Q3 2025 MYR Group Inc Earnings Call
Kelly Huntington: Good morning, everyone.
Speaker #2: Good morning everyone and welcome to the MYR GROUP INC. . Third quarter 2025 Earnings Results conference call . At this time , all participants are in a listen only mode .
Operator: Welcome to the MYR Group Inc. third quarter 2025 earnings results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Jennifer Harper, MYR Group Inc.'s Vice President of Investor Relations and Treasurer. Please go ahead, Jennifer.
Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .
Speaker #2: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.
Speaker #2: Today's conference is being recorded . At this time , for opening remarks and introductions , I would like to turn the call over to Jennifer Harper MYR GROUP INC. vice President of Investor Relations and Treasurer .
Speaker #2: Please go ahead . Jennifer .
Jennifer Harper: Thank you and good morning everyone. I would like to welcome you to the MYR Group Inc. conference call to discuss.
Speaker #3: Thank you and good morning , everyone . I would like to welcome you to the MYR GROUP INC. conference call to discuss the company's third quarter results for 2025 , which were reported yesterday .
Kelly Huntington: The company's third quarter results for 2025.
Jennifer Harper: Which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer, Kelly Huntington, Chief Financial Officer, Brian Stern, Chief Operating Officer of MYR Group Inc.'s Transmission & Distribution segment, and Don Egan, Chief Operating Officer of MYR Group Inc.'s Commercial & Industrial segment. A copy of yesterday's press release is available on the MYR Group Inc. website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for seven days following the call. Please note, today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group Inc.'s management as of this date and MYR Group Inc. 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.
Speaker #3: Joining us on today's call are Rick Schwartz , President and Chief Executive Officer . Kelly Huntington Senior Vice President and Chief Financial officer , Brian Stern .
Speaker #3: Senior vice chief operating officer of MYR GROUP INC. transmission and Distribution Segment and Don Egan senior vice president and chief operating officer of MYR GROUP INC. Commercial and Industrial segment .
Speaker #3: A copy of yesterday's press release is available on the MYR GROUP INC. website at MYR GROUP INC. . Under the investors tab . A webcast replay of today's call will be available on the website for seven days following the call .
Speaker #3: A copy of yesterday's press release is available on the MYR GROUP INC. website at MYR GROUP INC. . Under the investors tab . A webcast replay of today's call will be available on the website for seven days following the call president and available to MYR GROUP INC. management as of this date and MYR GROUP INC. assumes no obligation to update any such forward looking statements .
Speaker #3: 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 .
Jennifer Harper: Accordingly, these statements are no guarantee of future performance. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K and quarterly report on Form 10-Q. In yesterday's press release, certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that, let me turn the call over to Rick Swartz.
Speaker #3: For more information , please refer to the Risk factors discussed in the company's most recently filed annual Report on Form 10-K and Quarterly Report on Form 10-q , and in yesterday's press release .
Speaker #3: Certain non-GAAP Financial measures will also be presented . A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release .
Speaker #3: With that , let me turn the call over to Rick Schwartz .
Rick Swartz: Thanks, Jennifer. Good morning, everyone. Welcome to our third quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the third 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 segments' performance and discuss some of MYR Group Inc.'s opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. The strength of our long-term customer relationships and a strong market position resulted in a solid third quarter performance. Our teams continue to execute projects with operational excellence and expand existing client relationships through master service and alliance agreements across our districts.
Speaker #4: Thanks , Jennifer . Good morning , everyone . Welcome to our third quarter 2025 conference call to discuss financial and operational results . I will begin by providing a summary of the third quarter results , and then we'll turn the call over to Kelly Huntington , our chief Financial officer , for a more detailed financial review .
Speaker #4: Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our TMD and CNI segments, will provide a summary of our segments' performance and discuss some of MYR Group Inc.'s opportunities going forward.
Speaker #4: I will then conclude today's call with some closing remarks and open the call up for your questions . The strength of our long term customer relationships and a strong market position resulted in a solid third quarter performance .
Speaker #4: Our teams continued to execute projects with operational excellence and expand existing client relationships through master service and alliance agreements across our districts . Bidding activity remains healthy as we strategically pursue and capture new opportunities that position us for potential future growth .
Rick Swartz: Bidding activity remains healthy as we strategically pursue and capture new opportunities that position us for potential future growth. The Edison Electric Institute's 2024 Financial Review, released earlier this month, projects that U.S. investor-owned utilities will exceed $1.1 trillion in combined capital investments for 2025 through 2029. More than $123 billion of this is forecasted to be spent on transmission in the first three years from 2025 to 2027. The report also found that electric utilities are on pace to spend nearly $208 billion on grid upgrades and expansions in 2025, the highest amount ever. Growing demand for electrification, a focus on grid modernization and hardening, and technology advancements continue to be strong market drivers and could present opportunities for consistent success across our business.
Speaker #4: The Edison Electrical Institute's 2024 Financial Review , released earlier this month , projects that U.S. investor owned utilities will exceed $1.1 trillion in combined capital investments for 2025 through 2029 .
Speaker #4: More than $123 billion of this is forecasted to be spent on transmission in the first three years from 2025 to 2027 . The report also found that electric utilities are on pace to nearly $208 billion on grid upgrades , and expansions in 2025 .
Speaker #4: The highest amount ever growing demand for electrification . A focus spend on grid modernization and hardening , and technology advancements continue to be strong .
Speaker #4: Market drivers and could present opportunities for consistent success across our business . According to Fmi's 2025 , North American Engineering and Construction Outlook released in July , chosen key markets for our CNA segments are forecasted for healthy growth through 2025 and into 2026 , including data centers , transportation , healthcare , education and wastewater construction .
Rick Swartz: According to FMI's 2025 North American Engineering and Construction Outlook released in July, chosen key markets for our C&I segment are forecasted for healthy growth through 2025 and into 2026, including data centers, transportation, health care, education, and wastewater construction. By expanding existing relationships with our preferred customers and strategically bidding and expanding work in our chosen markets, we continue to experience a steady backlog of work and could see potential growth moving forward. As always, our greatest strength lies within our talented and dedicated employees. We continue to develop and empower our teams to reach their highest potential as we grow our company. Our team members strive to provide excellence in safety and project delivery, helping our customers achieve their business goals. Now Kelly will provide details on our third quarter 2025 financial results.
Speaker #4: By grow our company As . Our team members strive to provide excellence in safety and project delivery , helping our customers achieve their business goals .
Speaker #4: expanding existing relationships with our preferred customers and strategically bidding and expanding work in our chosen markets , we continue to experience a steady backlog of work and could see potential growth moving forward .
Speaker #4: Now , Kelly will provide details on our third quarter 2020 financial results .
Kelly Huntington: Thank you Rick and good morning everyone. Our third quarter 2025 revenues were $950 million, which represents an increase of $62 million, or 7% compared to the same period last year. Our third quarter T&D revenues were $503 million, an increase of 4% compared to the same period last year. The breakdown of T&D revenues was $293 million for transmission and $210 million for distribution, with increases in revenues from both transmission and distribution projects from the prior year. Work performed under master service agreements continued to represent approximately 60% of our T&D revenue. C&I revenues were $447 million, an increase of 10% compared to the same period last year. The C&I segment revenues increased primarily due to an increase in revenue on fixed price contracts. Our gross margin was 11.8% for the third quarter of 2025 compared to 8.7% for the same period last year.
Speaker #5: Thank you , Rick , and good morning , everyone . Our third quarter 2020 revenues were $950 million , which represents an increase of $62 million , or 7% , compared to the same period last year .
Speaker #5: Our third quarter revenues were $503 million , an increase of 4% compared to the same period last year . The breakdown of T&E revenues was $293 million for transmission and $210 million for distribution with increases in revenues from both transmission and distribution projects from the prior year .
Speaker #5: Work performed under Master Service agreements continued to represent approximately 60% of our revenues . CNI revenues were $447 million , an increase of 10% compared to the same period last year .
Speaker #5: The CNI segment revenues increased primarily due to an increase in revenue on fixed price contracts . Our gross margin was 11.8% for the third quarter of 2025 , compared to 8.7% for the same period last year .
Kelly Huntington: The increase in gross margin was primarily due to the third quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project in the third quarter of 2025. Gross margin was also positively impacted by better than anticipated productivity, favorable change orders, and favorable job closeouts. These margin increases were partially offset by an increase in costs associated with project inefficiencies, unfavorable change orders, and inclement weather. T&D operating income margin was 8.2% for the third quarter of 2025 compared to 3.6% for the same period last year. The increase was primarily due to the third quarter of 2024 being negatively impacted by certain clean energy projects as well as favorable change orders and better than anticipated productivity on certain projects during the third quarter of 2025. These increases were partially offset by higher costs related to project inefficiencies, unfavorable change orders, and inclement weather.
Speaker #5: The increase in gross margin was primarily due to the third quarter of 2024 being negatively impacted by certain clean energy projects and Acini project in the third quarter of 2025 , gross margin was also positively impacted by better than anticipated productivity , favorable change orders , and favorable job closeouts .
Speaker #5: These margin increases were partially offset by an increase in costs associated with project inefficiencies . Unfavorable change orders , and inclement weather . T&E operating income margin was 8.2% for the third quarter of 2025 , compared to 3.6% for the same period last year .
Speaker #5: The increase was primarily due to the third quarter of 2024 being negatively impacted by certain clean energy projects , as well as favorable change orders and better than anticipated productivity on certain projects .
Speaker #5: During the third quarter of 2025 . These increases were partially offset by higher costs related to project inefficiencies , unfavorable change orders , and inclement weather .
Kelly Huntington: C&I operating income margin was 6.4% for the third quarter of 2025 compared to 5.2% for the same period last year. The increase was primarily due to the third quarter of 2024 being negatively impacted by a single project as well as contingent compensation expense related to a prior acquisition that did not recur in the third quarter of 2025. Operating income margin for the third quarter of 2025 was also positively impacted by better than anticipated productivity and favorable job closeouts. These positive drivers were partially offset by unfavorable change orders and higher costs related to project inefficiencies. Third quarter 2025 SGA expenses were $66 million, an increase of approximately $8 million compared to the same period last year. The increase was primarily due to an increase in employee incentive compensation costs and an increase in employee related expenses to support future growth.
Speaker #5: CNI operating income margin was 6.4% for the third quarter of 2025 , compared to 5.0% for the same period last year . The increase was primarily due to the third quarter of 2024 being negatively impacted by a single project , as well as contingent compensation expense related to a prior acquisition that did not recur in the third quarter of 2025 .
Speaker #5: Operating income margin for the third quarter of 2025 was also positively impacted by better than anticipated productivity and favorable job closeouts . These positive drivers were partially offset by unfavorable change orders and higher costs related to project inefficiencies .
Speaker #5: Third quarter 2025 G&A expenses were $66 million , an increase of approximately $8 million compared to the same period last year . The increase was primarily primarily due to an increase in employee incentive compensation costs and an increase in employee related expenses to support future growth .
Kelly Huntington: These increases were partially offset by contingent compensation expense related to a prior acquisition recognized during the third quarter of 2024 that did not recur. Our third quarter effective tax rate was 28.3% compared to 42.5% for the same period last year. The decrease was primarily due to lower permanent difference items, mostly associated with deductibility limits of contingent compensation experienced in the prior year as well as lower U.S. taxes on Canadian income. Third quarter 2025 net income was a record $32 million compared to net income of $11 million for the same period last year. Net income per diluted share of $2.05 increased 215% compared to $0.65 for the same period last year. Third quarter 2025 EBITDA was a record $63 million compared to $37 million for the same period last year. Total backlog as of September 30, 2025 was $2.66 billion, 2.5% higher than a year ago.
Speaker #5: These increases were partially offset by contingent compensation expense related to a prior acquisition recognized during the third quarter of 2024 that did not recur .
Speaker #5: Our third quarter effective tax rate was 28.3% , compared to 42.5% for the same period last year . The decrease was primarily due to lower permanent difference items , mostly associated with deductibility limits of contingent compensation experienced in the prior year .
Speaker #5: As well as lower U.S. taxes on Canadian income . Third quarter 2025 . Net income was a record $32 million , compared to net income of $11 million for the same period last year .
Speaker #5: Net income per diluted share of $2.05 increased 215% , compared to $0.65 for the same period last year . Third quarter 2025 EBITDA was a record $63 million , compared to $37 million for the same period last year .
Speaker #5: Total backlog . As of September 30th , 2025 was $2.66 billion , 2.5% higher than a year ago . Total backlog as of September 30th , 2025 consisted of $929 million for our T&E segment and $1.73 billion for our CNI segment .
Kelly Huntington: Total backlog as of September 30, 2025 consisted of $929 million for our T&D segment and $1.73 billion for our C&I segment. Third quarter 2025 operating cash flow was a record $96 million compared to operating cash flow of $36 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions and higher net income. Third quarter 2025 free cash flow was $65 million compared to free cash flow of $18 million for the same period last year, reflecting the increase in operating cash flow partially offset by higher capital expenditures to support future growth. Moving to liquidity in our balance sheet, we had approximately $267 million of working capital, $72 million of funded debt, and $400 million in borrowing availability under our credit facility as of September 30, 2025.
Speaker #5: Third quarter 2025 operating cash flow was a record $96 million compared to operating cash flow of $36 million for the same period last year .
Speaker #5: The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions , and higher net income .
Speaker #5: Third quarter 2025 free cash flow was $65 million , compared to free cash flow of $18 million for the same period last year , reflecting the increase in operating cash flow , partially offset by higher capital expenditures .
Speaker #5: To support future growth . Moving to liquidity and our balance sheet . We had approximately $267 million of working capital , $72 million of funded debt , and $400 million in borrowing availability under our credit facility .
Speaker #5: As of September 30th , 2025 , funded debt to EBITDA leverage remained strong at 0.34 times as of September 30th , 2025 . 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 .
Kelly Huntington: Funded debt to EBITDA leverage remains strong at 0.34 times as of September 30, 2025. 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 & Distribution segment.
Speaker #5: I'll now turn the call over to Brian Stern , who will provide an overview of our transmission and distribution segment .
Brian Stern: Thanks Kelly, and good morning everyone. A continued focus on strengthening and expanding existing relationships with key customers, along with executing our work to their expectations, led to solid third quarter results in our T&D segment. We continue to see steady bidding activity and are pleased with our strong backlog consisting of master service agreements and a healthy mix of various size projects.
Speaker #6: Thanks , Kelly , and good morning , everyone . A continued focus on strengthening and expanding existing relationships with key customers , along with executing our work to their expectations , led to solid third quarter results in our segment .
Speaker #6: We continue to see steady activity and are pleased with our strong backlog consisting of master Service agreements and a healthy mix of various sized projects .
Rick Swartz: This quarter.
Speaker #6: This quarter . Lee Myers was awarded a midsize transmission line rebuild project in North Carolina , as well as substation and transmission work in Iowa .
Brian Stern: L.E. Myers was awarded a mid-sized transmission line rebuild project in North Carolina as well as substation and transmission work in Iowa. In addition, High Country Line Construction won multiple transmission line projects in the Midwest, while E.S. Boulos and Harlan Electric were awarded substation and transmission work, respectively, throughout the Northeast. Great Southwestern Construction received transmission line and substation project awards in Texas, with Sturgeon Electric winning work in Arizona, Oregon, and Alaska. As Rick mentioned, we are seeing significant investments in electrical infrastructure throughout North America. Utilities continue to invest in upgrading and expanding their electric infrastructure, driven by several factors including aging infrastructure, concern over resiliency and reliability, and the need to accommodate larger load growth. After roughly two decades of flat electricity demand, it is now growing rapidly and driving the need for electric infrastructure investments, according to Power Insights 2025 North American Transmission Market Forecast.
Speaker #6: In addition , high country line construction won multiple transmission line projects in the Midwest , while s and Harlan Electric were awarded substation and transmission work , respectively .
Speaker #6: Throughout the northeast . Great Southwestern Construction received transmission line and substation project awards in Texas , with Sturgeon Electric winning work in Arizona , Oregon , and Alaska .
Speaker #6: As Rick mentioned , we are seeing significant investments in electrical infrastructure throughout North America . Utilities continue to invest in upgrading and expanding their electric infrastructure , driven by several factors , including aging , infrastructure , concern over resiliency and reliability , and the need to accommodate larger low growth .
Speaker #6: After roughly two decades of flat electricity demand . It is now growing rapidly and driving the need for electric infrastructure investments . According to Power Insights 2025 , North American transmission market Forecast released in September , the report forecasts 9.1% compound annual growth rate in transmission spending from 2024 to 2029 .
Brian Stern: Released in September, the report forecasts 9.1% compound annual growth rate in transmission spending from 2024 to 2029. In summary, we believe these encouraging forecasts could generate growth opportunities for our business as we continue a firm dedication to our customers and a strict adherence to our operating principles. I would like to thank all of our talented employees for their commitment and effort in making our success possible. I will now turn the call over to Don Egan who will provide an overview of our Commercial & Industrial segment.
Speaker #6: In summary , we believe these encouraging forecasts could generate growth opportunities for our business as we continue a firm dedication to our customers and a strict adherence to our operating principles .
Speaker #6: I would like to thank all of our talented employees for their commitment and effort in making our success possible . 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 segment achieved solid results in the third quarter thanks to the strength of our chosen core markets. We continue to strategically monitor and pursue new opportunities in a healthy bidding environment while executing projects of various sizes in close collaboration with our valued customers. Recent market outlooks suggest positive indicators for the segment. The Dodge Momentum Index increased 3.4% in September and commercial planning expanded 4.7% in the same period. Year to date, the DMI is up 33% from the average reading over the same period in 2024. The unprecedented growth in spending on data centers is expected to continue at an elevated pace. According to the American Institute of Architects, the AIA July 2025 Consensus Construction Forecast reported that after increasing more than 50% in 2024, data center spending is expected to grow by an additional 20% in 2026.
Speaker #7: Thanks , Brian , and good morning , everyone . Our CNI segment achieved solid results in the third quarter thanks to the strength of our chosen core markets .
Speaker #7: We continued to strategically monitor and pursue new opportunities in a healthy bidding environment while executing projects of various sizes in close collaboration with our valued customers .
Speaker #7: Recent market outlooks suggest positive indicators for the segment . The Dodge Momentum Index increased 3.4% in September , and commercial planning expanded 4.7% in the same period .
Speaker #7: Year to date , the DMI is up 33% from the average reading over the same period in 2020 . For the unprecedented growth in spending on data centers is expected to continue at an elevated pace .
Speaker #7: According to the American Institute of Architects, the AIA July 2025 Consensus Construction Forecast reported that, after increasing more than 50% in 2024, data center spending is expected to grow by an additional 20% in 2026.
Don Egan: These encouraging forecasts could generate growth for our business and we continue to leverage our expertise to place us in a leading position to win opportunities in these markets while bolstering our strategy to remain diversified across our chosen core markets. In the third quarter, our teams across all subsidiaries earned multiple awards and secured new work in each of our core markets. This includes wins in data centers, health care, clean energy, warehousing, higher education, and transportation. These achievements reflect our continued momentum and strong market presence across the U.S. and Canada. To conclude, our chosen core markets are healthy and the strength of our customer relationships continues to generate additional opportunities. This is thanks to our committed employees and their daily dedication to executing projects with a safety-first mindset. Thanks everyone for your time today.
Speaker #7: These encouraging forecasts could generate growth for our business , and we continue to leverage our expertise to place us in a leading position to win opportunities in these markets .
Speaker #7: While bolstering our strategic our strategy to remain diversified across our core markets . In the third quarter , our teams across all subsidiaries earned multiple awards and secured new work in each of our core markets .
Speaker #7: This includes wins in data centers , healthcare , clean energy warehousing , higher education and transportation . These achievements reflect our continued momentum and strong market presence across the US and Canada .
Speaker #7: The conclude our chosen core markets are healthy and the strength of our customer relationships continue to generate additional opportunities . This is thanks to our committed employees and their daily dedication to executing projects with a safety first mindset .
Speaker #7: Thanks everyone for your time today . I will now turn the call back to Rick , who will provide us with some closing comments .
Don Egan: I will now turn the call back to Rick, who will provide us with some closing comments.
Rick Swartz: Thank you for those updates. Kelly, Brian, and Don, due to the strength of our core markets and our ability to bolster and broaden our customer relationships to create growth opportunities, we are proud of our third quarter performance. Our focus remains on safely executing projects strategically, bidding opportunities, and meeting the needs of our customers as they adapt to dynamic market conditions and a shifting energy landscape. This is supported by our continued investment and development of our teams across the company, as our people enable us to maintain our status as an industry leader by the work they perform every day. A commitment to our employees and customers is the foundation we build from to remain a strong and agile partner for customers.
Speaker #4: Thank you for those updates . Kelly , Brian and Don . Due to the strength of our core markets and our ability to bolster and broaden our customer relationships to create growth opportunities , we are proud of our third quarter performance .
Speaker #4: Our focus remains on safely executing projects , strategically bidding opportunities , and meeting the needs of our customers as they adapt to dynamic market conditions and a shifting energy landscape .
Speaker #4: This is supported by our continued investment in development of our teams across the company . As our people enable us to maintain our status as an industry leader by the work they perform every day , a commitment to our employees and customers is the foundation we build from .
Speaker #4: To remain a strong and agile partner for customers . I would like to extend a thank you to our employees for their invaluable contributions and to our shareholders for your continued support of MYR GROUP INC. .
Rick Swartz: I would like to extend a thank you to our employees for their invaluable contributions and to our shareholders for your continued support of MYR Group Inc. I look forward to connecting with you in the future quarters. Operator, we are now ready to open the call up for your comments and questions.
Speaker #4: I look forward to connecting you with in the future quarters . Operator . We are now ready to open the call up for your comments and questions .
Jennifer Harper: Thank you.
Speaker #2: Thank you . As a reminder , for those of you on the phone to ask a question , please press star one one on your telephone .
Operator: As a reminder, for those of you on the phone, to ask a question, please press star 11 on your telephone, then wait until you hear your name announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster, and our first question comes from Jane of KeyBanc. Your line is open.
Speaker #2: Then wait until you hear your name announced. To withdraw your question, please press one one again. Please stand by while we compile the Q&A roster.
Speaker #2: And our star first question comes from Sangeeta Jain of KeyBanc . Your line is open .
Rick Swartz: Great.
Operator: Thank you.
[Analyst 1]: Good morning and thanks for taking my questions. First, if I can ask, on C&I margins, they were considerably stronger than they have been in the recent quarters even though you had a negative change order. Can you talk a little bit about that and how we should think about those C&I margins going forward?
Rick Swartz: Yeah, I would say we did have a slight negative there, but overall we had some positive adjustments too. Our margins were a little higher than what we projected coming into this year. I think as we look to next year, I would say our margin profile is probably, you know, we've always said it's going to be in that 4% to 6% in the past. I think as we look into next year it'll kind of go to that mid range of kind of that 5% to 7.5%. We're upping that a little bit as we forecast out next year with probably, you know, 10% growth both in our C&I and T&D areas.
[Analyst 1]: 10% code growth. Sorry, go ahead Kelly.
Kelly Huntington: I was just going to say to elaborate, you know, just looking at full year for C&I, given that we have been trending a little higher, we are expecting that we'll be in the upper half of, you know, the target range for this year of the 4% to 6% for full year 2025. As Rick mentioned, looking to raise that expectation for next year to that 5% to 7.5% range.
[Analyst 1]: Okay. Did I just hear Rick say 10% for next year? No, or did I get that wrong?
Rick Swartz: I would look for 10% ish revenue growth.
[Analyst 1]: 10% revenue growth company wide.
Rick Swartz: Yes.
[Analyst 1]: Okay, great. Five to seven and a half C&I.
Rick Swartz: Yeah. With our margin profile remaining the same on T&D, that 7% to 10.5% and probably operating in the middish range of those numbers just because we're not seeing the large projects really roll in until 2027.
[Analyst 1]: Okay, that's helpful. I appreciate the breakdown of the new awards in the quarter on the T&D side. How sizable are they in the sense that does that change your breakdown between MSA and non-MSA work in that segment?
Rick Swartz: No, we really didn't speak anything about large projects coming into our backlog. It's small and mid sized, so somewhere in that same range where we've been, I would say, is kind of how we're forecasting it for this next quarter.
[Analyst 1]: Okay, got it. Thank you. Appreciate you letting me ask questions.
Rick Swartz: Thank you.
Operator: Thank you. Our next question comes from Andrew Whitman of Baird. Your line is open.
Rick Swartz: Hi.
[Analyst 2]: Great, good morning and thanks for taking our questions here. Everybody wants to talk about data centers, so let's talk about data centers. Obviously this is a growth end market for electricians, broadly speaking. Rick, in the past when we've talked to you about this, you totally see the opportunity there. You're open to it. You've always said we don't want to abandon our legacy customers everywhere else as well, but just kind of wanted to get an update on your view here. Is this market evolving faster and bigger than you maybe thought six months ago? How is your company approaching the data center opportunity? Are you going to go for it directly or wait for overall demand to lift demand for the types of services you offer and still compete in the traditional end markets as well? I'm just wondering, talk about that maybe.
[Analyst 2]: The simple way of asking that question.
Rick Swartz: Of course, do you expect the.
[Analyst 2]: Data center as a percentage of your Dodge Momentum Index mix to materially increase or not.
Rick Swartz: I think, as we go forward, data centers could increase. Our other core markets are very strong too, within C&I. When we talked about the overall markets we're in, whether it's wastewater or hospitals or solar, even on that side, we see good growth opportunities there. We're really not focused on just data centers, but again, a lot of good opportunities going forward. I don't see that outpacing the other segments at this point. Got it.
On your view here is this Market evolving faster and bigger than you maybe thought 6 months ago. And um how has is your company approaching the data center opportunity? Are you going to go for it directly or wait for overall demand? Uh to lift demand for for the types of services you offer and and still compete in the traditional and markets as well. I just wondering if you could talk about that, maybe the simple way of asking that question, of course is, do you expect the data center as a percentage of your dni mix, uh, to materially increase or not?
and I, so,
[Analyst 2]: Okay. I wanted to follow up on your balance sheet and your ability and desire to deploy capital. Obviously, balance sheet, like normal, is in a very good spot here. Historically, you've done some M&A pretty consistently over the years, but the dynamics and the growth rates behind your business have changed. I've got to think the multiples, like your own stock's multiple, are up. I was just wondering, Rick, what you're seeing out there in your desire as well as your ability to deploy M&A capital in an environment like this where prices are up. What do you think?
We talked about the overall, you know, markets we're in whether its Wastewater or hospitals or um, you know, solar even on that side and we see good growth opportunities there. So, um, really not focused on just data centers, but again, a lot of good opportunities going forward, but I don't see that outpacing the other segments at this point.
Got it.
Okay and then I guess um I wanted to follow up on um your balance sheet and your ability and desire to deploy Capital. Obviously balance sheet, like normal is in a very good spot here. Historically, you've done some m&a um pretty consistently over the years.
But but the, the Dynamics and the growth rates behind your business have changed. And they've got to think the multiples like your own stocks multiple are up. I, I was just wondering kind of Rick. What you're seeing out there and your and your desire, as well as your ability to deploy m&a, Capital Inn in a environment like this, where prices are up.
Rick Swartz: The multiples are definitely up. I mean, as you said, our multiples are up. When we look at it, for us, it's really just focused on that right strategic fit. There are opportunities out there, but again, it's got to fit us from a cultural fit and then from a structural fit. We continue to look at them and evaluate them, and there's quite a bit of activity out there. That's positive, and hopefully we can capitalize on the right opportunity. Our balance sheet enables us to really go after any acquisition. We've always said that our kind of goal is anything within that annual revenue of $50 million to $600 million is kind of our target. We're not looking for something transformational, but again, we continue to see good activity in that market, just trying to find the right fit.
What do you think?
Um, the multiples are definitely up. I mean, as you said our multiples up, but when we look at it um for us, it's really just focused on that right strategic fit. Um, there's opportunities out there, but again, it's got a bit of us, um, from a cultural fit and then, from a, a structural fit. So we continue to look at them and evaluate them and, um, you know, there's quite a bit of
[Analyst 2]: Thanks a lot.
Activity out there. So that's positive. And um, you know, hopefully we can capitalize on the right opportunity but our balance sheet enables us to to really go after, uh, you know, any acquisition. We've always said that, you know, our our kind of goal is to anything within that annual revenue of 50 to 600. Million is kind of our, our Target. We're not looking for something transformational, uh, but again we continue to see good activity in that market. Just trying to find the right fit.
Operator: Thank you. Our next question comes from Jonathan Braatz of KeyBanc. Your line is open.
Thanks a lot.
Thank you.
Rick Swartz: Morning, everyone.
And our next question comes from John, Bratz of kcca. Your line is open morning, everyone.
[Analyst 2]: Rick, on the margin profile for.
Rick Swartz: The C&I segment increased the range a little bit. Does that reflect market conditions or execution? I would say both. I think we're always focused on execution, how we better improve our performance out there, but also seeing some market, I guess, expansion in our market, margins within the market. We push margins every chance we get, but we're also focused on our own performance. I would say it's a mixture of the two.
Rick, uh, on the um, uh, the margin, uh, profile for the cni segment. Uh, increase the range a little bit. Does that reflect uh, market conditions or
Execution.
I I would say both I I think our, you know, we're always focused on execution how how we better improve our performance out there. But also seeing, you know, some Market, uh, I guess expand expansion in our Market margins, uh, within the market. So uh, we push margins, every chance we get, but we're also focused on our own performance.
[Analyst 2]: Okay.
Rick Swartz: Industry wide in the T&D segment, every time you read a.
[Analyst 2]: Reports from utility companies, they talk about accelerating spending plans.
Rick Swartz: From an overall perspective, Rick, is there enough labor out there to meet this demand that seems to be forthcoming? If not, is there going to be?
I would say it's a mixture of the 2, okay? And then um, industrywide on and and the util and the tnd segment, you know, every time you read a report uh from from utility companies, um they talk about accelerating uh,
Spending plans. And I guess from an overall perspective, Rick does
The is there enough labor out there to meet this demand? That seems to be uh forthcoming and
[Analyst 2]: Some opportunity to take some additional margin?
uh, if not is is there going to be, uh,
Rick Swartz: We definitely hope so. That's the way we've always said it. I mean, as we look at it into this market, it's an elongated market and it's going to go out for years. Not all these projects are going to be built overnight. It's just not the labor side. It's also the material shortages or those time delays on that material coming in. I would say those cycles on material aren't getting any shorter. I think it's a balancing act between the labor availability in the market, but also the material availability. I would say lots of early conversations with our clients. Very positive on the conversations. Really, none of our customers are concerned about what they're going to build more or less in 2026. They're more concerned about what they're going to build in 2027, 2028, 2029 and beyond. Very good conversations going on. Okay. All right.
uh, some opportunity to take some additional, uh, margin
Well, we hopefully we we definitely hope so. And that's the way we, we've always said it, I mean, as we look at it into this Market, it's a an elongated market and it's going to go out for years. Um, not all these projects are going to be built overnight and you know, it's just not the the labor side. It's also the material shortages or those time delays on that material coming in.
So I would say those Cycles on the material, aren't getting any shorter. Um, so I, I think it's a balancing act between kind of, you know, the labor availability in the market, but also the, the material availability. So, I would say lots of early conversations with our clients, uh, very positive on the conversations but really, you know, none of our customers are concerned about what they're going to build more or less than 26. They're more concerned about what they're going to
Rick Swartz: Thank you, Rick. Thank you.
In 272829, uh, and beyond. So very good conversations going on.
Operator: Thank you. Our next question comes from Brian Brophy of Stifel. Your line is open.
Okay, all right. Thank you, Rick.
Thank you.
Thank you.
Rick Swartz: Thanks. Good morning. Appreciate you taking the question. Appreciate the thoughts on 2026. I'm curious if you're expecting any change to some of the high single digit growth, excluding solar and T&D and C&I that you've communicated for this year. As Kelly said, we're running a little ahead of that on, you know, the T&D side. C&I is right in that range for kind of that overall revenue growth. We see that coming in maybe a little stronger on the C&I or on the T&D side and kind of maintaining where we're at on the C&I side this year.
And our next question comes from Brian Broy of Stifel. Your line is open.
Thanks, good morning, appreciate you taking the question. Um appreciate the thoughts on 2026.
Some of the uh High single digit growth um excluding solar and tnd and cni that you've communicated for this year.
Kelly Huntington: Okay, so we're up 10% so far year to date on C&I.
As Kelly said, we're running a little ahead of that on you know, the the tnd side cni's, right? In that range for kind of that overall Revenue growth. So uh, we we see that coming in maybe a little stronger on the cni, or on the tnd side and kind of maintaining where we're at on the cni side this year.
Rick Swartz: Got it. That's helpful. Just curious, the latest you're hearing from your customers on large transmission project opportunities and what that outlook could look like as we look out a couple years. Thanks. It's strong on that side, I would say. Lots of good conversations going on, lots of good activity. We're doing a lot of budgeting with our clients, a lot of working with our clients on longer term projects. It remains a very active market. You know, those projects, as I said before, their large projects that we're discussing aren't going to start in 2026, but they'll start in 2027, 2028, 2029, and we're even having conversations with clients on projects that go out past then. Appreciate it. I'll pass it on.
Okay, and we're at at 10% so far year to date on. Cni.
That's helpful. And then just curious are the latest your hearing from your customers on large transmission, project opportunities and what that Outlook could look like, as we look out a couple of years, thanks,
Uh it it's it's strong on that side. I would say lots of good conversations going on. Um, lots of good activity. We're doing a lot of budgeting with our clients, a lot of working with our clients on, on longer term projects. So again re remains a very active market and
You know, those projects as I said before, they're large projects, uh that we're discussing aren't going to start in 26 but they'll start in 27, 28, 29. And we're even having conversations with clients on projects that go out past them.
Jennifer Harper: Thank you.
Appreciate it. I'll pass it on.
Operator: Our next question comes from Atidrip Modak.
Thank you.
Jennifer Harper: Modak of Goldman Sachs.
Operator: Your line is open.
Atidrip Modak: Hey, good morning, guys. Rick, can I ask you for directional comments relative to that 10% overall revenue growth you talked about for 2026? Is that a decent bogey for a run rate expectation based on everything that you're seeing in the market, or what factors would you ask us to consider as we think about that?
And our next question comes from ADI modok of Goldman Sachs, your line is open.
Hey, good morning guys. Um Rick can I ask you for directional comments relative to that 10% overall Revenue growth? You talked about for 26.
Rick Swartz: I would say it doesn't have a, you know, we don't forecast a dip in the economy or a dip in anything going forward with our clients as far as pulling back work. When we look at the project availability and the current market, I would say that's how we're forecasting it right now with that kind of 10% overall growth and pretty equally spread between C&I and T&D as we see it today. Got it.
Is that a decent bogey for a run rate expectation based on everything that you're seeing in the market or what factors would you ask us to consider as we think about that?
Well I I would say it, it doesn't have a you know, that we don't forecast a dip in the economy or a dip in anything. Going forward with our clients as far as pulling back work when we look at at the project availability and uh, the current market, I would say that's how we're forecasting it right now. Would that kind of ten as percent overall growth?
Atidrip Modak: That's super helpful. Maybe, Kelly, one for you. No buybacks this quarter. Just curious if there's anything to point out there or point out in terms of related to near term capital allocation program.
And pretty equally spread between C and I and T and D as we see it today.
Kelly Huntington: Sure. You're right. We did announce that program at the last earnings call for another $75 million, and we continue to look at that opportunistically. It remains part of our capital allocation strategy. I would say, as usual, we are prioritizing directing capital towards growth. On the organic side, that comes in the form of both our capital expenditures, which you could see this quarter did trend a little higher. Part of that was timing from earlier in the year, but part of that is to support that longer term growth that we see, particularly on the T&D side, which is of course the more capital intensive side of the business. We could see that running closer to 3% of revenue given the growth opportunity that's out there.
Got it. That's super helpful and then maybe Kelly 1 for you. Um, no BuyBacks this quarter. Just curious if there's anything to point out there or um, point out in terms of related to near-term Capital allocation program.
5 million then you know, we continue to look at that opportunistically. Um, so it remains part of our Capital allocation strategy. But I would say um as usual we are prioritizing um,
Kelly Huntington: I would say, back to Rick's answer to the earlier question, we're also in a really good position to pursue acquisitions that are the right fit. We continue to be active in evaluating opportunities there. Just to summarize, I'd say we're in a great position to do all three.
Directing Capital towards growth. So uh you know, on the organic side that's comes in the form of both our Capital expenditures, which you could see uh, this quarter did Trend a little higher part of that was timing from earlier in the year. But part of that is to support that, uh, longer term, uh, growth that we see, particularly on the tnd side, which is, of course, the more Capital intensive side of the business. So you know, that we could see running closer to 3% of Revenue, um given the growth opportunity that's out there. Um and then I would say you know back to Rick's answer to the earlier question. We're also in a really good position to uh pursue Acquisitions that are the right fit. Um so continue to be active in evaluating opportunities there.
Atidrip Modak: Yeah, that's very helpful.
Don Egan: Thank you.
So I think, you know, just to summarize I'd say we're in a, a great position to do all 3.
Rick Swartz: Appreciate it.
Operator: Thank you. Our next question comes from Julian Demoulin Smith of Jefferies. Your line is open.
Yeah. That's that's very helpful. Thank you. Appreciate it.
Thank you.
Brian Brophy: Good morning, it's Brian Brophy on for Julian. Hey, just to follow up on the T&D segment, how should we think about your current master service agreements or new or potentially enhanced master service agreements with the upward CapEx provisions that we're seeing with many of your large utility customers already this quarter? Is that part of what might be driving the 10%, 10% growth in that segment in 2026 over high single digits in 2025?
And our next question comes from Julian de Molen Smith of Jefferies. Your line is open.
Yeah, good morning. It's Brian. Moo on for Julian.
Morning.
Hey, just um, just to follow up on the the tnd, uh, segment. How should we think about, you know, your, your current msa's or new or, or potentially enhance msa's with the, um, with the upward capex, revisions that that we're seeing with, uh, many of your large utility customers already? This, this quarter is, is that part of what might be driving the 10%,
Rick Swartz: Yeah, that's definitely a component of it. As we look at that, most of our customers are forecasting some increased spend next year, and as we said, then in future years beyond that we'll see some large projects hopefully come into the mix. I would say it's increased spend on master service agreements is a good component of it.
10 inch percent growth in that segment uh in 26 over High single digits and 25.
Yeah, that's definitely.
Brian Brophy: That and with the whole lighter labor shortage maybe backdrop in the latter years in, say, 2027, 2028, when you re-sign your master service agreements, do you have more leverage in terms of the premium for skilled labor, or should we just kind of assume similar margins as they are today?
And as we said, then in future years beyond that, we'll see some large projects hopefully come into the mix. I would say that increased spending on MSA is a good component of that.
Rick Swartz: I think we're always, you know, pushing on our performance to outperform where we've been. With that being said, you know, over 90% of our clients are return clientele. We're always going to treat those clients fair. We're going to look at our productivity side and we're going to try to enhance our margins where we can, but again, always treating our customers fairly. Okay.
And and with the whole, you know, lighter, uh, labor shortage, you know, maybe backdrop in in the in in the latter years and say 2728 um when you when you resign your msa's uh you know, or do you have more, you know, leverage, you know, in terms of the um the premium for skilled labor or or should we just kind of assume similar, you know, margins as they are today?
Brian Brophy: Lastly, I appreciate, you know, the project discussions at T&D earlier. Could you kind of triangulate any of those projects to be more significant than others or what was added to the September backlog or that is still to be added?
Well, I think we're always, you know, pushing on our performance to outperform where we've been. Um, with that being said, you know, over 90% of our clients are return clientele. So, we're always going to treat those clients well. Um, we're going to look at our productivity side, and we're going to try to enhance our margins where we can. But again, we're always treating our customers fairly.
Rick Swartz: I would say, you know, our backlog, we always capture it at a month end. Again, it's always going to be lumpy at any given time. I think when you're looking at, you know, as we said, no large project came into it. Brian talked about some of the projects, smaller and mid sized projects that were captured, and we see that continuing. Again, we, you know, I would say we don't get down to it customer by customer, but good activity in all the markets we're in, and we pretty much have coast to coast coverage, a little bit into Canada. Pretty excited about the opportunities that lie in front of us.
Okay. And then lastly uh I appreciate, you know, the um the project uh discussions at tnd earlier it. It could you kind of triangulate any of those projects to bite me more significant than others or or what was added to the September backlog or that is still to be added
Um, I would say, you know, our backlog we always capture at month end. So again, it's always going to be lumpy at any given time. I think when you're looking at, you know, as we said, no large project came into it. Brian talked about some of the.
Projects, um, smaller and mid-sized projects that were captured, and you see that continuing. But again, we, you know, I would say we don't get down to a customer by customer basis, but good activity in all the markets we're in, and we pretty much have coast-to-coast coverage, a little bit into Canada. So,
[Analyst 2]: Okay, great.
Rick Swartz: Thank you very much.
Pretty excited about the opportunities that lie in front of us.
Jennifer Harper: Thank you.
Okay, great. Thank you very much.
Operator: I'm showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for any additional or closing remarks to conclude.
Rick Swartz: 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 in the future and speaking with you again on our next conference call. Until then, stay safe.
Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Rick, Schwarz, for any additional or closing remarks.
Operator: Thank you. This concludes today's conference call. We thank you for your participation and you may now disconnect.
Include on behalf of Kelly, Brian Dawn 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 in the future and speaking with you again on our next conference call, until then stay safe.
Thank you. This concludes today's conference call. We thank you for your participation and you may now disconnect
Don Egan: It sa.
Rick Swartz: Sam.