Good morning, everyone, and welcome to the MYR Group Second Quarter 2020 Earnings Results Conference Call. Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to David Gutierrez of Dresner Corporate Services. Please go ahead, David. Thank you, and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's second quarter results for 2020, which we reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Betty Johnson, Senior Vice President, Chief Financial Officer and Treasurer; Tod Cooper, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Jeff Waneka, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment. If you did not receive yesterday's press release please contact Dresner Corporate services at 312-726-3600 and we will send you a copy or go to the MYR Group website, where a copy is available under the Investor Relations tab. Also, a replay of today's call will be available until Thursday, August 6, at 1:00 P.M. Eastern Time by dialing 855-859-2056 or 404-537-3406 and entering conference ID 4291068. Before we begin, I want to remind you that this discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group 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. These risks and uncertainties are discussed in the company's annual report on Form 10-K for the period ended December 31, 2019, the company's quarterly reports on Form 10-Q for the first and second quarters of 2020 and in yesterday's press release. Certain non-GAAP financial information will be discussed on the call today. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that said, let me turn the call over to Rick Swartz.

Thanks, David. Good morning, everyone. Welcome to our second quarter 2020 conference call to discuss financial and operating results. I will begin by providing a brief summary of our second quarter results and then turn the call over to Betty Johnson, our Chief Financial Officer for a more detailed financial review. Following Betty's discussion, Tod Cooper and Jeff Waneka, Chief Operating Officers for our T&D and C&I segments will provide an industry outlook and discuss some of MYR Group's opportunities going forward. I will then conclude with some closing remarks and open the call up for your comments and questions. As the COVID-19 pandemic continues to dominate the headlines and its future impacts remain to be seen, our priority continues to be the health, safety, and well-being of our employees, clients, and communities. We are closely monitoring and adhering to the latest government recommendations and client protocols as the policies we have enacted facilitate our ability to adapt to this evolving situation. We developed plans and contingencies that have enabled us to deliver on our promises, meet the expectations of our clients, and return positive results to our stockholders, despite these uncertain times. We are pleased with our second quarter results, highlighted by revenue of $513.1 million, a 14.3% increase over the second quarter of 2019, along with increases in gross profit, earnings per share, net income, EBITDA, and free cash flow. Our backlog was $1.55 billion at the end of the second quarter, which marks another record high for MYR. During the second quarter, bidding and project execution remained active. We are pleased to announce that we are currently in negotiations to finalize the contract with LS Power Grid New York Corporation I, an affiliate of LS Power, to provide procurement and construction services for the Marcy to New Scotland upgrade project in the state of New York. The project consists of nearly 100 miles of 345-kilovolt transmission construction within the existing utility corridors. The contract is valued at more than $250 million. This project will ultimately relieve bottlenecks on the New York Power grid to improve system reliability, increase efficiency, and facilitate statewide access to renewable energy. We remain an industry leader in both our T&D and C&I segments and, as always, stay focused on continually raising the bar to improve our quality and efficiency in project delivery. Additionally, we continue to have a positive outlook about the future. Despite the ongoing challenges, we are confident in our ability to adapt and grow in the years ahead. It is especially in times like these that I am humbled and grateful for our incredible team who seamlessly demonstrates their commitment to safely executing work and delivering quality services to all our clients. Now, Betty will provide an overview of our financial results for the second quarter of 2020.

Thank you, Rick, and good morning everyone. On today's call, I'll be reviewing our quarter-over-quarter results for the second quarter of 2020, as compared to the second quarter of 2019. Our second quarter of 2020 revenues were $513.1 million. This represents an increase of $64.3 million or 14.3% compared to the same period last year. Our second quarter T&D revenues were $276.8 million, an increase of 8.1% compared to the same period last year. The breakdown of T&D revenues was $181.2 million for transmission and $95.6 million for distribution. The T&D segment revenues increased, primarily due to an increase in volume in both Transmission and Distribution-related projects. Approximately 50% of our second quarter T&D revenues related to work performed under master service agreements. C&I revenues were $236.3 million, an increase of 22.5% compared to the same period last year. The C&I segment revenues increased due to incremental revenues from the CSI acquisition, partially offset by a decrease due to the timing of activity on various size projects along with the impacts related to the COVID-19 pandemic. Our gross margin was 11.9% for the second quarter of 2020 compared to 9.6% for the same period last year. The increase in gross margin was primarily due to better-than-anticipated productivity, an increase in higher-margin work, and favorable job closeouts on certain projects. These improvements were partially offset by decreases in revenue recognized on pending claims and change orders for which we're seeking reimbursement and labor inefficiencies on certain projects. SG&A expenses were $41.2 million, an increase of $7.3 million compared to the same period last year. The increase was primarily due to the acquisition of CSI along with higher employee-related expenses to support the growth in our operations, partially offset by a reversal of contingent compensation expense related to a prior acquisition. Second quarter 2020 net income attributable to MYR Group was $13.4 million or $0.80 per diluted share, compared to $7.2 million or $0.43 per diluted share for the same period last year. Total backlog as of June 30, 2020 was $1.55 billion, a record high, and was 33.5% higher than a year ago. Total backlog as of June 30, 2020 consisted of $520.8 million for the T&D segment and $1.03 billion for the C&I segment. Turning to the June 30, 2020 balance sheet, we had approximately $191.4 million of working capital, $82 million of funded debt, and $280.2 million in borrowing availability under our credit facility. Free cash flow came in strong for the period at $54.9 million. We have continued to focus on strengthening our balance sheet, which can be seen in our funded debt-to-EBITDA leverage ratio improvements over the last nine months since our CSI acquisition improving from 1.85 to 0.7 leverage as of June 30, 2020. We also continued to focus on our free cash flow controlling our operating and overhead costs and limiting capital exposures to preserve our ability to continue to fund our operations with increased scrutiny of the spend in light of uncertainties around the economic impacts from the COVID-19 pandemic. However, we do continue to balance this with investing and developing key personnel and procuring the specific specialty equipment and tooling needed to win and execute projects of all sizes and complexity. We believe our credit facility, strong balance sheet, and future cash flow from operations will enable us to meet our working capital needs, equipment investments, growth initiatives, and bonding requirements. In summary, we had improvements this quarter in revenues, gross profit, net income, earnings per share, EBITDA, free cash flow, funded debt-to-EBITDA leverage, and backlog compared to the prior year. I'll now turn the call over to Tod Cooper, who will provide an overview of our Transmission and Distribution segment.

Thanks, Betty, and good morning everyone. Throughout the second quarter, we experienced active bidding and project execution throughout our T&D operations with minimal impact from COVID-19. We are very fortunate to be considered a critical and essential business. As Rick mentioned, we are excited about the potential award of the Marcy to New Scotland upgrade project. Aside from this notable announcement, activity continues to center around small to medium-sized projects and ongoing work under long-term master service agreements with upticks in bidding for a few larger transmission projects and several EPC and renewable opportunities. Throughout the Northeast, Mid-Atlantic, and Southeast, work continues for several long-term clients such as Eversource, Dominion, and the Tennessee Valley Authority. The second quarter marks the completion of the Coastal Virginia offshore wind project for Dominion, which included building the high-voltage interconnection and providing the ocean boring for future offshore cable installation. This project was a first for MYR Group in the offshore space and our successful performance should position us well for future opportunities. In June, we were awarded a contract for Phase II of Dominion's Mount Storm Valley 500kV rebuilt project in Virginia. Construction is underway and the project is expected to be completed in July of 2021. In the Midwest, work progresses on the Connersville Transmission Project for Duke Energy and the Gateway Transmission Project for Ameren, both of which are expected to be completed later this year. Throughout the Midwest and Texas, we experienced steady transmission substation and distribution work, much of which falls under our long-term MSAs. Momentum continues for solar, wind, and transmission opportunities throughout the West. Our project team has begun mobilization and start-up efforts on the Battle Mountain storage and solar project in Nevada, and work continues on the Gateway West substation projects for Pacificorp. On the distribution front, a number of utilities are making ongoing investments in system upgrades to improve asset performance and modernize and strengthen the grid. Many utilities are relying on outside contractors for much of this work and our distribution work remains strong from many customers. Industry headlines continue to reflect the positive market outlook and healthy T&D capital spending projections. Although the magnitude of COVID-19 impacts are still unfolding and could affect future initiatives. In May, FERC reinforced that electric T&D spending should remain resilient despite weaker economic conditions. Key drivers to strengthen grid reliability, replace aging infrastructure, and integrate renewable energy remain intact. Elevated levels of investments are expected to continue for the next five to ten years with most utility customers maintaining substantial multiyear CapEx plans. Growth is still expected primarily in small to medium-sized projects and over the next five years with potential for a handful of key large projects to accelerate towards construction in the next couple of years. Several of our long-term customers made significant spending announcements in the second quarter. Excel announced plans to accelerate $3 billion in clean energy spending in response to the Minnesota Public Utilities Commission and the Department of Commerce request to involve utilities in the state's economic recovery process due to impacts from COVID-19. In New York, National Grid filed its annual Transmission and Distribution capital investment plan with the New York State Public Service Commission, which includes a proposed $4 billion spend over the next five years. Promising developments on the renewable front included a June report from the International Renewable Energy Agency that reflected significant declines in costs since 2010 for utility-scale solar power, which has dropped 82%, onshore wind which has dropped 39%, and offshore wind which has dropped 29%. These declines are expected to continue with improved technology and expanded market participation. As these energy sources become cheaper compared to new electricity capacity based on fossil fuels, leaders of U.S. hydro, solar, wind, and storage industry associations plan to expand market share over the next decade. In summary, we are pleased with our second quarter performance and remain optimistic about our future prospects for growth and our ability to persevere through these challenging times. As we strive to bring the best of MYR Group to our customers, employees, and shareholders, we will carefully monitor and adjust our business operations as necessary to assure that the health and safety of our people and communities remains our top priority. I'll now turn the call over to Jeff Waneka, who will provide an overview of our Commercial and Industrial segment.

Thanks, Tod, and good morning, everyone. Our second quarter performance is reflective of the disruption we faced in resequencing our workflow and implementing additional safety measures throughout the quarter. Our employees adapted rapidly to new guidelines and continued serving our clients with minimal impact. We're proud of every team member who took the lead on their respective job site, adhering to the guidelines to keep everyone healthy and safe. We entered 2020 with record backlog that continued to burn at a steady pace through the quarter. The initial decrease in C&I revenue reported last quarter continued to improve in most of our district offices, as restrictions were lifted throughout the U.S. and Canada. While we have not experienced any significant project cancellations, we have faced some delayed project starts and slower ramp-ups as project schedules are adjusted in response to market disruption. C&I bidding activity has remained active in most of our district offices. Most of the large projects being tracked appear to be moving forward. However, market predictability is likely to remain a concern through the rest of 2020, as COVID-19 cases vary across the country. We believe that Commercial and Industrial recovery through the balance of the year will continue to be dependent on overall economic recovery and we remain hopeful that the various approved stimulus packages will offer continued opportunities. C&I was successful in winning significant projects during the second quarter. These awards provide confidence that our chosen markets will continue to offer a solid platform for growth and profitability. We have continued our investment in building our transportation and infrastructure expertise across all district offices, which we believe positions us favorably for future expansion. We remain encouraged by the possible award of a national infrastructure bill and believe we will be positioned well when additional spending bills are released. In addition to transportation and infrastructure, we believe our other primary markets may be somewhat less vulnerable to economic slowdowns, including healthcare, data centers, warehousing, renewable energy, and water projects. As always, we remain focused on working safely, productively, and in close collaboration with our clients and industry partners. We expect that our C&I segment will emerge even stronger following the near-term challenges. We are fortunate that most of our operations are considered an essential business and are proud to employ the best field and support services in the industry. Thanks everyone for your time today. I'll now turn the call back to Rick, who will provide us with some closing comments.

Thank you for those updates, Betty, Tod, and Jeff. I want to take a moment to express my appreciation to our employees who continue to inspire me every day. Amidst challenges due to COVID-19's continually evolving impacts, their constant dedication and positive outlook remind me that we are fortunate to have the best team, talent, and culture in the business. We will remain at the forefront of identifying industry trends and client needs in order to grow our business and provide superior services to achieve our long-term strategic targets. We will continue to make disciplined decisions to move our business forward. Operator, we are now ready to open the call up for your comments and questions.

Thank you. Your first question comes from the line of Sean Eastman with KeyBanc.

Hi. This is Alex on for Sean. Congrats on the strong results.

Thank you.

Yes. So, first question, I just wanted to touch on the commentary around the project pipeline remaining active for both of your segments and the outlook remaining intact. How would you characterize your visibility and line of sight on actual awards in the second half of the year? And maybe how would this compare to the past at this point in the year?

I believe the market is not as vibrant as it was a year ago, but it is still active. A year back, we described it as robust. The T&D segment continues to show high activity, and I don't foresee any significant impact there moving forward. None of our clients have indicated they are reducing their budgets. In the C&I sector, as Jeff mentioned, there may be a shift in the type of work being undertaken. We do not have significant exposure to office buildings. It's uncertain if those will be constructed next year, but projects in areas like data centers and hospitals are still being planned, and discussions with engineers and clients suggest these projects will proceed. The issue is primarily about timing. Regarding our backlog, as we've mentioned in previous quarters, it can be uneven. We want to ensure the right contracts are in place before proceeding, and we cannot control when awards are given, leading to this variability in some quarters.

Very helpful. And my second question, can you just give us some color around how you've been able to control costs during this pandemic, during the last couple of quarters? And are you able to quantify the magnitude of the impact? And then also last call you mentioned, $15 million of questionable CapEx. Have your plans for this changed in the past few months? It seems like CapEx has been pretty light this year so far. So that's...

We'll start with capital expenditures. We continue to keep an eye on it. As we mentioned, we're in the final stages of negotiating the LS Power project, which will necessitate ongoing investment in some capital. Therefore, we'll adjust our capital according to our current business and where we anticipate the near future heading. This may fluctuate somewhat. However, it's essential that we have the proper tools and equipment to execute the work profitably. We will keep monitoring this situation, but it likely won't lead to a significant reduction in our capital expenditures; we will evaluate it as we move forward. Now, could you please repeat the first part of your question?

I just wanted to understand the cost-cutting during the pandemic over the past couple of quarters and if you're able to quantify the magnitude of impacts.

We haven't quantified it. When we look at our overall projects, our teams immediately got together and looked at the projects, especially on the C&I side that may be pushed out a little bit. We didn't cut back on the side of where we needed to do additional planning. I think Jeff can add more on what he's done on that planning and where we see some of his productivity based on that. We're always looking at our overhead and examining what it takes to work more efficiently, developing new plans and procedures that will enable us to strive for higher profit margins. This is a continuous process, not just during the pandemic.

Yeah. I think initially we believed there would be a considerable impact on productivity due to the safety measures put in place. But we've seen that the additional time spent discussing the project and protocols and how we're going to proceed with our trade partners has actually benefited us. There is clearly some offsetting productivity out there that's been helpful. We see that continuing as some of the projects are pushed out, allowing for more collaboration between us and our partners, which is beneficial.

Thank you.

Our next question comes from Justin Hauke with Robert W. Baird.

Good morning, everyone. Thanks for taking my question here. I guess this one is for Betty, but just you called out a couple of things on the margins, some positives and negatives. Maybe to the extent you could help us quantify some of those specifically the earn-out reversal that you talked about. And then maybe on the offset to that the project closeouts and how that impacted the margins? Thank you.

Yes. I'm going to point to the operating results for C&I, although we haven't quantified very specifically the reversal of the contingent consideration or specifically the job closeouts. We do quantify in total. If you just took those when you think about them as one-time events, basically the reversal of the contingent consideration and then some of the maybe some of the offsetting negative impacts that were one-time in C&I, have pretty much offset. So the 3.8% margin that we had in the C&I segment this quarter reflects a more consistent margin because those two did offset. Just a reminder that we always talk about reaching around 4% as our typical target, when you take the higher amortization for the acquisitions, mainly CSI, as we've discussed in prior quarters. Even with those different events in there, this would have been just above 4%, as it has been since this time last year when CSI became part of our operations. We had that higher amortization, especially in the first year.

Great, yeah that was going to be kind of what I was going to follow up on that is just the amortization is that still in the 100 basis point range, in terms of what's running through C&I? And then, what's the timeline for that rolling off? Because I know usually that's highest in the first year, and you're kind of getting to the point where we're anniversarying the CSI acquisition.

Yes exactly. So the CSI acquisition amortization will definitely come down after this quarter. And it'll be very similar to the past when we had large amortization that decreased. There will still be some, and you can see in our cash flow the amortization, it's about 0.5% of the C&I business revenue. And it will cut back to probably at least half of that going forward.

Great. Okay. That's helpful. And then I guess the next question is just on the balance sheet. It is great to see that it's opened up here after a couple of years of it being a little more stretched at least versus your history. And I guess the question is, where do you guys want to manage the leverage longer term assuming a steady state? And then also what's the thought process on coming back into the market on the buyback since it's been a couple of years since you guys have done anything on that front?

I can start with that, Rick, and you can add. Our leverage as we discussed is down to 0.7%, which is even lower than we have set as our goal. Historically in the last several quarters, after we acquired CSI, we set our comfort zone. We discussed on a regular basis that goes up to two times leverage. Sometimes it could even be higher for acquisition-related spending. The CSI acquisition took us to 1.85%. As a company, our focus was to bring that down to the 1% to 1.25% range prior to considering another acquisition. Rick has emphasized the last year on the focus on the balance sheet and improving operations before we consider another transaction. We have stated that we wouldn’t be doing an acquisition in 2020. However, we would be open to considering transactions next year as we look at potential opportunities. When it comes to stock buybacks, we always discuss that every quarter with the Board. It's always been on our agenda. We do not have an ongoing program right now; it is not our first priority for capital spending. M&A is the first focus assuming suitable transactions are available. Based on today’s market, the most likely would be our first priority. Rick, anything else to add?

I don't have anything to add. Betty, you covered it well.

Okay. Thank you very much. I appreciate all of that. I think that’s all for me right now. Thank you.

Thank you.

Your next question comes from the line of Jaya Yadav with Stifel.

Good morning.

Hi. This is Jaya on for Noelle Dilts. Congrats on a great quarter. So I just wanted to ask about what you guys are thinking about for the nonresidential construction markets? Recently the AI consensus forecast came out for the midyear, talking about their expectations for 2020 and 2021. Some of that data was a bit more negative. So I'm just curious about how you guys are thinking about the non-residential construction market into 2021?

Yeah, I'll let Jeff start, and then I'll add to it.

Yeah. In prior challenging economic times, we have found ourselves in a resilient position. A lot of our clients during these periods turn to their most trusted partners to get their work done. There is no doubt that there is less work in the pipeline in the design industry. However, we feel there are plenty of projects out there that are perhaps more challenging that our clients will seek out a trusted partner to help them get their work completed. They know that other contractors could become stressed during this time, so we believe it places us in a very favorable position, and we trust we will navigate this well.

As a company, we have little exposure to big box construction and limited experience with high-rise tenant improvements. We do conduct some of that work, but it is not a high percentage of our C&I business. We focus more on specialized commercial industrial projects. We constantly monitor the entire market and see potential upsides in areas as Jeff mentioned, such as data centers and others that are growing.

Great. Thanks.

At this time, there are no further questions. I will now turn the call over to Rick Swartz for closing remarks.

To conclude, on behalf of Betty, Tod, Jeff, and myself, I sincerely thank you for joining us on the call today. I don't have anything further and we look forward to working with you going forward and speaking with you again on our next conference call. Until then, stay safe and healthy everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.