MYR(MYRG) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter 2024 revenues were $888 million, a decrease of$52 million or 5.5% compared to the same period last year [12] - Gross margin was 8.7% for Q3 2024, down from 9.8% in the same period last year [14] - Net income for Q3 2024 was $11 million, compared to$22 million for the same period last year, with net income per diluted share at $0.65 compared to$1.28 [20] - Effective tax rate increased to 42.5% from 30.3% year-over-year [19] - Total backlog as of September 30, 2024, was $2.6 billion, 1$482 million, a decrease of 12% year-over-year, with $277 million from Transmission and$205 million from Distribution [12] - Commercial and Industrial (C&I) revenues were $406 million, an increase of 4$186 billion and 203 billion in annual capital investments from 2024 to 2026 to meet electrification demand [10] - T&D spending is expected to increase by 30% from 2024 to 2026 compared to 2021 to 2023 [25] - Distribution spending increased by a record 18% in 2023 [25] Company Strategy and Development Direction - The company is focused on strengthening customer relationships and executing projects safely and reliably [11] - There is a commitment to pursuing long-term growth opportunities through strong bidding activity and expanding existing relationships [10] - The company remains selective in taking on solar projects, focusing on favorable terms and conditions [42][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the T&D industry outlook and the potential for future opportunities due to increased electrification and clean energy transition [26][28] - The company anticipates that problematic projects will be resolved by year-end, allowing for improved margins moving forward [39][40] - Management expects to operate within the midpoint of long-term margin ranges in 2025, barring impacts from current problem projects [39][40] Other Important Information - Third quarter 2024 operating cash flow was 36 million, an increase from $13 million year-over-year [21] - Free cash flow was positive$18 million compared to negative $10 million in the same period last year [21] - The company repurchased 526,000 shares at an average price of$111.65 during the quarter, exhausting its current share repurchase program [22] Q&A Session Summary Question: Impact of change orders on margins for clean energy projects - Management indicated ongoing discussions regarding change orders and expects to resolve impacts from problematic projects by year-end [37][38] Question: T&D backlog and solar project terms - Management noted a decline in solar project backlog while core T&D business backlog is growing, emphasizing selectivity in project acceptance [42][43] Question: Margin progression from Q3 to Q4 - Management expects margins to improve as problematic projects reach completion, aiming for mid-range operating margins [45][46] Question: Free cash flow performance - Positive free cash flow was attributed to project timing and modest reversals on retainage balances [46] Question: C&I backlog drivers - Management highlighted a balanced portfolio with various market activities contributing to C&I backlog strength [59] Question: Capital deployment priorities - The company is focused on organic growth and potential tuck-in acquisitions while remaining opportunistic with share repurchases [60] Question: Pursuit of solar work - Management confirmed continued pursuit of solar projects but with a selective approach based on favorable terms [62]