MYR Group Inc. Announces Second-Quarter and First-Half 2018 Results

ROLLING MEADOWS, Ill., Aug. 01, 2018 (GLOBE NEWSWIRE) — MYR Group Inc. (“MYR”) (NASDAQ:MYRG), a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets in the United States and western Canada, today announced its second-quarter and first-half 2018 financial results.

Highlights

• Second quarter revenues of $339.7 million
• Second quarter net income of $6.8 million
• Backlog of $1.01 billion, an all-time high
• Acquired the Huen Companies on July 2, 2018 for approximately $47.1 million

Management Comments
Rick Swartz, MYR’s President and CEO, said, “Our second-quarter 2018 financial results included increases in gross profit, earnings per share, net income and EBITDA as compared to the second quarter of 2017. Our backlog in the second quarter reached a new record high of $1.01 billion consisting of short and long-term projects in both our T&D and C&I segments. As we continue to expect future strength in both markets, we believe our strong position and active bidding climates should continue to support efficiencies in our operations and drive further growth.” Mr. Swartz added, “On July 2^nd we completed the acquisition of the Huen Companies which will expand our C&I services and geographic reach for delivering cost effective solutions to both new and existing customers. I am pleased to welcome these strong performing companies to the MYR Group.”

Second Quarter Results
MYR reported second-quarter 2018 revenues of $339.7 million, a decrease of $16.5 million, or 4.6 percent, compared to the second quarter of 2017. Specifically, the T&D segment reported revenues of $196.9 million, a decrease of $42.9 million, or 17.9 percent, from the second quarter of 2017, primarily due to lower revenue from large transmission projects. The C&I segment reported second-quarter 2018 revenues of $142.8 million, an increase of $26.4 million, or 22.6 percent, from the second quarter of 2017, primarily due to increased spending from new and existing customers and increased volume at certain organic expansion locations.

Consolidated gross profit increased to $38.6 million in the second quarter of 2018, compared to $27.5 million in the second quarter of 2017. The increase in gross profit was primarily due to increased margins. Gross margin increased to 11.4 percent for the second quarter of 2018 from 7.7 percent for the second quarter of 2017. The increase in gross margin was largely due to improvements in efficiency compared to the second quarter of 2017, which was significantly impacted by write-downs on three projects, and also to a favorable claim settlement during the second quarter of 2018. These margin improvements were partially offset by a write-down on a project due to inclement weather, lower productivity and ongoing negotiations relating to a contract termination. Changes in estimates of gross profit on certain projects, including those discussed above, resulted in a gross margin increase of 0.1 percent for the second quarter of 2018. Gross margin decreased 2.1 percent due to changes in estimates of gross profit on certain projects for the second quarter of 2017.

Selling, general and administrative expenses (“SG&A”) increased to $29.2 million in the second quarter of 2018, compared to $25.0 million in the second quarter of 2017. The period-over-period increase was primarily due to higher bonus and profit sharing costs. As a percentage of revenues, SG&A increased to 8.6 percent for the second quarter of 2018 from 7.0 percent for the second quarter of 2017.

Income tax expense was $2.8 million for the second quarter of 2018, with an effective tax rate of 28.8 percent, compared to a provision of $2.5 million for the second quarter of 2017, with an effective tax rate of 67.3 percent. The effective tax rate for the second quarter of 2018 benefited from the enactment of the United States Tax Cuts and Jobs Act in 2017. Our inability to utilize losses experienced in certain Canadian operations negatively impacted the effective tax rate in the second quarter of both 2018 and 2017.

For the second quarter of 2018, net income was $6.8 million, or $0.41 per diluted share, compared to $1.2 million, or $0.07 per diluted share, for the same period of 2017. Second-quarter 2018 EBITDA, a non-GAAP financial measure, was $19.8 million, or 5.8 percent of revenues, compared to $14.1 million, or 3.9 percent of revenues, in the second quarter of 2017.

First-Half Results
MYR reported first-half 2018 revenues of $685.3 million, an increase of $29.0 million, or 4.4 percent, compared to first-half 2017. Specifically, the T&D segment reported revenues of $413.3 million, a decrease of $22.2 million, or 5.1 percent, from the first half of 2017, due primarily to lower revenue from large transmission projects partially offset by an increase in distribution revenues. The C&I segment reported first-half 2018 revenues of $272.0 million, an increase of $51.2 million, or 23.2 percent, from first-half 2017, due primarily to increased spending from new and existing customers and increased volume at certain organic expansion locations.

Consolidated gross profit increased to $74.4 million in the first half of 2018, compared to $53.3 million in the first half of 2017. The increase in gross profit was primarily due to higher revenues and increased margins. Gross margin increased to 10.9 percent for the first half of 2018 from 8.1 percent for the first half of 2017. The increase in gross margin was largely due to improvements in efficiency compared to the first half of 2017, which was significantly impacted by write-downs on three projects, and also to a favorable claim settlement during the second quarter of 2018. These margin improvements were partially offset by a write-down on a project due to inclement weather, lower productivity and ongoing negotiations relating to a contract termination. Changes in estimates of gross profit on certain projects, including those discussed above, resulted in a gross margin increase of 0.1 percent for the first half of 2018. Gross margin decreased 1.0 percent due to changes in estimates of gross profit on certain projects for the first half of 2017.

SG&A increased to $57.4 million in the first half of 2018, compared to $50.8 million in the first half of 2017. The year-over-year increase was primarily due to higher bonus and profit sharing costs. As a percentage of revenues, SG&A increased to 8.4 percent for the first half of 2018 from 7.7 percent for the first half of 2017.

Other income was $0.3 million for the first half of 2018 compared to $1.6 million in the first half of 2017. The change was primarily attributable to contingent consideration related to margin guarantees on certain contracts associated with the acquisition of Western Pacific Enterprises Ltd. recognized in the first half of 2017.

The income tax provision was $5.1 million for the first half of 2018, with an effective tax rate of 28.8 percent, compared to a provision of $2.2 million for the first half of 2017, with an effective tax rate of 47.2 percent. The decrease in the tax rate in the first half of 2018 was primarily caused by the enactment of the United States Tax Cuts and Jobs Act in 2017. Our inability to utilize losses experienced in certain Canadian operations negatively impacted the effective tax rate in the first half of both 2018 and 2017. The tax rate in the first half of 2017 benefited from excess tax benefits pertaining to the vesting of stock awards and the exercise of stock options.

For the first half of 2018, net income was $12.5 million, or $0.75 per diluted share, compared to $2.4 million, or $0.15 per diluted share, for the same period of 2017. First-half 2018 EBITDA, a non-GAAP financial measure, was $37.9 million, or 5.5 percent of revenues, compared to $25.2 million, or 3.8 percent of revenues, in the first half of 2017.

Acquisition of the Huen Companies
On July 2, 2018, the Company completed the acquisition of substantially all of the assets of Huen Electric, Inc., Huen Electric New Jersey Inc. and Huen New York, Inc. (collectively, the “Huen Companies”). The Huen Companies are leading electrical construction firms with offices in Illinois, New Jersey and New York. The transaction closed on July 2, 2018 and was valued at approximately $47.1 million, subject to working capital and net asset adjustments. Additionally, there could also be contingent payments based on the successful achievement of certain performance targets.

Share Repurchase Program
MYR’s current share repurchase program will expire on August 15, 2018. On July 26, 2018, the Board of Directors approved a new $20 million share repurchase program that will begin when our current program expires. The new share repurchase program will continue in effect through August 15, 2019 or until the authorized funds are exhausted.

Backlog
As of June 30, 2018, MYR’s backlog was $1.013 billion, which represented an increase of $54.9 million, or 5.7 percent, compared to March 31, 2018. Specifically, in the same period, T&D backlog increased $48.6 million, or 11.2 percent, to $482.9 million, while C&I backlog increased $6.3 million, or 1.2 percent, to $530.5. Total backlog at June 30, 2018 increased $380.9 million, or 60.2 percent, from the $632.5 million reported at June 30, 2017.

Balance Sheet
As of June 30, 2018, MYR had $171.5 million of borrowing availability under its credit facility.

Non-GAAP Financial Measures
To supplement MYR’s financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), MYR uses certain non-GAAP measures. Reconciliation to the nearest GAAP measures of all non-GAAP measures included in this press release can be found at the end of this release. MYR’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

MYR believes that these non-GAAP measures are useful because they (i) provide both management and investors meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results, (ii) permit investors to view MYR’s performance using the same tools that management uses to evaluate MYR’s past performance, reportable business segments and prospects for future performance, (iii) publicly disclose results that are relevant to financial covenants included in MYR’s credit facility and (iv) otherwise provide supplemental information that may be useful to investors in evaluating MYR.

Conference Call
MYR will host a conference call to discuss its second-quarter 2018 results on Thursday, August 2, 2018, at 9:00 a.m. Central time. To participate in the conference call via telephone, please dial (877) 561-2750 (domestic) or (763) 416-8565 (international) at least five minutes prior to the start of the event. A replay of the conference call will be available through Thursday, August 9, 2018, at 11:59 p.m. Eastern time, by dialing (855) 859-2056 or (404) 537-3406, and entering conference ID 6167708. MYR will also broadcast the conference call live via the internet. Interested parties may access the webcast through the Investor Relations section of MYR’s website at www.myrgroup.com. Please access the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. The webcast will be available until Thursday, August 9, 2018, at 11:59 P.M. Eastern time.

About MYR
MYR is a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets throughout the United States and western Canada who have the experience and expertise to complete electrical installations of any type and size. Their comprehensive services on electric transmission and distribution networks and substation facilities include design, engineering, procurement, construction, upgrade, maintenance and repair services. Transmission and distribution customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. Commercial and industrial electrical contracting services are provided to general contractors, commercial and industrial facility owners, local governments and developers generally throughout the western and northeastern United States and western Canada. For more information, visit myrgroup.com.

Forward-Looking Statements
Various statements in this announcement, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenue, income, capital spending, segment improvements and investments. Forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “encouraged,” “estimate,” “expect,” “intend,” “likely,” “may,” “objective,” “outlook,” “plan,” “possible,” “potential,” “project,” “remain confident,” “should” “unlikely,” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this announcement speak only as of the date of this announcement; we disclaim any obligation to update these statements (unless required by securities laws), and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Forward-looking statements in this announcement should be evaluated together with the many uncertainties that affect MYR’s business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of MYR’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and in any risk factors or cautionary statements contained in MYR’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

MYR Group Inc. Contact:
Betty R. Johnson, Chief Financial Officer, 847-290-1891, investorinfo@myrgroup.com

Investor Contact:
Steve Carr, Dresner Corporate Services, 312-780-7211, scarr@dresnerco.com

Financial tables follow…