MYR Group Inc. Aktie

Good morning, everyone, and welcome to the MYR Group First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] Today's conference is being recorded. I will now turn the call over to Jennifer Harper, Vice President of Investor Relations and Treasurer, for introductory remarks.

Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2026, which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment.

A copy of yesterday's press release announcing our first quarter results can be found on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for 7 days following the call. Please note, today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K. Certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that, let me turn the call over to Rick Swartz.

Thanks, Jennifer. Good morning, everyone. Welcome to our first quarter 2026 conference call to discuss financial and operational results. I will begin by providing a summary of the first quarter results and then turn the call over to Kelly Huntington, our Chief Financial Officer, for a detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. We delivered strong financial results in the first quarter, supported by ongoing work with long-term customers and the selective pursuit of new opportunities while continuing to expand customer relationships.

Quarterly results reflect strong bidding activity and continued infrastructure investment to support electrification needs across our business segments. We continue to monitor project opportunities and remain focused on disciplined project execution. Safe, reliable delivery and strong customer relationships remain central to our operations. Our teams are focused on understanding our customers' requirements, maintaining clear communication and producing consistent results. I'm proud of our teams for their continued dedication to quality, safety and collaboration. Now Kelly will provide details on our first quarter 2026 financial results.

Thank you, Rick, and good morning, everyone. Our first quarter 2026 revenues were $1 billion, which represents an increase of $167 million or 20% compared to the same period last year. Our first quarter T&D revenues were $541 million, an increase of 17% compared to the same period last year. T&D segment revenues increased primarily due to higher revenue on unit price and T&E contracts, partially offset by a decrease in revenue on fixed price contracts. Work performed under master service agreements increased to approximately 70% of our T&D revenues. C&I revenues were $459 million, a record high for our C&I segment and an increase of 24% compared to the same period last year. C&I segment revenues increased primarily due to higher revenue on fixed price contracts.

Our gross margin was 13.4% for the first quarter of 2026 compared to 11.6% for the same period last year. The increase in gross margin was primarily due to a larger portion of our projects progressing at higher contractual margins, some of which are nearing completion. Gross margin was also positively impacted by better-than-anticipated productivity, favorable change orders and a favorable job closeout. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. T&D operating income margin was 9.7% for the first quarter of 2026 compared to 7.8% for the same period last year. The increase was primarily due to better-than-anticipated productivity and a favorable job closeout, partially offset by an increase in costs associated with inefficiencies on a project.

C&I operating income margin was 8.1% for the first quarter of 2026 compared to 4.7% for the same period last year. The increase was primarily due to a larger portion of our projects progressing at higher contractual margins, some of which are nearing completion. C&I operating income margin was also positively impacted by better-than-anticipated productivity and favorable change orders, partially offset by an increase in costs associated with inefficiencies on certain projects. First quarter 2026 SG&A expenses were $69 million, an increase of approximately $7 million compared to the same period last year. The increase was primarily due to higher employee incentive compensation costs and employee-related expenses to support future growth.

Our first quarter effective tax rate was 26.9% compared to 28.9% for the same period last year. The decrease was primarily due to a favorable impact from stock compensation excess tax benefits, partially offset by higher U.S. taxes on Canadian income and other permanent difference items. First quarter 2026 net income was a record $47 million compared to net income of $23 million for the same period last year. Net income per diluted share of $2.99 increased 106% compared to $1.45 for the same period last year.

First quarter 2026 EBITDA was a record $82 million compared to $50 million for the same period last year. Total backlog as of March 31, 2026, was a record $2.84 billion, 8% higher than a year ago. Total backlog as of March 31, 2026, consisted of $981 million for our T&D segment and $1.86 billion for our C&I segment. First quarter 2026 operating cash flow was $85 million compared to operating cash flow of $83 million for the same period last year. The increase in cash provided by operating activities was primarily due to higher net income, partially offset by the timing of billings and payments associated with project starts and completions.

First quarter 2026 free cash flow was $69 million compared to free cash flow of $70 million for the same period last year. This slight decrease was due to higher capital expenditures, partially offset by an increase in operating cash flow. Moving to liquidity and our balance sheet. We had approximately $258 million of working capital, $9 million of funded debt, $460 million in borrowing availability under our credit facility and $163 million in cash and cash equivalents as of March 31, 2026. We improved our already strong funded debt-to-EBITDA leverage ratio to 0.04x as of March 31, 2026.

We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment.

Thanks, Kelly, and good morning, everyone. The T&D segment delivered strong first quarter results, supported by a mix of small to midsized projects across our markets. Execution remains consistent with a focus on safety, quality and reliability. Bidding activity remained steady with increases in revenue and margins from the prior quarter and compared to our first quarter of last year. We continue to deepen relationships with long-standing customers while also pursuing opportunities with both new and existing customers, supported by a positive industry outlook. This quarter, Sturgeon was awarded an MSA in Arizona, spanning transmission, distribution and substations along with EPC program opportunities in the Northwest.

Great Southwestern Construction secured the construction of 2 greenfield substations in Texas. High Country Line Construction was selected for substation work in Arizona, along with the 345 kV transmission line project in South Carolina. L.E. Myers was selected for a 345 kV transmission job and several overhead distribution rebuild projects across Illinois and Iowa. Harlan Electric was awarded overhead transmission work in Pennsylvania. This activity is supported by a strong industry outlook. According to the S&P Global Horizons Top Trends 2026 report, grid infrastructure has become a central focus in 2026 as electrification and digital demand continue to strain existing systems and underinvestment in transmission and distribution modernization presents a potential bottleneck for reliability and capacity growth.

This dynamic reinforces the ongoing importance of our T&D project activity across our markets. We expect work to remain steady across the U.S. and Canada, spanning a range of sizes and complexities. Our ability to support this demand is driven by a continued focus on safety and ongoing investment in our workforce. We are proud of our accomplishments in the first quarter and look forward to advancing this momentum in the months ahead. I'll now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment.

Thanks, Brian, and good morning, everyone. Our C&I segment achieved strong first quarter results supported by the health of our core markets. Bidding activity remained consistent and backlog expanded further, reflecting both market demand and the depth of our customer relationships. By working closely with customers to understand their needs, plan projects effectively and execute safely and efficiently, we continue to create opportunities for long-term collaboration across projects of various sizes. These strong ongoing customer relationships remain central to our strategy, reinforcing our position as a trusted partner in the industry. Data center projects and water, wastewater projects are driving the strongest growth in today's construction market.

According to FMI's 2026 North American Engineering and Construction Outlook, data center construction starts are up nearly 100% year-over-year. While nonbuilding infrastructure such as power, water and wastewater also continues to grow, supported by committed funding and long-term investment needs. These projects require specialized expertise in grid modernization and complex installations creating multiyear backlogs and sustained demand. The result is a clear divergence within the construction market. Mission-critical electrical and infrastructure work is showing sustained resilient growth, while more traditional commercial building segments remain volatile.

Our teams across all subsidiaries continue to execute and pursue a diverse range of projects. We were awarded multiple data center projects in New Jersey, Arizona, California and Colorado, clean energy work in California and multiple water treatment plants in Colorado. These awards reflect the strong and growing demand for data centers and related electrical infrastructure projects across our key markets. We continue to earn significant project awards, reflecting our ongoing ability to deliver value across markets and sectors. In closing, we continue to see steady performance across our core markets, supported by our long-standing customer relationships that drive opportunities. Our employees remain central to this execution with a consistent focus on quality and safety across every project. Thank you, everyone, for your time today. I will now hand the call back to Rick for his closing remarks.

Thank you for those updates, Kelly, Brian and Don. Our first quarter 2026 performance reflects the effectiveness of our business strategies and the value of our long-term customer relationships across both segments. We believe we are well positioned for continued growth as investments in electrical infrastructure increases, supported by safe execution, disciplined bidding and close collaboration with our customers in a dynamic energy environment. Our record of integrity, teamwork and dependable project delivery enables us to pursue new opportunities and deepen long-term customer relationships.

I appreciate our employees for their contributions and our shareholders for their ongoing support. As we move through the rest of 2026, we look forward to building on the progress and continuing to strengthen our customer relationships across the business. Operator, we are now ready to open the call up for comments and questions.

[Operator Instructions] Our first question comes from Sangita Jain of KeyBanc Capital Markets.

First, can I ask about C&I margins, which were very, very strong in 1Q. If you could help us kind of understand what led to the strength and what we should expect going forward?

Yes. I said our backlog margins were similar to what they were in the past, but we had less risk in our contracts. And again, we've been focusing on carrying less risk in our contracts along with project execution and making sure that we continue to do as much prefab as we can. We do it in a controlled environment where we're taking that labor risk out of the field. So we continue to double down on that. And then we also had some projects that were nearing completion that had some potential upsides. With that being said, our margin profiles coming into this year, we were at 5% to 7.5%, and we're looking to increase that going forward for the rest of the year. We're looking kind of at that 6% to 9% margin profile and operating kind of in that mid-ish range on the C&I side.

That's helpful. And then can we talk overall guidance for the year because you also beat on -- well, I shouldn't say beat, but your revenue performance was also very strong in 1Q, and I think you said 10% in each segment for the year? And how should we think about T&D margins, which also came in towards the high end of your range?

Yes. I think previously, our margin profile on T&D was at 7% to 10.5%. And as we look at what's in our backlog and the quality of our backlog work, really upping that margin profile to that 8% to 11% with the goal of operating in that mid part of that range. So again, an increase on that one going forward for the rest of the year. Now quarter-to-quarter in either one of those, it can be a little lumpy depending on which projects are starting and finishing. But we see that kind of as our goal overall.

Along with that, I think if you look at our revenue growth, we came into the year saying we have that 10-ish percent growth. I think when we look at it across both segments as a whole, kind of that 12-ish percent growth this year is where I would forecast that out, knowing it can be lumpy quarter-to-quarter depending on how subcontractors come into our mix or materials delivered. So it can be a little lumpy between segments, but I'd look at that overall 12% growth on revenue.

Our next question comes from the line of Manish Somaiya of Cantor Fitzgerald.

Congrats team on a fantastic quarter. Rick, I wanted to just go back to the C&I business. I think you mentioned that the fixed price contracts are now about 86% of the mix. If you could just help us understand where that mix has been over the past year, over the past couple of years? And perhaps that's what's kind of driving some of the upside in C&I based on solid execution?

It's solid execution on that. I mean, as I said, a little less risk in our contracts, so more favorable terms and conditions, managing our projects very well. So that's really where it is. I'd say that mix has been similar over the past. So fixed cost is really a big component of how we do C&I work. I think we're pretty good at executing it as a whole and our customers trust us and continue to release that work. But again, with contracts that have a little less risk in them contractually than what historically they've had.

Okay. Helpful. And then, Kelly, if you could just talk about cash flow from operations, free cash flow. Clearly, Q1 was exceptionally strong. How should we think about it for the rest of the year?

Sure. Yes, we delivered another strong quarter from a cash flow perspective, and we were able to maintain our DSO in that kind of mid-50s range, which is significantly below our historical average. I think if we look out, we could see DSO rise to the low 60s, and that will really depend on the timing of new awards and the weighting between projects with more favorable billing structures versus more MSA-like work. As I noted in my comments on the call, MSA work in T&D represented 70% of our revenues, which was an uptick from what we've seen for the last few quarters. And we like that work. It's recurring, it's predictable, but we never get into an overbuild position. So that can represent a little bit of a headwind from a DSO perspective.

The other thing I would say about cash flows is I would just point out CapEx. We've been talking for a couple of quarters now, how we expect that to be trending more to about 3% of revenue on a full year basis. And that is above our historical average, really driven by the opportunities that we see on the T&D side of the business that is the more capital-intensive side of the business. And with first quarter being light from a CapEx perspective, which was really just due to timing, that does mean we'll see an increase as we look rest of the year.

Our next question comes from the line of Julien Dumoulin-Smith of Jefferies.

It's Brian Russo on for Julien. I was wondering if you could just elaborate a little bit more on what's driving the structural margins higher now in both segments? Is it just your confidence in your labor productivity and maybe better contract terms? Or is it more so a function of the electrician labor constraints that we read and see nearly every day in the end markets that you serve. Is that driving better bidding power for you and the E&Cs.

Yes. I would say that tight market right now on labor isn't really turning into margins today and what we're seeing. It still remains fairly competitive, and we feel that will potentially change in the future, and we continue to be selective on the larger projects we're taking on because I've said in the past, we don't want to be the first in on those projects, plenty of opportunities, great conversations going on with our clients. I think it really has more to do about what I talked about a little earlier in the call with better contract management, better terms and conditions and then better execution on our project side as far as the way we're laying out our projects, doing pre-fab, kitting our material, really being more efficient out there. So that's really where we've seen those margin increases. But again, hopefully, in the future, we can see more margins come in because of the tightness of the market with the labor.

Okay. And should we assume kind of gradual improvement in the segment margins as we move through the year, assuming lower margin projects are burned off and replaced in the backlog with the higher margin type profile? Is that the way to progression?

I think from quarter-to-quarter, it can be lumpy. We've given the new margin profiles that 6% to 9% operating margin for C&I and that 8% to 11% for T&D. And again, we plan on operating on a yearly basis, kind of in that mid-ish range of those. With that being said, it can always be lumpy quarter-to-quarter depending on weather, depending on project timing, which ones are finishing up, which ones are starting. So again, on a yearly basis, I'd look at that. But from a quarterly basis, it's always going to be lumpy.

Got it. And then just on the T&D side, can you just talk about some of the recently signed MSA awards and kind of the cadence of layering that into the backlog, the Xcel $500 million 5-year MSA and then I think it was a Kentucky new MSA highlighted last quarter. Neither of those are in backlog yet. Is that accurate?

The Kentucky one wouldn't be in complete backlog yet. I mean we're not burning it. So the whole amount is not in there. Again, we only count on the MSA side, 90 days of that work in our backlog. So the Xcel one is starting to have some activity, but a little bit slower start as we said it would. And we see that progressing and going forward and that spend really start continuing to ramp up this year slowly and into next year and take off from there. But good activity on those projects and great opportunities going forward.

Okay. And then just lastly, I think your 10-K referred to any large transmission or T&D project awards granted this year would not start construction or generate revenue until 2027 at the earliest. I mean is that kind of insinuating that you're still in discussions on some high-voltage transmission projects? And that -- is that what you were referring to? Or were you being more broad?

Yes, we are. Yes, that's -- we anticipate with our conversations going on that some of those large projects will start rolling in our backlog this year. So we see that still happening, ongoing great conversations with our clients, and we see that continuing into next year also. But we do feel we'll have some large projects come into our backlog in the future quarters.

Our next question comes from the line of Ati Modak from Goldman Sachs.

I guess some of your peers in the market are increasingly stepping into C&I data center exposure. I'm curious how you're thinking about your exposure on a relative basis. You've guided to a very strong year and obviously, the fundamentals look pretty strong. But does it create a little bit more competition or risk to project awards or pricing concerns? Any thoughts on that?

Not overly concerned. We've got long-term client relationships with a lot of the data center providers. We've been doing it since we're not just trying to get in the market now. We've been doing data centers since data centers first started. So again, we continue to expand that market, very good conversations with our clients. But along with that, we've always said we want to balance business. So we don't want 100% of our resources just doing data centers. But again, we haven't seen margin pressure from these new entrants. There's a lot of work going on. And again, it's how do we keep our relationships with our clients going forward and keeping those relationships strong.

Great. And then I guess you mentioned some of the transmission line awards along the larger projects. You mentioned 345 kV line awards. So I'm curious what the outlook for [ 500 kV ] and more specifically 765 kV lines looks like as you think about the rest of the decade. Like in terms of your conversations, how are you positioning for that?

I feel we're well positioned for that. We've done -- there hasn't been much 765 kV done in the country, but we performed that work in the past, having great conversations with our clients. It's a matter of project timing. I think the 765 kV for the most part, won't get started the project at the earliest, probably mid next year, rolling out. But again, very good conversations with our client. We've got long-term alliances with some of those clients that are building that work. And as I said, ongoing conversations. So hopefully, more to come in this year, next year. I think there's great activity in that market, though.

Out next call comes from Brian Brophy of Stifel.

Congrats on the nice quarter. Just a big picture question for me, Rick. How would you compare the environment you're seeing here today, maybe over the next couple of years to the demand environment we saw back during the CREZ project in 2013 and 2014? And what do you think the market [ implications ] of that?

Yes. I don't -- I really can't say what the market -- what the margin impact or implications are on that. What I can say is when you go back to the CREZ days and you look at that during that '13, '14, '15 time frame, it had an increased margin against not just on our work, but across all our peers at that point. But that was in one area. I mean that was [ 2,500 miles ] being built out in Texas. And now you have the build-out going across the United States over the next 10 years or so, over the next decade.

So I think it's just going to be amplified from what we saw there. Potentially, we're not seeing that yet today. But again, our conversations with clients aren't just about projects that are going to start in the next year or 2. We're having conversations with clients about projects going to start in '30, '31, '32 and beyond. And they're concerned about 2 things where are they going to -- how do they get the material lined up to have their project built on time and where -- how do they get their labor secured. So very good conversations with our clients.

Our next question comes from the line of Justin Hauke of Baird.

Great. First of all, thank you for giving those updated margin targets. That's interesting. I just wanted to clarify on those, the 6% to 9% for C&I and the 8% to 11% now for T&D, those are like kind of multiyear targets at this point, right? That's not -- you're not talking about just for this year because of some of the pull-through, but that's kind of the operating environment as it stands today, right?

Yes. We see that, as I said, on a yearly basis this year, we feel those are our margin profiles we can operate within. I think when you look beyond, I don't see the market getting any softer. So we haven't got done anything beyond that, but that's where I see it for this year. And again, I think there's great opportunities going in future years.

Yes. Okay. That's what I figured. And then I guess the second thing, I heard you talk a little bit more about the prefab capacity that you guys have as something that's been controlling the risk terms on your jobs. I feel like you mentioned that more than you have in the past. And Kelly, maybe it's a question on the CapEx as well. You've got a lot of net cash here, $152 million. Is that one of the areas where you're seeing or where you expect to kind of deploy some of that capital to the extent that there aren't acquisitions that you do and kind of expanding some of that prefab capacity?

Sure. I can start on that, and then Rick or John might give you a little bit more color. But absolutely, that is an area where we continue to invest. I mean we've been doing prefab for a long time, but I think our teams are continuing to push the limits on how we can perform more work in a controlled environment in a way that really helps us to be effective at the job site, especially in congested areas and can help support our more consistent execution. I would still say that the vast majority of our capital expenditures go to the T&D side of the business, but it is part of our growth in CapEx overall.

Yes. And then you talked a little bit about our strong balance sheet and what we're doing with that. I think we'll continue to invest in the prefab, but that's not going to take that all up. So I think we continue to look for acquisitions. And I'll say right now, there's some great activity in the market with some, I would say, some high-quality companies that are out there. So we talked about kind of the 12-ish percent growth on revenue overall, and that's on the organic side. If we capture the right, I guess, acquisition and it came into our portfolio, that would be above that. So again, we're looking to potentially do acquisitions with that money or do stock buybacks either way.

Yes. And I would just kind of reiterate Rick's point in a very strong financial position with almost no debt at the end of the quarter and [ $160 million plus ] in cash on the balance sheet. So in a good position to support that strong organic growth that we're seeing as well as pursue the right acquisitions.

At this time, I'm showing no further questions in the queue, and I would now like to turn the call back over to Rick Swartz for additional closing remarks.

To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I do not have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe.

Thank you very much. This concludes today's conference call. We thank you for your participation, and you may now disconnect.

Good morning, everyone, and welcome to the MYR Group Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now turn -- like to turn the call over to Jennifer Harper, Vice President of Investor Relations and Treasurer, for introductory remarks.

Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's fourth quarter and full year results for 2025, which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment.

A copy of yesterday's press release announcing our fourth quarter and full year 2025 results, can be found on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for 7 days following the call.

Please note today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K.

Certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release.

With that, let me turn the call over to Rick Swartz.

Thanks, Jennifer. Good morning, everyone. Welcome to our fourth quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the fourth quarter and full year results, and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions.

We closed 2025 with strong financial performance in the fourth quarter and full year revenues of $3.7 billion. A steady backlog of $2.8 billion at the end of 2025 reflects a healthy bidding environment and the continued investment in infrastructure to meet the growing electrification needs across the U.S. and Canada.

Our work this year underscores the stability and expansion of our clients' relationships as well as our measured pursuit of new opportunities. We continue to see strong bidding activity across our business segments, and are closely monitoring these opportunities and positioning ourselves to strategically pursue and execute projects with operational excellence.

As always, our success is grounded in an unwavering commitment to our customers through safe and reliable project execution. Our teams are dedicated to helping our customers advance their business objectives, and I'm grateful for their continued hard work.

Now Kelly will provide details on our fourth quarter and full year 2025 financial results.

Thank you, Rick, and good morning, everyone. For the year ended December 31, 2025, we reached record annual revenues of $3.7 billion. Full year net income of $118 million and EBITDA of $233 million. Our fourth quarter 2025 revenues were $974 million, which represents an increase of $144 million or 17% compared to the same period last year.

Our fourth quarter T&D revenues were $531 million, an increase of 18% compared to the same period last year. The breakdown of T&D revenues was $330 million for transmission and $201 million for distribution with increases of $64 million in revenue on transmission projects, and $17 million in revenue on distribution projects from the prior year. Work performed under master service agreements continue to represent approximately 60% of our T&D revenues.

C&I revenues were $443 million, a record high for our C&I segment and an increase of 17% compared to the same period last year. C&I segment revenues increased primarily due to an increase in revenue on fixed price contracts.

Our gross margin was 11.4% for the fourth quarter of 2025 compared to 10.4% for the same period last year. The increase in gross margin was primarily due to the fourth quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project. In the fourth quarter of 2025, gross margin was also positively impacted by better-than-anticipated productivity, favorable change orders and a favorable job close out. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects.

T&D operating income margin was 7.4% for the fourth quarter of 2025 compared to 6.7% for the same period last year. The increase was primarily related to the fourth quarter of 2024 being negatively impacted by certain clean energy projects. In the fourth quarter of 2025, T&D operating income margin was also positively impacted by a favorable change order and better-than-anticipated productivity. These operating income margin increases were partially offset by an increase in costs associated with project inefficiencies on certain projects.

C&I operating income margin was 6.6% for the fourth quarter of 2025 compared to 3.9% for the same period last year. The increase was primarily related to a larger portion of our C&I projects progressing at higher contractual margins, some of which are nearing completion. In the fourth quarter of 2025, a C&I operating income margin was also positively impacted by better-than-anticipated productivity, a favorable change order and a favorable job close out. These operating income margin increases were partially offset by an increase in cost associated with inefficiencies on certain projects.

Fourth quarter 2025 SG&A expenses were $65 million, an increase of $8 million compared to the same period last year, primarily due to increases in employee incentive compensation costs and employee-related expenses to support future growth. Fourth quarter 2025 interest expense was $1 million, a decrease of $1 million compared to the same period last year. The decrease was attributable to lower interest rates and lower average outstanding debt balances during the fourth quarter of 2025 as compared to the same period last year.

Our fourth quarter effective tax rate was 21.2% compared to 40.9% for the same period last year. The decrease was primarily due to changes in state tax rates used to measure our state deferred income taxes and lower permanent different items.

Fourth quarter 2025 net income was a record $37 million compared to $16 million for the same period last year. Net income per diluted share of $2.33 compared to $0.99 for the same period last year. Fourth quarter 2025 EBITDA was a record $64 million compared to $45 million for the same period last year.

Total backlog as of December 31, 2025, was $2.8 billion, a 9.6% increase from the prior year. Total backlog as of December 31, 2025, consisted of $1.0 billion for our T&D segment and $1.8 billion for our C&I segment. As a reminder, our backlog includes projected revenue for only a 3-month period for many of our unit price, time and equipment, time and materials and cost plus contracts, which are generally awarded as part of a master service agreement. However, our master service agreements typically have a much longer duration.

Fourth quarter 2025 operating cash flow was $115 million compared to operating cash flow of $21 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions, higher net income and lower contingent compensation payments associated with the prior acquisition.

Fourth quarter 2025 free cash flow was $85 million compared to free cash flow of $9 million for the same period last year, reflecting the increase in operating cash flow, partially offset by higher capital expenditures to support future growth.

Moving to liquidity. We had approximately $265 million of working capital, $59 million of funded debt, $408 million in borrowing availability under our credit facility and $150 million in cash and cash equivalents as of December 31, 2025. We have continued to maintain a strong funded debt-to-EBITDA leverage ratio of 0.25x leverage as of December 31, 2025. We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares.

I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment.

Thanks, Kelly, and good morning, everyone. The T&D segment delivered steady fourth quarter and full year results, supported by a healthy mix of smaller to midsized jobs and ongoing master service agreements. Our performance reflects the continued application of our core business principles around safety, quality and reliable execution. Bidding activity remains healthy as backlog, revenue, margins, and income increased from 2024 to 2025. We continue to expand relationships with long-term clients and pursue opportunities with new and existing clients, building on the positive industry outlook.

This quarter, Great Southwestern Construction executed a new 7-year master service agreement in Kentucky for transmission line construction and maintenance projects. L.E. Myers was awarded a transmission project in Virginia as well as transmission work in Iowa. In addition, Sturgeon Electric won 2 transmission projects in Oregon and transmission work in Arizona. Both Sturgeon Electric and high-country line construction were awarded station and line work in Washington, California and Arizona. [ Hearne ] Electric was selected to perform multiple jobs throughout New Jersey and Pennsylvania.

According to electric -- Edison Electric Institute industry data, investor-owned electric companies are projected to invest approximately $178 billion in transmission construction between 2025 and 2028. This level of planned investment reflects an ongoing need for grid modernization and the increased capacity to accommodate low growth. As utilities invest in these upgrades, we believe we are well positioned to benefit from expanding backlogs and long-duration project pipelines.

With our experience, we continue to position ourselves to capture future 765 kV projects along with 500 kV and 345 kV transmission and substation projects over the next 10 years. MYR Group subsidiaries are prepared to pursue and perform these opportunities across the U.S. and Canada.

In summary, we are proud of our accomplishments in the fourth quarter and all of 2025. We will continue to actively bid and execute projects of very capacity size and complexity across the U.S. and Canada, while maintaining our consistent focus on safety and the development of our dedicated workforce, who ultimately enable us to take on the important work ahead.

I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment.

Thanks, Brian, and good morning, everyone. Our C&I segment achieved solid results in the fourth quarter, thanks to the health of our core markets. We continue to see steady bidding activity and increases in backlog as we strategically monitor and pursue new opportunities in collaboration with our valued customers. We believe our ability to safely and skillfully execute projects of various sizes continues to create many long-term opportunities in our core markets.

Data centers continue to be 1 of the most active areas of investment nationwide, fueled by the accelerating need for cloud, AI and digital infrastructure. Industry researchers expect this demand to remain robust through 2026, with utilities and developers working to expand power capacity to support this surge. Infrastructure-related construction is also benefiting from ongoing commitments in transportation, clean energy, wastewater and fresh water treatment facilities. Our ever-expanding network of clients continues to engage us early on upcoming opportunities in these segments.

Our teams across all subsidiaries continue to execute and pursue an array of work. During this period, we were awarded multiple data center projects in Colorado, Arizona, California and New Jersey. In addition to data centers, our subsidiaries were awarded projects in clean energy, manufacturing and industrial projects in California and Arizona. These accomplishments highlight our ongoing momentum and solid market presence throughout the U.S. and Canada.

In conclusion, we believe our core markets remain healthy and the depth of our customer relationships continues to create new opportunities. This success is driven by our dedicated employees whose commitment to quality and safety is at the heart of everything we do.

Thank you, everyone, for your time today. I will now hand the call back to Rick for his closing remarks.

Thank you for those updates, Kelly, Brian and Don. We are proud of our fourth quarter and full year 2025 performance, which demonstrated the strength of our sound business strategies and our ability to maintain and expand long-term customer relationships across both segments.

We believe our core markets are well positioned for continued growth as investment in electrical infrastructure accelerates. We remain committed to safely executing projects, strategically bidding opportunities and supporting our customers in an ever-changing energy environment. We believe our proven track record of collaboration, integrity and dependable project delivery puts us in a strong position for opportunities ahead. We are excited to play a meaningful role in strengthening the electrical infrastructure that keeps our communities running.

I would like to thank our employees for their invaluable contributions and our shareholders for your continued support of MYR Group. I look forward to the year ahead. Operator, we are now ready to open the call up for your comments and questions.

[Operator Instructions] Our first question comes from Sangita Jain of KeyBanc.

First, Rick, can I ask you for your thoughts on the [ large ] transmission market out there. I know you were optimistic on late 2026 potential bookings for 2027 revenue. Just wondering if you're seeing the same type of trend right now?

We are. Nothing's changed on that side. I mean it takes a while to bring these projects to market, and we've known that. So we're in good conversations with our clients. And we believe we'll capture some of that work that will start to burn in '27. .

Got it. And then, Kelly, maybe for you, cash flow has been really, really strong this year. So I'm trying to figure out if some of that was catch-up from the pending payments from last year's solar projects? Or if there's any meaningful advances in new projects that we should be aware of?

Yes. Thank you for that question. Yes, a very strong year for cash flow, and particularly in the fourth quarter. A lot of that is driven by our lower DSOs. We're now -- we've been in the mid-50s versus the historical average of around 70. And that's driven by a combination of things. We saw a 16-day improvement if you look year-over-year with 11 days of that in the third quarter. Part of it is getting beyond those -- the problem projects that we have in 2024. But I'd say a larger factor is just that we have a very strong net overbuild position, really driven by some of the large fixed price work that we have on the C&I side, in particular.

So I think that does represent potentially a little bit of a headwind as we look forward. And part of that will depend on the mix of work that we have as far as awards this year and how much of it is some of that mid- to large-sized fixed price work that can have have a more favorable billing profile versus more MSA weighted, -- which is great work to have but doesn't have quite as positive about the cash flow profile.

Our next question comes from Julien Dumoulin-Smith of Jefferies.

It's Brian Russo on for Julien. Could you just comment more on the strength in the T&D backlog at $1 billion it was up about 20% year-over-year, quite a bit of improvement from the year-over-year progression that we've been seeing in the last few quarters. Just curious are any of the new projects, in particular, that Kentucky MSA agreement included in the December backlog? And then also, is there any [ XL ] $500 million 5-year MSA in that December backlog as well?

As far as the backlog goes, I'd say on the XL stuff, very little of that is in that backlog as of now. I mean we said it would be a slow start to the year and then kind of progressing throughout the year in increases. So again, not too much of that in our backlog right now because we only count 90 days of that MSA work, as Kelly highlighted in her script within our backlog. When we look at the Kentucky side, that work really will start later this year. So not much of that in there.

So again, we've seen great activity in the markets out there, and we're being selective of what we take on and really focused on long-term relationships with clients. 90% our business is [indiscernible]. We're always looking for those one-off projects as additive. But again, how do we grow with our existing clients, and that's where our focus is at.

Okay. Great. And just a follow-on there in T&D. We saw a very large Texas-based wires company, announced a rather robust 5-year capital plan update. And can you just remind us what your positioning is currently in Texas and maybe what your level of activity has been kind of in the past, up cycles in capital spend that we've seen.

Yes. Texas has been a good market for us for the last decade. I mean it's been a good market. We continue to see that grow. We're excited about some of the opportunities that are out there with some of the 765 work, but even some of the 500 and 345 where -- we do that every day. So I think the 765 is upcoming. We're excited about our positioning on that. But again, we're seeing good activity, not just in Texas but across the nation, lots of good opportunities out there.

Okay. And the strong C&I margins in the fourth quarter, plus 6%. How does that fit into the 5% to 7.5% operating margin target step up you're guiding towards this year? And then just kind of tie that into the backlog. Are there still projects still to be completed that would be in that old kind of 4% to 6% target? Or are those really nearly [indiscernible] in the new 5% to 7.5% range.

Well, I would say our forecast when we look at it for the year, is operating within the mid part of both our T&D and C&I margin profile. So in that midpoint of that, we see good opportunities out there. We continue to see good activity in the market. So with that being said, we haven't changed from what we said last quarter on both from a revenue standpoint, we look at that 10-ish percent growth in both segments and then as a company overall. And then we look at operating in those -- that mid part of that range.

So good opportunities there, and I think we'll continue to do everything we can to increase our margins from our standpoint as what -- as far as what we do from a refab standpoint, from an efficiency standpoint, from utilizing our equipment better, and we'll continue to try to maximize on that side.

Our next question comes from Justin Hauke of Baird.

Great. So I had 2 quick ones here. The first one, I was just going to ask about in your backlog, you break out what you expect to book over 12 months and what you expect to look beyond 12 months? And it looks like almost all the backlog increase this quarter was kind of the longer duration backlog. And so I guess I just wanted to understand the components of that. Is that some of the data center work from C&I that you're talking about? And so like you're -- the duration of your projects has just extended because the size is getting bigger? Or maybe just kind of how to think about that.

On our larger project side, I would say those go out a little way, so they go out. Some of those data centers take 18 months to construct or so. 18 to 24 months when you look at the larger projects and that goes for transportation work. Some of that goes beyond that. There are 4- or 5-year projects. But again, good activity on the small and midsize that's burning quickly, but the larger projects, it does take a little longer to construct those projects.

And then I guess my second question, not to be myopic, I guess, but obviously, there's been a lot of winter weather all over. 1Q is not typically your productive quarter versus the summer. But just curious if there's anything you would be thinking about or you want to communicate in terms of potential weather impacts in the first quarter that would be unusual that have occurred thus far? Or maybe it's not, maybe it's just in line with kind of normal seasonality. .

I think for us, we always bid our work on normal seasonality. I think there's always going to be some storms that take place if it's I don't think [indiscernible] always affects us in the way that maybe really wet weather where we can't [indiscernible] the right way. That seems to affect us a little bit more. But again, we're always monitoring the weather, and it really has to do where those -- what projects are affected. You can see in any given area. I mean, -- you can be 50 miles away, and it really affects 1 area, and it may not affect the other.

So again, the weather hasn't affected our business across I guess, the country everywhere equally. So I would say we'll -- we continue to look at that, whether is the biggest impact we can have. But again, it hasn't affected us across the country as a whole, just in some select areas.

And with that, sometimes we have some offset of some storm and other type work that we're doing for repair. But again, our base business is that day-to-day and just construction projects. We like storm work. But again, we're not dependent on it.

Yes. And I would just add a little bit broader context, Justin, and looking at first quarter revenues. We are expecting that we will trend in the first quarter, a little bit above that full year rate. of about 10% growth, and that's really driven by first quarter last year had a little bit slower start. So it is a bit of an easier comp compared to the rest of the year. So just as you're thinking about modeling that, I would expect a little stronger revenue growth in the first quarter.

Our next question comes from [ Caitlin Donahue ] of Goldman Sachs.

Just focusing on the data centers, you outlined a few awards this past quarter. How are you seeing that project pipeline shape up for 2026, 2027 as you're speaking with your customers?

The conversations are strong -- on that side, it's not just '27 and '28. I mean, we're having conversations with customers that go well beyond that time frame. So again, I think our awards are always lumpy just on how long it takes the projects to get finalized. But again, great conversations going forward. So good activity in that market. But again, not completely dependent on that market by itself. We like the diversification we have with transportation, health care, some of that other work we do. So good opportunities on that side also.

That's helpful. And then just on capital allocation strategy for 2026. We've seen CapEx step up a little bit. You've done buybacks in the past. How are you thinking through MYR Group's strategy for the year?

Yes. We are seeing great opportunities to continue to grow our business organically and through acquisitions. And so I think as we talked about before, we'll continue to prioritize our capital allocation to growth. We do use share repurchases opportunistically. And I think the last 2 years are a great example of that with deploying over $150 million at an average price of $117. So -- but I think at this point, really focused on the growth opportunities that we see both organically and from acquisitions.

Our next question comes from Manish Somaiya from Cantor Fitzgerald. Our next question comes from Brian Brophy of Stifel.

Just want to kind of continue the conversation on the large transmission opportunity and some potential awards you may see there -- would those -- assuming you see something in the back half of '26, as you kind of alluded to, would those projects be additive to growth in 2027? Or would you have to pull resources from somewhere else to meet some of that demand?

I don't see us having to pull any resources. I mean we've done a good job of retaining our employees, recruiting and developing people. So to us, that's additive, and it goes into '27 and beyond. So it's not just the work that's going to start in '27. We see this cycle being much longer than that. So I think it's a decade worth of growth out there, and we're going to capitalize on it where we can, and there's some great opportunities we feel coming our way.

Great. Yes, that's good to hear. And then just as a follow-up to that, how do you think about some of the large transmission wins potentially impacting the profile of the business -- margin profile of the business at all, maybe not from an individual project standpoint, but capacity utilization overall -- should we think about that being a margin driver?

Yes. I think it can -- I think it can show, I guess, marginal margin increases on that side. Again, it's it's how can we better utilize our equipment, how can we take labor out of the field and do more things on the prefab or the kitting side. So we're always looking at that side and being a solution provider for our customers. So I think along with that, we're always looking to enhance our margins. But again, our relationships with our clients are long term. So it's not always -- on this side, it's -- they're a regulated business. We'll continue to, I guess, push margins where we can but more from an efficiency standpoint than what I'd call ever reaching out and trying to to gouge our customers or anything like that. We really build on long term. Again, over 90% of our business is returned clientele, and we always want to make sure we maintain those relationships. .

Our next question comes from Manish Somaiya from Cantor Fitzgerald.

Can you hear me? .

Yes.

Okay. Wonderful. Rick, I have the first question for you. In the press release, we talked about the bid environment being steady. Maybe if you can just give us a sense as to what you're seeing in terms of pricing by geography, by end market? And what are you walking away from business that may not be attractively priced. So maybe if you can just give us a sense of what's going on in the marketplace.

I think for us, our -- I would say we've got a select client list. We're not trying to be everything to everyone if that makes sense. So on the -- let's say, C&I as an example, if it's a customer we've done for a long time with or it's somebody that's a continued relationship or we can build a continued relationship, we really focus on that side. not the one-off ones. We're not focused on bidding a project that has 20 bidders on it. We like the customers that have select bid list or we have teaming arrangements with. So with that side, good activity, good opportunities there.

I would say market by market, when you're talking geographies across the U.S. Some are a little tighter than others still, but we see those areas that are maybe not as busy as others getting busy in the future. So we're always monitoring that. We've got 65-plus offices across the U.S. and some in Canada. And with that, we're always using that local expertise to help us pick what work we want to go after, which ones really fit us and which ones don't. So along the way, we always evaluate weight those opportunities. And again, we're seeing good activity in all our marketplaces.

And I know we talked a bit about the data centers. Maybe Don can shed some more light, are the customers on the data center side, hyperscalers, GCs, developers, maybe if you can just give us a sense.

And then as it pertains to backlog is -- it seems, obviously, everybody is doing more data center work, but would you say that the backlog on the C&I side is diversified? Or is it kind of more concentrated?

Well, I'll answer that question first. It is -- our backlog is very diversified. Yes, you're absolutely correct. There is a lot of activity in the market, and we're having conversations with end users the hyperscalers, general contractors, developers, it's ongoing conversations on a very regular basis. If that answers your question. .

And in terms of the customers on the data center side, would it be hyperscalers or general contractors, developers?

Again, as I had stated, it's all of the above. We are having conversations with hyperscalers on a daily, weekly basis, same with general contractors and end users owners.

Okay. And then just lastly, Rick, from a high level, obviously, you guys don't give guidance, but what would be the puts and takes for '26 as you kind of look at your internal benchmarks and targets. How should we think about the risks and opportunities?

Let me go back to Don's question real quick, the 1 you asked for him. I would say the other side on data centers is it's not just the new construction. I think that's really what has the headline, but a lot of it is the retrofits in existing buildings to existing data centers that have been there. I mean they're living buildings. They're always changing the technology. So as that happens, that repeat work for us is very important. And once we're in a data center, we tend to stay there for a long time. So it's not just the new builds. It's also that retrofit work. That's the only thing I would add to that.

When we look at kind of the puts and takes going forward, I would say the biggest impact we can always have on the T&D side is weather. Other than that, the activity in the market other than something that would -- we don't see right now from any of our conversations with our clients would be any kind of slowing in the market. But -- we don't see that, nor do we anticipate it. So it's really the weather on our T&D is the biggest impact. And then the timing of these projects, how quick they roll out would be the other kind of risk out there because it's not if these projects are going to be built, it's when. So sometimes you can see a 2- to 4-month push on projects. But it's not like they're going to be pushed out years. And that's kind of how we see it now.

And then the other side of the T&D side that I'd probably highlight is permitting. Sometimes that can push a project out a little bit. But again, it's not if the projects are going to be built, it's when. So again, good activity on both sides, both T&D and C&I.

Our next question comes from [ Tim Moore of Clear Street. ]

Great job with your backlog growth and book-to-bill. My equipment utilization tailwind for the T&D side was already asked. So I just have 2 questions remaining. Maybe, Rick, walk us through or even Kelly, elaborate on kind of the trade-off in your selectivity for staffing for maybe like an 18-month data center versus cross-selling more medium-sized utility project. I know they're separate segments, but I'm just kind of wondering if you could talk a bit more to like the regional staffing playing in cross-selling opportunity. And if it is a new customer, not more than 90% incumbents?

Yes, I'll start there. Like what you just said, I mean 90% of our business is return clientele. We're always focused on that. We're always trying to cost -- cross-sell. There's lots of opportunities on that side, especially on data centers, where the substation in that side might be on the on -- within the owner side of it rather than the utility side. So either way, we're able to construct that portion of the project.

I would say we're always looking at those opportunities. We're always going to focus on our long-term clients first and then we'll take the one-off ones later. If they're just going to build 1 project and out, that's probably not our focus. But if they're going to build multiple projects. That's where we're focusing. And I think we've done a very good job on, as an example, some of our data centers where there are facilities that are -- they're built one building, then they move into the next as they build out their campus, it's a great place for us. There are some of them where we might be on -- as an example, we're on building 3 of maybe a planned 12 buildings. So again, this goes out for many years forward, and that's really where our focus is. Kelly, do you want to add?

I think you've covered that well, Rick. Thanks.

Great. That was really helpful. The only other question I had was, given your liquidity and the cash and the bolt-on acquisition opportunity, can you maybe just talk high level about the philosophy as your priority within T&D more of the electrical contractors. And then on the C&I side, is it to build geographic scale like in the Southeast. Just kind of curious if you can add any color.

I was just going to say on the T&D side, definitely focused on electrical contractors. We do have really good geographic presence across the U.S. and up into Canada and Ontario on the T&D side. So we also look at opportunities that would be ancillary services like right of way or foundation or environmental work. Those can be of interest to us as well. On the C&I side, I would say really 2 primary screens from a strategic perspective. First would be the geographic fit because we don't have quite as consistent of coverage as we do on the T&D side. And then really taking a close look at the end markets they serve. So does that acquisition opportunity have a similar profile as far as exposed to those higher growth tend to be less cyclical and more complex core markets like we are.

So those would be the main things we're looking at, really still focused on tuck-in acquisitions in the places we know and the risk profiles that we understand as well.

Our next question comes from Jon Braatz of KCCA.

Rick, your markets are very strong, and I think you -- and you've indicated that the top line, you could see 7% to 10% type of revenue growth. But should the opportunities present themselves as they might, do you have the ability or the capacity of the labor force and infrastructure in place to maybe accelerate that growth as we go forward?

Yes. I mean we've got that opportunity. I think if you look back in our history, we've grown more than that in certain years, and we've -- other years, we've tamed ] that back a little bit. Again, it's timing of the awards, how they happen. I see good opportunities out there, but where we're really focused is controlled growth also. I think anybody could really add revenue at this point, but could they do it profitably. And for us, it's maintaining that right amount of growth. So we can be profitable. We're definitely capable of doing more than that. But we have said for this year, we anticipate growing in that 10%-ish range. So a little more than the 7%. But again, making sure we have controlled risk and then we take on the right opportunities.

Sure. Given the strength of your market and the number of projects out there and so on, I sense that you can be more selective and maybe the risk profile of the work that you're doing has improved. Would that be a fair statement?

Sure. We're always focused on that as we select our projects is how do we limit our risk, how do we partner with our customers. How do we make sure that we have those kind of conversations. But again, derisking our projects is definitely important to us, and that's 1 of the evaluations we go through as we look at projects is I would say we have less risk in our backlog today than we had in our backlog a year ago or 5 years ago.

I am showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for additional closing remarks.

To conclude on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe.

Thank you. This concludes today's conference call. We thank you for your participation, and you may now disconnect.

Good morning, everyone, and welcome to the MYR Group Third Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Today's conference is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Jennifer Harper, MYR Group's Vice President of Investor Relations and Treasurer. Please go ahead, Jennifer.

Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's third quarter results for 2025, which were reported yesterday.

Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment.

A copy of yesterday's press release is available on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for 7 days following the call.

Please note today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance.

For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K and quarterly report on Form 10-Q and in yesterday's press release. Certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release.

With that, let me turn the call over to Rick Swartz.

Thanks, Jennifer. Good morning, everyone. Welcome to our third quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the third quarter results and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of the [indiscernible] Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions.

The strength of our long-term customer relationships and a strong market position resulted in a solid third quarter performance. Our teams continue to execute projects with operational excellence and expand existing client relationships through master service and alliance agreements across our districts. Bidding activity remains healthy as we strategically pursue and capture new opportunities that position us for potential future growth.

The Edison Electrical Institute's 2024 financial review released earlier this month, projects that U.S. investor-owned utilities will exceed $1.1 trillion in combined capital investments for 2025 through 2029. More than $123 billion of this is forecast to be spent on transmission in the first 3 years from 2025 to 2027. The report also found that electric utilities are on pace to spend nearly $208 billion on grid upgrades and expansions in 2025, the highest amount ever.

Growing demand for electrification, a focus on grid monetization and hardening and technology advancements continue to be strong market drivers and could present opportunities for consistent success across our business. According to FMI's 2025 North American engineering and construction outlook released in July, chosen key markets for our C&I segment are forecasted for healthy growth through 2025 and into 2026, including data centers, transportation, health care, education and wastewater construction.

By expanding existing relationships with our preferred customers, and strategically bidding and expanding work in our chosen markets, we continue to experience a steady backlog of work and could see potential growth moving forward. As always, our greatest strength lies within our talented and dedicated employees. We continue to develop and empower our teams to reach their highest potential as we grow our company. Our team members strive to provide excellence in safety and project delivery, helping our customers achieve their business goals.

Now Kelly will provide details on our third quarter 2025 financial results.

Thank you, Rick, and good morning, everyone. Our third quarter 2025 revenues were $950 million, which represents an increase of $62 million or 7% compared to the same period last year. Our third quarter T&D revenues were $503 million, an increase of 4% compared to the same period last year. The breakdown of T&D revenues was $293 million for transmission and $210 million for distribution with increases in revenues from both transmission and distribution projects from the prior year.

Work performed under master service agreements continue to represent approximately 60% of our T&D revenue. C&I revenues were $447 million, an increase of 10% compared to the same period last year. The C&I segment revenues increased primarily due to an increase in revenue on fixed price contracts. Our gross margin was 11.8% for the third quarter of 2025 compared to 8.7% for the same period last year. The increase in gross margin was primarily due to the third quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project.

In the third quarter of 2025, gross margin was also positively impacted by better-than-anticipated productivity, favorable change orders and favorable job closeouts. These margin increases were partially offset by an increase in costs associated with project inefficiencies, unfavorable change orders and inclement weather.

T&D operating income margin was 8.2% for the third quarter of 2025 compared to 3.6% for the same period last year. The increase was primarily due to the third quarter of 2024, being negatively impacted by certain clean energy projects as well as favorable change orders and better-than-anticipated productivity on certain projects during the third quarter of 2025. These increases were partially offset by higher costs related to project inefficiencies, unfavorable change orders and inclement weather.

C&I operating income margin was 6.4% for the third quarter of 2025 compared to 5.0% for the same period last year. The increase was primarily due to the third quarter of 2024, being negatively impacted by a single project as well as contingent compensation expense related to a prior acquisition that did not recur in the third quarter of 2025.

Operating income margin for the third quarter of 2025 was also positively impacted by better-than-anticipated productivity and favorable job closeouts. These positive drivers were partially offset by unfavorable change orders and higher costs related to project inefficiencies.

Third quarter 2025 SG&A expenses were $66 million, an increase of approximately $8 million compared to the same period last year. The increase 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 contingent compensation expense related to our prior acquisitions recognized during the third quarter of 2024 that did not recur.

Our third quarter effective tax rate was 28.3% compared to 42.5% for the same period last year. The decrease was primarily due to lower permanent difference items, mostly associated with deductibility limits of contingent compensation experienced in the prior year as well as lower U.S. taxes on Canadian income.

Third quarter 2025 net income was a record $32 million compared to net income of $11 million for the same period last year. Net income per diluted share of $2.05 increased 215% compared to $0.65 for the same period last year.

Third quarter 2025 EBITDA was a record $63 million compared to $37 million for the same period last year. Total backlog as of September 30, 2025, was $2.66 billion, 2.5% higher than a year ago. Total backlog as of September 30, 2025, consisted of $929 million for our T&D segment and $1.73 billion for our C&I segment.

Third quarter 2025 operating cash flow was a record $96 million compared to operating cash flow of $36 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions and higher net income.

Third quarter 2025 free cash flow was $65 million compared to free cash flow of $18 million for the same period last year, reflecting the increase in operating cash flow, partially offset by higher capital expenditures to support future growth.

Moving to liquidity and our balance sheet. We had approximately $267 million of working capital, $72 million of funded debt and $400 million in borrowing availability under our credit facility as of September 30, 2025. Funded debt-to-EBITDA leverage remained strong at 0.34x as of September 30, 2025.

We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares.

I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment.

Thanks, Kelly, and good morning, everyone. The continued focus on strengthening and expanding existing relationships with key customers, along with executing our work to their expectations, led to solid third quarter results in our T&D segment. We continue to see steady bidding activity and are pleased with our strong backlog consisting of master service agreements and a healthy mix of various sized projects.

This quarter, L.E. Myers was awarded a midsized transmission line rebuild project in North Carolina as well as substation and transmission work in Iowa. In addition, high country line construction on multiple transmission line projects in the Midwest while E.S. Boulos and Harlan Electric were awarded substation and transmission work, respectively, throughout the Northeast. Great Southwestern Construction received transmission line and substation project awards in Texas with Sturgeon Electric winning work in Arizona, Oregon and Alaska.

As Rick mentioned, we are seeing significant investments in electrical infrastructure throughout North America. Utilities continue to invest in upgrading and expanding their electric infrastructure driven by several factors, including aging infrastructure, concern over resiliency and reliability and the need to accommodate larger [indiscernible].

After roughly 2 decades of flat electricity demand and is now growing rapidly and driving the need for electric infrastructure investments. According to Power Insights 2025 North American transmission market forecast released in September, report forecast 9.1% compound annual growth rate and transmission spending from 2024 to 2029.

In summary, we believe these encouraging forecasts could generate growth opportunities for our business as we continue a firm dedication to our customers and a strict adherence to our operating principles. I'd like to thank all of our talented employees for their commitment and effort in making our success possible.

I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment.

Thanks, Brian, and good morning, everyone. Our C&I segment achieved solid results in the third quarter, thanks to the strength of our chosen core markets. We continue to strategically monitor and pursue new opportunities in a healthy bidding environment while executing projects of various sizes in close collaboration with our valued customers.

Recent market outlook suggest positive indicators for the segment. The Dodge Momentum Index increased 3.4% in September and commercial planning expanded 4.7% in the same period. Year-to-date, the DMI is up 33% from the average reading over the same period in 2024.

The unprecedented growth in spending on data centers is expected to continue at an elevated pace. According to the American Institute of Architects, the AIA July 2025 consensus construction forecast reported that after increasing more than 50% in 2024, data center spending is expected to grow by an additional 20% in 2026.

These encouraging forecasts could generate growth for our business and we continue to leverage our expertise to place us in a leading position to win opportunities in these markets while bolstering our strategy to remain diversified across our chosen core markets.

In the third quarter, our teams across all subsidiaries earned multiple awards and secured new work in each of our core markets. This includes wins in data centers, health care, clean energy, warehousing, higher education and transportation. These achievements reflect our continued momentum and strong market presence across the U.S. and Canada.

To conclude, our chosen core markets are healthy and the strength of our customer relationships continue to generate additional opportunities. This is thanks to our committed employees and their daily dedication to executing projects with a safety-first mindset.

Thanks, everyone, for your time today. I will now turn the call back to Rick, who will provide us with some closing comments.

Thank you for those updates, Kelly, Brian and Don. Due to the strength of our core markets and our ability to bolster and stroaden our customer relationships to create growth opportunities. We are proud of our third quarter performance. Our focus remains on safely executing projects, strategically bidding opportunities and meeting the needs of our customers as they adapt to dynamic market conditions and a shifting energy landscape.

This is supported by our continued investment and development of our teams across the company as our people enable us to maintain our status as an industry leader by the work they perform every day. Our commitment to our employees and customers is the foundation we built from to remain a strong and agile partner for customers. I would like to extend a thank you to our employees for their invaluable contributions and to our shareholders for your continued support of MYR Group. I look forward to connecting with you in the future quarters.

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

[Operator Instructions] And our first question comes from Sangita Jain of KeyBanc.

So first, if I can ask on C&I margins. There were considerably stronger than they have been in the recent quarters, even though you had a negative change order. So can you talk a little bit about that and how we should think about those C&I margins going forward?

Yes, I would say we did have a slight negative there. But overall, we had some positive adjustments too. So our margins were a little higher than what we projected coming into this year. I think as we look to next year, I would say our margin profile is probably -- we've always said it's going to be in that 4% to 6% in the past. And I think as we look into next year, it will kind of go to the mid-range of kind of that 5% to 7.5%. So we're upping that a little bit as we forecast out next year with probably 10-ish percent growth, both in our C&I and T&D areas.

So 10% core growth -- sorry, go ahead, Kelly.

I was just going to say, to elaborate just looking at full year for C&I, given that we have been trending a little higher, we are expecting that we'll be in the upper half of the target range for this year of the 4% to 6% for full year '25. And then as Rick mentioned, looking to raise that expectation for next year to that 5% to 7.5% range.

Okay. Did I just hear, like, you say, 10% for next year? Or did I get that wrong?

I would look for 10%-ish revenue growth.

10% revenue growth company-wide?

Yes.

Okay. Great. But 5% to 7.5% in C&I?

Yes, with our margin profile remaining the same on T&D at 7% to 10.5% and probably operate in the midish range of those numbers just because we're not seeing the large projects really roll in until 2027.

Okay. That's helpful. And then I appreciate the breakdown of the new awards in the quarter on the T&D side. Does how sizable are they in the sense that does that change your breakdown between MSA and non-MSA work in that segment?

No, we really didn't speak anything about large projects coming into our backlog. So it's small and midsized. So somewhere in that same range where we've been, I would say, is kind of how we're forecasting it for this next quarter.

And our next question comes from Andrew Wittman of Baird.

Thanks for taking our questions here. Everybody wants to talk about data centers, so let's talk about data centers. I mean, obviously, this is a growth end market for electricians, broadly speaking, Rick, in the past, and we've talked to you about this, you like totally see the opportunity there. You're open to it. You've always said we don't want to abandon our legacy customers everywhere else as well. But just kind of wanted to get an update on your view here.

Is this market evolving faster and bigger than you maybe thought 6 months ago? And how has -- is your company approaching the data center opportunity? Are you going to go for it directly or wait for overall demand to lift demand for the types of services you offer and still compete in the traditional end markets as well. I was just wondering if you could talk about that, maybe the simple way of asking that question, of course, is do you expect the data center as a percentage of your C&I mix to materially increase or not?

I think as we go forward, data centers could increase, but our other core markets are very strong to within C&I. So when we talked about the overall market brand, whether it's wastewater or hospitals or [indiscernible] even on that side, and we see good growth opportunities there. So really not focused on just data centers. But again, a lot of good opportunities going forward, but I don't see that outpacing the other segments at this point.

Got it. Okay. And then I guess I wanted to follow up on your balance sheet and your ability and desire to deploy capital. Obviously, balance sheet like normal is in a very good spot here. Historically, you've done some M&A pretty consistently over the years. But the dynamics and the growth rates behind your business have changed and you have got to think the multiples like your own stock multiple are up.

I was just wondering kind of, Rick, what you're seeing out there and your desire as well as your ability to deploy M&A capital in an environment like this where prices are up? What do you think?

The multiples are definitely up. I mean, as you said, our multiple is up. But when we look at it, for us, it's really just focused on that right strategic fit. There's opportunities out there. But again, it's got to fit us from a cultural fit and then from a structural fit. So we continue to look at them and evaluate them. And there's quite a bit of activity out there. Some of that's positive. And hopefully, we can capitalize on the right opportunity, but our balance sheet enables us to really go after any acquisition.

We've always said that our kind of goal is to anything within that annual revenue of $50 million to $60 million is kind of our target. We're not looking for something transformational. But again, we continue to see good activity in that market and just trying to find the right fit.

And our next question comes from Jon Braatz of KA-CCA

Rick, on the margin profile for the C&I segment increased the range a little bit. Does that reflect market conditions or execution?

I would say both. I think our -- we're always focused on execution, how we better improve our performance out there, but also seeing some market I guess, expansion in our margins within the market. So we push margins every chance we get, but we're also focused on our own performance. So I would say it's a mixture of the two.

Okay. And then industry-wide in the T&D segment, every time you read a report from utility companies, they talk about accelerating spending plans. And I guess from an overall perspective, Rick, does the -- is there enough labor out there to meet this demand that seems to be forthcoming? And if not, is there going to be some opportunity to take some additional margin?

Well, we hopefully -- we definitely hope so, and that's the way we've always said it. I mean as we look out into this market, it's an elongated market, and it's going to go out for years. Not all these projects are going to be built overnight. And it's just not the labor side. It's also the material shortages or those time delays on that material coming in. So I would say those cycles on material [indiscernible] I think balancing as between kind of the labor visibility in the market, but also the material availability. So I would say a lot of early conversations with our clients, very positive on the conversation, but really a number of customers are concerned about what they're going to build more or less in '26. They're more concerned about what they're going to build in '27, '28, '29 and beyond. So very good conversations going on. .

Our next question comes from Brian Brophy of Stifel.

I'm curious if you're expecting any change to some of the high single-digit growth between solar and T&D and C&I that you've communicated for this year?

As Kelly said, we're running a little ahead of that on the T&D side, C&I is right in that range for kind of that overall revenue growth. So we see that coming in maybe a little stronger on the C&I -- or on the T&D side and kind of maintaining where we're at on the C&I side this year. .

So we're at up 10% so far year-to-date on C&I..

Got it. That's helpful. And then just curious, the latest you're hearing from your customers on large transmission project opportunities and what that outlook would look like as we look out a couple of years?

It's strong on that side. I would say lots of good conversations going on, lots of good activity. We're doing a lot of budgeting with our clients, a lot of working with our clients on longer-term projects. So again, remains a very active market. Those projects, as I said before, they are large projects that we're discussing are going to start in '26, but they'll start in '27, '28, '29 and we're even having conversations with clients on projects that go out past then. .

Our next question comes from Ati Modak of Goldman Sachs.

Rick, can I ask you for directional comments relative to that 10% overall revenue growth you talked about for '26. Is that a decent bogey for a run rate expectation based on everything that you're seeing in the market? Or what factors would you ask us to consider as we think about that?

Well, I would say it doesn't have -- we don't forecast a dip in the economy or a dip in anything going forward with our clients as far as pulling back work when we look at the project availability and the current market. I would say that's how we're forecasting it right now with that kind of 10-ish percent overall growth and pretty equally spread between C&I and T&D as we see it today.

Got it. That's super helpful. And then maybe, Kelly, one for you, no buybacks this quarter. Just curious if there's anything to point out there or point out in terms of related to near-term capital allocation program?

Sure. So you're right. We did announce that program at the last earnings call for another $75 million, and we continue to look at that opportunistically. So it remains part of our capital allocation strategy. But I would say, as usual, we are prioritizing directing capital towards growth. So on the organic side, that kind of comes in the form of both our capital expenditures, which you could see this quarter did trend a little higher part of that was timing from earlier in the year, but part of that is to support that. longer-term growth that we see, particularly on the T&D side, which is [indiscernible] more capital-intensive side of the business. So that we could see running closer to 3% of revenue, given the growth opportunity that's out there.

And then I would say, back to Rick's answer to the earlier question, we're also in a really good position to pursue acquisitions that are the right fit to continue to be active in evaluating opportunities there. So I think just to summarize, I'd say we're in a great position to do all three.

And our next question comes from Julien Dumoulin-Smith of Jefferies. .

It's Brian [indiscernible] on for Julien. Just to follow up on the T&D segment. How should we think about your current MSAs or new or potentially enhanced MSAs with the upward CapEx provisions that we're seeing with many of your large utility customers already this quarter? Is that part of what might be driving the 10% -- 10-ish percent growth in that segment in '26 over high single digits in '25?

Yes, that's definitely a component of it. As we look at that, our -- most of our customers are forecasting some increased spend next year and as we said then, in future years beyond that, we'll see some large projects hopefully come into the mix. But I would say it's increased spend on MSA is a good component of that.

And with the whole labor shortage, maybe backdrop in the latter years, say, '27, '28, when you resign your MSAs or do you have more leverage in terms of the premium for skilled labor? Or should we just kind of assume similar margins as they are today?

Well, I think we're always pushing on our performance to outperform where we've been. But with that being said, 90 -- over 90% of our clients are returned clientele. So we're always going to treat those clients there. We're going to look at our productivity side, and we're going to try to enhance our margins where we can. But again, always treating our customers fairly.

Okay. And then lastly, I appreciate the project discussions at T&D earlier. Could you kind of triangulate any of those projects that might be more significant than others? Or what was added to the September backlog or that is still to be added?

I would say our backlog, we always capture it at a month end. So again, it's always going to be lumpy at any given time. I think when you're looking at -- as we said, a large project came into it, Brian talked about some of the projects, smaller and midsized projects that were captured, and we see that continuing. But again, we I would say we don't get down to a customer by customer, but good activity in all the markets we're in, and we pretty much have coast-to-coast coverage a little bit into Canada. So pretty excited about the opportunities lying in front of us.

I'm showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for any additional or closing remarks.

To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe.

Thank you. This concludes today's conference call. We thank you for your participation, and you may now disconnect.

Good morning, everyone, and welcome to the MYR Group's Second Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jennifer Harper, MYR Group's Vice President of Investor Relations and Treasurer. Please go ahead, Jennifer.

Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's second quarter results for 2025, which were reported yesterday.

Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment.

A copy of yesterday's press release is available on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for seven days following the call.

Before we begin, I want to remind you that this discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the company's annual report on Form 10-K for the year ended December 31, 2024, the company's quarterly report on Form 10-Q for the second quarter of 2025 and in yesterday's press release.

We also present certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release.

With that, let me turn the call over to Rick Swartz.

Thanks, Jennifer. Good morning, everyone. Welcome to our second quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the second quarter results, and then will turn the call over to Kelly Huntington, our Chief Financial Officer, for a detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segments' performance and discuss some of the MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions.

A steady second quarter performance resulted from the strength of our long-term customer relationships, operational consistency and strong market presence. We were awarded several master service agreements, further expanding existing relationships with key customers while safely performing ongoing work around the U.S. and Canada. We also captured additional projects in our chosen core markets, further solidifying our market position and continue to strategically pursue new opportunities.

Across both business segments, bidding activity remains healthy, driven by the demand for electricity and reliable, resilient infrastructure as well as the increasing prominence of modern technologies, such as artificial intelligence. Emphasis on grid modernization and hardening continue to be strong market drivers and could present opportunities for consistent success across our business. As always, our focus remains on collaborating closely with our customers in an open and trusting partnership while delivering safe, quality and consistent on-time results in this dynamic energy landscape.

Overall, the increased electrification and investments being made in the electrical infrastructure are encouraging and highlight why we believe our chosen markets are poised for ongoing success for years to come.

Now Kelly will provide details on our second quarter 2025 financial results.

Thank you, Rick, and good morning, everyone. Our second quarter 2025 revenues were $900 million, which represents an increase of $71 million or 8.6% compared to the same period last year. Our second quarter T&D revenues were $506 million, an increase of 10% compared to the same period last year. The breakdown of T&D revenues was $305 million for Transmission and $201 million for Distribution. Distribution revenues increased by $25 million and Transmission revenues increased by $23 million. Work performed under master service agreement continued to represent approximately 60% of our T&D revenues.

C&I revenues were $394 million, an increase of 6% compared to the same period last year, primarily due to an increase in revenue on fixed price contracts. Our gross margin was 11.5% for the second quarter of 2025 compared to 4.9% for the same period last year. The increase in gross margin was primarily due to the second quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project. In the second quarter of 2025, gross margin was also positively impacted by better-than-anticipated productivity and a favorable job closeout. These margin increases were partially offset by an increase in costs associated with labor and project inefficiencies and unfavorable change orders.

T&D operating income margin was 8% for the second quarter of 2025 compared to an operating loss margin of 1.8% for the same period last year. The increase was primarily due to the second quarter of 2024 being negatively impacted by certain clean energy projects as well as better-than-anticipated productivity on certain projects during the second quarter of 2025. These increases were partially offset by higher costs related to labor and project inefficiencies.

C&I operating income margin was 5.6% for the second quarter of 2025 compared to 0.4% for the same period last year. The increase was primarily due to the second quarter of 2024 being negatively impacted by a single project as well as contingent compensation expense related to a prior acquisition that did not recur in the second quarter of 2025. In addition, higher gross margin in the second quarter of 2025 was due to a larger portion of our projects progressing at higher contractual margins, some of which are nearing completion as well as better-than-anticipated productivity and a favorable job closeout. These positive drivers were partially offset by higher costs related to labor and project inefficiencies and unfavorable change orders.

Second quarter 2025 SG&A expenses were $63 million, an increase of approximately $2 million compared to the same period last year. The increase was primarily due to increases in employee incentive compensation costs and employee-related expenses to support future growth. These increases were partially offset by $5 million of contingent compensation expense related to a prior acquisition recognized during the second quarter of 2024, that did not recur in 2025.

Second quarter 2025 net income was $27 million compared to a net loss of $15 million for the same period last year. Net income per diluted share was $1.70 compared to negative $0.91 for the same period last year. Second quarter 2025 EBITDA was $56 million compared to negative $5 million for the same period last year.

Total backlog as of June 30, 2025, was $2.64 billion, 4% higher than a year ago. Total backlog as of June 30, 2025, consisted of $927 million for our T&D segment and $1.72 billion for our C&I segment.

Second quarter 2025 operating cash flow was $33 million compared to $23 million for the same period last year. The increase in cash provided by operating activities was primarily due to higher net income. Second quarter 2025 free cash flow was $12 million compared to $3 million for the same period last year, reflecting an increase in operating cash flow, partially offset by higher capital expenditures.

Moving to liquidity and our balance sheet. We had approximately $251 million of working capital, $86 million of funded debt and $383 million in borrowing availability under our credit facility as of June 30, 2025. We have continued to maintain a strong funded debt-to-EBITDA leverage ratio of 0.46x as of June 30, 2025. We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares.

Our Board of Directors authorized a new $75 million share repurchase program, which replaces our prior repurchase program. The new program will expire on February 4, 2026 or when the authorized funds are exhausted, whichever is earlier.

I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment.

Thanks, Kelly, and good morning, everyone. Our T&D segment achieved steady results in the second quarter as our focus remained on strengthening and expanding existing relationships with key customers by executing our work at a high level and creating value. Healthy bidding activity continued in the second quarter as we monitored and selectively pursued projects of various sizes with our project portfolio consisting of master service agreements and a healthy mix of smaller to midsized jobs.

This quarter, an MYR Group subsidiary executed a 5-year design, build electric distribution master service agreement with Xcel Energy with anticipated revenues to be in excess of $500 million over the 5-year period. The MSA is effective through 2029 with construction projects estimated to begin in the first part of 2026. In addition, we were awarded two other MSAs with major utilities in the Northeast and Midwest. Beyond MSAs, we also won a variety of transmission and substation work across the country, including two 30 kV and three 45 KV transmission line rebuilds in South Carolina and Missouri, respectively.

The growing demand for electricity continues to create exciting growth opportunities in the industry. A recent Deloitte Research Center for Energy and Industrials report released in February forecast $1.4 trillion of capital investments in the U.S. power sector from 2025 to 2030 and predicts similar expenditures to last until 2050. The report also projects that by 2030, power demand will increase 10% to 17% from 2024 levels. MYR Group will continue serving as a dependable and agile partner for our utility customers as they strive to meet this increasing electrification demand, helping build an improved infrastructure for the future.

In summary, our strong focus and commitment to safety and project execution has enabled us to grow our customer base with new contract wins and expand our current partnerships. We continually strive to leverage the full capabilities of our companies and teams to contribute to our customers' success.

I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment.

Thanks, Brian, and good morning, everyone. The second quarter saw steady results in the C&I segment as we continue to strengthen and leverage strong relationships with our valued customers while professionally executing projects of various sizes and strategically bidding new opportunities. Bidding activity remains healthy in our chosen core markets even as wider economic questions linger moving forward. The major construction indices continue reporting increases in growth potential compared to the previous year.

According to the most recent Q1 2025 market conditions report based on information from the U.S. Census Bureau, total nonresidential constructions spending in the U.S. increased 3.9% from February 2024 to February 2025. This includes 6.7% increase for educational construction spending and a 4.8% increase in manufacturing construction spending. This improvement is also reflected in the latest Dodge Momentum Index report released in June, which saw an overall 3.7% growth in May compared to the previous month, including a 10.5% increase in institutional building. The report also found that DMI was up 24% when compared to May of 2024 with data centers still significantly contributing to the overall healthy growth.

Last quarter, we mentioned the verbal award of Phase 1 of a large-scale data center project in Colorado for Sturgeon Electric valued at over $90 million, which has now been contractually awarded and added to our backlog. We also won additional work throughout our core markets across the country in the quarter including aerospace, healthcare and higher education. We also received awards in battery storage, transportation and manufacturing.

In summary, we are proud of our employees for their creative thinking, dedication and commitment to collaborating closely with our valued customers. Their proactive and customer-focused approach enables us to maintain a healthy pipeline of work and enhance our potential for continued growth.

Thanks, everyone, for your time today. I will now turn the call back to Rick, who will provide us with some closing comments.

Thank you for those updates, Kelly, Brian and Don. Our performance in the second quarter reflects the strength of our operational teams, our ability to maintain and expand diverse customer relationships and the stability of our core markets. We continue to be proactive and disciplined in this dynamic energy landscape and remain committed to the strong operating principles and sound business strategies that have enabled us to become an industry leader.

We recognize the importance of adapting to market conditions and being an agile partner for our customers as we respond to industry changes. This is supported by our continued investment and development of our teams, who drive value for our customers and communities by the work they perform each day. Thank you to every employee for your dedication and invaluable contributions to this organization. It does not go unnoticed.

And finally, I want to thank each of you for your continued support of MYR Group. We look forward to progressing our business strategies, while emphasizing our customer relationships and creating shareholder value.

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

[Operator Instructions] Our first question comes from Sangita Jain from KeyBanc.

First, if I can ask Rick and Kelly on the MSA that you press released earlier, I think it was, this month. If it was -- I'm presuming it's a new MSA and not a renewal and whether you displaced an incumbent or if it's like brand-new scope that you won with Xcel?

It's new scope. So it's additional to what we already have under our MSAs.

And did you displace -- and so there was no displacement. This was just new work you're saying?

This is additional work, yes.

Okay. And then -- that's helpful. And then if I can ask a follow-up on your C&I backlog? Good to see the data center $90 million award getting booked in 2Q. But I'm just trying to wonder why the backlog was down sequentially? And if there's anything big that you -- that got finished in the second quarter? Or how should we think about that?

I would say it was the normal progression of work. Our backlog is always going to be lumpy. I've said that for years. I mean it takes us a long time to negotiate out these contracts, lots of good activity on that side. But again, it's going to be lumpy. These projects are longer-term projects in a lot of cases when you're getting into some of the data centers and other types of work, some of the transportation work and those projects, again, can take months to negotiate it out.

Our next question comes from Atidrip Modak from Goldman Sachs.

Rick, that color on the MSA was very helpful. But I guess, maybe in terms of the business footprint expansion, assuming that is mostly the MSA, anything you can talk to in terms of the philosophy on how additional expansion would occur? And should we expect new MSA announcements or something that you're actively pursuing?

We're always -- I mean, we like the MSA work, as Kelly said, it was approximately 60% of our T&D revenue for this last quarter. But again, we like the bid work too. So it's really just timing how it comes in, not all customers want to do MSA work. So we'll continue to expand that where we can. And -- but very good opportunities when we're looking kind of the mid- to large-sized longer-term projects out there, too. So we're pushing on, I guess, all fronts on that side. But this last quarter, we did have some pretty good MSA activity.

That's great. And then as you think of this new sort of incremental slice of revenue, how are you thinking about labor requirements? Any need to acquire or sort of expand part of work that is not self-sourced? And how should we think about the margin impact of these new MSAs?

I think for the most part, we've always self-performed 100% of our electrical work. We do ancillary services, we'll subcontract that out. But good opportunities in the labor market. I think we do a lot on the training, the development side, the recruitment side. Over the years, we've shown we can grow our company that way. And then again, we're always looking for that right, tuck-in acquisition on top of it where it makes sense, and it would be additive to our company. So I think we're really pushing it on all fronts, but trying to make sure we're patient and make the right decisions.

Our next question comes from Justin Hauke from Baird.

I guess I wanted to get an update just because you guys have kind of intentional -- I know you've been in the solar market forever, renewables generation forever, but it's kind of been something that you've moved away from some of your work there from maybe where it was at a peak. I think you've given us some stats for the T&D business in terms of some of the trailing 12-month revenue contribution from solar work. And I guess I was just hoping to get an update on that. And I guess the reason why specifically, maybe you can comment on this, just any change in customer discussions in terms of their planning with the One Big Beautiful Bill because that's something that's obviously topical and we're getting a lot of questions on that.

Yes. I would say on the T&D side, we continue to be selective on those projects. We haven't seen big changes in the markets that we've talked about that we've competed on historically in the -- on the solar side of our T&D business. So being selective, we haven't announced any new work come into that. But again, our core T&D business is growing well. On our C&I side where we do active solar work, seeing good activity in the markets we're in there, seeing long-term activity and good conversations with our clients. So we're having conversations with our clients across the country. But I would say in the T&D areas, not as strong a conversation as far as what's going to be built out for pending projects for us right now, but we continue to watch that and monitor it. And at the right contractual terms and the right pricing, we like that market, but we're patient again.

Okay. Would it be fair to say that, that's a low single-digit percentage contribution of your revenue in that is little more stuff at this point?

Yes. So if you look on the T&D side of our revenues, it was 10% of our revenues last year. And as we've mentioned previously, it was down to just 4% of our fourth quarter revenues and that percentage has continued to decline in the first and second quarters as we've been undertaking activities to reach final completion on that existing portfolio of projects. And then on the C&I side, it's been a core market for us for a long time and been a part of our growth on the C&I side of the business, but not a single one of our core markets is dominant, including fuller or data centers.

Yes. Okay. All right. That's helpful. And I guess my second question, Rick, you talked a little bit about the M&A. But just philosophically thinking about it, your balance sheet is obviously in a really good position. You've got the new $75 million authorization. You were aggressive on buying the stock in the first quarter. But just thinking about, I don't know, kind of the various ways that you could deploy capital, desire for M&A versus buyback or just how you're balancing that, especially since some of your peers have been more aggressive, particularly on the C&I side in terms of bringing on some more capacity. Just maybe just the lay of the land of capital allocation outlook.

Sure, sure. When you look at that side of it, I think for us, it's finding the right acquisition. So we continue to look. We see good activity out there, but it's just finding the right one. And again, we're going to be disciplined in the price we'll pay for an acquisition. So that plays into it. We've seen multiples come up significantly on the C&I side. But again, for the right company, we will pay a fair multiple for that company, and we want somebody that's going to be with us long term.

So continue to look at those opportunities. But with our balance sheet, with the shape it's in, our leverage as low as it is, we've got the opportunities to still do acquisitions, push our organic growth and do stock buybacks when it makes sense.

Our next question comes from Jon Braatz from Kansas City Capital Associates.

Rick, Kelly, maybe my first question is your environment -- your operating environment seems to be getting incrementally better every quarter. You hear a lot of great news about demand for electricity. I guess my question is, Rick, do you have to sort of ramp up your investment spending, your CapEx spending and maybe your -- sort of your corporate expenses to meet this incrementally stronger demand? Any reason you have to begin to accelerate spending?

I think we watch that all the time, especially on the CapEx side. When you look at equipment deliveries, where that size is at, the commitments we need to make for some potentially larger projects out there, we continue to look at it. But I wouldn't say it's going to be a needle mover on something that's going to double or anything like that, but we continue to make the right calls, buy the equipment and advance, make the right capital expenditures as needed and invest in our people to capture the right people to manage this work. So I would say it's a balancing act, but a very strong long-term market out there that we're really trying to monitor, gauge and adapt to as we -- and prepare to be ready to take on this work.

Okay. Okay. And a question for Don. Obviously, there's a lot of noise out there all the time regarding tariffs and supply chain and so on. Are you seeing any C&I projects or any projects having to go back to -- for rebid and maybe the time line to project rewards lengthening at all?

Haven't necessarily seen many projects extend their schedules. However, we do have clients that are coming to us much sooner, issuing, in some cases, a limited notice to proceed to get long lead equipment coming, so we're talking actively with our customers to try to do what we can to prevent any extension to schedules.

Our next question comes from Brian Brophy from Stifel.

I guess if I remember correctly, you guys have previously talked about high single-digit growth in T&D this year, excluding some of the headwind on the clean energy side. It feels like after this quarter and some of the backlog and order activity that maybe there is some upside to that. Just curious if you would mind providing an update there.

Yes, I would say Kelly would -- go ahead, Kelly.

Okay, sure. So we still see that expectation for the full year, that high single-digit growth, excluding solar, which as I mentioned before, was 10% of our revenues last year. I think we're continuing to see a really strong market environment out there. And I think the one thing that can continue to be a little bit unpredictable on how quarterly revenues fall out on both sides of the business really is timing and materials expense and when projects are ramping up, pushes by a few weeks in either direction can cause some variability to quarterly revenues, but continue to see a strong market outlook and that high single-digit growth for both C&I and for T&D, excluding solar.

I am showing no further questions in the queue. I will now turn the call over to Rick Swartz for any additional or closing remarks.

To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe.

Thank you. This concludes today's conference call. We thank you for participating. You may now disconnect.