Q1 2025 MYR Group Inc Earnings Call
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Operator: Good morning, everyone, and welcome to the MYR Group First Quarter 2025 Earnings Results Conference call. At this time, all participants are on a listen-only mode.
Speaker Change: Good morning, everyone and welcome to the MYR Group first quarter 2025 earnings results Conference call. At this time, all participants on a listen only mode. After the speaker's presentation. There will be a question answer session. Just a question during the session you need to press star one on your telephone.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again.
And here the automated message advising that your hands raised.
Speaker Change: We're drawing a question please press star one again.
Operator: Today's conference is being recorded at this time.
James: Today's conference is being recorded at this time for opening remarks, and introductions I would like to turn the call over to Jennifer Heartburn, MYR Group, Vice President of Investor Relations and Treasurer. Please go ahead James.
Jennifer Harper: For opening remarks and introductions, I would like to turn the call over to Jennifer Harper, MYR Group Vice President of Industry Relations and Treasurer. Please go ahead, Jennifer. Thank you and good morning, everyone.
Speaker Change: Thank you and good morning, everyone.
Jennifer Harper: I would like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2025, which were reported yesterday.
Speaker Change: I'd like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2020.
James: Our reported yesterday.
Jennifer Harper: Joining us on today's call are Rick Swartz, President and Chief Executive Officer, 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.
Rick Swartz: Joining us on today's call are Rick Swartz, President and Chief Executive Officer, Kelly, Huntington, Senior Vice President and Chief Financial Officer.
Dan: Brian It's Dan.
Rick Swartz: President and Chief operating officer of MYR, groups' transmission and distribution segments.
Speaker Change: And I'm eager senior Vice President and Chief operating Officer.
Rick Swartz: Our group's commercial and industrial segments.
Jennifer Harper: A copy of yesterday's press release is available on the MYR Group website at myrgroup.com under the Investors tab.
Speaker Change: A copy of yesterday's press release.
Speaker Change: And why our group website.
Speaker Change: And why our group Dot com under the investors tab.
Jennifer Harper: A webcast replay of today's call will be available on the website for seven days following the call.
Speaker Change: A webcast replay of today's call will be available on the website for seven days following.
Jennifer Harper: Before we begin, I want to remind you that this discussion may contain forward-looking speech. Any such statements are based upon information available to MYR Group's management as of this date and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance.
Speaker Change: Before we begin I want to remind you that this discussion may contain forward looking statements.
Speaker Change: Any such statements are based upon information available to MYR groups' management.
Speaker Change: H and MYR group assumes no obligation to update any such forward looking statements.
Speaker Change: These forward looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward looking statements.
Speaker Change: Accordingly. These statements are no guarantee of future performance.
Jennifer Harper: These risks and uncertainties are discussed in the company's annual report on Form 10-K for the year ended December 31, 2024, the company's quarterly report on Form 10-Q for the first quarter of 2025, and in yesterday's press release.
Speaker Change: These risks and uncertainties are discussed in the company's annual report on Form 10-K for the year ended December 31st 2020 for.
Speaker Change: The company's quarterly report on Form 10-Q.
Speaker Change: First quarter of 2025.
Speaker Change: And in yesterday's press release.
Jennifer Harper: We also present certain non-GAAP financial measures. A reconciliation of these non-GAP measures to the most comparable GAP measures is set forth in yesterday's press release.
Speaker Change: We also present certain non-GAAP financial measures.
Speaker Change: A reconciliation of these non-GAAP measures.
Speaker Change: Most comparable GAAP measures is set forth in yesterday's press release.
Rick Swartz: With that, let me turn the call over to Rick Swartz. Thanks, Jennifer. Good morning, everyone.
Rick Swartz: With that let me turn the call over to Rick Swartz.
Speaker Change: Thanks, Jennifer and good morning, everyone welcome to our first quarter 2025 conference call to discuss financial and operational results.
Rick Swartz: Welcome to our first quarter 2025 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.
Speaker Change: 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 Donigan, Chief operating officers for our T&D and C&I segments will provide a summary of our segment's performance and discuss some.
Rick Swartz: 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.
Speaker Change: Are there more air group's opportunities going forward I will then conclude today's call with some closing remarks and open the call up for your questions.
Rick Swartz: I will then conclude today's call with some closing remarks and open the call up for your questions. We achieved solid financial results in the first quarter, as we continue to expand strong customer relationships through Master Service and Alliance Agreements, perform ongoing work for our long-term customers, and strategically pursue new opportunities. We remain committed to operational consistency and serving as an open and trusted partner for our customers. Bidding activity is healthy in both business segments and is reflective of the investments being made to meet the growing electrification demand. We believe our experience and proven ability to deliver safe, quality, and on-time results places us in leading positions to capture this expansive work and grow our business.
Speaker Change: We achieved solid financial results in the first quarter as we continue to expand strong customer relationships through master service in a lot.
Speaker Change: Through Master servicing alliance agreements perform ongoing work for our long term customers and strategically pursue new opportunities, we remain committed to operational consistency and serving as an open and trusted partner for our customers.
Speaker Change: Activity is healthy in both business segments and is reflective of the investments being made to meet the growing electrification domain.
Speaker Change: We believe our experience and proven ability to deliver safe quality and on time results places us in leading positions to capture this expansive work and grow our business.
Rick Swartz: Remaining a strong and nimble partner while executing projects with superior quality enables us to offer to our customers and develop future opportunities. Our financial results and performance continue to reflect a commitment to long-term growth and creating a foundation for future opportunities and success.
Speaker Change: Remaining a strong and nimble partner well executing projects with superior quality enables us to offer to our customers and develop future opportunities.
Speaker Change: Our financial results and performance continued to reflect our commitment to long term growth and creating a foundation for future opportunities and success.
Kelly Huntington: Now Kelly will provide details on our first quarter 2025 financial results. Thank you, Rick, and good morning, everyone. Our first quarter 2025 revenues were $834 million, which represents an increase of $18 million, or 2.2% compared to the same period last year. Our first quarter T&D revenues were $462 million, a decrease of 5.8% compared to the same period last year. The breakdown of T&D revenues was $270 million for transmission and $192 million for distribution. Transmission revenues decreased by $44 million, primarily related to our continued selectivity on clean energy projects, offset by an increase of $16 million in revenue on distribution projects.
Speaker Change: We will provide details on our first quarter 2025 financial results.
Speaker Change: Thank you Rick and good morning, everyone.
Speaker Change: Our first quarter 2025 revenues were $834 million.
Speaker Change: Which represents an increase of $18 million or two 2% compared to the same period last year.
Speaker Change: Our first quarter T&D revenues were $462 million.
Speaker Change: A decrease of five 8% compared to the same period last year.
Speaker Change: The breakdown of T&D revenues was $270 million for transmission and $192 million for distribution.
Speaker Change: Transmission revenues decreased by 44 million, primarily related to our continued selectivity on clean energy projects.
Speaker Change: Offset by an increase of $16 million in revenue on distribution fragile.
Kelly Huntington: Work performed under Master Service Agreements continue to represent approximately 60% of our T&V revenue. C&I revenues were $372 million, an increase of 14.4%, compared to the same period last year due to an increase in revenue on fixed price contracts and C&E contracts. Our gross margin was 11.6% for the first quarter of 2025, compared to 10.6% for the same period last year. The increase in gross margin was primarily due to the larger portion of our project progressing at higher contractual margins, some of which are nearing completion. gross margin was also positively impacted by favorable change orders, better than anticipated productivity, and a favorable job closeout.
Speaker Change: Work performed under Master service agreements continue to represent approximately 60% of our T&D revenues.
Speaker Change: C&I revenues were $372 million, an increase of 14, 4% compared to the same period last year due to an increase in revenue on fixed price contracts.
Speaker Change: Danny contract.
Speaker Change: Our gross margin was 11, 6% for the first quarter of 2025 compared to 10, 6% for the same period last year.
Speaker Change: The increase in gross margin was primarily due to the larger portion of our projects progressing at higher contractual margin some of which are nearing completion.
Speaker Change: Margin was also positively impacted by favorable change orders better than anticipated productivity and a favorable job closeouts.
Kelly Huntington: These margin increases were partially offset by higher costs related to labor and project inefficiencies and unfavorable change orders. T&D operating income margin was 7.8% for the first quarter of 2025, compared to 6.1% for the same period last year. The increase was primarily due to a lower negative impact of significant changes in our estimated gross profit on certain projects, primarily due to fewer labor and project inefficiencies when compared to the same period last year. C&I operating income margin was 4.7% for the first quarter of 2025, compared to 3.5% for the same period last year. The increase was primarily due to a larger portion of our C&I project progressing at higher contractual margins, some of which are nearing completion, as well as favorable change orders.
Speaker Change: These margin increases were partially offset by higher costs related to labor and project inefficiencies and unfavorable changeovers.
Speaker Change: <unk> operating income margin was seven 8% for the first quarter of 2025 compared to six 1% for the same period last year.
Speaker Change: Increase was primarily due to a lower negative impact of <unk>.
Speaker Change: <unk> changes in our estimated gross profit on certain projects, primarily due to fewer labor and project inefficiencies when compared to the same period last year.
Speaker Change: C&I operating income margin was four 7% for the first quarter of 2025 compared to three 5% for the same period last year.
Speaker Change: The increase was primarily due to a larger portion of our C&I projects.
Speaker Change: Wrapping it higher contractual margin some of which are nearing completion as well as favorable change order.
Kelly Huntington: Additionally, C&I operating income for the first quarter of 2024 was negatively impacted by contingent compensation expense related to a prior acquisition that did not recur in the first quarter of 2025. C&I operating income margin was also positively impacted by favorable joint venture results, a favorable job closeout, and better-than-anticipated productivity. These increases were partially offset by higher costs related to labor and project inefficiencies and unfavorable change orders. First quarter 2025 SG&A expenses were $62.5 million, an increase of approximately $300,000 compared to the same period last year. The increase was primarily due to higher employee-related expenses to support future growth and an increase in employee incentive compensation costs.
Speaker Change: Additionally, C&I operating income for the first quarter of 2024 was negatively impacted by contingent compensation expense related to a prior acquisition that did not recur in the first quarter of 2025.
Speaker Change: C&I operating income margin was also positively impacted by favorable joint venture results are favorable closeouts and better than anticipated productivity.
Speaker Change: These increases were partially offset by higher costs related to labor and project inefficiencies and unfavorable exchange rates.
Speaker Change: First quarter 2025, SG&A expenses were $62 5 million.
Speaker Change: An increase of approximately $300000 compared to the same period last year.
Speaker Change: The increase was primarily due to higher employee related expenses to support future growth and an increase in employee incentive compensation costs.
Kelly Huntington: These increases were partially offset by 3.2 million dollars of contingent compensation expense related to a prior acquisition, recognized during the first quarter of 2024. This first quarter 2025 interest expense was $1.4 million, an increase of $300,000 compared to the same period last year. The increase was due to higher average outstanding debt balances, partially offset by lower interest rates. Our first quarter effective tax rate was 28.9%. compared to 18% for the same period last year. The increase was primarily due to no stock compensation excess tax benefits in the first quarter of 2025. First quarter 2025 net income was $23 million compared to net income of $19 million for the same period last year.
Speaker Change: These increases were partially offset by $3 $2 million of contingent compensation expense related to a prior acquisition recognized during the third quarter of 2024.
Speaker Change: First quarter 2025 interest expense was $1 4 million, an increase of $300000 compared to the same period last year.
Speaker Change: Greece was due to higher average outstanding debt balances, partially offset by lower interest rates.
Speaker Change: Our first quarter effective tax rate was 28, 9% compared to 18% for the same period last year.
Speaker Change: Increase was primarily due to stock compensation excess tax benefits in the first quarter at 2025.
Speaker Change: First quarter 2025, net income was $23 million compared to net income of $19 million for the same period last year.
Kelly Huntington: Net income per diluted share of $1.45 increased 29 percent compared to $1.12 for the same period last year. First quarter 2025 EBITDA was $50 million compared to $40 million for the same period last year. Total backlog as of March 31, 2025 was $2.64 billion, 9% higher than a year ago. Total backlog as of March 31, 2025 consisted of $873 million for our T&D segment and $1.77 billion for our C&I segment. First quarter 2025 operating cash flow was $83 million compared to operating cash flow of $8 million for the same period last year. The increase in cash provided by operating activities was primarily due to a reduction in our accounts receivable.
Speaker Change: Net income per diluted share of $1 45 increased 29% compared to $1 12 for the same period last year.
Speaker Change: First quarter 2025, EBITDA was $50 million compared to $40 million for the same period last year.
Speaker Change: Total backlog as of March 31, 2025, with $2 $64 billion nine.
Speaker Change: 9% higher than a year ago.
Speaker Change: Total backlog as of March 31, 2025 consisted of $873 million for our T&D segment and $1 $77 billion for our C&I segment.
Speaker Change: First quarter 2025, operating cash flow was $83 million compared to operating cash flow of $8 million for the same period last year.
Speaker Change: The increase in cash provided by operating activities was primarily due to a reduction in our accounts accounts receivable.
Kelly Huntington: First quarter 2025 free cash flow was $70 million compared to negative free cash flow of $18 million for the same period last year, reflecting the increase in operating cash flow and lower capital expenditure. During the quarter, we repurchased 639,000 shares at an average price of $117.33. exhausting our current share repurchase program. Moving to liquidity in our balance sheet, we had approximately $230 million of working capital, $87 million of funded debt, and $379 million in borrowing availability under our credit facility as of March 31, 2025. We have continued to maintain a strong funded debt-to-eve at that leverage ratio of 0.68 times as of March 31, 2025.
Speaker Change: Quarter 2025 free cash flow was $70 million.
Speaker Change: Compared to negative free cash flow of $18 million for the same period last year, reflecting the increase in operating cash flow and lower capital expenditure.
Speaker Change: During the quarter, we repurchased 639000 shares at an average price of $117.33 exhaust.
Speaker Change: Exhausting, our current share repurchase program.
Speaker Change: Moving to liquidity and our balance sheet, we had approximately $230 million of working capital $87 million of funded debt and $379 million in borrowing availability under our credit facility as of March 31 25.
Speaker Change: We have continued to maintain a strong funded debt to EBITDA leverage ratio of 0.6 to eight times as of March 31 2025.
Kelly Huntington: We believe that our credit facilities, 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.
Speaker Change: We believe that our credit facility strong balance sheet and future cash flow from operations will enable us to meet our working capital needs to support the organic growth of our business pursue acquisitions and opportunistically repurchase shares.
Brian Stern: I'll now turn the call over to Brian Stern, who will provide an overview of our transmission and distribution segment. Thanks, Kelly, and good morning, everyone. Expansion of long-term relationships and winning additional work with customers across the country resulted in solid financial results for our T&D segment in the first quarter. The project before the oath consists of a healthy mix of smaller to mid-sized jobs and master service agreements, which continue to increase backlog. Driven by a growing demand for electricity and the improvement needed to an aging electrical infrastructure, bidding activity remains strong in the sector. The utility market continues to see opportunities, such as the PJM interconnection approval of $5.9 billion in new transmission projects to bolster reliability throughout the grid operator's footprint.
Brian <unk>: I'll now turn the call over to Brian <unk>, who will provide an overview of our transmission and distribution segment.
Brian: Thanks, Kelly and good morning, everyone.
Brian: Expansion of long term relationships and winning additional work with customers across the country resulted in solid financial results for our T&D segment in the first quarter.
Brian: Project portfolio consists of healthy mix of smaller to mid sized jobs and master service agreements, which continued to increase backlog.
Brian: Driven by a growing demand for electricity and the improvement needed from aging electrical infrastructure bidding activity remains strong in the segment.
Brian: The utility market continues to see opportunities such as the PJM interconnection approval of $5 $9 billion of new transmission projects to bolster reliability throughout the grid operators footprint also MISO continue to add to it some offerings transmission planning by improving tranche two one plans of <unk>.
Brian Stern: Also, MISO continued to add to its long-range transmission planning by approving Tronch 2.1 plans of $6.7 billion in December 2024. We believe these significant investments in electrical infrastructure present many exciting opportunities for growth across our society. who have strong existing relationships with several utility customers. We will continue to monitor and strategically pursue project opportunities in the U.S. and Canada to further strengthen our market presence. as we continue serving our long-standing customers through MSAs and alliances. We were also awarded a variety of transmission, distribution, and substation work across the country in the first quarter, including a sizable transmission line rebuilding project in Virginia.
$6 7 billion in December 2024.
Brian: We believe these significant investments in electrical infrastructure present, many exciting opportunities for growth across our subsidiaries strong existing relationships with several utility customers in the region.
Brian: We will continue to monitor strategically pursue project.
Brian: Right.
Brian: And others in the U S and Canada to further strengthen our market presence.
Brian: As we continue serving our long standing customers through Msas and alliance agreements.
We were also awarded a variety of transmission distribution and substation work across the country in the first quarter, including a sizable transmission line rebuilding project in Virginia.
Brian Stern: In conclusion, we continue to evaluate, improve, and grow our T&E business. Our first quarter results reflect our ability to effectively listen to and work with our customers to meet or exceed their expectations. We will remain disciplined in our efforts to capitalize on the right opportunities.
Brian: In conclusion, we continue to evaluate improve and grow our T&D business, our first quarter results reflect our ability to effectively listen to and work with our customers to meet or exceed their expectations.
Brian: <unk> discipline and our efforts to capitalize on the right opportunities.
Don Egan: We will continue to invest in the development and safety of our talented teams. I will now turn over the call to Don Egan, who will provide an overview of our commercial and industrial sectors. Thanks, Brian, and good morning, everyone. Our C&I segment achieves solid results in the first quarter as we continue to execute projects of various sizes in close collaboration with our valued customers while strategically monitoring and pursuing new opportunities. Our chosen core markets remain strong and present a healthy bidding environment as we captured additional work this quarter in data centers, healthcare, industrial, and clean energy, just to name a few.
Brian: We will continue.
Brian: To invest in the development and safety of our talented team.
Brian: I will now turn over the call to Donnie again, who will provide an overview of our commercial and industrial segment.
Donnie: Thanks, Brian and good morning, everyone.
Our C&I segment achieved solid results in the first quarter as we continued to execute projects of various sizes and close collaboration with our valued customers, while strategically monitoring and pursuing new opportunities are chosen core markets remained strong and present, a healthy bidding environment as we captured additional work this quarter in data centers.
Donnie: Industrial and Green energy just to name a few.
Don Egan: Recently, Sturgeon was verbally awarded Phase I, a large-scale data center project in Colorado valued at over $90 million, which we anticipate being added to our backlog in the coming quarters. Additionally, CSI and Sturgeon were awarded water treatment projects in California and Colorado, respectively, while Sturgeon also won projects in healthcare, transportation, and municipality projects.
Recently Sturgeon was verbally awarded phase one large scale data center project in Colorado valued at over $90 million, which we anticipate being added to our backlog in the coming quarters.
Digitally geoscience 30 and were awarded water treatment projects in California, and Colorado, respectively. While surgeon also won projects in healthcare transportation and municipality projects out East <unk> was awarded solar industrial work in Maine, and human electric one higher education.
Don Egan: Out East, E.S. Boulos was awarded solar and industrial work in Maine, and Huon Electric won higher education, solar, and municipality projects in New York. We're also pursuing exciting opportunities for sizable data center projects this year across various subsidiaries, and it's a fact that some data center contracts are already in place to increase due to project expansion to meet the growing demand to support our official intelligence. The American Institute of Architects Consensus Construction Forecast released in January projects further growth for our core markets in 2025, with positive forecasts of 22% in data centers, 4% increases in both health care and education construction spend, and 3% in manufacturing.
Donnie: The municipality projects in New York.
Donnie: We're also pursuing exciting opportunities for sizable data center projects this year across various subsidiaries.
Donnie: Some data center contracts already in place to increase due to project expansion to meet the growing demand to support artificial intelligence.
Donnie: The American Institute of architects consensus construction forecast released in January projects further growth for our core markets in 2025 with positive forecast of 22% in data centers, 4% increases in both healthcare and education construction spend and 3% in manufacturing this.
Don Egan: This growth is also reflected in the Dodge Momentum Index figures reported in recent months. The latest Dodge Momentum Index report released in April found the overall index in February was up 30% compared to the previous year, and the commercial segment was up 32% from February of 2024. In summary, we believe these encouraging forecasts in our core markets could generate growth for our business as we continue to leverage our expertise to place us in leading positions strategically capturing future opportunities. I thank all of our employees for their daily commitment to safely executing projects and delivering exceptional quality and value to our customers.
Donnie: This growth is also reflected in the Dodge momentum index figures reported in recent months. The latest Dodge momentum Index report released in April on the overall index in February was up 30% compared to the previous year and the commercial segment was up 32% from February of 2024.
Donnie: In summary, we believe these encouraging forecasts in our core markets could generate growth for our business as we continue to leverage our expertise to place us in leading positions strategically capture future opportunities.
Donnie: Thank all of our employees.
<unk> commitment to safely executing projects and delivering exceptional quality and value to our customers.
Don Egan: I look forward to all the important work ahead of us this year and beyond.
Donnie: I look forward to all the important work ahead of us this year and beyond.
Don Egan: Thanks, everyone, for your time today.
Rick Swartz: I will now turn the call back to Rick, who will provide us with some closing comments. Thank you for those updates, Kelly, Brian, and Don. Our first quarter performance demonstrates the stability of our core markets, the strength of our operational teams, and the depth of our customer relationships. We will continue our commitment to sound business strategies and strong operating principles while remaining proactive and disciplined in a dynamic energy landscape. I am proud of the performance across both our market segments, which is a testament to the tireless work, skill, and ongoing training of our amazing employees.
Donnie: Thanks, everyone for your time today.
Rick Swartz: I'll now turn the call back to Rick who will provide us with some closing comments.
Speaker Change: Thank you for those updates Kelly, Brian and Dawn.
Rick Swartz: Our first quarter performance demonstrates the stability of our core markets the strength of our operational teams and the depth of our customer relationships. We will continue our commitment to sound business strategies and strong operating principles, while remaining proactive and disciplined in a dynamic energy landscape.
Rick Swartz: I am proud of the performance across both our market segments, which is a testament to the tireless work skill and ongoing training of our amazing employees.
Rick Swartz: I thank each of them for their efforts to safely and consistently deliver high-quality electrical construction services and generate value for our customers. We will continue to invest in the safety and development of our teams across the company because they are the catalyst to our success.
Rick Swartz: I, thank each of them for their efforts to safely and consistently deliver high quality electrical construction services.
Rick Swartz: And generate value for our customers, we will continue to invest in the safety and development of our teams across the company.
Rick Swartz: They are the catalyst to our success.
Rick Swartz: Finally, I would like to thank all of you for your continued support of MYR Group. We look forward to growing our business in 2025, serving our customers as a trusted and nimble partner, and creating value. for our communities and shareholders.
Rick Swartz: Finally, I would like to thank all of you for your continued support of MYR group, we look forward to growing our business in 2025, serving our customers as a trusted a nimble partner in creating value.
Speaker Change: For our communities and shareholders operator, we're now ready to open the call up for comments and questions.
Operator: Operator, we're now ready to open the call up for comments and questions. As a reminder, for those of you on the phone, if you have a question, please press star 11 on your telephone, and then wait until you hear your name announced. To withdraw your question, please press star 11 again. Please stand by while I compile the Q&A roster. One moment for our first question.
Rick Swartz: As a reminder for those of you on the phone that's a.
Rick Swartz: A question. Please press star one on your telephone and wait until you hear your name millions to withdraw your question. Please press star one again.
Rick Swartz: First of all in by or compile the Q&A roster.
Rick Swartz: One moment for our first question.
Atidrip Modak: Our first question will come from Atidrip Modak from Goldman Sachs. Your line is open. Hi, good morning, team. I guess on the CNI side, revenue was strong, margin was strong. I'm just curious how you are looking at the backlog and pipeline of opportunities there. I know you mentioned some of the end markets.
Rick Swartz: Our first question comes from the line of.
Speaker Change: How do we model from Goldman Sachs. Your line is open.
Speaker Change: Hi, Good morning game I guess on the C&I side revenue was strong margin was strong I'm just curious.
Speaker Change: How you are looking at the backlog and pipeline of opportunities that I know you mentioned some of your end markets.
Rick Swartz: But in wondering about the impacts of the macro in the potential timing of the backlog and anything that you are hearing from customer conversations there would be From our standpoint, still having very active conversations with our clients. We haven't seen anybody pull back or say they're pulling back in any way to date. Continue, as I said, to see an active market, and I think it right now points positive going forward. I know there's a lot of discussions around tariffs, and we continue to have those daily with our clients of how that's going to affect their projects, how inflation is going to affect them.
Speaker Change: But.
Speaker Change: Wondering about the impacts of the macro and the potential timing of the backlog and anything that you are hearing from customer conversations that would be helpful.
Speaker Change: From our standpoint is still having very active conversations with our clients, we haven't seen anybody pull back or say theyre pulling back in any way to date.
Speaker Change: Continue as I said to see an active market and I think.
Speaker Change: Right now points positive going forward I know, there's a lot of.
Speaker Change: Discussions around tariffs and we continue to have those daily.
Speaker Change: With our clients of how that's been a factor projects, how inflation is going to affect them.
Rick Swartz: But to date, we haven't seen any pullback.
Speaker Change: To date, we haven't seen any pullback.
Speaker Change: Got it and then maybe one for Kelly.
Kelly Huntington: WHAT WOULD YOU SHARE THE PURCHASE RANKING WITH KELLY HUNTINGTON OR SANGITA JAIN ON THE ее Yeah, thanks. We continue to prioritize growth with respect to our capital allocation strategy. So you know, that means supporting the organic growth that we see this year, as well as being in the position to make the right acquisitions. You know, we continue to be in a strong financial position.
Speaker Change: Guys authorized an exhausted the share repurchase this quarter.
Speaker Change: I'm just curious how youre thinking about that for the rest of the yard and just overall capital allocation priorities for this year.
Speaker Change: Yes.
Speaker Change: Yes, I think that we continue to prioritize growth with respect to our capital allocation strategy.
Speaker Change: That means supporting the organic growth that we see this year and as well as being in the position to make the right acquisition.
Speaker Change: We continue to be in a strong financial position.
Kelly Huntington: But we're not announcing another share repurchase program at this time. But I think, as you've seen in the past, we can be nimble and as we monitor the markets and our growth prospects, we can put in a program quickly, if that makes sense. Absolutely, thank you. Thank you.
Speaker Change: We're not announcing another share repurchase program at this time, but I think as you've seen in the past, we can be nimble and as we monitor the markets and our growth prospects. They can put in a program quickly if that makes sense.
Speaker Change: Yes.
Speaker Change: Absolutely. Thank you.
Sangita Jain: One moment for next question. Our next question comes from Sangita Jain from KeyBank. Your line is open. Yeah, good morning. Thank you for taking my question.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of sung <unk>.
Speaker Change: Jane from Keybanc Your line is open.
Jane: Yes. Good morning, Thank you for taking my question Kelly.
Kelly Huntington: Kelly, if I can ask one more on the on the capital allocation, your free cash flow this quarter was considerably stronger than at least what we were anticipating. So just trying to see if there was any kind of like, one time ish in there and how we should think about your free cash flow for the rest of the year. And more color maybe on why you wouldn't want to extend your share buyback authorization?
Jane: Kelly if I can ask one more on the on the capital allocation your free cash flow this quarter was considerably stronger than at least what we were anticipating.
Jane: So just trying to see if there was any kind of like.
Jane: One time ish.
Jane: And how we should think about your free cash flow for the rest of the year.
Jane: And more color maybe on why you wouldn't want to extend your share buyback authorization.
Kelly Huntington: Sure. So, on the last call, we mentioned some positive leading indicators from third quarter to fourth quarter 24. You know, we saw an over $30 million reduction in our pending change orders and over a $40 million reduction in retainage. So, that did translate to cash collections in first quarter driving higher operating and free cash flows.
Jane: Sure. So on the last call we mentioned some positive leading indicators from third quarter to fourth quarter 2004.
Jane: At over $30 million reduction in our pending change orders and over $40 million reduction in retaining and so that did translate to cash collections in the first quarter driving higher operating and free cash flow.
Kelly Huntington: You know, I think as we look forward, as we've talked about before, there's not a good rule of free cash flow conversion for our business, particularly in the near term. But maybe just to give some color on some of the pluses and minuses as we look forward, you know, on the positive side, our increased profitability this year should drive, you know, positive operating cash flow. On the negative side, you know, we are a little below our historic CSO average. So, that could be a headwind, especially as interest rates remain relatively high, you know, payment terms continue to be more of a focus in our contract negotiations.
Jane: I think as we look forward as we've talked about before there is not a good rule of thumb for free cash flow conversion for our business.
Jane: Clearly in the near term.
Jane: Maybe just to give some color on some of the pluses and minuses as we look forward on the positive side, our increased profitability this year should drive.
Jane: Operating cash flow.
Jane: On the negative side, we are a little below our historic DSO average so that could be a headwind, especially as <unk>.
Jane: Interest rates remain relatively high payment terms continue to be more of a focus in our contract negotiations.
Kelly Huntington: And as we've seen, you know, MSAs are increasing, an increasing percentage of our revenues. So, that along with selectivity on clean energy and kind of the lumpiness of large projects can mean less opportunity to get into a, you know, a really strong overbill position, like we saw back at the end of 2022.
Jane: As we've seen your msas are increasing and increasing percentage of our revenues.
Jane: So that along with selectivity on clean energy and kind of the Lumpiness of large project can be less opportunity to get into a really strong overbuild position like we thought back at the end of 2022.
Kelly Huntington: So I'd say, you know, that's at least some of the pluses and minuses we've seen.
Jane: So I'd say that there'll be some of the pluses and minuses, we see Rick did you want to give any more color on share repurchase we are sensitive to how much for declines to that overtime.
Rick Swartz: Rick, did you want to give any more color on share repurchase? You know, we are sensitive to how much we're deploying to that over time. Yeah, for us, it's just that balancing act. When we see the opportunities to organically grow our business, we want to make sure that that we can continue to do that. And then, you know, we're always looking at acquisitions. So those opportunities are out there, we just want to make sure we're patient and find the right ones. But as Kelly said, we've shown in the past, we can, you know, basically deploy our capital, you know, whether it's acquisitions, organic growth, or through share repurchase, and we try to balance that on the opportunities that are out there to continue to grow our business.
Rick Swartz: Yes for us, it's just that balancing act when we see the opportunities to organically grow our business, we want to make sure that that we can continue to do that and then we're always looking at acquisitions, though.
Speaker Change: Those opportunities are out there we just wanted to make sure we're buying the right ones, but as Kelly said, we've shown in the past we can base.
Speaker Change: Basically deploy our capital, whether it's acquisitions organic growth or through share repurchase and we try to balance out on the opportunities that are out there to continue to grow our business.
Sangita Jain: That's helpful.
Rick Swartz: And if I can ask one more, Rick, you mentioned in your prepared comments that positive margins this quarter in T&D partly were a function of burning off some higher margin projects. I just kind of want to make sure that what is coming behind that is not necessarily lower margin than this. So I'm hope what I want to see is if we can continue to see you work towards that seven to ten and a half percent margin target for the year. Yeah, yeah, I think we're for us, nothing's changed, we should be in that mid part of our margin profile.
Speaker Change: Got it that's helpful. And then if I can ask one more Rick you mentioned in your prepared comments that positive margins.
Speaker Change: This quarter in T&D Park, you were a function of burning of some higher margin projects.
Speaker Change: I, just kind of want to make sure that what is coming behind that is not necessarily lower margin than theirs. So im hope.
Speaker Change: To see if we can continue to see you work towards that seven to 10, 5% margin target for the year.
Speaker Change: Yes, I think were for US nothing's changed we should be in that mid part of our margin profile. That's the way, we we saw coming into this year and we still see that so when I look at the 7% to 10, 5%.
Sangita Jain: That's the way we we saw coming into this year. And we still see that. So when I look at the seven to 10 and a half percent, we should be in that that mid range by year end and, you know, continue continue our trend from there. Got it. Appreciate it. Thanks for taking my questions.
Speaker Change: Should be in that mid range by year end.
Speaker Change: Continue our trend from there.
Speaker Change: Alright, I appreciate it thanks for taking my questions.
Sangita Jain: Thank you.
Jonathan Braatz: One moment for our next question. Our next question will come from the line of Braatz from KCCA. Good morning, everyone. Rick, just sort of a broad question. With the new administration and issues with the Inflation Reduction Act and maybe the tariffs on solar product, solar panels. Are you seeing any change in thinking from the utilities on clean energy projects at this point? I think from a developer standpoint, I mean, any kind of price increase, I mean, those are really financially driven models of whether those are, you know, economically feasible to build. I think that always comes into play.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line.
Speaker Change: Brats from Casey.
Speaker Change: Your line.
Speaker Change: Good morning, everyone.
Speaker Change: Good morning.
Speaker Change: Rick.
Speaker Change: Sure.
Speaker Change: A broad question with the New administration.
Speaker Change: Issues with the inflation reduction act and maybe.
Speaker Change: With the.
Speaker Change: The tariffs on solar product.
Speaker Change: Solar solar panels.
Speaker Change: Are you seeing any change in thinking from.
Speaker Change: From the utilities on clean energy projects.
Speaker Change: At this point.
Speaker Change: I think from from a developer standpoint, I mean, any kind of price increase I mean, those are really financially driven models of whether those are economically feasible.
Speaker Change: To build I think that always comes into play so I would say there and there could be some pausing on that side a little bit in <unk>.
Rick Swartz: So I would say, you know, there could be some pausing on that side a little bit in a couple geographic areas where we work, and we've seen that over the last, you know, couple quarters. But for us, we've really been selective on what we take on on our T&D side. And then, as I said, on our C&I side, that market remains strong in the areas we're in today. So we haven't seen that pullback to date. Again, tariffs or inflation can affect those projects. But the rest of our core business, we really haven't seen it affect our conversations there at all.
Speaker Change: Couple of geographic areas, where we work and we've seen that.
Speaker Change: Over the last couple of quarters, but for US we've really been selective on what we take on on our TMT side, and then as I said on a C&I side.
Speaker Change: Does that market remains strong in the areas. We're in today. So we haven't seen that pull back to date.
Speaker Change: Again.
Speaker Change: Tariffs or inflation can affect those projects, but the rest of our core business.
Speaker Change: We really haven't seen it.
Speaker Change: <unk> there at all.
Jonathan Braatz: All right. Thank you.
Kelly Huntington: And Kelly, back to the free cash flow, it was so strong in the quarter. Would you imagine that as you go forward, you have to dip into your credit lines for working capital purposes? I would just refer back to the comments I gave in response to Sangita's question. We see some pluses and minuses, but I think we're in a good financial position right now. Of course, if we look forward from a leverage perspective, the second quarter of last year, we had those bigger losses that will be rolling off as part of the calculation. Okay. All right.
Speaker Change: Okay alright, thank you.
Speaker Change: Kelly back to the free cash flow. It was so strong in the quarter well what do you imagine that as you go forward do you you have to.
Speaker Change: Dip into your credit lines.
Speaker Change: Two for working capital purposes.
Speaker Change: I would just refer back to the comments I gave in response to <unk> question, you know <unk> been pluses and minuses, but we're in a good financial position right now and of course as we look forward from a leverage perspective, you know are at the second quarter of last year at rehab those bigger losses that will be rolling.
Speaker Change: And as part of that calculation.
Kelly Huntington: Thank you, Kelly.
Tony: Alright, Thank you Tony.
Justin Hauke: Thank you, one moment for our next question. Our next question comes from Justin Hauke from Baird. Your line is open. Great. A lot of questions I had have already been asked. I guess the one I wanted to ask about was just, you know, kind of CapEx has been like the last couple of quarters.
Speaker Change: Yes, one moment our next question.
Speaker Change: Our next question comes from the line of Justin Hauke from Baird. Your line is open.
Speaker Change: Great.
Justin Hauke: Lot of the questions I had have already been asked but I guess the one I wanted to ask about was just kind of Capex has been like the last couple of quarters and I was just curious.
Rick Swartz: And I was just curious if you've seen any shift in kind of purchasing decisions or maybe using rental assets instead of buying equipment. Because, you know, ahead of tariffs and just, you know, how rapidly costs are shifting in the environment for some of the equipment that bucks and things that you buy. Yeah, I think if you look at our lower capital expenditures in the first quarter, that was really just due to timing and, you know, how the receipt of fleet and equipment is kind of rolling out. You know, historically, we've seen CapEx as a percentage of revenue average around the mid 2% level.
Justin Hauke: You've seen any shift in kind of purchasing decisions or maybe using rental assets instead of buying equipment.
Justin Hauke: Because ahead of tariffs and just how rapidly costs or are you shifting environment for.
Justin Hauke: Some of the equipment the box increase with Dubai.
Justin Hauke: Yes, I think if you look at our lower capital expenditure than the first quarter that was really just due to timing and how the receipt of fleet and equipment is kind of rolling out you know.
Justin Hauke: Historically, we've seen capex as a percentage of revenue average around that 2% level.
Rick Swartz: So, you know, I'd say we continue to see that as a good benchmark going forward. And that could take a little higher or lower, depending on whether our growth is more weighted to T&D or C&I. But no, we haven't made any significant shifts in how we're looking at how we procure our fleet and equipment. You know, a lot of that we purchase and we do use rentals and leasing as well. And rentals in particular kind of throttle up and down as we see demand in different markets changing.
Justin Hauke: I'd say, we continue to see that as a good benchmark going forward and that could tick a little higher or lower depending on whether our growth is more weighted to T&D or C&I.
Justin Hauke: But no we haven't made any.
Justin Hauke: Significant shifts in how we're looking at how we procure our fleet and equipment.
Justin Hauke: A lot of that repurchase and we do use.
Justin Hauke: Rentals and leasing as well in rentals in particular kind of throttle up and down as we see.
Justin Hauke: The demand in different markets that changing.
Rick Swartz: And then I guess my other one, just from a modeling perspective, I think, so the T&D, I guess, particularly the transmission side, the pressure from the roll off of some of those larger clean energy projects, I just wanted to kind of confirm, I think 2Q is the last. Yeah, I would say nothing, you know, changed from what we said before. Right now, I would look at it as still that, you know, higher single-digit growth for the core T&D segment, and, you know, overall, minus solar. So when you take solar out of it, you know, the core T&D business, we expect to grow, but we, you know, that mid-single digit, or that higher single digit, with the offset of solar there, though.
Justin Hauke: Okay.
And then I guess my other one just from a modeling perspective I think.
Justin Hauke: So the.
Justin Hauke: T&D.
Justin Hauke: I guess, particularly the transmission side.
Justin Hauke: The pressure from the roll off of some of those larger clean energy project just wanted to kind of confirm I think Q2 is the last one.
Justin Hauke: You want to call it a headwind.
Justin Hauke: From a growth perspective and so.
Justin Hauke: We're thinking about revenue growth I guess, probably think <unk> remains pretty modest and then we get the second half of the year and see more of that underlying single digit type growth.
Speaker Change: You guys are outside of that.
Speaker Change: I just want to confirm that yes, I would say nothing's changed from what we said before right now I would look at it is still that.
Speaker Change: Higher single digit growth for the core T&D segment.
Speaker Change: And overall minus solar so when you take solar out of it.
Speaker Change: The core T&D business, we expect to grow but.
Speaker Change: That that mid single digit for that higher single digit.
Speaker Change: With the offset of solar there, though so that is a headwind so the solar revenue we have.
Rick Swartz: So that is a headwind, so the solar revenue we have. Yeah, and I think that's consistent with what we saw in the quarter, you know, where if you just look at that core T&D business that was up in the high single digits year over year. so in line with that. Yeah, right.
Speaker Change: Yes, I think thats consistent with what we saw in the quarter, where if you just look at that core T&D business that was up in the high single digit year over year.
Speaker Change: So in line with that.
Rick Swartz: I guess I was more curious when the bowler had It all rolls off. I think QQ is still pretty significant, but, you know, you got your ag there. Yeah, so just kind of a recap of what we shared last year about solar within T&D. So as the second quarter year to date, we had said that represented about 15% of our T&D revenues. That declined to 12% as of 9-30 year to date last year and was down to 10% for the full year last year. And we did mention in the fourth quarter last year that it was 4% of our T&D revenues and that has further declined here in the first quarter of 25.
Speaker Change: Yeah right.
Speaker Change: Mortgage curious when the polar headwind.
Speaker Change: We'll rolls off I think Q2 is still pretty significant but yes, you guys correct, yes, yes.
Speaker Change: So just kind of a recap of what we shared last year about solar with MTN DSO as of second quarter year to date, we've set that represented about 15% of our T&D revenues declined.
Speaker Change: Declined 12%.
Speaker Change: As of 930 year to date last year and was down to 10%.
Speaker Change: For the full year last year, and we did mention in the fourth quarter last year that it was 4% of our T&D revenues and that has further declined here in the first quarter of 'twenty five.
Rick Swartz: All right, that's what I thought.
Rick Swartz: Thank you very much.
Speaker Change: Alright, that's what I thought.
Speaker Change: Thank you very much.
Speaker Change: Thanks.
Operator: Thank you. As a reminder, that's Star 101 for questions. One moment for our next question.
Speaker Change: As a reminder, that star one for questions one moment for our next question.
Brian Brophy: Our next question will come from Brian Brophy from Stiefel, your line is open. Thanks, good morning everybody. I think I heard you mention in your opening comments the Sizable Transmission Award in Virginia. I guess I hear that right.
Speaker Change: Our next question comes from the line of Brian Brophy from Stifel. Your line is open.
Brian Brophy: Thanks, Good morning, everybody.
Brian Brophy: I think I heard you mentioned in your opening comments the sizable transmission award in Virginia.
Rick Swartz: Is there any more color you can provide on that project, whether it's the name or any other information, and how should we be thinking about timing and size of that project? For us, that's a mid-sized project, so it wasn't a large project, you know, we kind of classify projects, you know, large projects, 100 million plus, we always try to give a little color around if the client will let us. In this case, the client's not letting us disclose a lot, so with that being said, you know, the project will burn through this year. It's a good project for us, and we're happy to have it, and we're seeing, you know, a lot of long-term opportunities beyond this year, and as I said, you know, anything we capture on a large project size today really wouldn't come in.
Speaker Change: I hear that right is there any more color you can provide on that project.
Brian Brophy: Naeem.
Brian Brophy: Or any other information and how should we be thinking about timing and size of that project.
Brian Brophy: For us that's a.
Brian Brophy: Mid sized projects. So it wasn't a large projects, we kind of classify projects large large projects $100 million plus we always try to give a little color around that if the client will lead us in this case.
Brian Brophy: Clients not letting us disclose a lot. So so with that being said the project will will burn through this year.
Brian Brophy: It's a good project for us and we're happy to have it and we're seeing a lot of long term opportunities beyond this year and as I said anything we capture on a large project side.
Brian Brophy: Hey.
Rick Swartz: You know, though it would affect our backlog, we wouldn't really start burning any revenue on it until, you know, the end of the year or the beginning of next year, so anything we capture today would really be more burned in 26 and affect our revenue then. Okay, that's helpful.
Brian Brophy: Really wouldn't come in.
Brian Brophy: Beck, our backlog, we wouldn't really start Brian any revenue on it until the end of the year or the beginning of next year. So anything we capture today would really be more burned in 2006 and affects our affect our revenue.
Rick Swartz: And then I wanted to also ask a question on tariffs. How should we think about that impacting your cost profile, particularly on the C&I side where you guys have more fixed price contracts, and should we think about that potentially impacting your market performance at all this year? It could. I don't want to say there could be no impact from it. I think it's unknown at this time. I mean, the unknown side is the headlines change every 10 minutes as far as, you know, tariffs and how it could affect us and what tariffs are going to be in place.
Speaker Change: Okay. That's helpful. And then wanted to also ask.
Brian Brophy: A question on tariffs.
Speaker Change: How should we think about that impacting your cost profile.
Speaker Change: Particularly on the C&I side, where you guys have more fixed price contracts.
Speaker Change: And should we think about that potentially impacting your margin performance at all this year.
Speaker Change: Okay.
Speaker Change: It could I don't want to say there could be no impact from it I think it is unknown at this time I mean, the unknown side as the headlines change every every 10 minutes as far as <unk>.
Speaker Change: Tariffs and how it could affect us in and what tariffs are going to be in place. So we continue to watch. It. We've got teams that are very focused on that we're having conversations with our clients daily.
Rick Swartz: So we continue to watch it. We've got teams that are very focused on that. We're having conversations with our clients daily on that. I would say the newer contracts we have in place today have stronger language than the ones that, you know, some of the older ones that are in our backlog. But again, we continue to monitor it. You know, right now, I would say we, you know, as we see it today, we still expect to be in that mid range of our margin profiles that we've given. But again, we're watching it closely.
Speaker Change: That I would say the newer contracts we have in place today have stronger language than the ones that.
Speaker Change: Some of the older ones that are in our backlog, but again, we continue to monitor it.
Speaker Change: Right now I would say.
Speaker Change: We see it today, we still expect to be in that mid range of our margin profiles that.
Speaker Change: That we've given but.
Speaker Change: Again, we are watching it closely and if anything changes we would definitely light.
Rick Swartz: And if anything changes, we would definitely let everyone know.
Speaker Change: No.
Rick Swartz: Okay, thanks. I'll pass it on.
Speaker Change: Okay. Thanks, I'll pass it on.
Operator: Thank you.
Speaker Change: Yes.
Rick Swartz: And I'm not showing any further questions in the queue, I would now like to turn the call back over to Rick Swartz for any additional request or remarks. To conclude, on behalf of Kelly, Brian, Don, and myself, I sincerely thank you for joining us on the call today. I do not have anything further, and we look forward to working with you going forward and speaking with you again on our next conference call.
Speaker Change: And I'm not showing any further questions in the queue I would now like to turn the call back over to Rick Swartz for any additional or closing remarks.
Speaker Change: To conclude on behalf of Kelly, Bryan, Dan and myself I sincerely. Thank you for joining us on the call today I do not 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.
Rick Swartz: Until then, stay safe.
Operator: This concludes today's conference call. We thank you for your participation. You may now disconnect.
Speaker Change: This concludes today's conference call. We thank you for your participation you may now disconnect everyone have a great day.
Operator: Everyone have a great day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.