Strategic Performance Drivers

• Record quarterly net income and C&I revenue were driven by disciplined project execution and a strategic shift toward contracts with more favorable terms and conditions.

• C&I margin expansion resulted from increased utilization of prefabrication in controlled environments, which effectively mitigates field labor risks and improves productivity.

• T&D performance was bolstered by a high concentration of Master Service Agreements (MSAs), which now represent approximately 70% of segment revenue, providing a stable and predictable work base.

• Management attributed the strong bidding environment to a 'clear divergence' in the construction market, where mission-critical electrical infrastructure is outpacing volatile traditional commercial segments.

• Operational efficiencies were achieved through better contract management and material kitting, though these gains were slightly offset by inefficiencies on specific isolated projects.

• The company is maintaining a selective approach to large-scale projects, prioritizing long-term customer relationships over aggressive market share expansion to protect margin integrity.

Outlook and Strategic Assumptions

• Management raised full-year 2026 revenue growth expectations to approximately 12%, up from the previous 10% target, despite anticipated quarterly 'lumpiness' due to subcontractor and material timing.

• Operating margin targets were increased for both segments: C&I is now expected to range between 6% and 9%, while T&D is projected at 8% to 11% for the full year.

• Capital expenditure is forecasted to trend toward 3% of revenue, above historical averages, to support growth in the capital-intensive T&D segment and expanded prefabrication capabilities.

• Large-scale high-voltage transmission projects are expected to enter the backlog in future quarters, though construction and revenue generation for these awards are not anticipated until 2027 at the earliest.

• The company expects DSO to potentially rise to the low 60s as the mix of new project starts and MSA-style work fluctuates throughout the year.

Risk Factors and Structural Dynamics

• While the labor market remains tight, management noted that this has not yet translated into increased bidding power or higher margins, as the competitive environment remains intense.

• The Xcel Energy MSA is experiencing a slower-than-anticipated start, with spend expected to ramp up gradually through the remainder of 2026 and accelerate in 2027.

• Management highlighted a strong M&A pipeline featuring 'high-quality companies,' indicating that acquisitions remain a primary use for the company's $163 million cash balance.

• Grid infrastructure bottlenecks and underinvestment in modernization are identified as primary long-term demand drivers for the T&D segment through the end of the decade.