MYRG - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen, and welcome to the MYR Group's Second Quarter 2019 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at this time. [Operator instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to David Gutierrez. sir. yours, is floor The

David Gutierrez

reported Thank you, you discuss like welcome which everyone. Company's good the MYR morning, we XXXX, to for to quarter I'd Group second to results and yesterday. conference the call

Joining Segment. Officer, Chief Senior Officer; and Swartz, of Executive Chief and Treasurer; Group's today's Jeff us and Chief Vice Betty MYR Financial Operating President call and on President, Rick President are Vice and Johnson, Industrial Waneka, Commercial Senior Officer

X:XX release, or of entering press you please Investor Dresner you call August go available XXXXXXX. will did P.M. under yesterday's If and tab. where (XXX) conference send receive at Services by ID will be to website, at XXX-XXXX, available Thursday, Eastern a (XXX) contact dialing XXX-XXXX (XXX) a the Time copy Relations and XXX-XXXX replay Group not Corporate today's until XXXX or Also, is a the X, we MYR copy

this remind of this upon Before information such to as any MYR management we MYR based begin, Group forward-looking that available are to I forward-looking update to you date Any discussion statements contain statements. want assumes such obligation no Group statements. and may

the of call on will Company's information release. on Form XXXX on non-GAAP press from cause are the Report risks XX-K Company's actual Accordingly, statements. yesterday's uncertainties second year forward-looking in discussed future Report and discussed the for that in Certain are Quarterly the guarantee These differ performance. materially Annual be statements XXXX, XX-Q XX, of and for December and Form ended statements the uncertainties the no results involve could forward-looking today. quarter to these These risks financial

the GAAP set non-GAAP over press the call most in measures turn to said, that A reconciliation yesterday's measures let Swartz. Rick to me of is these release. With forth comparable

Richard Swartz

next is call Operating XXXX unable financial Thanks, for our to results. second to segment, Chief Cooper, morning, to T&D Officer us look Tod's call. today. conference David. everyone. We Welcome on Tod quarter our forward earnings operational the to join discuss Good and participation

I results review. the will Financial over our brief a providing financial detailed of summary turn Johnson, to then Chief second Betty quarter by more call a Officer, begin the for and

cover Jeff Operating Following our an call section; up industry I some forward. I Waneka, conclude segment, T&D and comments of and opportunities with open and Tod's questions. Chief will closing and C&I Officer MYR going your will Betty's outlook for discuss then some will discussion, remarks Group's provide for the

and as XXXX XXXX. Our quarter EBITDA second increases and second included quarter first the compared revenue, half to results share per of earnings in

Our backlog C&I in our the second new and quarter projects both long-term and billion, record high of short- $X.XX segments. in reached a of consisting T&D

growth. results business, further investments long-term of efficiencies, the continue our to the needs make to stockholders. paves meet Our expand consistent This our to to deliver reflect future customers opportunities our and for way returns solid improve strong

range of XX, offers we announced throughout expands capabilities management for CSI our markets. engineering, of Electrical July reach and project and Contractors, a On commercial service California. geographical of industrial breadth offerings and CSI the construction acquisition which

look working is clean in across leverage to and together CSI development, a leader wider the we project energy footprint. to collective strengths our forward

we gaining new and grow through acquisitions, are and organization. the As talent organically expertise we through

communicate enterprisewide to our framework for of We are knowledge efforts, ability to leverage leader. the anywhere, a prioritizing improve us integration is organization to the remaining aid from efficiencies provide an throughout implementation collective the and and systems that industry maximizing vital our collaborate

for quarter on financial our details of Betty XXXX. results will provide the Now second

Betty Johnson

for the the XXXX second Thank be XXXX. as you, quarter-over-quarter morning, of and Rick, will to quarter of On compared everyone. reviewing our today's good call, second I quarter results

compared to were of $XXX.X last year. Our million an represents million. same This revenues XX.X% XXXX increase $XXX.X or second period quarter the

to revenues compared to and XX% primarily T&D were of up year. T&D segment million, year. $XXX.X transmission million projects. The due on for revenues $XX.X million period the XX.X% the last transmission distribution. breakdown increase were million, last revenues increased in $XXX.X C&I was for same an same to mid-size revenues of to $XXX.X The T&D increase period small- revenue an compared

volume C&I The due the to increases primarily Companies. increased revenues segment and all from Huen incremental in project sizes across revenue

to acquisition, the margin Our period completion. decrease gross which year. XXXX, for that was The last venture for primarily compared million to final gross of in in its majority-owned the joint increase cost is was we of in stages on the X.X% related second same Huen margin a quarter $X in a XX.X% acquired

income gross other MYR the C&I to accounting net Group after the cost, income. attributable and interest in net and pre-tax offset. offsets $XXX,XXX than was These the $X.X contingent in non-controlling a included this consideration of increase Although for full to to million operating income less totaled loss attributable by margin and were impacted negatively recorded are to impact

projects margins few gross experienced increased scope subcontractor addition, change and lower that in conditions, margins. a impacted by project weather negatively were resulted costs In in a unfavorable that

inefficiencies reimbursement. which We negotiations we on a in project also for labor are experienced to receive

growth. to $XX.X expenses of and the higher compared the expenses $X.X acquired same were to an million to was The due SG&A year. period increase support to SG&A expenses employee-related Huen primarily increase our last million, related Companies

compared to percentage the period. quarter, X.X% the X.X% SG&A, as prior in of a for revenue, was

million income per year. to last per net the diluted $X.XX MYR for period share, $X.X XXXX to share diluted quarter Group was $X.X same Second or or compared $X.XX attributable million

June Total for of the for XXXX and backlog. C&I C&I $XXX.X another billion, $X.XX This segment. segment for million a million Total high record was backlog as T&D the record XX.X% the consists high represents is of a $XXX.X year-ago. and than XX, backlog higher

July XXth, completed we As acquisition. CSI earlier, mentioned on Rick the

our average CSI credit under purchase borrowings price capital Over the net was million, annual and funded and through asset subject is years, was facility. approximately to which last the two million. $XXX The approximately were of entirely adjustments our $XX.X revenues working

mainly successful financial in performance the and certain may to will certain based of impact additional targets. We margin make payments upon not the do the year of of accretive high to due We be guarantees. the second contingent CSI of to the amortization intangibles XXXX, in also be first expect achievement before half future, EPS which

be relating CSI filing financial and required will third information acquisitions the XXXX. the financial to of end the by We forma statements pro of quarter

sheet. that and Turning cash approximately strong growth needs, requirements. $XXX.X bonding of We to of million enable to XXXX the facility balance our million our credit us and $XXX.X June XX, sheet credit working meet million We and balance funded capital. facility, operations flow had $XXX.X believe initiatives our working from will debt, investments, future availability of equipment under

back in summary, existing our renewal to revenues our facility in for the both compared now call of and segments, had are distribution per will year. this currently overview quarter the turn Rick, process our capacity T&D growth. However, and provide In C&I the and to provide segment. borrowing revising prior of and from transmission support improvements continued we of an we EBITDA I'll expanded to who credit earnings backlog to early an share, our

Richard Swartz

Betty. Thanks,

project portfolio as as small- robust well T&D projects, need driven medium-size improve and the work transmission substation reliability. and Our of distribution consists to by is and

continued T&D work continues our opportunity service to U.S., expand long-term Eastern and anticipate clients. refine growth. our transmission for our will for Throughout that and continue agreement we a provide the segment distribution we capabilities, As significant master

of continues the first Virginia small- U.S. several portion Energy's Dominion Wind only this waters work In and and its on and fully for MYR projects, MSA is direct Federal medium-size to onshore award the Project, project of currently Offshore permitted the offshore addition which Group. wind the construction Coastal in type

the favorably us variety on MYR that Energy, and subsidiaries, Myers substation projects throughout a this to Great Company Texas, are distribution a Coast several gained direct per U.S. American Experience enCore, award Power Electric EPC Florida the should to Ameren CenterPoint, Group Light, and Southwestern and position Throughout such the of MSAs L.E. & developed the work continue Power on Duke of few. Midwest, along help performing being name customer, as project the East South, and transmission, similar

or projects We're either MSA several such EPC Service, of Electric remained which West, in Arizona Power and subcontract Edison, handful seeing extended California also Southwestern as Southern California, the as activity and QX. steady Energy, in Public with strong recently Great partner especially through our Arizona clients, Tucson to Utah. A awarded Colorado, XXXX. XCel throughout a been prime work has MSA

PacifiCorp's Harry on for associated with Transmission Allen-Eldorado of subsidiary LS Energy Work XXXX also which to part Vision Project installation Project, plan. West the LLC. begun the on has Power Aeolus Bridger Gateway Desertlink, the Conductor is substations continues Jim

grid to to the side The performed the be we services disruptions the second improve business major infrastructure and throughout across harden our service Overall, the aging distribution our master U.S. to quarter need remained the agreements through modernize as and the long-term continue steady reliability. drivers minimize of

investments to expect in quarter opportunities. in headlines second the will we industry in which clean pointed Several growth increased lead energy, to continued

of upgrades will and market. infrastructure expansions interconnections, fast-growing existing accommodate to Associated the be transmission required

For Utilities the Public by a draft achieve energy and to a energy Jersey released list on to a monetization. of of June, Board mix of states grid renewables, energy. that storage, nuclear state clean electrification, has committed example, carbon-free have growing energy New New the joined XXXX, Jersey plan help In XXX% relying

XXX In XXXX. the energy calls near-term, megawatts the developing of for plan by storage

includes Assembly supply a clean storage The carbon-free term, megawatts longer XXX% X,XXX be to sector passed and XXXX cuts to XX% dramatic by the XXX% energy XXXX. that utility of energy by calls energy offshore of renewable megawatts X,XXX and greenhouse requires For capacity for emissions York XXXX. gas by bill it wind New and recently the

latest The U.S.

of report the installed the that next in ever capacity was released more installed The will than gigawatts quarter solar Insight quarter total double also the the Market of over first This Report June, five Solar was XXXX. which that in the noted years. solar year. most the indicated X.X first in U.S. is installed of

expanding to expand to These geographic services developing productivity we in MYR choice. evaluate to clean with provide to customer and of quality, solutions capabilities invest are market effort remain continue footprint premier Along order our grow to a and the energy as and to in Group continually improve more safety developments we customers. more base, contractor seeking our our important new and our in T&D

employees benefit. believe opportunity, raising the energy summary, bar will our to to to clients, stockholders to our and our ensure all T&D the tremendous continue we In resources market devote and continue holds company and throughout we

who turn to Waneka, will the Jeff update industrial and I our call on provide an commercial now segment. will over

Jeffrey Waneka

build second represent a and growth of we good in everyone. morning, results Rick, quarter gradual most locations. Thanks, as experienced C&I the throughout another in backlog consistent our

We strategic We quarters. several over project believe with put of into the a awards. has which are building our relationships, fit sustainable our great momentum effort of we long-term deal number to pleased and contributed

leverage collaboration, technology with of craft bring believe to skilled many are We diluted labor, our sought-after MYR proven in deliver clients solutions they're and shortages project. all increase these While that and Group us attributes. hiring every companies faced on supervision to

leading a a unfavorable on that Our subcontractor that in financial negatively impacted couple were costs projects, primary weather second resulted The of West and quarter experienced expectations. by in few increased lower performance that below results to issues projects relate was project to a Coast conditions, specific scope the change margins.

also experienced Midwest, inefficiencies the In a impacted for on are projects negotiations which of project We in one negatively we completion performance. scheduling delays, couple reimbursement. we that labor which experienced had nearing receive our to

management as clients' could resolve worse. to our finish we craft returning reached issues. will workers, well and These to disruptions, completion, and believe we projects we Thanks financial which dedicated more otherwise normalized substantial proactively challenging our to bode margins. remaining We many our anticipate projects have mitigated to well-trained work efforts been have C&I team

and making our measurably as talented now I'd expand the relationships our the installation the we Along along about awards, share project cultural methods pool to important abundant an we delve companies market of looking and to and outlook to I my acquisition like commercial a merge fit, Group has in CSI, the client to innovative going subsidiaries, all into forward forward. combined minutes industry-leading opportunity opportunities I'm excitement preconstruction companies. with departments, few of take a see stronger. MYR CSI experts with services, Before

cost-effective aligned continual and all that constituents. CSI was a welfare learning established around technologies advancements that the allows delivering and the through and evident cultures employees, productive have step of of and high-quality we for knowledge. of our every and transfer that drives benefit of due MYR It product efficient diligence

Group's CSI already high-profile complex commercial industrial gigawatts But of I'm their in history, generation MYR markets, the projects has of building resume resume. a X.X photovoltaic excited about enhancing robust and expansive plants. most

expertise decade and in-house relationships in across market provides leverage and and than system CSI's cells engineering, construction turnkey established, to Group and runs geothermal. intend and subsidiaries solutions, the well energy this CSI solar a also to more solar including cogeneration Canada. on and design opportunities monitoring U.S. enhance the deep. fuel MYR are their maintenance We expertise in

CEO and these about programs to share portfolio Founder MYR to bringing practices CSI's best enthused and Steve company training of events extensive his forward Watts and team. Group's to was looks

Improvement Canada lean creative The from engaged implementing and Continuous Annual than Group and XXX Denver Conference in and held methods, MYR leaders U.S. construction across thinking the on more workshops presentations recently solutions. tech and MYR various offer will resources drive come. for together, years and beat the Working that we results be Group clients sustained CSI performance and to will hard believe to

market our outlook. to Turning

with our including majority through and in occurring and see markets, the are airport all voltage bidding shown increased awards mining, momentum. markets this in steady of quarter improvements. continued the systems, We of low healthy to multiple activity have expect opportunities remainder Project regions in XXXX. Backlog education

balance the and in won awards particularly Commercial a to project long-standing mid-size we've with maintained facilities, we regions, industrial wide strong occurring remain of relationships. commercial, at where of small Across variety our transportation. projects awards

indicates should that through this research remain Our XXXX. resilient market

budgeting provide stages. large on in extensive facilities We their several services continue planning early to

the pursuit water Other high deployed and no of a of commercial is commercial in transportation being best in highway There is Group. therefore diligence the projects. treatment entertainment include of project opportunities facilities, level MYR opportunities, for shortage awards number

in belief and nicely in projects, spending experienced a the the our is momentum resurgent and that we markets, quarter solar also last We in in backlog increasing clean under carried believe awards We energy solar way. increase second that bolsters quarter. that established good an activity is bidding which rooftop ground-mounted into

host generating pursuits. markets Our complementary chosen are a relationships our are robust, and committed of

today. stay managing employees. in and the Thanks, time create will for We fundamentals your everyone, customers, value to our shareholders diligent for

Rick, closing will now I'll provide back to comments. some call turn who with the us

Richard Swartz

call. you surrounded while Jeff. updates, you, feel time a I to address those clients. business to together Time for team. and and our challenges, today's Thank privileged them witnessed Betty everyone, supporting I've be for our such and Thank talented again, participating on by work growing

the diligent maintaining pride in source remain confidence a for that leadership jobs. and people we right I a industry in our of tremendous feel position, have As the knowing we right

Our people MYR the position factor are will for key Group that ongoing success.

questions. the now call up comments for Operator, ready we open are to and

Operator

from from first Capital Our KeyBanc from Instructions] the comes [Operator question line Tahira Afzal Markets.

Your line is open.

Sean Eastman

for on today. Sean, taking is questions. Thanks this team, for Hi, Tahira my

impacted you me just a the for I margins, margins. kind on inefficiencies is right, are But sounds couple heard completed. of one productivity First C&I those of like the guys all projects this if quarter

So should quarter. the back see in that kind third of up pop

of given that update wanted mix we're to segment based So also, an to a segment, should of that thinking wanted for make backlog. way And just in couple I be operating kind sure about of that's that that think to on into get acquisitions I just that about on the is we normalized what margin it. the holding

Richard Swartz

projects That primarily We've those in on quarter them impacted and now up, done. first, – that the projects negotiations I and some of financials. could our we're are talk we about do settling wrapped final the

believe issues us, we and that normalized going that to behind we're those to So more return margins. are

We very back that expect. to perspective they're working now the some would we're we and have results going come to on projects believe

Betty Johnson

the for that amortization. the our the higher that, is to – add just I'll get And of we amortization have Huen last factors that. is other year, first quarter in that this Sean. one for And Companies We

is So for Huen. this

charges. up for So $X.X per That's approximately our we'll quarter Huen. less for wind non-cash having million

start which normalized of behind will your question, last margins. quarter, the is And be next that but amortization CSI us. Now part will Huen then

comes other into that talked our after in we margin factor first also amortization, CSI going Huen accretive typically have factor highlighted X% we've guarantees contract the CSI. The not thing in being that expect being – we've that comes X% is with being CSI that it that be we and forward into to C&I year, other the not is they first exists range, the although We've had we've the in always that to same for play talked range. year in in within about one that about – that –

you the into to have us, always closer go higher end in just that to the see four those that first we – will experience job whenever the So back at owner that end quarters the X% to margins bring C&I they like uplifts range. those hence in of X% in to uplift. But them three quarters, still

Sean Eastman

Maybe And bullish for the coming getting one some kind extended. it. you work keeps segment should color mid-size It trend next transmission, out, second moving moving the very the of some T&D sounds got how think the pretty up it to there's me, backlog over on EPC Commentary like Okay, sounds no in quarters? on not over small segment. just of both provide then reason materially. can MSAs that to couple to

Richard Swartz

of I this see we a Yes, it lot haven't busy in time. long a seen activity.

of one. market, comments come seen continues look bids with this project When T&D I'd kind really that firm into – the quarter's I what last overall call out continue yet. haven't any large So at I

So plus see that and to our our MSA continuing. is portfolio small work mid-size I

a steady. bit Again, peers. count So of than little those our some our different are backlog we

our work there how that's for always and three in is MSA months, forecasted. we've only So all

of So of that count out those agreements to entire five we we don't – some off even revenue though that. go years, don't three

we strong, backlog So remaining again see our and consistent.

Sean Eastman

team. Okay. very much, Thanks

Richard Swartz

you. Thank

Operator

from the Kansas question Capital. next Jon Braatz comes Our line from of

line is open. Your

Richard Swartz

Morning, Jon.

Jonathan Braatz

morning. Good

Richard Swartz

Are you there?

Jonathan Braatz

margins – and their and duration glean to the of of backlog margin in the Back into able the to assumptions distracted. CSI, built got I backlog the you've what Yes. in of numbers? is significant sort the how terms backlog backlog

Richard Swartz

due almost they process, similar, I it's similar very that and we our started districts. very we started C&I mirror would say, when is we doing to what do. diligence CSI own

So revenue burning out their that out a work full-year capturing go they're much backlog period for don't really any have isn't it them, off, but outstanding. of projects and XX-month they and that always beyond

that's jobs with in two-year go out them. some where So really a tricklers we where again, that we – the There there, see go but but that's period, C&I to may of larger couple be see ourselves out of the even on them. front,

revenue. a they'll us far So be to contributor as as good

year, As accretive in that first Betty says, it won't to the due really amortization. be though,

Jonathan Braatz

do products don't that some versa? there – or or that does services Are Right. vice currently upon leverage CSI you you can provide

Richard Swartz

clients. that we'll that that have They be some leverage between some are similar to They've don't. our operations. able base relationship have we a different They with people to client some long-term had

On the in are that. are than solar side, they stronger we

third So their good that's a of business about is a add, solar.

the mirrors then almost side C&I other And district. our

work So customer travel have clients that have clients can lot us to had lot new C&I on to them. outside that avenue wanted a We've into California. a of in to and segment some of them but base, wanted do of got they've and pass same California that the do, that we go the to

some I synergies going think there'll be forward. good So

Jonathan Braatz

you. Thank Okay.

Operator

question comes next from Wittmann of from Andy Baird. the Our line

Your line is open.

Andrew Wittmann

you Hey, us thanks. estimate intangible the amortization to CSI? can what of give be an Betty, Great, for going is

Betty Johnson

yet. really don't I just that have amount

in have of you'll which We don't forma have filing, the see we the come quarter. through that the that by by But we third end our is and time estimates, record. pro on

Andrew Wittmann

cash cash pretty was an X-K. quarter, negative year. in guess, I We'll and I here for is out for on Okay. wanted I ask, flow, guess question flow. in keep next high just eye the CapEx to free the that the the

break balance out you quarter. up you year. I is the it to a feel flow calculations, cash some the here from the DSOs the as sense as year because terms capital wanted what outlook the in Maybe of the by budget, like of little do can for get to the capital get of business as you our a increased bit well working in guys

Betty Johnson

we retentions right. over fairly a accounts fairly I'm When made think, combined, year-end, it are improvements. say year-end. all nice – and but some the you're significantly come to are billings DSOs, are At – I under from overall, up So we referring had they when fairly steady, receivable, DSOs I steady,

So our year-to-date working capital spend impacted.

half our growth. last we've of at the first to we are expecting capital this to to support had expenditures higher year, half of comes recent be it the when that for So level kind the

of the the very significant cash. efforts overall But expecting, payment and say billing because I'd on be those focus company billings last renewed that is the in process positive that flow half. Part throughout some terms into our free and overall, challenging and of we cash turning to have

last However, is half negotiating of orders one have outstanding change of upon and as some pending of the is timing that the things June. we that billing is of collecting this dependent the –

by that So be we hit end time the the would our of wildcard the year.

that helps question. hopefully, answer So that

Andrew Wittmann

all It does. And Thank you. that's I have think today. for I

Operator

there and As call [Operator Rick time, back instructions] this at to now are the no would CEO. questions to I Swartz, like turn President

Richard Swartz

on Thank you, for participating call. everyone today's

on always, and look with I'd exceptional for their call. again and like going management our and to thank for stockholders our with our speaking don't further. forward have conference to forward work their team anything working employees you As hard next I support. We continued you

Operator

Ladies and and this for your have Thank today's conference. a participation day. wonderful you concludes gentlemen,

all disconnect. may You

MYR (MYRG) 4 Aug 192019 Q2 Earnings call transcript