MYR Group Inc.
MYR Group Inc.
30/07/2025 | Press release | Distributed by Public on 30/07/2025 19:27
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management's discussion and analysis provides a narrative on the Company's financial performance and condition that should be read in conjunction with the accompanying unaudited consolidated financial statements and with our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report"). In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed herein under the captions "Cautionary Statement Concerning Forward-Looking Statements and Information" and "Risk Factors," as well as in the 2024 Annual Report. We assume no obligation to update any of these forward-looking statements.
Overview and Outlook
We are a holding company of specialty electrical construction service providers that was established in 1995 through the merger of long-standing specialty contractors. Through our subsidiaries, we serve the electric utility infrastructure, commercial and industrial construction markets. We manage and report our operations through two electrical contracting service segments: Transmission and Distribution ("T&D") and Commercial and Industrial ("C&I").
We have operated in the transmission and distribution industry since 1891. We are one of the largest U.S. contractors servicing the T&D sector of the electric utility industry and provide T&D services throughout the United States and in Ontario, Canada. Our T&D customers include many of the leading companies in the electric utility industry. We have provided electrical contracting services for commercial and industrial construction since 1912. Our C&I segment provides services in the United States and in western Canada. Our C&I customers include general contractors and facility owners. We strive to maintain our status as a preferred provider to our T&D and C&I customers.
We believe that we have a number of competitive advantages in both of our segments, including our skilled workforce, extensive centralized fleet, proven safety performance and reputation for timely completion of quality work that allows us to compete favorably in our markets. In addition, we believe that we are better capitalized than some of our competitors, which provides us with valuable flexibility to take on additional and more complex projects.
We believe legislative actions aimed at supporting infrastructure improvements in the United States may positively impact long-term demand, particularly in connection with electric power infrastructure, expansion of domestic manufacturing, and transportation spending. We believe legislative actions are likely to provide greater long-term opportunity in both of our reporting segments. However, we may experience unanticipated volatility associated with policy changes and tariffs. Prolonged uncertainty in the business environment and higher inflation could also impact customer demand and our profitability.
We had consolidated revenues for the six months ended June 30, 2025 of $1.7 billion, of which 55.8% was attributable to our T&D customers and 44.2% was attributable to our C&I customers. Our consolidated revenues for the six months ended June 30, 2024 were $1.6 billion. For the six months ended June 30, 2025, our net income and EBITDA(1)were $49.8 million and $105.8 million, respectively, compared to $3.7 million and $35.1 million, respectively, for the six months ended June 30, 2024.
We believe there is an ongoing need for utilities to sustain investment in their transmission systems to improve reliability, reduce congestion, connect to new power generation sources and support future load growth. Consequently, we believe that we will see continued bidding activity on large transmission projects going forward. The timing of multi-year transmission project awards and substantial construction activity is difficult to predict due to regulatory requirements and the permitting needed to commence construction. Significant construction on any large, multi-year projects awarded in the remainder of 2025 will not likely have a large impact on 2025 results. Bidding and construction activity for small to medium-size transmission projects and upgrades remains active, and we expect this trend to continue.
We believe there is a need for further investment by utilities on their distribution systems to properly maintain or meet reliability requirements. We continue to see strong activity in many of our electric distribution markets. We believe the increased storm activity and destruction caused by wildfires will cause a push to strengthen utility distribution systems against catastrophic damage. Distribution systems may also require upgrades to accommodate additional distributed energy resources and increased electrification. We expect to see an increase in the distribution market opportunities during the rest of 2025.
(1) EBITDA is a non-GAAP measure. Refer to "Non-GAAP Measure-EBITDA" for a discussion of this measure.
We believe the increasing demand for electricity associated with additional power requirements, driven by increased electrification associated with new technologies, including the emergence and adoption of artificial intelligence technologies as well as increased power needs connected to the reshoring of manufacturing, will require significant investment by our customers in both of our reporting segments.
Our C&I bidding opportunities remain strong and we believe we will see continued opportunities in the primary markets we serve such as data centers, transportation, health care, clean energy and warehousing. In addition, the United States has experienced decades of underfunded economic expansion and aging infrastructure that have challenged the capacity of public water and transportation infrastructure forcing states and municipalities to seek creative means to fund needed expansion and repair. We believe the need for expanding public infrastructure in both the United States and Canada will offer opportunity in our C&I segment for several years. Legislation and regulation that promotes domestic manufacturing could also create opportunity for our C&I segment. We expect the long-term growth in our C&I segment to generally track the overall growth of the regions we serve.
We continue to implement strategies that are designed to further expand our capabilities and effectively allocate capital. We have maintained a strong balance sheet, while also supporting our organic growth with capital expenditures and working capital and repurchasing our shares. During the six months ended June 30, 2025, the Company repurchased 639,207 shares of its common stock under our Repurchase Program (as defined below) at a weighted-average price of $117.33 per share, exhausting substantially all of the authorized funds under our Repurchase Program. On July 30, 2025, the Company announced that its Board of Directors approved a new share repurchase program (the "New Repurchase Program"), which authorizes the Company to repurchase, in the aggregate, up to $75.0 million of its outstanding shares of common stock. The New Repurchase Program will expire on February 4, 2026, or when the authorized funds are exhausted, whichever is earlier. We believe the borrowing availability under our $490 million revolving credit facility and future cash flow from operations will enable us to support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares.
We continue to manage our increasing operating costs, including increasing insurance, equipment, labor and material costs. We believe that our financial position, positive cash flows and other operational strengths will enable us to respond to challenges and uncertainties in the markets we serve and give us the flexibility to successfully execute our strategy. We continue to invest in developing key management and craft personnel in both our T&D and C&I segments and in procuring the specific specialty equipment and tooling needed to win and execute projects of all sizes and complexity.
Backlog
We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as "backlog." A customer's intention to award us work under a fixed-price contract is not included in backlog unless there is an actual written award to perform a specific scope of work at specific terms and pricing. For many of our unit-price, time-and-equipment, time-and-materials and cost plus contracts, we only include projected revenue for a three-month period in the calculation of backlog, although these types of contracts are generally awarded as part of master service agreements that typically have a one-year to three-year duration from execution. Backlog may not accurately represent the revenues that we expect to realize during any particular period. Several factors, such as the timing of contract awards, the type and duration of contracts, and the mix of subcontractor and material costs in our projects, can impact our backlog at any point in time. Some of our revenue does not appear in our periodic backlog reporting because the award of the project, as well as the execution of the work, may all take place within the period. Our backlog includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. Backlog should not be relied upon as a stand-alone indicator of future events.
The difference between our backlog and remaining performance obligations is due to the exclusion of a portion of our master service agreements under certain contract types from our remaining performance obligations as these contracts can be canceled for convenience at any time by us or the customer without considerable cost incurred by the customer. Our estimated backlog also includes our proportionate share of unconsolidated joint venture contracts. Additional information related to our remaining performance obligations is provided in Note 6-Revenue Recognition in the accompanying notes to our Consolidated Financial Statements.
Our backlog was $2.64 billion at June 30, 2025, compared to $2.58 billion at December 31, 2024 and $2.54 billion at June 30, 2024. Our backlog at June 30, 2025 increased $1.4 million from March 31, 2025. Backlog in the T&D segment increased $54.0 million and C&I backlog decreased $52.6 million compared to March 31, 2025. Our backlog as of June 30, 2025 included our proportionate share of joint venture backlog totaling $172.9 million, compared to $169.2 million at March 31, 2025.
The following table summarizes that amount of our backlog that we believe to be firm as of the dates shown and the amount of our current backlog that we reasonably estimate will not be recognized within the next twelve months, and the amount estimated to be recognized after the next twelve months:
| Backlog at June 30, 2025 | ||||||||||||||||||||||||||
| (in thousands) | Total |
Amount estimated to be recognized within 12 months |
Amount estimated to be recognized after 12 months |
Total backlog at December 31, 2024 | ||||||||||||||||||||||
| T&D | $ | 926,525 | $ | 889,672 | $ | 36,853 | $ | 818,185 | ||||||||||||||||||
| C&I | 1,715,018 | 1,276,455 | 438,563 | 1,758,233 | ||||||||||||||||||||||
| Total | $ | 2,641,543 | $ | 2,166,127 | $ | 475,416 | $ | 2,576,418 | ||||||||||||||||||
Consolidated Results of Operations
The following table sets forth selected consolidated statements of operations data and such data as a percentage of revenues for the periods indicated:
|
Three months ended June 30, |
Six months ended June 30, |
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| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||||||||||||
| Contract revenues | $ | 900,325 | 100.0 | % | $ | 828,890 | 100.0 | % | $ | 1,733,945 | 100.0 | % | $ | 1,644,452 | 100.0 | % | ||||||||||||||||||||||||||||||||||
| Contract costs | 796,614 | 88.5 | 788,047 | 95.1 | 1,533,333 | 88.4 | 1,517,366 | 92.3 | ||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 103,711 | 11.5 | 40,843 | 4.9 | 200,612 | 11.6 | 127,086 | 7.7 | ||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 63,313 | 7.0 | 61,839 | 7.5 | 125,837 | 7.3 | 124,072 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 1,211 | 0.1 | 1,217 | 0.1 | 2,399 | 0.1 | 2,445 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of property and equipment | (600) | - | (1,506) | (0.2) | (1,701) | (0.1) | (2,995) | (0.2) | ||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | 39,787 | 4.4 | (20,707) | (2.5) | 74,077 | 4.3 | 3,564 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | 45 | - | 81 | - | 236 | - | 223 | - | ||||||||||||||||||||||||||||||||||||||||||
| Interest expense | (1,905) | (0.2) | (1,241) | (0.1) | (3,319) | (0.2) | (2,295) | (0.1) | ||||||||||||||||||||||||||||||||||||||||||
| Other expense, net | (533) | - | (270) | - | (833) | - | (533) | - | ||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before provision for income taxes | 37,394 | 4.2 | (22,137) | (2.6) | 70,161 | 4.1 | 959 | 0.2 | ||||||||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 10,928 | 1.3 | (6,860) | (0.8) | 20,387 | 1.2 | (2,703) | - | ||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 26,466 | 2.9 | % | $ | (15,277) | (1.8) | % | $ | 49,774 | 2.9 | % | $ | 3,662 | 0.2 | % | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Revenues increased $71.4 million, or 8.6%, to $900.3 million for the three months ended June 30, 2025 from $828.9 million for the three months ended June 30, 2024. The increase was primarily due to an increase of $25.1 million in revenue on distribution projects, an increase of $23.4 million in C&I revenue and an increase of $22.9 million in revenue on transmission projects.
Gross margin for the three months ended June 30, 2025 increased to 11.5% compared to 4.9% for the three months ended June 30, 2024. The increase in gross margin was primarily impacted by significant changes in our estimated gross profit on certain projects resulting in a net gross margin decrease of 1.0% for the three months ended June 30, 2025, compared to a net gross margin decrease of 7.2% for the three months ended June 30, 2024. During the three months ended June 30, 2025, significant estimate changes negatively impacted gross margin by 1.7%, largely related to an increase in costs associated with labor and project inefficiencies and unfavorable change orders. In addition, significant estimate changes in gross profit positively impacted gross margin by 0.7%, primarily related to better-than-anticipated productivity and a favorable job closeout. During the three months ended June 30, 2024, gross margin was primarily impacted by negative significant estimate changes in our estimated gross profit on certain T&D clean energy projects and a C&I project.
Gross profit was $103.7 million for the three months ended June 30, 2025 compared to $40.8 million for the three months ended June 30, 2024. The increase of $62.9 million, or 153.9%, was due to higher margin and revenues.
Selling, general and administrative expenses ("SG&A") were $63.3 million for the three months ended June 30, 2025 compared to $61.8 million for the three months ended June 30, 2024. The period-over-period increase of $1.5 million was primarily due to an increase in employee incentive compensation costs and an increase in employee-related expenses to support future growth. These increases were partially offset by $5.0 million of contingent compensation expense, related to a prior acquisition, recognized during the three months ended June 30, 2024.
Interest expense was $1.9 million for the three months ended June 30, 2025 compared to $1.2 million for the three months ended June 30, 2024. The increase was attributable to higher average outstanding debt balances partially offset by lower interest rates during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.
Income tax expense was $10.9 million for the three months ended June 30, 2025, with an effective tax rate of 29.2%, compared to the income tax benefit of $6.9 million for the three months ended June 30, 2024, with an effective tax rate of 31.0%. The decrease in the tax rate for the three months ended June 30, 2025 was primarily due to the reduction of the impact of the global intangible low tax income ("GILTI").
Net income was $26.5 million for the three months ended June 30, 2025 compared to net loss of $15.3 million for the three months ended June 30, 2024. The increase was primarily due to the reasons stated earlier.
Segment Results
The following table sets forth, for the periods indicated, statements of operations data by segment, segment net sales as percentage of total net sales and segment operating income as a percentage of segment net sales:
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
| Contract revenues: | ||||||||||||||||||||||||||
| Transmission & Distribution | $ | 506,273 | 56.2 | % | $ | 458,209 | 55.3 | % | ||||||||||||||||||
| Commercial & Industrial | 394,052 | 43.8 | 370,681 | 44.7 | ||||||||||||||||||||||
| Total | $ | 900,325 | 100.0 | % | $ | 828,890 | 100.0 | % | ||||||||||||||||||
| Operating income (loss): | ||||||||||||||||||||||||||
| Transmission & Distribution | $ | 40,465 | 8.0 | % | $ | (8,300) | (1.8) | % | ||||||||||||||||||
| Commercial & Industrial | 21,992 | 5.6 | 1,608 | 0.4 | ||||||||||||||||||||||
| Total | 62,457 | 6.9 | (6,692) | (0.8) | ||||||||||||||||||||||
| General Corporate | (22,670) | (2.5) | (14,015) | (1.7) | ||||||||||||||||||||||
| Consolidated | $ | 39,787 | 4.4 | % | $ | (20,707) | (2.5) | % | ||||||||||||||||||
Transmission & Distribution
Revenues for our T&D segment for the three months ended June 30, 2025 were $506.3 million compared to $458.2 million for the three months ended June 30, 2024, an increase of $48.1 million, or 10.5%. The increase in revenue was related to an increase of $25.1 million in revenue on distribution projects and of $22.9 million in revenue on transmission projects.
Operating income for our T&D segment for the three months ended June 30, 2025 was $40.5 million, an increase of $48.8 million, from the three months ended June 30, 2024. As a percentage of revenues, operating income for our T&D segment was 8.0% for the three months ended June 30, 2025 compared to an operating loss of 1.8% for the three months ended June 30, 2024. Operating income margin was impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income margin decrease of 0.9% for the three months ended June 30, 2025, compared to a net operating income margin decrease of 10.5% for the three months ended June 30, 2024. During the three months ended June 30, 2025, significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 1.0%, primarily related to labor and project inefficiencies. These decreases were partially offset by positive significant estimated gross profit changes totaling 0.1% and largely related to better-than-anticipated productivity. During the three months ended June 30, 2024, operating loss margin was negatively impacted by significant estimated gross profit changes related to clean energy projects.
Commercial & Industrial
Revenues for our C&I segment for the three months ended June 30, 2025 were $394.1 million compared to $370.7 million for the three months ended June 30, 2024, an increase of $23.4 million, or 6.3%. The increase in revenue was primarily related to an increase of $23.3 million in revenue on fixed priced contracts.
Operating income for our C&I segment for the three months ended June 30, 2025 was $22.0 million, an increase of $20.4 million, over the three months ended June 30, 2024. As a percentage of revenues, operating income for our C&I segment was 5.6% for the three months ended June 30, 2025 compared to 0.4% for the three months ended June 30, 2024. Operating income margin was impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income margin decrease of 1.2% for the three months ended June 30, 2025, compared to a net operating income margin decrease of 3.1% for the three months ended June 30, 2024. Significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 2.6%, primarily related to an increase in costs associated with labor and project inefficiencies and unfavorable change orders. These decreases were partially offset by positive significant estimated gross profit changes totaling 1.4% and largely related to better-than-anticipated productivity and a favorable job closeout. During the three months ended June 30, 2024, operating income margin was negatively impacted by significant estimated gross profit changes primarily related to a single project. Operating income margin was also positively impacted during the three months ended June 30, 2025, by a larger portion of our C&I projects progressing at higher contractual margins, some of which are nearing completion. Additionally, C&I operating income for the three months ended June 30, 2024, was negatively impacted by contingent compensation expense related to a prior acquisition, that did not recur during the three months ended June 30, 2025.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
Revenues increased $89.4 million or 5.4%, to $1.73 billion for the six months ended June 30, 2025 from $1.64 billion for the six months ended June 30, 2024. The increase was primarily due to an increase of $70.1 million in C&I revenue, and an increase of $40.6 million in revenue on distribution projects, partially offset by a decrease of $21.2 million in revenue on transmission projects, primarily related to clean energy.
Gross margin for the six months ended June 30, 2025 increased to 11.6% compared to 7.7% for the six months ended June 30, 2024. The increase in gross margin was primarily impacted by significant changes in our estimated gross profit on certain projects resulting in a net gross margin decrease of 1.2% for the six months ended June 30, 2025, compared to a net gross margin decrease of 4.2% for the six months ended June 30, 2024. During the six months ended June 30, 2025, significant estimate changes negatively impacted gross margin by 2.1%, largely related to an increase in costs associated with labor and project inefficiencies and unfavorable change orders. In addition, significant estimate changes in gross profit positively impacted gross margin by 0.9%, mainly related to better-than-anticipated productivity, favorable change orders and a favorable job closeout. During the six months ended June 30, 2024, gross margin was primarily impacted by negative significant estimate changes in our estimated gross profit on certain T&D clean energy projects and a C&I project.
Gross profit was $200.6 million for the six months ended June 30, 2025 compared to $127.1 million for the six months ended June 30, 2024. The increase of $73.5 million, or 57.9% was due to higher margin and revenues.
SG&A was $125.8 million for the six months ended June 30, 2025 compared to $124.1 million for the six months ended June 30, 2024. The period-over-period increase of $1.7 million was primarily due to an increase in employee incentive compensation costs and an increase in employee-related expenses to support future growth. These increases were partially offset by $8.2 million of contingent compensation expense, related to a prior acquisition, recognized during the six months ended June 30, 2024.
Gains from the sale of property and equipment for the six months ended June 30, 2025 were $1.7 million compared to $3.0 million for the six months ended June 30, 2024. Gains from the sale of property and equipment are attributable to routine sales of property and equipment no longer useful or valuable to our ongoing operations.
Interest expense was $3.3 million for the six months ended June 30, 2025 compared to $2.3 million for the six months ended June 30, 2024. The increase was primarily attributable to higher average outstanding debt balances, partially offset by lower interest rates during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Income tax expense was $20.4 million for the six months ended June 30, 2025, with an effective tax rate of 29.1%, compared to the benefit of $2.7 million for the six months ended June 30, 2024, with an effective tax rate of (281.9)%. The change in the tax rate for the six months ended June 30, 2025 was primarily due to higher pretax income, lower other permanent difference items and lower stock compensation excess tax benefits.
Net income was $49.8 million for the six months ended June 30, 2025 compared to $3.7 million for the six months ended June 30, 2024. The increase was primarily due to the reasons stated earlier.
Segment Results
The following table sets forth, for the periods indicated, statements of operations data by segment, segment net sales as percentage of total net sales and segment operating income as a percentage of segment net sales:
| Six months ended June 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
| Contract revenues: | ||||||||||||||||||||||||||
| Transmission & Distribution | $ | 968,043 | 55.8 | % | $ | 948,604 | 57.7 | % | ||||||||||||||||||
| Commercial & Industrial | 765,902 | 44.2 | 695,848 | 42.3 | ||||||||||||||||||||||
| Total | $ | 1,733,945 | 100.0 | % | $ | 1,644,452 | 100.0 | % | ||||||||||||||||||
| Operating income: | ||||||||||||||||||||||||||
| Transmission & Distribution | $ | 76,686 | 7.9 | % | $ | 21,536 | 2.3 | % | ||||||||||||||||||
| Commercial & Industrial | 39,369 | 5.1 | 13,031 | 1.9 | ||||||||||||||||||||||
| Total | 116,055 | 6.7 | 34,567 | 2.1 | ||||||||||||||||||||||
| General Corporate | (41,978) | (2.4) | (31,003) | (1.9) | ||||||||||||||||||||||
| Consolidated | $ | 74,077 | 4.3 | % | $ | 3,564 | 0.2 | % | ||||||||||||||||||
Transmission & Distribution
Revenues for our T&D segment for the six months ended June 30, 2025 were $968.0 million compared to $948.6 million for the six months ended June 30, 2024, an increase of $19.4 million, or 2.0%. The increase in revenue was related to an increase of $40.6 million in revenue on distribution projects, partially offset by a decrease of $21.2 million in revenue on transmission projects. Revenues from transmission projects represented 59.4% and 62.9% of T&D segment revenue for the six months ended June 30, 2025 and 2024, respectively.
Operating income for our T&D segment for the six months ended June 30, 2025 was $76.7 million, an increase of $55.2 million, from the six months ended June 30, 2024. As a percentage of revenues, operating income for our T&D segment was 7.9% for the six months ended June 30, 2025 compared to 2.3% for the six months ended June 30, 2024. Operating income margin was impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income margin decrease of 0.8% for the six months ended June 30, 2025, compared to a net decrease of 5.7% for the six months ended June 30, 2024. During the six months ended June 30, 2025, significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 1.2% primarily related to labor and project inefficiencies. These decreases were partially offset by positive significant estimated gross profit changes totaling 0.4% of revenues mostly related to better-than-anticipated productivity and a favorable change order. During the six months ended June 30, 2024, T&D operating income margin was negatively impacted by significant estimated gross profit changes related to clean energy projects.
Commercial & Industrial
Revenues for our C&I segment for the six months ended June 30, 2025 were $765.9 million compared to $695.8 million for the six months ended June 30, 2024, an increase of $70.1 million, or 10.1%. The increase in revenue was primarily related to an increase of $52.3 million in revenue on fixed priced contracts.
Operating income for our C&I segment for the six months ended June 30, 2025 was $39.4 million, an increase of $26.4 million, over the six months ended June 30, 2024. As a percentage of revenues, operating income for our C&I segment was 5.1% for the six months ended June 30, 2025, compared to 1.9% for the six months ended June 30, 2024. Operating income margin was positively impacted during the six months ended June 30, 2025, by a larger portion of our C&I projects progressing at higher contractual margins, some of which are nearing completion. Additionally, C&I operating income for the six months ended June 30, 2024, was negatively impacted by contingent compensation expense related to a prior acquisition, that did not recur during the six months ended June 30, 2025. C&I operating income margin during the six months ended June 30, 2025, was also impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income margin decrease of 1.8% for the six months ended June 30, 2025, compared to a net decrease of 2.1% for the six months ended June 30, 2024. Significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 3.3%, primarily related to an increase in costs associated with labor and project inefficiencies and unfavorable change orders. These decreases were partially offset by positive significant estimated gross profit changes totaling 1.5% and largely related to better-than-anticipated productivity, favorable change orders and a favorable job closeout.
Non-GAAP Measure-EBITDA
We define EBITDA, a performance measure used by management, as net income plus interest expense net of interest income, provision for income taxes and depreciation and amortization. EBITDA, a non-GAAP financial measure, does not purport to be an alternative to net income as a measure of operating performance or to net cash flows provided by operating activities as a measure of liquidity. We believe that EBITDA is useful to investors and other external users of our Consolidated Financial Statements in evaluating our operating performance and cash flow because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, useful lives placed on assets, capital structure and the method by which assets were acquired. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from, the presentation of EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations.
Using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under accounting principles generally accepted in the United States of America ("U.S. GAAP"), as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our shareholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and amortization are a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net income in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) monitor our capacity to generate returns for our shareholders.
The following table provides a reconciliation of net income to EBITDA:
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Three months ended June 30, |
Six months ended June 30, |
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| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Net income (loss) | $ | 26,466 | $ | (15,277) | $ | 49,774 | $ | 3,662 | ||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
| Interest expense, net | 1,860 | 1,160 | 3,083 | 2,072 | ||||||||||||||||||||||
| Income tax expense (benefit) | 10,928 | (6,860) | 20,387 | (2,703) | ||||||||||||||||||||||
| Depreciation & amortization | 16,345 | 16,274 | 32,538 | 32,104 | ||||||||||||||||||||||
| EBITDA | $ | 55,599 | $ | (4,703) | $ | 105,782 | $ | 35,135 | ||||||||||||||||||
We also use EBITDA as a liquidity measure. Certain material covenants contained within our credit agreement (the "Credit Agreement") are based on EBITDA with certain additional adjustments. Non-compliance with these financial covenants under the Credit Agreement - our interest coverage ratio which is defined in the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement) and our net leverage ratio, which is defined in the Credit Agreement as Total Net Indebtedness (as defined in the Credit Agreement), divided by Consolidated EBITDA (as defined in the Credit Agreement) - could result in our lenders requiring us to immediately repay all amounts borrowed on our revolving credit facility. If we anticipated a potential covenant violation, we would seek relief from our lenders, likely causing us to incur additional cost, and such relief might not be available, or if available, might not be on terms as favorable as those in the Credit Agreement. In addition, if we cannot satisfy these financial covenants, we would be prohibited under the Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring or disposing of assets. Based on the information above, management believes that the presentation of EBITDA as a liquidity measure is useful to investors and relevant to their assessment of our capacity to service or incur debt, fund capital expenditures, finance acquisitions and expand our operations.
The following table provides a reconciliation of net cash flows provided by operating activities to EBITDA:
|
Three months ended June 30, |
Six months ended June 30, |
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| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Provided by Operating Activities: | ||||||||||||||||||||||||||
| Net cash flows provided by operating activities | $ | 32,861 | $ | 22,681 | $ | 116,147 | $ | 30,371 | ||||||||||||||||||
| Add/(subtract): | ||||||||||||||||||||||||||
| Changes in operating assets and liabilities | 12,872 | (20,249) | (29,610) | 7,914 | ||||||||||||||||||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities | (19,267) | (17,709) | (36,763) | (34,623) | ||||||||||||||||||||||
| Depreciation & amortization | 16,345 | 16,274 | 32,538 | 32,104 | ||||||||||||||||||||||
| Income tax expense (benefit) | 10,928 | (6,860) | 20,387 | (2,703) | ||||||||||||||||||||||
| Interest expense, net | 1,860 | 1,160 | 3,083 | 2,072 | ||||||||||||||||||||||
| EBITDA | $ | 55,599 | $ | (4,703) | $ | 105,782 | $ | 35,135 | ||||||||||||||||||
Liquidity, Capital Resources and Material Cash Requirements
As of June 30, 2025, we had working capital of $251.2 million. We define working capital as current assets less current liabilities. During the six months ended June 30, 2025, operating activities of our business provided net cash of $116.1 million, compared to $30.4 million of cash provided for the six months ended June 30, 2024. Cash flow from operations is primarily influenced by operating margins, timing of contract performance and the type of services we provide to our customers. The $85.8 million year-over-year increase in cash provided by operating activities was primarily due to an increase of $46.1 million in net income and favorable net changes in operating assets and liabilities of $37.5 million. The favorable change in operating assets and liabilities was primarily due to the favorable change of $25.9 million in other liabilities, slightly offset by the net unfavorable year-over-year changes in various working capital accounts that relate primarily to construction activities (accounts receivable, contract assets, accounts payable and contract liabilities) of $1.0 million. The favorable change of $25.9 million in other liabilities was primarily due to changes in our employee incentive compensation accruals and the timing of employee related wage and tax payments.
In the six months ended June 30, 2025, we used net cash of $30.6 million in investing activities consisting of $34.3 million for capital expenditures, partially offset by $3.7 million of proceeds from the sale of equipment.
In the six months ended June 30, 2025, financing activities used net cash of $66.5 million, consisting primarily of $75.0 million of share repurchases under our Repurchase Program, $2.7 million of shares repurchased to satisfy tax obligations under our stock compensation programs and $2.2 million of payments under our equipment notes, partially offset by $13.9 million of net borrowings under our revolving line of credit.
We believe our $383.3 million borrowing availability under our revolving line of credit as of June 30, 2025, future cash flow from operations and our ability to utilize short-term and long-term leases will provide sufficient liquidity for our short-term and long-term needs. Our primary short-term liquidity needs include cash for operations, debt service requirements, capital expenditures, and acquisition and joint venture opportunities. We believe we have adequate sources of liquidity to meet our long-term liquidity needs and foreseeable material cash requirements, including those associated with funding future acquisition opportunities. We continue to invest in developing key management and craft personnel in both our T&D and C&I segments and in procuring the specific specialty equipment and tooling needed to win and execute projects of all sizes and complexity.
We have not historically paid dividends and currently do not expect to pay dividends.
Debt Instruments
Credit Agreement
On May 31, 2023, the Company entered into a five-year third amended and restated credit agreement (the "Credit Agreement") with a syndicate of banks led by JPMorgan Chase Bank, N.A. and Bank of America, N.A. that provides for a $490 million revolving credit facility (the "Facility"), subject to certain financial covenants as defined in the Credit Agreement. The Facility allows for revolving loans in Canadian dollars and other non-US currencies, up to the U.S. dollar equivalent of $150 million. Up to $75 million of the Facility may be used for letters of credit, with an additional $75 million available for letters of credit, subject to the sole discretion of each issuing bank. The Facility also allows for $15 million to be used for swingline loans. The Company has an expansion option to increase the commitments under the Facility or enter into incremental term loans, subject to certain conditions, by up to an additional $200 million upon receipt of additional commitments from new or existing lenders. Subject to certain exceptions, the Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries, and by a pledge of substantially all of the capital stock of the Company's domestic subsidiaries and 65% of the capital stock of the direct foreign subsidiaries of the Company. Additionally, subject to certain exceptions, the Company's domestic subsidiaries also guarantee the repayment of all amounts due under the Credit Agreement. The Credit Agreement provides for customary events of default. If an event of default occurs and is continuing, on the terms and subject to the conditions set forth in the Credit Agreement, amounts outstanding under the Facility may be accelerated and may become or be declared immediately due and payable. Borrowings under the Credit Agreement are used to refinance existing indebtedness, and to provide for future working capital, capital expenditures, acquisitions and other general corporate purposes.
Amounts borrowed under the Credit Agreement bear interest, at the Company's option, at a rate equal to either (1) the Alternate Base Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 0.25% to 1.00%; or (2) the Term Benchmark Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.25% to 2.00%. The applicable margin is determined based on the Company's Net Leverage Ratio (as defined in the Credit Agreement). Letters of credit issued under the Facility are subject to a letter of credit fee of 1.25% to 2.00% for non-performance letters of credit or 0.625% to 1.00% for performance letters of credit, based on the Company's Net Leverage Ratio. The Company is subject to a commitment fee of 0.20% to 0.30%, based on the Company's Net Leverage Ratio, on any unused portion of the Facility. The Credit Agreement restricts certain types of payments when the Company's Net Leverage Ratio, after giving pro forma effect thereto, exceeds 2.75.
Under the Credit Agreement, the Company is subject to certain financial covenants including a maximum Net Leverage Ratio of 3.0 and a minimum Interest Coverage Ratio (as defined in the Credit Agreement) of 3.0. The Credit Agreement also contains covenants including limitations on asset sales, investments, indebtedness and liens. The Company was in compliance with all of its financial covenants under the Credit Agreement as of June 30, 2025.
We had $72.3 million and $58.4 million of borrowings outstanding under the Facility as of June 30, 2025 and December 31, 2024, respectively.
Letters of Credit
Some of our vendors require letters of credit to ensure reimbursement for amounts they are disbursing on our behalf, such as to beneficiaries under our insurance programs. In addition, from time to time, certain customers require us to post letters of credit to guarantee performance under our contracts. Such letters of credit are generally issued by a bank or similar financial institution. The letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder claims that we have failed to perform specified actions in accordance with the terms of the letter of credit. If this were to occur, we would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, we may also have to record a charge to earnings for the reimbursement. Currently, we do not believe it is likely that any claims will be made under any letter of credit.
As of June 30, 2025, we had $34.5 million in letters of credit outstanding under our Credit Agreement, including $29.8 million related to the Company's payment obligation under its insurance programs and $4.7 million related to contract performance obligations. As of December 31, 2024, we had $37.3 million in letters of credit outstanding under our Credit Agreement, including $32.6 million related to the Company's payment obligations under its insurance programs and $4.7 million related to contract performance obligations.
Equipment Notes
We have entered into multiple Master Loan Agreements with multiple finance companies. The Master Loan Agreements may be used for financing of equipment between us and the lenders pursuant to one or more equipment notes ("Equipment Notes"). Each Equipment Note constitutes a separate, distinct and independent financing of equipment and contractual obligation.
As of June 30, 2025 and December 31, 2024, we had one outstanding Equipment Note collateralized by equipment and vehicles owned by us. As of June 30, 2025 and December 31, 2024, we also had one other equipment note outstanding collateralized by a vehicle owned by us. The outstanding balance of all equipment notes was $13.8 million as of June 30, 2025 and $16.0 million as of December 31, 2024. As of June 30, 2025, we had outstanding short-term and long-term equipment notes of approximately $4.5 million and $9.4 million, respectively. As of December 31, 2024, we had outstanding short-term and long-term equipment notes of approximately $4.4 million and $11.6 million, respectively.
Lease Obligations
From time to time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. The Company's leases have remaining terms ranging from less than one to eight years, some of which may include options to extend the leases for up to ten years, and some of which may include options to terminate the leases within one year. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive.
The outstanding balance of operating lease obligations was $45.2 million as of June 30, 2025, consisting of short-term and long-term operating lease obligations of approximately $12.8 million and $32.4 million, respectively. The outstanding balance of operating lease obligations was $42.6 million as of December 31, 2024, consisting of short-term and long-term operating lease obligations of approximately $12.1 million and $30.5 million, respectively.
The outstanding balance of finance lease obligations was $2.5 million as of June 30, 2025, consisting of short-term and long-term finance lease obligations of approximately $0.9 million and $1.6 million, respectively. As of December 31, 2024, we had $3.0 million outstanding finance lease obligations, consisting of short-term and long-term finance lease obligations of approximately $1.1 million and $1.9 million, respectively.
Purchase Commitments for Construction Equipment
As of June 30, 2025, we had approximately $9.2 million in outstanding purchase obligations for certain construction equipment to be paid with cash outlays scheduled to occur in 2025.
Performance and Payment Bonds and Parent Guarantees
Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors. If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. We must reimburse our sureties for any expenses or outlays they incur. Under our continuing indemnity and security agreements with the issuers of the bonds, we may be required to grant them a security interest relating to a particular project. We believe that it is unlikely that we will have to fund significant claims under our surety arrangements. As of June 30, 2025, an aggregate of approximately $2.24 billion in original face amount of bonds issued by our sureties were outstanding. Our estimated remaining cost to complete these bonded projects was approximately $640.2 million as of June 30, 2025.
From time to time, we guarantee the obligations of our wholly owned subsidiaries, including obligations under certain contracts with customers, certain lease agreements, and, in some states, obligations in connection with obtaining contractors' licenses. Additionally, from time to time, we are required to post letters of credit to guarantee the obligations of our wholly owned subsidiaries, which reduces the borrowing availability under our credit facility.
Concentration of Credit Risk
We grant trade credit under normal payment terms, generally without collateral, to our customers, which include high credit quality electric utilities, governmental entities, general contractors and builders, owners and managers of commercial and industrial properties located in the United States and Canada. Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States and Canada. However, we generally have certain statutory lien rights with respect to services provided. Under certain circumstances such as foreclosures or negotiated settlements, we may take title to the underlying assets in lieu of cash in settlement of receivables. As of June 30, 2025 and 2024, none of our customers individually exceeded 10% of consolidated accounts receivable. Management believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.
New Accounting Pronouncements
For a discussion regarding new accounting pronouncements, please refer to Note 1-Organization, Business and Basis of Presentation-Recent Accounting Pronouncements in the accompanying notes to our Consolidated Financial Statements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates. For further information regarding our critical accounting policies and estimates, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" included in our 2024 Annual Report.
Cautionary Statement Concerning Forward-Looking Statements and Information
We are including the following discussion to inform you of some of the risks and uncertainties that can affect our company and to take advantage of the protections for forward-looking statements that applicable federal securities law affords.
Statements in this Quarterly Report on Form 10-Q contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), which represent our management's beliefs and assumptions concerning future events. When used in this document and in documents incorporated by reference, forward-looking statements include, without limitation, statements regarding financial forecasts or projections, and our expectations, beliefs, intentions or future strategies that are signified by the words "anticipate," "believe," "estimate," "expect," "intend," "likely," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should", "unlikely," or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to update these statements (unless required by securities laws), and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict, and many of which are beyond our control. These and other important factors, including those discussed under the caption "Forward-Looking Statements" and in Item 1A. "Risk Factors" in our 2024 Annual Report, and in any risk factors or cautionary statements contained in our other filings with the Securities and Exchange Commission, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.
These risks, contingencies and uncertainties include, but are not limited to, the following:
•Our operating results may vary significantly from period to period.
•Our industry is highly competitive.
•Negative economic and market conditions including tariffs and inflation on materials, interest rates and recessionary conditions have in the past and may in the future adversely impact our customers' spending and, as a result, our operations and growth.
•We may be unsuccessful in generating internal growth, which could impact the projects available to the Company.
•Our inability to successfully execute or integrate acquisitions or joint ventures may have an adverse impact on our growth strategy and business.
•Project performance issues, including those caused by third parties, or certain contractual obligations have in the past and may in the future result in additional costs to us, reductions or delays in revenues or the payment of penalties, including liquidated damages.
•We may be unable to attract and retain qualified personnel.
•The timing of new contracts and termination of existing contracts may result in unpredictable fluctuations in our cash flows and financial results.
•During the ordinary course of our business, we have in the past and may in the future become subject to lawsuits or indemnity claims.
•Backlog may not be realized or may not result in profits and may not accurately represent future revenue.
•Our insurance has limits and exclusions that may not fully indemnify us against certain claims or losses, including claims resulting from wildfires or other natural disasters and an increase in cost, or the unavailability or cancellation of third-party insurance coverages would increase our overall risk exposure and could disrupt our operations and reduce our profitability.
•Risks associated with operating in the Canadian market could impact our profitability.
•Changes in tax laws or our interpretations of tax laws could materially impact our tax liabilities.
•The nature of our business exposes us to potential liability for warranty claims and faulty engineering, which may reduce our profitability.
•Pandemic outbreaks of disease, such as the COVID-19 pandemic, have in the past had and may in the future have an adverse impact on our business, employees, liquidity, financial condition, results of operations and cash flows.
•Our dependence on customers, suppliers, subcontractors and equipment manufacturers has in the past and may in the future expose us to the risk of loss in our operations.
•Our participation in joint ventures and other projects with third parties may expose us to liability for failures of our partners.
•Legislative or regulatory actions relating to electricity transmission and clean energy may impact demand for our services.
•We have in the past and may in the future incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety matters, including those related to environmental hazards such as wildfires and other natural disasters.
•Our failure to comply with environmental and other laws and regulations could result in significant liabilities.
•Our business may be affected by seasonal and other variations, including severe weather conditions and the nature of our work environment.
•Opportunities associated with government contracts could lead to increased governmental regulation applicable to us.
•We are subject to risks associated with climate change including financial risks and physical risks such as an increase in extreme weather events (such as floods, wildfires or hurricanes), rising sea levels and limitations on water availability and quality.
•Our use of percentage-of-completion accounting could result in a reduction or reversal of previously recognized revenues and profits.
•Our financial results are based upon estimates and assumptions that may differ from actual results.
•Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.
•An increase in the cost or availability for items such as materials, parts, commodities, equipment and tooling may also be impacted by trade regulations, tariffs, global relations, wars, taxes, transportation costs and inflation which could adversely affect our business.
•We may not be able to compete for, or work on, certain projects if we are not able to obtain necessary bonds, letters of credit, bank guarantees or other financial assurances.
•Unfavorable developments affecting the banking and financial services industry could adversely affect our business, liquidity and financial condition and overall results of operations.
•Work stoppages or other labor issues with our unionized workforce could adversely affect our business, and we may be subject to unionization attempts.
•Multi-employer pension plan obligations related to our unionized workforce could adversely impact our earnings.
•We rely on information, communications and data systems in our operations and we or our business partners may be subject to failures, interruptions or breaches of such systems, which could affect our operations or our competitive position, expose sensitive information or damage our reputation.
MYR Group Inc. published this content on July 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on July 30, 2025 at 20:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]