What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-10-25 · 96 added, 163 removed, 241 unchanged (52% of the section changed)

16 unchanged sentences

Our C&I customers include facility owners and general contractors.

We strive to maintain our

status as a preferred provider to our T&D and C&I customers.

We believe that we have a number of competitive advantages in both of our segments, including our skilled workforce, extensive centralized fleet, proven safety performance and reputation for timely completion of quality work that allows us to compete favorably in our markets.

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We believe the legislative actions are likely to provide greater long-term opportunity in both of our reporting segments.

However both of our segments and supporting operations may be subject to delays and cost volatility due to supply chain disruptions, inflationary pressures, tariffs and regulatory slowdowns, which may result in decelerations in project opportunities and awards.

We had consolidated revenues for the nine months ended September 30, 2023 of $2.64 billion, of which 56.7% was attributable to our T&D customers and 43.3% was attributable to our C&I customers.

Our consolidated revenues for the nine months ended September 30, 2022 were $2.14 billion.

For the nine months ended September 30, 2023, our net income and EBITDA (1) were $66.9 million and $135.4 million, respectively, compared to $58.8 million and $123.8 million, respectively, for the nine months ended September 30, 2022.

However, we expect our financial results, in both of our segments, to continue to be affected by delays and cost volatility through 2024, due to supply chain disruptions, inflationary pressures, tariffs and regulatory slowdowns.

These factors will cause us to carry impacted projects at lower margins until their completion and may result in decelerations in project opportunities and awards.

We had consolidated revenues for the three months ended March 31, 2024 of $815.6 million, of which 60.1% was attributable to our T&D customers and 39.9% was attributable to our C&I customers.

Our consolidated revenues for the three months ended March 31, 2023 were $811.6 million.

For the three months ended March 31, 2024, our net income and EBITDA (1) were $18.9 million and $39.8 million, respectively, compared to $23.2 million and $41.3 million, respectively, for the three months ended March 31, 2023.

We believe there is an ongoing need for utilities to sustain investment in their transmission systems to improve reliability, reduce congestion and connect to new clean energy sources.

Consequently, we believe that we will continue to see significant bidding activity on large transmission projects going forward.

Consequently, we believe that we will continue to see continued bidding activity on large transmission projects going forward.

The timing of multi-year transmission project awards and substantial construction activity is difficult to predict due to regulatory requirements and the permitting needed to commence construction.

Significant construction on any large, multi-year projects awarded in the remainder of 2023 will not likely begin until 2024.

Significant construction on any large, multi-year projects awarded in the remainder of 2024 will not likely have a large impact on 2024 results.

Bidding and construction activity for small to medium-size transmission projects and upgrades remain active, and we expect this trend to continue.

(1) EBITDA is a non-GAAP measure.

Refer to “Non-GAAP Measure—EBITDA” for a discussion of this measure.

We believe there is a need for further investment by utilities on their distribution systems to properly maintain or meet reliability requirements.

We continue to see increased bidding activity in some of our electric distribution markets.

We continue to see strong bidding activity in some of our electric distribution markets.

We believe the increased storm activity and destruction caused by wildfires will cause a push to strengthen utility distribution systems against catastrophic damage.

Distribution systems may also require upgrades to accommodate additional distributed energy resources and increased electrification.

Several industry and market trends are also prompting customers in the electric utility industry to seek outsourcing partners rather than performing projects internally.

These trends include an aging electric utility workforce, increasing costs and staffing constraints.

We believe electric utility employee retirements could increase with further economic recovery, which may result in an increase in outsourcing opportunities.

We expect to see an incremental increase in distribution opportunities in the markets we serve during the rest of 2023.

We expect to see an incremental increase in distribution opportunities in some of the markets we serve during the rest of 2024.

(1) EBITDA is a non-GAAP measure.

Refer to “Non-GAAP Measure—EBITDA” for a discussion of this measure.

Although our C&I bidding opportunities remain strong, we may see impacts due to continued market disruptions and overall market volatility which could result in slower growth of our C&I segment.

We believe that the primary markets we serve such as health care, transportation, data centers, warehousing, clean energy and water/waste-water projects, may be somewhat less vulnerable to an economic slowdown.

In addition, the United States has experienced decades of underfunded economic expansion and aging infrastructure that has challenged the capacity of public water and transportation infrastructure forcing states and municipalities to seek creative means to fund needed expansion and repair.

In addition, the United States has experienced decades of underfunded economic expansion and aging infrastructure that have challenged the capacity of public water and transportation infrastructure forcing states and municipalities to seek creative means to fund needed expansion and repair.

We believe the need for expanding public infrastructure will offer opportunity in our C&I segment for several years.

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We expect the long-term growth in our C&I segment to generally track the overall growth of the regions we serve.

We strive to maintain our status as a preferred provider to our T&D and C&I customers.

We continue to implement strategies that are designed to further expand our capabilities and effectively allocate capital.

We have focused on strengthening our balance sheet by maintaining a low level of variable rate outstanding debt in the current higher interest rate environment and increasing our revolving credit facility to $490 million.

We have focused on strengthening our balance sheet by maintaining a low level of variable rate outstanding debt in the current higher interest rate environment and by increasing our revolving credit facility to $490 million on May 31, 2023.

This expanded availability of liquidity will allow us to take advantage of future opportunities as they arise.

Additionally, as of September 30, 2023, we had $75.0 million of remaining availability to purchase shares under our share repurchase program, which continues in effect until November 8, 2023, or until the authorized funds are exhausted.

Additionally, as of March 31, 2024, we had $72.5 million of remaining availability to purchase shares under our share repurchase program, which continues in effect until May 8, 2024, or until the authorized funds are exhausted.

We continue to manage our increasing operating costs, including increasing insurance, equipment, labor and material costs.

We believe that our financial position, positive cash flows and other operational strengths will enable us to manage our markets and give us the flexibility to successfully execute our strategy.

We believe that our financial position, positive cash flows and other operational strengths will enable us to respond to challenges and uncertainties in the markets we serve and give us the flexibility to successfully execute our strategy.

We continue to invest in developing key management and craft personnel in both our T&D and C&I segments and in procuring the specific specialty equipment and tooling needed to win and execute projects of all sizes and complexity.

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Additional information related to our remaining performance obligations is provided in Note 6–Revenue Recognition in the accompanying notes to our Consolidated Financial Statements.

Our backlog was $2.62 billion at September 30, 2023, compared to $2.50 billion at December 31, 2022 and $2.48 billion at September 30, 2022.

Our backlog at September 30, 2023 decreased $116.4 million from June 30, 2023.

Backlog in the T&D segment decreased $42.9 million and C&I backlog decreased $73.5 million compared to June 30, 2023.

Our backlog as of September 30, 2023 included our proportionate share of joint venture backlog totaling $23.5 million, compared to $29.0 million at June 30, 2023.

The following table summarizes that amount of our backlog that we believe to be firm as of the dates shown and the amount of our current backlog that we reasonably estimate will not be recognized within the next twelve months:

Backlog at September 30, 2023

(in thousands) Total Amount estimated to not

be recognized within 12 months Total backlog at December 31, 2022

Our backlog was $2.43 billion at March 31, 2024, compared to $2.51 billion at December 31, 2023 and $2.67 billion at March 31, 2023.

Our backlog at March 31, 2024 decreased $87.1 million from December 31, 2023.

Backlog in the T&D segment decreased $106.4 million and C&I backlog increased $19.3 million compared to December 31, 2023.

Our backlog as of March 31, 2024 included our proportionate share of joint venture backlog totaling $4.0 million, compared to $18.9 million at December 31, 2023.

Backlog at March 31, 2024

(in thousands) Total Amount estimated to be

recognized within 12 months Amount estimated to be

recognized after 12 months Total backlog at December 31, 2023

T&D $ 853,183 $ 792,781 $ 60,402 $ 959,553

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Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

(dollars in thousands) Amount Percent Amount Percent Amount Percent Amount Percent

(dollars in thousands) Amount Percent Amount Percent

Contract revenues $ 815,562 100.0 % $ 811,616 100.0 %

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Interest expense (1,054) (0.1) (586) (0.1)

Other income (expense), net (91) — 223 — (61) — 2,485 0.1

Other expense, net (263) — (90) —

Income before provision for income taxes 23,096 2.9 27,071 3.3

1 unchanged sentence

Net income $ 18,939 2.3 % $ 23,163 2.9 %

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Revenues were $939.5 million for the three months ended September 30, 2023 compared to $799.8 million for the three months ended September 30, 2022.

The increase of $139.7 million, or 17.5%, was primarily due to an increase in revenue on transmission projects and an increase in C&I revenue in certain geographical areas.

Clean energy projects increased revenues in both of our segments during the three months ended September 30, 2023.

Gross margin.

Gross margin was 9.8% for the three months ended September 30, 2023 compared to 10.8% for the three months ended September 30, 2022.

The decrease in gross margin was primarily due to labor and project inefficiencies, some of which were caused by supply chain disruptions and inclement weather experienced on certain projects.

Gross margin was also negatively impacted by rising costs associated with inflation.

These margin decreases were partially offset by favorable change orders and better-than-anticipated productivity on certain projects.

Changes in estimates of gross profit on certain projects resulted in gross margin decreases of 1.3% and 0.3% for the three months ended September 30, 2023 and 2022, respectively.

Gross profit.

Gross profit was $92.4 million for the three months ended September 30, 2023 compared to $86.3 million for the three months ended September 30, 2022.

The increase of $6.1 million, or 7.0%, was due to higher revenues, partially offset by lower margins.

Selling, general and administrative expenses.

Selling, general and administrative expenses (“SG&A”) were $59.9 million for the three months ended September 30, 2023 compared to $58.9 million for the three months ended September 30, 2022.

The period-over-period increase of $1.0 million was primarily due to an increase in employee incentive compensation costs and an increase in employee-related expenses to support the growth in our operations.

Gain on sale of property and equipment .

Gains from the sale of property and equipment for the three months ended September 30, 2023 were $0.8 million compared to $0.3 million for the three months ended September 30, 2022.

Gains from the sale of property and equipment are attributable to routine sales of property and equipment no longer useful or valuable to our ongoing operations.

Interest expense.

Interest expense was $1.3 million for three months ended September 30, 2023 compared to $1.1 million for the three months ended September 30, 2022.

This increase was primarily attributable to higher interest rates, partially offset by lower average debt balances, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Income tax expense.

Income tax expense was $9.3 million for the three months ended September 30, 2023, with an effective tax rate of 30.3%, compared to the expense of $7.7 million for the three months ended September 30, 2022, with an effective tax rate of 29.4%.

The increase in the tax rate for the three months ended September 30, 2023 was primarily due to higher other permanent difference items.

Net income was $21.5 million for the three months ended September 30, 2023 compared to $18.4 million for the three months ended September 30, 2022.

The increase was primarily due to the reasons stated earlier.

Segment Results

The following table sets forth, for the periods indicated, statements of operations data by segment, segment net sales as percentage of total net sales and segment operating income as a percentage of segment net sales:

Three months ended September 30,

(dollars in thousands) Amount Percent Amount Percent

Contract revenues:

Transmission & Distribution $ 548,595 58.4 % $ 452,014 56.5 %

Commercial & Industrial 390,881 41.6 347,834 43.5

Total $ 939,476 100.0 % $ 799,848 100.0 %

Operating income (loss):

Transmission & Distribution $ 36,262 6.6 % $ 34,315 7.6 %

Commercial & Industrial 13,932 3.6 10,876 3.1

Total 50,194 5.3 45,191 5.7

General Corporate (18,167) (1.9) (18,216) (2.3)

Consolidated $ 32,027 3.4 % $ 26,975 3.4 %

Transmission & Distribution

Revenues for our T&D segment for the three months ended September 30, 2023 were $548.6 million compared to $452.0 million for the three months ended September 30, 2022, an increase of $96.6 million, or 21.4%.

The increase in revenue was related to an increase in revenue on transmission projects, primarily related to an increase in revenue on clean energy projects.

Revenues from transmission projects represented 65.2% and 58.4% of T&D segment revenue for the three months ended September 30, 2023 and 2022, respectively.

Operating income for our T&D segment for the three months ended September 30, 2023 was $36.3 million, an increase of $2.0 million, or 5.7%, from the three months ended September 30, 2022.

The increase in T&D operating income from the prior year was primarily due to higher revenues.

As a percentage of revenues, operating income for our T&D segment was 6.6% for the three months ended September 30, 2023 compared to 7.6% for the three months ended September 30, 2022.

The decrease in T&D operating income as a percentage of revenues was primarily due to labor and project inefficiencies, mainly related to clean energy projects, and inclement weather.

These decreases were partially offset by better-than-anticipated productivity.

Commercial & Industrial

Revenues for our C&I segment for the three months ended September 30, 2023 were $390.9 million compared to $347.8 million for the three months ended September 30, 2022, an increase of $43.1 million, or 12.4%, primarily due to higher revenue related to clean energy projects in certain geographical areas.

Operating income for our C&I segment for the three months ended September 30, 2023 was $13.9 million, an increase of $3.0 million, over the three months ended September 30, 2022.

The period-over-period increase in operating income was primarily due to higher revenues.

As a percentage of revenues, operating income for our C&I segment was 3.6% for the three months ended September 30, 2023 compared to 3.1% for the three months ended September 30, 2022.

The increase in C&I operating income as a percentage of revenues was primarily due to favorable change orders and better-than-anticipated productivity on certain projects.

These increases were partially offset by labor and project inefficiencies, some of which were caused by supply chain disruptions and inclement weather.

C&I operating income margin was also negatively impacted by rising costs associated with inflation.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Revenues were $2.64 billion for the nine months ended September 30, 2023 compared to $2.14 billion for the nine months ended September 30, 2022.

The increase of $495.1 million, or 23.1%, was primarily due to an increase in revenue on transmission projects, an increase in C&I revenue in certain geographical areas and an increase in revenue on distribution projects.

Clean energy projects increased revenue in both of our segments during the nine months ended September 30, 2023.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenues increased $4.0 million or 0.5%, to $815.6 million for the three months ended March 31, 2024 from $811.6 million for the three months ended March 31, 2023.

The increase was primarily due to an increase of $29.3 million in revenue on distribution projects and an increase of $15.8 million in revenue on transmission projects, offset by a decrease of $41.1 million in C&I revenue.

Gross margin.

Gross margin was 10.1% for the nine months ended September 30, 2023 compared to 11.5% for the nine months ended September 30, 2022.

The decrease in gross margin was primarily due to labor and project inefficiencies, some of which were caused by inclement weather and supply chain disruptions experienced on certain projects.

Gross margin was also negatively impacted by rising costs associated with inflation as well as an increase in cost associated with an adjustment to sales tax accruals for prior periods in one of our operating areas.

These margin decreases were partially offset by favorable change orders and better-than-anticipated productivity on certain projects.

Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 1.2% for the nine months ended September 30, 2023 and were not significant for the nine months ended September 30, 2022.

Gross margin for the three months ended March 31, 2024 increased to 10.6% compared to 10.4% for the three months ended March 31, 2023.

Favorable joint venture results increased gross margin by approximately 0.6% during the three months ended March 31, 2024.

This improvement in gross margin was partially offset by significant changes in our estimated gross profit on certain projects resulting in a net gross margin decrease of 1.2% for the three months ended March 31, 2024, compared to a net decrease of 0.6% for the three months ended March 31, 2023.

During the three months ended March 31, 2024, significant estimate changes negatively impacted gross margin by 3.0%, largely related to labor and project inefficiencies, some of which were caused by inclement weather experienced on certain projects, rising costs associated with supply chain disruptions, an unfavorable change order and an unfavorable job closeout.

In addition, significant estimate changes in gross profit positively impacted gross margin by 1.8% and mainly related to better-than-anticipated productivity, favorable change orders and a favorable job closeout.

Gross profit.

Gross profit was $266.9 million for the nine months ended September 30, 2023 compared to $247.7 million for the nine months ended September 30, 2022.

The increase of $19.2 million, or 7.8% was due to higher revenues, partially offset by lower margins.

Gross profit was $86.2 million for the three months ended March 31, 2024 compared to $84.4 million for the three months ended March 31, 2023.

The increase of $1.8 million, or 2.2%, was due to higher revenues and higher margin.

Selling, general and administrative expenses.

SG&A was $174.6 million for the nine months ended September 30, 2023 compared to $164.5 million for the nine months ended September 30, 2022.

The period-over-period increase of $10.1 million was primarily due to an increase in employee-related expenses to support the growth in our operations and an increase in employee incentive compensation costs.

Selling, general and administrative expenses were $62.2 million for the three months ended March 31, 2024 compared to $57.0 million for the three months ended March 31, 2023.

The period-over-period increase of $5.2 million was primarily due to an increase in employee-related expenses, an increase of $1.7 million related to contingent compensation expense related to a prior acquisition and an increase in employee incentive compensation costs.

Gain on sale of property and equipment .

Gains from the sale of property and equipment for the nine months ended September 30, 2023 were $3.3 million compared to $1.7 million for the nine months ended September 30, 2022.

Gains from the sale of property and equipment for the three months ended March 31, 2024 were $1.5 million compared to $1.2 million for the three months ended March 31, 2023.

Gains from the sale of property and equipment are attributable to routine sales of property and equipment no longer useful or valuable to our ongoing operations.

Interest expense.

Interest expense was $3.1 million for the nine months ended September 30, 2023 compared to $2.2 million for the nine months ended September 30, 2022.

This increase was primarily attributable to higher interest rates, partially offset by lower average debt balances during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Interest expense was $1.1 million for three months ended March 31, 2024 compared to $0.6 million for the three months ended March 31, 2023.

This increase was attributable to higher average outstanding debt balances and higher interest rates, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Income tax expense.

Income tax expense was $22.6 million for the nine months ended September 30, 2023, with an effective tax rate of 25.2%, compared to the expense of $19.6 million for the nine months ended September 30, 2022, with an effective tax rate of 25.0%.

The increase in the tax rate for the nine months ended September 30, 2023 was primarily due to higher other permanent difference items, partially offset by a higher favorable impact from stock compensation excess tax benefits.

Net income was $66.9 million for the nine months ended September 30, 2023 compared to $58.8 million for the nine months ended September 30, 2022.

The increase was primarily due to the reasons stated earlier.

Income tax expense was $4.2 million for the three months ended March 31, 2024, with an effective tax rate of 18.0%, compared to the expense of $3.9 million for the three months ended March 31, 2023, with an effective tax rate of 14.4%.

The increase in the tax rate for the three months ended March 31, 2024 was primarily due to lower stock compensation excess tax benefits and higher other permanent difference items.

Net income was $18.9 million for the three months ended March 31, 2024 compared to $23.2 million for the three months ended March 31, 2023.

The decrease was primarily due to the reasons stated earlier.

Segment Results

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands) Amount Percent Amount Percent

10 unchanged sentences

Transmission & Distribution

Revenues for our T&D segment for the nine months ended September 30, 2023 were $1.50 billion compared to $1.23 billion for the nine months ended September 30, 2022, an increase of $265.6 million, or 21.6%.

The increase in revenue was related to an increase in revenue on transmission projects, primarily related to an increase in revenue on clean energy projects, and an increase in revenue on distribution projects.

Revenues from transmission projects represented 65.3% and 59.7% of T&D segment revenue for the nine months ended September 30, 2023 and 2022, respectively.

Operating income for our T&D segment for the nine months ended September 30, 2023 was $106.8 million, an increase of $9.2 million, or 9.5%, from the nine months ended September 30, 2022.

The increase in T&D operating income from the prior year was primarily due to higher revenues.

As a percentage of revenues, operating income for our T&D segment was 7.1% for the nine months ended September 30, 2023 compared to 7.9% for the nine months ended September 30, 2022.

The decrease in T&D operating income as a percentage of revenues was primarily due to labor and project inefficiencies, some of which were associated with clean energy projects, and inclement weather.

These decreases were partially offset by a favorable change order and better-than-anticipated productivity.

Revenues for our T&D segment for the three months ended March 31, 2024 were $490.4 million compared to $445.3 million for the three months ended March 31, 2023, an increase of $45.1 million, or 10.1%.

The increase in revenue was related to an increase of $29.3 million in revenue on distribution projects and an increase of $15.8 million in revenue on transmission projects.

Revenues from transmission projects represented 64.0% and 66.9% of T&D segment revenue for the three months ended March 31, 2024 and 2023, respectively.

Operating income for our T&D segment for the three months ended March 31, 2024 was $29.8 million, a decrease of $3.0 million, or 9.1%, from the three months ended March 31, 2023.

As a percentage of revenues, operating income for our T&D segment was 6.1% for the three months ended March 31, 2024 compared to 7.4% for the three months ended March 31, 2023.

Operating income margin was impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income margin decrease of 2.5% for the three months ended March 31, 2024, compared to a net decrease of 0.5% for the three months ended March 31, 2023.

During the three months ended March 31, 2024, significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 3.1% and largely related to labor and project inefficiencies, most of which related to clean energy projects, primarily in one geographic area that also experienced inclement weather, as well as an unfavorable change order.

These decreases were partially offset by positive significant estimated gross profit changes totaling 0.5% of revenues mostly related to better-than-anticipated productivity.

Additionally, T&D operating income margin was positively impacted by an increase in work in progress, partially offset by higher fleet depreciation and maintenance expenses.

Commercial & Industrial

Revenues for our C&I segment for the nine months ended September 30, 2023 were $1.14 billion compared to $912.5 million for the nine months ended September 30, 2022, an increase of $229.6 million, or 25.2%, primarily due to higher revenue related to clean energy projects in certain geographical areas.

Operating income for our C&I segment for the nine months ended September 30, 2023 was $37.2 million, an increase of $6.7 million over the nine months ended September 30, 2022.

The period-over-period increase in operating income was primarily due to higher revenues.

As a percentage of revenues, operating income for our C&I segment was 3.3% for the nine months ended September 30, 2023 and 2022.

During the nine months ended September 30, 2023, C&I operating income as a percentage of revenues benefited from favorable change orders and better-than-anticipated productivity on a project.

These increases were partially offset by labor and project inefficiencies, some of which were caused by supply chain disruptions, and by rising costs associated with inflation.

C&I operating income margin was also negatively impacted by an increase in cost associated with an adjustment to sales tax accruals for prior periods in one of our operating areas.

Revenues for our C&I segment for the three months ended March 31, 2024 were $325.2 million compared to $366.3 million for the three months ended March 31, 2023, a decrease of $41.1 million, or 11.2%, which was primarily due to the delayed start of certain projects, that are expected to begin later in 2024.

The decrease in revenue was related to a decrease of $40.8 million in revenue on fixed priced contracts and a decrease of $1.3 million in revenues on unit price work, partially offset by an increase of $1.0 million on T&E contracts.

Operating income for our C&I segment for the three months ended March 31, 2024 was $11.4 million, an increase of $0.8 million, over the three months ended March 31, 2023.

As a percentage of revenues, operating income for our C&I segment was 3.5% for the three months ended March 31, 2024 compared to 2.9% for the three months ended March 31, 2023.

Operating income margin was impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income margin increase of 0.8% for the three months ended March 31, 2024, compared to a net decrease of 0.7% for the three months ended March 31, 2023.

Significant estimated gross profit changes positively impacted operating income as a percentage of revenues by 3.8% and largely related to better-than-anticipated productivity, some of which related to clean energy projects, favorable change orders and a favorable job closeout.

These increases were partially offset by negative significant estimated gross profit changes totaling 3.0% of revenues largely related to labor and project inefficiencies, some of which were caused by supply chain disruptions and an unfavorable change order.

Additionally, C&I operating income margin was positively impacted by approximately 1.4% due to favorable joint venture results, this increase was partially offset by a decrease in work in progress, higher contingent compensation expense related to a prior acquisition and higher fleet depreciation and maintenance expenses.

Non-GAAP Measure—EBITDA

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Three months ended

September 30, Nine months ended

September 30,

(in thousands) 2024 2023

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Three months ended

September 30, Nine months ended

September 30,

(in thousands) 2024 2023

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Liquidity, Capital Resources and Material Cash Requirements

As of September 30, 2023, we had working capital of $291.6 million.

As of March 31, 2024, we had working capital of $293.8 million.

We define working capital as current assets less current liabilities.

During the nine months ended September 30, 2023, operating activities of our business provided net cash of $28.4 million, compared to $73.7 million of cash provided for the nine months ended September 30, 2022.

During the three months ended March 31, 2024, operating activities of our business provided net cash of $7.7 million, compared to $37.2 million of cash provided for the three months ended March 31, 2023.

Cash flow from operations is primarily influenced by operating margins, timing of contract performance and the type of services we provide to our customers.

The $45.3 million year-over-year decrease in cash provided by operating activities was primarily due to unfavorable net changes in operating assets and liabilities of $50.3 million, offset by an increase of $8.1 million in net income.

The $29.5 million year-over-year decrease in cash provided by operating activities was primarily due to unfavorable net changes in operating assets and liabilities of $27.3 million, and a decrease of $4.2 million in net income.

The unfavorable change in operating assets and liabilities was primarily due to the net unfavorable year-over-year changes in various working capital accounts that relate primarily to construction activities (accounts receivable, contract assets, accounts payable and contract liabilities) of $33.7 million, partially offset by the favorable change of $9.9 million in other liabilities.

The net unfavorable changes of $33.7 million in cash provided by working capital accounts, mainly related to construction activities, was due to the timing of billings and payments under our contracts.

The favorable change of $18.6 million in other liabilities was primarily due to changes in our employee incentive compensation accruals.

In the nine months ended September 30, 2023, we used net cash of $59.8 million in investing activities consisting of $63.8 million for capital expenditures, partially offset by $4.0 million of proceeds from the sale of equipment.

In the nine months ended September 30, 2023, financing activities provided net cash of $10.9 million, consisting primarily of $26.4 million of net borrowings under our revolving line of credit, partially offset by $7.9 million of shares repurchased to satisfy tax obligations under our stock compensation programs, $4.6 million of payments under our equipment notes and $2.1 million of debt refinancing costs.

We believe our $431.8 million borrowing availability under our revolving line of credit at September 30, 2023, future cash flow from operations and our ability to utilize short-term and long-term leases will provide sufficient liquidity for our short-term and long-term needs.

The favorable change of $9.9 million in other liabilities was primarily due to the timing of employee related wage and tax payments.

In the three months ended March 31, 2024, we used net cash of $23.9 million in investing activities consisting of $25.8 million for capital expenditures, partially offset by $1.9 million of proceeds from the sale of equipment.

In the three months ended March 31, 2024, financing activities used net cash of $4.5 million, consisting primarily of $5.9 million of shares repurchased to satisfy tax obligations under our stock compensation programs and $2.6 million of payments under our equipment notes, partially offset by $4.3 million of net borrowings under our revolving line of credit.

We believe our $434.3 million borrowing availability under our revolving line of credit as of March 31, 2024, future cash flow from operations and our ability to utilize short-term and long-term leases will provide sufficient liquidity for our short-term and long-term needs.

Our primary short-term liquidity needs include cash for operations, debt service requirements, capital expenditures, and acquisition and joint venture opportunities.

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The Credit Agreement also contains covenants including limitations on asset sales, investments, indebtedness and liens.

The Company was in compliance with all of its financial covenants under the Credit Agreement as of September 30, 2023.

We had $39.3 million of borrowings outstanding under the Facility as of September 30, 2023.

We had $12.9 million of borrowings outstanding under our revolving credit facility under our previous credit agreement as of December 31, 2022.

The Company was in compliance with all of its financial covenants under the Credit Agreement as of March 31, 2024.

We had $17.5 million and $13.2 million of borrowings outstanding under the Facility as of March 31, 2024 and December 31, 2023, respectively.

Letters of Credit

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Currently, we do not believe it is likely that any claims will be made under any letter of credit.

As of September 30, 2023, we had $18.9 million in letters of credit outstanding under our Credit Agreement, including $11.7 million related to the Company's payment obligation under its insurance programs and approximately $7.2 million related to contract performance obligations.

As of December 31, 2022, we had $12.8 million in letters of credit outstanding under our previous credit agreement, which were almost entirely related to the Company's payment obligation under its insurance programs.

As of March 31, 2024, we had $38.2 million in letters of credit outstanding under our Credit Agreement, including $27.1 million related to the Company's payment obligation under its insurance programs and approximately $11.1 million related to contract performance obligations.

As of December 31, 2023, we had $34.4 million in letters of credit outstanding under our previous credit agreement, including $27.1 million related to the Company's payment obligations under its insurance programs and approximately $7.3 million related to contract performance obligations.

Equipment Notes

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Each Equipment Note constitutes a separate, distinct and independent financing of equipment and contractual obligation.

As of September 30, 2023 and December 31, 2022, we had two outstanding Equipment Notes collateralized by equipment and vehicles owned by us.

As of September 30, 2023 and December 31, 2022, we also had one other equipment note outstanding collateralized by a vehicle owned by us.

The outstanding balance of all equipment notes was $23.0 million as of September 30, 2023 and $27.6 million as of December 31, 2022.

As of September 30, 2023, we had outstanding short-term and long-term equipment notes of approximately $5.3 million and $17.8 million, respectively.

As of December 31, 2022, we had an outstanding short-term and long-term Equipment Notes of approximately $5.1 million and $22.6 million, respectively.

As of March 31, 2024 and December 31, 2023, we had two outstanding Equipment Notes collateralized by equipment and vehicles owned by us.

As of March 31, 2024 and December 31, 2023, we also had one other equipment note outstanding collateralized by a vehicle owned by us.

The outstanding balance of all equipment notes was $20.4 million as of March 31, 2024 and $23.0 million as of December 31, 2023.

As of March 31, 2024, we had outstanding short-term and long-term equipment notes of approximately $6.6 million and $13.8 million, respectively.

As of December 31, 2023, we had outstanding short-term and long-term Equipment Notes of approximately $7.1 million and $16.0 million, respectively.

Lease Obligations

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These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them.

The Company’s leases have remaining terms ranging from one to six years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year.

The Company’s leases have remaining terms ranging from one to ten years, some of which may include options to extend the leases for up to six years, and some of which may include options to terminate the leases within one year.

Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements.

The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive.

The outstanding balance of operating lease obligations was $29.1 million as of September 30, 2023, consisting of short-term and long-term operating lease obligations of approximately $9.3 million and $19.8 million, respectively.

The outstanding balance of operating lease obligations was $38.5 million as of March 31, 2024, consisting of short-term and long-term operating lease obligations of approximately $9.9 million and $28.6 million, respectively.

The outstanding balance of operating lease obligations was $35.0 million as of December 31, 2023, consisting of short-term and long-term operating lease obligations of approximately $9.2 million and $25.8 million, respectively.

The outstanding balance of finance lease obligations was $2.5 million as of September 30, 2023, consisting of short-term and long-term finance lease obligations of approximately $2.1 million and $0.4 million, respectively.

The outstanding balance of finance lease obligations was $2.0 million as of March 31, 2024, consisting of short-term and long-term finance lease obligations of approximately $1.8 million and $0.2 million, respectively.

As of December 31, 2023 we had $2.3 million outstanding finance lease obligations, consisting of short-term and long-term finance lease obligations of approximately $2.0 million and $0.3 million, respectively.

Purchase Commitments for Construction Equipment

As of September 30, 2023, we had approximately $37.4 million in outstanding purchase obligations for certain construction equipment to be paid with cash outlays scheduled to occur in 2023 and 2024.

As of March 31, 2024, we had approximately $26.9 million in outstanding purchase obligations for certain construction equipment to be paid with cash outlays scheduled to occur in 2024.

Performance and Payment Bonds and Parent Guarantees

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We must reimburse our sureties for any expenses or outlays they incur.

Under our continuing indemnity and security agreements with our sureties, with the consent of our lenders under the Credit Agreement, we have granted security interests in certain of our assets to collateralize our obligations to the surety.

We may be required to post letters of credit or other collateral in favor of the surety or our customers.

Posting letters of credit in favor of the surety or our customers reduces the borrowing availability under the Credit Agreement.

To date, we have not been required to make any reimbursements to any of our sureties for bond-related costs.

Under our continuing indemnity and security agreements with the issuers of the bonds, we may be required to grant them a security interest relating to a particular project.

We believe that it is unlikely that we will have to fund significant claims under our surety arrangements.

As of September 30, 2023, an aggregate of approximately $2.30 billion in original face amount of bonds issued by our sureties were outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $732.2 million as of September 30, 2023.

As of March 31, 2024, an aggregate of approximately $2.59 billion in original face amount of bonds issued by our sureties were outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $660.8 million as of March 31, 2024.

From time to time, we guarantee the obligations of our wholly owned subsidiaries, including obligations under certain contracts with customers, certain lease agreements, and, in some states, obligations in connection with obtaining contractors’ licenses.

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Under certain circumstances such as foreclosures or negotiated settlements, we may take title to the underlying assets in lieu of cash in settlement of receivables.

As of September 30, 2023 and 2022, none of our customers individually exceeded 10% of consolidated accounts receivable.

As of March 31, 2024 and 2023, none of our customers individually exceeded 10% of consolidated accounts receivable.

Management believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

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• Our industry is highly competitive.

• Negative economic and market conditions including tariffs on materials and recessionary conditions may in the future adversely impact our customers’ spending and, as a result, our operations and growth.

• Negative economic and market conditions including tariffs on materials, interest rates and recessionary conditions have in the past and may in the future adversely impact our customers’ spending and, as a result, our operations and growth.

• We may be unsuccessful in generating internal growth, which could impact the projects available to the Company.

• Our inability to successfully execute or integrate acquisitions or joint ventures may have an adverse impact on our growth strategy and business.

• Project performance issues, including those caused by third parties, or certain contractual obligations may result in additional costs to us, reductions or delays in revenues or the payment of penalties, including liquidated damages.

• Project performance issues, including those caused by third parties, or certain contractual obligations have in the past and may in the future result in additional costs to us, reductions or delays in revenues or the payment of penalties, including liquidated damages.

• We may be unable to attract and retain qualified personnel.

• The timing of new contracts and termination of existing contracts may result in unpredictable fluctuations in our cash flows and financial results.

• During the ordinary course of our business, we may become subject to lawsuits or indemnity claims.

• During the ordinary course of our business, we have in the past and may in the future become subject to lawsuits or indemnity claims.

• Backlog may not be realized or may not result in profits and may not accurately represent future revenue.

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• Pandemic outbreaks of disease, such as the COVID-19 pandemic, have in the past had and may in the future have an adverse impact on our business, employees, liquidity, financial condition, results of operations and cash flows.

• Our dependence on suppliers, subcontractors and equipment manufacturers could expose us to the risk of loss in our operations.

• Our dependence on suppliers, subcontractors and equipment manufacturers has in the past and may in the future expose us to the risk of loss in our operations.

• Our participation in joint ventures and other projects with third parties may expose us to liability for failures of our partners.

• Legislative or regulatory actions relating to electricity transmission and clean energy may impact demand for our services.

• We may incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety matters, including those related to environmental hazards such as wildfires and other natural disasters.

• We have in the past and may in the future incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety matters, including those related to environmental hazards such as wildfires and other natural disasters.

• Our failure to comply with environmental and other laws and regulations could result in significant liabilities.

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• Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.

• An increase in the cost or availability for items such as materials, parts, commodities, equipment and tooling may also be impacted by trade regulations, tariffs, global relations, taxes, transportation costs and inflation which could adversely affect our business.

• An increase in the cost or availability for items such as materials, parts, commodities, equipment and tooling may also be impacted by trade regulations, tariffs, global relations, wars, taxes, transportation costs and inflation which could adversely affect our business.

• We may not be able to compete for, or work on, certain projects if we are not able to obtain necessary bonds, letters of credit, bank guarantees or other financial assurances.

• Unfavorable developments affecting the banking and financial services industry could adversely affect our business, liquidity and financial condition and overall results of operations.

• Work stoppages or other labor issues with our unionized workforce could adversely affect our business, and we may be subject to unionization attempts.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis