and our historical strong performance, including our record quarter revenue and a record year to date earnings.
In our Q3 earnings out of our 21% higher this year than last year write downs are part of our business.
They should be overcome and we will be overcome by strong performance on a majority of our projects. We've got exceptional teams focused on.
Getting work.
Being selective.
Our backlog remains consistent among our ENN group, which is about 80% of our backlog versus our T&D group, which is about 20%. The largest component of that work is a commercial which includes our hospitality Airport data center work industrial but we've got.
A number of segments that really exemplifies our diverse project offerings and strengthens our business included in that as renewables. We've got several renewable projects and two more pending that we anticipate on getting we're also doing electric vehicle charging.
Stations.
And we've got great great growth in our service work and our special projects.
Darius any follow up for Jeff or I'll go on to Dave Barney just wanted to make sure Jeff.
Answered your question.
Yes, yes, yes.
Very helpful. Thank you.
Okay very good Dave Barney.
Can you just touch on kind of the dynamics that youre seeing out there in the end.
And what's your team is doing to get ahead of them.
Sure.
Good morning Darius.
As you know we had record revenue in the quarter due mainly to higher prices.
Almost every product line, we have a record backlog across almost all our regions and I can tell you our bid schedule looks strong and we continue to pick up work.
Demand is strong our price increase has largely been accepted by our customers.
We continue to raise prices just in October .
Implemented another price increase on the aggregates so going forward, we expect our margins to continue to improve.
Okay.
Okay.
That answer your question. Thank you, Dave anything else Darius.
No I think that's everything I appreciate the color that's it here.
Okay.
Excellent. Thank you for calling in and the further questions Darius.
Okay.
This marks the last call for questions. If you would like to ask a question Press Star then the number one on your telephone keypad. The webcast can be accessed at www dot MDU dot com under the Investor relations heading select events and presentations and then click Q3 2022 earnings conference call.
After the conclusion of the webcast a replay play will be available at the same location.
Okay.
At this time there are no further questions I would now like to turn the conference back to management for closing remarks.
Thank you Lisa and thank you all for taking the time to join US here on our third quarter earnings call. We are optimistic about our growth opportunities with record combined construction backlog and our ongoing and future regulated energy delivery projects, we look forward to connecting with you again as we can.
Close out the year and prepare for 2023.
Again. Thank you. We appreciate your continued interest in and support of MDU resources and with that I'll turn this back to the operator.
This concludes today's MDU resources Group Conference call. Thank you for your participation you may now disconnect.