ITG Q3 2026 Earnings Call Transcript

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Provided by Quartr
November 11, 2026

Key Takeaways

  • Positive Sentiment: Q3 revenue rose 49% year over year to a record, with growth across all business lines; adjusted EBITDA increased 63% and margin expanded 120 basis points to 14%. Management attributed results to organic growth, acquisitions, seasonal project activity, and data center work.
  • Positive Sentiment: Next Twelve Month Backlog reached $1.54 billion, up 27% year over year, with about $237 million in new awards during the quarter. Data center work remains a significant opportunity, with roughly $500 million of scoped backlog and additional bids outstanding, though new awards in that market were limited in Q3.
  • Positive Sentiment: Management maintained its 2026 growth outlook of 37% for both revenue and adjusted EBITDA, and said it remains confident in its previously communicated 2027 plans. The company cited new-customer wins and work moving from design into construction, while noting that project timing and customer authorizations can affect results.
  • Negative Sentiment: Free cash flow was notably negative in Q3, reflecting acquired working capital, seasonal work-in-progress growth, slower invoicing, and higher-than-planned capital spending. Management expects cash flow to improve in Q4 and says positive free cash flow is possible in 2027, but it has not yet provided a formal 2027 forecast.
  • Negative Sentiment: Fuel and healthcare costs are pressuring margins, and management said fuel inflation has not been fully recovered through customer pricing. It expects to pursue contract rate adjustments and operational efficiencies, but the timing and extent of any offset remain uncertain.
AI Generated. May Contain Errors.
Earnings Conference Call
ITG Q3 2026
00:00 / 00:00

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Operator

Good day, and welcome to the ITG Q3 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star one one on your touchtone telephone. Please note, this call is being recorded. I would now like to turn the call over to Chris Mecray, CFO. Please go ahead.

Chris Mecray
CFO at ITG

Good morning, and thank you for joining us for today's third quarter 2026 financial results webcast. Joining us today are myself, Chris Mecray, Chief Financial Officer, and Andy Parrott, Chief Executive Officer. Yesterday, after the market closed, we issued a quarterly results press release, which can be found in the investor relations section of our website at itgcomm.com. We also posted a separate shareholder letter with more detailed operational and financial commentary to accompany our earnings release. The shareholder letter is intended to provide much of the details typically included in management's prepared remarks. Accordingly, we will provide more condensed comments on our quarterly performance and outlook, and then turn the call over to Q&A. Please be advised that information shared in this webcast is currently as of today's date and may no longer be accurate as of any replay of this event later.

Chris Mecray
CFO at ITG

This webcast will include forward-looking statements qualified under the Safe Harbor rules established by the Private Securities Litigation Reform Act of 1995, including statements reflecting expectations, intentions, assumptions, or beliefs about future events or financial performance. These statements involve certain risks, uncertainties, and assumptions that are difficult to predict or beyond ITG's control, and actual results may differ materially from those expressed or implied in this webcast. We will also discuss historical and forecasted non-GAAP financial measures. Reconciliations of these historical financial measures to their most directly comparable GAAP financial measures are included in our earnings release and accompanying shareholder letter. Please refer to these statements for additional information regarding our forward-looking statements and non-GAAP financial measures. With that, I will turn the call over to Andy.

Andy Parrott
CEO at ITG

Thank you, Chris, and good morning. We are pleased to be with you today for ITG's second earnings call as a public company. Our third quarter performance reflected continued strong execution against the objectives we outlined during the IPO process, and I am pleased that we showed ongoing growth, continued strong new awards with both new and existing customers, and that we remain on track with our strategic objectives. As noted in August, we remain focused on disciplined organic growth, complementary value-creating acquisitions, and refining our operation execution, all with an eye towards shareholder value creation. With that in mind, we have clearly been surprised and disappointed in our share price performance since IPO. We do not believe it represents the underlying value of our business or of the structural opportunity we see to build the broadband backbone of the United States for years to come.

Andy Parrott
CEO at ITG

We believe price pressure reflects a set of company-specific trading dynamics combined with the market level sentiment shift we have seen with public peers, as well as certain other recent IPO issuers. We are committed to doing everything in our power to maximize our market value, including active investor outreach, communications around notable business developments, and ensuring management access and transparency with our investors. That said, I'd like to offer a few thoughts about our third quarter and underscore a few items of note. Regarding ITG's focus on growth, we saw record level revenue and increased our top line in third quarter by almost 50% year-over-year, including growth from each of our business lines. Our E&M service saw 39% growth, while Infrastructure Deployment grew a fully 63% versus the prior year.

Andy Parrott
CEO at ITG

This includes growth from our top two customers combined and significant contributions from newer customers that have been added in the last year on both service lines. Nearly all business lines saw sequential growth as we enjoyed our peak seasonal quarter, and we saw a notable ramp in both new logo wireline projects with data center customers, which remain a significant growth opportunity for ITG. We're helping to build the fiber backbone and related infrastructure connecting data center campuses, network routes, and end markets. We also have multiple bids outstanding to continue building on our growth we're experiencing in that market. Broadband connectivity is rapidly becoming an essential service, and our customers are investing to expand access, support growing bandwidth requirements, and improve network reliability. One way to see this is through our backlog and new project and relationship wins, which also illustrate the breadth of ITG's platform.

Andy Parrott
CEO at ITG

We saw new awards of about $237 million this quarter, largely from Infrastructure Deployment, representing direct contracts for fiber build-outs across the national footprint. Our largest win was from a new logo that we've recently added to ITG, and excited about the growth as they are a multi-state fiber builder, continuing to show our team and hopefully to all of our investors, the continued trust in new logos that we're able to organically bring into the organization. Regarding our core legacy customers, I also note that ITG is well-positioned to benefit from our customers' interest to continue vendor consolidation and outsource their infrastructure requirements. Our ability to support customers across the infrastructure lifecycle is a differentiator that can create multiple entry points for future work, and we are confident that we will be included in the list of partners for the future as these companies consolidate their providers.

Andy Parrott
CEO at ITG

As we've noted previously, we completed our first post-IPO acquisition in August. Purchasing certain assets of Full Circle Fiber. This tuck-in transaction was uniquely suited to ITG's flexibility, ability to move fast, and our integration strengths. The acquired assets and contracts contributed positively to ITG out of the gate, and we expect a run rate contribution of at least $50 million in sales at corporate average margins. We fully expect significant accretion from the acquisition, giving attractive low single-digit multiples paid, coupled with a highly complementary profile of the business, including visible and immediate synergies. Chris will now comment more on the quarter and outlook.

Chris Mecray
CFO at ITG

Good morning, everyone, and thanks for joining us. Regarding third quarter results and key drivers, third quarter revenue increased 49% year-over-year, about 5% ahead of the plan, driven by both contributions from acquisitions as well as strong organic growth. E&M benefited from stable core customer volumes, new customer expansion, and growth in new service lines. Infrastructure Deployment benefited from the expected seasonal ramp of project work, as well as rollout of data center projects during the period. I think it is important to point out that all of our business lines grew in the quarter. Also, Charter and Comcast, our top customers, collectively grew both year-over-year by over 20%, and sequentially were stable versus Q2. While they both may be slowing overall CapEx, we remain stable and believe we are gaining share of wallet.

Chris Mecray
CFO at ITG

Adjusted EBITDA was $64.5 million, also slightly ahead of our forecast, and an increase of 63% from the prior year period. Adjusted EBITDA margin was 14%, 120 basis points increase from a year earlier, and a similar increase from the second quarter. The year-over-year margin improvement reflected slowing new business startup headwinds. Mixed changes related to acquisitions completed also contributed. The sequential lift was driven by normal seasonal volume pickup, as well as the start of new data center projects, though offset in part by higher fuel expense, which has been a headwind for several quarters versus the prior year as well. On free cash flow, the use in the third quarter was notable, but included a number of factors. We saw about $18 million of acquired contract assets, as well as a significant increase in WIP due to seasonal volumes.

Chris Mecray
CFO at ITG

We expect more stable working capital outcomes in the fourth quarter, including seasonal increases in cash collection. Our Next Twelve Month Backlog was $1.54 billion at quarter end, increasing slightly sequentially and 27% year-over-year. E&M Next Twelve Month Backlog was essentially stable sequentially and increased 24% year-over-year, while Infrastructure Deployment backlog increased 10% sequentially and 31% year-over-year. The sequential increases reflected new and extended MSA awards from four notable new customers. We have updated our guidance for full year 2026, the details of which are in our release and commentary documents. We remain confident in achieving our growth plans set out at our IPO, including 37% full year revenue growth and 37% Adjusted EBITDA growth, slightly higher than the 35% projected last quarter, inclusive of the beat in Q3.

Chris Mecray
CFO at ITG

Our outlook reflects currently expected customer activity and timing of project ramps and normal business seasonality, including essentially two weeks of fewer working days in the fourth quarter around the holiday season and the winter's effect on production in northern states. It also incorporates the expected ramp in data center activity and continued new work awarded in Infrastructure Deployment, which is expected to grow faster than E&M in Q4, as well as the pace of customer authorizations and permit issuance and other factors can influence variable outcomes. With that, we are happy to take your questions.

Operator

Thank you. If you would like to ask a question, please press star one one. If your question has been answered and you would like to remove yourself from the queue, press star one one again. Our first question comes from Angel Castillo with Morgan Stanley. Your line is open.

Stefan Diaz
Stefan Diaz
Analyst at Morgan Stanley

Hi, good morning. Hi, Andy. Hi, Chris. This is actually Stefan Diaz sitting in for Angel. Maybe just to begin, can you just talk a little bit about your data center pipeline? How much of the backlog does it represent today? How do you view this opportunity post the midterm election results, and maybe what your customers are saying on the ground post-election?

Chris Mecray
CFO at ITG

Yeah. Hi, Stefan. So our data center backlog entering this year was over $500 million, and we have been ramping our revenue and production associated with that work really since more or less early summer, and that was a good contributor to the third quarter on the top line. So we have burned a little bit of that backlog down, but we still have substantial, call it half a billion dollar kind of scoped backlog in data center. So, significant opportunity there. While we did not have any major new contracts in the third quarter associated with data center, we have a number of bids outstanding, and those could hit one way or another. We will get decisions on that relatively near term. So there is a lot of work still out there for incremental associated jobs, and we are still equally bullish on that end market.

Stefan Diaz
Stefan Diaz
Analyst at Morgan Stanley

Great.

Chris Mecray
CFO at ITG

I am sorry, did I miss another part of your question there?

Stefan Diaz
Stefan Diaz
Analyst at Morgan Stanley

No, that was all of it. That was really helpful. Then, maybe just a question on 2027. There was a major telco that cut CapEx for next year. It does not seem like it is a major customer of yours, but can you just speak to the demand environment and maybe how you see it shaping up next year versus your original expectations that you communicated to the market throughout the IPO process?

Andy Parrott
CEO at ITG

Hey, Stefan. This is Andy. I can tell you that our 2027 is looking extremely well. It gives us tons of confidence that we will absolutely deliver everything that we have committed to the street and to you on our 2027. There are levers that we absolutely have on CapEx, because we actually have a handful of customers that would love for us to even accelerate some of our deliverables in 2027. So, as we find peaks and valleys throughout the U.S., we absolutely have opportunities to shift resources and be able to come alongside those CapEx kind of limiting customers of ours. The other thing that is also happening is the consolidation.

Andy Parrott
CEO at ITG

With limited CapEx, as it pertains to third-party partners, also drives limited CapEx internal resources, and it really allows ITG to even provide greater value to our customers because we are able to do full turnkey solutions, and it requires less capital overhead to execute these projects. So, as we see consolidation, ITG is very, very well positioned to be able to absorb that consolidated. So, our share of the wallet, if you will, continues to increase even with our customers that are out there publicly announcing that there is some CapEx reduction. We do not see that in our backlog.

Stefan Diaz
Stefan Diaz
Analyst at Morgan Stanley

Great. Thanks for the color.

Operator

Thank you. Our next question comes from Steven Fisher with UBS. Your line is open.

Steven Fisher
Steven Fisher
Analyst at UBS

Thanks. Good morning. Just wanted to ask you about the guidance for this year. Just curious how you factored in Full Circle, what's the quarterly impact of that $50 million of sales you mentioned. Just curious, the growth implied or your forecast specifically in the guidance for the fourth quarter slows down quite a bit year-over-year basis. Just curious why it does that in the fourth quarter, please.

Chris Mecray
CFO at ITG

Thank you, Steve. What we see is a ramping contribution from Full Circle with relatively smaller numbers in the third quarter. It will be a little stronger in the fourth, closer to the annualization of the full year guide that I gave. Our overall guide for the fourth quarter is intact. Obviously, that builds in an assumption of a little bit of slippage from a couple of customers in the fourth quarter relative to where we were. But there could be potential to perform a little bit better than planned, depending on circumstances. But we don't want to get ahead of our skis when it comes to what we see on the top line, and Full Circle is brand new, so it's just starting to contribute.

Steven Fisher
Steven Fisher
Analyst at UBS

Just sort of on the growth rate year-over-year, just a significant slowdown sequentially.

Chris Mecray
CFO at ITG

Yeah, that growth rate is really just baking in the annualization of acquisitions that were completed in the third quarter, a bunch of them in the third quarter of last year. It is really just reflecting that. Still good growth assumed as we go forward. The fourth quarter is the one where you annualize a bunch of those deals from last year.

Steven Fisher
Steven Fisher
Analyst at UBS

Okay, that makes sense. Then just maybe shifting gears, in terms of cash flow, happy to see the new definition that you will be using. Just curious how much improvement to working capital you see as possible and the potential for cash flow, free cash flow under the new definition to be positive in 2027.

Chris Mecray
CFO at ITG

Yeah, thank you. When you look at cash flow from operations, net CapEx, there is a couple of things that, number one, we had somewhat stronger CapEx than budgeted in the third quarter and again in the fourth quarter. That is coming, it is inclusive of the acquisitions, but also some spend associated with incremental opportunities that have come up more recently. One area where we spent a little more CapEx is in our civil utility business, where we have won new business and are ramping that opportunity here over coming months. So, a little bit of earlier spend to CapEx than previously planned. On the working capital side, I did note in the commentary that we had $18 million in purchased working capital in the third quarter. So, that is an inorganic portion there.

Chris Mecray
CFO at ITG

We had significant ramp in volume and beat the top line, which did come with some early working capital use. What I see is that the fourth quarter is going to be a quarter where you stabilize that, and not only do we see a seasonal dip in volume, which will then help pull through some of the cash because you are not building the incremental WIP, but also just a focus overall on cash collection and the pace of invoicing, which I would acknowledge was a little slow in the third quarter, which also contributed to the build in working capital. That is not structural. I view that as a timing difference.

Chris Mecray
CFO at ITG

We do see cash improving in the fourth quarter, and we continue to believe we have the opportunity to be positive in 2027, and we will detail that outlook next quarter when we have a formal forecast for 2027.

Steven Fisher
Steven Fisher
Analyst at UBS

Thank you very much.

Operator

Thank you. Our next question comes from Andrew Kaplowitz with Citigroup. Your line is open.

Analyst at Citigroup

Hey, good morning, guys. This is actually Jose on for Andy.

Chris Mecray
CFO at ITG

Morning, Jose.

Analyst at Citigroup

Morning. Throughout the quarter, we have increasingly heard about the potential competition from SpaceX in the future. Maybe you guys can provide a little bit more color there about how you think about the longer term competition environment and the ability of ITG to stay ahead in the future?

Andy Parrott
CEO at ITG

Hey, Jose. This is Andy. One of the reasons ITG will continue to stay ahead, even through, I would say, disruptors like SpaceX, Amazon Leo, when that publicly deploys, is it does drive a lot of activity as it pertains to our E&M business, where the life cycle of a customer is absolutely being reduced on the duration. When I bring that up, what I am saying is, you see some of our largest customers reporting potentially net losses and seeing some of the disruption, but it is absolutely creating more truck rolls, more activity, more connect and disconnect activity, as we are an extension to those teams.

Andy Parrott
CEO at ITG

Our E&M business absolutely kind of increases because we are having higher volume, because a customer that would typically stay for seven years is potentially staying with their service provider for three or less because they are chasing the promos because there are more choices. You could have that same conversation about 5G wireless. You could have the same conversation about now that we have more choice, those choices are driving more truck rolls. The other thing that doesn't change is the network of management of the homes passed the plant miles. What I am saying is, the volume of networks still requires the same amount of work to maintain those networks, even if, unfortunately, some of those providers have a lower penetration than what they would have had previously.

Andy Parrott
CEO at ITG

Because we are the E&M side of the business, that's absolutely going to continue to probably be on scale or greater, even with the increase of the competition. Then there's a race to add greater reliability through fiber enhancements of those networks, and that's where, once again, ITG comes in as an extension of those teams, augmenting those legacy copper plants into fiber-to-the-home and being far more competitive because the competitive landscape is there. Same with other partners that we have. There's this land grab race to try and get fiber as fast as possible. Then with DOCSIS 4.0 on a legacy MSO side, the benefit is ITG is absolutely the experts that are out there executing those electronic upgrades and what's required to have symmetrical gigabit speeds on a legacy network.

Andy Parrott
CEO at ITG

ITG is brought in both in the engineering and design and then the execution of that, and that's going to be going on for the next half decade before we get to that technology completely rolled out. So, yes, it changes things, but no, we don't see that as any kind of detractor to our business plan at ITG.

Chris Mecray
CFO at ITG

One other thing I'd throw on that is just, I was reading recently, and Andy, you have a lot of perspective since you built some of these towers earlier in your career, but there's a lot of terrestrial fiber associated with wireless networks in general, right? So if you do build out more and more mobile-friendly and wireless technology, you're also ultimately doing a lot of terrestrial-based fiber deployment on top of that, right?

Andy Parrott
CEO at ITG

Definitely for the 5G. There's a lot of conversion from microwave to fiber projects that are still going on today with the wireless carriers that allow us to have leveraging some of our relationships that we have directly with some of these wireless carriers to ensure that we have these longer haul and fiber networks there. You have to offload this, and fiber gets closer and closer. Whether it converts at the side of your house or it converts on the curb, it goes back to fiber eventually.

Analyst at Citigroup

Very helpful. Lots of details there. Maybe shifting a little bit, I did also want to dig into the margin performance a little bit more. How should we think about the puts and takes here potentially impacting your business? You do have a fair amount of acquisitions and investments that tends to add costs. You are also scaling your business, and there is also the fuel costs, but the margin performance here has still held up pretty well. Maybe you can talk about some of that dynamics.

Chris Mecray
CFO at ITG

Yeah. I mean, we are pleased with the margin outcome in third quarter, and we do believe we can maintain solid margins, kind of that we outlined during the IPO process as we look forward into 2027. But you are correct, there are a bunch of puts and takes. I think the headwinds are quite clear. We have had pretty substantial fuel headwinds in the last couple of quarters, and when you look on a year-over-year basis, you are probably a little shy of 1% of sales when you look at the incremental headwind of fuel expense. Beyond that, and that is real, and frankly, not fully recovered in terms of our ability to go out and just kind of get rate right away to offset that.

Chris Mecray
CFO at ITG

But I would say positively that those negotiations are ongoing, and I do think over the course of time, we have the ability to offset some of that fuel inflation with our customer contracts. But it does not happen right away in this business, so there has been a headwind there. The other thing I would highlight is just pretty substantial increases in healthcare costs, which maybe you read a little bit about in the news, but that is also very real. The way we do it, there is very real absorption of costs that we take because we provide healthcare to our employees across the country. So there is incremental inflation headwind associated with that. So there are a couple headwinds on margins.

Chris Mecray
CFO at ITG

On the other side of the coin, we are working every day on utilization of fleet, utilization of our workforce, and I would probably say that overall business mix in the outlook, well, I do not want to commit to more than neutral as I look forward today. There are some elements that could provide tailwinds as we look into 2027. So we will have to internalize that and kind of look at a net effect in our guidance. But, I think overall, the magnitude of opportunity and the top line opportunity for this company gives us a lot of comfort in our ability to get to the kind of Adjusted EBITDA profit level expectations that are out there. You can get there in different ways, right? Either through more volume or more margin.

Chris Mecray
CFO at ITG

I ask for a little bit of wiggle room as a new public company as we look at guidance. We are not buttoned down so much that I can be to the dollar on guide there, but I think there is a couple different ways we can get to the outlook that we have outlined.

Analyst at Citigroup

Appreciate all the color.

Chris Mecray
CFO at ITG

Thank you.

Operator

Thank you. Our next question comes from Jamie Cook with Truist Securities. Your line is open.

Jamie Cook
Jamie Cook
Analyst at Truist Securities

Hey, good morning. I guess a couple questions. Andy, just because you put it out there, it sounds like you are comfortable with the 2027 outlook you guys provided at the IPO. Just wondering if we should think about the mix between organic and acquisition contribution changing. Layered on that, just wondering what your acquisition pipeline looks like, if you are seeing any opportunities, if you are seeing multiple contraction or valuations more attractive, similar to what we are seeing in the public markets, and does that create an opportunity? Then my second question, just with regards to customer mix, it was good to see an improvement in customer concentration despite the fact that you are growing with Comcast and Charter. Just wondering if you think that is a trend that continues as we look to 2027. Thank you.

Andy Parrott
CEO at ITG

Yeah. Yes and is the answer. As I think of the organic contribution, it gives us the confidence to absolutely deliver our 2027 forecast. The exciting thing is a lot of organic relationships. As I have said during our IPO process, our strategy right now is to land and expand. If you look at a lot of the things that we are doing for a lot of our new logos, we are at the design phase. That means 2027, we are converting from design to build, and that is really where the volume is going to kick in, is we have just hundreds of crews out there every single day delivering fiber infrastructure for a lot of customers. A lot of them are not, as you mentioned, they are not the top two, top three, top five customers.

Andy Parrott
CEO at ITG

The new entrances into the space are really investing in fiber infrastructure across the Atlantic Ocean and the Pacific Ocean. We are thrilled to be their partners. We are thrilled to have this variety of being able to have the peaks and valleys of having 10s, 20s, 30 different companies that are out there with the same mission and leveraging ITG to be the experts. The benefit we are having is a lot of new organic growth and new logos have come to us because we are absolutely easy to do business with. When I have conversations with other CEOs and investors on other fiber companies, it is, Yes, we can do that for you. You don't have to have five different partners to go get this thing put together.

Andy Parrott
CEO at ITG

You can have one back to path. That is really one of the benefits that is allowing us to have this natural organic growth with companies that might have only been a fraction of our total revenue in 2026. That is going to have significant multiplication because we are converting from either a consulting side, a permitting side, and we are putting all the foundations in place to then convert them into full construction activation. Then once again, ITG is well-positioned because we then convert to our E&M side. Great, you built this network, but if you don't have customers connected to it, you are not getting any revenue, and that is where our strengths come in for our partners as well.

Chris Mecray
CFO at ITG

I guess I'll jump in on the M&A question. The reality is we've got far more transactions out there to look at that are actionable than we can actually act on. That's good news. I mean, we are being selective, and we're confident that there will be continued opportunity in the inorganic side as we look forward and into next year. Absolutely very active there. Jamie, the overall value opportunity along the lines of what we've seen historically appears to be intact. The kind of valuations that are out there haven't changed. If anything, maybe even better in some instances. That's good news.

Chris Mecray
CFO at ITG

We think at the price points that we're looking at for transactions that in most cases are either moderately or not, or direct negotiated essentially, we're not risking a scenario where we've got to suddenly do something that's not economic or whatever. I mean, we wouldn't do it if it were, but we're not having to turn things down because it would be uneconomic for us or non-returning. So feel very good about the M&A construct, still very much intact. We certainly saw that with the Full Circle transaction. We think there's a very, very strong return on capital associated with that transaction. Yeah, so the inorganic-organic mix probably won't change materially in 2027 versus prior years. Was there anything we missed on the question, Jamie?

Jamie Cook
Jamie Cook
Analyst at Truist Securities

No, I was just the customer concentration, if that improved.-

Jamie Cook
Jamie Cook
Analyst at Truist Securities

It sounded like it should.

Chris Mecray
CFO at ITG

Right. So per Andy's answer, yeah, there's so much opportunity with new customers that we've been adding in that I think despite expected growth from those core customers, we will continue to outgrow in the overall delivery of revenue. So, they will continue to move down in a concentration sense. Just year-over-year, we went from 60% to under 50% in the third quarter. So, it's already kind of happening today, and I think that'll continue.

Jamie Cook
Jamie Cook
Analyst at Truist Securities

Thank you.

Operator

Thank you. Our next question comes from Michael Dudas with Vertical Research Partners. Your line is open. Michael, if your telephone is muted, please unmute.

Michael Dudas
Analyst at Vertical Research Partners

Yeah. Unmute there. Good morning, gentlemen.

Chris Mecray
CFO at ITG

Good morning.

Michael Dudas
Analyst at Vertical Research Partners

Yeah. Andy or Chris, maybe you can share a little bit more about the new business you took in the third quarter. You mentioned in some of your prepared remarks some of the notable areas. Maybe you could expand on that a little bit, current versus new logo customer. Then as you look at the pipeline of opportunities to convert that pipeline into next 12 month or backlog, where do you predominantly see that? Can you anticipate if things work right, an acceleration of that moving into 2027 to give you more visibility or comfort levels on achieving those targets? Thank you.

Chris Mecray
CFO at ITG

Yeah. Starting with the backlog, we have over $1.5 billion of backlog, so we're not even at the end of the year, and we've got obviously the vast majority of expected or planned revenue against current consensus in backlog. So, I feel quite good about the visibility of where the work's coming from based on that NTM Backlog that we have. I think, as Andy has highlighted, there's so much incremental opportunity with existing and newer customers that we've added on that it's not necessarily the full scope of that opportunity is not reflected directly in the NTM Backlog.

Chris Mecray
CFO at ITG

There are illustrations of that with some of the customers that we've added just in the last year, where we've taken new orders or new wins and awards that'll be reflected in the fourth quarter, for example, on top of awards that we've been given within the last year. So, this idea of compounding opportunity with existing customers is playing out, and I think you'll see that reflected in the Q4 backlog. In Q3, we added, I think we had four good new customers in that award list, Andy.

Andy Parrott
CEO at ITG

Yeah. The great thing is probably our greatest awards were new logos. One great logo that I'm excited that they've turned to ITG as their trusted partner and doing full turnkey solutions on doing hundreds of thousands of passings that they want to deliver. ITG is their strategic partner to be their trusted source to go execute in 2027. We're ramping that up now in 2024. So, we're thrilled that people are trusting us and seeing our reputation is preceding us, because sometimes people are actually outreaching out to us. From a sales perspective, it's always good when fish are jumping in the boat and the phone's ringing with new logos and new opportunities because they're looking for trusted partners that can execute and deliver what they commit on. That's where ITG stands out.

Chris Mecray
CFO at ITG

Yeah. I think, as I kind of alluded to, I think the pace of business that we're seeing in the fourth quarter is already at the point here mid-quarter where we can say it's almost certainly going to be as good or better than the previous quarter. So, just a lot of business coming in over the transom here.

Operator

Thank you. Our next question comes from Brian Brophy with Stifel. Your line is open.

Brian Brophy
Brian Brophy
Analyst at Stifel

Yeah. Thanks. Good morning. Appreciate you taking the question. I believe in your opening comments, you mentioned Full Circle Fiber margins were expected to be in line with corporate average. If I remember correctly, that asset was in a troubled financial situation. So, is the margin profile improving rapidly there? And just any color on how you're executing that so quickly? Thanks.

Chris Mecray
CFO at ITG

Yeah. Thanks for the question. And fair comment. It's a company that was facing financial difficulties, but it really is a perfect illustration of the business model that we've employed, not only with that deal, but with a number of others, where you have a company that has perfectly good existing contracts, productive labor, and a high-quality fleet, but running into some financial challenges. Because that's an asset purchase, we're buying essentially the fleet and the contracts, and then we're bringing the people on as new employees on ITG. And that integration day one approach allows us to essentially adopt those contracts, integrate them into our company, and operate it as ITG almost immediately. And that's how you ultimately solve for and get to a corporate average margin quite quickly after just a matter of weeks of initial integration activity.

Chris Mecray
CFO at ITG

Feel very good about that as an illustration of the actual M&A model that we employ and can continue to employ based on other transactions that we are looking at today.

Brian Brophy
Brian Brophy
Analyst at Stifel

Appreciate it. That is very helpful. Then there is a pretty healthy acceleration in Infrastructure Deployment growth here in the third quarter. Just any more color on what drove that and how we should be thinking about the sustainability there? Thanks.

Chris Mecray
CFO at ITG

I am sorry, can you restate the question? We did not hear you clearly.

Brian Brophy
Brian Brophy
Analyst at Stifel

Yeah, no problem. There is a pretty healthy acceleration in Infrastructure Deployment growth here in the third quarter. Just any more color on what drove that and how we should think about the sustainability? Thanks.

Chris Mecray
CFO at ITG

Yeah. Oh, thank you. Definitely third quarter acceleration in business, and that's a combination of just a seasonal ramp. We do typically see a ramp in the summer season for the construction season, so you've got people working all over the country with good weather everywhere. We also saw contribution from new end markets, so the work that we're doing with hyperscaler customers, for example, flows through Infrastructure Deployment, and a lot of that was starting to pick up during the third quarter. So there's both regular seasonality and just a pure acceleration of backlog conversion into that business. I think it's a smaller service line than E&M, but as we noted back at the IPO, it's going to grow faster because of the magnitude of fiber build-out opportunity that's out there. So you saw that realized in the third quarter.

Brian Brophy
Brian Brophy
Analyst at Stifel

Appreciate it. I'll pass it on.

Operator

Thank you. As a reminder, to ask a question, please press star one one. Our next question comes from Justin Hauke with Baird. Your line is open.

Justin Hauke
Justin Hauke
Analyst at Baird

Hi. Most of my questions have been answered, but I did want to just clarify the organic versus the inorganic contribution in the quarter and in the guide for 4Q. You mentioned that some of the inorganic contribution falls off in the fourth quarter, but it kind of looks like, given the Full Circle acquisition plus the run rate of what you previously had, that the organic revenue is maybe implied negative in 4Q. I guess I just wanted to understand the dynamics there. Then, you reiterated the outlook for 2027, and I think the organics were kind of mid-teens is typically what you do. So maybe if you could just address the kind of the moving pieces there. Thank you.

Chris Mecray
CFO at ITG

Yeah. I would like to respond by really highlighting how we run the company, and the acquisition model that we employ is pretty unique, and I just want people to understand that organic and inorganic are pretty hard to track given our model. We do operate a total growth model, and we do not plan to dissect overall from core growth over time. There is disclosure in our filings related to revenue from operations and assets acquired, but nearly all deals that we have done to date have been asset purchases, not equity deals. We have bought people and fleet and contracts, essentially assets plus working capital and very limited liabilities. We integrate them into ITG immediately and layer them onto our FUSE360 platform, and they operate as ITG right away.

Chris Mecray
CFO at ITG

Frankly, even the fleet that we buy has ITG decals within days or weeks, and they are immediately operating under the ITG insurance policy, just as one illustration. Many of our deals also come from struggling companies that are in or even near bankruptcy, and there are multiple illustrations of that. With ITG, that trajectory of growth is turned around rapidly. We enable bonding, we restore credit with customers, or enable fleet expansion to meet those opportunities. As an integrated asset, they can produce revenue previously not available to them, and we could go through deal by deal and explain how that has worked for many of the deals that we have done. The fleet becomes fungible, so assets are applied seamlessly around the business, and that can frankly be hard to track from the original source.

Chris Mecray
CFO at ITG

Because of all these things, the growth that we have seen from acquired assets has, in many cases, been very substantial, and that could be misinterpreted to be coming from talent, resources, and capital investment from those relationships that we have acquired. It is really the opposite. In many cases, we are seeing these folks operating as ITG right away, and it is the growth coming from being with ITG that is enabled. While we do track our profit centers and track inorganic and organic on a technical basis according to sort of that traditional definition, I think it is just really important to note that our acquired businesses have grown dramatically since we have acquired them.

Chris Mecray
CFO at ITG

I did some math on this, and if you hold revenue stable at day one when we acquired companies over the last couple of years, and if you just look at the last year, holding acquisitions at levels of revenue acquired on day one, we grew 27% in the third quarter. The reality is if you just counted that as inorganic, it would make it appear that our overall organic growth is low, but in fact, you really have to give some credit to some of the opportunities that have been realized from acquired companies once they are integrated immediately. If you do that, you can see that the success of this company is really based on that model. It is a little difficult to track the sort of technical organic/inorganic, but hopefully that makes sense.

Justin Hauke
Justin Hauke
Analyst at Baird

No, that does. Actually, I really appreciate that response because I think all of that intellectually makes a lot of sense, and that is helpful for context on it. I guess my final question here would just be on the legacy customers and the consolidations that they are talking about as part of their restructuring. I guess I would just be curious your thoughts about to the extent that you pick up share, is the mix more of more revenue from more share, but maybe the incremental margin on that is a little bit lower as part of their because I think that is kind of what they have communicated as part of their desire to consolidate this. We should think of this as maybe additive to revenue and maybe a little bit dilutive to margins on at least on the legacy ops. Thank you.

Andy Parrott
CEO at ITG

Yeah, I would say the dilution of margin is not necessarily going to be the case. They may dilute their spend because they do not have the same amount of layers of management to have to go and execute some of these projects. You take some of these larger customers of ours that are going through staffing changes, announcing reductions in cost, it is actually driving more volume to companies like ITG or specifically ITG, because we are the ones coming in and you are seeing reductions of positions that would typically need to be required to go execute their BAU activity day-to-day business. We are seeing requests coming in from those larger customers to add more incremental trucks for the E&M side to pick up more project management.

Andy Parrott
CEO at ITG

It allows us to actually maintain our margins and grow our market share within them because they are no longer using in-house resources to go execute these projects and leveraging ITG because it is more efficient. To our customers, we are always 100% productive and efficient because everything we do is per foot, per task, and there is not this level of overhead that our customers have to absorb, training cost, turnover. When you partner with ITG, all that sits on ITG is our ability to maintain, keep our workforce in place, and be able to provide the skilled workforce to execute is very, very attractive when our customers are looking for their margin expansion and using us as one of their levers. To their street, they are saying our partnerships, our leverage on companies like ITG is going to create savings.

Andy Parrott
CEO at ITG

It is not because they are getting necessarily discounted margin rates on our rate cards, but they are finding synergies from their own internal overhead because it does not take 20 people to execute a project when you have one ITG partner that can go do the role of 20 people that are on your staff.

Operator

Thank you. I am showing no further questions at this time. I would like to turn the call back over to management for closing remarks.

Chris Mecray
CFO at ITG

Yeah, so thanks for joining us today. If anyone has any follow-up questions, we are available. We look forward to speaking with you, the sell-side analysts, and any investors who would like to contact us, and we look forward to an ongoing relationship. Thanks for tuning in today.

Operator

Thank you for your participation. You may now disconnect. Good day.

Executives
    • Chris Mecray
      CFO
    • Andy Parrott
      CEO
Analysts
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