NASDAQ:MYRG MYR Group Q4 2023 Earnings Report $205.08 -1.93 (-0.93%) As of 11:46 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast MYR Group EPS ResultsActual EPS$1.43Consensus EPS $1.41Beat/MissBeat by +$0.02One Year Ago EPS$1.46MYR Group Revenue ResultsActual Revenue$1.00 billionExpected Revenue$904.76 millionBeat/MissBeat by +$99.44 millionYoY Revenue Growth+16.20%MYR Group Announcement DetailsQuarterQ4 2023Date2/28/2024TimeAfter Market ClosesConference Call DateThursday, February 29, 2024Conference Call Time10:00AM ETUpcoming EarningsMYR Group's Q3 2025 earnings is scheduled for Wednesday, October 29, 2025, with a conference call scheduled on Thursday, October 30, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by MYR Group Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 29, 2024 ShareLink copied to clipboard.Key Takeaways MYR Group delivered record full year 2023 revenues of $3.6 billion (up 9th consecutive year) and Q4 revenues of $1.0 billion (+16% YoY), with a backlog of $2.51 billion at year-end. The Transmission & Distribution segment posted Q4 revenues of $592 million (+15%) and the Commercial & Industrial segment reached $413 million (+18%), both achieving all-time highs. Fourth quarter gross margins declined to 9.7% from 11.1% due to labor and project inefficiencies, supply chain disruptions and weather, with operating income margins dipping in both segments. Market drivers remain strong as a Clean Grid Initiative report forecasts up to 4.7% electricity demand growth and $630 billion in grid investment through 2028, while data center spending is expected to exceed $150 billion, boosted by AI and hybrid cloud trends. MYR ended Q4 with $279 million in working capital, only $36 million of funded debt (0.19x debt/EBITDA), $442 million available under its credit facility, and positive free cash flow of $22 million, underscoring strong liquidity. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallMYR Group Q4 202300:00 / 00:00Speed:1x1.25x1.5x2xThere are 12 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to the MYR Group 4th Quarter and Full Year 2023 Earnings Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to David Goudrezz of Dresner Corporate Services. Operator00:00:43Please go ahead, David. Speaker 100:00:46Thank you, and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's 4th quarter and full year results for 2023, which were reported yesterday. Joining us on today's call are Rich Swartz, President and Chief Executive Officer Kelly Huntington, Senior Vice President and Chief Financial Officer Todd Cooper, 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 Dresner Corporate Services at 312-726 3600 and we will send you a copy. Or go to the MYR Group website where a copy is available under the Investor Relations tab. Speaker 100:01:40Also, a webcast replay of today's call will be available for 7 days on the Investors 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. Speaker 100:02:18These risks and uncertainties are discussed in the company's annual report on Form 10 ks for the year ended December 31, 2023, 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. Speaker 200:02:44Thanks, David. Good morning, everyone. Welcome to our Q4 and full year 2023 conference call to discuss financial and operational results. I will begin by providing a summary of the Q4 and full year results and then will turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Todd Cooper and Don Egan, Chief Operating Officers for our T and D and C and I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. Speaker 200:03:17I will then conclude today's call with some closing remarks and open the call up for your questions. We finished 2023 with solid financial performance in the 4th quarter and full year revenues of $3,600,000,000 setting a record high for the 9th consecutive year. A steady backlog of $2,510,000,000 reflects a healthy bidding environment and the continued investment to meet growing electrification demands across the U. S. And Canada. Speaker 200:03:48Our accomplishments this year demonstrate the strength and expansion of deep client relationships through alliance and multi year service agreements, while strategically pursuing and capturing new opportunities. Our December 2023 report from Clean Grid Initiative forecast electricity demand will increase from 2.6% to 4.7% in the U. S. Over the next 5 years, with grid planners expecting a growth of 38 gigawatts through 20 28, nearly double the 2022 forecast. In total, the report found $630,000,000,000 in near term investment will be required to meet this load growth. Speaker 200:04:34MYR Group will continue to serve as a strong and nimble partner for our clients as they strive to meet demands for reliable power. In our C and I segment, data centers continue to provide steady opportunities alongside our chosen core markets including wastewater, transportation and healthcare. The same clean grid initiative report forecast data center growth alone to exceed $150,000,000,000 through 2028 as the use of artificial intelligence increases. We continue to track these opportunities and seek to intelligently bid and execute projects to position us for future success. Grid modernization, reliability improvement, system hardening, decarbonization and greater usage of hybrid cloud environments and artificial intelligence are the key market drivers that present opportunities for consistent success across our business. Speaker 200:05:34The tremendous investments being made in Electrical Infrastructure are encouraging and highlight why we believe our chosen markets are poised for ongoing success for many years to come. Now, Kelly will provide details on our Q4 and full year 2023 financial results. Speaker 300:05:53Thank you, Rick, and good morning, everyone. For the year ended December 31, 2023, we reached record annual revenues of $3,600,000,000 full year net income of $91,000,000 and EBITDA of $188,000,000 Our Q4 2023 revenues were $1,000,000,000 a record high and an increase of 16% compared to the same period last year. Our 4th quarter T and D revenues were $592,000,000 a record high for our T and D segment and an increase of 15% compared to the same period last year. The breakdown of T and D revenues was $403,000,000 for transmission, a record high and $189,000,000 for distribution. T and D segment revenues increased due to higher revenue on transmission projects, primarily related to higher revenue on clean energy projects as well as higher revenue on distribution projects. Speaker 300:06:54Work performed under master service agreements continue to represent approximately 50% of our T and D revenues. C and I revenues were $413,000,000 a record high for our C and I segment and an increase of 18% compared to the same period last year. C and I revenues increased primarily due to higher revenue related to clean energy projects. Our gross margin was 9.7% for the 4th quarter of 2023 compared to 11.1% for the same period last year. The decrease in gross margin was primarily due to labor and project inefficiencies, some of which were caused by supply chain disruptions and inclement weather experienced on certain projects. Speaker 300:07:37Gross margin was also negatively impacted by rising costs associated with inflation and unfavorable job closeouts. These margin decreases were partially offset by better than anticipated productivity and favorable weather on a project. T and D operating income margin was 7.2% for the Q4 of 2023 compared to 8% for the same period last year. The decrease was primarily due to labor and supply chain inefficiencies, mainly related to clean energy projects, inclement weather and an unfavorable job closeout. These decreases were partially offset by favorable weather on a project and better than anticipated productivity. Speaker 300:08:21C and I operating income margin was 2.1% for the Q4 of 2023 compared to 3.6% for the same period last year. The decrease was primarily due to labor and project inefficiencies, some of which were caused by supply chain disruptions and inflation as well as unfavorable job closeouts. These decreases were partially offset by better than anticipated productivity. 4th quarter 2023 SG and A expenses were $60,000,000 an increase of $2,000,000 compared to the same period last year. The increase was primarily due to higher employee related expenses to support the growth in our operations and an increase in contingent compensation expense related to a prior acquisition, partially offset by a decrease in employee incentive compensation costs. Speaker 300:09:134th quarter 2023 interest expense was $2,000,000 an increase of $600,000 compared to the same period last year. The increase was primarily due to higher interest rates and higher outstanding debt balances during the Q4 of 2023 as compared to the same period last year. 4th quarter 2023 net income was $24,000,000 compared $25,000,000 for the same period last year. Net income per diluted share of $1.43 decreased compared to $1.46 for the same period last year. Q4 2023 EBITDA was $53,000,000 compared to $52,000,000 for the same period last year. Speaker 300:09:54Total backlog as of December 31, 2023, was $2,510,000,000 a slight increase from the prior year. Total backlog as of December 31, 2023 consisted of $960,000,000 for our T and D segment and $1,550,000,000 for our C and I segment. 4th quarter 2023 operating cash flow was $43,000,000 compared to operating cash flow of $94,000,000 for the same period last year. The decrease in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions. 4th quarter 2023 free cash flow was $22,000,000 compared to free cash flow of $65,000,000 for the same period last year, reflecting the decrease in operating cash flow, partially offset by lower capital expenditure. Speaker 300:10:46Moving to liquidity and our balance sheet. We had approximately $279,000,000 of working capital, dollars 36,000,000 of funded debt and $442,000,000 in borrowing availability under our credit facility as of December 31, 2023. We have continued to maintain a strong funded debt to EBITDA leverage ratio of 0.19 times as of December 31, 2023. 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 Todd Cooper, who will provide an overview of our Transmission and Distribution segment. Speaker 400:11:35Thanks, Kelly, and good morning, everyone. The T and D segment achieved solid Q4 and full year 2023 results, once again proving that our business principles of partnering closely with our clients and executing our projects safely with expected quality and on time delivery remain intact and effective. Expanding relationships with our long term clients through alliance and master service agreements and strategically bidding and winning work with new and existing clients helped us continue to strengthen and grow our market presence. As Rick mentioned, the Clean Grid Initiative report forecasts robust investments in the coming years, and we believe there are abundant opportunities for sustained growth in this market. Our strategic insight survey of T and D clients conducted earlier this year had 67% of the respondents planning increased new transmission build over the next 5 years and validates the clean grid initiative report for the growing electrification demand in the U. Speaker 400:12:40S. With 56% of our clients ranking low demand as a high impact factor in their businesses' strategic direction. The solar market faced headwinds in 2023. We mentioned on our Q3 call that rising labor costs, project inefficiencies and weather, most notably on a few solar projects along with supply chain disruptions affected our financial results. This is true for the Q4 as well and we continue to work with our clients and project teams to advance these projects to completion. Speaker 400:13:17We anticipate that the majority of the field work on these projects will be completed by the beginning of Q3. However, our outlook for solar opportunities and ability to execute remains positive as we see rising labor costs stabilizing and supply chain issues becoming less severe. The Q4 2023 Solar Market Insight Report released by the Solar Energy Industries Association and Wood Mackenzie reported 58% growth compared to the Q3 of 2022 and their outlook remains strong for the solar market's trajectory over the next 5 years, forecasting an average 14% growth annually over that period. We will continue to closely monitor and strategically pursue opportunities in the solar market. Within the T and D segment, transmission, distribution, substation and clean energy projects of varied size, complexity and capacity continue to create a steady pipeline of work. Speaker 400:14:19Across the U. S. And Canada, we have won or renewed several MSAs in 20 23 and been successful in securing a nice share of lump sum transmission substation and distribution work. In summary, we are proud of our accomplishments in the Q4 and all of 2023. Our teams maintained a strong focus on safety and project execution, positioning us as a strong partner in the T and D industry into the future, and I thank them for their tremendous effort. Speaker 400:14:50Increased grid demand and reliability and aging electrical infrastructure, decarbonization goals and legislative funding remain primary market drivers and when combined with our operational excellence positions us well for long term success in the segment. In closing, as I step down as the Chief Operating Officer of MYR Group's Transmission and Distribution segment, I'd like to thank Rick and the entire management team for their support throughout my career, as well as the thousands of employees whose hard work and dedication on all of our projects have made MYR what it is today. I look forward to supporting Rick and the team with other initiatives going forward in what remains an exciting and dynamic market. I'll now turn the call over to Don Egan to provide an overview of our Commercial and Industrial segment. Speaker 500:15:42Thanks, Todd, and good morning, everyone. Our C and I segment saw steady growth, thanks to healthy bidding activity and our continued ability to safely and skillfully execute projects, while leveraging our strong vendor relationships to mitigate inflationary and supply chain headwinds. Our backlog increased as we capture desirable projects in our core markets and we continue to see and track new opportunities in data centers, transportation, clean energy and healthcare. As Rick mentioned earlier, the December 2023 Clean Grid Initiative report forecast significant growth in data centers across the U. S. Speaker 500:16:22Driven by the rise of artificial intelligence and hybrid cloud environments. The report found investments in data centers as well as new industrial and manufacturing facilities as key drivers for the significant near term investment to meet load growth demands. With $481,000,000,000 in commitments for industrial and manufacturing facilities since 2021, in addition to the announcement of 200 manufacturing facilities this past year. Data centers are forecasted to increase from 17 gigawatts to 45 gigawatts of low demand by 2,030, the report found. These forecasts align with the healthy activity we've seen with Sturgeon Electric executing and pursuing additional data center projects in Arizona and Colorado. Speaker 500:17:09Pharmaceutical manufacturing is another core market showing strong bidding activity across the segment that we continue to monitor and intelligently pursue. Outside of data centers and pharmaceuticals, Western Pacific continues to perform a pipeline of transportation work and monitor exciting transit opportunities in Canada. CSI is executing clean energy and commercial projects across California, while water treatment and healthcare facilities continue to offer strong opportunities throughout the C and I business. A few of our district offices were negatively impacted from long term pre COVID-nineteen projects that had continued inflationary and supply chain disruptions during the quarter. Most of these projects will be completed during the first half of this year, allowing us to focus and execute on our healthy backlog of projects. Speaker 500:17:58Through our strengths of proven pre construction service, strong execution and national buying power, we continue to collaborate with our clients enabling us to secure additional work. To conclude, our chosen core markets are healthy and the strength of our client relationships are generating additional pursuits. Our dedicated employees continue to respond to lingering challenges to the business segment with proactive and customer facing communication help MYR Group maintain our leading positions in the markets we serve. We are proud of their dedication, commitment to our organizational values and the strong culture they create. Thanks everyone for your time today. Speaker 500:18:40I will now turn the call back to Rick, who will provide us with some closing comments. Speaker 200:18:46Thank you for those updates, Kelly, Todd and Don. We are Speaker 600:18:49proud of our Speaker 200:18:50growth, which reflects our ongoing commitment to strong operating principles, sound business strategies and our ability to maintain and expand long term customer relationships across both business segments. We believe the future is promising for our industry as the demand for electrification increases and our communities come to depend on reliable, clean energy more than ever before. Our accomplishments in 2023 are the result of our talented and dedicated employees. Their commitment is admirable and I appreciate each of them for placing tremendous care in everything they do. I would also like to thank Todd for his contributions to the company over his 33 years of service and in his tenure as COO as he transitions towards retirement and also welcome Brian Stern, as Senior Vice President and COO to our T and D segment. Speaker 200:19:44Finally, I thank each of you for your ongoing commitment and support to the success of our organization. I look forward to working with you going forward. Operator, we are now ready to open the call up for your comments and questions. Operator00:19:57Thank you. As just mentioned, at this time, we'll conduct the question and answer session. To ask a question, you'll need to press star 1, 1,000,000 and wait for your name to be announced. Our first question comes from the line of Justin Hauck with Baird. Your line is now open. Speaker 700:20:30Great. Thank you. Good morning, everyone. Good Speaker 200:20:34morning, Justin. Speaker 700:20:36Good morning. I wanted to start, I guess, I mean, this has been kind of the theme all year and certainly here in the Q4 as well with your revenue for the year was really, really strong and the margins have been kind of held back here. In the quarter, you called out the 2 20 basis points of negative gross profit revisions on projects for the year that was 170 basis points. So I guess I'm just trying to understand how much of an ongoing drag some of these projects are going to be? I mean, have they completed and you don't have low margin or 0 margin bad jobs they're continuing to run through or how should we think about that kind of drag from the profit adjustments continuing in 2024? Speaker 200:21:23Sure, sure. I would look at it. On the T and D side, I think we talked about it last quarter that the majority of our issues were really on a handful of solar projects in one geographic area. So with that, those projects, as Todd said during his script, will end the end of the second quarter, beginning of the third quarter with field labor. We'll continue to negotiate and go through that side with the customer and make sure that we get hopefully a fair agreement in the end. Speaker 200:21:55But I think we that will continue to have some margin pressures on our T and D side. Without those, we would be operating in the mid range of kind of our T and D margin profile of that 7% to 10.5%. So very comfortable that will happen. These just have a slight drag as these projects near completion. On the C and I side, we've said, if you look at it on a monthly basis by the end of the second quarter, we'll be back to that kind of 4% operating margin and hopefully have a trajectory above that going forward through the year. Speaker 200:22:28And that's really getting those problem projects that were kind of that pre COVID awarded projects behind us. So we did have some margin degradation during the quarter on a couple of those projects, but and then we had material come in on those projects that were low margin. So again, by the end of the second quarter, we see on a monthly basis that margin getting back to that kind of that low end of our margin profile for C and I. I'll stop there and ask any other questions around that. Speaker 700:23:03Yes. No, that's helpful. We kind of think about the trajectory of the earnings for the year. It's with the margins, I guess, staying kind of muted here in the first half on those. I guess the second part of it on the top line, I'm just trying to think about the growth expectations for the year. Speaker 700:23:24If I go back to where your backlog was at the end of 2022, it was up 40%. You grew this year revenue up 20 over 20%. Obviously, that's not a sustainable long term growth rate. I think you've been pretty clear about what you can sustainably grow at. But with backlog flat now year over year going into 2024, just kind of how to think about what you're thinking for the top line trends based on the awards that you have? Speaker 200:23:57I would still look at that high single digit growth for the year, probably a little weighted a little more heavy towards the second half of the year, very positive about what's being out there on the C and I side. I mean, as far as opportunities that Don talked about, Todd talked about opportunities on the transmission and distribution side. And then on the clean energy side, we're going to be continue to be selective on what we take on. We've seen some people taking some low margin work on that side and we're willing to we like that market. We've got people that are well prepared to do that work and we've got some very good projects. Speaker 200:24:32But again, we'll continue to be selective. And then as I always say in every quarter, backlog is always going to be lumpy. But when you look at the opportunities out there, I think everything in our script and what I see day to day, very active market still. Speaker 700:24:47Okay, great. I'll leave it. That's helpful for just kind of thinking about the modeling. So, thank you very much. Speaker 200:24:55Thank you. Operator00:24:56Thank you. Our next question comes from the line of Sangeeta Jain with KeyBanc Capital Markets. Your line is now open. Speaker 800:25:08Yes. Thank you so much for taking my question. I was just wondering if you could share more color on the supply chain comments from your release and your prepared remarks and where those pinch points may be. I'm wondering if it's P and L still or if it's more of a balance of plans constraint in terms of switch gears and transformers maybe, if you could share any more color on that? Speaker 200:25:31I would say from the all time, I guess, slow side of the supply chain, it has improved. I mean, they're not getting any worse when you talk about transformers or equipment that way. Panel seem to be levelizing out on that supply. Again, we usually don't So with that, I think we're seeing improvements on that side. We're not seeing anything worse. Speaker 200:26:05And in some cases, as we've talked about in previous quarters, our customers are releasing the material portion early now and equipment portion, so we can actually order that in advance of the projects and have it for on time delivery for future work. So not all negative on that side, but it did have some impacts during this last quarter. Speaker 800:26:28Great. Thank you. That's helpful. And if I can follow-up with one on your comment on MSA renewals and new MSA is getting signed. I was just wondering if you're seeing any change of tone on the side of the utilities in terms of them facing their own regulatory headwinds and if they're rationalizing the scopes of the MSAs in any ways? Speaker 200:26:49I think they're always looking at the MSAs. But as far as the amount of work we have and our conversations with them, very positive that that work is going to continue and those trends are going to continue. We haven't seen anybody pull back on anything. Todd, is there anything you want to add or any insight you want to give? Speaker 400:27:11No, Rick, I think you covered it. The MSAs are really about utilities today trying to lock in resources to get their work done and that continues. We're seeing more clients use this approach. So we've been excited, especially in 2023 with several of ours coming up for renewal that we were able to renew. So more to come on that front. Speaker 400:27:37But we see more utilities shifting some of their work to the MSA model and staying out of the lump sum at this point, primarily due to resources. Speaker 800:27:49Great. That's very helpful. Thank you so much. Speaker 200:27:52Thank you. Operator00:28:04This question comes from the line of Adi Modak with Goldman Sachs. Your line is now open. Speaker 600:28:11Hi, thank you. Good morning team. I just wanted to understand, you mentioned some capital allocation towards M and A, but wanted to dig into that a little bit and see if you can help us understand the nature of the opportunities you see across both segments or end markets. It seems like the competitive landscape is very fragmented on the T and D side in particular and the market opportunity seems to have a lot of upside. So I'm wondering what your appetite is to make transformative transactions to increase your footprint or do you think it's more reasonable to focus on tuck in type acquisitions? Speaker 200:28:49For us, I would say both. I mean, if you look at 2022, I mean, we had 20% growth roughly, 17% of that was organic, the rest was through acquisitions. If you look at last year, we had 20% growth roughly and it was all organic. So I think we're always looking for acquisition opportunities. But again, we're always going to be patient on that side. Speaker 200:29:13And I think we've shown we can organically grow our business on top of doing acquisitions if they make sense. Speaker 600:29:22Thank you for that. And then on the clean energy side, you said you mentioned you would be selective, but wondering if you can talk about the nature of the projects that you're looking at today, the customer base, the size of the projects and what we should think of as we model our numbers for 2024? Speaker 200:29:42Yes. For us, I think it's just being selective. Again, as we go forward, it's not that that business is 40% of our overall business when we look at the clean energy market, but it's growing every day. And we'll continue to pursue the right opportunities and the ones that make sense, but we do have a margin profile that we want to meet. And as we said before, this year, we really want to focus on, but we don't mind growing our top line and we still see it coming in, in kind of that higher single digit. Speaker 200:30:15We're really going to focus on that bottom line growth and this all takes that into account. We want to make sure that the work we're doing is that and we take on is profitable going forward. Speaker 600:30:28Got it. Thank you. I'll turn it over. Operator00:30:34Thank you. One moment for our next question. This question comes from the line of Brian Brophy with Stifel. Your line is now open. Speaker 900:30:45Thanks. Good morning. I appreciate you taking my question. Just wanted to ask about the high single digit growth that you mentioned. I think that's overall for 2024 on the top line. Speaker 900:30:56Is there anything specific to call out as it relates to T and D versus C and I? Or should we expect high single digit growth across both of them? Thanks. Speaker 200:31:06Right now, I would anticipate it across both segments. I mean, barring something, a project coming in on one side or the other. I mean, we do clean energy on both sides. So that's an example where one could come into T and T really doesn't matter where that comes into us on that side of the business. But I think you heard the opportunities from both Todd and Don and those are very strong. Speaker 200:31:31And again, very lumpy on the awards. It's always going to be lumpy and it always has. But when we look at the amount of activity out there, very positive about the amount of work that's out there. Speaker 900:31:44Okay, got it. And then I've heard from some others that transmission may outgrow distribution here in 2024, just given some of the strength on the clean energy side, need to interconnect with data centers, things of that nature. Curious of what you guys are seeing here? Any thoughts on whether transmission or distribution may outgrow this year? Thanks. Speaker 200:32:07I don't have any size in it. One is going to outgrow the other one. I think for us, it's where our customers are spending their money during a given quarter or given a couple of given quarters. So it's the type of projects we do. We have MSAs on transmission and distribution for many of our clients. Speaker 200:32:26So I don't really care where it comes from. The margin profiles are almost identical. So for us, we're not picky and we haven't heard our customers saying they're spending more towards distribution than transmission to date. Speaker 900:32:40Okay, thanks. I will pass it on. Speaker 1000:33:02Yes. Hi, good morning. Speaker 200:33:04Good morning. Speaker 1000:33:06Hey, just to follow-up on the transmission and distribution question. We've been hearing a lot from utilities about accelerating resiliency programs, which generally speaking get good regulatory support. And I was just wondering if you're seeing that in terms of maybe your MSA agreements or something outside of that? Speaker 400:33:36Yes, absolutely. That's been an ongoing trend for probably the last 4 or 5 years where they've started to accelerate that. And then if you think about it, there were some supply chain impacts during COVID and thereafter with some of the equipment associated with it. So we are seeing it come back in a little stronger period or right now we're seeing more focus on that throughout all of our MSAs that, as Rick mentioned, we do for distribution work across the U. S. Speaker 400:34:09And even in Canada. Speaker 1000:34:13Okay, great. And then just to follow-up on, I think last quarter you may have mentioned that you were actively positioning us up to bid on some of these high voltage multibillion dollar transmission projects in MISO, but there's also a lot of planning basically all over the country, California, as far as the NYISO, SPP, PJM. And I was just wondering, where what stage of the development on your side are we at for some of these projects that may start construction by 2026 and come online in 2028 to 2,030? Speaker 400:35:00Yes, I think a year ago we talking about these things are starting to hit the streets and coming out for bid. And today they're still in various stages, but they have advanced some of them to the award stage. And we're seeing a lot of activity, both bidding and projects being awarded and negotiated at the present time. Speaker 1000:35:25Okay, great. Then on C and I, obviously, you guys are very diversified in terms of end markets. But are there any could you maybe point to maybe top 1 or 2 markets that are driving growth more than others? And then maybe talk about some more longer term emerging end markets, whether it's manufacturing, reshoring and then more specific and then maybe even more importantly, electric vehicle infrastructure as it pertains to your utility customers? Speaker 500:36:03Okay. I can take that. I would answer that as it kind of depends on the geographic area as far as the end markets are concerned. Data centers obviously is a big trend and we've been talking about that for a couple of quarters. There's obviously parts of the country that are more prone to take on data center opportunities than others. Speaker 500:36:25So that's a big focus for ours. As far as the EV charging, there's lots of information in the news about EV infrastructure, about EV cars. We're still in the I think the design of what that's going to look like long term. We're still doing a fair amount of that work now and still monitoring what the progress looks like going forward. Speaker 200:36:48Yes. I would say the other market that's out there on the transportation front is some of the light rail stuff out there. That's a growing market in some areas. That's something that we've been good at in certain geographic locations. So we see that continuing to grow. Speaker 200:37:03Healthcare continues strong. And then kind of that manufacturing side. I would take all those kind of along with data centers is kind of the top tier stuff we're doing. Back to the electrical vehicle side, I think we've always said that was going to be a slower build than what was anticipated. We see it as a great long term business, but the U. Speaker 200:37:26S. Isn't 50% of the vehicles in my opinion are going to be electric vehicles by 2027. I think it's going to be a lesser amount than that. So the infrastructure is going to continue to build out, but probably at a manageable pace. Speaker 1000:37:43All right, great. And then just lastly, any thoughts on the Q1 impact to weather? I mean, I know you guys do storm emergency storm restoration work, but it also sometimes displace other projects you might be working on that might even just be get delayed due to weather? Just wondering what your thoughts were given the well below normal temperatures we saw throughout the country? Speaker 200:38:12Yes. I think to date there hasn't been big storm calls. We don't have a lot of people out on storm. We have had some geographic areas. I mean, if you look at it individually that have had some weather impact. Speaker 200:38:24So we continue to have that, but we've had some that are better than anticipated. So I don't want you to think that the weather is bad everywhere. It's really how does it affect the given projects. And I think we've talked before on calls, you have brought 2 projects that are 50 miles apart. 1 has extremely bad weather and the other one has normal weather. Speaker 200:38:45So it can really vary. But again, today, we're not going to we haven't seen big storm revenue. Speaker 1000:38:52Okay, great. Thank you very much. Operator00:38:56Thank you. One moment for our next question. This comes from the line of Jon Braatz with KCCA. Your line is now open. Speaker 1100:39:08Good morning, everyone. Rick, a question for maybe you and Kelly. Obviously, the outlook is very positive, a lot of opportunities ahead. But over the last couple of years, your maybe your SG and A expenses have moderated a little bit, the growth in SG and A expenses have moderated. Do you see that continuing? Speaker 1100:39:30Or do you think that you may have to reaccelerate some of those expenses as we go forward? Speaker 300:39:40Yes. Thanks for that question. If you look, we did have, I think, near record low SG and A expense as a percentage of revenue in the 4th quarter and that benefited from the very strong revenues we saw and the higher materials in the quarter. So I think, certainly, our goal is to grow our SG and A expense at a slower rate than our revenue growth. And we've been doing a good job of that the last several quarters, but I don't think I would look at 4th quarter as the new assumption for that. Speaker 300:40:12I'd look over a little bit longer trend line of like maybe 12 to 18 months because like you said, recognizing we're growing business, so we want to make sure we're investing in our workforce, in technology, really just continuing to mature our capabilities to go after the great organic growth that's out there. Speaker 1100:40:29Okay. And Kelly, one other question. You mentioned the higher interest costs in the quarter and higher interest rates and so on. Yet at the end of the quarter, your borrowings were sharply lower than at the end of the third quarter. Did you repay some debt at year end? Speaker 1100:40:52And that might account for the lower borrowings at year end? Speaker 300:41:00Yes. That's a good way to look at it. We did see some stronger cash flow in towards the end of the quarter that allowed us to pay down some more debt at the end of the quarter. But when we're talking about a pretty low level of debt to begin with, it doesn't take much of a fluctuation in the amount. And certainly rates year over year are quite a bit higher. Speaker 300:41:21So it ends up being almost a rounding error. These are pretty small numbers and something we continue to stay focused on and make sure we're driving operating cash flow and trying to keep those debt levels low in anticipation of continuing to support the business and the organic growth. Speaker 1100:41:40Sure. Okay. All right. Thank you, Kelly. Operator00:41:48Okay. Thank you. I'm showing no further questions at this time. I would now like to turn the call back to Rick Swartz for closing remarks. Speaker 200:41:58To conclude, on behalf of Kelly, Todd, 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 going forward and speaking with you again on our next conference call. Until then, stay safe. Operator00:42:15Thank you. This does conclude the program. You may now disconnect.Read morePowered by Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) MYR Group Earnings HeadlinesMYR Group, Inc. (NASDAQ:MYRG) Receives $191.83 Consensus Price Target from AnalystsOctober 5, 2025 | americanbankingnews.comMYR Group (MYRG) was downgraded to a Hold Rating at KeyBancOctober 4, 2025 | theglobeandmail.com9 AI Stocks Set to Soar Amid U.S.-China Trade TensionsThe escalating U.S.-China trade tensions are reshaping the AI landscape. Companies like Nvidia are facing significant revenue hits with the U.S. imposing new export restrictions on advanced AI chips to China. This shift opens doors for U.S.-based AI companies poised to fill the gap.October 9 at 2:00 AM | StockEarnings (Ad)Is Fair Valuation for MYR Group (MYRG) Shifting Focus to Its Long-Term Growth Story?October 3, 2025 | finance.yahoo.comWhat is KeyCorp's Estimate for MYR Group FY2025 Earnings?October 3, 2025 | americanbankingnews.comQ2 Earnings Highlights: MYR Group (NASDAQ:MYRG) Vs The Rest Of The Construction and Maintenance Services StocksOctober 2, 2025 | msn.comSee More MYR Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like MYR Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on MYR Group and other key companies, straight to your email. Email Address About MYR GroupMYR Group (NASDAQ:MYRG) Inc. (NASDAQ: MYRG) is a specialty electrical contractor that provides a broad array of construction, maintenance and emergency restoration services to utility, commercial, industrial and renewable energy customers. The company was formed in 1995 through the consolidation of several regional specialty contractors and has since expanded its capabilities to support complex transmission and distribution projects, substation installations, communication and wireless infrastructure, as well as renewable power interconnections. Through a network of operating subsidiaries, MYR Group delivers turnkey solutions that include overhead and underground line construction, substation and switchgear installation, substation maintenance and testing, and storm restoration services. The company’s workforce is trained to deploy advanced equipment and adhere to stringent safety and regulatory standards, enabling it to work on projects ranging from urban transmission rebuilds to rural distribution extensions and large-scale solar, wind and battery storage interconnection systems. Headquartered in Henderson, Colorado, MYR Group serves customers across the United States and Canada, with regional offices and field locations that provide local responsiveness and operational flexibility. The company is led by President and Chief Executive Officer Clive H. Lewin, whose tenure has focused on strategic growth through selective acquisitions and investment in technology, workforce development and safety programs. MYR Group continues to pursue opportunities in evolving energy markets while maintaining its emphasis on reliable delivery and long-term customer relationships.View MYR Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Tesla Earnings Loom: Bulls Eye $600, Bears Warn of $300Spotify Could Surge Higher—Here’s the Hidden Earnings SignalBerkshire-Backed Lennar Slides After Weak Q3 EarningsWall Street Eyes +30% Upside in Synopsys After Huge Earnings FallRH Stock Slides After Mixed Earnings and Tariff ConcernsCelsius Stock Surges After Blowout Earnings and Pepsi DealWhy DocuSign Could Be a SaaS Value Play After Q2 Earnings Upcoming Earnings Fastenal (10/13/2025)Wells Fargo & Company (10/14/2025)Citigroup (10/14/2025)Johnson & Johnson (10/14/2025)JPMorgan Chase & Co. 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There are 12 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to the MYR Group 4th Quarter and Full Year 2023 Earnings Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to David Goudrezz of Dresner Corporate Services. Operator00:00:43Please go ahead, David. Speaker 100:00:46Thank you, and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's 4th quarter and full year results for 2023, which were reported yesterday. Joining us on today's call are Rich Swartz, President and Chief Executive Officer Kelly Huntington, Senior Vice President and Chief Financial Officer Todd Cooper, 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 Dresner Corporate Services at 312-726 3600 and we will send you a copy. Or go to the MYR Group website where a copy is available under the Investor Relations tab. Speaker 100:01:40Also, a webcast replay of today's call will be available for 7 days on the Investors 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. Speaker 100:02:18These risks and uncertainties are discussed in the company's annual report on Form 10 ks for the year ended December 31, 2023, 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. Speaker 200:02:44Thanks, David. Good morning, everyone. Welcome to our Q4 and full year 2023 conference call to discuss financial and operational results. I will begin by providing a summary of the Q4 and full year results and then will turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Todd Cooper and Don Egan, Chief Operating Officers for our T and D and C and I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. Speaker 200:03:17I will then conclude today's call with some closing remarks and open the call up for your questions. We finished 2023 with solid financial performance in the 4th quarter and full year revenues of $3,600,000,000 setting a record high for the 9th consecutive year. A steady backlog of $2,510,000,000 reflects a healthy bidding environment and the continued investment to meet growing electrification demands across the U. S. And Canada. Speaker 200:03:48Our accomplishments this year demonstrate the strength and expansion of deep client relationships through alliance and multi year service agreements, while strategically pursuing and capturing new opportunities. Our December 2023 report from Clean Grid Initiative forecast electricity demand will increase from 2.6% to 4.7% in the U. S. Over the next 5 years, with grid planners expecting a growth of 38 gigawatts through 20 28, nearly double the 2022 forecast. In total, the report found $630,000,000,000 in near term investment will be required to meet this load growth. Speaker 200:04:34MYR Group will continue to serve as a strong and nimble partner for our clients as they strive to meet demands for reliable power. In our C and I segment, data centers continue to provide steady opportunities alongside our chosen core markets including wastewater, transportation and healthcare. The same clean grid initiative report forecast data center growth alone to exceed $150,000,000,000 through 2028 as the use of artificial intelligence increases. We continue to track these opportunities and seek to intelligently bid and execute projects to position us for future success. Grid modernization, reliability improvement, system hardening, decarbonization and greater usage of hybrid cloud environments and artificial intelligence are the key market drivers that present opportunities for consistent success across our business. Speaker 200:05:34The tremendous investments being made in Electrical Infrastructure are encouraging and highlight why we believe our chosen markets are poised for ongoing success for many years to come. Now, Kelly will provide details on our Q4 and full year 2023 financial results. Speaker 300:05:53Thank you, Rick, and good morning, everyone. For the year ended December 31, 2023, we reached record annual revenues of $3,600,000,000 full year net income of $91,000,000 and EBITDA of $188,000,000 Our Q4 2023 revenues were $1,000,000,000 a record high and an increase of 16% compared to the same period last year. Our 4th quarter T and D revenues were $592,000,000 a record high for our T and D segment and an increase of 15% compared to the same period last year. The breakdown of T and D revenues was $403,000,000 for transmission, a record high and $189,000,000 for distribution. T and D segment revenues increased due to higher revenue on transmission projects, primarily related to higher revenue on clean energy projects as well as higher revenue on distribution projects. Speaker 300:06:54Work performed under master service agreements continue to represent approximately 50% of our T and D revenues. C and I revenues were $413,000,000 a record high for our C and I segment and an increase of 18% compared to the same period last year. C and I revenues increased primarily due to higher revenue related to clean energy projects. Our gross margin was 9.7% for the 4th quarter of 2023 compared to 11.1% for the same period last year. The decrease in gross margin was primarily due to labor and project inefficiencies, some of which were caused by supply chain disruptions and inclement weather experienced on certain projects. Speaker 300:07:37Gross margin was also negatively impacted by rising costs associated with inflation and unfavorable job closeouts. These margin decreases were partially offset by better than anticipated productivity and favorable weather on a project. T and D operating income margin was 7.2% for the Q4 of 2023 compared to 8% for the same period last year. The decrease was primarily due to labor and supply chain inefficiencies, mainly related to clean energy projects, inclement weather and an unfavorable job closeout. These decreases were partially offset by favorable weather on a project and better than anticipated productivity. Speaker 300:08:21C and I operating income margin was 2.1% for the Q4 of 2023 compared to 3.6% for the same period last year. The decrease was primarily due to labor and project inefficiencies, some of which were caused by supply chain disruptions and inflation as well as unfavorable job closeouts. These decreases were partially offset by better than anticipated productivity. 4th quarter 2023 SG and A expenses were $60,000,000 an increase of $2,000,000 compared to the same period last year. The increase was primarily due to higher employee related expenses to support the growth in our operations and an increase in contingent compensation expense related to a prior acquisition, partially offset by a decrease in employee incentive compensation costs. Speaker 300:09:134th quarter 2023 interest expense was $2,000,000 an increase of $600,000 compared to the same period last year. The increase was primarily due to higher interest rates and higher outstanding debt balances during the Q4 of 2023 as compared to the same period last year. 4th quarter 2023 net income was $24,000,000 compared $25,000,000 for the same period last year. Net income per diluted share of $1.43 decreased compared to $1.46 for the same period last year. Q4 2023 EBITDA was $53,000,000 compared to $52,000,000 for the same period last year. Speaker 300:09:54Total backlog as of December 31, 2023, was $2,510,000,000 a slight increase from the prior year. Total backlog as of December 31, 2023 consisted of $960,000,000 for our T and D segment and $1,550,000,000 for our C and I segment. 4th quarter 2023 operating cash flow was $43,000,000 compared to operating cash flow of $94,000,000 for the same period last year. The decrease in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions. 4th quarter 2023 free cash flow was $22,000,000 compared to free cash flow of $65,000,000 for the same period last year, reflecting the decrease in operating cash flow, partially offset by lower capital expenditure. Speaker 300:10:46Moving to liquidity and our balance sheet. We had approximately $279,000,000 of working capital, dollars 36,000,000 of funded debt and $442,000,000 in borrowing availability under our credit facility as of December 31, 2023. We have continued to maintain a strong funded debt to EBITDA leverage ratio of 0.19 times as of December 31, 2023. 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 Todd Cooper, who will provide an overview of our Transmission and Distribution segment. Speaker 400:11:35Thanks, Kelly, and good morning, everyone. The T and D segment achieved solid Q4 and full year 2023 results, once again proving that our business principles of partnering closely with our clients and executing our projects safely with expected quality and on time delivery remain intact and effective. Expanding relationships with our long term clients through alliance and master service agreements and strategically bidding and winning work with new and existing clients helped us continue to strengthen and grow our market presence. As Rick mentioned, the Clean Grid Initiative report forecasts robust investments in the coming years, and we believe there are abundant opportunities for sustained growth in this market. Our strategic insight survey of T and D clients conducted earlier this year had 67% of the respondents planning increased new transmission build over the next 5 years and validates the clean grid initiative report for the growing electrification demand in the U. Speaker 400:12:40S. With 56% of our clients ranking low demand as a high impact factor in their businesses' strategic direction. The solar market faced headwinds in 2023. We mentioned on our Q3 call that rising labor costs, project inefficiencies and weather, most notably on a few solar projects along with supply chain disruptions affected our financial results. This is true for the Q4 as well and we continue to work with our clients and project teams to advance these projects to completion. Speaker 400:13:17We anticipate that the majority of the field work on these projects will be completed by the beginning of Q3. However, our outlook for solar opportunities and ability to execute remains positive as we see rising labor costs stabilizing and supply chain issues becoming less severe. The Q4 2023 Solar Market Insight Report released by the Solar Energy Industries Association and Wood Mackenzie reported 58% growth compared to the Q3 of 2022 and their outlook remains strong for the solar market's trajectory over the next 5 years, forecasting an average 14% growth annually over that period. We will continue to closely monitor and strategically pursue opportunities in the solar market. Within the T and D segment, transmission, distribution, substation and clean energy projects of varied size, complexity and capacity continue to create a steady pipeline of work. Speaker 400:14:19Across the U. S. And Canada, we have won or renewed several MSAs in 20 23 and been successful in securing a nice share of lump sum transmission substation and distribution work. In summary, we are proud of our accomplishments in the Q4 and all of 2023. Our teams maintained a strong focus on safety and project execution, positioning us as a strong partner in the T and D industry into the future, and I thank them for their tremendous effort. Speaker 400:14:50Increased grid demand and reliability and aging electrical infrastructure, decarbonization goals and legislative funding remain primary market drivers and when combined with our operational excellence positions us well for long term success in the segment. In closing, as I step down as the Chief Operating Officer of MYR Group's Transmission and Distribution segment, I'd like to thank Rick and the entire management team for their support throughout my career, as well as the thousands of employees whose hard work and dedication on all of our projects have made MYR what it is today. I look forward to supporting Rick and the team with other initiatives going forward in what remains an exciting and dynamic market. I'll now turn the call over to Don Egan to provide an overview of our Commercial and Industrial segment. Speaker 500:15:42Thanks, Todd, and good morning, everyone. Our C and I segment saw steady growth, thanks to healthy bidding activity and our continued ability to safely and skillfully execute projects, while leveraging our strong vendor relationships to mitigate inflationary and supply chain headwinds. Our backlog increased as we capture desirable projects in our core markets and we continue to see and track new opportunities in data centers, transportation, clean energy and healthcare. As Rick mentioned earlier, the December 2023 Clean Grid Initiative report forecast significant growth in data centers across the U. S. Speaker 500:16:22Driven by the rise of artificial intelligence and hybrid cloud environments. The report found investments in data centers as well as new industrial and manufacturing facilities as key drivers for the significant near term investment to meet load growth demands. With $481,000,000,000 in commitments for industrial and manufacturing facilities since 2021, in addition to the announcement of 200 manufacturing facilities this past year. Data centers are forecasted to increase from 17 gigawatts to 45 gigawatts of low demand by 2,030, the report found. These forecasts align with the healthy activity we've seen with Sturgeon Electric executing and pursuing additional data center projects in Arizona and Colorado. Speaker 500:17:09Pharmaceutical manufacturing is another core market showing strong bidding activity across the segment that we continue to monitor and intelligently pursue. Outside of data centers and pharmaceuticals, Western Pacific continues to perform a pipeline of transportation work and monitor exciting transit opportunities in Canada. CSI is executing clean energy and commercial projects across California, while water treatment and healthcare facilities continue to offer strong opportunities throughout the C and I business. A few of our district offices were negatively impacted from long term pre COVID-nineteen projects that had continued inflationary and supply chain disruptions during the quarter. Most of these projects will be completed during the first half of this year, allowing us to focus and execute on our healthy backlog of projects. Speaker 500:17:58Through our strengths of proven pre construction service, strong execution and national buying power, we continue to collaborate with our clients enabling us to secure additional work. To conclude, our chosen core markets are healthy and the strength of our client relationships are generating additional pursuits. Our dedicated employees continue to respond to lingering challenges to the business segment with proactive and customer facing communication help MYR Group maintain our leading positions in the markets we serve. We are proud of their dedication, commitment to our organizational values and the strong culture they create. Thanks everyone for your time today. Speaker 500:18:40I will now turn the call back to Rick, who will provide us with some closing comments. Speaker 200:18:46Thank you for those updates, Kelly, Todd and Don. We are Speaker 600:18:49proud of our Speaker 200:18:50growth, which reflects our ongoing commitment to strong operating principles, sound business strategies and our ability to maintain and expand long term customer relationships across both business segments. We believe the future is promising for our industry as the demand for electrification increases and our communities come to depend on reliable, clean energy more than ever before. Our accomplishments in 2023 are the result of our talented and dedicated employees. Their commitment is admirable and I appreciate each of them for placing tremendous care in everything they do. I would also like to thank Todd for his contributions to the company over his 33 years of service and in his tenure as COO as he transitions towards retirement and also welcome Brian Stern, as Senior Vice President and COO to our T and D segment. Speaker 200:19:44Finally, I thank each of you for your ongoing commitment and support to the success of our organization. I look forward to working with you going forward. Operator, we are now ready to open the call up for your comments and questions. Operator00:19:57Thank you. As just mentioned, at this time, we'll conduct the question and answer session. To ask a question, you'll need to press star 1, 1,000,000 and wait for your name to be announced. Our first question comes from the line of Justin Hauck with Baird. Your line is now open. Speaker 700:20:30Great. Thank you. Good morning, everyone. Good Speaker 200:20:34morning, Justin. Speaker 700:20:36Good morning. I wanted to start, I guess, I mean, this has been kind of the theme all year and certainly here in the Q4 as well with your revenue for the year was really, really strong and the margins have been kind of held back here. In the quarter, you called out the 2 20 basis points of negative gross profit revisions on projects for the year that was 170 basis points. So I guess I'm just trying to understand how much of an ongoing drag some of these projects are going to be? I mean, have they completed and you don't have low margin or 0 margin bad jobs they're continuing to run through or how should we think about that kind of drag from the profit adjustments continuing in 2024? Speaker 200:21:23Sure, sure. I would look at it. On the T and D side, I think we talked about it last quarter that the majority of our issues were really on a handful of solar projects in one geographic area. So with that, those projects, as Todd said during his script, will end the end of the second quarter, beginning of the third quarter with field labor. We'll continue to negotiate and go through that side with the customer and make sure that we get hopefully a fair agreement in the end. Speaker 200:21:55But I think we that will continue to have some margin pressures on our T and D side. Without those, we would be operating in the mid range of kind of our T and D margin profile of that 7% to 10.5%. So very comfortable that will happen. These just have a slight drag as these projects near completion. On the C and I side, we've said, if you look at it on a monthly basis by the end of the second quarter, we'll be back to that kind of 4% operating margin and hopefully have a trajectory above that going forward through the year. Speaker 200:22:28And that's really getting those problem projects that were kind of that pre COVID awarded projects behind us. So we did have some margin degradation during the quarter on a couple of those projects, but and then we had material come in on those projects that were low margin. So again, by the end of the second quarter, we see on a monthly basis that margin getting back to that kind of that low end of our margin profile for C and I. I'll stop there and ask any other questions around that. Speaker 700:23:03Yes. No, that's helpful. We kind of think about the trajectory of the earnings for the year. It's with the margins, I guess, staying kind of muted here in the first half on those. I guess the second part of it on the top line, I'm just trying to think about the growth expectations for the year. Speaker 700:23:24If I go back to where your backlog was at the end of 2022, it was up 40%. You grew this year revenue up 20 over 20%. Obviously, that's not a sustainable long term growth rate. I think you've been pretty clear about what you can sustainably grow at. But with backlog flat now year over year going into 2024, just kind of how to think about what you're thinking for the top line trends based on the awards that you have? Speaker 200:23:57I would still look at that high single digit growth for the year, probably a little weighted a little more heavy towards the second half of the year, very positive about what's being out there on the C and I side. I mean, as far as opportunities that Don talked about, Todd talked about opportunities on the transmission and distribution side. And then on the clean energy side, we're going to be continue to be selective on what we take on. We've seen some people taking some low margin work on that side and we're willing to we like that market. We've got people that are well prepared to do that work and we've got some very good projects. Speaker 200:24:32But again, we'll continue to be selective. And then as I always say in every quarter, backlog is always going to be lumpy. But when you look at the opportunities out there, I think everything in our script and what I see day to day, very active market still. Speaker 700:24:47Okay, great. I'll leave it. That's helpful for just kind of thinking about the modeling. So, thank you very much. Speaker 200:24:55Thank you. Operator00:24:56Thank you. Our next question comes from the line of Sangeeta Jain with KeyBanc Capital Markets. Your line is now open. Speaker 800:25:08Yes. Thank you so much for taking my question. I was just wondering if you could share more color on the supply chain comments from your release and your prepared remarks and where those pinch points may be. I'm wondering if it's P and L still or if it's more of a balance of plans constraint in terms of switch gears and transformers maybe, if you could share any more color on that? Speaker 200:25:31I would say from the all time, I guess, slow side of the supply chain, it has improved. I mean, they're not getting any worse when you talk about transformers or equipment that way. Panel seem to be levelizing out on that supply. Again, we usually don't So with that, I think we're seeing improvements on that side. We're not seeing anything worse. Speaker 200:26:05And in some cases, as we've talked about in previous quarters, our customers are releasing the material portion early now and equipment portion, so we can actually order that in advance of the projects and have it for on time delivery for future work. So not all negative on that side, but it did have some impacts during this last quarter. Speaker 800:26:28Great. Thank you. That's helpful. And if I can follow-up with one on your comment on MSA renewals and new MSA is getting signed. I was just wondering if you're seeing any change of tone on the side of the utilities in terms of them facing their own regulatory headwinds and if they're rationalizing the scopes of the MSAs in any ways? Speaker 200:26:49I think they're always looking at the MSAs. But as far as the amount of work we have and our conversations with them, very positive that that work is going to continue and those trends are going to continue. We haven't seen anybody pull back on anything. Todd, is there anything you want to add or any insight you want to give? Speaker 400:27:11No, Rick, I think you covered it. The MSAs are really about utilities today trying to lock in resources to get their work done and that continues. We're seeing more clients use this approach. So we've been excited, especially in 2023 with several of ours coming up for renewal that we were able to renew. So more to come on that front. Speaker 400:27:37But we see more utilities shifting some of their work to the MSA model and staying out of the lump sum at this point, primarily due to resources. Speaker 800:27:49Great. That's very helpful. Thank you so much. Speaker 200:27:52Thank you. Operator00:28:04This question comes from the line of Adi Modak with Goldman Sachs. Your line is now open. Speaker 600:28:11Hi, thank you. Good morning team. I just wanted to understand, you mentioned some capital allocation towards M and A, but wanted to dig into that a little bit and see if you can help us understand the nature of the opportunities you see across both segments or end markets. It seems like the competitive landscape is very fragmented on the T and D side in particular and the market opportunity seems to have a lot of upside. So I'm wondering what your appetite is to make transformative transactions to increase your footprint or do you think it's more reasonable to focus on tuck in type acquisitions? Speaker 200:28:49For us, I would say both. I mean, if you look at 2022, I mean, we had 20% growth roughly, 17% of that was organic, the rest was through acquisitions. If you look at last year, we had 20% growth roughly and it was all organic. So I think we're always looking for acquisition opportunities. But again, we're always going to be patient on that side. Speaker 200:29:13And I think we've shown we can organically grow our business on top of doing acquisitions if they make sense. Speaker 600:29:22Thank you for that. And then on the clean energy side, you said you mentioned you would be selective, but wondering if you can talk about the nature of the projects that you're looking at today, the customer base, the size of the projects and what we should think of as we model our numbers for 2024? Speaker 200:29:42Yes. For us, I think it's just being selective. Again, as we go forward, it's not that that business is 40% of our overall business when we look at the clean energy market, but it's growing every day. And we'll continue to pursue the right opportunities and the ones that make sense, but we do have a margin profile that we want to meet. And as we said before, this year, we really want to focus on, but we don't mind growing our top line and we still see it coming in, in kind of that higher single digit. Speaker 200:30:15We're really going to focus on that bottom line growth and this all takes that into account. We want to make sure that the work we're doing is that and we take on is profitable going forward. Speaker 600:30:28Got it. Thank you. I'll turn it over. Operator00:30:34Thank you. One moment for our next question. This question comes from the line of Brian Brophy with Stifel. Your line is now open. Speaker 900:30:45Thanks. Good morning. I appreciate you taking my question. Just wanted to ask about the high single digit growth that you mentioned. I think that's overall for 2024 on the top line. Speaker 900:30:56Is there anything specific to call out as it relates to T and D versus C and I? Or should we expect high single digit growth across both of them? Thanks. Speaker 200:31:06Right now, I would anticipate it across both segments. I mean, barring something, a project coming in on one side or the other. I mean, we do clean energy on both sides. So that's an example where one could come into T and T really doesn't matter where that comes into us on that side of the business. But I think you heard the opportunities from both Todd and Don and those are very strong. Speaker 200:31:31And again, very lumpy on the awards. It's always going to be lumpy and it always has. But when we look at the amount of activity out there, very positive about the amount of work that's out there. Speaker 900:31:44Okay, got it. And then I've heard from some others that transmission may outgrow distribution here in 2024, just given some of the strength on the clean energy side, need to interconnect with data centers, things of that nature. Curious of what you guys are seeing here? Any thoughts on whether transmission or distribution may outgrow this year? Thanks. Speaker 200:32:07I don't have any size in it. One is going to outgrow the other one. I think for us, it's where our customers are spending their money during a given quarter or given a couple of given quarters. So it's the type of projects we do. We have MSAs on transmission and distribution for many of our clients. Speaker 200:32:26So I don't really care where it comes from. The margin profiles are almost identical. So for us, we're not picky and we haven't heard our customers saying they're spending more towards distribution than transmission to date. Speaker 900:32:40Okay, thanks. I will pass it on. Speaker 1000:33:02Yes. Hi, good morning. Speaker 200:33:04Good morning. Speaker 1000:33:06Hey, just to follow-up on the transmission and distribution question. We've been hearing a lot from utilities about accelerating resiliency programs, which generally speaking get good regulatory support. And I was just wondering if you're seeing that in terms of maybe your MSA agreements or something outside of that? Speaker 400:33:36Yes, absolutely. That's been an ongoing trend for probably the last 4 or 5 years where they've started to accelerate that. And then if you think about it, there were some supply chain impacts during COVID and thereafter with some of the equipment associated with it. So we are seeing it come back in a little stronger period or right now we're seeing more focus on that throughout all of our MSAs that, as Rick mentioned, we do for distribution work across the U. S. Speaker 400:34:09And even in Canada. Speaker 1000:34:13Okay, great. And then just to follow-up on, I think last quarter you may have mentioned that you were actively positioning us up to bid on some of these high voltage multibillion dollar transmission projects in MISO, but there's also a lot of planning basically all over the country, California, as far as the NYISO, SPP, PJM. And I was just wondering, where what stage of the development on your side are we at for some of these projects that may start construction by 2026 and come online in 2028 to 2,030? Speaker 400:35:00Yes, I think a year ago we talking about these things are starting to hit the streets and coming out for bid. And today they're still in various stages, but they have advanced some of them to the award stage. And we're seeing a lot of activity, both bidding and projects being awarded and negotiated at the present time. Speaker 1000:35:25Okay, great. Then on C and I, obviously, you guys are very diversified in terms of end markets. But are there any could you maybe point to maybe top 1 or 2 markets that are driving growth more than others? And then maybe talk about some more longer term emerging end markets, whether it's manufacturing, reshoring and then more specific and then maybe even more importantly, electric vehicle infrastructure as it pertains to your utility customers? Speaker 500:36:03Okay. I can take that. I would answer that as it kind of depends on the geographic area as far as the end markets are concerned. Data centers obviously is a big trend and we've been talking about that for a couple of quarters. There's obviously parts of the country that are more prone to take on data center opportunities than others. Speaker 500:36:25So that's a big focus for ours. As far as the EV charging, there's lots of information in the news about EV infrastructure, about EV cars. We're still in the I think the design of what that's going to look like long term. We're still doing a fair amount of that work now and still monitoring what the progress looks like going forward. Speaker 200:36:48Yes. I would say the other market that's out there on the transportation front is some of the light rail stuff out there. That's a growing market in some areas. That's something that we've been good at in certain geographic locations. So we see that continuing to grow. Speaker 200:37:03Healthcare continues strong. And then kind of that manufacturing side. I would take all those kind of along with data centers is kind of the top tier stuff we're doing. Back to the electrical vehicle side, I think we've always said that was going to be a slower build than what was anticipated. We see it as a great long term business, but the U. Speaker 200:37:26S. Isn't 50% of the vehicles in my opinion are going to be electric vehicles by 2027. I think it's going to be a lesser amount than that. So the infrastructure is going to continue to build out, but probably at a manageable pace. Speaker 1000:37:43All right, great. And then just lastly, any thoughts on the Q1 impact to weather? I mean, I know you guys do storm emergency storm restoration work, but it also sometimes displace other projects you might be working on that might even just be get delayed due to weather? Just wondering what your thoughts were given the well below normal temperatures we saw throughout the country? Speaker 200:38:12Yes. I think to date there hasn't been big storm calls. We don't have a lot of people out on storm. We have had some geographic areas. I mean, if you look at it individually that have had some weather impact. Speaker 200:38:24So we continue to have that, but we've had some that are better than anticipated. So I don't want you to think that the weather is bad everywhere. It's really how does it affect the given projects. And I think we've talked before on calls, you have brought 2 projects that are 50 miles apart. 1 has extremely bad weather and the other one has normal weather. Speaker 200:38:45So it can really vary. But again, today, we're not going to we haven't seen big storm revenue. Speaker 1000:38:52Okay, great. Thank you very much. Operator00:38:56Thank you. One moment for our next question. This comes from the line of Jon Braatz with KCCA. Your line is now open. Speaker 1100:39:08Good morning, everyone. Rick, a question for maybe you and Kelly. Obviously, the outlook is very positive, a lot of opportunities ahead. But over the last couple of years, your maybe your SG and A expenses have moderated a little bit, the growth in SG and A expenses have moderated. Do you see that continuing? Speaker 1100:39:30Or do you think that you may have to reaccelerate some of those expenses as we go forward? Speaker 300:39:40Yes. Thanks for that question. If you look, we did have, I think, near record low SG and A expense as a percentage of revenue in the 4th quarter and that benefited from the very strong revenues we saw and the higher materials in the quarter. So I think, certainly, our goal is to grow our SG and A expense at a slower rate than our revenue growth. And we've been doing a good job of that the last several quarters, but I don't think I would look at 4th quarter as the new assumption for that. Speaker 300:40:12I'd look over a little bit longer trend line of like maybe 12 to 18 months because like you said, recognizing we're growing business, so we want to make sure we're investing in our workforce, in technology, really just continuing to mature our capabilities to go after the great organic growth that's out there. Speaker 1100:40:29Okay. And Kelly, one other question. You mentioned the higher interest costs in the quarter and higher interest rates and so on. Yet at the end of the quarter, your borrowings were sharply lower than at the end of the third quarter. Did you repay some debt at year end? Speaker 1100:40:52And that might account for the lower borrowings at year end? Speaker 300:41:00Yes. That's a good way to look at it. We did see some stronger cash flow in towards the end of the quarter that allowed us to pay down some more debt at the end of the quarter. But when we're talking about a pretty low level of debt to begin with, it doesn't take much of a fluctuation in the amount. And certainly rates year over year are quite a bit higher. Speaker 300:41:21So it ends up being almost a rounding error. These are pretty small numbers and something we continue to stay focused on and make sure we're driving operating cash flow and trying to keep those debt levels low in anticipation of continuing to support the business and the organic growth. Speaker 1100:41:40Sure. Okay. All right. Thank you, Kelly. Operator00:41:48Okay. Thank you. I'm showing no further questions at this time. I would now like to turn the call back to Rick Swartz for closing remarks. Speaker 200:41:58To conclude, on behalf of Kelly, Todd, 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 going forward and speaking with you again on our next conference call. Until then, stay safe. Operator00:42:15Thank you. This does conclude the program. You may now disconnect.Read morePowered by