Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MYR Group Inc (NASDAQ:MYRG) reported a 2.2% increase in first-quarter revenues, reaching $834 million compared to the same period last year.
• The company's CNI segment saw a significant revenue increase of 14.4%, driven by fixed price contracts and T&E contracts.
• Gross margin improved to 11.6% from 10.6% in the previous year, aided by favorable change orders and better-than-anticipated productivity.
• Operating cash flow for the first quarter was $83 million, a substantial increase from $8 million in the same period last year.
• Total backlog increased by 9% year-over-year, reaching $2.64 billion, indicating strong future business prospects.

Negative Points

• T&D revenues decreased by 5.8% compared to the same period last year, primarily due to selectivity on clean energy projects.
• Higher costs related to labor and project inefficiencies partially offset the increase in gross margin.
• The effective tax rate increased to 28.9% from 18% in the previous year, impacting net income.
• Interest expense rose by $300,000 due to higher average outstanding debt balances.
• The company exhausted its current share repurchase program, with no immediate plans to announce a new one.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with MYRG.

Q: On the CNI side, revenue and margin were strong. How are you looking at the backlog and pipeline of opportunities, and what impacts are you seeing from the macro environment? A: Rick Schwartz, CEO: We continue to have active conversations with clients and haven't seen any pullback. The market remains active, and discussions around tariffs and inflation are ongoing, but no significant impact has been observed yet.

Q: You exhausted the share repurchase program this quarter. What are your capital allocation priorities for the rest of the year? A: Kelly Huntington, CFO: We prioritize growth, supporting organic growth, and potential acquisitions. While we haven't announced another share repurchase program, we remain nimble and can quickly implement one if it makes sense.

Q: Your free cash flow was stronger than expected. Were there any one-time factors, and how should we think about free cash flow for the rest of the year? A: Kelly Huntington, CFO: The strong cash flow was due to reductions in pending change orders and retainage. While there's no specific rule of thumb for free cash flow conversion, increased profitability should drive positive cash flow, though some headwinds like interest rates and payment terms could impact it.

Q: Are you seeing any changes in utility thinking on clean energy projects due to the new administration's policies and tariffs? A: Rick Schwartz, CEO: There could be some pausing in certain areas due to financial considerations, but we remain selective in our T&D projects. The CNI market remains strong, and we haven't seen significant pullback.

Q: How are tariffs impacting your cost profile, especially on the CNI side with fixed-price contracts? A: Rick Schwartz, CEO: Tariffs could impact costs, but it's uncertain. We have stronger contract language in place now, and while we monitor the situation closely, we still expect to maintain our margin profiles.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.