Executive Summary / Key Takeaways

• Strong Market Tailwinds: MYR Group is exceptionally positioned to capitalize on secular growth drivers in electrical infrastructure, including surging demand from AI data centers, broad electrification, and critical grid modernization efforts, underpinning a robust long-term outlook.
• Operational Resilience & Margin Recovery: The company has effectively worked through past project-specific headwinds, demonstrating a return to healthy profitability margins in Q2 2025, with management guiding towards the mid-range of its target operating margins for 2025.
• Strategic Backlog & Customer Relationships: MYRG's growing backlog, including significant new multi-year Master Service Agreements (MSAs) and large project awards, reflects its deep, expanding customer relationships and disciplined project selection.
• Robust Financial Health: A strong balance sheet, ample liquidity, and consistent operating cash flow generation provide MYR Group with the flexibility to fund organic growth, pursue strategic acquisitions, and execute opportunistic share repurchases.
• Differentiated Capabilities: MYRG's competitive edge stems from its highly skilled workforce, extensive specialized equipment fleet, and a proven track record of safe, high-quality, and on-time project delivery, which are critical in complex electrical construction.

A Century of Powering Progress: MYR Group's Strategic Foundation

MYR Group Inc. (NASDAQ:MYRG) stands as a venerable institution in the electrical construction services sector, with roots tracing back to 1891 in Transmission and Distribution (T&D) and 1912 in Commercial and Industrial (C&I) services. This deep-seated history, built through the merger of long-standing specialty contractors in 1995, has forged a holding company of wholly-owned subsidiaries renowned for their expertise across North America. MYR Group's enduring strategy centers on cultivating and expanding long-term customer relationships, notably through multi-year master service agreements (MSAs) and alliance agreements, which provide a stable foundation for its operations.

The company's strategic growth is not merely organic; it is augmented by disciplined, targeted acquisitions. A significant example is the 2022 acquisition, which added substantial intangible assets and goodwill, enhancing MYRG's capabilities. This blend of organic expansion and strategic inorganic growth positions MYR Group to capitalize on the profound shifts occurring in the energy landscape.

The Electrification Imperative: A Market Ripe for Growth

The demand for electricity is undergoing an unprecedented surge, driven by several powerful secular trends. The proliferation of artificial intelligence (AI) and the rapid expansion of data centers are creating immense new power requirements. Industry forecasts are compelling: the C3 Group's 2024 North American electric transmission market forecast noted over 170 hyperscale and colocation data centers planned, demanding more than 45 gigawatts of capacity. The American Institute of Architects (AIA) projects a 22% increase in data center construction spending in 2025 alone. This, coupled with the reshoring of manufacturing and a broader push towards electrification across various sectors, necessitates significant investment in electrical infrastructure.

Utilities are responding with record capital expenditures. Deloitte's February 2025 report forecasts $1.4 trillion in U.S. power sector capital investments from 2025 to 2030, with similar expenditures expected until 2050. Power demand is projected to increase 10% to 17% from 2024 levels by 2030. S&P Global anticipates aggregate energy utility investments to reach $202 billion in 2025, rising to $211 billion by 2027. Furthermore, the Edison Electrical Institute projects U.S. investor-owned utilities will invest between $186 billion and $203 billion annually from 2024 to 2026. These figures underscore a robust, multi-decade growth runway for MYR Group's specialized services.

Beyond new load growth, the aging electrical grid demands substantial upgrades. Grid modernization, system hardening against extreme weather events (like wildfires and storms), and the integration of distributed energy resources are critical drivers. The C3 Group's 2024 forecast highlighted that U.S. investor-owned utilities spent $90 billion on T&D grids in 2023, with distribution spending increasing a record 18%. These trends create a fertile environment for MYR Group, whose core business directly addresses these infrastructure needs.

Operational Excellence: MYR Group's Differentiated Capabilities

Unlike companies that differentiate through proprietary product technology, MYR Group's competitive moat is built on its deep operational excellence and strategic deployment of resources. This "technology" of execution is critical in the complex and safety-intensive electrical construction industry. The company leverages:

• A Highly Skilled Workforce: MYRG consistently invests in developing its key management and craft personnel through ongoing training and recruitment. This ensures a steady supply of expertise capable of tackling diverse and complex projects.
• Extensive Centralized Fleet: The company maintains a substantial and specialized equipment fleet. This centralized asset base provides efficiency and flexibility, allowing MYRG to deploy the right tools for projects of all sizes and complexities, often more readily than smaller, less capitalized competitors.
• Proven Safety Performance and Quality Delivery: MYRG has a long-standing reputation for timely completion of quality work and superior safety records. This track record is paramount for securing repeat business and expanding relationships with risk-averse utility and industrial clients.
• Strategic Adaptability: The company's ability to manage various contract types—from fixed-price to time-and-equipment (T&E) and cost-plus—allows it to tailor its approach to project risk and client needs. While fixed-price contracts offer higher margin potential, T&E contracts generally carry lower risk of cost overruns, providing a balanced portfolio.

These operational differentiators translate into tangible benefits for MYRG. They enable the company to bid competitively, execute projects efficiently, and maintain strong customer loyalty, contributing directly to its financial performance and market positioning.

Competitive Landscape: A Disciplined Approach in a Dynamic Market

MYR Group operates within a highly competitive landscape, facing off against larger, more diversified players such as Quanta Services (PWR), MasTec (MTZ), and EMCOR Group (EME), as well as more specialized firms like Primoris Services (PRIM).

MYRG's strategic positioning emphasizes its specialized expertise and strong customer relationships. It is "better capitalized than some of its competitors," providing valuable flexibility for more complex projects. This is a key advantage against smaller, regional players.

• Compared to Quanta Services (PWR): While PWR operates on a significantly larger scale with a broader portfolio, MYRG's specialized focus on T&D and C&I allows for deeper expertise and more tailored customer solutions. MYRG's emphasis on safety and customer service fosters stronger relationships, potentially leading to more consistent, repeat business. Financially, PWR generally exhibits more consistent revenue growth and stronger profitability margins (PWR's TTM Gross Profit Margin: 13% vs. MYRG's 10.54%; PWR's TTM Net Profit Margin: 4% vs. MYRG's 2.21%), reflecting its scale. However, MYRG's targeted approach aims for efficiency and strong project execution within its chosen niches.
• Compared to MasTec (MTZ): MTZ also has a strong T&D presence, including renewables, and can be agile in pursuing diverse infrastructure projects. MYRG's focus on reliability and customer-focused execution, particularly in long-term maintenance contracts, offers a compelling alternative. While MTZ's financial performance can be variable, MYRG's recent backlog trends suggest a more stable revenue outlook. MTZ's TTM Gross Profit Margin is 13% compared to MYRG's 10.54%, and MTZ's TTM Net Profit Margin is 1% compared to MYRG's 2.21%.
• Compared to EMCOR Group (EME): EME specializes in mechanical and electrical construction, with a strong C&I focus. MYRG's comprehensive T&D and C&I offerings, including utility infrastructure, directly compete. EME often demonstrates strong profitability through cost management (EME's TTM Gross Profit Margin: 19% vs. MYRG's 10.54%; EME's TTM Net Profit Margin: 7% vs. MYRG's 2.21%). MYRG differentiates by its prime contractor role for utilities and its attractive margin focus, aiming for superior project profitability.
• Compared to Primoris Services (PRIM): PRIM focuses on energy and utility construction, overlapping with MYRG in T&D. MYRG distinguishes itself through its emphasis on emergency restoration and comprehensive service range, potentially exploiting PRIM's market dependencies. PRIM's TTM Gross Profit Margin is 11% compared to MYRG's 10.54%, and PRIM's TTM Net Profit Margin is 3% compared to MYRG's 2.21%.

MYRG's competitive advantages are further reinforced by significant barriers to entry in the industry, including stringent regulatory requirements, the need for highly specialized expertise, and substantial capital investment in equipment. These factors limit new entrants and help MYRG defend its market position, though they also favor larger, established competitors.

Financial Performance: Overcoming Headwinds and Reclaiming Momentum

MYR Group's recent financial performance reflects a period of working through specific project challenges while simultaneously capitalizing on underlying market strength. For the six months ended June 30, 2025, consolidated revenues reached $1.73 billion, an increase of 5.4% from $1.64 billion in the prior year period. This growth was primarily driven by a $70.1 million increase in C&I revenue and a $40.6 million increase in T&D distribution projects, partially offset by a $21.2 million decrease in T&D transmission revenue, largely due to a strategic reduction in clean energy projects.

The company's profitability has shown a significant rebound. Gross margin for the three months ended June 30, 2025, surged to 11.5% from 4.9% in the same period last year. This improvement was largely due to the absence of significant negative impacts from certain T&D clean energy projects and a C&I project that had weighed on Q2 2024 results. Additionally, better-than-anticipated productivity and favorable job closeouts contributed positively. For the six months ended June 30, 2025, gross margin increased to 11.6% from 7.7% in the prior year.
Segment-wise, T&D operating income margin recovered to 8.0% in Q2 2025, a substantial improvement from a 1.8% operating loss margin in Q2 2024. Similarly, C&I operating income margin rose to 5.6% in Q2 2025, up from 0.4% in Q2 2024. This C&I improvement was driven by higher contractual margins on projects nearing completion, favorable productivity, and the non-recurrence of contingent compensation expense from a prior acquisition.

Net income for Q2 2025 was $26.5 million, a stark contrast to a net loss of $15.3 million in Q2 2024. Diluted earnings per share (EPS) followed suit, reaching $1.70 compared to negative $0.91. For the first half of 2025, net income was $49.8 million, significantly up from $3.7 million in the first half of 2024. EBITDA for Q2 2025 was $56 million, compared to negative $5 million in Q2 2024, reflecting the strong operational turnaround.

Robust Backlog and Financial Strength

MYR Group's backlog remains a key indicator of its future revenue potential. As of June 30, 2025, total backlog stood at $2.64 billion, a 4% increase year-over-year. The T&D segment contributed $926.5 million, while the C&I segment accounted for $1.72 billion. Approximately 80% of remaining performance obligations are expected to be recognized within the next twelve months, with 95% or more within twenty-four months, though project timing can introduce variability.

The company maintains a strong financial position. As of June 30, 2025, MYRG reported $251.2 million in working capital, $86.08 million in funded debt, and a substantial $383.3 million in borrowing availability under its $490 million revolving credit facility. The funded debt-to-EBITDA leverage ratio stood at a healthy 0.46x, well within its financial covenants. Operating cash flow for Q2 2025 was $33 million, primarily due to higher net income. For the six months ended June 30, 2025, operating cash flow was $116.1 million, a significant increase from $30.4 million in the prior year, driven by higher net income and favorable changes in operating assets and liabilities.

MYR Group's capital allocation strategy prioritizes growth. It supports organic expansion, pursues disciplined tuck-in acquisitions, and engages in opportunistic share repurchases. On July 30, 2025, the Board authorized a new $75 million share repurchase program, replacing the prior one, underscoring confidence in future cash flow generation. The company has not historically paid dividends and does not currently expect to.

Outlook and Risks

Management's outlook for 2025 is optimistic, projecting high single-digit revenue growth for both the core T&D business (excluding solar projects) and the C&I segment. They anticipate operating income margins to stabilize in the mid-range of their targets: 7% to 10.5% for T&D and 4% to 6% for C&I. This guidance assumes the problematic projects from prior periods are largely behind them. The Zacks Consensus Estimate for FY2025 EPS is $6.59, representing a substantial increase.

While the outlook is positive, several risks warrant consideration. The company's reliance on estimates for contract costs and variable consideration means actual results could differ. Ongoing discussions regarding change orders and claims on past projects could still have minor, unpredictable impacts. Macroeconomic factors like prolonged uncertainty, higher inflation, and tariffs could affect customer demand and profitability, though newer contracts include provisions to mitigate such risks. The timing of large, multi-year project awards and construction activity remains difficult to predict due to regulatory and permitting requirements, potentially leading to lumpiness in quarterly revenues. Furthermore, the ability to attract and retain a qualified workforce in a competitive labor market remains crucial.

Conclusion

MYR Group is a deeply experienced and financially robust specialty contractor poised to thrive amidst the transformative investments in electrical infrastructure. Its century-plus history, coupled with a disciplined strategy of organic growth, strategic acquisitions, and strong customer relationships, forms a formidable foundation. The company's operational excellence, characterized by its skilled workforce, extensive equipment fleet, and unwavering commitment to safety and quality, serves as its primary competitive differentiator in a market demanding reliable, complex project execution.

Despite recent challenges from a handful of problematic projects, MYR Group has demonstrated impressive resilience and a clear path to margin recovery, evidenced by its strong Q2 2025 results and positive guidance for the remainder of the year. With a healthy backlog, robust liquidity, and a strategic focus on high-growth areas like AI-driven data centers and grid modernization, MYR Group is well-positioned to convert secular tailwinds into sustained profitability and shareholder value. Investors seeking exposure to the critical and expanding electrical infrastructure sector should find MYRG's disciplined approach and operational prowess highly compelling.