Q1 2024 MYR Group Inc Earnings Call

May 2, 2024

Okay.

Operator: Good morning everyone, and welcome to the MYR Group First Quarter 2024 Earnings Results Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to David Gutierrez of Dresdner Corporate Services. Please go ahead, David.

Okay.

Good morning, everyone and welcome to the MYR group first quarter 'twenty to 'twenty four earnings results Conference call. Today's conference is being recorded at.

Sangita Jain: Hi, good morning. Thanks for taking my question. So Kelly or Rick, can you tell us a little bit more about the delayed projects there? What type of projects they are, the geography, maybe, and what may be causing the delay and start?

David E. Gutierrez: At this time for opening remarks, and introductions I would like to turn the conference I bet you David gets areas of Dresner Corporate services. Please go ahead David.

David E. Gutierrez: Thank you and good morning everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2024, which were reported yesterday. Joining us on today's call are Rick Schwartz, President and Chief Executive Officer, and Kelly Huntington, Senior Vice President and Chief Financial Officer. Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution Segment, and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's commercial and industrial segment.

Richard S. Swartz: As I said, it was kind of a myriad of issues, and it's on the C&I side, and it's not on one specific type of work. I would say it affected us on a couple different sides of the work, and it was anything from permitting or owner-furnished material coming in, so it was just push-out on that. But again, nothing that's canceling the projects, and we see them starting kind of in the third and fourth quarter rather than the first and second quarters of this year.

Speaker Change: Thank you and good morning, everyone I'd like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2024, which were reported yesterday.

David E. Gutierrez: Joining us on today's call are Rick Swartz, President and Chief Executive Officer, Kelly, Huntington, Senior Vice President and Chief Financial Officer.

David E. Gutierrez: Brian It's John Senior Vice President and Chief operating Officer, I'm wire groups' transmission and distribution segment.

David E. Gutierrez: And Donnie Egan Senior Vice President and Chief operating officer of MYR group's commercial and industrial segment.

David E. Gutierrez: If you did not receive yesterday's press release, please contact Reznor Corporate Services at 312-726-3600 and we will send you a copy, or go to the MYR Group website, where a copy is available under the Investor Relations tab. Also, a webcast replay of today's call will be available for seven days on the investors page of the MYR Group website at myrgroup.com. Before we begin, I want to remind you that this discussion may contain forward-looking statements.

David E. Gutierrez: If you did not receive yesterday's press release, please contact dresner corporate services at 3127 to 630 600, and we will send you a copy.

David E. Gutierrez: Go to the MYR group website, where a copy is available under the Investor Relations tab.

David E. Gutierrez: Also a webcast replay of today's call will be available for seven days on the investors page of the MYR group website at MYR group Dotcom.

David E. Gutierrez: Any such statements are based upon information available to MYR Group's management. As of this date, MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those indicated. 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, 2023, the company's quarterly report on Form 10-Q for the first quarter of 2024, and in yesterday's press release.

David E. Gutierrez: Before we begin I want to remind you that this discussion may contain forward looking statements.

David E. Gutierrez: 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.

David E. Gutierrez: These forward looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward looking statements.

David E. Gutierrez: Accordingly. These statements are no guarantee of future performance.

David E. Gutierrez: Risks and uncertainties are discussed in the company's annual report on Form 10-K for the year ended December 31 2023.

David E. Gutierrez: The company's quarterly report on Form 10-Q for the first quarter of 2024.

David E. Gutierrez: And in yesterday's press release.

David E. Gutierrez: 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 said, I will turn the call over to Rich Swartz.

David E. Gutierrez: Certain non-GAAP financial information will be discussed on the call today.

Richard S. Swartz: A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release.

Kelly Michelle Huntington: Got it. Thanks. And on the higher SG&A, was that a function of maybe some closeouts or earnouts that you had to pay on some acquisitions? And if so, should we be modeling it the same way going forward?

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

Richard S. Swartz: Thanks, David. Good morning, everyone.

Kelly Michelle Huntington: Yeah, I can address that. So that was a part of the variance when we look year over year. And it does come from higher profitability from prior acquisitions and some contingent compensation expense related to that. And, you know, we did see some, some strong favorable closeouts during the quarter. So that was, it was a significant driver of the increase in SG&A expense, especially when you look year over year.

Richard S. Swartz: Thanks, David Good morning, everyone welcome to our first quarter 2024 conference call to discuss financial and operational results.

Richard S. Swartz: Welcome to our first quarter 2024 conference call to discuss financial and operational results. I will begin by providing a summary of the first quarter results, and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up to your questions.

Kelly Michelle Huntington: How should we think about that going forward? Do you expect to have more of these payments for the rest of the year, or will that taper off?

Richard S. Swartz: I will begin by providing a summary of the first quarter results and then we'll turn the call over to Kelly Huntington, Our Chief Financial Officer for a more detailed financial review.

Kelly Michelle Huntington: So that could continue to be a factor in the second quarter, but I would expect that it would not be a material factor as we go into the second half of the year.

Kelly Michelle Huntington: I got it. Thank you so much. Thank you.

Operator: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Justin Hawke from Baird. Please go ahead; your line is now open.

Kelly Michelle Huntington: Following Kelly's overview, Brian Stern, and Don Egan, Chief operating officers for our T&D and C&I segments will provide a summary of our segment's performance and discuss some of them were our group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions.

Richard S. Swartz: Our strong market position, operational consistency, and the strength of our long-term customer relationships resulted in steady first quarter performance. Bidding activity remains healthy across both our business segments, as we seek to strategically capture new opportunities and stay true to our sound business principles. The country's growing need for and investment in a more robust electrical infrastructure, along with the continued shift to clean energy sources, present ongoing opportunities for growth for our T&D segment. The Deloitte Research Center for Energy and Industrials report from 2023 estimates up to $350 billion in spending towards transmission infrastructure and investments through 2030, with an additional forecast of up to $580 billion in distribution infrastructure investments over the same timeframe.

Justin P. Hauke: Our strong market position operational consistency and the strength of our long term customer relationships resulted in steady first quarter performance.

Richard S. Swartz: Activity remains healthy across both our business segments as we seek to strategically capturing new opportunities and stay true to our sound business principles.

Richard S. Swartz: The country's growing need for an investment in a more robust electrical infrastructure along with the continued shift to clean energy sources present ongoing opportunities for growth for our T&D segment.

Richard S. Swartz: The Deloitte Research center for energy and industrial to report from 2023.

Richard S. Swartz: Estimates up to $350 billion in spending towards transmission infrastructure and bid estimates through 2030 with an additional forecast of up to $580 billion in distribution infrastructure investments over the same timeframe.

Richard S. Swartz: These markets are traditional strengths for our T&D segment, where we are well positioned for success. Much of our growing demand for electricity across the U.S. and Canada is fueled by the core markets our CNA segment serves. Data centers and the advancement of artificial intelligence, transportation, manufacturing, and healthcare facilities are some of the expanding markets driving the need for electrification now and into the future.

Richard S. Swartz: These markets are traditional strengths for our T&D segment, where we are well positioned for success.

Richard S. Swartz: Much of our growing demand for electricity across the U S and Canada is fueled by the core markets. Our C&I segment serves data centers and the advancement of artificial intelligent transportation manufacturing and healthcare facilities or some of the expanding markets drive.

Richard S. Swartz: The need for electrification now and into the future.

Richard S. Swartz: Our teams have the experience and relationships to continue pursuing and winning work in these chosen core markets. As always, our success is grounded in an unwavering commitment to our customers. Safe and Reliable Project Execution, and the talent and dedication of our team members. We continue to develop and empower our employees to reach their highest potential as we grow our company, and I thank each of them for their efforts. Now Kelly will provide details on our first quarter 2024 financial report.

Richard S. Swartz: Our teams have the experience and relationships to continue pursuing and winning work in these chosen core markets.

Kelly: As always our success is grounded and an unwavering commitment to our customers.

Kelly: Safe and reliable project execution, and the talent and dedication of our team members.

Richard S. Swartz: We continue to develop and empower our employees to reach their highest potential as we grow our company and I think he and I. Thank each of them for their efforts now Kelly will provide details on our first quarter 2024 financial results.

Kelly Michelle Huntington: Thank you, Rick, and good morning, everyone. Our first quarter 2024 revenues were $816 million, which represents an increase of $4 million, or half a percent, compared to the same period last year. Our first quarter T&D revenues were $490 million, an increase of 10% compared to the same period last year. The breakdown of T&T revenues was $314 million for transmission and $176 million for distribution. The T&D segment revenues increased $29 million on distribution projects and $16 million on transmission projects. Work performed under Master Service Agreements continued to represent approximately 50% of our T&V revenues.

Justin P. Hauke: Hi, good morning. So I guess I just wanted to circle back on the solar projects. Obviously, that's not new, and your timing saying they're going to be done sometime in the third quarter is kind of what, you know, was the expectation before. I guess just to think about the margins and how those roll off. I mean, approximately how much revenue are those projects generating? And then are you still, you know, with the gross margin adjustments that you made on them, are they still earning a profit, or is that basically running at zero margin at this point? And I'm just trying to understand the magnitude of, you know, how that drags, could reverse once those are complete.

Kelly: Thank you Rick and good morning, everyone.

Kelly Michelle Huntington: Yes, Justin, I would point you out.

Kelly Michelle Huntington: Our first quarter 2024 revenues were $816 million, which represents an increase of $4 million or half a percent compared to the same period last year.

Richard S. Swartz: Sorry, Rick. But go ahead.

Richard S. Swartz: I was going to say those projects are difficult projects for us, that handful. We're getting them behind us. They are very, very low margin projects for us, so they are slightly negative for us on that side. Hence, they are pulling us down. Weather continues to be an impact on those projects, and as I said, they'll be finished during that beginning of the third quarter timeframe. So, for us, we really haven't disclosed what the revenue was on those projects, and we're in discussions with our clients, and they don't want to say much about those projects. So that's about as deep as I can get into it.

Kelly Michelle Huntington: Our first quarter T&D revenues were $490 million, an increase of 10% compared to the same period last year.

Richard S. Swartz: The breakdown of TNT revenues was $314 million for transmission and $176 million for distribution.

Richard S. Swartz: T&D segment revenues increased $29 million on distribution projects and $16 million on transmission projects.

Richard S. Swartz: Work performed under Master service agreements continued to represent approximately 50% of our T&D revenues.

Kelly Michelle Huntington: CNI revenues were $325 million, a decrease of 11% compared to the same period last year. The C&I segment revenues primarily decreased due to the delayed start of certain projects that are expected to begin later in 2024. Our gross margin was 10.6% for the first quarter of 2024 compared to 10.4% for the same period last year. The increase in gross margin was primarily due to better than anticipated productivity, favorable joint venture results, favorable change orders, and favorable job closeout.

Richard S. Swartz: C&I revenues were $325 million, a decrease of 11% compared to the same period last year.

Kelly Michelle Huntington: The C&I segment revenues, primarily decreased due to the delayed start of certain projects that are expected to begin later in 2024.

Kelly Michelle Huntington: Our gross margin was 10, 6% for the first quarter of 2024 compared to 10, 4% for the same period last year.

Kelly Michelle Huntington: The increase in gross margin was primarily due to better than anticipated productivity.

Kelly Michelle Huntington: Both joint venture results favorable change orders and a favorable job closeouts.

Kelly Michelle Huntington: These margin improvements were partially offset by labor and project inefficiencies, some of which were caused by inclement weather experienced on certain projects, rising costs associated with supply chain disruptions, an unfavorable change order, and an unfavorable job closeout. T&D operating income margin was 6.1% for the first quarter of 2024, compared to 7.4% for the same period last year. The decrease was primarily due to labor and project inefficiencies, most of which related to clean energy projects, primarily in one geographic area that also experienced inclement weather, as well as higher fleet depreciation and maintenance expenses and an unfavorable change order.

Kelly Michelle Huntington: These margin improvements were partially offset by labor and project inefficiencies some of which were caused by inclement weather experienced on certain projects.

Kelly Michelle Huntington: Rising costs associated with supply chain disruptions and unfavorable change order and an unfavorable job closeouts.

Kelly Michelle Huntington: And I would just point you to some of the disclosures that we have in the 10Q that just provide a little bit more background on that 6.1% margin we had in the quarter and some of the puts and takes from that perspective. That gives you a little bit more detail.

Kelly Michelle Huntington: <unk> operating income margin was six 1% for the first quarter of 2024 compared to seven 4% for the same period last year.

Kelly Michelle Huntington: The decrease was primarily due to labor and project inefficiencies most of which related to clean energy projects, primarily in one geographic area that also experienced inclement weather.

Kelly Michelle Huntington: While it's higher fleet, depreciation and maintenance expenses and an unfavorable change order. These.

Kelly Michelle Huntington: These decreases were partially offset by better than anticipated productivity and an increase in work in progress.

Kelly Michelle Huntington: These decreases were partially offset by better-than-anticipated productivity and an increase in work-in-progress. CNI's operating income margin was 3.5% for the first quarter of 2024, compared to 2.9% for the same period last year. The increase was primarily due to better than anticipated productivity, some of which related to clean energy projects, favorable joint venture results, favorable change orders, and favorable job closeout. These increases were partially offset by labor and project inefficiencies, some of which were caused by supply chain disruption.

Kelly Michelle Huntington: C&I operating income margin was three 5% for the first quarter of 2024 compared to two 9% for the same period last year.

Kelly Michelle Huntington: The increase was primarily due to better than anticipated productivity, some of which related to clean energy projects.

Kelly Michelle Huntington: Both joint venture results favorable change orders and a favorable job closeouts.

Kelly Michelle Huntington: These increases were partially offset by labor and project inefficiencies.

Kelly Michelle Huntington: All of which were caused by supply chain disruption.

Kelly Michelle Huntington: CNI's operating income margin was also negatively impacted by a decrease in work-in-progress, higher contingent compensation expense related to a prior acquisition, an unfavorable change order, and higher fleet depreciation and maintenance expenses. First quarter 2024 SG&A expenses were $62 million, an increase of $5 million compared to the same period last year. The increase was primarily due to an increase in employee-related expenses, an increase in contingent compensation expense related to a prior acquisition, and an increase in employee incentive compensation costs. First quarter 2024 interest expense was $1 million, an increase of $500,000 compared to the same period last year. The increase was due to higher average outstanding debt balances and higher interest rates.

Kelly Michelle Huntington: C&I operating income margin was also negatively impacted by a decrease in work in progress higher contingent compensation expense related to a prior acquisition and unfavorable change order and higher fleet depreciation and maintenance expenses.

Kelly Michelle Huntington: First quarter 2020 for SG&A expenses were $62 million.

Kelly Michelle Huntington: An increase of $5 million compared to the same period last year.

Kelly Michelle Huntington: The increase was primarily due to an increase in employee related expenses, an increase in contingent compensation expense related to a prior acquisition.

Kelly Michelle Huntington: And an increase in employee incentive compensation costs.

Kelly Michelle Huntington: First quarter 2024 interest expense was $1 million, an increase of $500000 compared to the same period last year.

Kelly Michelle Huntington: Greece was due to higher average outstanding debt balances and higher interest rates.

Brian Daniel Brophy: First quarter 2024 net income was $19 million compared to $23 million for the same period last year. Net income per diluted share of $1.12 decreased compared to $1.38 for the same period last year. First quarter 2024 EBITDA was $40 million, compared to $41 million for the same period last year. Total backlog as of March 31, 2024, was $2.43 billion, 9% lower than a year ago. Total backlog as of March 31, 2024 consisted of $853 million for our T&D segment and $1.57 billion for our C&I segment.

Kelly Michelle Huntington: First quarter 2024, net income was $19 million compared to $23 million for the same period last year.

Brian Daniel Brophy: Net income per diluted share of $1.12 decrease compared to one dollar and 38 cents for the same period last year.

Brian Daniel Brophy: First quarter 2024, EBITDA was $40 million compared to $41 million for the same period last year.

Brian Daniel Brophy: Total backlog as of March 31, 2024, with 243 billion, 9% lower than a year ago total backlog as of March 31, 2024 consisted of $853 million for our T&D segment and $1 $5 7 billion for our C&I segment.

Brian Daniel Brophy: First quarter 2024 operating cash flow was $8 million compared to operating cash flow of $37 million for the same period last year. The decrease in cash provided by operating activities was primarily due to the timing of billings and payments, as well as an increase in our days' sales outstanding as compared to the prior year. First quarter 2024 free cash flow was negative $18 million, compared to positive $18 million for the same period last year, reflecting a decrease in operating cash flow and higher capital expenditure.

Brian Daniel Brophy: First quarter 2020 for operating cash flow was $8 million compared to operating cash flow at $37 million for the same period last year.

Brian Daniel Brophy: The decrease in cash provided by operating activities was primarily due to the timing of billings and payments as well as an increase in our days sales outstanding as compared to the prior year.

Brian Daniel Brophy: First quarter 2020 for free cash flow was negative $18 million compared to positive free cash flow of $18 million for the same period last year, reflecting the decrease in operating cash flow and higher capital expenditures.

Brian Daniel Brophy: Moving to liquidity on our balance sheet, we had approximately $294 million of working capital, $38 million of funded debt, and $434 million in borrowing availability under our credit facility as of March 31, 2024. We have continued to maintain a strong funded debt to EBITDA leverage ratio of 0.2 times as of March 31, 2024. We believe that our credit facility, strong balance sheet, and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions, and opportunistically repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment.

Brian Daniel Brophy: Moving to liquidity and our balance sheet, we had approximately $294 million of working capital $38 million of funded debt and $434 million in borrowing availability under our credit facility as of March 31 2024.

Brian Daniel Brophy: We have continued to maintain a strong funded debt to EBITDA leverage ratio of 0.2 times as of March 31 2024.

Brian Daniel Brophy: We believe that our credit facility strong balance sheet and future cash flow from operations will enable us to meet our working capital needs support the organic growth of our business pursue acquisitions acquisitions and opportunistically repurchase shares.

Kelly Michelle Huntington: Yeah, no, I saw the 250 basis points net. I was just kind of trying to understand, I mean, is this 10% of the T&D business? Is it 5%? I mean, just kind of directionally on that because that kind of helps, you know, understand, like, once those roll off, you know, what it would be considering that they're running at very low margin or negative margin. I don't know if they're getting back together.

Brian Daniel Brophy: I'll now turn the call over to Brian Stern, who will provide an overview of our transmission and distribution segment.

Brian Daniel Brophy: Thanks, Kelly, and good morning, everyone. Within the T&D segment, we remain focused on strategically pursuing new opportunities, expanding long-term customer relationships through master service agreements, and continuing to maintain and expand our long-term client relationships. Fitting activity shows positive signs of growth with increased opportunities for various-sized projects that we continue to monitor and selectively pursue. However, solar market headwinds persist into 2024. And the same group's projects continue to negatively impact our financial results in the first quarter.

Richard S. Swartz: No, I would say it would take us more towards our mid-range of our guidance of where we should be somewhere in there, lower to mid-range without those projects.

Kelly Michelle Huntington: Yes.

Kelly Michelle Huntington: Thanks, Kelly and good morning, everyone.

Richard S. Swartz: I guess my second question, just, you know, maybe the bigger picture, your distribution revenue is actually up pretty strongly by 20%. You know, I guess we've heard some commentary that the utilities have been pulling back work under their MSAs. Maybe it's shifted to more transmission or, you know, they're restricting hours just to make sure that they don't, you know, kind of run over their CapEx budgets for the year. But yours was up nicely. So I guess, are you seeing that? Or what are your customers saying in terms of, you know, kind of their progression of how they plan to roll out under your MSA contracts for the year?

Richard S. Swartz: The T&D segment, we remain focused on strategically pursuing new opportunities.

Richard S. Swartz: Justin, you know, we've always said between, you know, whether it's transmission or distribution, our MSAs are a lot of our dual purpose, and we do both transmission and distribution work for the same client. So, it's really how they roll out their work during that quarter. And for us, the margin profile is very similar. We don't care which one we do.

Richard S. Swartz: Expanding long term customer relationships through Master service agreements.

Richard S. Swartz: And continuing to maintain and expand our long term client relationships hitting.

Richard S. Swartz: Bidding activity shows positive signs of growth with increased opportunities for various sized projects and we continue to monitor and selectively pursue.

Richard S. Swartz: Solar market headwinds persisted into 2024.

Richard S. Swartz: And the same group projects continued to negatively impact our financial results in the first quarter.

Brian Daniel Brophy: We continue to work closely with our clients and project teams and anticipate reaching substantial completion on this group of projects during the third quarter. Forecasts for capital spending on aging infrastructure, reliability, and energy transition projects remain strong, with spending expected to grow at record levels over the next decade, according to S&P Global's Industry and Credit Outlook for 2024, released in April. Increasing electric electrification demand emphasizes the need for system hardening, upgrades, and new transmission and distribution infrastructure. In the Deloitte report mentioned earlier, respondents cited upgrading and expanding grid infrastructure as their biggest challenge, creating future opportunities for our business.

Richard S. Swartz: We continue to work closely with our clients and project teams and anticipate reaching substantial completion on this group of projects during the third quarter.

Brian Daniel Brophy: Forecast for capital spending on the aging infrastructure reliability and energy transition projects remained strong with spending expected to grow at record levels over the next decade. According to S&P global to industry and credit outlook for 2024 released in April.

Brian Daniel Brophy: Increasing electric electrification demand emphasizes the need for system hardening.

Brian Daniel Brophy: Upgrades and new transmission and distribution infrastructure.

Brian Daniel Brophy: And the Deloitte report mentioned earlier respondents cited upgrading and expanding grid infrastructure is our biggest challenge, creating future opportunities for our business.

Don Egan: Our traditional D&D operations continue their strong execution of work throughout our operating territories. We continue to focus on our long-term MSA customers and support their needs. This is evident in a recent renewal of an existing alliance in our western operations and the award of an exciting new MSA for a major utility in the Midwest. Additionally, substation, transmission, and distribution work remains active across the country, with numerous subsidiaries being awarded projects. To conclude, our consistent focus on safety and project execution has enabled us to expand our customer relationships while strategically pursuing new opportunities.

Brian Daniel Brophy: Our traditional T&D operations continued their strong execution of work throughout our operating territories. We continue to focus on our long term MSA customers and supporting their needs.

Richard S. Swartz: So, it's just being, you know, able to support our clients. So, again, it could, it can always shift quarter to quarter based on the work they're releasing us. But I don't think we've got anything that's specific that says they're going to shift. And again, we only report 90 days of backlog in our MSA. So, we're forecasting what we see for the next 90 days. We're not forecasting that out a year, but you know, our clients aren't pulling back overall. We haven't seen that. So again, good spend from them. And I really don't care which bucket it goes in. Yeah, okay.

Justin P. Hauke: Yeah, okay. Yeah, no, and that's a fair point with the 90 days because that's different from how some of your peers report their backlog.

Richard S. Swartz: This is evident by a recent renewal of an existing alliance and our western operations and the award of an exciting new MSA for a major utility in the Midwest.

Justin P. Hauke: Additionally, substation transmission and distribution work remains active across the country with numerous subsidiaries being awarded projects.

Justin P. Hauke: To conclude our consistent focus on safety and project execution has enabled us to expand our customer relationships, while strategically pursuing new opportunities.

Don Egan: We strive to leverage our capabilities and experienced teams across our companies to contribute to our customer success and overcome challenges together. We are excited about the outlook for the T&D industry and look forward to playing a key role in helping meet future energy demand. I will now turn the call over to Don Egan, who will provide an overview of our commercial and industrial segment.

Justin P. Hauke: Strive to leverage our capabilities and experienced teams across our company has to contribute to our customer success and overcome challenges together.

Don Egan: We are excited about the outlook for the T&D industry and look forward to playing a key role in helping meet the future energy demand.

Don Egan: I will now turn the call over to Don Egan, who will provide an overview of our commercial and industrial segment.

Don Egan: Thanks, Brian, and good morning, everyone. Our C&I results in the first quarter improved from previous quarters and demonstrate the strength of our core markets we serve. Our C&I segment continues to overcome challenges as we capture and execute new projects through extensive collaboration with our clients and vendors, and by leveraging our strong supplier network across the organization, bidding activity remains healthy in our chosen core markets with continued signs of long-term stability. According to the 2024 North American Engineering and Construction Outlook released in April, forecasts for growth in engineering and construction spending remain strong across all non-residential segments.

Richard S. Swartz: So, thank you very much. I appreciate it. Thank you.

Don Egan: Thanks, Brian and good morning, everyone.

Richard S. Swartz: Our C&I results in the first quarter improved from previous quarters and demonstrates the strength of our core markets. We serve our C&I segment continues to overcome challenges as we capture and execute new projects through extensive collaboration with our clients and vendors and by leveraging our strong supplier network across the organization.

Richard S. Swartz: Bidding activity remains healthy and our chosen core markets with continued signs of long term stability.

Richard S. Swartz: According to the 2024, North American Engineering and construction outlook released in April forecast for growth in engineering and construction spending remains strong across all nonresidential segments.

Don Egan: The report predicts continued positive growth rates in high-performing markets such as healthcare, transportation, and manufacturing, all of which are core markets for our CNI segment. These encouraging forecasts could generate growth for our business as we continue to leverage our expertise and place us in a leading position to strategically capture future opportunities in these markets. Across the U.S. and Canada, our companies continue to perform and pursue an array of projects. Data centers remain strong, with recent awards as well as new opportunities in Arizona, Colorado, Chicago, and California.

Richard S. Swartz: The report predicts continued positive growth rates in high performing markets, such as healthcare transportation and manufacture all of which are core markets for our C&I segment.

Don Egan: These encouraging forecasts could generate growth for our business as we continue to leverage our expertise and to place us in a leading position to strategic strategically capture future opportunities in these markets.

Don Egan: Across the U S and Canada, our companies continue to perform pursue an array of projects.

Don Egan: Data centers remains strong with recent awards as well as new opportunities in Arizona, Colorado, Chicago in California.

Don Egan: Transportation also remains strong as we pursue new opportunities with transit work in Canada by Western Pacific Enterprises, and we see increased opportunities for additional transportation work in Colorado and California. Aerospace is another market with opportunities and recent awards for CSI electrical contractors in California, Huen Electric in Chicago, and Sturgeon Electric in Colorado. We also continue to see new opportunities in solar, warehousing, and water treatment facilities, which are strong core markets for our CNI-6.

Don Egan: Aerospace is another market with opportunities in recent awards for CSI electrical contractors in California, two in electric in Chicago, and Sturgeon electric in Colorado.

Don Egan: We also continued to see new opportunities in solar warehousing and water treatment facilities, which were strong core markets for our C&I segment.

Don Egan: In summary, we are proud of our employees for their creative thinking, dedication, and strong customer relationships as they continue to navigate the ever-changing landscape of the industry. These attributes enable us to mitigate day-to-day challenges and continue to execute our projects while maintaining a healthy pipeline of work, enhancing our potential for continued growth. Thank you everyone for your time today. I will now turn the call back to Rick, who will provide us with some closing comments.

Don Egan: In summary, we are proud of our employees for their creative thinking and dedication and strong customer relationships as they continue to navigate the ever changing landscape of the industry.

Rick: These attributes enable us to mitigate the day to day challenges and continue to execute our projects, while maintaining a healthy pipeline of work enhancing our potential for continued growth.

Don Egan: Thanks, everyone for your time today I will now turn the call back to Rick who will provide us with some closing comments.

Richard S. Swartz: Thank you for those updates, Kelly, Brian, and Don. Our first quarter performance reflects our ongoing commitment to strong operating principles and sound business strategies while remaining proactive and disciplined in a dynamic energy landscape. We continue to expand long-term customer relations and remain focused on creating value through safe and quality projects. Thanks to the tireless efforts of our talented employees, MYR Group is strongly positioned as an industry leader that is viewed as an essential partner by our customers.

Rick: Thank you for those updates Kelly, Bryan and Dan <unk>, our first quarter performance reflects our ongoing commitment to strong operating principles and sound business strategies, while remaining proactive and disciplined in a dynamic energy landscape.

Richard S. Swartz: We continue to expand long term customer relationships and remain focused on creating value through safe and quality project execution.

Richard S. Swartz: Thanks to the tireless efforts of our talented employees MYR group is strongly positioned as an industry leader that is viewed as an essential partner by our customers.

Richard S. Swartz: I believe 2024 represents a great opportunity for MYR Group to build upon our success. I thank each of you for your ongoing commitment and support to the success of this organization. And I look forward to working with you to advance our vision and realize our business goals. Operator, we are now ready to open the call up for comments and questions. Thank you.

Richard S. Swartz: I believe 2024 represents a great opportunity for MYR group to build upon our success.

Speaker Change: Hi, Thank each of you for your ongoing commitment and support to the success of this organization and I look forward to working with you to advance our vision and realize their business goals.

Richard S. Swartz: Operator, we're now ready to open the call up for comments and questions.

Operator: Thank you. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. We will now take our first question. Please stand by. And the first question comes from the line of Atid Modak from Goldman Sachs. Please go ahead; your line is now open.

Operator: As a reminder, to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced. You will now take our next question. Please stand by. The next question comes from the line of John Braatz from KCCA. Please go ahead; your line is now open. Good morning, everyone.

Speaker Change: Thank you.

Operator: Ask a question during this session you will need to press star one one on your telephone you will then hit also may just message advising Johan database to withdraw your question. Please press star one one that again.

Atid Modak: We will now take our first question.

Jonathan Paul Braatz: Kelly, could you give us a little more detail on the gross margin impact from your joint venture investment that you have, and I think it contributed 60 basis points of improvement. Can you give us a little more specifics on that?

Operator: Please standby.

Kelly Michelle Huntington: Sure, and that relates to a couple of joint venture projects that were nearing the finish line on and had some strong results. And so that contributed to a favorable effect on the C&I segment in the quarter.

Atid Modak: And the first question comes from the line of <unk> <unk> from Goldman Sachs. Please go ahead. Your line is now open.

Richard S. Swartz: Hi, good morning team. Just, you are among the few players that have unique exposure to data centers, so both from a direct and indirect exposure perspective. I'm curious about your views here. From your vantage point on where you are seeing customer conversations progress today, when do you think the volume of work really starts to inflect in the backlog, again both for direct and indirect exposure, and what are the challenges, maybe supply chain or others that you might have to navigate, if any?

Kelly Michelle Huntington: Okay, any

Speaker Change: Hi, good morning team.

Kelly Michelle Huntington: Okay, anything going forward from those JVs?

Kelly Michelle Huntington: Just you are among the few players that have a unique exposure to data center. So both from our direct and indirect exposure perspective. So curious about your view of your from your vantage point on where you are seeing customer conversations progress today. When do you think the volume of work really starts to inflect in the backlog again.

Kelly Michelle Huntington: Both for direct and indirect exposure.

Kelly Michelle Huntington: And what are the challenges may be supply chain or others that you might have to navigate if any.

Richard S. Swartz: I'll start and then I'll let Don add something. I think it's a very active market for us, but we're very selective in what we approach. I think anybody can overcommit in this data center market today. So for us, it's being very selective with the resources we have, the customers we have, and then being aware of the supply chain. Right now, it's really the longer lead times that we're seeing as an issue out there, and I think our clients are addressing it and coming to us sooner and sooner with future opportunities so they can prepare for that. Don, I'll let you talk about some of the opportunities out there. I think you should.

Kelly Michelle Huntington: They're getting closer to the finish line. So, you know, we're not quite finished with that. They're not fully closed out. But I would expect that this was a larger contribution than we saw in this.

Richard S. Swartz: larger in the second quarter? Did I hear that right? I'm sorry, no, larger in the first quarter. Oh, okay, okay, okay, fine. And Rick, from a big-picture standpoint, sort of as always, the utilities are facing a little bit higher cost of capital. And are you seeing... Any reluctance to go forward with some of their capital spending because of the higher cost? Any reason to think that maybe some projects could be pushed further out to the right?

Speaker Change: I'll start and then I'll, let Don add I think it's a very active market for us, but we're very selective in what we are projecting.

Richard S. Swartz: Nothing that we see as of now. I mean, you're always seeing that shift in a quarter or shorter term; maybe the next nine months, things can move around. But we are still in, you know, discussions with customers on projects that are, are, you know, well into the future. And we haven't seen anybody say anything that they're going to delay any projects or not build them because of the cost of capital or anything like that. Okay, okay. Thank you.

Richard S. Swartz: Okay, okay. Thank you.

Richard S. Swartz: As there are no further questions, I would now like to hand the floor back to Rick Swartz for closing remarks.

Richard S. Swartz: To conclude, on behalf of Kelly, Brian, Don, 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.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

Operator: Anybody can overcommit in this data center market today.

Operator: So for us its very being very selective with the resources. We have the customers we have and then being aware of the supply chain.

Operator: Right now, it's really the longer lead items.

Operator: That we're seeing as an issue out there and I think our clients are addressing it.

Operator: Coming to us sooner and sooner with future opportunities. So they can prepare for that Dan I'll, let you talk about some of the opportunities out there. Thank.

Don Egan: I think you really nailed it, Rick. We need to be extremely selective in the pursuits that we pursue. We can get over-committed, which is a big concern of ours, while we continue to monitor what's happening in the supply chain. As far as when we may see an increase in our backlog, we've talked about it before. Backlog can be very clunky, but the reality is sometimes we may have a small amount of backlog we're adding so we can get some of that long-lead equipment ordered early. Ultimately, we're really focused on our existing clients and what their builds are looking like in the future.

Speaker Change: Thank you really nailed it Rick.

Don Egan: We need to be extremely selective in the pursuits that we're chasing we can get over committed which is which is a big concern of ours. While we continue to monitor what's happening on the supply chain as far as when we may see an increase in our backlog we talked about it before backlog can be very clunky, but the reality.

Don Egan: It is sometimes we may have a small amount of backlog we are adding so we can get some of that long lead equipment ordered early but really ultimately we're really focused on our existing clients and what their builds are looking like in the future.

Don Egan: Got it. Thank you for that.

Speaker Change: Got it. Thank you for that and then you spoke about expanding the line's agreements and strategically capturing new opportunities.

Don Egan: Is that additional market share can you just give some color around that on the opportunities that youre seeing and how we should think about the margin impact from bank.

Speaker Change: Sure for us, it's steady opportunities to continue and grow and expand our business.

Don Egan: Those are new market opportunities that Brian covered.

Don Egan: For us, it's just additive to what we do and Thats just part of our steady growth profile long term.

Speaker Change: Got it I appreciate that Gardner Denver.

Speaker Change: Thank you.

Speaker Change: We will now take our next question.

Speaker Change: Please standby.

Don Egan: And the next question comes from the line of Brian Brophy from Stifel. Please go ahead. Your line is now open.

Richard S. Swartz: And then you spoke about expanding alliance agreements and strategically capturing new opportunities. Is that additional market share? Can you give some color around that on the opportunities that you're seeing and how we should think about the margin impact from that?

Speaker Change: Yes. Thanks, Good morning, everybody I think last quarter, you talked about expectations for high single digit growth.

Speaker Change: For the year in both segments. Just curious now that we're through the first quarter, how things are shaking up relative to that initial expectation or are you still expecting high single digit growth in both segments. This year. Thanks.

Richard S. Swartz: Sure, for us, it's steady opportunities to continue and grow and expand our business. Those are new market opportunities that Brian mentioned. And for us, it's just additive to what we do. And it's just part of our steady growth profile over the long term.

Richard S. Swartz: Got it. I appreciate that, Dr. Togon. Thanks.

Speaker Change: For us.

Richard S. Swartz: I would say, it's a little bit off on the C&I side, it's the push out of some of the projects. We saw we anticipated some projects starting in the first quarter and into the second quarter.

Richard S. Swartz: We've seen those push out to the fourth quarter. So it is not the projects were canceled or anything for a myriad of issues. They were really pushed out so I think that'll be more of a flattish profile for our company this year.

Richard S. Swartz: Then kind of that higher single digit growth, but great opportunities going forward in both of our segments.

Richard S. Swartz: So thats really where we see that heading right now, but again just a push out of those projects not anything that's detrimental or we're not seeing a big slowing of anything.

Richard S. Swartz: As I identified last quarter on the T&D side.

Richard S. Swartz: We are seeing some of the larger clean energy or solar projects getting very competitive.

Richard S. Swartz: We saw that continue this quarter.

Richard S. Swartz: So again, we're not going to take projects below where we feel our cost is or our cost, but prepare markup as we see it as a great long term market, but very competitive at this point.

Speaker Change: Okay, Great. That's really helpful. And then could you talk about margin progression that you're expecting for the remainder of the year I guess in both segments seem to seem to expecting kind of an inflection here in the back half.

Richard S. Swartz: Some projects roll off just curious if youre still expecting that and how we should be thinking about margin progression for the year.

Speaker Change: Yes, I'll start with your API side.

Kelly: Go ahead Kelly.

Brian: Thanks, Rick I'll, just jump in and say I think from from the C&I side, we were pleased to see an improvement from the fourth quarter at the three 5% margin this quarter.

Richard S. Swartz: We still see the same trajectory that we talked about on the last call with getting to the low end of our target operating income margin range of that.

Richard S. Swartz: At 4% to 6% at midyear on a run rate basis, and so I think we've demonstrated some good progress there this quarter, so I'm expecting probably something pretty similar as we go to second quarter and then seeing continued gradual improvement from there on the <unk>.

Richard S. Swartz: Candy side.

Richard S. Swartz: As was mentioned in Brian's remarks, it really comes back to the same set of projects that we talked about on the last couple of calls.

Richard S. Swartz: And that had been bringing our operating income margins down there.

Richard S. Swartz: We do continue to see that we'll be wrapping up skilled labor on those projects at the beginning of the third quarter.

Richard S. Swartz: And so as a result, we would expect to see since we're carrying those projects that lower margin, but that will continue to affect us in the second quarter, but then we should start to see margin improvement in the second half of the year trending back towards that target range of the 7% to 10, 5% going forward of course all of that is.

Richard S. Swartz: Particularly on the T&D side is weather dependent.

Richard S. Swartz: Consider normal weather, there, but hopefully that gives you a sense of where we're headed in a very similar story to what we talked about on the last call.

Speaker Change: That's very helpful. Thank you I'll pass it on.

Speaker Change: Thanks Keith.

Operator: We will now take our next question. Please stand by. And the next question comes from the line of Brian Brophy from Stifle. Please go ahead; your line is now open.

Speaker Change: We will now take our next question.

Brian Daniel Brophy: Please standby.

Brian Daniel Brophy: And the next question comes from the line of Sanjay <unk> from Keybanc capital markets. Please go ahead. Your line is now open.

Brian Daniel Brophy: Yeah, thanks. Good morning, everybody.

Brian Daniel Brophy: Yes, hi, good morning, Thanks for taking my question.

Brian Daniel Brophy: Kelly can you tell us a little bit more about the delayed projects there.

Brian Daniel Brophy: What type of projects there the geography, maybe and what may be causing the delay in start.

Richard S. Swartz: I think last quarter you talked about expectations for high single-digit growth for the year in both segments. Just curious now that we're through the first quarter, how things are shaking up relative to that initial expectation. Are you still expecting high single-digit growth in both segments this year? Thanks.

Brian Daniel Brophy: As I said that was kind of a myriad of issues.

Richard S. Swartz: And it's on the C&I side.

Richard S. Swartz: On a not on one specific type of work I would say it affected us on a couple of different sides of the work and it was anything from.

Richard S. Swartz: For us, I would say it's a little bit of, on the C&I side, the push out of some of the projects we saw. We anticipated some projects starting in the first quarter and into the second quarter, but we've seen those push out to the fourth quarter.

Richard S. Swartz: Permitting or owner furnished material coming in so it was just push out on that side.

Richard S. Swartz: So it's not that the projects were canceled or anything. For a myriad of issues, they were really pushed out. So I think that'll be more of a flattish profile for our company this year, then kind of that higher single-digit growth, but great opportunities going forward in both our segments. So that's really where we see that heading right now. But again, just a push out of those projects, not anything that's detrimental, or we're not seeing a big slowing of anything.

Richard S. Swartz: But but again nothing thats canceling the project and we see them starting kind of in that third and fourth quarter, rather than the first and second quarter of this year.

Speaker Change: Got it thanks, and then on.

Richard S. Swartz: If I can ask a question on the higher SG&A was that a function of maybe some closeouts are announced that you had to pay on some acquisitions and if so should we be modeling it the same way going forward.

Speaker Change: Yes, I can address that and so that was that part of it.

Richard S. Swartz: The variance and we look at year over year and it does come from higher profitability from a prior acquisition and some contingent compensation expense related to that and.

Richard S. Swartz: And we did see some sort.

Richard S. Swartz: Strong favorable closeouts during the quarter. So that was that it was a significant driver of the increase in SG&A expense, especially when you look year over year.

Speaker Change: How should we think about that going forward do you expect to have more of these payments through the rest of the year or does that taper down.

Richard S. Swartz: So that could continue to be a factor in the second quarter, but I would expect that that would not be a material factor as we go into the second half of the year.

Speaker Change: Got it thank you so much.

Speaker Change: Thank you.

Speaker Change: We will now take our next question.

Speaker Change: Please standby.

Richard S. Swartz: And the next question comes from the line of Justin Hauke from Baird. Please go ahead. Your line is now open.

Richard S. Swartz: As I identified last quarter on the T&D side, we are seeing some of the larger clean energy or solar projects getting very competitive. We saw that continue this quarter. So again, we're not going to take projects below where we feel our cost is or our cost with a fair markup is. We see it as a great long-term market, but very competitive.

Richard S. Swartz: Okay.

Speaker Change: Hi, good morning.

Speaker Change: So I guess I just wanted to circle back on the solar projects, obviously, that's not new in your timing, saying youre going to be done sometime in the third quarter is kind of what what's the expectation before.

Richard S. Swartz: I guess just for thinking about the margins and how those roll off.

Speaker Change: Approximately how much revenue are those projects generating and then are you still with the gross margin adjustments that you made on them are they still earning a profit or is that basically running at zero margin at this point and I'm just trying to understand the magnitude of.

Richard S. Swartz: How that drag.

Richard S. Swartz: Could reverse once those are complete.

Kelly Michelle Huntington: Great, that's really helpful. And then, could you talk about margin progression that you're expecting for the remainder of the year? I guess in both segments, we seem to be expecting kind of an inflection here in the back half, as some projects roll off. Just curious if you're still expecting that and how we should be thinking about margin progression for the year.

Richard S. Swartz: Yes.

Kelly Michelle Huntington: So.