MYR Group Inc. (MYRG) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the MYR Group First Quarter 2018 Conference Call. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Miss Kristine Walczak. Ma'am, you may begin.

Thank you, and good morning, everyone. I'd like to welcome you to MYR Group Conference Call to discuss the Carney's First Quarter Results for 2018, which were 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 this morning's press release, please contact Dresner Corporate Services at 312-726-3600 and we will send you a copy, or go to MYR Group's website, where a copy is available under the Investor Relations tab. Also, a replay of today's call will be available until Thursday, May 10, 2018, at 11:59 PM Eastern Time by dialing 855-859-2056 or 404-537-3406 and entering conference ID 6855529. 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 year ended December 31, 2017, the company's quarterly report on Form 10-Q for the first quarter of 2018 and in yesterday's press release. Certain non-GAAP financial information will be discussed on the call today. A reconciliation of this non-GAAP information to the most comparable GAAP measure is set forth in yesterday's press release. With that said, let me turn the call over to Rick Schwartz.

Thanks, Christine. And good morning, everyone. Welcome to our first quarter 2018 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 move 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 Officer's, for our T&D C&I segments, would 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. We are pleased with our first quarter 2018 financial results, which include a $45.5 million increase in revenues, a $4.4 million increase in net income and a $6.9 million increase in EBITDA, as compared to the first quarter of 2017. While there is always room for further improvement, we are pleased with the increase in our gross margins during the first quarter as compared to the same period last year. This increase was driven by the strides we have made in improving our efficiency. Our first quarter 2018 backlog reached a record high of $958.5 million, a 41.1% increase from our backlog on December 31, 2017. Our healthy backlog consists of both, long-term projects in both our T&D C&I segments, with varying construction start dates that will be covered by Tod and Jeff, later on. The strength of our economy, industry news and spending trends by our customers point to continue strong investments in electrical infrastructure, which, we believe, should support further growth in both our T&D and C&I segments. We have seasoned, experienced craft and management teams in place throughout the geographies we serve and are confident we have the expertise and resources necessary to successfully meet the needs of our clients. Regardless of the size, type, or complexity of their projects. We also remain diligent, refining our internal processes for continuous improvement for all aspects of our operations. We will continue to profitably grow our company, both organically and through acquisitions, as we execute our strategy and expand our service offerings to a wider base of clients. We believe these growth initiatives, coupled with our dedication to maintain a solid financial position, should lay the foundation for future success and allow us to deliver strong returns to our stockholders. Now Betty will provide us with financial results for the first quarter of 2018.

Thank you, Rick, and good morning, everyone. Our first quarter 2018 revenues were $345.6 million, an increase of $45.5 million or 15.2% compared to the same period last year. The increase was primarily due to higher revenues at C&I and an increase in the distribution revenue. T&D revenues were $216.4 million and increase of 10.6% compared to the same period last year. The breakdown of T&D revenue was $134.5 million for transmissions and $81.9 million for distribution. C&I revenues were $129.2 million, an increase of 23.8% compared to the same period last year. Our gross margin was 10.3% in the first quarter of 2018 compared to 8.6% in the same period last year. This increase in gross margin was largely due to improvements in efficiency, fleet utilization and improved weather conditions from the first quarter of 2017. SG&A expenses were $28.3 million, an increase of $2.5 million compared to the same period last year. The increase was primarily due to higher bonus and profit-sharing costs. SG&A, as a percentage of revenue, decreased to 8.2% for the first quarter of 2018 from 8.6% for the first quarter of 2017. Income tax expenses $2.3 million in the first quarter of 2018 compared to a $400,000 income tax benefit for the same period last year. The tax rate in the first quarter of 2018 represented 28.9% of pretax income. In the first quarter of 2017, income tax benefit represented 42.7% of pretax income. The effective tax rate for the first quarter of 2018 benefited from the enactment of 2017 Tax Act. First quarter 2018 net income was $5.6 million or $0.34 per diluted share, compared to $1.2 million or $0.07 per diluted share in the first quarter of 2017. Total backlog as of March 2018 was $958.5 million, a record high, consisting of $434.3 million in the T&D segment, $524.2 million in the C&I segment, also a record high for the C&I segment. This total backlog represents a sequential quarter-over-quarter increase of $279.4 million or 41.1% from last quarter. The increase in backlog was primarily due to the addition of previously announced 70 projects and various small and midsized T&D projects. Turning to the March 2018 balance sheet, we had approximately $1.7 million in cash, $67.4 million in funded debt, $162 million in available to under our credit facility and $181 million of working capital. In summary, we are pleased with our results for this quarter. Compared to the first quarter of 2017, we had improvements in revenue from both of our T&D and C&I market segments, improvements in overall margins and net income, and an increase in backlog to a record high. We believe that the fundamental business and markets in which we participate are strong and should support continued profitable -- profitability going forward. We also believe, our strong balance sheet and borrowing capacity are sufficient to support our working capital needs bonding requirements, equipment investments and our strategic acquisition in our organic growth initiatives. 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. MYR Group's first quarter T&D operational results demonstrated a solid start to 2018. We continue strengthening existing client relationships to a superior service while pursuing opportunity for the new clients that aligned with our expertise. Our reputation to position in the industry support our goals expanding work with our current clients and gaining competitive edge and pursuing opportunities with new clients. Our improvement in T&D backlog reflects an active bidding environment and wins all the number of small- and medium-size projects. Including in our first quarter, addition to backlog, is the Harry Allen to El Dorado project for approximately 60 miles of 500 kV transmission line. In late 2015, the California Independent System Operator selected desert link LLC, a subsidiary of LS power, as the approved sponsor to develop, construct, own, operate, and maintain the new line. And MYR Group teamed with Ellis Tower to provide construction services. The estimated construction start for the project is late 2018 and completion is scheduled for January of 2020. The overall outlook for Transmission and Distribution markets remained strong with healthy bidding activity. Investments in electrical infrastructure continue with the need to update aging infrastructure, increase grid resiliency, connect new generation resources and harden the system against the currencies that may disrupt our supply. I'd like to take a few moments to highlight some recent industry news point into strength in the end markets we serve, which bodes well for increase T&D opportunity for MYR. In the Northeast, we are monitoring events surrounded the outcome of several proposed larger transmission projects. For example, Massachusetts recently mandated 9 million megawatts of new clean generation by 2022 as part of their clean energy RFP. One proposal from the RFP is all long grids 145-mile, New England clean Energy Connect project. The project is budgeted at approximately $950 million, and it's part of a joint bid offering from Auburn Grid Subsidiary, Central Manpower and Hydrophobic. Our successful performance as prime contractor of the northern loop of the $1 billion main power reliability program for central main power, illustrates our ability to execute projects of this magnitude in the Northeast. We will closely monitor the outcome of the Massachusetts RFP and all associated large projects, which could lead to significant opportunities for MYR Group subsidiaries. We also see strong market activity in the southeastern and Midwestern U.S., which we believe, could provide opportunity for strategic growth across several of our operating areas. For example, Duke Energy recently announced plans to spend $25 million on grid modernization throughout its entire service area over the next decade. And MYR is positioned well to pursue and participate in projects related to this initiative and all of Duke's service territories. One of our clients, American Electric Power, ATV, covers a large geographic territory, included but not limited to, parts of Ohio, Indiana and Kentucky, West Virginia, Oklahoma and Texas. All areas were MYR Group subsidiaries provide T&D services. As part of its capital investment plan, AP recently announced a $17.7 billion investment in its Transmission and Distribution system between 2018 and 2020. We have a long proud record of working with AP across all their service territories, which, we expect, will position us well for future opportunities. Our growth in the Texas market also continues at a solid pace. The recent investments we've made in our operations, fleet and training facility near Dallas, are allowing us to better serve that vibrant and growing market both in Transmission and Distribution. Our outlook for projects of all sizes for a wide range of clients in this region remains robust. As an example, Oncore electric recently announced that it is been granted approval for over 100 miles of new transmission and associated substation facilities. These projects will help support new load growth in the region. In the western U.S., we serve clients who have expensed territory. This geographic reach allows us to pursue some of the largest transmission projects in the West that are currently in development to delever renewable generation to large population centers. These proposed multistate projects required extensive permitting and planning, which often takes years before reaching the construction phase. We are actively pursuing or have bids under evaluation for many of these Western initiatives. These projects, along with previously announced plans by clients, such as PacifiCorp with their energy vision 2020 initiatives across several western states, provide significant opportunities in the region. We believe our ability to effectively staff, manage and build these complex projects throughout the West will be an important competitive factor. The overall distribution market continues to trend up, and we have several groups working on the long-term contracts with multiply utilities across the country. We continue to offer proposals for additional projects and alliances and are excited to announce the recent awards of a 5-year Distribution alliance contract with soldier group project in Arizona. Opportunity, such as this, are part of a growing portfolio that further positions MYR as a major player in the T&D market. We know that as we constantly evaluate, improve and grow our business, our results to panel our ability to effectively listen to our clients and respond and deliver according to their expectations. We will remain disciplined in our approach to capitalize on the right opportunities to grow our business. Our priority is to always recruit the top people improve our processes and invest prudently in our resources will support our future growth and prepare us for the opportunities in the years ahead. I'll now turn the call over to Jeffrey Waneka, who will provide an outlook of our Commercial and Industrial segment.

Thanks Todd. And good morning, everyone. As you heard during Berry's report, our C&I segment continues to build momentum in nearly all our markets, as demonstrated by our continued growth in backlog. Our most notable achievement in the first quarter was the successful execution of the contract on Colorado Central 70 project, which added more than $100 million to our backlog. While the project is still in the design phase, we are anticipating crews will mobilize to the site at least later this year as early works packages get underway. In addition to this exciting award, the Colorado Department of Transportation intends to award other large contracts in 2018 to begin relieving the congestion on interstate 25, north and south of Denver. Our transportation experts have been engaged in several meetings with key general contractors, which is set the stage for continued growth in our Transportation group. One of the primary drivers for awards, such as central 70, is our continued focus on strengthening the preconstruction services we offer clients. Our efforts to build trusted relationships are generating opportunity in all our markets with successful transit projects underway in California, Arizona, Washington, and Alberta Canada. We believe, we are well positioned for teaming opportunities on additional projects. In the data center market, we continue to see strong movement, which is bolstered by the recent award of a Data Center in Colorado for JPMorgan Chase. Additionally, JPMorgan Chase has announced plans to build two similar facilities in the East, which could bode well for our subsidiary Our contract with JPMorgan Chase is with Holder construction Company, which is one of the latest nation's largest datacenter builders. Our ability to provide a workforce, specially trained for mission-critical facilities, is a key driver in winning these types of projects. This specialized training comes in the form of our in-house training program, which are designed to train our workforce to meet our clients needs. We believe, this training sets apart and our industry and represents key attributes that helps us create -- capture work on extremely complex, high-tech facility projects. For example, our datacenter University is designed to educate employees on how to work in and enhance the unique sensitive and complex environment in our characteristic of data centers. We believe, these highly valued training programs will continue to place us in a favorable position with datacenter clients in all our markets. North of the border, we are staying positive trends in many of Western Pacific Enterprises markets. WPE's strong existing relationships have generated many teaming arrangements that, we believe, will mature into project awards. These projects include office buildings in Vancouver. Water treatment plants on Vancouver Island and large industrial facilities across Western Canada. Our resume on Vancouver's elevated rail system is unprecedented, which is lying to a high level of confidence on transit projects that are currently on the planning phase. E.S. Boulos also experienced an increase in backlog this quarter with the award of projects that have been in the procurement phase. The largest being a project at the Kobe College Athletic Field. In addition to strong activity in education for tracking select projects for the Navy and with healthcare providers, we continue to assist long-standing clients in preplanning efforts for projects planned to break ground later this year. And finally, in Arizona, we're seeing a diverse project pipeline, which includes exciting announcements about sizable spends in the mining industry. Although, this industry has been slowly bound, we have maintained strong relationships to several clients that will allow her company to rapidly deploy a knowledgeable workforce in an area where skilled craftsmen are limited. In 2018, our business unit leaders remain focused on providing exceptional preconstruction services and project execution, which, we expect, to drive continued expansion this year and beyond. The acquisitions we have made over the past few years expanded our footprint and have led to exciting new opportunities across the U.S. and in Canada. We're always staying abreast of new technology, mastering our skills and refining our expertise in order to serve our clients, which reinforces our reputation as one of the few contractors capable of performing highly-complex projects. Looking ahead, we expect strong growth in both, our new and established markets and no, other core competencies in healthcare, transportation, data centers, commercial, industrial, aviation and manufacturing, position us well for future project awards. Thanks, everyone, for your time today. I'll now turn the call back to Rick who'll provide us with closing comments.

Thank you for those updates Betty, Todd, Jeff. I'm pleased with the overall market and our solid market position in both our T&D and C&I segments. We will remain at the forefront of identifying the industry trends and client needs in order to grow our business and provide service excellence as efficiently and effectively as possible. We believe these are the key factors that will position MYR Group for ongoing success. From Betty, Todd, Jeff and myself, I sincerely thank you for joining us on the call today and for your ongoing confidence in the MYR Group. I look forward to updating you on our progress next quarter. Operator, we are now ready to open up the call for comments and questions.

[Operator Instructions]. Our first question comes from Tahira Afzal with KeyBanc .

I guess, first question is, we're seeing a lot of commercial clients and industrial clients really focusing on mission-critical and resilience. Just -- Do you see an opportunity now at this point? Do you really take your C&I business, bundle it a little more with your T&D business that you did in the past? You guys are -- actually, from the publicly traded side, very unique in the fact you do both?

Yes, we do see that opportunity. In most locations our T&D and C&I where we serve -- where we have both operations they are housed in one building, so that interaction is always there. We do a lot of joint proposals and chase work on a regular basis. So as this -- as that component expands in the market place, I see that as a place where we can definitely leverage and grow.

Got it, okay. And then, if I look at your first quarter margins, it's pretty good to see that the T&D margins up holding our pretty steady, and what is typically a tough winter quarter. Could you talk a bit about the moving parts in there? What's anything one-time to deposit over negative? I know storm plays a part, but just wanted to get a sense of the sustainability and ramp as we go into higher-activity quarters?

Yes, I'll start and then, I'll turn it over to Todd. I think this last quarter we really had some positive impacts due to good weather that we usually don't see in the first quarter, so that's one component. A lot of our projects lined up kind of the end of one to the start of the other, so that was a positive thing for us. So we didn't -- we had that GAAP in that nonutilization of equipment. So that really helped us there. And then, finally, it's a good market out there, and we are able to secure some work and keep our crews busy, which allowed us to be efficient in our deployment of resources. So those kind of together are added to it and made a good quarter. The one thing we did have -- happened is, that we did finish the large project for CTT in Texas. So as we -- as Todd and Jeff talked about the new projects, really don't start till late this year. So we'll see very little revenue. Where in the past, we had some quite a bit of revenue burning in quarters based on large projects. We kind of have a gap on that side. But we do have small and medium size that remained steady. Todd, anything you want to add?

I think, you hit on the wreck that basically, it was more about the smaller-to-midsize projects that had a nice flow and continuity throughout the course of the first quarter and less gaps this year than -- early this year than in the first quarter that We've seen in the past.

Got it. And then, is part of the gaps going away, obviously, the market. But you did mention in your release, you have talked about it that you have seen some of the efficiency measures stakeholders out. Is that something that is sustainable, going forward? And are you pretty please with efficiency targets you've hit? And are there more that you can hit, going forward?

We're always striving to improve and really take on a lot of the lean construction techniques from how we deliver our material -- how we approach our preplanning, and we spend a lot of time on that. We always strive for that. But some things are out of our control sometimes. So we try to plan and have contingency plans in place, but we plan on always gaining on our efficiency that's what makes us competitive and price competitive in the end. So we strive to spend a great amount of time on that. Jeff, you, on the C&I side spend a great amount of time on prefab and other items. You may want to talk about a little bit?

Yes, we like the type of projects that are out there and clients that are aligning ourselves with we have a history with. And that always helps us start that project really on the right foot where we're synergizing our work with theirs and the other trade partners which really gives us projects a great start.

The next question comes from Alex Rygiel with B. Riley FBR.

I'm in a little bit of difficulty in thinking about how these small or medium projects will transition to the P&L over the next six months till the larger projects work starts in the latter half of the year. Can you, sort of, help us to think about that as it relates to EPS or profitability for the next couple of quarters? Are we to witness traditional seasonal trends? Do the smaller medium projects have a bit higher margin, lower margin as we process them? Any additional thoughts would be helpful.

Yes, again, we don't give guidance, but I would say use kind of our past history over the past few years to look at the seasonality where we've been on that work. I don't -- that's something that can always affect us depending where -- what work we have going in certain areas and how that weather impacts us in those given areas. But the small- to medium-size, we are continuing to see a lot of activity, and we turn and burn a lot of work on a regular basis, so it's having that -- right now, we see a lot of activity. So it's a matter of securing that and keeping that coming forward. Our backlog growth we are happy with. But again, like I say every quarter, I wish we had better control over the timing of those awards, because it can be lumpy. And in some quarters, we see a lot, like we saw last quarter, and then it can came off because we really don't have control of those award dates with our customers. But we are seeing a lot of bidding activities, budgeting activities. Our clients are positive about spending money. It just remains a very competitive market out there. And which is kind of shocking with the shortage of labor out there, some of the other items the increase in material pricing, you think the margin would be coming up and you're still seeing to maintain that. I wouldn't say there's a strain on it, but we're not seeing the increases, I would've thought we would've seen a year ago.

Our next question comes from Andy Wittmann with Baird .

I guess, given the backlog is so materially changed here, it's bigger and probably got a little bit more C&I that it's had in the past. Can you, maybe, Rick, help us understand what's in there in terms of the amount of gross margin in the projects? And how it compares to what you had in the industry? I mean, you look at Central 17 in particular, it's larger, the scope, and we haven't seen anything like that in C&I. And I don't know, if TNT's changing too, but I think, we'd all like to understand how you're viewing in the profitability that's in this new much higher backlog? And then, how it compares to what you had previously?

It's very similar to what we've had in the past. It's really, if I look at the TMD or the C&I component separately from a margin standpoint in our backlog, it remains consistent to where we've been over the last couple of years. It's not like we're seeing big margin increases. Again, we're working on our efficiency. We're trying to do everything we can to maximize our return on those projects. But the margin we bid those projects are a very similar to what our history has been.

Is there any significant material subcontractor cost or cost that are in the numbers today that driven that backlog? Or is it -- because that was a factor in '17, you did have some of that. So I'm just wondering if that complexion is changed?

It hasn't. On all the C&I, let's take them two separate things. On the C&I projects, there is always material and subcontractor components. I'd say Central 70 is a similar to any other C&I-type job we have or transportation job. There's not a bigger mix on that. On the line side, on the T&D side, there's definitely a material component in there. But I would say, within our backlog it's similar to what we've had in the past. So it's not as aggressive as what it has been on some of the other large projects. And again, the projects we've received on the T&D side are mid-to small size, not -- they're all sub-$100 million, not above that.

Okay. That's helpful. Maybe, just on a going along that line of thinking that. And just to check on maybe the average size that's in the backlog here. As you look at it, is that larger? Maybe, another way to ask the same question is, do expect the burn rate. In other words, the revenue dollars attributable to converts in the next, say, 12 months versus the amount of backlog that you have? Do you expect the burn rate of that backlog to slow down or speed up? Slow down, obviously, implying that the average project size is smaller. Because historically, you've converted -- your backlog has converted to about 40% of the next 12 month's revenue. And i'm just trying to get a sense about how that may or may not change today?

Yes, when we talked about the -- in our script, the LS power project and the Central 70, those projects really -- they are multi-year projects, and they start the end of this year. So we will see very little revenue from those projects. So when we look at the remaining backlog we have, it will burn on a normal basis, and we did release what our revenue we burn in the next 12 months was. So I think, people kind of know what that is and -- from our backlog now, so it's one of those things, you can put it together and see that these really -- these projects really -- these large projects and midsize on the line side really wont burn this year, it will help us next year and many years after that.

Yes, but the number that you disclosed in terms of the amount that you expect in the next 12 months. Also they're still going to be added to book-and-burn type of business that's -- that complements the, I think, was 750 I think was the number, on the top of my head that was in the filing? Is that right?

Yes, no, we have to capture new work everyday. As we're -- as you said, we're burning a lot of work everyday. It's something that we do see busy environment out there from a bidding standpoint and we see as a positive thing, we just need to capture our fair share.

There is been some common share from others in your industry, not necessarily contractors, but more broadly speaking, suppliers to the regulated utilities. Who are seeing their utility customers having to give back rate as a result of federal tax reform was. Those utilities may be looking to recapture some of the savings that you and others like you have captured from the tax reform changes. Are you seeing any commentary from the regulated utilities looking to continue your profits?

Not as of now. I think every customer we have wants -- is challenge you -- is challenging you to be the low-cost provider. So we always see that trend. We're trying to do everything we can through our efficiencies and other items to be that low-cost provider to all our clients, whether it's on the C&I or on the T&D front, because it is an important cut -- measurement and you measure it everyday when we put in events.

Got it. My last question. Sorry, to take up so much time, but hope, this is helpful for everyone. On CapEx, Betty, did you give -- I don't think I heard it, but can you give us an updated outlook for the year for CapEx budget, please?

CapEx, we didn't talk specifically about it, but it is similar to what we have historically had with respect to capital expenditures, not much different to date as well as for the full year, and as well as for M&A. So for capital, consistent and then, continuous looking on spending investments and M&A as we find an acquisition.

Our next question comes from Bob Burleson with Canaccord Genuity.

You mentioned that things still remain pretty competitive despite the increase in bid activity. I'm wondering, what your series are behind that? you nobody thing is causing that? And is there anything that you see down the road that might change that dynamic?

I think it's a few things. One is the large projects on the T&D side haven't come to be, so people are continually trying to build the backlog and there is so the companies that we chase that work are going after the other work it had competitive margin. I think that affects church and then, you just look at areas that we're working in and everybody's trying to grow the company sent back to the last question, you've gotta be low-cost provider in most areas and it's a lot of people trying to do that. So it's getting in there and making sure we have a team that can execute and there is some projects that we've been on a long drop long time and we know what the price of that market if we kind of know other projects estimated at and there is only solo we will go and we're not going to win every project out there. And sometimes we can't make sense of the prices that come in from some of our competitors. But again, we're not going to been everything but to evaluate it a job at a time and make sure that we understand the cost component of those jobs, each cost component. And make sure we understand the cost side of it and then put a fair margin on top of that.

Okay. And then, in terms of, things like potential wage inflation or other materials inflation. What you're seeing out there in terms of pricing and if there is anything you can do if not, raising your bid margins can you just deal of skill contract in some way to get some benefit from the uptick in activity that we're saying?

We attempt to do that all the time and I will let may be chopped talk a little bit about on the C and eyesight were leasing projects are coming out for rebudget and budgeting some of the stuff that you are doing.

Yes, we're seeing increases across the board that are driving prices up and sometimes, that doesn't fit with our clients pro forma for that project, which then has a tendency to delay the award, has -- can push that job out till it gets the scope and gets that project back in line with where that clients expect them to be her needs them to be. So there is some pressures there on the market that we are working our way through.

I just assume that the T&D side right now, it's really isn't really impacting us. We can captured this anticipated increase during the bidding phase because the smaller to medium-size projects don't extend or over duration quite often enough to impact that project.

Okay, great. And just wondering, with tax cuts and more investment more capital expenditures here domestically. What you guys seeing going forward in terms of an [indiscernible], do you expect a lot of increased opportunities may be outside of the realm of where you guys normally operate? Is that kind of adjacent your core business that is starting to perk up a little bit?

Well, we see some stuff. We're really focused, as we said in past calls, before we expanded organically too much further is making sure that the organic areas -- we expansion areas we have now turn profitable as a net-net overall and I've said, I wanted to do that but yet of the second quarter of this year. We're trending that way but we do before we grow too much in a geographic expansion mode. We definitely want to see those areas turned and be profitable overall. And that's been our focus along with finding the right acquisitions of their and we continue to look for those and where we really focus on expectation at this point.

Our next question comes from Zachary Larkin with Stephens Inc.

So Rick, you mentioned in one of your sponsors that labor is tied in certain areas that something we hear about a lot in the construction space. Could you just one, just where maybe you're seeing some of that tightness since there a certain if there is certain kind of key positions are areas where there is more for constraint? And then, if you doing anything, or how you're approaching addressing what could be a coming shortfall?

Sure, Todd, you want to start and then, Jeff, you can add.

Yes, on the T&D side, I think it's relatively tight across the country. And to be honest with you, in the past we've seen it move to a geographic region to region but today we're seeing relatively tight across the area and our planned and I mentioned I think in the script that we've built a training facility in Dallas, which is in Texas, which I mentioned was a growing area for us and we're bringing in our own folks and train an alignment on there and all aspect of construction including transmission, distribution, work in substation as well. Outside of that, the actively participate in probably 8 to 10 apprenticeship programs across the country and played key roles in recruiting an interview thing and developing those employees of the swell. So it's a challenge in the market is tight across the country, but we are being proactive in our approach to it and doing what we can to recruit from the high schools from island colleges and the general population as a whole.

I'll add to that. There is no doubt, it's a tight labor market, but we have worked really hard to make our company attractive places for people to work. Grade safety program, great processes the right relationships with our clients. So we've been fortunate to be able to get to people that we need on the projects that we secured and we're very careful not to go after something that's all we know there is a pool that's not laterally available or we can build with the speed that the project needs to build. So right now, we feel like we're combating that situation fairly well.

That's helpful. And then, Rick, kind of extending upon the last question a little bit. It feels like now for a while, you've been focused on making sure you've attained adequate levels of profitability at the greenfield expansions within see Hyundai. We are getting close to that point if you look at maybe Phase II of what growth in that division could look like I mean, do you think in extension would be more focused on another wave of the sort of organic expansions or do you think it might be more M&A focused?

I would say it's going to be a mixture of both. We were table or of doing both most of the growth we've had in the company's since we went public has been organic growth and even through the years, so we know that, where -- I want to say, we understand doing that and how to do it and, which markets you want to go to. We have a list of Todd and Jeff have list of areas that would like to expand into what we want to make sure those business opportunities are solid before we go there. And then, on the acquisition front, it's opportunities come across our desk every day. We look at some, some like better than others and then, some of them come down to what kind of multiple you're willing to pay for a good company. And we've got some other be like, will Jesse of what happens over time.

At this time, I'm showing no, further questions I'd like to turn the call back over for closing remarks.

Thank you, everyone, for participant on today's call. As always, I'd like to thank you -- thank our exceptional management team and employees for their hard work and our stockholders for their continued support. I don't have anything further. We look forward to working with you going forward and speaking with you again on our next conference call.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.