Good morning everyone and welcome to the MYR Group First Quarter 2020 Earnings Results Conference Call. Today's conference is being recorded. At this time for opening remarks and introductions, I would now like to turn the conference over to David Gutierrez of Dresner Corporate Services. Please go ahead David.

Thank you Chris 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 2020 which were reported yesterday. Joining us on the call today 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 March seven at 1:00 p.m. Eastern Time by dialing 855-859-2056 or 404-537-3406 and entering conference ID 6289207. 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, 2019 the company's quarterly report on Form 10-Q for the first quarter 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 first quarter 2020 conference call to discuss financial and operating 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 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. First and foremost, as the coronavirus pandemic continues to impact our lives our thoughts go out to everyone who has been affected by this virus whether directly or indirectly. As developments continue to unfold we are adhering to the latest government and client recommendations and protocols and we are taking swift and prudent measures to ensure that the health and safety of our employees and communities remain paramount. Despite the many challenges caused during this unprecedented time in history we are fortunate that a significant portion of our business is deemed critical or essential under the various governmental pronouncements governing business activities during this pandemic. We are thankful that we can continue to deliver high levels of performance, reliability, safety and quality to our clients and communities, while protecting and maintaining the electrical systems and networks that we all depend on. We have enacted measures designed to maintain safe, efficient and resilient business operations during this pandemic and have created a task force that is actively monitoring the situation as it evolves, so we can adjust operations as needed. The majority of our office employees are working remotely and we have provided resources to help them work as effectively as…

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 2020, as compared to the first quarter of 2019. Our first quarter 2020 revenues were $518.5 million. This represents an increase of $50.4 million or 10.8% compared to the same period last year. The COVID-19 pandemic started to have a relatively minimal negative impact on both our operating segments during the last few weeks of the first quarter due to project restrictions and stay-at-home orders. Although, most of our operations are considered critical and essential businesses, making our projects generally exempt from stay-at-home or similar orders, we did experience some disruption as both our customers and employees implemented safe work procedures that have enabled the majority of our projects to continue. Our first quarter T&D revenues of $259.3 million were down 4.9% compared to the same period last year. The breakdown of T&D revenues was $171.6 million for Transmission and $87.7 million for Distribution. The T&D segment revenues decreased primarily due to reduced volume on a medium-sized transmission project that is nearing completion. Approximately 48% of our first quarter T&D revenues related to work performed under master services agreements. C&I revenues were $259.2 million, an increase of 32.6% 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 sized projects, along with project restrictions and a temporary slowdown of work related to the COVID-19 pandemic. Our gross margin was 11.9% for the first quarter of 2020 compared to 9.2% for the same period last year. The increase in gross margin was primarily due to better-than-anticipated productivity on certain projects, partially offset by labor inefficiencies on…

Thanks, Betty and good morning everyone. Across the United States, we are encouraged the project execution and bidding opportunities have remained active to date with minimal impact from the COVID-19 pandemic due to most of our T&D operations being considered critical and essential businesses. Work activity primarily consists of small to medium-sized projects and we continue to execute routine maintenance and construction work under our long-term master service agreements. The majority of bidding activity is also comprised of small to medium-sized projects with clients throughout the country additional alliance and MSA opportunities and a few larger projects primarily located in the eastern half of the U.S. We have seen ample EPC and renewable pursuits and increases related to solar and battery storage facilities, which includes the recent award of a 100-megawatt-plus utility-scale solar project with 25 megawatts of battery storage. This exciting win with an anticipated start date in July 2020 and a 15-month build cycle is just north of $100 million and is not included in Q1 backlog. Prior to the recent crisis, the market outlook and capital spending projections for electrical infrastructure were robust. The drivers for T&D spending currently remain intact, but it is too early to tell how the magnitude and timing of initiatives may be affected. Currently in the Northeast Mid-Atlantic and Southeast, the majority of bidding and project activity continues to be comprised of small to medium-sized work for long-term clients and a few larger bid opportunities thrown into the mix. In addition to continuing long-term MSA work throughout the Midwest and Texas, small to medium-sized project awards for transmission, substation, distribution and street lighting we're setting in Q1. Work began on the Connersville Transmission Project for Duke Energy and the gateway transmission project for Ameren in Southern Illinois which are notable project awards…

Thanks Tod and good morning everyone. Continuing with the themes from Rick and Tod our C&I business was minimally impacted by COVID-19 in the first quarter in both construction and bidding activity due to shelter-in-place orders only applying during the last few weeks of the quarter. Starting with the impact to ongoing construction activity throughout the U.S. and Western Canada our primary focus has been to continue providing outstanding service to our clients while keeping our employees safe and healthy. A few of our projects are temporarily halted, primarily in the Northeast and on the West Coast, locations where shelter-in-place orders are currently the most stringent. We've also experienced some slowing on projects across the organization due to social distancing requirements and necessary adjustments to manpower. However, our employees continue to adapt rapidly to the new requirements allowing us to continue most of our operations. We entered 2020 with record backlogs and managed to improve backlog again in the first quarter. A few projects have had their start dates pushed forward and we anticipate others could follow suit. But in general, our backlog remains intact. Turning to the market outlook, bidding activity remained particularly strong through the first quarter with heavy activity occurring in the medium to large project category. Just a handful of large project pursuits have been put on hold while developers assess their -- the viability of their program. Although the slowdown through the first quarter was minimal, market uncertainty could contribute to an overall deceleration in projects coming out to bid. Recovery through the balance of the year will be heavily dependent on overall economic recovery. We're hopeful that the various approved stimulus packages provide greater opportunity and are encouraged by the possible approval of a long-awaited infrastructure bill. We believe the primary markets we serve may be somewhat less vulnerable to economic slowing including healthcare, transportation, data centers, warehousing, renewable energy, and water projects. In addition many analysts are predicting increased spending in these markets as society changes their behavior post-pandemic. The small project market has experienced a greater slowdown while owners focused their efforts on dealing with the pandemic. Many signs suggest that the service industry and small project market could quickly rebound later in the year in response to pent-up demand. 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'm so very proud and grateful to our dedicated field forces, support services, and management teams who are playing a crucial role keeping the majority of our people working during this crisis. MYR Group is a leader in the industry. We will remain at the forefront of identifying industry trends and client needs in order to grow our business and provide superior service as efficiently and effectively as possible. We believe these are the key factors that have and will continue to position MYR group for ongoing success. Operator, we are now ready to open the call up for your comments and questions.

Thank you. [Operator Instruction] And our first question comes from the line of Justin Hauke with Robert W. Baird.

Yes. Hi, good morning, everyone. I guess, I've got two questions. I'll focus on the two different businesses. But just starting on C&I, given that it is such a meaningful part of the backlog now two-thirds of it, I know you mentioned the areas that are relatively a cyclical and probably don't see an impact here from a downturn. But I guess could you just help maybe give kind of a pie chart overview of what your end markets look like in your current backlog today or maybe geography? Just something that kind of gives us a stake in the ground of what the mix is?

Well I'll start and then I'll let Jeff add something to it. I think when we look at really what we have work wise, we have very little if anything to do with multi-use-type facilities. So if you're talking about residential and some commercial combined, we have very little of that work. So I feel we have no impact on that side. Jeff kind of talked about the markets he's in as far as health care, data centers, governmental work that stuff that we do all the time and we do see that is increasing. So we see that not going down at all. And Jeff, do you want to talk about some of your projects that maybe you've had pushed out a little bit, but really nothing canceled that's within our backlog at all so far?

Yes, Rick. We did see a slowdown as people were just trying to anticipate what was coming our way. A couple of those jobs have already come back. A few have been pushed out and we've been in discussions about when they will restart. So there's a bit of a hesitation here, but it doesn't look like anything that we see long-term. There may be some projects in the pipeline that we've been pursuing. And we never know if they're going to happen or not, but some of those look like they may be pushed out even further.

Okay. On T&D then maybe this is for Betty, but the medium-sized project. Could you help quantify the impact of that from a revenue standpoint and when that anniversaries just so we can kind of get a better idea of the underlying growth in the transmission business?

I think you can -- as we say in our 10-Q, the majority of the change year-over-year was the change relating to that one medium-sized project, which is essentially complete at this point in time. It had a very large -- it had a large material component, especially in the first quarter of last year. So the year-over-year comparison reduction was mainly related to that. Tod, anything else on that?

No, Betty that's accurate. Thank you.

The only thing I would probably add to that is our backlog remains strong within the T&D segment. We really haven't seen much work pushed out at this point. And most of the MSA work we do is remaining strong at this point. So those are positives as it goes into this. And again, I'll go back to what we always say quarter-to-quarter is -- the timing of the awards we really don't have control over. So as Tod said, is backlog strong? Is the work coming in to bid is strong? And when you look at that side of it, we want to make sure we have the right contract in place and the right terms and conditions before we accept any contract. So our backlog can be a little lumpy, but again still a strong bid market at this time.

Thank you.

Thank you. Our next question comes from the line of Sean Eastman with KeyBanc Capital Markets. Your line is now open.

This is Alex on for Sean. Thanks for taking my questions.

Good morning.

Good morning. I guess, I just wanted to start on the C&I book-to-bill for the quarter which was much better than what you were expecting at 1.2 times. I'm just kind of wondering if there is anything like large in there driving that? And also what kind of margin profile this current C&I backlog supports relative to the operating margin target range you guys have provided in the past?

I think very -- the margin in our backlog is very similar to what it's been in the past. So again really no changes on that side and nothing large that made that big jump. It's small and medium-sized projects. Jeff, do you want to anything specific you want to talk about?

I agree Rick. It's a good mix and it's a good mix from coast-to-coast. So you're right, it's very similar to what we've been looking at in prior quarters.

Got it. Thanks. And then I guess I have a question on T&D, and specifically wondering about the distribution part of it. I'm just kind of wondering how much of the distribution work you guys do is tied to regulatory-driven versus -- compared to the housing cycle?

The majority of the work we do is tied to regulatory side. It's not really, I mean, some of it goes into housing where they're extending it out, but so much of it is the ongoing day-to-day maintenance kind of that reliability side of it is where we're spending a lot of our time. Tod, do you want anything you can add?

No. That's accurate Jeff. I mean, I mentioned in the -- when we were talking there that grid hardening and reliability continues to be the primary driver for the distribution work across the country.

Thank you.

Thank you. And our next question comes from the line of Jon Braatz with Kansas City Capital. Your line is now open.

Good morning, Rick and Betty.

Good morning.

Betty, a question on the operating expenses. Obviously, they were up quite a bit, because of the acquisition. But can you give us a sense of what maybe the growth in operating expenses might have been for let's say the core organic piece of business? Just trying to separate those two out.

We don't actually separate those two. I'd say the majority of those dollars though is the CSI overhead cost that came through year-over-year.

Okay. Okay. And then on…

Something we have done. I just want to make sure we add on that kind of as we come in this pandemic and we're looking at it. And really though our business has been affected some and we see that potentially continuing on. We have done some stuff to manage towards that. We've got a strong backlog, but with that being said, we have frozen all overhead raises going forward. So we've implemented that now. And then if the market changes or our business changes, it goes down, we'll adjust further. But we have implemented that and really we have except in areas to support growth we have no new hires coming on. So we are doing some stuff proactively. Also looking at capital expenditures and cutting those back everywhere we can with the unknown nature of the market today.

Okay. Rick what do you think CapEx will be for now -- this year now?

At the beginning of the year we said it would be similar to what it's been in the past. I think it's -- I think we've identified approximately $15 million that we have is questionable whether we need to spend or not and that's going to be based on the market going forward and how we see our work coming in and also our work burning. Betty anything to add on that?

No. That was $15 million depending on which scenario comes through as the year progresses.

Yeah. Okay.

All right. Thank you very much.

Thanks.

Thank you. [Operator Instruction] And our next question comes from the line of Jaya Yadav with Stifel. Your line is now open

Hi. This is Jaya on for Noelle Dilts. I had a quick question about how you guys were thinking about the renewable energy market moving forward? Do you guys see renewables being prioritized and a potential infrastructure stimulus plan, because it really wasn't included in the recent COVID-19 stimulus plan?

Tod, do you want to take that?

Yes. Yes. I mean, our belief is that renewable generation is still going to be a key driver in the industry and that's primarily due to the fact that so many utilities have made these announcements in the past. We know what their plans are going forward. And we see utilities that are going to be 50% renewable, 100% renewable by certain days that are out there. So we think it's going to play a big part and we're working hard to ramp up and get the skill sets and the people in place to take part in that. I did mention the award of the solar plant that took place just a few weeks ago. So we think the drivers are the need for renewable generation that means this is the right thing to do meets the reports and what the utilities have put out there in the past as to what their plans and their goals are for future renewable generation.

Great. Thanks. And how are you guys thinking about the current state of the labor market? Have you seen any changes in the availability of labor? I know that you mentioned continuing to invest in key management and craft personnel in both of the segments.

In the markets we're in, we haven't seen a big decline. I mean, net it's probably around 5% of our business that's been impacted and a lot of that has to do with projects, as Jeff said, kind of in that California, Seattle, New York area that have been -- the stay at home has affected our projects. Labor wise, we haven't -- we've never had a problem so far getting labor. So we haven't seen the market tighten, especially during these times. But I would say with the way we manage our workforce, the supervision we provide, the tools and equipment and our safety aspect of our business, we've never had a problem attracting people on either the C&I side or the T&D to- date.

Great. Thanks.

Thank you. And this does conclude today's question-and-answer session. I would now like to turn the call back to Rick Swartz for closing remarks.

To conclude on behalf of Betty, Tod, Jeff and myself, I sincerely thank you for joining us on today's call. 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 and you may now disconnect.