Primoris Services (PRIM) 8 Aug 232023 Q2 Earnings call transcript

Thank you for standing by. My name is Enrique and I'll be your conference operator today. At this time, I would like to welcome everyone to the Primoris Service Corporation Second Quarter 2023 Conference Call. All participants have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions] [Operator

would of the ahead. Investor I Blake over to VP Holcomb, Relations. like you. call turn to Thank Please, go

morning the conference to and quarter Good earnings XXXX Primoris call. second welcome

comments Joining me Executive and Dodgen, Ken Tom President Financial and Officer; Officer. are Chief today Chief McCormick, prepared with

to aware forward-looking made Harbor and risks we company statement. from various the Before everyone cautions I and during contained SEC. results language that materially in and with like would reports certain begin, statements our this expectations. uncertainties The are call in subject make certain Actual filed differ uncertainties. to of our risks and discussed These Safe are may projections our

We may disclaim except obligation these represent statements required update be any forward-looking today as Our statements XXXX. our to as law. outlook X, by of only August

In to reference press in these on we will yesterday. website of addition certain reconciliation release, issued call financial our non-GAAP the measures this during of we XXXX earnings A available second quarter are section non-GAAP measures. make which conference Investors our financial and

turn like Tom would McCormick. the to call over now Tom? I to

performance quarter Thank financial us today quarter with second for and you, results revenue and margins. joining momentum Good discuss to our and delivering Blake. you to build continues another well-executed morning thank update. operational positive XXXX, Primoris XXXX in improved topline

customer profit gross records believe benefit highest market the new spending. increased were revenue in grow recorded company's QX to our the have businesses we we share in potential history we and the fact, and and to from In as certain set in continue

of success they often construct efficiently, satisfaction and us to and They offices in power conditions pump. importantly, the a fill our repair Most with that harsh that lines homes allow build to are provide the electricity working I our make their field and to employees in performed duties our to cars thank facilities customers. in the sun out want storm, after to weather hard our possible. generation safely, this to

and to our been has on Our safety ability record. strong this or year exceed particularly have we the performance best safety year meet

quarter during We $X.X a under also booking quarter. billion the record with of ended just $X.X billion, record backlog the including

heavy perspective, This in only attributed business to an XXX% total or increase that work. our be billion development in hard-working being power and and our backlog also operations period. decision can put and was while delivery risk, on to personnel winning our renewables, years $X.X five This ago, selective increase pipeline strategic represents civil, To opportunities, and $X.X over that margin industrial, billion. lower growth focus strong our of communications,

and Starting drive Now, PLH performance more the let's Comm by of segment. improvement the turn we revenue, quarter. gross power during and revenues our The operational saw acquisitions profit, segment, higher in and with closely year-over-year margin gross to Utility helped delivery in B communications.

strong than more saw improved gas of XX% in also growth We with operations margins.

in been than been has have to in we as regions. pick XXXX operations Gas up share market expected better certain able

underperforming some increase been and in months. able past margins to unfavorable by exiting reducing over markets We contracts have selectively costs the also XX

improvement revenue delivery margin and saw also from year. Power last gross the

operating up If for experienced not you we wages the rapid XXXX, escalation challenges that significant in were the our quarter in to make second we able recall the faced inflationary non-union of that of during areas period. we

the Ukraine. prices in the fuel due start in supply conflict uncertainty increases steep saw following of to of also We

MSAs. many of with we negotiate our adjustments much Today, position ability are due better a contracts our to to in to our

through improved elevated non-union XXXX rates much contracts. increased and the While have of able back been we labor compared to levels, pressure to remain claw margin revenue

contracts, progress region. make We updating continuing the in Southern to particularly PLH are the

completed effort margins. be accretive be this to by and to to expect year-end We

delivery. our increase to in power intention our discussed we quarter of projects Last mix major

grow to expense them. not of MSAs, is projects to goal but at the complement Our

often continue and projects. of customers position our we as in are work work share a the to good with adding project customers growing by MSAs serve with to gateway our MSA

to of some winning We these us and exceptional have managing more assist talent projects. in also acquired

To opportunity bidding in billion evaluating existing scope of perspective, most market major or the this we put currently them of of $X are with customers. MSA projects, over

other We support will work project interconnect business scopes are projecting $XX need, are of a growing work that These over by XX industry we their renewables and approximately of currently to months, customers' also our Primoris. underserved in high-voltage the XX next from projects. perform million and an market of

share risk major and our while that managing our profile. margin approach optimistic will win of We maintaining in project disciplined work, we fair execution are project

segment Wrapping while the our maximize being communications, remain disciplined which in grow ability customers we work we up and revenue pleased the the efficiency We margins. with regions to the for, work margins. on in with in and our selective to maintain are teams order we of

the expansion with share customer the the market market. Texas significant in To and end, are Arizona this Central seeing new in we gained

was and slow even first half We year. growth into pulled area achieve the expected forward to targets Colorado on high-growth are allow track of in a into is key enter another communications which as XXXX, us relationship, our to down since country. our market the of being this also will to by pulled the of to remain some half second customer work We the

to our We margin overruns saw margins the and on pipeline Pipeline their volumes, segment. Moving businesses. the seen project. cost the turnaround has of including low multiple somewhat year, services from to a business over from we project negative revenue when lines renewables, increase improve prior year, industrial a and gross prior Energy due and experienced

execute able margins. and pick favorable to backlog some In work additional pipeline at been from position up has well a QX XXXX, stronger

are to Challenges on the remain success to we to In opportunities fact, the our competitive, the margins market quarter remains digits. of There in that level projects also and but are improved project, announced possess. year. first this seeing experience, equipment several closer in carbon second low we earlier targeting double that specific we scopes in additional business a that the the bid more build require mid-cycle this capture skills are and

several quarter big in for in the that representing provide awards and book-to-bill over across and favorable civil in Included range stimulus, a bookings, in the states a segment. behavior. benefits in bookings, X.X federal $X.X but heavy from customer diverse Another billion were times industrial the represent was span only and these wins $XXX for change not of story These the also Energy, a sizes coming scopes. million

this is we that finalize to next improved in businesses. that we in are of these continue a will have for demand drag continues some contractors seeing rising. Customer on And the couple for specialty high trend services been and a margin projects expansion productivity in that We we believe, years if are quality result, see as margins, demand.

going of We customers XXXX, late to and choice These Renewables and of continued a the million. see early relationships positioned approximately customers, will to with of $XXX the to and well, will X.X until combined grid. solid construction energy not contractor to in energy add announcing quarter chain our signifies be supply uniquely which the make contract strength begin the we several forward. demand, for these value have are other renewable projects gigawatts another believe commitments. these our as the facilities contract people, our large awards solar Two in of confidence of

achieve quarter margin revenue as margins within XXXX. on great believe in bookings, On solid top the compared revenue second saw renewables achieve to growth we track target, of We XX% as to to continuing a our we high well are XX% standards. to by and maintaining of quarter XXXX performance also our growth

execution with strong within in Market slowdown overall, and aren't pleased renewables for We are the renewables. and anticipating very our years. performance few we a next remains

industry for in are to market XXXX. seeing of bullish this To the investment delays share on manufacturers. a Inflation Reduction of solar these we capture the of Act. of supply benefits module investments that concern manufacturing, module reflects in Solar billions a support we delivery less help with This appearing to domestic long-term view chain dollars are be this, the

our IRA requirements are to in this clarity in prevailing first our QX. industry's that growth on our place, project the with May that following were We means strong the are and anticipation continued This trajectory, labor also we utility-scale have the further on seeing teams this IRA number of using made than our Also program, in year. apprenticeship wage of we project execute customers solar programs sooner the expanding of towards beginning now year. in by the of we comply plans working are known end incentives expected, and

work safely is retaining and and to very a solid We to to us solar the profitability. our built believe maximize talent to approach plan attract to promote best-in-class, top perform have keep reputation enables ensure, we and our we top industry, and which our We talent. EPC efficiency recruiting and in

more it turn I'll our financial now for Ken, results. on over to

billion, in industrial work QX year. over as $XXX business. the $XXX The everyone. in Revenue was of some morning, Good $X.X growth segments. growth from prior Energy pipeline the an as little driven lines, from This second especially, million XX% increase renewables was the for pipeline, and up of both segment million by over prior our driven business or our forward quarter in by year and QX our being from was well pulled a

XXX the lines by also segment compared almost year all XXXX. XX% across from $XXX profit million, double-digit approximately for the growth up increase an million, gross second in year. quarter for Utilities more $XXX was driven X% of of which than saw The margins due business $XX prior Gross to over revenue both points was strong gains were and prior higher million margins. improved the quarter, year Gross prior compared to XX.X% up the to from basis

at contracts the felt full We of margins X% seeing to of or margins in down PLH like of when million, QX be results the X.X% our B prior to improved which to an markets. partially driven $XX.X normal. year Utility QX the year In to year XX.X%, higher better we compared are of rates. certain and revenue, segment and Utilities Comm. labor many increase from was renegotiated better fuel Gross slightly for those by with than $XX.X and compared of in the seasonally expect will the XX% segment acquisitions QX due the impacts QX gross margins look inflation let's million Now XX% results. was We've the profit prior margins still almost to segment and

margins margins profit Gross is increase in gross the Energy low delivered lines. almost million revenue negative double-digit pipeline which quarter, million improved both an due which in an remained for the XX.X%, attributed the and in gross year. X.X% from a and at Gross to to in of improvement higher prior $XX businesses. business the projects, was year came the or this prior margins second XX% of $XX over gross multiple year. segment, in margins industrials compared can margins across the be in margins last also to Much quarter increase of quarter strong renewables our In recovery

to continues that growth in profit segment after on revenue XX% a and remains gross moving and this the also the project legacy on LNG prior lead revenue year. track margins year. past Industrial XX% in to to improved Renewables margins achieving weighed

We the range. expect balance year strong in margins and XX% gross segment to the of the Energy the to comfortably remain for remain XX% to

business. increase Taking due support Expenses in of year. an is our incremental the of a the to acquisitions and primarily look million, key lines were impact our almost the to at second $XX in of growth million The increase $XX.X in over quarter costs SG&A. prior SG&A

increased result, in with year SG&A We a to range. line our full the as guidance maintain X.X% X% of SG&A revenue low As expectations. percentage but a our slightly in

was balances interest to the Net expense higher in due million rates. year. $X.X quarter the debt compared and million $XX.X prior in The higher second interest average increase average was to

range million to anticipate We continue to million. expense year between interest our $XX and full $XX

quarter. expect in per Our slightly year. from and first be was jurisdictions, diem to small for range tax full the during some in that items tax XX% revenues we primarily XX% to quarter tax nondeductible for effective and higher quarter shift the in increased The due the the to increase discrete rate would it a

of diluted of due a primarily year, from income last sale million share leaseback year. prior $X.XX down which occurred was the or million transaction, and $XX million gain approximately Net QX per $XX in on $XX to

EBITDA was increases and prior an EPS diluted were EPS EBITDA of the per noted increase an or the for XX% adjusted $XX.X increase adjusted prior quarter, Both million profit million adjusted to earlier. and driven higher $X.XX the $XXX.X year. primarily per by revenues compared from share, However, $X.XX year and the gross share was of adjusted in

increase in deposits quarter. in operations generated primary in cash were drivers from Turning income net customer to cash with adjusted We million flow. strong QX. of $XX.X the an The along

we we with of early we the announced are progress We capital continued by last approximately forward total quarters. debt are million available $X $XXX.X cash progress the capacity look but initiatives made million, stages at over encouraged the this providing our coming and under billion. net we of We end. quarter, the to ended quarter the of liquidity $XXX.X quarter working Borrowing in quarter still $XXX.X revolver of million and was

to the leverage priority continues for our a be Reducing company.

was XX-month trailing Our the by around of around to we end times be QX believe end debt-to-EBITDA the net are to reach on times and two ratio X.X we of at our goal track XXXX.

debt the to earnings growth Our reduction quarters. accomplish this through and several is plan over next

of XX%, in $X.X billion quarter resulting a $XXX up backlog billion increased about up increase prior to communications power little our of MSA strength a end growth. growth backlog backlog the $X.X Central $X over or Total primarily another to Fixed an over in due the XX% Energy $X.X delivery Texas backlog. record billion in to $X.X and was segment. under compared under driven in little or XX% year, million the was by billion just to the billion, at

of into quarters. XXX% our backlog four utilities of XX% over next energy convert to the our and expect We backlog revenue

year And finally, guidance. full earnings our turning to

and Given guidance. XXXX, the we half for year our our of strong are outlook to constructive start the raising earnings second

million $XXX EBITDA to also the EPS to EPS to full $XXX share to is expect adjusted share. per $X.XX of year and We $X.XX for XXXX. $X.XX million raised of per $X.XX being Adjusted guidance

the anticipate of the QX. year, the revenue first forward we projects half flat pulled to of be Given certain and was slightly to will timing the sequentially that QX from up

are are fourth QX to to optimistic certain and the for XXXX. expect we we further quarter closer results our see XXXX believe markets pleased a foundation quarter. the as Overall, will fourth also with track in growth in levels, set which on the we revert during a typically are for record We we slowdown

With I'll to back that turn it Tom. over

you, Ken. Thank

key quarter. operational questions, take our results first summarize some we in I takeaways as Before from as XXXX. of half I'd performance well safety our of and of the to like am financial proud the

businesses We focus and successes to with have celebrate across to customers safety, productivity. on our committed all the and remain our of on of behalf executing quality

what achieve yet company we new believe as raising our records the in I establishing expectations We are for is come. a can to and best

strategic We great in execution. the right and of focused markets profitability disciplined of communications. right customers many with are we strides power right have strong conviction made delivering increases through renewables, We're on delivery markets. other that our in This and growing improved also flow leadership the the and only our businesses projects bidding cash in our

Additionally, particularly in and we to are further a share energy in grow space great market storage. renewable in the position solar

provider and our the service renewable top of value to us and as are customer relationships help of services. which will We solidify bringing growing teams, our offerings our position expanding customers all EPC

Primoris with our sources in position grow from to to and customers the strategy. great energy to environment, a renewable a favorable execute benefit work is on continue right As

transition assist the We the the people building best in to US have economies also unique the to while and North infrastructure with America opportunity necessary smoothly. running the keep energy

the finish half do more know as we the not is complacent work to back of there year to Finally, toward we are that XXXX, and look we strong.

flexibility which the our and and to provide in communities in reduce safe improving our business we our focused employees, We our productivity invest with customers' of profitability work allow generation, to balance management. on Success benefit our in maximum not cash the to effective will us flow are shareholders. of us areas our the increased our execution project debt through these and projects, improve

the We will call for now open questions. up

Instructions] from first [Operator from ahead. please comes Our question Thalhimer go Davis. Adam, Adam Thompson

all kind fair guys. good of Hey, the just a a work amount discussion you morning, review that? Great about the was half from quarter. of second Can pull of forward quarter. back There into

I but of of line that little utility have a in on a different bit $XXX numbers I Yeah. forward. lot top spread pipelines across pulled me, the the was definitely side it's probably well. about exact front the is units, million as of business mean don't

those a revenue is and then up more Okay. along revenue And slightly same about with line then QX QX guess I QX was comment that versus QX? lines in

Yes.

That's a revenue.

down that the Okay. of And then how segments? break does between kind

The in of the Utilities QX peak segment forward. just is had We double Utilities of it going we pull to revenue actually -- segment normally be I'm QX. kind checking. our The in because have

QX is from Energy sequentially up QX. opposite. to revenue to QX Energy going be So be and in QX. QX going the sequentially into in will down Utilities be is and

and Okay. Thanks. over Perfect. the hop it I queue. will back in turn

question next KeyBanc the Eastman go Capital Markets. of line from ahead. comes Sean please at Your Sean,

[ph] taking on and congrats is Sean Hi, team. our Thanks for morning. This on quarter. Alex the questions for this

my So $XXX operating cash beyond cash this million and on capital question, conversion that working And think as still normal about are like XXXX do first we $XXX I how flow flow a we guess year? these pace for think we initiatives? like then, range million with about to

Yeah.

yes, the year, same still looking picked this QX. We at bit up range. a we're in For little

you timing be to As kicking It going on off a is it's going QX. be of in to certain QX, in the dependent projects push. noticed

year, tell many planning to kick into going So initiatives to so honest be more is year just don't that loaded I can next And you, back-end of be yet. you year. I know as normal. bulk going, to next for just And QX off we're it for process with the like about our much next about with

I or think we that. better so that another quarter to have into it's before be going visibility

sounds this pipeline diameter you months? pipeline lot construction? seeing of an over on business it's that carbon just talk Cool. opportunities better that And begin performing next large booked more quarter? pipeline bid? on future you there out Can the you Are to last Got the And is XX year. this update pipeline, like it. about Did then a

project there's last again, So shorter what them. it the seen more more remiss they're runs field next we a a large year, in are that so of across or announced give go smaller would we we've diameter. lot are or state than a of than but not that the projects there range, but into smaller seeing XXXX. see, be seeing more are but you -- lines, carbon projects. we're you We're historically, year typically And to will lot intrastate they If they're

a there's outs and smaller supporting So plants these industrial facilities sections some of are built. cut that are and lot replaced LNG being just and of sections other these that

Thank you.

comes question next Co. of from the & Sidoti Julio, with line ahead. please go Julio Romero Your

Good This Hi. and morning, Ken on Blake. Julio. Hantman Tom, Alex for is

in around Can win utilities. First power the to delivery to expect backlog? when efforts about talk can the project question that more your and reflected in business see work you to we talk

to we're it Well, starting backlog. of see in some reflected the

with executing we'll work in I revenue for of my back high for year. group spend added noted in comments them. $XX see voltage about as some You'll earlier projects the think so just renewables doing this -- alone. we been We've And see I half our of are some those probably cross-selling million we'll

up ramp going we as up. in XXXX, you see into our revenue that I that think to work get you're ramp as see

sacrifice work. And experience drive really has I and noted the just for higher it in of our work through type will really for to the us. little to that consorted margins we're to We management bringing not a And as work. going went the a MSA a expertise earlier, bit team actually in MSA complement effort chase that

Got you. Thank it.

pipeline profit quarter of to second a Mid-Atlantic the from a In pipelines, dollar overall perspective there Energy margin the is way on performance? or the segment of projects quantify either terms benefit

last talking are project the year? from about Mid-Atlantic The -- you

Yes.

respective -- in that that that to so up was that Really that's pipeline has certain some and which walk was of from of they -- being just client work have built. clean can the the departments which away work. Energy to meet right They maintenance states built way and in to that the obligations

up and cleaning finish some just quarter. And that that way work them. right up work up cleaning of we're for work the and so We'll finishing this

you. it. Got Thank

comes Your Sachs. Goldman [Operator from Instructions] next question Jerry from Revich

that scale Hi. of question. count today the Good morning. Thanks today. how entering and This just taking my in and on count you course us Jerry Can is crew Adam update to utilities year stands XXXX? over crew where the for you the evolve solar small for and scale on expect

towards I -- utilities to the can the and XX XX tell you scale end trying we're by we're to middle of or actually this year in between build and XX crews somewhere the right new working on teams end We're solar. three get of that. achieve

somewhere it's So between XX. and XX

teams of I seeing goal scale, but there. sure or that a those smaller far our a off as be team building work, smaller at And think, we're that's five is DG teams I what we're may as teams. two. with I'm not bit -- their quite

the I concentration scale right biggest think now the is teams. larger building

business, business. Got it. in a around That's see points. Energy basis performance the XQ, XXX then helpful. margin in really that of seasonal we think, down step strong And In I normally

Given some versus help solar the in energy growing of pieces puts just moving us the and you calibrate seasonality? takes margin on on normal sequential of in cadence back can year half the there and revenues, the

question. Yes. It's good

in but closer to into that in and QX, mentioned. you about It We QX. cadence see -- in the down step QX sequentially XX flat a probably to stay the not probably small then be bps will will

much. so Thanks

please go Your ahead. Chornous next line D.A. Oliver question comes Oliver, with Davidson. from the of

I'm feel guys. you're just progress you back to work you my and work Can talk work? of sitting that were Brent. the MSAs? project And there versus between that making question. about earlier. finding for you to more the progress towards towards made Thanks MSAs MSA balance project finding speaking the for kind wanted do taking with Hi balance versus project in I get

Yes.

are. I think we

between MSAs. of total more we'll and think, really of work course I the what we were little see get project. project maybe we to something the down -- do our through think, the year in At We last a bit balanced percentage versus year, to that more the a think we're be -- now. we're intention would And XX-XX But but going right some balanced to bad. work successfully do and to bid little our of projects. seeing clients it that opportunity with XX-XX, -- we become and revenue at not and in that one not to work I have seeing MSA capability I want demonstrate time bit XX-XX group as perform we in continue doing a to other lower XX% that more that we're XX% point more

That's just much you're on color. taking the for great. on more? get I substantial workload back capacity to on bit. so take mentioned Thanks you that a -- is the And solar more kind you you to that taking guys Do of are there know with that more crews.

very as is. we've been been just had we've in because years in how be and disciplined that onboard trying tremendous we've develop to business our our successfully hire there Well it. very and do recruit Look We're continue we're crews crews the we that. growth train successful we executing rates to of projects last all build disciplined about our over going five in and to

Awesome. Thanks so much guys.

from comes line CJS Jagoda question with of next Your the Securities. Lee

Good Lee. for Lukas It's Hi. Pete morning.

strong there. about color in utility us gave quarter good you the the of talked in outlook being You some margins and terms

contract the impacting contract PLH more than half? on And get back pulled about impact those that repricing. how forward that of expected? some of wondering should we Did margins Just think the

we continue balance about as process much of that continue over it talked will year. forward. We with and it got Not of the Yes. the the pulled of just course

up a in QX should as in bit going I bit normal of you're So and back combination sequentially within what see tick think it's negotiation. a see little down going PLH of as normal. contract to seasonality to little like well We drop be margins a then utilities QX

solar of Very QX? how current is Great. backlog much of helpful. to then attributable projects as energy the And

point, I'm -- looking $X.X One billion. at

And for Great. then me. one last

starting show rolling some improving demand pipeline to there. some mentioned projects off You

business? happening the front wondering is there improve Just to the anything on structurally meaningful regulatory

it haven't keep but it permits. We we're talk we lot seen about doing A Yes. it. require is what hearing for of does

fact we're doing doesn't As almost permits. require now a of everything matter not -- for right

-- we're talk hope we're not but there hear and it -- we So yet. on we about it but waiting

Thanks. helpful. jump Very queue. in I will the back

question the Adam next Thompson go of Thalhimer Please from Our comes with Davis. ahead. line

comment could a said struck you of be a Tom possibly made a rising. more. just And as good could comment. for few was as bullish little it about consequence demanding The was for customers that a years. demand really specialty It I Hey, you flesh hoping me you margins quality a that contractors. think out I

more we've in more We there One schedules all few with and have know much to just been Well, a available. there room. very talent. is willing schedules agreeing We're long their to seeing project to able but to had respect for our and little to We seen for respect a management labor tightness in market the the have there's had also clients really in be so to very past room several projects craft years Adam. to with been negotiate. their actually move little clients to seller's bid where much to terms. are we've amenable very We've receptive being it renewables market teams

more following where so peers of them we're projects for executing if And as are more successfully upcoming some benefit seeing those are clients have and sure. that their projects. if to are I'm other of seeing they resources contractors secure they for those the projects And want our

renewables mostly markets? a end that is of comment, that Was bunch in or

it seeing as well. in energy We're

based leadership where with to industrial have the some opportunities getting this projects team In power for in clients delivery -- our that we want they and past in. is in have some on seeing a say if sure see have good it they work a retain because of think I struggled for they sure. them client lot it. in breed utilities seen it And success of see executed when successfully successful prior project team we're clients you you we've -- to we're where other your we've

Understood.

Tom. Thanks, Okay.

back remarks. I'll the for now to over Tom closing turn McCormick call

also I and you for in and your great to the morning. the the and that Primoris great Enrique you, it leader this be a who had of all want company of who a is questions We Thank our industries XXXX. employees our participating in for we and drivers come. thank again today thank becoming years make serve to the the QX will in half of first call

Now year to balance in you promising day. the and of We quarter. year the I groundwork a good about XXXX. am the next forward Have optimistic a for look setting updating

gentlemen all call. today's Thank you and joining. Ladies concludes that for

now disconnect. You may