MYR Group Inc. Aktie

Good morning, everyone, and welcome to the MYR Group Second 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 second 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 second quarter results can be found on the MYR Group website at myrgroup.com under the Investors tab. 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 second quarter 2026 conference call to discuss financial and operational results. I will begin by providing a summary of the second 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 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 achieved solid second quarter financial results, reflecting consistent performance throughout our business. During the quarter, we saw steady activity across our markets with ongoing infrastructure investments and electrification initiatives supporting demand.

We remain focused on maintaining operational discipline, pursuing opportunities aligned with our strategy and creating long-term value for our stakeholders. On July 1, we closed the acquisition of Valley Electric and Comet Electric, further expanding our commercial and industrial capabilities and geographic presence. Their diverse project portfolios, strong customer relationships and extensive pre-fabrication capabilities complement our existing capabilities, positioning us to pursue a broader range of opportunities. We look forward to working together to leverage our combined strengths and support continued growth across an expanded footprint.

As we continue to build our capabilities and serve our customers, our commitment to safe, reliable execution remains unchanged. Our teams are focused on maintaining strong customer relationships, producing high-quality results and working collaboratively across our organization. I'm grateful to our teams for their continued dedication and the contributions they make every day.

Now Kelly will provide details on our second quarter 2026 financial results.

Thank you, Rick, and good morning, everyone. Our second quarter 2026 revenues were a record $1.08 billion, which represents an increase of $181 million or 20% compared to the same period last year. Our second quarter T&D revenues were $524 million, an increase of 4% compared to the same period last year. T&D segment revenues increased primarily due to higher revenue on T&E contracts and unit price contracts, partially offset by lower revenue on fixed price contracts. Work performed under master service agreements represented approximately 65% of our T&D revenues. C&I revenues were $558 million, a record high for our C&I segment and an increase of 42% 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 13.2% for the second quarter of 2026 compared to 11.5% for the same period last year. The increase in gross margin was primarily due to better-than-anticipated productivity, favorable job closeouts and an increase in scope on certain projects. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. T&D operating income margin was 9.4% for the second quarter of 2026 compared to 8% for the same period last year. The increase was primarily related to better-than-anticipated productivity, favorable job closeouts and an increase in scope on a project, partially offset by an increase in costs associated with inefficiencies on certain projects.

C&I operating income margin was 8.5% for the second quarter of 2026 compared to 5.6% for the same period last year. The increase was primarily related to better-than-anticipated productivity on certain projects, most of which are nearing completion and an increase in scope on a project, partially offset by an increase in costs associated with inefficiencies on certain projects. C&I operating income margin was also positively impacted by a larger portion of our projects progressing at higher contractual margins, some of which are nearing completion.

Second quarter 2026 SG&A expenses were $74 million, an increase of approximately $11 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 second quarter effective tax rate was 25.7% compared to 29.2% 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.

Second quarter 2026 net income was a record $50 million compared to net income of $27 million for the same period last year. Net income per diluted share of $3.17 increased 86% compared to $1.70 for the same period last year. Second quarter 2026 EBITDA was a record $85 million compared to $56 million for the same period last year. Total backlog as of June 30, 2026, was a record $3.16 billion, 20% higher than a year ago. Total backlog as of June 30, 2026, consisted of $1.27 billion for our T&D segment and $1.89 billion for our C&I segment.

Second quarter 2026 operating cash flow was $3 million compared to operating cash flow of $33 million for the same period last year. The decrease in cash provided by operating activities was primarily due to the timing of tax payments and the timing of billings and payments associated with project starts and completions. Second quarter 2026 free cash flow was negative $26 million compared to positive free cash flow of $12 million for the same period last year. The decrease was due to the decrease in operating cash flow and higher capital expenditures to support future growth.

Moving to liquidity in our balance sheet. We had approximately $307 million of working capital, $9 million of funded debt, $460 million in borrowing availability under our credit facility and $138 million in cash and cash equivalents as of June 30, 2026. We had a funded debt-to-EBITDA leverage ratio of 0.03x at the end of the second quarter. After quarter end, on July 1, we acquired all issued and outstanding capital stock of Valley Holdings and its subsidiaries for initial cash consideration of $328 million, which is subject to working capital and net asset adjustments.

We funded the cash payment at closing through a combination of approximately $93 million of cash on hand and $235 million of borrowings under our revolving credit facility. We continue to believe that the remaining borrowing availability under our credit facility and future cash flow from operations will enable us to support the organic growth of our business, pursue future acquisitions and opportunistically repurchase shares of our common stock.

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 another solid quarter, reflecting effective execution across a broad range of small to midsized projects throughout our markets. Our teams remain focused on delivering safe, high-quality work while maintaining reliable project performance. We continue to leverage our trusted customer relationships while selectively expanding our presence with new and existing customers amid ongoing investments in transmission and distribution infrastructure.

This quarter, L. E. Myers Company was awarded 2 large transmission jobs for Xcel Energy with a combined value in excess of $200 million. Sturgeon Electric was selected for a 500 kV substation project in Arizona. Great Southwestern Construction was awarded a 345 kV transmission rebuild project in Texas, along with a greenfield substation project in Colorado with an additional substation work in New Mexico. Harlan was awarded a substation expansion project in Ohio, along with several distribution projects in Pennsylvania. Electricity demand continues to reshape utility capital investment priorities across the transmission and distribution market.

Deloitte Research Center for Energy and Industrials notes that utilities are making significant long-term investments to modernize transmission and distribution infrastructure as electricity demand increases and grid reliability requirements continue to evolve. We believe these ongoing grid needs are creating opportunities within our T&D markets where we continue to see steady bidding activity. Our ability to execute in this environment is driven by the strength of our teams, our commitment to safety and quality and to the continued investment in our workforce. We remain focused on delivering consistent results for our customers while maintaining the operational discipline that supports long-term success. We appreciate our employees' dedication to safety and performance across the organization.

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 continued to perform well during the second quarter, reflecting steady activity across our core markets and the disciplined execution of our teams. Bidding activity remained healthy during the quarter, and backlog continued to grow, supported by a balanced mix of new project opportunities and repeat business. We remain focused on understanding our customers' evolving needs, delivering projects safely and efficiently and positioning ourselves to support a diverse range of projects. .

We believe these long-standing customer relationships remain a key differentiator for our business and will support sustainable growth over time. Market conditions continue to support demand across our commercial and industrial markets. Recent data points to sustained investment in data centers, grid modernization, power infrastructure and industrial facilities. ConstructConnect reports U.S. data center construction starts remain at historically elevated levels, while utilities and developers continue to accelerate investment in the electrical infrastructure needed to support growing power demand.

These trends combine to reinforce a healthy backdrop for electrical contracting, particularly in mission-critical facilities and complex commercial and industrial projects. Our teams throughout all subsidiaries continue to deliver on existing commitments while pursuing new project opportunities, leveraging the breadth of our capabilities and customer relationships. We were awarded data center work in New Jersey and Arizona, multiple data center projects in Colorado, aerospace work in California and hospitality and higher education work in New York.

These wins highlight ongoing activity in key markets and a broad range of project types. We remain focused on supporting our customers' needs and broadening our ability to serve them. In closing, we recognize the dedication of our employees and remain focused on executing our strategy as we continue to build on the strengths of our organization.

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 second quarter 2026 results reflect the continued strength of our operating model, supported by the capabilities of our teams and the relationships we have built with our customers across both segments. We continue to see opportunities throughout our markets as investment in electrical infrastructure evolves, and we remain committed to disciplined project selection, operational execution and serving our customers' needs. Our commitment to integrity, collaboration and delivering quality work provides a strong foundation as we pursue initiatives aligned with our long-term strategy.

I want to thank our employees for their exceptional dedication and our shareholders for their confidence and support. We welcome the employees of Valley Electric and Comet Electric to MYR Group and are focused on leveraging the capabilities and expertise they bring to the organization. Looking ahead through 2026, we continue executing our strategy and maintaining the standards we have supported our success.

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

[Operator Instructions] Our first call comes from the line of Caitlin Donohue of Goldman Sachs.

I just want to ask on the acquisition of Valley and Comet Electric. It was great to see. Can you walk us through your expectations now that you have them in-house, how you see that growing your customer base and your capabilities within C&I throughout the geography within the U.S.

We've talked about that a little bit in the past as we did some of our press releases and went through it. Their capabilities are very similar to our own. So we see that leveraging both their customer base and then having an influx with our own customer base. So we've been able to do that on past acquisitions and expand both markets. So for us, we see that as a continued opportunity for us. As I said earlier, they're very strong with prefab, strong customer relationships similar to our own, and we see that as a very good acquisition going forward.

That's helpful. And then just another one for me. Can you talk a little bit about -- I know we've seen margins come in pretty strong in both segments within the first half of the year. And I know we had talked previously about maybe full year landing in that middle range of those margin guide. How do you see the back half of the year shaping up from a margin perspective given the strength that we've seen in the first 2 quarters.

Yes. Yes. I think we've had good strength. We've had good project closeouts as we've gone through both segments this year. We continue to see good performance across really our project portfolio. But again, as we look at the total year, nothing has changed with our kind of projections that we will be in the mid part of our projections for operating margins on the C&I of that 6% to 9% and T&D will fall in that midrange of that 8% to 11%. We see that continue. We'd love to see an uptick from there. But right now, when we look at the market and the jobs that are closing out, we see it kind of in that midrange for the rest of the year.

Our next call comes from Sangita Jain of KeyBanc Capital Markets.

Kelly, can you help us understand the revenue bridge for second half now that you have Valley in your -- now that you've closed on the Valley acquisition? I understand that the application may be more muted.

Yes, I can cover that. So you're correct. I'll just maybe start on that last point you made around the EPS contribution. Typically, our acquisitions have higher amortization expense in the first 12 months, really driven by the shorter amortization period for backlog. So we would expect the contribution to be more neutral from Valley on EPS and also operating income as we look through that first year of owning them. From a revenue perspective, we expect their contributions will be in that approximately $250 million range rest of year. And then maybe I'll turn it over to Rick just to talk about our revenue expectations overall.

Yes. I think when we look at our overall revenue projections for the year, again, that should add roughly that $250 million. And then when I -- when we look at our growth, I think it will kind of be in that overall growth, probably in that 13% to 15% if I looked at our overall growth on an organic basis going forward.

Great. And then on that Xcel $200 million award that you just highlighted, is that part of that MSA that you won a few quarters ago? Or is this outside of that? And is it all in your backlog.

This is in our backlog. So those 2 projects are in our backlog. It's the larger projects I've been talking about for the last 6 months that we anticipated coming into our backlog in the second half of this year. So those projects did mature into contracts, and we were able to add them to our backlog during this quarter. So yes, they are in there. And again, we continue to see good activity on the large project side. But again, those projects are always lumpy, how they come into our backlog. But these ones, as I said earlier, came into our backlog just as we projected for the last 6, 8 months that we've been talking about those projects coming in.

Our next call comes from the line of Manish Somaiya of Cantor.

Two questions for me. Kelly, if you can just touch on the cash flows. I guess there were some timing-related issues. If you could just help us understand how we should kind of think about second half cash flow and working capital in particular?

Sure. So we've seen some very strong cash flows over the past 5 quarters. And in the second quarter here, we did see the timing of cash payments, tax payments really impacting the quarter. So that was about $30 million higher than the second quarter of last year. So still positive from an operating cash flow perspective. As we look out the rest of the year, we do see strong EBITDA growth with the revenue growth that Rick was talking about as well as with our improving margins with those higher target ranges.

The headwind, just as we talked about the last quarter is we are sitting at near record low DSOs. And we do see -- a lot of that is driven by the strong overbillings we have on some projects, and those do naturally balance out over time. So we could see our DSOs going from the current kind of mid to more of the low to mid-50s as we progress through the next few quarters. So we do see that as a little bit of a headwind against that strong EBITDA growth that we see going forward.

That's helpful. And then -- sorry, I don't know if somebody had a comment, but I was just going to follow up on the T&D side. Obviously, nice activity, especially on the backlog with some pretty significant sequential increase. How should we think about the cadence of that backlog in terms of the conversion to revenues as we go into second half '26 and '27.

Yes. I would look at those kind of carving out that -- the 2 projects that we captured on the large project side and that excess of $200 million, I'd look at that contribution is really coming in and starting kind of in that second half of '27. So there won't be much contribution from those projects prior to that. There's a chance material could come in a little sooner than that. But if you really -- as you model it out, look at that revenue starting to burn kind of in that second half of '27 and then kind of continuing for an 18-month period beyond that.

Congrats again.

Our next call comes from the line of Brent Thielman of Oppenheimer & Company.

Congrats. Great quarter. Rick, I just had maybe a follow-up on the T&D business. Again, really solid bookings, great backlog here to finish the quarter. I guess, could you talk about your ability to absorb sort of new business for the segment just given the huge backlog you have today and certainly finite level of resources out there. But if you could just talk about that.

Yes. I think we're well positioned. I mean, we've been modeling this growth for a long time. It's not that it's something new or that we haven't been targeting. I think you've seen our growth over the last 6, 7 years, primarily organic on the T&D side, so well positioned on that side. I think from a labor standpoint, we're well positioned to continue to capture additional projects. We feel we're well aligned with 345, 500 and even some of that 765 work that will be available. But as I said before, we really don't see that work starting until the second half of '27 and beyond. We're doing a lot of budgeting and looking at a lot of projects and doing constructability for projects that are going to construct in that kind of '28 and beyond, way out into the '30s. So lots of good activity, lots of good opportunities, and I think we're well positioned to continue to capture future large projects as this market moves forward.

Great. And just a follow-up, I guess, just on the C&I business, if you could just talk about the quality of the business you're adding here? I mean what's the competitive environment look like for the types of projects you're securing in that business? And I guess just an opportunity to talk about what you're seeing outside the data center world as well.

Sure. Sure. I'll let Don start that one, and then I'll add to it.

I think as I mentioned in my script, we were awarded a couple of the jobs outside the data center world in New York and also in California. So our markets are strong. We're seeing a fair amount of activity. But unfortunately, we are not price makers as it will, but it's still a competitive landscape out there.

But we are seeing strong activity. So again, as I described it on the T&D front, a lot of projects that we're budgeting and doing constructability that are going to build in '28, '29, '30. We're seeing that same activity on the C&I side. So I'd say a very robust market and making sure we're well positioned to capture that work as we go forward.

Our next call comes from Julian Dumoulin-Smith of Jefferies.

It's Brian Russo on for Julian. Just to follow up on -- I think it was the $250 million second half of the year run rate of revenue for Valley. There seems to be quite a bit of growth relative to what you kind of disclosed to be for the full year average over the last 2 years. And I'm just wondering, I know the deal just closed in early July, but is the performance of Valley and Comet exceeding your expectations? And how does that kind of play into what is very strong first half C&I performance out of your core business?

Well, I think when we look at the contribution that we anticipate that making in the second half, a portion of that is material and as it comes in. So again, material is always going to be lumpy as it comes in. That can vary quarter-to-quarter. But I would say when we look at that market overall, we're pleased with the acquisition, we look forward to it. But I would say it's as projected. I wouldn't say there's any things we're shocked about or we haven't seen big revenue move forward. It's really that -- how that material comes into play and how that delivery comes. So again, I would say, as anticipated, but again, very positive on this acquisition. We think it's going to be very positive for us going forward.

Okay. Great. And then could you comment on the C&I end market diversification? What's driving the 40% year-over-year revenue growth and the top end of those margins. I would just assume that the data center end market is growing a lot faster than, say, education or health care. I just want to get a bit of understanding of how that mix is evolving.

I would say it varies quarter-to-quarter and geographic area by geographic area. So again, we've described it before as we've talked about it, that data centers isn't the #1 market in every geographic area we're in. We see good activity on whether it's advanced manufacturing, whether it's transportation work, some of our other key markets we're in, we like being diversified. We want to make sure we continue to be diversified. But we are seeing good activity, I would say, across all our key markets.

So there's 5 or 6 key markets we talk about. And when I look at it, good activity in them all. So again, we're not going to focus just on data centers. We like data centers. We like those opportunities there. But again, we've got a lot of long-term clients that have been with us a long time that build other types of facilities, and we see great opportunities with them.

Okay. And then just one last question on high-voltage transmission. How are discussions progressing with some of the other key customers maybe in ERCOT in Texas in addition to the nice $200 million of 2 project awards with Xcel?

Yes. No, I would say those -- when you look at the 765 and some of those projects that will be coming to market in the future here, I would say good conversations going on with our clients again. As you read and you see in the headlines, a lot of them are still going through siting issues and making sure that they get that all addressed before the projects are released. But again, making good progress on that. I would say we're having good conversations, and we see good opportunities going forward. But again, those projects, as I said before, will really start at best case, the end of '27, but more likely '28 and beyond when you look at that 765 work.

Our next question comes from the line of Brian Brophy of Stifel.

Congrats on the nice quarter. I know there was some commentary on competitiveness still in the market. But just curious generally how you're seeing terms and conditions trending within some of the awards you've gotten recently? And to what extent does that increase the odds of continued positive closeout activity moving forward?

Well, for us, it's always a focus of ours. We're getting the best terms and conditions we can, both on the C&I and T&D front. I think we're always pushing for that side to have fair terms and conditions. And again, over 90% of our business is return clientele. So we have strong relationships with these clients. Hopefully, that's reflected in less risk for us as we go forward. But again, try to be fair with our customers. And I think, in turn, our long-term customers are fair with us. So good opportunities, I would say, from a business standpoint and probably, as I said before, more favorable terms and conditions today than we saw in contracts 8 months or a year ago. So continue to see advancements on that side.

That's helpful. And then obviously, great award quarter, particularly in T&D. But maybe just touch on the labor environment, how tight is it? And generally, where are you seeing more or less tightness in the marketplace when you look across T&D and C&I.

Yes. I don't think -- I think some areas are a little tighter than others, but we're starting to see a lot of markets tighten up a little bit. But with that, a lot of these projects are longer-term projects. So they're not going to all be built in '27. And as I said, we've been building out this -- our groups for a long time. We see these opportunities, and I think we're well strategically positioned to capture these projects.

So again, from a labor standpoint of retaining our employees, advancing our employees and recruiting new employees, we continue to see those opportunities. And I would say our conversations with customers still remain around 2 items. They're concerned about how they get their material on time to build their projects and making sure that they have the labor aligned to do their projects when that construction takes place. So very strong positions again, but our backlog is always going to be lumpy as it comes in because as we've talked before, some of these projects are 2 to 3 years in the development stage. But again, we see a very long runway on these projects and lots of good opportunities out there.

Our next call comes from the line of Tim Moore from Clear Street.

Impressive backlog growth and operating margin leverage in the quarter. My first question is just around within T&D. I believe you formed a large project group team there separate from the MSA side work staff. Can Rick or anyone on the team just provide some insights on kind of either risk management and the trade-off that you make of maybe geographic concentration with fleet utilization in one area of benefit versus maybe taking on a larger project in a less scaled geography. So I'm just trying to wrap my head around, is one of the drivers also servicing the 90% repeat customers kind of wherever they are.

I'll start, and I'll let Brian add a little bit to this. I'd say a large project group we formed 20 years ago in the anticipation of these larger projects coming into play because we wanted to make sure that we continue to take care of our day-to-day MSA contracts. But remember, a lot of these investor-owned utilities that we have MSAs with are also the same ones that are doing some of these larger projects out there.

So it's really -- it's being able to service them on both sides. We centralized our fleet years ago so that we could make sure that we utilize our fleet the best we could and took advantage of both the MSA work and also positioned ourselves well to be able to take on some of these larger projects. So making sure we have the right equipment available to take on some of these larger projects while we serve those customers with that MSA work. Brian, anything you want to add as you've gone through your marketing phase.

No, you kind of hit it there other than our large projects teams work hand-in-hand with the local teams, as Rick said, to service those customers. So it's an independent group, but it's to make sure we can handle any of our customer needs or other projects that may come out of the market.

Great. That's helpful color. And then just one more follow-up on the Valley and Comet acquisitions. Is it fair to assume that they can integrate fairly quickly because they're C&I and you don't have to integrate a large fleet like you might have to if it was T&D and then mostly kind of reporting systems integration?

Yes. I would say, as we go through that, we did the initial assessment. I think, as we said, we're always going to look at all their systems. Their systems are very strong as they stand alone. But some of that stuff on the accounting side and the finance side, we're going to bring them on to our systems. That's planned from day 1. We've done that with our other acquisitions we've done. And then from -- as far as an integration standpoint and assimilating them into our company, I would say we're pleased at the speed that's going, very early conversations with them about what would change, what would remain the same. And again, they are a very strong operating company. So they had very good systems in place as they run their business.

So really, it's -- I'd say, in a lot of cases, when we do acquisitions, we learn from each other. There's a lot of things we try to add to them, but I think we also try to learn as much as we provide to them. So I think we've got some areas that we can see that they've done stuff maybe a little better than we have in some cases, and we adapt to that. So I would say it's been a very good sharing experience so far.

At this point, I'm showing no further questions in the queue. I'd like to turn the call back over to Rick Swartz for any 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. This concludes today's conference call. We thank you for your participation. You may now disconnect.

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.