What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-05-01 · 162 added, 88 removed, 249 unchanged (50% of the section changed)

24 unchanged sentences

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.

We had consolidated revenues for the six months ended June 30, 2024 of $1.64 billion, of which 57.7% was attributable to our T&D customers and 42.3% was attributable to our C&I customers.

Our consolidated revenues for the six months ended June 30, 2023 were $1.7 billion.

For the six months ended June 30, 2024, our net income and EBITDA (1) were $3.7 million and $35.1 million, respectively, compared to $45.4 million and $88.4 million, respectively, for the six months ended June 30, 2023.

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

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

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

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

We expect to see an increase in the distribution market opportunities during the rest of 2024.

(1) EBITDA is a non-GAAP measure.

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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.

We believe that the primary markets we serve such as transportation, data centers, health care, clean energy and warehousing, 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 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.

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

Legislation and regulation that promotes domestic manufacturing could also create opportunity for our C&I segment.

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

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.

During the six months ended June 30, 2024, the Company repurchased 117,422 shares of its common stock under our repurchase program at a weighted-average price of $138.47 per share.

As of June 30, 2024, we had $58.7 million of remaining availability to purchase shares under our share repurchase program, which continues in effect until November 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.

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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 $2.43 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.

Our backlog was $2.54 billion at June 30, 2024, compared to $2.51 billion at December 31, 2023 and $2.73 billion at June 30, 2023.

Our backlog at June 30, 2024 increased $118.5 million from March 31, 2024.

Backlog in the T&D segment decreased $22.5 million and C&I backlog increased $141.0 million compared to March 31, 2024.

Our backlog as of June 30, 2024 included our proportionate share of joint venture backlog totaling $188.7 million, compared to $4.0 million at March 31, 2024.

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, and the amount estimated to be recognized after the next twelve months:

Backlog at March 31, 2024

Backlog at June 30, 2024

(in thousands) Total Amount estimated to be

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Three months ended

(dollars in thousands) Amount Percent Amount Percent

June 30, Six months ended

2024 2023 2024 2023

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

Contract revenues $ 828,890 100.0 % $ 888,616 100.0 % $ 1,644,452 100.0 % $ 1,700,232 100.0 %

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Gain on sale of property and equipment (1,506) (0.2) (1,315) (0.1) (2,995) (0.2) (2,539) (0.1)

Income from operations 24,271 3.0 27,426 3.4

Income (loss) from operations (20,707) (2.5) 32,438 3.6 3,564 0.3 59,864 3.5

Other income (expense):

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Interest expense (1,241) (0.1) (1,154) (0.1) (2,295) (0.1) (1,740) (0.1)

Other expense, net (263) — (90) —

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

Income tax expense 4,157 0.6 3,908 0.4

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

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.

Other income (expense), net (270) — 120 — (533) — 30 —

Income (loss) before provision for income taxes (22,137) (2.6) 31,597 3.5 959 0.2 58,668 3.4

Income tax expense (benefit) (6,860) (0.8) 9,324 1.0 (2,703) — 13,232 0.7

Net income (loss) $ (15,277) (1.8) % $ 22,273 2.5 % $ 3,662 0.2 % $ 45,436 2.7 %

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Revenues decreased $59.7 million or 6.7%, to $828.9 million for the three months ended June 30, 2024 from $888.6 million for the three months ended June 30, 2023.

The decrease was primarily due to a decrease of $39.8 million in revenue on transmission projects, a decrease of $14.2 million in C&I revenue, and a decrease of $5.8 million in revenue on distribution projects.

Gross margin.

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.

Gross margin for the three months ended June 30, 2024 decreased to 4.9% compared to 10.1% for the three months ended June 30, 2023.

The decrease in gross margin was primarily impacted by significant changes in our estimated gross profit on certain projects resulting in a net gross margin decrease of 7.2% for the three months ended June 30, 2024, compared to a net decrease of 1.3% for the three months ended June 30, 2023.

During the three months ended June 30, 2024, significant estimate changes negatively impacted gross margin by 9.1%, primarily related to clean energy projects in T&D, the unfavorable impact of a C&I project as well as an increase in costs associated with labor, project inefficiencies and schedule compression on certain projects.

In addition, significant estimate changes in gross profit positively impacted gross margin by 1.9% and largely related to favorable change orders, better-than-anticipated productivity, a favorable job closeout and favorable materials pricing on a project.

Gross margin also benefited by approximately 0.2% from favorable joint venture results during the three months ended June 30, 2024.

Gross profit.

Gross profit was $40.8 million for the three months ended June 30, 2024 compared to $90.1 million for the three months ended June 30, 2023.

The decrease of $49.3 million, or 54.7%, was due to lower margin and lower revenues.

Selling, general and administrative expenses.

Selling, general and administrative expenses (“SG&A”) were $61.8 million for the three months ended June 30, 2024 compared to $57.8 million for the three months ended June 30, 2023.

The period-over-period increase of $4.0 million was primarily due to an increase of $3.6 million related to contingent compensation expense related to a prior acquisition and an increase in employee-related expenses to support future growth, partially offset by a decrease in employee incentive compensation costs.

Gain on sale of property and equipment .

Gains from the sale of property and equipment for the three months ended June 30, 2024 were $1.5 million compared to $1.3 million for the three months ended June 30, 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 $1.2 million for three months ended June 30, 2024 and 2023.

Income tax expense (benefit).

Income tax benefit was $6.9 million for the three months ended June 30, 2024, with an effective tax rate of 31.0%, compared to the expense of $9.3 million for the three months ended June 30, 2023, with an effective tax rate of 29.5%.

The increase in the tax rate for the three months ended June 30, 2024 was primarily due to higher other permanent difference items.

Net income (loss).

Net loss was $15.3 million for the three months ended June 30, 2024 compared to net income of $22.3 million for the three months ended June 30, 2023.

The decrease 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 (loss) as a percentage of segment net sales:

Three months ended June 30,

(dollars in thousands) Amount Percent Amount Percent

Contract revenues:

Transmission & Distribution $ 458,209 55.3 % $ 503,737 56.7 %

Commercial & Industrial 370,681 44.7 384,879 43.3

Total $ 828,890 100.0 % $ 888,616 100.0 %

Operating income (loss):

Transmission & Distribution $ (8,300) (1.8) % $ 37,734 7.5 %

Commercial & Industrial 1,608 0.4 12,623 3.3

Total (6,692) (0.8) 50,357 5.7

General Corporate (14,015) (1.7) (17,919) (2.0)

Consolidated $ (20,707) (2.5) % $ 32,438 3.7 %

Transmission & Distribution

Revenues for our T&D segment for the three months ended June 30, 2024 were $458.2 million compared to $503.7 million for the three months ended June 30, 2023, a decrease of $45.5 million, or 9.0%.

The decrease in revenue was related to a decrease of $39.8 million in revenue on transmission projects and a decrease of $5.8 million in revenue on distribution projects.

Revenues from transmission projects represented 61.7% and 64.0% of T&D segment revenue for the three months ended June 30, 2024 and 2023, respectively.

Operating loss for our T&D segment for the three months ended June 30, 2024 was $8.3 million, a decrease of $46.0 million, or 122.0%, from the three months ended June 30, 2023.

As a percentage of revenues, operating loss for our T&D segment was 1.8% for the three months ended June 30, 2024 compared to operating income of 7.5% for the three months ended June 30, 2023.

Operating income (loss) margin was impacted by significant changes in our estimated gross profit on certain projects resulting in a net operating income (loss) margin decrease of 10.5% for the three months ended June 30, 2024, compared to a net decrease of 1.2% for the three months ended June 30, 2023.

During the three months ended June 30, 2024, significant estimated gross profit changes negatively impacted operating income (loss) as a percentage of revenues by 10.5% and related to clean energy projects.

Losses on these projects were primarily related to contractual disputes, labor and project inefficiencies, higher labor and contract related costs and unfavorable weather conditions.

In addition, schedule extensions caused by owner-furnished panel delays led to increased costs on two clean energy projects.

Many of these projects have reached mechanical completion and the remaining projects are anticipated to reach mechanical completion in the third and fourth quarters of 2024.

Additionally, T&D operating income margin was negatively impacted by higher fleet depreciation and maintenance expenses and a decrease in work in progress.

Commercial & Industrial

Revenues for our C&I segment for the three months ended June 30, 2024 were $370.7 million compared to $384.9 million for the three months ended June 30, 2023, a decrease of $14.2 million, or 3.7%, which was primarily due to the delayed start of certain projects.

The decrease in revenue was related to a decrease of $6.7 million in revenue on fixed priced contracts, a decrease of $4.8 million in revenues on unit price work, and a decrease of $2.7 million on T&E contracts.

Operating income for our C&I segment for the three months ended June 30, 2024 was $1.6 million, a decrease of $11.0 million, over the three months ended June 30, 2023.

As a percentage of revenues, operating income for our C&I segment was 0.4% for the three months ended June 30, 2024 compared to 3.3% for the three months ended June 30, 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 3.1% for the three months ended June 30, 2024, compared to a net decrease of 1.4% for the three months ended June 30, 2023.

Significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 7.4%, with 3.6% of the impact from a single project that is anticipated to reach substantial completion during the fourth quarter of 2024.

The loss from this project was primarily due to scope additions, increased labor costs related to schedule compression and lower productivity due to access and workflow issues.

C&I operating income margin was also negatively impacted by an increase in costs associated with labor, project inefficiencies and schedule compression on certain projects.

These decreases were partially offset by positive significant estimated gross profit changes totaling 4.3% and largely related to favorable change orders, better-than-anticipated productivity, a favorable job closeout and favorable materials pricing on a project.

Additionally, C&I operating income margin was negatively impacted by approximately 1.0% due to higher contingent compensation expense related to a prior acquisition, partially offset by approximately 0.4% due to favorable joint venture results.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Revenues decreased $55.7 million or 3.3%, to $1.64 billion for the six months ended June 30, 2024 from $1.70 billion for the six months ended June 30, 2023.

The decrease was primarily due to a decrease of $55.4 million in C&I revenue, and a decrease of $24.0 million in revenue on transmission projects, partially offset by an increase of $23.5 million in revenue on distribution projects.

Gross margin.

Gross margin for the six months ended June 30, 2024 decreased to 7.7% compared to 10.3% for the six months ended June 30, 2023.

The decrease in gross margin was primarily impacted by significant changes in our estimated gross profit on certain projects resulting in a net gross margin decrease of 4.2% for the six months ended June 30, 2024, compared to a net decrease of 1.0% for the six months ended June 30, 2023.

During the six months ended June 30, 2024, significant estimate changes negatively impacted gross margin by 5.9%, primarily related to clean energy projects in T&D, labor and project inefficiencies, the unfavorable impact of a C&I project, an increase in costs associated with schedule compression on certain projects and an unfavorable change order.

In addition, significant estimate changes in gross profit positively impacted gross margin by 1.7% and mainly related to better-than-anticipated productivity, favorable change orders and a favorable job closeout.

Gross margin also benefited by approximately 0.3% from favorable joint venture results during the six months ended June 30, 2024.

Gross profit.

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.

Gross profit was $127.1 million for the six months ended June 30, 2024 compared to $174.5 million for the six months ended June 30, 2023.

The decrease of $47.4 million, or 27.2% was due to lower margin and lower revenues.

Selling, general and administrative expenses.

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.

SG&A was $124.1 million for the six months ended June 30, 2024 compared to $114.7 million for the six months ended June 30, 2023.

The period-over-period increase of $9.4 million was primarily due to an increase of $5.3 million related to contingent compensation expense related to a prior acquisition and an increase in employee-related expenses to support future growth.

Gain on sale of property and equipment.

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 for the six months ended June 30, 2024 were $3.0 million compared to $2.5 million for the six months ended June 30, 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 $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 $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.

Interest expense was $2.3 million for the six months ended June 30, 2024 compared to $1.7 million for the six months ended June 30, 2023.

This increase was primarily attributable to higher interest rates, partially offset by lower average debt balances during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Income tax expense (benefit).

Income tax benefit was $2.7 million for the six months ended June 30, 2024, with an effective tax rate of (281.9%), compared to the expense of $13.2 million for the six months ended June 30, 2023, with an effective tax rate of 22.6%.

The change in the tax rate for the six months ended June 30, 2024 was primarily due to lower pretax income and higher other permanent difference items, offset by lower stock compensation excess tax benefits.

Net income was $3.7 million for the six months ended June 30, 2024 compared to $45.4 million for the six months ended June 30, 2023.

The decrease was primarily due to the reasons stated earlier.

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Three months ended March 31,

Six months ended June 30,

(dollars in thousands) Amount Percent Amount Percent

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Total $ 1,644,452 100.0 % $ 1,700,232 100.0 %

Operating income (loss):

Operating income:

Transmission & Distribution $ 21,536 2.3 % $ 70,554 7.4 %

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Transmission & Distribution

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.

Revenues for our T&D segment for the six months ended June 30, 2024 were $948.6 million compared to $949.1 million for the six months ended June 30, 2023, a decrease of $0.5 million.

The decrease in revenue was related to a decrease of $24.0 million in revenue on transmission projects, mostly offset by an increase of $23.5 million in revenue on distribution projects.

Revenues from transmission projects represented 62.9% and 65.4% of T&D segment revenue for the six months ended June 30, 2024 and 2023, respectively.

Operating income for our T&D segment for the six months ended June 30, 2024 was $21.5 million, a decrease of $49.1 million, or 69.5%, from the six months ended June 30, 2023.

As a percentage of revenues, operating income for our T&D segment was 2.3% for the six months ended June 30, 2024 compared to 7.4% for the six months ended June 30, 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 5.7% for the six months ended June 30, 2024, compared to a net decrease of 0.8% for the six months ended June 30, 2023.

During the six months ended June 30, 2024, significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 5.9% and related to clean energy projects.

Losses on these projects were primarily related to contractual disputes, labor and project inefficiencies, higher labor and contract related costs and unfavorable weather conditions.

In addition, schedule extensions caused by owner-furnished panel delays led to increased costs on two clean energy projects.

Many of these projects have reached mechanical completion and the remaining projects are anticipated to reach mechanical completion in the third and fourth quarters of 2024.

These decreases were partially offset by positive significant estimated gross profit changes totaling 0.3% 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.

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

Commercial & Industrial

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.

Revenues for our C&I segment for the six months ended June 30, 2024 were $695.8 million compared to $751.2 million for the six months ended June 30, 2023, a decrease of $55.4 million, or 7.4%, which was primarily due to the delayed start of certain projects.

The decrease in revenue was related to a decrease of $47.5 million in revenue on fixed priced contracts, a decrease of $6.1 million in revenues on unit price work and a decrease of $1.7 million on T&E contracts.

Operating income for our C&I segment for the six months ended June 30, 2024 was $13.0 million, a decrease of $10.3 million, over the six months ended June 30, 2023.

As a percentage of revenues, operating income for our C&I segment was 1.9% for the six months ended June 30, 2024, compared to 3.1% for the six months ended June 30, 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 2.1% for the six months ended June 30, 2024, compared to a net decrease of 1.3% for the six months ended June 30, 2023.

Significant estimated gross profit changes negatively impacted operating income as a percentage of revenues by 5.8% and largely related to labor and project inefficiencies.

A single project that is anticipated to reach substantial completion during the fourth quarter of 2024, caused 2.0% of this negative impact.

The loss from this project was primarily due to scope additions, increased labor costs related to schedule compression and lower productivity due to access and workflow issues.

Significant estimated gross profit changes were also negatively impacted by an increase in costs associated with schedule compression on certain projects and an unfavorable change order.

These decreases were partially offset by positive significant estimated gross profit changes totaling 3.7% and largely related to better-than-anticipated productivity, some of which related to clean energy projects, favorable change orders and a favorable job closeout.

Additionally, C&I operating income margin was positively impacted by approximately 0.8% due to favorable joint venture results.

This increase was partially offset by higher contingent compensation expense related to a prior acquisition, a decrease in work in progress and higher fleet depreciation and maintenance expenses.

Non-GAAP Measure—EBITDA

We define EBITDA, a performance measure used by management, as net income plus interest expense net of interest income, provision for income taxes and depreciation and amortization.

We define EBITDA, a performance measure used by management, as net income (loss) plus interest expense net of interest income, provision for income taxes and depreciation and amortization.

EBITDA, a non-GAAP financial measure, does not purport to be an alternative to net income as a measure of operating performance or to net cash flows provided by operating activities as a measure of liquidity.

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We use, and we believe investors benefit from, the presentation of EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations.

Using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under accounting principles generally accepted in the United States of America (“U.S.

Using EBITDA as a performance measure has material limitations as compared to net income (loss), or other financial measures as defined under accounting principles generally accepted in the United States of America (“U.S.

GAAP”), as it excludes certain recurring items, which may be meaningful to investors.

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Using both EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) monitor our capacity to generate returns for our shareholders.

The following table provides a reconciliation of net income to EBITDA:

The following table provides a reconciliation of net income (loss) to EBITDA:

Three months ended

June 30, Six months ended

(in thousands) 2024 2023 2024 2023

Net income $ 18,939 $ 23,163

Net income (loss) $ (15,277) $ 22,273 $ 3,662 $ 45,436

Interest expense, net 1,160 961 2,072 1,226

Income tax expense 4,157 3,908

Income tax expense (benefit) (6,860) 9,324 (2,703) 13,232

Depreciation & amortization 16,274 14,506 32,104 28,495

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Certain material covenants contained within our credit agreement (the “Credit Agreement”) are based on EBITDA with certain additional adjustments.

Non-compliance with these financial covenants under the Credit Agreement — our interest coverage ratio which is defined in the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement) and our net leverage ratio, which is defined in the Credit Agreement as Total Net Indebtedness (as defined in the Credit Agreement), divided by Consolidated EBITDA (as defined in the Credit Agreement) — could result in our lenders requiring us to immediately repay all amounts borrowed.

If we anticipated a potential covenant violation, we would seek relief from our lenders, likely causing us to incur additional cost, and such relief might not be available, or if available, might not be on terms as favorable as those in the Credit Agreement.

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Three months ended

June 30, Six months ended

(in thousands) 2024 2023 2024 2023

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Depreciation & amortization 16,274 14,506 32,104 28,495

Income tax expense 4,157 3,908

Income tax expense (benefit) (6,860) 9,324 (2,703) 13,232

Interest expense, net 1,160 961 2,072 1,226

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Liquidity, Capital Resources and Material Cash Requirements

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

As of June 30, 2024, we had working capital of $269.9 million.

We define working capital as current assets less current liabilities.

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.

During the six months ended June 30, 2024, operating activities of our business provided net cash of $30.4 million, compared to $15.8 million of cash provided for the six months ended June 30, 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 $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 $14.5 million year-over-year increase in cash provided by operating activities was primarily due to favorable net changes in operating assets and liabilities of $51.7 million, offset by a decrease of $41.8 million in net income.

The favorable change in operating assets and liabilities was primarily due to the net favorable 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 $47.6 million and the favorable change of $13.5 million in other liabilities.

The net favorable changes of $47.6 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 $13.5 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.

In the six months ended June 30, 2024, we used net cash of $42.6 million in investing activities consisting of $46.0 million for capital expenditures, partially offset by $3.4 million of proceeds from the sale of equipment.

In the six months ended June 30, 2024, financing activities used net cash of $10.3 million, consisting primarily of $14.3 million of share repurchases under our share repurchase program, $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 $11.4 million of net borrowings under our revolving line of credit.

We believe our $426.6 million borrowing availability under our revolving line of credit as of June 30, 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 applicable margin is determined based on the Company’s Net Leverage Ratio (as defined in the Credit Agreement).

The Credit Agreement establishes Adjusted Term Secured Overnight Financing Rate (“SOFR”) (as defined in the Credit Agreement) as the benchmark rate in replacement of LIBOR.

Letters of credit issued under the Facility are subject to a letter of credit fee of 1.25% to 2.00% for non-performance letters of credit or 0.625% to 1.00% for performance letters of credit, based on the Company’s Net Leverage Ratio.

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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 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.

The Company was in compliance with all of its financial covenants under the Credit Agreement as of June 30, 2024.

We had $24.6 million and $13.2 million of borrowings outstanding under the Facility as of June 30, 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 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.

As of June 30, 2024, we had $38.1 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 $11.0 million related to contract performance obligations.

As of December 31, 2023, we had $34.4 million in letters of credit outstanding under our Credit Agreement, including $27.1 million related to the Company's payment obligations under its insurance programs and $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 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 June 30, 2024 and December 31, 2023, we had two outstanding Equipment Notes collateralized by equipment and vehicles owned by us.

As of June 30, 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 June 30, 2024 and $23.0 million as of December 31, 2023.

As of June 30, 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.

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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 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.

The Company’s leases have remaining terms ranging from one to nine years, some of which may include options to extend the leases for up to ten 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 $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 $40.4 million as of June 30, 2024, consisting of short-term and long-term operating lease obligations of approximately $10.5 million and $29.9 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 $2.0 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.

The outstanding balance of finance lease obligations was $3.8 million as of June 30, 2024, consisting of short-term and long-term finance lease obligations of approximately $2.2 million and $1.6 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 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.

As of June 30, 2024, we had approximately $14.9 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 believe that it is unlikely that we will have to fund significant claims under our surety arrangements.

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.

As of June 30, 2024, an aggregate of approximately $2.76 billion in original face amount of bonds issued by our sureties were outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $770.1 million as of June 30, 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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Concentration of Credit Risk

We grant trade credit under normal payment terms, generally without collateral, to our customers, which include high credit quality electric utilities, governmental entities, general contractors and builders, owners and managers of commercial and industrial properties located in the United States.

Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States.

Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States and Canada.

However, we generally have certain statutory lien rights with respect to services provided.

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

As of June 30, 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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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