MYR Group (MYRG) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations and Treasurer - Jennifer Harper
• President and Chief Executive Officer - Rick Swartz
• Senior Vice President and Chief Financial Officer - Kelly Huntington
• Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment - Brian Stern
• Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment - Don Egan

TAKEAWAYS

• Revenue -- $1.26 billion, a record quarterly performance and a 32.5% increase year over year driven by strength in the Commercial and Industrial segment.
• C&I Revenue -- $704.5 million, up 58% year over year reflecting increased revenue on fixed-price contracts and incremental contributions from the Valley and Comet acquisitions.
• T&D Revenue -- $554.5 million, a 10.2% increase year over year due to higher revenue on time and equipment, fixed-price, and unit-price contracts.
• Net Income -- $60.0 million, a record high that represents an 86.9% increase compared to $32.1 million in the third quarter of 2025.
• Diluted EPS -- $3.82, an 86.3% increase year over year from $2.05 in the prior-year period.
• Gross Margin -- 13.6%, up 180 basis points year over year primarily due to better-than-anticipated productivity and favorable project closeouts.
• Backlog -- $3.68 billion, representing a record high and a 38.2% increase year over year.
• C&I Backlog -- $2.39 billion, as of Sept. 30, 2026, supported by warehousing, data center, and transportation awards.
• T&D Backlog -- $1.29 billion, as of Sept. 30, 2026, driven by multiple transmission and substation project awards across several states.
• EBITDA -- $110.0 million, a record quarterly figure compared to $62.7 million in the same period last year.
• T&D Operating Income Margin -- 9.3%, up from 8.2% year over year because of productivity gains and favorable job closeouts.
• C&I Operating Income Margin -- 8.7%, up from 6.4% year over year despite a $4.9 million impact from acquisition-related amortization.
• SG&A Expenses -- $81.5 million, an increase of 23.7% year over year due to acquisition-related expenses and higher employee incentive compensation costs.
• Operating Cash Flow -- $46.1 million, down from $95.6 million year over year due to the timing of billings and payments associated with project cycles.
• Free Cash Flow -- $9.2 million, a decrease from $65.4 million in the prior-year period reflecting lower operating cash and higher capital expenditures.
• Total Funded Debt -- $215.8 million, as of Sept. 30, 2026, with a funded debt-to-EBITDA leverage ratio of 0.63x.
• Share Repurchase Program -- $100 million, a new authorization approved by the Board of Directors that becomes effective on Nov. 4, 2026.
• 2027 Revenue Growth Guidance -- 15% to 18% for the total company, consisting of 18% to 22% growth for C&I and 10% to 13% for T&D.
• 2027 Margin Guidance -- 6% to 9% for the C&I segment and 8% to 11% for the T&D segment.
• Capital Expenditures Guidance -- 3% of revenues for the fourth quarter of 2026, with 2027 spending projected at low to mid-3% of revenues.

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RISKS

• Huntington indicated that higher interest rates are affecting payment terms in contract negotiations, stating, "We are seeing payment terms being part of our conversations with customers and contract negotiations more than we were a few years ago. I think that does represent some headwind against the otherwise strong EBITDA growth."
• Management noted that consolidated gross margin gains were partially offset by an increase in costs associated with inefficiencies on certain projects.

SUMMARY

MYR Group Inc. (NASDAQ:MYRG) reported record quarterly results for the third quarter of 2026, supported by strong organic performance and the successful integration of the Valley Electric and Comet Electric acquisitions. The company experienced significant growth in its Commercial and Industrial segment, which reached record revenue levels due to healthy demand in data centers, warehousing, and municipal projects. Management reported that the Transmission and Distribution segment continues to benefit from long-term utility infrastructure investments, grid modernization, and electrification trends. The company expanded its financial capacity through an amended credit facility and initiated a new share repurchase program, reflecting confidence in its balance sheet and future cash flow generation. Guidance for 2027 anticipates continued top-line expansion and steady operating margins across both primary segments.

• Management expects a significant build-out of large transmission projects to accelerate in 2028, following a period of smaller project execution through 2027.
• COO Stern highlighted long-term demand for the T&D segment, stating, "According to Power Insights' latest report, transmission is expected to continue growing about 10% a year through 2030."
• The company is increasing its investment in prefabrication to mitigate field labor challenges, with CEO Swartz noting, "We'll continue to focus on taking that work out of the field and putting it into a controlled environment to assemble all those pieces."
• Management indicated that acquisition-related amortization for Valley and Comet was less of a headwind than initially projected because of the multiyear burn rate of the acquired backlog.
• CEO Swartz noted that Commercial and Industrial margins should remain near the upper end of the target range, stating, "We anticipate that being at that upper end of the margin profile of that 6% to 9% going into next year and throughout next year."

INDUSTRY GLOSSARY

• C&I: Commercial and Industrial, a business segment providing electrical wiring for facilities such as data centers, airports, and hospitals.
• Dodge Momentum Index: A monthly measure of the value of nonresidential building projects entering the planning stage.
• EPC: Engineering, Procurement, and Construction, a common form of contracting arrangement in the construction industry.
• MSA: Master Service Agreement, a contract that outlines the terms of a long-term relationship between a service provider and a client.
• T&D: Transmission and Distribution, a business segment serving the electric utility infrastructure market.
• 345 kV: 345 kilovolts, a high-voltage level used in electrical power transmission.

Full Conference Call Transcript

Operator: Good morning, everyone, and welcome to the MYR Group third quarter 2026 earnings results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one again. 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.

Jennifer Harper: 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 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 third 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.

Rick Swartz: Thanks, Jennifer. Good morning, everyone. Welcome to our third quarter 2026 conference call to discuss financial and operational results. I will begin by providing a summary of the third quarter performance before turning the call over to Kelly Huntington for a detailed financial review. Following Kelly's remarks, Brian Stern and Don Egan will provide updates on our T&D and C&I segments, including recent performance and market opportunities. I will then return with some closing comments before opening the call up for your questions. Our third quarter results reflect the strength of our business, the benefits of disciplined execution, and the continued demand for services we provide.

Investments in electrical infrastructure, grid modernization, and electrification continue to create opportunities across the markets we serve. The additions of Valley Electric and Comet Electric have expanded our capabilities, geographic reach, and customer relationships, further strengthening our platform for long-term growth. As we move forward, we remain focused on serving our customers, executing projects safely and efficiently, and creating value for our shareholders. Our success is driven by the dedication and expertise of our employees across the organization. Their commitment to safety, quality, and operational excellence enables us to consistently deliver for our customers and position the company to capitalize on future opportunities. I want to thank our team for their continued hard work and contributions to our success.

I will now turn the call over to Kelly to review our third quarter 2026 financial results.

Kelly Huntington: Thank you, Rick, and good morning, everyone. Our third quarter 2026 revenues were a record $1.26 billion, which represents an increase of $309 million or 32% compared to the same period last year. Our third quarter C&I revenues were $704 million, a record high for our C&I segment, and an increase of 58% compared to the same period last year. C&I revenues increased primarily due to an increase in revenue on fixed-price contracts, which included incremental revenues from the Valley and Comet acquisition. T&D revenues were $555 million, an increase of 10% compared to the same period last year. T&D revenues increased due to higher revenue on T&E, fixed-price, and unit price contracts.

Work performed under master service agreements represented approximately 65% of our T&D revenue. Our gross margin was 13.6% for the third quarter of 2026, compared to 11.8% for the same period last year. The increase in gross margin was primarily due to significant changes in our estimated gross profit on certain projects related to better-than-anticipated productivity and favorable job closeouts. Gross margin was also positively impacted by the continued benefit of higher margins on certain projects nearing completion, largely due to better-than-anticipated productivity. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects.

T&D operating income margin was 9.3% for the third quarter of 2026, compared to 8.2% for the same period last year. The increase was primarily related to better-than-anticipated productivity and a favorable job closeout, partially offset by an increase in costs associated with inefficiencies on certain projects. C&I operating income margin was 8.7% for the third quarter of 2026, compared to 6.4% 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, partially offset by an increase in costs associated with inefficiencies on certain projects.

C&I operating income margin was partially offset by an additional $4.9 million of amortization expense related to certain intangibles acquired with Valley and Comet. Third quarter 2026 SG&A expenses were $82 million, an increase of approximately $16 million compared to the same period last year. The increase was primarily due to SG&A expenses associated with Valley and Comet, which were acquired on July 1st, and increases in employee incentive compensation costs and employee-related expenses to support future growth. Our third quarter effective tax rate was 27.1% compared to 28.3% for the same period last year.

The decrease was primarily due to a favorable impact from state taxes, partially offset by higher U.S. taxes on Canadian income, other permanent difference items, and a reduction in foreign tax credits. Third quarter 2026 net income was a record $60 million, compared to net income of $32 million for the same period last year. Net income per diluted share of $3.82 increased 86%, compared to $2.05 for the same period last year. Third quarter 2026 EBITDA was a record $110 million, compared to $63 million for the same period last year. Total backlog as of September 30th, 2026, was a record $3.68 billion, 38% higher than a year ago.

Total backlog as of September 30th, 2026, consisted of $1.29 billion for our T&D segment and $2.39 billion for our C&I segment. Third quarter 2026 operating cash flow was $46 million, compared to operating cash flow of $96 million for the same period last year. The decrease in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions. Third quarter 2026 free cash flow was $9 million, compared to free cash flow of $65 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 $298 million of working capital, $216 million of funded debt, and $650 million in borrowing availability under our credit facility as of September 30th, 2026. We had a funded debt-to-EBITDA leverage ratio of 0.63x at the end of the third quarter. In September, we completed an amendment and extension of our credit facility, which now includes a $690 million revolving facility and a term loan facility consisting of a $150 million tranche and a CAD 70 million tranche, representing a $400 million aggregate capacity increase.

We believe that our credit facility, strong balance sheet, and future cash flow from operations will enable us to support the organic growth of our business, pursue acquisitions, and opportunistically repurchase shares. Our Board of Directors authorized a new $100 million share repurchase program that is effective on November 4th. The new program will expire on November 3rd, 2027, or when the authorized funds are exhausted, whichever is earlier. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment.

Brian Stern: Thanks, Kelly, and good morning, everyone. The T&D segment maintained steady performance in the third quarter as our teams continued to execute work across our markets. Bidding activity remained consistent, supported by ongoing utility infrastructure needs. Our focus remains on selecting projects that align with our capabilities, maintaining strong customer relationships, and delivering results across the markets we serve. This quarter, L.E. Myers was awarded multiple transmission projects in Indiana, Virginia, and Iowa. We also secured an EPC contract for substation work in New Mexico and Washington. Great Southwestern was selected for additional line and substation work, including a transmission line rebuild in Texas and greenfield substation work in Indiana.

Harlan Electric was selected for a 345 kV line rebuild in Massachusetts. E.S. Boulos was awarded a collector and switchyard substation project in New York. Looking ahead, the broader market backdrop remains supportive. According to Power Insights' latest report, transmission is expected to continue growing about 10% a year through 2030. Power Insights points to load growth, aging infrastructure, and ongoing resilience programs as the drivers, which supports the durable demand backdrop for T&D work. We're proud of the work accomplished this quarter and the continued focus of our employees to bring safety, quality, reliable project delivery. Their efforts across the business are an important part of our ability to serve our customers and perform well across our markets.

I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment.

Don Egan: Thanks, Brian, and good morning, everyone. Our C&I segment delivered solid results in the third quarter, supported by steady activity across our core markets and continued focus on project execution. Bidding activity remained healthy and backlog continued to grow as we pursued new opportunities and strengthened existing customer relationships. We remain focused on meeting customer needs, delivering quality work safely and efficiently, and maintaining a balanced mix of projects across our business. Market conditions continue to support demand across commercial and industrial construction. The Dodge Momentum Index, which tracks non-residential building projects entering the planning stage, increased 3.7% in September compared with a year ago. Growth was led by institutional projects, particularly healthcare, education, and government.

These trends point to continued opportunities for our subsidiaries across the markets we serve. During the quarter, our operating companies secured a diverse mix of new work across several key markets. Huen Electric added warehousing work in New Jersey, while Sturgeon Electric continued its momentum in Colorado with data center and airport transportation awards. In California, Comet secured a light rail extension project, and CSI added municipality work while also securing additional data center opportunities. Valley also added wastewater work in Seattle. These results reflect the hard work and commitment of our employees across the organization. Their focus on execution, safety, and customer relationships continues to support our performance and position us for future opportunities.

Thank you, everyone, for your time today. I will now hand the call back to Rick for his closing remarks.

Rick Swartz: Thank you Kelly, Brian, and Don for your updates. Our third quarter results demonstrate the strength of our business, the discipline of our execution, and the dedication of our employees across the organization. The progress we continue to make is rooted in the expertise of our people, the trust we've earned from our customers, and our ability to deliver solutions across a broad range of end markets and project types. As we look ahead, we remain encouraged by the opportunities created by continued investment in electrical infrastructure and the ongoing demand for reliable power, grid modernization, and electrification.

We will continue to approach growth thoughtfully, focusing on operational excellence, strong customer relationships, and the values that have guided our success for many years. I want to thank our employees for their commitment to safety, quality, and execution, and our shareholders for their continued confidence and support. As we move through the remainder of 2026, we remain focused on serving our customers, executing our strategy, and creating long-term value for our stakeholders. Operator, we are now ready to open the call for questions.

Operator: Thank you. As a reminder to those of you on the phone, to ask a question, please press star one on your telephone, and then wait until you hear your name announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first call comes from the line of Caitlin Donohue of Goldman Sachs. Caitlin, your line is open.

Caitlin Donohue: Good morning, team, and thank you for taking our questions. We saw C&I results come in strong this quarter. Can you walk us through how you're seeing growth within the end markets that are involved in that segment through 4Q in 2027, and then how you see margin progression on top of that?

Rick Swartz: Yeah. For us, I think we're seeing good activity in all our key markets. When you look at that side, it's not just data centers, it's the diversification that Don talked about during his prepared comments. We see good opportunities. I would say from a margin progression standpoint, we plan on operating in the higher range of our profile there on the 6%-9%, so consistent with where we've been in this last quarter. Going into next year, I think we see the same thing, kind of that mid-range of growth, or mid-range of operating margin to the upper end there on the C&I side.

Then we look at probably that 18%-20% or 22% growth on the C&I side for next year, and probably that 10%-13% on the T&D when you're looking at revenue growth. Overall, probably in that 15%-18% range as a company.

Caitlin Donohue: That's very helpful. Thank you. Just some commentary on what you're hearing on the T&D side. I know that we've seen a lot of regulatory headlines around larger projects recently. Just curious to what you're hearing from the customer perspective, particularly for some of these anticipated higher-voltage projects.

Rick Swartz: When we look at that, I would say when you're looking at the larger projects out there, really seeing good opportunities. Projects seem to be moving forward. As we said before, that primary build-out will probably start in the 2028 timeframe. So we'll have some larger projects that probably start towards that mid to end part of 2027. I would say you'll see a lot more growth in 2028 and beyond as it relates to large projects.

Caitlin Donohue: That is helpful. Thank you. I will turn it back.

Operator: Thank you very much. Our next call comes from the line of Sangita Jain of KeyBanc Capital Markets. Sangita, your line is open.

Sangita Jain: Great. Thanks so much. Good morning. If I can ask—

Rick Swartz: Good morning.

Sangita Jain: —another one on C&I margins. We were expecting to see some impact from the Valley acquisitions from the amortization, but clearly margins were super strong. Was there anything one-timey around positive closeouts there, or is that just strength in performance, as Rick, you mentioned, you expect margins trending towards the high end of the range?

Kelly Huntington: Yeah, I can start on that one, Sangita, and then Rick might have some more to add. You are correct. We did see some impact from amortization expense. As we finished the purchase price allocation work, we did see that being less of a headwind on margins than we had originally anticipated. We do see the backlog burning on Valley and Comet in the way that works for amortization expense being a little over two years. That is a little bit longer than some of our prior acquisitions. So not quite as much of a headwind as we anticipated.

Rick Swartz: Yeah, and I would say on the margin profile, it is good performance across the business units. That is the strong closeouts. But again, we anticipate that being at that upper end of the margin profile of that 6%-9% going into next year and throughout next year.

Sangita Jain: Can you help us with the revenue contribution from Valley and Comet in 3Q and the expectations for 4Q?

Rick Swartz: I think we projected that coming into the second half of this year when we closed them, and we are pretty much right on plan for what we anticipated there. Really no change, and then we see continued growth in the next year. But again, we do not cover it company by company or district by district. Overall, I would say the contribution was positive. Kelly talked about the amortization and how that affected us. But again, good performance, and I think good growth opportunities there.

Sangita Jain: Rick, can I ask on the T&D margin outlook that you just gave to the prior question?

Rick Swartz: Yeah.

Sangita Jain: What is driving your optimism in margin heading into next year when T&D margins tend not to swing a whole lot?

Rick Swartz: Yeah, if I did not say that, I meant to say they would be in the middle range as far as operating margins on the T&D side. So kind of, 8%-11% be right in the middle where we are at now. I think the large projects do not start until the second half of next year, so you really will not see an impact from those. As I said, they really start a little bit more from what we are anticipating projects coming out in 2028 and beyond.

Kelly Huntington: Yeah, just to clarify.

Sangita Jain: Thank you. Go ahead.

Kelly Huntington: Thank you. The 10%-13% that Rick mentioned, that was year-over-year revenue growth that we anticipate for T&D. I think he just clarified the margin contribution, but just wanted to link back to that.

Sangita Jain: Yeah. I figured as he was answering. Thank you, Kelly.

Kelly Huntington: Okay.

Operator: Thank you very much. Our next call comes from the line of Justin Hauke of Baird. Justin, your line is open.

Justin Hauke: Oh, great. I have two here. The first one is a quick one. You did not give the quantification of the revenue, but you said it was in line. I am just curious on the backlog contribution from the acquisitions. Is it similar to the kind of the $400 million of kind of annualized revenue that you were expecting as a contribution from that, or is the backlog a smaller number for that quarter?

Rick Swartz: Again, we do not talk about backlog by division or group, but I would say it is what we anticipated coming in, and it is consistent with where the revenue has kind of been.

Justin Hauke: Okay. My next question is more on the balance sheet and cash flow. I was just curious, it looks like there is more fixed-price contract work mix that is coming in. We noticed that the unbilled receivables, the balance is kind of growing as a percentage of revenue. You have kind of a step up in unapproved change orders. I am just curious if that is just a function of mix shifts or if there is anything else unusual that you would call out specific on that for the quarter.

Kelly Huntington: Yeah, nothing unusual there. The last several quarters, we've had such a low balance of the pending change orders, and I'd say that's just kind of ordinary course fluctuations from quarter to quarter. Often we'll get a change order that we have a verbal on, but until we get that final approval, it can show up in that bucket. I'd say that's the ordinary course. As far as looking at cash flows and working capital, there we do see some continued headwinds, especially with interest rates being higher for longer. We are seeing payment terms being part of our conversations with customers and contract negotiations more than we were a few years ago.

I think that does represent some headwind against the otherwise strong EBITDA growth that we would be expecting with the revenue growth and sustaining the strong margins we've seen this year.

Operator: Thank you very much. Our next question comes from the line of Manish Somaiya of Cantor Fitzgerald. Manish, your line is open.

Manish Somaiya: Thank you so much, and congrats team on a strong quarter.

Rick Swartz: Thank you.

Manish Somaiya: Rick, thank you. Rick, my first question is on Valley and Comet. Obviously, 3Q demonstrates that those transactions have worked out favorably, but I just wanted to get some more clarity from you as to how well those transactions have performed as far as your revenue, profitability, backlog, and specifically as it relates to creating cross-selling opportunities.

Rick Swartz: All right. Yeah. From that standpoint, I would say the acquisitions of Valley and Comet are really meeting our expectations. We have pretty high expectations, and I would say they are meeting them today. I think they have good opportunities in their marketplace. We continue to cross-sell where we can. As I said before, on individual conversations, I think anytime we do an acquisition, we try to capitalize on customers they have that we may not have across the country and vice versa. Great opportunities on that side and continued growth in those markets they are in. Pretty pleased with the acquisition to date.

Manish Somaiya: Perhaps if you can just talk about the acquisition pipeline that you see ahead. Clearly based on your comments, markets remain strong. I just wanted to get a sense from you as to what pockets of potential opportunities might make sense, as far as geographically or by business. Secondly, with the strong growth that you have talked about, is backlog and RPO a good measure of indication of forward visibility? Because it seems that there could be a lot of opportunities that may not be captured in the backlog. I guess, a two-prong question there.

Rick Swartz: Yeah, I think on your second part of the question, our backlog is always going to be lumpy. I would say listen more to what we are saying about the activity in the market. We are seeing good activity on large projects out there, so great opportunities there. A lot of conversations going on with clients, and I would anticipate some larger projects coming into our backlog, either by the end of this year or the end of the first quarter of next year. Good opportunities there and good conversations. Pretty excited about that market and where it stands today. I think from the Valley side, I think good opportunities there.

When you look at the acquisitions out there in that pipeline, it is active. I think we are patient. We are always going to find that right acquisition. It might take us a while to find one. When we do, it's one we definitely want to capitalize on, if we can close the deal. Again, good activity out there, both on the T&D and C&I side. I don't have a preference either way. It's really finding the quality acquisition out there and making sure that it is quality and long-term, and they have more than one customer.

Again, we're not focused on storm-chasing contractors, but any of the ones that are on the T&D side or C&I that have a solid business and a great reputation, and that's what we're looking for. Again, patient on that side, but good activity in the marketplace as far as acquisitions.

Manish Somaiya: Have valuations adjusted, Rick, to what's transpired in the public markets? In private markets, have those also compressed, I guess, from what we've seen in the past?

Rick Swartz: Yeah, I think they probably compressed a little bit from where they were. But again, we're looking at the quality of the acquisition, and I think from that side, I would say multiples are down a little bit. But still, I think with the activity out there, we see that multiple potentially coming up a little bit again from where it is today. But again, if we can capitalize on the right acquisition with the right growth profile, we'll pay a fair price for a good acquisition.

Manish Somaiya: Is 8x-10x a reasonable sort of estimate for where the private markets are in terms of M&A before synergies, or is that-?

Rick Swartz: I would say probably on the C&I side, that is within that range. On the T&D side, it could tick up a little bit from that, depending on what the acquisition is. But I would say it is within those ranges on the C&I side, and again, a little higher on the T&D side.

Manish Somaiya: Okay, wonderful. Thank you so much.

Operator: Thank you very much. Our next question comes from the line of Brent Thielman of Oppenheimer & Co. Brent, your line is open.

Brent Thielman: Hey, thanks. Good morning. Great quarter. Hey, Rick.

Rick Swartz: Hey.

Brent Thielman: Maybe just one more on the C&I margins. As you look at it this year, they're up call it 300 basis points. I guess that is the amortization year as well in the third quarter. I understand the assumed margin range going forward. I know you got to go out there and you got to execute. Would it be fair to say the new business you are entering into, I guess the contract agreements as they are structured, do they afford you more leeway to the upside to that range, again, assuming you go out and execute as you have?

Rick Swartz: I think for part of our performance, we said it is related to better contract terms and conditions. We really pushed that side for more favorable ones, and I think our project outcomes reflect a little bit of that. Then again, good performance and good execution is also necessary. I would say we are seeing that today, and we anticipate that continuing. As I said, we will be within that high range of the 6%-9% next year, is where we are anticipating it right now.

Brent Thielman: Yep. Understood. No, appreciate that. On that side of the business, as you look at the larger project funnel, sort of beyond backlog, how far out is your visibility your customers are sharing with you, just in terms of projects? Just curious what you see beyond the book of business you have today in that segment.

Rick Swartz: On the C&I segment, again, they are sharing projects that are further and further out. They want to make sure that they have the labor secured to do those projects, and the material is also available. We are seeing a lot of Part A and Part B contracts where maybe we are securing the material, working with them on pricing and development. Some of those projects go out into 2029, 2030. I think we are seeing good opportunities there for long-term growth.

Brent Thielman: Okay. Just last one on the share repurchase authorization. I do not think you have been especially active this year on that front. I guess I am just wondering if this is a statement of your view on your own share price being more compelling today versus other opportunities, or just simply keeping all the options on the table?

Kelly Huntington: Yeah. I would say we have always thought about share repurchases being part of our capital allocation strategy, and we have had a good history of using that opportunistically. The program we are putting in place is $100 million, and I think reflects that we are in a really strong financial position, even after closing on and funding the Valley acquisition. So we feel like we have got room to make repurchases where it makes sense, as well as continue to pursue tuck-in acquisitions and support the organic growth that we see ahead. That is a place where we have talked about this year. Our expectation is for CapEx to represent 3% of our revenues.

We have trended a little bit below that year-to-date just really because of timing. So do expect that to be picking up here in the fourth quarter. As we look forward into 2027, see that probably being in the low to mid-3% of revenues, and that is just really reflecting the opportunities that we see ahead on the T&D side in particular, which of course is the more capital-intensive side of the business, but also continue to make investments in prefab on the C&I side as well.

Brent Thielman: Okay. Very good. Thanks for the time.

Operator: Thank you very much. Our next question comes from the line of Julien Dumoulin-Smith of Jefferies. Julien, your line is open.

Brian Russo: Yeah. Hi, good morning. It's Brian, for Julien.

Rick Swartz: Morning, Brian.

Brian Russo: Hey, good morning. Just first on the T&D side, we've seen several of your key MSA customers on the utility side significantly increase the CapEx yesterday and today. I'm just wondering what your conversations are with them. In theory, does your MSA work increase with the increased capital expenditures, and is that the primary driver of the 10%-13% revenue growth in 2026? Or is it the 345 kV projects with Xcel Energy that start in the second half? Just trying to get a sense of your organic MSA kind of growth, and then layering on top some of these larger projects that appear to be forthcoming.

Rick Swartz: Yeah, I think for us, we're seeing good activity on the MSA side, but also on the small and medium-sized projects. We've talked about the large projects really not starting till the second half of 2027 and beyond. Really it's just CapEx growth that our customers are having. A lot, the majority of our customers we have MSA agreements with. We also do small and medium-sized projects with that are outside of that. I would say all our clients are having, or we're having good conversations with our clients and they have additional CapEx that they're spending.

For us, it's a good place to be, and I think we've got good relationships with our clients and the long-term growth perspective is strong.

Brian Russo: Okay, great.

Kelly Huntington: Yeah. Brian, I would just add in and make one comment just as you think about kind of timing too. We talked about that 10%-13% year-over-year increase for T&D next year. We do see that being more weighted to kind of starting to pick up in second quarter and more weighted to the back half of the year. Especially as we see a tougher comp for T&D. We had a big uptick in our T&D revenues last year in the fourth quarter. We do see that revenue growth being more modest the next two quarters, but then really starting to pick up in second quarter and into the second half of the year.

Brian Russo: Okay, great. Just to confirm your earlier comments, the Valley second half 2026 revenue is $250 million, and then it'll grow kind of consistent with what you guys are forecasting for organic growth at C&I. Is that accurate?

Kelly Huntington: Just to clarify the—

Rick Swartz: That is what we- Oh, go ahead. Go ahead, Kelly.

Kelly Huntington: Sorry about that, Rick. Just to clarify, the 18%-22% growth next year for C&I that Rick talked about is inclusive of having full-year contributions from Valley and Comet and their continued growth. We put that all together in that number.

Brian Russo: Okay.

Rick Swartz: Yes. We do not look at it from a district by district or company by company as we talk about it with investors. We look at that overall. Again, we have not said anything about the growth for Valley next year, but we see good opportunities for them. But I would not tie them into that 18%-22% or any individual unit into that.

Brian Russo: Okay, understood. And then just lastly, to follow up on the opportunistic M&A question, are you still strictly focused on electrical only at C&I or may look to kind of add adjacent services given the robust market we are seeing out there?

Rick Swartz: So I would say all our conversations with customers are around the electrical side. That is what we know. That is what we are good at, and we see plenty of expansion there as we go forward. So good opportunities out there, and I think there is some potentially good acquisitions out there. So again, we will continue to focus on the electrical side, not looking adjacent side on the C&I. On the T&D side, I think we could take on some of the ancillary services that we do not do today or that we do it limited in certain areas. So again, and expand from that side.

So on the T&D, it is either T&D companies specifically or kind of that ancillary services. So a little more potential for expanded growth there, than there is on the C&I side.

Brian Russo: Okay, great. Thank you very much.

Operator: Thank you very much. Our next call comes from the line of Brian Brophy of Stifel. Brian, your line is open.

Brian Brophy: Yeah, thanks. Good morning. Appreciate you taking the question. Just another one on C&I. I guess, were there any end markets or geographic regions where you saw a disproportionate amount of strength in the quarter? Thanks.

Rick Swartz: I would say in the quarter, it was pretty well evenly distributed. We always have some pockets in any given quarter that can grow a little more or have a little better performance just due to the timing of the work. So again, it fluctuates from quarter to quarter, but fairly even across. Well, as far as the way we budget it and looked at it, pretty close to where we were, what we anticipated.

Brian Brophy: Okay, that's helpful. Then you touched on prefab investments driving some of the CapEx. I guess I'm curious if you could talk about where you stand on that adoption curve from a prefab standpoint, and how much opportunity is left there to continue to increase the amount of mix on the prefab side. Thanks.

Rick Swartz: For us, we continue to push that side. It's something that we started many years ago, so it's not new to us. I think as technology continues to change, and we find more ways to take labor out of the field and have our people do more installing than assembling in the field, we'll continue to focus on that. So it's something, again, we focused for years. We've got teams that focus on taking that work out of the field and putting it into a controlled environment to assemble all those pieces. So we'll continue to expand that.

Again, part of our CapEx for the past five, 10 years has been building out our prefab, and we'll continue to do that going forward.

Brian Brophy: Appreciate it.

Operator: Thank you. At this time, I am showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for any additional closing remarks.

Rick Swartz: 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.

Operator: Thank you. This concludes today's conference call. We thank you for your participation, and you may now disconnect.

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