MYR Group Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are primarily with fiscal 2020. MYR Group is a specialty electrical contractor operating in the United States and Canada through Transmission and Distribution (T&D) and Commercial and Industrial (C&I) segments.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $2.498 billion | $2.247 billion |
| Gross profit / margin | $325.0 million / 13.0% | $275.9 million / 12.3% |
| Operating income / margin | $118.6 million / 4.7% | $86.5 million / 3.8% |
| Net income attributable to MYR Group | $85.0 million | $58.8 million |
| Diluted EPS | $4.95 | $3.48 |
| Operating cash flow | $137.2 million | $175.2 million |
| Capital expenditures | $52.4 million | $44.4 million |
Cash and cash equivalents were $82.1 million at year-end, versus $22.7 million a year earlier. Working capital was $249.8 million, up from $193.3 million. MYR reported $4.5 million of equipment-note debt, no borrowings under its $375 million revolving facility, and $12.3 million of letters of credit outstanding; reported borrowing availability was $362.7 million. Operating lease obligations were $21.0 million. The company was in compliance with its credit-facility covenants.
Non-GAAP EBITDA was $164.2 million, compared with $132.4 million in 2020. The company cautions that EBITDA is not a substitute for GAAP earnings or operating cash flow.
Material changes versus 2020
- Revenue rose 11.2%, driven by higher activity on C&I projects, distribution work and larger T&D projects; 2020 C&I activity had been affected by the pandemic.
- Gross margin improved to 13.0% from 12.3%. Management cited better-than-expected productivity, favorable project close-outs and change orders, partly offset by labor and equipment inefficiencies and unfavorable adjustments on some projects.
- T&D revenue increased 12.8% to $1.302 billion; segment operating income rose 21.3% to $132.7 million, with a 10.2% operating margin versus 9.5%.
- C&I revenue increased 9.5% to $1.197 billion; segment operating income rose 46.1% to $54.4 million, with a 4.5% margin versus 3.4%.
- Operating cash flow declined by $37.9 million, primarily reflecting working-capital timing and payments related to 2020 CARES Act payroll-tax deferrals, despite higher net income.
Backlog, outlook and notable items
- Year-end backlog was $1.789 billion, compared with $1.649 billion at year-end 2020. Remaining performance obligations were $1.678 billion; $423.7 million of these were estimated not to be recognized within 12 months. Management cautions that backlog is not a stand-alone predictor of future revenue and may be canceled, changed or delayed.
- Management expressed optimism about utility grid investment, reliability upgrades, renewable-energy connections and infrastructure spending, and expected incremental U.S. and Ontario distribution opportunities in 2022. It noted that large transmission awards and construction timing are difficult to predict, with substantial work on large projects awarded in 2022 potentially beginning in 2023. C&I recovery was described as dependent on economic conditions.
- Management identified continuing pandemic-related disruption, regulatory delays, supply-chain constraints and rising insurance, equipment, labor and material costs as risks to schedules, pricing and project opportunities. Fixed-price work also exposes the company to cost overruns.
- Changes in project estimates increased 2021 gross margin by 0.4 percentage points and operating income by $9.2 million; the corresponding 2020 estimate changes reduced gross margin by 0.8 points and operating income by $18.0 million. The 2021 estimate effect increased diluted EPS by $0.39.
- On January 4, 2022, MYR acquired the Powerline Plus Companies in Ontario for approximately $114.4 million, subject to adjustments, funded with cash and revolver borrowings; additional contingent consideration may be payable. The filing’s preliminary purchase-price allocation was not yet complete.
- MYR had $12.6 million of remaining CARES Act payroll-tax deferrals expected to be paid by the end of 2022. It reported no material expected adverse outcome from disclosed ordinary-course legal proceedings and had not paid cash dividends.
Important facts for investors to verify
- Whether improved margins and project productivity persist, particularly given the material effect of project-estimate revisions and change orders.
- Conversion, timing and profitability of backlog and remaining performance obligations, including customer cancellation rights and the large share of fixed-price C&I revenue.
- Cash conversion and working-capital requirements as contract assets, receivables, billing timing and CARES Act repayments affect operating cash flow.
- The financing, integration and eventual purchase-price allocation for the January 2022 Powerline Plus acquisition, including any contingent payments.
- Exposure to labor availability and costs, supply-chain and commodity inflation, insurance and wildfire losses, safety incidents, weather, and multi-employer pension obligations.
- The filing provides qualitative outlook commentary but no quantified revenue, earnings or margin guidance.