MYR Group Inc (MYRG) (Q1 2024) Earnings Call Transcript Highlights: Mixed Results Amidst ...
Revenue: $816 million, a slight increase of $4 million or 0.5% year-over-year.
T&D Revenue: $490 million, up 10% year-over-year.
C&I Revenue: $325 million, down 11% year-over-year.
Gross Margin: Improved to 10.6% from 10.4% the previous year.
Net Income: $19 million, down from $23 million year-over-year.
Earnings Per Share (EPS): $1.12, decreased from $1.38 year-over-year.
EBITDA: $40 million, slightly down from $41 million year-over-year.
Operating Cash Flow: $8 million, significantly lower than $37 million year-over-year.
Free Cash Flow: Negative $18 million, a decline from positive $18 million year-over-year.
Total Backlog: $2.43 billion, down 9% year-over-year.
Interest Expense: $1 million, an increase of $500,000 year-over-year.
Release Date: May 02, 2024
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 steady first quarter performance with a strong market position and operational consistency.
Revenue for the first quarter of 2024 was $816 million, a slight increase from the previous year, with T&D revenues up 10%.
The company is well-positioned to benefit from significant forecasted investments in transmission and distribution infrastructure, estimated at up to $930 billion through 2030.
Gross margin improved to 10.6% in Q1 2024 from 10.4% in the same period last year, driven by better productivity and favorable joint venture results.
MYR Group Inc (NASDAQ:MYRG) has a strong balance sheet with $434 million in borrowing availability and a low debt-to-EBITDA leverage ratio of 0.2 times.
Negative Points
C&I segment revenues decreased by 11% due to delayed start of certain projects, expected to begin later in 2024.
Net income and diluted earnings per share for Q1 2024 decreased compared to the same period last year, with net income at $19 million down from $23 million.
The backlog as of March 31, 2024, was 9% lower than a year ago, indicating potential challenges in project pipeline volume.
First quarter 2024 free cash flow was negative $18 million, a significant decrease from the positive free cash flow of $18 million in the same period last year.
Operating income margins in the T&D segment decreased to 6.1% from 7.4% due to labor and project inefficiencies and higher fleet depreciation.
Q & A Highlights
Q: You are among the few players that have a unique exposure to data centers, so both from a direct and indirect exposure perspective. So curious about your views here. From your vantage point on where you are seeing customer conversations progress today, when do you think the volume of work really starts to inflect in the backlog, again, both for direct and indirect exposure? And what are the challenges, maybe supply chain or others that you might have to navigate, if any? A: Richard Swartz, President and CEO of MYR Group, noted the active market for data centers and emphasized the importance of being selective in project commitments due to potential overcommitment risks. He highlighted supply chain issues, particularly with longer lead items, as a current challenge. Don Egan, SVP and COO of the Commercial and Industrial segment, added that the focus is on being selective in project pursuits to avoid overcommitment, while monitoring ongoing supply chain developments.
Q: And then you spoke about expanding alliance agreements and strategically capturing new opportunities. Is that additional market share, can you give some color around that on the opportunities that you're seeing and how we should think about the margin impact from that? A: Richard Swartz responded that the opportunities are steady and additive to MYR Group's business, contributing to long-term growth without specifying the impact on margins.
Q: I think last quarter, you talked about expectations for high-single-digit growth, for the year in both segments. Just curious now that we're through the first quarter, how things are shaking up relative to that initial expectation? Are you still expecting high single digit growth in both segments this year? A: Richard Swartz indicated a shift in expectations due to project delays, particularly on the C&I side, which have pushed some projects to the fourth quarter, leading to a more flat growth profile for the year.
Q: And then, could you talk about margin progression that you're expecting for the remainder of the year? I guess in both segments seem to expecting kind of an inflection here in the back half as some projects roll off. Just curious, if you're still expecting that and how we should be thinking about margin progression for the year? A: Kelly Huntington, CFO, outlined expectations for margin improvements, particularly in the C&I segment, aiming for the lower end of the target operating income margin range of 4% to 6% by midyear. For the T&D segment, margins are expected to improve in the second half of the year as certain low-margin projects are completed.
Q: So Kelly or Rick, can you tell us a little bit more about the delayed projects there? What type of projects they are? The geography maybe and what maybe causing the delay in start? A: Richard Swartz explained that the delays were not specific to one type of work and were due to various factors such as permitting issues or delays in receiving owner-furnished materials. He emphasized that these projects were not canceled but merely postponed to later in the year.
Q: And if I can ask a question on the higher SG&A, was that a function of maybe some closeouts earnouts that you had to pay on some acquisitions? And if so, should we be modeling it the same way going forward? A: Kelly Huntington confirmed that the increase in SG&A was partly due to higher profitability from prior acquisitions and related contingent compensation expenses. She anticipated that this factor might continue to influence the second quarter but would not be significant in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.