Updated - Third Quarter 2019
To Our Shareholders:
The third quarter of 2019 produced record revenues of $307,473,000, exceeding the 2018 third-quarter revenue by $42,155,000 or 15.9%. Both of our reporting segments produced solid increases in the quarter with Utility being up 17.9% and Residential/Commercial (“R/C”) being up 12.5% compared to the third quarter of 2018. For the third quarter of 2019, income from operations was also very strong at $22,783,000, compared to $14,585,000 for the third quarter of 2018. This represents an increase of $8,198,000 or 56.2%. Net income was $13,434,000 compared to $8,384,000 in the third quarter 2018.
The first nine months of 2019 also produced record revenues of $856,796,000, which exceeded 2018 first-nine month’s revenue by $112,178,000, or 15.1%. Again, both reporting segments provided strong increases as year-to-date revenue growth was up in Utility by 18.0% and in R/C by 11.9%, compared with the first nine months of 2018. To put some color around our robust revenue growth, the first nine months of revenue in 2019 of $856,796,000 is $11,118,000 higher than our 2016 full-year revenue.
Our significant growth over the past two years has been exciting, and it all stems from the hard work and dedication of our 10,500 plus employees every day.
Year-to-date income from operations was $56,031,000, compared to $38,719,000 in 2018, which represents a 44.7% increase. Net income of $32,688,000 was higher than the first nine months of 2018 by $9,217,000 or 39.3%. The increase in profitability was driven by strong revenue growth, solid operational performance in almost every service line and our focus on continuing to implement key initiatives. Strong revenue growth had a positive impact on our fixed cost absorption which enhanced profitability. The majority of our service lines financial performance improved year-over-year with several providing double-digit revenue and profit growth. Another contributor to our enhanced profitability was the continued implementation of several initiatives, including exiting unprofitable utility contracts, cost management and diversifying geographically. What’s more amazing is that our improved profitability was achieved with minimal storm-related work in 2019. I want to recognize the hard work and dedication that the management team and field personnel have delivered for the first nine months of 2019 and thank them for their efforts. As we work through the fourth quarter, we will remain focused on providing a positive client experience and implementing our key initiatives.
Along with the Company’s solid operating performance, we have also made progress in strengthening our balance sheet. As we continue to grow, our balance sheet and cash flow remain key components to our financial strength, and we remain focused on managing them and on seeking opportunities for improvement. Cash provided by operating activities for the first nine months of 2019 was $57,214,000, an increase of $32,417,000 from 2018. Several items contributed to this strong improvement, with most of the increase coming from our increase in net income and our success in working capital management. Due to the solid cash flow performance, we saw a reduction in our long-term debt balance as well. Cash used for capital expenditures, including acquisitions, was down $6,465,000, and 2019 year-to-date stock redemptions were down $5,523,000 compared to the first nine months of 2018. Going forward, we will maintain our emphasis on the balance sheet with the two main areas of focus being working capital and debt management.
We are in the final months of 2019, and as we close out the year, we remain committed to finishing the year on a positive note. Our strategic plan has been in place for nearly seven years, and our overriding objectives remain consistent, which are to be disciplined with our resource allocation, while optimizing safety, employee engagement, client experience and shareholder value. We are very excited about how 2019 has progressed, and we look forward to finishing strong in the fourth quarter. Thus, as the year comes to a close, we need to ensure that we run through the tape, and we are confident that the management team and field personnel will remain committed to meeting this challenge.
Thank you for your continued support.
Patrick M. Covey
President and Chief Executive Officer