MYR Group, Inc.

Good day and thank you for standing by. Welcome to the MYR Group third quarter 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today. David Gutierrez of Dresdner Corporate Services, please go ahead.

Thank you, and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's third quarter results for 2024, which were reported yesterday. 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, 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. If you did not receive yesterday's press release, please contact Dresden Corporate Services at 312-780-7204, and we will send you a copy, or go to the MYR Group website where a copy is available under the Investor Relations tab. Also, a webcast replay of today's call will be available for seven days on the investor's page of the MYR Group website at myrgroup.com. Before we begin, I want to remind you that this discussion may contain forward-looking statements. 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. These risks and uncertainties are discussed in the company's annual report on Form 10-K for the year ended December 31, 2023, the company's quarterly report on Form 10-Q for the third quarter of 2024, and in yesterday's press release. Certain non-GAAP financial information will be discussed on the call today. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that said, let me turn the call over to Rick Schwartz. Thanks, David. Good morning, everyone. Welcome to our third quarter 2024 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 segment's performance and discuss some of MWIR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. Our steady third quarter performance improvement was a result of our strong market position and the strengthening of our longstanding customer relationships as we continue to resolve unfavorable impacts from a relatively small group of projects that were discussed last quarter. With the exception of these projects that are anticipated to reach mechanical completion in the fourth quarter, we are seeing strong project execution across our business segments. Opportunities for long-term growth remain healthy as we continue to see strong bidding activity, as well as opportunities to build new relationships and expand existing ones. In July, the Edison Electrical Institute projected that U.S. investor-owned utilities will invest between $186 and $203 billion in annual capital investments from 2024 to 2026, in order to meet the growing electrification demand. We continue to track these major expansion projects that may lead to future work opportunities and growth while remaining committed to executing projects for our valued customers. Our CNI segment continues to see strong bidding activity in our core markets while capturing new opportunities in transportation, data centers, and pharmaceuticals. As always, our success is grounded in an unwavering commitment to our customers, safe and reliable project execution, and the dedication of our talented team members. I thank each of them for their hard work and the important role they play in helping our company grow. Now Kelly will provide details on our third quarter 2024 financial results.

Thank you, Rick, and good morning, everyone. Our third quarter 2024 revenues were $888 million. which represents a decrease of $52 million or 5.5% compared to the same period last year. Our third quarter T&D revenues were $482 million, a decrease of 12% compared to the same period last year. The breakdown of T&D revenues was $277 million for transmission and $205 million for distribution. T&D segment revenues decreased due to a reduction of $81 million in revenue on transmission projects, partially offset by an increase of $14 million in revenue on distribution projects. Transmission revenues include revenues from our clean energy projects. Work performed under master service agreements represented approximately 55% of our T&D revenues. CNI revenues were $406 million, an increase of 4% compared to the same period last year. The CNI segment revenues primarily increased due to an increase in revenue on fixed price contracts and T&E contracts. Our gross margin was 8.7% for the third quarter of 2024, compared to 9.8% for the same period last year. The decrease in gross margin was primarily related to unfavorable impacts from certain clean energy projects in T&D and a single CNI project. T&D operating income margin was 3.6% for the third quarter of 2024 compared to operating income of 6.6% for the same period last year. The decrease was primarily related to losses on certain clean energy projects due to unfavorable weather conditions labor and project inefficiencies, higher labor and contract-related costs, and contractual disputes. In addition, schedule extensions caused by owner-furnished panel delays led to increased costs on two clean energy projects for which we are pursuing change orders. Combined, the gross profit changes related to clean energy projects negatively impacted operating income as a percentage of revenues by 5.5%. Many of these projects have reached mechanical completion, and the remaining projects are anticipated to reach mechanical completion in the fourth quarter of 2024. CNI operating income margin was 5% for the third quarter of 2024, compared to 3.6% for the same period last year. The increase was primarily due to the continued benefit of higher margins on certain projects nearing completion, as well as better than anticipated productivity and a favorable change order experienced during the third quarter. These increases were partially offset by a single project that was discussed in the prior quarter, which had a negative impact of 2.9% on C&I operating income margin during the third quarter. This project is anticipated to reach substantial completion during the fourth quarter of 2024. The loss on this project was primarily due to scope additions increased labor costs related to schedule compression, and lower productivity due to access and workflow issues. Third quarter 2024 SG&A expenses were $58 million, a decrease of $2 million compared to the same period last year. The decrease was primarily due to a decrease in employee incentive compensation costs and a decrease in contingent compensation expense related to a prior acquisition. partially offset by an increase in employee related expenses to support future growth. Our third quarter effective tax rate was 42.5% compared to 30.3% for the same period last year. The increase was primarily due to higher permanent difference items, mostly related to deductibility limits on contingent compensation associated with the CSI acquisition, which was successfully achieved during the third quarter of 2024. as well as higher US taxes on Canadian income. Third quarter 2024 net income was $11 million compared to net income of $22 million for the same period last year. Net income per diluted share was $0.65 compared to $1.28 for the same period last year. Third quarter 2024 EBITDA was $37 million compared to $47 million for the same period last year. Total backlog as of September 30th, 2024 was $2.6 billion, 1% lower than a year ago and a 2% increase from the prior quarter. Total backlog as of September 30th, 2024 consisted of $799 million for our T&D segment and $1.8 billion for our C&I segment. Third quarter 2024 operating cash flow was $36 million compared to operating cash flow of $13 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. Third quarter 2024 free cash flow was positive $18 million compared to negative free cash flow of $10 million for the same period last year, reflecting the increase in operating cash flow and lower capital expenditures. During the quarter, we repurchased 526,000 shares at an average price of $111.65. Year to date, we have repurchased 643,000 shares at an average price of $116.54 for a total cost of $75 million, exhausting our current share repurchase program. Moving to liquidity in our balance sheet, we had approximately $269 million of working capital $93 million of funded debt, and $376 million in borrowing availability under our credit facility as of September 30, 2024. We have continued to maintain a strong funded debt to EBITDA leverage ratio of 0.74 times as of September 30, 2024. We believe that our credit facility, strong balance sheet, and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, to pursue acquisitions and opportunistic repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our transmission and distribution segment.