ITG Q3 2026 earnings call transcript, November 11, 2026

Hi, Andy.

Hi, Chris.

Yeah.

Hi, Stefan.

So our data center backlog entering this year was over $500 million. And we've been ramping our revenue and production associated with that work really since more or less early summer. And that was a good contributor to the third quarter on the top line. So we've burned a little bit of that backlog down, but we still have, you know, substantial, call it half a billion dollar kind of scoped backlog in data centers. So significant opportunity there. While we didn't have any major new contracts in the third quarter associated with data center, we have a number of bids outstanding, and those could hit one way or another. We'll get decisions on that relatively near term. So there's a lot of work still out there for incremental associated jobs, and we're still equally bullish on that end market.

Sorry, I missed another part of your question there. No, no, that was all of it. That was really helpful. And then maybe just a question on 2027. You know, there was a major telco that cut CapEx for next year. You know, it doesn't seem like it's a major customer of yours, but can you just speak to the demand environment and maybe how you see it shaping up next year versus, you know, your original expectations that you communicated to the market? with the IPO process?

Hey, Stephan, this is Andy.

Thank you, Steve.

So what we see is a ramping contribution from full circle with relatively smaller numbers in the third quarter. It'll be a little stronger in the fourth, closer to the annualization of the full-year guidance. That I gave. And our overall guide for the fourth quarter is intact. Obviously, that builds in an assumption of a little bit of slippage from a couple of customers in the fourth quarter relative to where we were. But, you know, there could be potential to perform a little bit better than planned, you know, depending on circumstances. But, you know, we don't want to get ahead of our ahead of our skis when it comes to to what we feel on the top line and full circles brand new. So it's just starting to contribute. And just sort of on the growth rate year over year, you know, significant slowdown kind of sequentially. Yeah, that that growth rate is really just baking in the annualization of acquisitions that were completed in the third quarter, a bunch of them in the third. quarter of last year. So it's, it's really just reflecting that. But still, still good growth assumed as we as we go forward. But the fourth quarter, you know, is the one where you, you annualize a bunch of those deals from last year. Okay, that makes sense. And then just maybe shifting gears, in terms of cash flow, you know, having to see the the new definition that you'll be using, just curious how much improvement to working.

Capital, you see as possible and the potential for cash flow on free cash flow under the new definition to be positive in 2027.

Yeah, thank you. So, you know, when you when you look at cash flow from operations, net CapEx, there's a couple of things that number one, we had somewhat stronger CapEx than than budgeted in the third quarter. And again, in the fourth quarter. And that's coming. It's inclusive of of the acquisitions, but also some spend associated with incremental opportunities that have come up more recently. One area where we spent a little more CapEx is in our civil utility business where we've won new business and are ramping that that opportunity here over coming months. So a little bit of earlier spend the CapEx than previously planned on the working capital side. I did note in the. Commentary that we had 18 million in in purchased working capital in the third quarter. So so that is an inorganic portion there. And we had significant ramp in in volume and beat the top line, which did come with some early working capital use. So what I see is that the fourth quarter is going to be a quarter where you stabilize that. And, you know, not only do. We see a seasonal dip in volume, which will then help pull through some of the cash because you're not building the incremental whip, but also just to focus overall on cash collection and the pace of invoicing, which, you know, I would acknowledge was a little slow in the third quarter, which also contributed to the build and working capital. But that's not structural. I view that as a timing difference. So we do see cash improving in the fourth quarter.

And we. We continue to believe we we have the opportunity to to be positive in 2027. And we'll detail that outlook next quarter when we have a formal forecast for 27.

Thank you very much.

Thank you.

Good morning, Jose.

Good morning.

Hey, Jose.

This is Andy. One of the reasons ITG will continue to stay ahead, even through, you know, I would say... ...disruptors, like SpaceX, you know, Amazon, Leo, when that publicly deploys, is it does drive a lot of activity as it pertains to our E&M business, where the lifecycle of a customer is absolutely being reduced on the duration. So, when I bring that up, what I'm saying is, you know, you see some of our largest customers, you know, reporting potentially net losses and seeing some of the disruption, but it's absolutely... creating more truck rolls, more activity, more disconnect activity, as we are an extension to those teams. So, our E&M business absolutely kind of increases because we're having higher volume because a customer that would typically stay for seven years is potentially staying with their service provider for three or less because they're chasing the promos because there are more choices. So, you can have that same conversation about 5G wireless. You can have the same conversation about now that we have more... choice, those choices are driving more truck rolls. The other thing that doesn't change is the network of management of the homes past on plant miles. So, what I'm saying is the volume of networks still requires the same amount of work to maintain those networks, even if, unfortunately, some of those providers have a lower penetration than what they would have had previously. Just because we are the E&M side,

Three, we added, I think we had four good new customers in that award list, Andy. Yeah, we've got, you know, and the great thing is, is probably our greatest awards were new logos. One great logo that, you know, I'm excited that they've turned to ITG as their trusted partner and doing full turnkey solutions on doing, you know, hundreds of thousands of passings that they want to deliver. And ITG is their strategic partner to be, you know. The trusted source to go execute in 2027. And we're, you know, we're ramping that up now in 2024. So we're thrilled that people are trusting us and seeing, you know, our reputation is preceding us because sometimes people are actually outreaching out to us. And, you know, from a sales perspective, you know, it's always good when fish are jumping in the boat and the phone's ringing with new logos and new opportunities because they're looking for trusted partners that can execute. Deliver what they commit on. And that's where ITG stands out. Yeah, I think as I kind of alluded to, I think the pace of business that we're seeing in the fourth quarter is already at the point here mid-quarter where we can say it's almost certainly going to be as good or better than the previous quarter. So just a lot of business coming in over the transom here.

Thank you.

Appreciate it. That's very helpful. And then there's a pretty healthy acceleration in infrastructure employment growth here in the third quarter. Just any more color on what drove that? And how we should be thinking about the sustainability? I'm sorry. Can you restate the question? We didn't hear you clearly. Yeah, no problem. There's a pretty healthy acceleration in infrastructure deployment growth here in the third quarter. Just any more color on what drove that and how we should think about the sustainability? Thanks. Yeah. Oh, thank you. You know, definitely third quarter acceleration in business. And that's a combination of. Of just a seasonal ramp. You know, we do typically see a ramp in the summer season for the construction season. So you've got people working all over the country, you know, with good weather everywhere. We also saw contribution from new end markets. So the work that we're doing with hyperscaler customers, for example, flows through infrastructure deployment. And a lot of that was starting to pick up during the third quarter. So there's both regular season. And just a pure acceleration of backlog conversion into that business. And I think it's a smaller service line than E&M. But as we noted back at the IPO, it's going to grow faster because of the magnitude of fiber build-out opportunity that's out there. So you saw that realized in the third quarter. Appreciate it. I'll pass it on.

The fleet becomes fungible, so assets are applied seamlessly around the business, and that can, frankly, be hard to track from the original source. So because of all these things, the growth that we've seen from acquired assets has, in many cases, been very substantial, and that could be misinterpreted to be coming from talent, resources, and capital investment from those relationships that we've acquired. It's really the opposite. In many cases, we're seeing these folks operating as ITG right away, and it's the growth coming from being with ITG that's enabled. So while we do track our profit centers and track inorganic and organic on a technical basis, according to sort of that traditional definition, I think it's just really important to note that our acquired businesses have grown dramatically since we've acquired them. So I did some mapping. on this. And if you look at, if you hold revenue stable at day one, when we acquired companies over the last couple of years, and if you just look at the last year, holding acquisitions at levels of revenue acquired on day one, we grew 27% in the third quarter. So the reality is, if you just counted that as inorganic, it would make it appear that our overall organic growth is low. But in fact, you really have to give some credit to some of the opportunities that have been realized from acquired companies once they're integrated immediately. And if you do that, you can see that the success of this company is really based on that model. And so it's a little difficult to track the sort of technical, organic, inorganic, but hopefully that makes sense.

No, that does. Actually, I really appreciate that response because that does, I think, all of that intellectually. It makes a lot of sense, and that's helpful for context on it. I guess my final question here would just be on the legacy customers and the consolidations that they're talking about as part of their restructuring. I guess I would just be curious your thoughts about, to the extent that you pick up share, is the mix more of more revenue from more share, but maybe the incremental margin on that is a little? A little bit lower as part of their, because I think that's kind of what they communicated as part of their desire to consolidate this, and so we should think of this as maybe additive to revenue and maybe a little bit diluted to margins on, at least on the legacy ops. Thank you. Yeah, I would say, you know, the dilution of margin isn't necessarily going to be the case. They may dilute their spend because they don't have the same amount of layers. There's a management to have to go and execute some of these projects. So you take some of these larger customers of ours that are going through, you know, staffing changes, announcing reductions in cost. It's actually driving more volume to companies like ITG or specifically ITG because we're the ones coming in and you're seeing reductions of positions that would typically, you know, need to be required to go execute their just BAU.

Activity day-to-day business. So we're seeing requests coming in from those larger customers to add more incremental trucks for the E&M side to pick up more project management. So it allows us to actually maintain our margins and grow our market share within them because they're no longer using in-house resources to go execute these projects and leveraging ITG because it is more efficient. To our customers, we're always 100% productive and efficient because everything we do is per foot, per task, and there's not this level of overhead that our customers have to absorb. Training cost, turnover, when you partner with ITG, all that sits on ITG is our ability to maintain, keep our workforce in place and be able to provide the skilled workforce to execute is very, very attractive. When our customers are looking for their margin expansion and using us as one of their levers. So to their street, they're saying our partnerships, our leverage on companies like ITG is going to create savings. It's not because they're getting necessarily discounted margin rates on our rate cards, but they're finding synergies from their own internal overhead because it doesn't take 20 people to execute a project when you have one ITG partner that can go.