MYR Group Inc. (NASDAQ:MYRG) is a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets in the United States and Canada. With a rich history dating back to 1891, MYR Group has evolved into a diversified electrical services provider, leveraging its expertise across a wide range of projects and customer segments.
Business Overview and History MYR Group's roots can be traced back to 1891 when it first began operating in the transmission and distribution (T&D) industry. In 1912, the company expanded its expertise to provide electrical contracting services for commercial and industrial (C&I) construction projects. This diversification allowed MYR Group to serve a broader customer base and laid the foundation for its future growth.
The company as it exists today was established in 1995 through the merger of long-standing specialty contractors, combining their deep industry knowledge and technical capabilities. Over the years, MYR Group has grown to become one of the largest U.S. contractors servicing the T&D sector of the electric utility industry.
Through strategic acquisitions and organic growth, MYR Group has built a strong presence across the United States and Canada. The company now operates through two main business segments: Transmission and Distribution (T&D) and Commercial and Industrial (C&I).
The T&D segment provides a comprehensive suite of services on electric transmission and distribution networks, as well as substation facilities. This includes design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair. The company's T&D customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, and industrial facility owners, among others.
The C&I segment, on the other hand, offers services such as the design, installation, maintenance and repair of commercial and industrial wiring, the installation of intelligent transportation systems, roadway lighting, signalization and electric vehicle charging infrastructure. C&I customers include general contractors, commercial and industrial facility owners, government agencies and developers.
MYR Group's long-standing customer relationships, technical expertise, and focus on safety have been key to its success over the decades. However, like many companies in the construction industry, MYR Group has faced various challenges such as project delays, cost overruns, and managing labor and supply chain issues throughout its history.
Financials and Key Metrics For the full year 2024, MYR Group reported total revenues of $3.36 billion, down 7.7% from $3.64 billion in 2023. This decline was primarily attributable to a decrease in revenue from transmission projects, particularly related to the mechanical completion of certain clean energy projects. The company's backlog as of December 31, 2024, stood at a healthy $2.6 billion, a 2.5% increase from the prior year.
The company's gross margin for 2024 was 8.6%, down from 10.0% in 2023. This decrease was largely driven by significant changes in estimated gross profit on certain projects, particularly in the T&D segment. Net income for the year came in at $30.3 million, or $1.83 per diluted share, compared to $91.0 million, or $5.40 per diluted share, in 2023.
In the fourth quarter of 2024, MYR Group reported revenue of $829.8 million, a 17.4% decrease year-over-year, primarily due to a decline in transmission project revenues as certain clean energy projects reached mechanical completion. Net income for the quarter was $16.0 million.
Liquidity Operating cash flow for 2024 was $87.1 million, up from $71.0 million in 2023, while free cash flow was $11.2 million, compared to negative $13.7 million in the prior year. For the fourth quarter of 2024, operating cash flow was $21.0 million, with free cash flow of $9.0 million.
The company's liquidity position remained strong, with $354.8 million in borrowing availability under its $490 million revolving credit facility as of December 31, 2024. Cash and cash equivalents stood at $3.5 million. The company's debt-to-equity ratio was 0.20, while its current ratio and quick ratio were both 1.35 as of December 31, 2024.
Segment Performance The T&D segment, which contributed 55.9% of the company's total revenue in 2024, generated revenues of $1.88 billion, down from $2.09 billion in 2023. This decrease was primarily due to the decline in transmission project revenue, which represented 60.6% of the T&D segment's revenue in 2024, down from 66.1% in 2023. Operating income for the T&D segment was $69.4 million, or 3.7% of revenues, compared to $149.7 million, or 7.2% of revenues, in the previous year. The decline in operating margin was largely attributable to the unfavorable impact of certain clean energy projects that reached mechanical completion during the year.
The C&I segment, contributing 44.1% of total revenue in 2024, reported revenues of $1.48 billion, down from $1.55 billion in 2023, primarily due to delayed project starts. Operating income for the C&I segment was $48.0 million, or 3.2% of revenues, compared to $45.9 million, or 3.0% of revenues, in the prior year. The improvement in operating margin was driven by the continued benefit of higher margins on certain completed projects and those nearing completion, as well as better-than-anticipated productivity and favorable joint venture results.
Risks and Challenges MYR Group operates in a highly competitive industry, which can result in pricing pressures for its services. The company's financial performance is also susceptible to various market and industry factors, such as changes in customer spending patterns, delays in project schedules, and fluctuations in commodity prices. Additionally, the company's reliance on a limited number of large customers and the cyclical nature of the construction industry pose risks to its business.
The company also faces risks related to its involvement in multi-employer pension plans, potential liabilities from lawsuits and claims, and the need to comply with various laws and regulations governing its operations. The company's success is also heavily dependent on its ability to attract and retain qualified personnel, particularly skilled craft employees.
Outlook and Growth Opportunities Despite the challenges faced in 2024, MYR Group remains optimistic about its long-term growth prospects. The company believes that key market drivers, such as system hardening, grid modernization, technology advancement, infrastructure improvement, and decarbonization, present significant opportunities for its business.
In the T&D segment, the company expects continued strong bidding activity and a stable pipeline of transmission, distribution, and substation projects, as utilities invest in upgrading and expanding their electrical infrastructure to meet increasing electricity demand. The C&I segment is also poised to benefit from robust long-term opportunities in its core markets, such as data centers, transportation, pharmaceuticals, healthcare, and clean energy.
The electrical infrastructure and construction industry is poised for growth, driven by increasing electricity demand, grid modernization, and clean energy investments. According to industry forecasts, utility capital expenditures are expected to reach $174 billion in 2024 and continue rising in the coming years.
While the company did not provide specific quantitative guidance for 2025, management expressed confidence in the company's positioning for enduring success. Rick Swartz, the company's CEO, highlighted the growth forecast in the markets they serve, a steady pipeline of project opportunities, and the continued development of their experienced teams as factors contributing to their positive outlook.
MYR Group's strong balance sheet, with $354.8 million in borrowing availability under its credit facility as of December 31, 2024, and its ability to generate positive cash flow, position the company to support organic growth, pursue strategic acquisitions, and opportunistically repurchase shares, as evidenced by its recent $75 million share repurchase program authorization.
Conclusion MYR Group's diversified business model, spanning the electric utility infrastructure and commercial and industrial construction markets, has demonstrated its resilience in the face of market challenges. While the company faced headwinds in 2024, particularly with unfavorable impacts from a small group of clean energy projects in the T&D segment and one project in the C&I segment, its long-standing relationships with customers, technical expertise, and commitment to safety and quality have positioned it well to capitalize on the growing demand for electrical infrastructure investments across North America. With a strong financial foundation and a clear focus on expansion, MYR Group appears poised to continue its trajectory as a leading specialty contractor in the years to come.