Myr Group Inc. Q1 FY2021 Earnings Call

Good day, and thank you for standing by. Welcome to the MYR Group First Quarter 2021 Earnings Results Conference Call. I would now like to hand the conference over to your speaker today, David Gutierrez of Dresner Corporate Services. Please go ahead, David. Thank you, Elizabeth, and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's first quarter results for 2021, which were reported yesterday. Joining us on today's call are Rick Schwartz, President and Chief Executive Officer; Betty Johnson, Senior Vice President and Chief Financial Officer; Todd Cooper, Senior Vice President and Chief Operating Officer of MYR Group's Transmission & 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 3127263600, 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, May 6, at 11 a.m. Mountain Time by dialing (855) 859-2056 or (404) 537-3406 and entering conference ID 3066739. 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'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 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 year ended December 31, 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 Schwartz.

Thanks, David. Good morning, everyone. Welcome to our first quarter 2021 conference call to discuss financial and operational results. I will begin by providing a brief summary of the first quarter results and then turn the call over to Betty Johnson, our Chief Financial Officer, for a more detailed financial review. Following Betty's overview, Todd Cooper and Jeff Waneka, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will conclude today's call with some closing remarks and open the call up for your questions. We entered 2021 with positive momentum fueled by record-setting financial performance in 2020 and a substantial backlog. Our first quarter results included record high net income of $19.9 million, double the first quarter of 2020, along with increases in revenues, gross profit, EBITDA, and free cash flow as compared to the same period of 2020. Our backlog at the end of the first quarter was $1.64 billion, reflecting the ongoing stability in the markets we serve as well as our competitive strength. We successfully navigated the challenges presented by the COVID-19 pandemic in 2020. Our focus remains on anticipating and adapting to client needs as they continue to respond to the evolving conditions related to COVID-19 impacts. Our T&D and C&I segments are currently experiencing active bidding and project activity. Major trends in the energy market point to continued investment in clean energy, improving grid resiliency, and favorable energy policies. The business strategies of our clients reflect these trends, which present growth opportunities for MYR Group. We continue to position ourselves for opportunities to partner with customers to successfully execute their investment strategies going forward. Our C&I market segments have shown resiliency through the pandemic, and I'm excited about the future opportunities. Our pipeline includes projects from a diverse range of customers and work types. Our focus on technical and complex facilities position us well to capitalize on the increased opportunities within the market. Our T&D and C&I segments continue to build high-performing teams and diverse capabilities to support growth opportunities in the market. In alignment with our values, MYR Group companies are committed to continuous improvement in innovation. We openly share best practices with customers to strengthen our partnerships and work to enhance the value we bring to their business. Our commitment to excellence and safety, project delivery, and the development of our team members contributes to the recognition of MYR Group as a leading company within the industry. We are proud of our first quarter performance and are excited to continue to implement our strategies for generating growth and delivering stockholder value. Now Betty will provide details on our first quarter 2021 financial results.

Thank you, Rick, and good morning, everyone. On today's call, I will be reviewing our quarter-over-quarter results for the first quarter of 2021 as compared to the first quarter of 2020. Our first quarter 2021 revenues were $592.5 million. This represents an increase of $74 million or 14.3% compared to the same period last year. Our first quarter T&D revenues were $314.9 million, an increase of 21.5% compared to the same period last year. The breakdown of T&D revenues was $211.2 million for transmission and $103.7 million for distribution. The T&D segment revenues increased primarily due to an increase in revenue on large-sized projects. Approximately 50% of our first quarter T&D revenues related to work performed under master services agreements. C&I revenues were $277.6 million, with an increase of 7.1% compared to the same period last year. The C&I segment revenues increased due to an increase in revenue on medium-sized projects. Additionally, revenues during the first quarter of 2020 were negatively impacted by a slight slowdown of C&I work in certain geographic areas related to the COVID-19 pandemic. Our gross margin was 13% for the first quarter of 2021 compared to 11.9% for the same period last year. The increase in gross margin was primarily due to better-than-anticipated productivity on certain projects and a favorable job closeout. These improvements were partially offset by inclement weather experienced on a project, unfavorable pending change order adjustments on certain projects, and labor inefficiencies on certain projects. SG&A expenses were $49.6 million, an increase of $4.6 million compared to the same period last year. The increase was primarily due to an increase in employee incentive compensation costs and an increase in contingent compensation expense related to a prior acquisition. First quarter 2021 net income was $19.9 million or $1.17 per diluted share, both of which were record highs for MYR compared to $9.9 million or $0.59 per diluted share for the same period last year. Total backlog as of March 31, 2021, was $1.64 billion, and was 6.7% higher than a year ago. Total backlog as of March 31, 2021, consisted of $694.5 million for our T&D segment and $948.8 million for our C&I segment. Turning to the March 31, 2021 balance sheet, we had approximately $217.5 million of working capital, $29.7 million of funded debt, and $362.7 million in borrowing availability under our credit facility. We have continued to focus on strengthening our balance sheet and improving our free cash flow. Free cash flow came in strong for the period at $52.4 million and was a record high $157.1 million for the trailing 12 months providing a net cash position of $43.6 million as of March 31, 2021. The funded debt-to-EBITDA ratio has continued to stay strong at 0.2 times leverage as of March 31, 2021. We believe that our credit facility, strong balance sheet, and future cash flows from operations will enable us to meet our working capital needs, equipment investments, overall growth initiatives, and bonding requirements. In summary, we had improvements this quarter in revenue, gross profit, net income, earnings per share, EBITDA, free cash flow, funded debt-to-EBITDA leverage, and backlog compared to the prior year. Additionally, in the first quarter of 2021, we set a new record high for gross profit, net income, earnings per share, and EBITDA. I will now turn the call over to Todd Cooper, who will provide an overview of our transmission and distribution segment.

Thanks, Betty, and good morning, everyone. Our T&D segment performed well in the first quarter of 2021. Our current project portfolio remains a mix of smaller to midsized projects, alliance agreements, and some larger scale projects. Our bidding activity and success rate resulted in a nice backlog with continued growth in EPC, master service agreements, and renewable energy opportunities, which remain a focus area for growth at MYR Group. As I discussed in our last call, MYR Group recently surveyed executive leaders for more than 20 of our top T&D customers in our annual strategic Insight survey. Nearly all of the leaders acknowledged that significant investments in transmission and distribution infrastructure are necessary to support a transition to reduced emissions and/or carbon-free generation. However, the delays and complexities associated with regulatory compliance remain an ongoing concern for executives focused on leading the energy transformation. President Biden's recently announced American Jobs plan calls for the creation of a new grid deployment authority within the Department of Energy. The new entity would be focused on better leveraging existing rights of way and supporting creative financing tools to spur additional high priority, high-voltage transmission lines. The current political climate indicates supportive investments and implementation of new and upgraded electrical infrastructure to complement environmental and economic goals. Our T&D companies continue to strengthen and expand their market presence, and we are steadily growing our position in the solar energy storage market. In the first quarter, we received verbal commitments on three groupings of EPC solar projects totaling just under 200 megawatts. Each of these projects represents new customers to MYR Group, and we are targeting additional projects that would create work for our solar team through the early part of 2022. These projects are also expected to provide growth opportunities for other subsidiary companies. We also continue to pursue a number of large projects and programs in the market with established utilities on both an EPC and construct-only basis. We see the demand for larger, more sophisticated contractors in the T&D space increasing and the barriers for entry should allow us to continue improving our market share. The Western region of our business remains very active. Sturgeon Electric company continues to provide ongoing services for Xcel Energy under a multiyear alliance agreement. The Arizona market is providing steady, ongoing work and growth opportunities through strong relationships with three major utilities, and our Portland office is actively engaged in projects with Portland General Electric, PacifiCorp, and other local utilities. The Eastern region of our business has experienced solid bidding and project activity. Harlan Electric recently executed a five-year extension with DTE Energy and was awarded three transmission projects for Eversource. Harlan also partnered with MYR Energy Services to be selected as the EPC contractor for AEP's Howard Bucyrus project in Ohio. In the Midwest, Elli Myers is actively engaged in work with mid-American Energy, Amren, IPL, and NIPSCO, to name a few. In Texas, we have multiple crews from the Ellie Myers company and Great Southwestern Construction supporting CenterPoint Energy and other utility projects respectively. In summary, we continue maintaining our focus on safety and operational excellence as we adapt our strategies to remain equipped to support our customers in the dynamic and rapidly changing energy market. I'll now turn the call over to Jeff Waneka, who will provide an overview of our commercial and industrial segment.

Thanks, Tod. Good morning, everyone. Our C&I market segments have shown resiliency throughout the pandemic, and our results through the first quarter demonstrate that our strategy is sound and our ability to adapt rapidly is proving successful. We are also pleased that several projects whose start dates were pushed at the onset of the pandemic have announced that they will begin construction this year. Although the delayed starts disrupted our planned workflow in 2020, they also allowed for some unexpected benefits such as greater coordination time, creative alternatives to improve cost efficiency, and a more connected relationship between all the team members. Budgeting and bidding activities experienced a notable increase in quantity throughout the quarter, and we are pleased with the quality of the projects in our pipeline. Leading the way in the first quarter have been numerous projects in e-commerce, data security and data storage. These include several expansions, upgrades, and sizable greenfield builds. In addition to these already anticipated projects, there were a number of new opportunities in a surprisingly wide breadth of building types, which include medical research, manufacturing, higher education, healthcare, rooftop solar, power generation, water treatment and various forms of warehousing. Activity levels differ across our regions with some regions returning to pre-COVID levels while others are still facing significant headwinds. The American Institute of Architects reported increases in the architectural billing index in January, February, and March. This returned the index to positive territory for the first time since the pandemic began. The positive trend reflects increased C&I investments and should lead to continued improving bidding opportunities for our business. The Dodge Momentum Index increased 7.1% in February and another 1.7% in March. This quarter's increase marked the highest level in the momentum index since the pandemic began. Dodge expects total construction activity gains of $771 billion in 2021. While certainly positive news, the question of sustainable gains still remains. Consensus among economists and industry experts is that the construction industry will rebound in a K-shaped recovery with some sectors growing positively while others continue to contract. We are pleased that the strategic decisions to focus our future on e-commerce, renewable-related projects, transportation, healthcare, and industrial water projects are proving beneficial as these industries are all showing positive forecasts for the coming years. The industry is experiencing a notable increase in competition in some market segments where the projects are commoditized and relationships have less importance. But our chosen markets have remained primarily relationship-driven and expertise-focused as everyone in the industry works their way through the post-pandemic cycle. We believe our clients will continue relying on trusted contractors who will help them navigate through the numerous industry challenges present in today's economy. And to wrap up, I will address the pending infrastructure legislation titled the American Jobs Act. While it is too early to understand the full impact of the proposed legislation, there is good reason to believe that MYR Group is well-positioned to benefit from its approval since the current plan directly relates to the work we perform. In general, we are pleased with the improving activity on inquiries for projects in planning and enthused by the bidding activity on fully funded projects. Thanks, everyone, for your time today. I'll now turn the call over to Rick, who will provide us with some closing comments.

Thank you for those updates, Betty, Tod, and Jeff. Our first quarter 2021 performance reflects our ability to build strong customer relationships, identify and pursue new markets, and attract and develop talented team members who deliver excellence in all they do. MYR Group is strongly positioned as an industry leader who is viewed as a value and essential partner by our customers. 2021 represents a great opportunity for MYR Group to build upon our success while implementing effective strategies to increase the value we deliver to customers, team members, and stockholders. I thank each of you for your ongoing commitment and support to the success of this organization. I look forward to working with you to advance our vision and realize our business goals. Operator, we are now ready to open the call up for comments and questions.

The first question is from the line of Sean Eastman with KeyBanc Capital Markets.

Compliments. First, I'd just like to try and get a sense for whether T&D segment margins can sustain above that sort of historically targeted 6% to 9% range. Would you be able to quantify the closeout benefit in the first quarter? And maybe speak to how much the large project contributions are helping margins and what the phasing of those large projects in backlog looks like over the next couple of quarters and how that dynamic could impact T&D margins?

Okay, I'll start, and then I'll let Todd add. I think when you look at our margins, and we identified the puts and the takes on our T&D margins, both the good and bad. I think those really offset each other. So I would say that the percentage we're running at operating margin on the T&D is on the upper end, and we like where it's at. And really, those two puts and takes offset each other. So we see that continuing, or at least we hope to see it continuing going forward. The large projects did have a good contribution in the quarter, and they'll continue for a while because, as we said, it was delayed by a couple of quarters of getting started. So we're off and going now, but that front-end is a little heavier than maybe the last end of the projects go. So when you look at that, it'll continue for the next couple of quarters to add a little bit and then stabilize from there. Tod, do you want to talk about the overall market a little bit?

What we're experiencing at the moment is some irregularity with certain awards, and we're working to finalize a few things. However, as Rick noted, activity on our larger projects has increased and is expected to keep growing over the next few quarters. In the meantime, we are exploring more large project opportunities that are close to being fully permitted and will be up for bid soon. We're quite optimistic about the current situation.

And then I guess similarly on the C&I side, it was really nice to see those margins inflect up, I mean, 5.1% in the first quarter, is there anything onetime-y in there? Are we looking at sort of a sustained improvement in C&I versus what we've been seeing over the past couple of years as well?

We've consistently aimed to operate within the 4% to 6% range and are currently at 5%, which shows good improvement from our previous position. We've resolved some change order items, but still have a few left to address. Overall, we view the market positively. Previously, we've mentioned projects that have two phases: Part A, which includes early constructability and planning, and Part B, the main project portion that is awarded later. We have many projects in Part A, but the timing for Part B remains uncertain. To date, we haven't seen any cancellations, but there is a possibility that some projects may be delayed by a month or two or even a quarter. We will continue to monitor this situation. As Jeff highlighted, he is pleased with the market activity related to bidding and the sectors we are engaged in, and Jeff can add anything I might have missed.

Well, it's certainly good to be returning back to that range that we're customary to and to work through some of the challenges that were a bit of drag on the business for a while. But we are back into the range that we can continue to operate in and the projects that we have under contract now look healthy, and the pipeline is equally. So we intend to stay there.

And then it's also noteworthy. It looks like you guys flipped to net cash this quarter. So I assume you guys are kind of primed up to do an acquisition here at some point. I'm just curious whether you'd like to add more T&D at this point or more C&I maybe something different. And I guess, particularly on the T&D side, do you think you'd be able to acquire more T&D revenues at a multiple below where you guys are trading today, and I'd be curious to get a sense on that.

Yes, I'll let Betty cover the free cash flow in a minute. As far as our cash position and looking at acquisitions, we took a holiday last year, as we said, to make sure we focused on our bottom line, the integration of the businesses, and making sure our balance sheet was back in shape. And we accomplished all those items. Not that we're happy with where we're at. We're always trying to take it to the next level and be a little better. But with the acquisition front, we continue to see what's out there. We continue to explore. There are companies we'd like to have. But can you get them at the right price? Can you get a good company at the right price? That's the unknown side. So the good news is we don't have to do anything. I'd like both segments, and I've said that for years that we're in, both the T&D and the C&I. So I would like to add to both; it's really what opportunities are out there and how good companies we can find. We're not looking to buy a broken company; we're looking for a good company that's additive to what we do. So we'll continue to look, and hopefully, we can find something in the next year or so. Betty, anything on free cash flow you want to highlight?

Thank you for acknowledging that, Sean. The strong free cash flow and net cash position are largely about timing, as reflected in our free cash flow statement. This quarter, capital expenditures are likely on the lower end. We expect to continue our usual capital spending; it’s simply a matter of when that occurs. Expenditures will increase later in the year. Additionally, cash flow timing can vary, particularly with some of the larger projects and the job mix. Overall, this quarter performed well, and while we don’t expect the same strength in upcoming quarters, we have ample capacity for capital deployment regardless.

Next question comes from the line of Andrew Wittmann with Baird.

I would like to follow up on the margins in the C&I segment. They are at a level we haven't seen in a while, and I'm trying to understand the sequential change in margin improvement. You mentioned cleaning up some change orders, and there were clearly some jobs that weren't very profitable last year. Is the increase in margin performance mainly due to finishing low-margin jobs in the previous quarters, or can you attribute it to other factors? Also, could you clarify the closeout mentioned in the press release? Which segment does it pertain to?

The closeout was in the T&D segment. Regarding the margins on the C&I side, we experienced lower profit work wrapping up last year and difficulties with change order negotiations. While we are not entirely through the lower margin work, we are making good progress. This has contributed to our current performance. Additionally, as Jeff mentioned, some areas rebounded more quickly than anticipated from the COVID-related challenges. There are a few sectors responding very well, while others are still lagging. Surprisingly, some areas expected to recover slowly are actually regaining momentum faster than predicted. It will be crucial to see how things develop in the next six months regarding the release of some of those projects we discussed earlier. Jeff, do you have any further insights based on what you’re observing?

Rick, you covered it pretty well. All I would add is that there are a number of things that were causing some drag in C&I. And so some of those things are behind us, as we've talked about. And as I've mentioned, it looks like we're on a pretty good clean run rate right now, and that's where we intend to stay.

I wanted to mention that when we refer to the one-time items, we are discussing better-than-expected productivity on certain jobs, along with some offsets. These offsets are nearly equal, and if removed, they lead to a very slight impact overall. Therefore, the 5.1 percentage is fairly accurate now that those jobs are completed.

And by the same commentary, it sounded like for the T&D segment with that first question that you answered that on a net-net basis, including the closeout? I guess maybe that's worth clarifying, including the closeout that you had still net-net, pretty reflective margin performance in the T&D segment this quarter.

Yes, that's correct.

The only thing to make sure you take into mind is we did have extremely good weather across most of the country. So that did help our margins some. I've always got to highlight that because I would say it's above average as far as what we've had good weather-wise, not bad weather-wise. So it affects our margins. And then remember, as we move into the summer season, part of the transmission work is you cannot work on certain right-of-ways during that period of time. So make sure you take that into consideration as you look into our future quarters.

Regarding the large projects in the T&D segment, you've mentioned them entering the award stage for quite some time, at least a year. It seems they're now starting to impact the income statement. My question is about how many large projects you've been involved with in the first quarter. It sounds like there's ongoing ramp-up from these projects, as well as possibly others starting in the next couple of quarters. Can you provide details on how many projects you're currently engaged with? Additionally, regarding the booking outlook, you've discussed these substantial projects, especially concerning solar. Have the timelines for any of these changed? Previously, you indicated that some of the larger solar projects might impact backlog in the fourth quarter, so I'm looking for an update on that.

Sure, as far as our company goes right now, we've got what we consider three large projects going. So when you look at those, they've all been announced, it's the I-70 project, it's the solar project that we have in Nevada, and then it's also the LS Power project that we've talked about. Those are all at various stages. So the I-70 project has another two years left on it, basically to finish up. The Battle Mountain or the Nevada project actually has about six months left to finish on that project. And then the LS Power one was the one that we thought would start a couple of quarters earlier, and due to some permitting and some other issues, it got extended out, and that's what we've really seen push up this last quarter. That's the one that's starting. So when you look at that, that's what we have now. I'll let Todd talk about future projects out there that we're chasing. And remember, any of those projects we land are 12 to 18 months if we do land them before they really hit backlog.

Just to add to Rick's comment on the LS Power and the other project that we did an announcement on that will run through midyear 2023, at least. So that's a 2.5 to three-year project. The other opportunities that we're seeing right now, we're seeing some of the transmission lines that have been discussed in the West coming out for bid actually. And then I think there's a couple of other ones that we're hearing about that we're tracking that are very sizable projects that still have some hurdles to get through. But I know that there are some power purchase agreements being sold on a few of them right now. And there's an intent to get some of those out to bid here in mid-summer. So we're pretty excited about the opportunities that are out there, as well as the opportunities on what we typically call midsized projects, which we're seeing quite a few of the 500 kV transmission lines that maybe don't have the length that we would get it to what we claim to be a large project, but very nice projects that we're going to be seeing probably make that start dates as early as this summer to the fall. The other ones I mentioned previously would be 2022 start dates.

Our next question comes from the line of Brian Russo with Sidoti.

To summarize your responses regarding margins, can we conclude that you are entering a sustained period where your sales mix is shifting towards larger projects in the T&D segment, which will help maintain high T&D margins beyond the next couple of quarters due to timing?

I would say not so much just on the large projects side. I mean, we've talked about the projects we have going. We talked about the opportunities, but any large project we would start or if we were awarded in the next, let's say, six months wouldn't start for at least another six months as a minimum. So I wouldn't say our margins are sustainable based on that. I think if you look at our total mix of work, right now, when you look at the large, small, and medium-sized projects and you look at it that way, I would say that's why we're saying we're trending toward that upper end of our guidance.

And just on the Aeolus Power contract, it's running through 2023. How much percent completion did you actually have in this first quarter? And I would imagine it ramps up through the middle of the project. I mean, how should we think about kind of the sequential revenue contribution of that project over the next two or three years?

The way I usually look at a project like that is because of the material component and part of the subcontractor component, you'll see it a little heavier on the front that you might see as far as a percentage of the job. Within the first 20% of the job, you may be 30% or 35% of the revenue, something like that. And then as it progresses, it levels out.

How is your labor force currently? Do you have enough labor to meet the increasing demand on both sides of your business, which could lead to faster growth in margins compared to revenue in that scenario?

I would like to say we're in that position. I've always mentioned that contractors can be their own worst enemy as they pursue the next project. Even though resources are limited, we do not see this reflected in our margins related to backlog or project performance. We aim to build long-term relationships with our clients and ensure we have a reasonable margin for our work. However, the market remains very competitive despite the tight labor situation. I have experienced this for a long time, and in every cycle where labor has tightened, one would expect it to significantly impact margins and work availability. Yet, it remains highly competitive.

Then just lastly, big picture, and I can appreciate the commentary on transmission and your current utility customers, and there's been a general consensus among utility senior management teams in this earnings cycle related to the infrastructure build. The clean energy and renewables are a big focus, but it seems as if the biggest opportunity for a lot of these large utilities is transmission. But from MYR Group's perspective, given your mix of business between T&D and C&I, and I know there's a lot of work to do on the infrastructure build, but where do you see more opportunity? Do you see it in the C&I segment in terms of market opportunity? Or do you see bigger opportunities in these larger multibillion-dollar transmission projects that ultimately will be needed, but it certainly will take time to develop and permit?

For us, it's both. We see opportunities in both the C&I market and transmission. We hope that there won't be delays in decisions to move projects forward due to economic recovery. We haven't observed any cancellations, which is a positive sign. We're actively building our C&I business through acquisitions and organic growth, and we are very strong in that market, where we aim to continue expanding. Although we would have pursued more acquisitions, some of the valuations and past events have hindered us from fully capitalizing on potential acquisition growth. However, considering our organic growth over the last four to five years, we will continue to focus on that area. There are significant opportunities in both markets, and we are enthusiastic about both.

One last question, if I could. We didn't hear much about storm response efforts or margins maybe in the first quarter in Texas or in the Gulf in the South. I was just curious, were you involved in any storm restoration? And/or does that create near-term opportunity for maybe weatherization or upgrades and reliability and even redundancies that might be needed in electric transmission down there?

Sure, for us, it was very little storm work done even in Texas. It wasn't where lines were coming down. It wasn't bad wind, it was freezing conditions and it was ice loading. So it wasn't taking lines down. It was really just freezing things. So we had a lot of different kind of outages and things we worked on there. But for the most part, it was the crews we've had in Texas. So we have a substantial number of crews in Texas, and they moved from doing their day-to-day work to that storm type restoration, but not anything that's moved the needle. I think long term, Texas needs to decide what they're trying to decide what they're going to do. I think more to come on that as we all learn more.

Your next question comes from the line of Noelle Dilts with Stifel.

Congrats on another good quarter. I was hoping, Tod, that you could expand a bit more on what you're seeing in solar, kind of how you're thinking about the size of the opportunity and what you're seeing in terms of the competitive dynamics. And also if you could touch on any actions or hires that you've taken on in order to position yourselves better in that market.

Yes, first, to answer your last question there, we continue to recruit from contractors that have had experience in the solar industry to help us with the experience that we've had. And we believe that some of the hires that we've had recently are going to play a key part in the growth of our solar business going forward. Anytime we have a new business, we want to make sure that that business has a strong start, the ability to grow organically and continue at a nice steady pace. So as we started this last year, we were really looking at getting our feet on the ground while still having success in our projects, and we've achieved that. We'll continue to grow that incrementally as we can and get resources for it. But from a market perspective, I will say that there are a lot of opportunities that are coming our way with the individuals that we brought with us. They have brought with them or brought along. So they're there from a competitive standpoint; there is some competition, and competition is growing pretty rapidly in that market. Just over the past year, we've seen more people trying to get in it. And therefore, it's become more competitive. But right now, we're still able to almost source some projects with some people coming to us for some of the smaller distributor type stuff and even a few of the midsized utility-scale solar plants that are out there. So we're going to grow the market. We're going to grow it smart, and we think there's great opportunity in it.

I was wondering, considering the inflation we've observed in steel and other raw materials, if you have any concerns regarding indirect exposure. For instance, could you face challenges with the availability of transmission poles or potential delays? I'm interested in your perspective on this situation.

On existing projects, I think we're good, but we are closely monitoring the situation, especially with the structures and the folks that are out there manufacturing lattice towers and steel poles. As always, we try to protect ourselves upfront by having conversations upstream with our clients as well as downstream with our vendors to make sure that the project is executable in the timeframe. We just work on contractually in both positions up and down to make sure that we're protected. We're monitoring that every day. That in addition to the freight situation is something that we're monitoring closely as we continue to see those charges go up.

And finally, just on the infrastructure bill. Obviously, Biden's done a lot of interesting commentary around addressing some of these hurdles that have really plagued the industry for decades around siting, permitting, and cost allocation. But how are you guys thinking generally about when that benefit could come through? Let's say a bill is passed later this year; is this something that we should be thinking about as having an impact in the market over the next three to five years? Could it be sooner? Just curious how you're thinking about timing on that front.

Yes, anything that gets approved in Washington can be altered during the process. We believe that any approval will be beneficial for us, but there will likely be a delay of at least 12 to 18 months before we see any effects. Things move very slowly in Washington, and based on conversations I've had with our utility clients and others involved, it's reasonable to expect this timeframe before we see any outcomes.

At this time, I show there are no further audio questions in queue. I will now turn the call back over to Mr. Rick Schwartz for closing final 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.

Thank you. This concludes today’s conference call. Thank you for participating. You may now all disconnect.