Third Quarter 2026 Conference Call - MYR GROUP INC

Explicit Guidance:

• FY2027 Revenue Growth: Management anticipates 18–22% growth for the C&I segment and 10–13% growth for the T&D segment, implying total company revenue growth in the 15–18% range.
• FY2027 Margin Profiles:
  • C&I: Operating margins expected to trend toward the high end of the 6% to 9% range.
  • T&D: Operating margins expected to remain in the middle range of 8% to 11%.
• CapEx Outlook: Capital expenditures are projected to remain in the low-to-mid 3% of revenues for 2027.
• Share Repurchases: A new $100 million share repurchase program is effective November 4, 2026, expiring November 3, 2027.

Business-Segment Outlook:

• C&I Segment:
  • Backlog & Pipeline: Seeing "good activity" on large projects; expects new large projects to enter backlog by year-end 2026 or Q1 2027. Long-term project visibility extends into 2029–2030, with customers securing labor and materials early via "Part A, Part B" contracts.
  • End Markets: Strong demand in healthcare, education, government, data centers (Colorado, California), and warehousing (New Jersey).
  • Acquisition Integration: Valley and Common Electric are performing in line with expectations; full-year 2027 revenue growth guidance (18–22%) is inclusive of these acquisitions' continued growth.
• T&D Segment:
  • Market Drivers: Driven by utility infrastructure needs and MSAs (approx. 65% of revenue). Bidding activity remains consistent.
  • Large Projects: Primary build-out of large-scale, higher-voltage projects (e.g., Excel) is expected to begin in the second half of 2027, with significant volume growth anticipated in 2028 and beyond.
  • Growth Timing: 10–13% revenue growth guidance for 2027 is weighted toward the back half of the year following a tougher Q4 2026 comparison.

Market and Competitive Outlook:

• Transmission Sector: Industry data (Power Insights) projects 10% annual growth through 2030, fueled by aging infrastructure and resilience programs.
• Commercial/Industrial Sector: Dodge Momentum Index for non-residential planning increased 3.7% year-over-year in September, led by institutional projects.
• M&A Environment: Private market valuations have compressed slightly; multiples estimated at 8–10x on the C&I side and potentially higher on the T&D side for quality targets. Management remains "patient" and focused on long-term, multi-customer businesses rather than "storm chasing."
• Contract Structure: Increased adoption of favorable contract terms and conditions by management to support margin expansion.

Macro / Industry Outlook:

• Interest Rates: Management notes "higher for longer" rates are creating working capital headwinds as payment terms become a more frequent point of negotiation with customers.
• Regulation: Regulatory headlines regarding larger projects are present, but customer feedback indicates projects are "moving forward" without immediate disruption.
• Electrification: Continued investment in electrical infrastructure, grid monetization, and electrification remains a primary long-term growth driver.

Strategic Initiatives:

• Acquisitions: Valley and Common Electric (acquired July 1, 2026) are being fully integrated; amortization impact is projected to last slightly over two years.
• M&A Strategy: Active pipeline of targets. While C&I strategy remains strictly electrical, T&D strategy may expand into ancillary services not currently offered.
• Operational CapEx: Continued investment in prefab manufacturing capabilities to shift labor from field assembly to controlled environments.
• Financing: Credit facility amended in September to include a $690 million revolving facility and term loans (total $400 million aggregate capacity increase) to support growth and acquisitions.

Risks and Headwinds to Outlook:

• Working Capital & Liquidity: Payment term negotiations and higher interest rates may exert pressure on free cash flow and working capital cycles.
• Project Inefficiencies: Certain projects have experienced costs associated with inefficiencies, partially offsetting margin gains from productivity and closeouts.
• Acquisition Integration: Amortization of intangibles from acquisitions will impact margins for the next two years, though impacts are projected to be less severe than originally anticipated.
• Execution Risks: Management emphasizes that achieving margin targets relies on continued operational excellence, safety execution, and successful project closeouts.
• Forward-Looking Statement Disclaimer: Actual results may differ materially due to risks and uncertainties outlined in the Form 10-K.

Management Tone on the Future:

• Confidence: "Encouraged" by market opportunities and "pleased" with acquisition performance. Tone reflects strong conviction in the durability of demand.
• Strategic Stance: "Patient" regarding M&A but opportunistic regarding share buybacks and organic growth. Focus remains on disciplined capital allocation and "thoughtful" growth.
• Hedges: Margins are described as "anticipated" and "projected" to trend to the high end, contingent on execution; revenue growth guidance assumes organic performance combined with acquired entities.

Miscellaneous:

• Timing of Large Projects: While large project start dates are pushed to late 2027, significant growth volume is not expected until 2028.
• Backlog Composition: Total backlog as of Sept 30, 2026, was $3.68B (up 38% YoY), split $1.29B (T&D) and $2.39B (C&I).