MYR Group Q2 Earnings Call Highlights

Key Points

• Record second-quarter results: Revenue rose 20% year over year to $1.08 billion, while net income reached $50 million and EBITDA hit $85 million. Gross margins improved to 13.2%, with profitability increasing in both the T&D and C&I segments.
• Backlog reached a record $3.16 billion, up 20% from a year earlier, supported by major transmission awards and continued demand for grid modernization, data centers and industrial infrastructure.
• MYR completed its $328 million acquisition of Valley Electric and Comet Electric on July 1. The businesses are expected to add about $250 million in 2026 revenue, though earnings contribution may be limited initially by higher amortization expenses.

MYR Group NASDAQ: MYRG reported record second-quarter revenue, earnings and backlog as demand for electrical infrastructure work remained steady across its transmission and distribution and commercial and industrial operations.

Revenue for the quarter ended June 30 rose 20% from a year earlier to a record $1.08 billion. Net income increased to a record $50 million, or $3.17 per diluted share, from $27 million, or $1.70 per diluted share, in the prior-year period. EBITDA reached a record $85 million, compared with $56 million a year earlier.

“We achieved solid second-quarter financial results reflecting consistent performance throughout our business,” President and Chief Executive Officer Rick Swartz said. He said ongoing infrastructure investments and electrification initiatives continued to support activity across the company’s markets.

Margins Improve in Both Segments

Gross margin increased to 13.2% from 11.5% a year earlier. Chief Financial Officer Kelly Huntington attributed the improvement primarily to better-than-expected productivity, favorable project closeouts and expanded scope on certain projects. Those benefits were partly offset by costs associated with inefficiencies on other projects.

Transmission and Distribution, or T&D, revenue rose 4% year over year to $524 million. The increase was driven mainly by higher revenue from time-and-materials and unit-price contracts, partly offset by lower fixed-price-contract revenue. Work performed under master service agreements accounted for about 65% of T&D revenue.

T&D operating income margin rose to 9.4% from 8.0% in the prior-year quarter, reflecting productivity, project closeouts and added scope, partially offset by project inefficiencies.

Commercial and Industrial, or C&I, revenue increased 42% to a record $558 million, primarily due to higher fixed-price-contract revenue. C&I operating income margin rose to 8.5% from 5.6%, aided by productivity on projects nearing completion, expanded project scope and a greater portion of work advancing at higher contractual margins.

Swartz said the company still expects full-year operating margins to fall in the middle of its stated target ranges: 6% to 9% for C&I and 8% to 11% for T&D. He said the company has seen strong project closeouts and performance across its portfolio, but its full-year outlook has not changed.

Backlog Reaches $3.16 Billion

Total backlog at June 30 was a record $3.16 billion, up 20% from a year earlier. The backlog included $1.27 billion in T&D and $1.89 billion in C&I work.

During the quarter, T&D subsidiary The L.E. Myers Co. received two Xcel Energy transmission awards with a combined value exceeding $200 million. Swartz said the projects were included in backlog and represent the large-project awards management had anticipated. He said revenue from those projects is expected to begin contributing primarily in the second half of 2027 and continue over roughly an 18-month period.

Other T&D awards included a 500-kilovolt substation project in Arizona, a 345-kilovolt transmission rebuild in Texas, a greenfield substation project in Colorado, substation work in New Mexico and a substation expansion project in Ohio.

Brian Stern, senior vice president and chief operating officer of T&D, said the segment continued to see steady bidding activity as utilities invest in grid modernization and reliability. Swartz said the company believes it is positioned to pursue additional large transmission work, including potential 765-kilovolt projects that are more likely to begin in 2028 or later.

C&I Activity Includes Data Centers and Other Markets

In C&I, the company reported awards for data center work in New Jersey, Arizona and Colorado, along with aerospace work in California and hospitality and higher-education projects in New York.

Don Egan, senior vice president and chief operating officer of C&I, said bidding remained healthy and backlog growth was supported by a mix of new opportunities and repeat business. He pointed to sustained investment in data centers, grid modernization, power infrastructure and industrial facilities.

Swartz said the company is maintaining a diversified C&I portfolio rather than focusing solely on data centers. He said MYR continues to see activity in advanced manufacturing, transportation and other key end markets, with projects being budgeted and evaluated for construction in 2028, 2029 and 2030.

Valley and Comet Acquisition Closes

After the quarter ended, MYR completed its acquisition of Valley Electric and Comet Electric on July 1. The company acquired Valley Holdings and its subsidiaries for initial cash consideration of $328 million, subject to working-capital and net-asset adjustments.

MYR funded the purchase with approximately $93 million of cash on hand and $235 million of borrowings under its revolving credit facility. Huntington said the acquired businesses are expected to contribute about $250 million of revenue during the remainder of 2026. However, she said their contribution to earnings per share and operating income is expected to be more neutral during the first year because of higher amortization expense, including amortization related to acquired backlog.

Swartz said the acquired companies have capabilities similar to MYR’s existing C&I operations, including strong customer relationships and prefabrication capabilities. He said the company sees opportunities to leverage both organizations’ customer bases and expand market reach.

MYR ended the quarter with $307 million in working capital, $138 million in cash and cash equivalents, $9 million of funded debt and $460 million in borrowing availability under its credit facility before the acquisition financing. Operating cash flow was $3 million, down from $33 million a year earlier, while free cash flow was negative $26 million. Huntington said the decline reflected the timing of tax payments, billings and project-related payments, as well as higher capital expenditures to support future growth.

About MYR Group (NASDAQ:MYRG)

MYR Group 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.

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