MYR GROUP INC. Q4 FY2024 earnings call

• Rick Swartz started by summarizing fourth quarter results, noting continued financial improvement despite impacts from certain projects, backlog at $2.6 billion, and key market drivers. - Kelly Huntington detailed financial results: Q4 revenues $830M (-17% y/y), gross margin 10.4% (+0.7% y/y), T&D operating income margin 6.7% (-0.5% y/y), C&I operating income margin 3.9% (+1.8% y/y), SG&A expenses $57M (-$3M y/y), effective tax rate 40.9% (+8.6% y/y), net income $16M (-$8M y/y), backlog $2.6B. - Brian Stern discussed T&D segment's stable pipeline, bidding activity, and regional project wins. - Don Egan highlighted C&I segment's improved results, healthy bidding activity, and growth in core markets like data centers and healthcare, with regional project wins.

In the fourth quarter of 2024, MYR Group's T&D segment had revenues of $450 million, a decrease of 24% compared to the same period last year. Transmission revenue was $267 million and distribution was $183 million. The C&I segment had revenues of $380 million, a decrease of 8% compared to the same period last year. T&D segment revenues contributed approximately 54.2% of the total $830 million quarterly revenue, while C&I contributed approximately 45.8%.

• MYR Group anticipates operating on a year basis with T&D operating margins in the mid-range of 7% to 10.5% and C&I in 4% to 6%. - C&I is expected to have low single-digit revenue growth. - T&D is working to fill gaps from lost clean energy work and sees opportunities to do so. - Free cash flow is expected to be stronger in 2025 due to increased profitability and reduced retainage and pending change orders.

• Forward-looking statements involve risks and uncertainties that could cause actual results to differ. - Potential impacts from tariffs in new contracts. - Project execution issues such as labor and inefficiency affecting margins. - Tax rate impacts due to higher permanent differences and unrecognized deferred tax assets.

Q: Can you talk about the bidding environment in C&I, project types, geographies, and potential tariffs?

A: Rick Swartz said there's activity in all markets served, including data centers, hospitals, and transit, and tariffs are a discussed point with contracts having provisions to cover risk.

Q: Can you explain lower revenue in fixed price contracts and the shift to T&E contracts?

A: Rick Swartz said it's a mix of projects, not a long-term trend, with an increase in T&E contracts in the quarter. Kelly Huntington added revenue from clean energy projects in T&D is fixed price, and MSA work in T&D rose to 60% of T&D revenue.

Q: Thoughts on free cash flow and clean energy revenue in 2025?

A: Kelly Huntington said free cash flow should be stronger in 2025 due to increased profitability, and clean energy revenue in T&D was about 4% in Q4 and 10% year-to-date, with selectivity in taking on clean energy work.

Q: Growth thinking and margin progression for 2025?

A: Rick Swartz said T&D and C&I have mid-range operating margin targets, C&I has low single-digit growth potential, and T&D is filling gaps from lost clean energy work.

Q: Thoughts on generation mix change due to new administration and tax rate?

A: Rick Swartz said MYR Group works on lines in and out of generation plants regardless of type, and Kelly Huntington discussed the effective tax rate being higher due to permanent differences and uneven profitability, expecting more even tax rates quarter to quarter in 2025.

Q: Status of claims and change orders on prior challenge projects?

A: Rick Swartz said conversations are ongoing, some settled, some still ongoing, with potential impacts, but currently covered as reported.