Primoris Services (PRIM) 9 May 242024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Primoris Services Corporation First Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Blake Holcomb, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to the Primoris First Quarter 2024 Earnings Conference Call.

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

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

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

financial available issued measures. measures would quarter reconciliation non-GAAP to during financial the our website release, these on which A addition, was yesterday. Tom to conference will this make non-GAAP In of are Section we earnings McCormick. press first in turn over I call, of Investors XXXX the our call like reference certain now to

improved to morning, Blake. solid quarter first and us joining to today operational you, you year, for compared year. and our Thank financial the delivering to Primoris margins had discuss and start the results. a prior XXXX thank revenue Good

and the across cash performance. organization safe on teams and Our strategy are focused improve with our productive and profitability engaged to executing flow leading while

energy driving construction areas as adoption having sources increased The and increase natural driving retiring transition are energy generation well momentum facility of America to infrastructure plants bridge primary demand growing of supply solar the solutions a X support energy lower to chain. in our the generation help to carbon electricity and and see grid in investment as coal to replace continue We the positive that transition, transition. gas power impact the emitting increased business: is in shift North in modernization, a on in

is construction, production closer facility new generation that maintain and and and manufacturing, years. is modernization these need grid support and We of extended connect including Many technologies component higher demand. already reliability these interconnected for require for U.S. which will in in chip well new these believe the being capitalize emerging themes also are driven additional capacity order by period growing on to electricity to sustained time, demand them to that an of need substations critical supporting lines electrical transmission in to data positioned a the a of sources to and will coming we are There's of centers investment are themes adding or that

Now segment, let's performance of the segment. lower the revenue Utilities factors look led we with had prior for at Starting that to by quarter versus the a couple year. our

driven certain in experienced favorable in by conditions and XXXX quarter more in weather we a seasonal of markets first First, spending. slower ramp-up the delays less communication

Second, work time due increased revenue this MSA that less XXXX. were we completed was year, a quarter. the from to prior executed major project while constructing year was primarily during that last our substation the in This we project

deliver communications, a to goals. reach backlog our to work. by performance mix operations good to the gas in our able project which and comparable were we margins margin of project Building and segment priority decline target impacts, a these Despite work higher-margin the offset remains Utilities for driven in helped operational high gross

Our address suited well believe projects and that project growing capabilities for to our customers. are list we are of actively market our need our teams a evaluating

estimate will more projects. of as earnings the their quarter As and now our substation evolve continue business, transmission call, on bid the much on the focus fourth supporting teams is Renewables right of this power delivery discussed we needs but and to

activity. construction work growth driven more expansion, significant to the The during decline to in Civil growth line We revenues the and awarded lower XXXX. segment. that by record-setting Heavy able the growth were to top line margin year. also industrial new the and projects on contributed our initiated was Energy and increased year. We that quarter several during achieved Turning start businesses margins a to than of in anticipated offset these versus backlog pipeline projects due that to top we improved prior renewables

of a began of degree led the to This combined major awards our quarterly are on the outperformance. new drive booking QX we outpacing X new Renewables, which In pulled work. up being into which of with high helped ramping projects, efficiency, progressing timing efficiency, XXXX revenue the project at

backlog new projects healthy resume see with down will we solar the a robust, expect and slightly from albeit We in bookings year-end. our the up The ended that pick remains growth. of $X.X backlog second billion, of quarter quarter portfolio to

In the evaluating exceed a projects year. are fact, if to new couple goals for full would of we business us awarded, that, our allow

first for the the Additionally, continue power in we delivery encouraged These of with competitive making adjacent O&M roughly work by business offer we progress Still, to the are accounted provided by stages. are and a believe seeing for along like revenue increased contribution us forward. and advantage are customers still our our Renewables battery high-voltage we that early solar that with are in going revenue services services, quarter. X% storage from they will

into projects in pushed quarter. the and led coming the operations selective Coast grow quarters. the while also to on QX in we the commenced quarter. of projects performance our to offset in timing We we in being being Construction work we've western believe operations. in bid improved the and Industrial These to Canadian funnel of The continue can for in is in drivers a had years, U.S. the margins the bright choose was in business Gulf opportunities we seen new Industrial than work our recent spot improved higher that

next loss this select the we over expect quarters. wind from or divest of businesses subscale several that to We will that or revenue low-margin will mitigate look down the

due in the performance QX, in quarter revenue segment. our which with to is and lowest particularly pleased our are we seasonality, historically Utilities Overall, earnings for

in their to meet XXXX contact the that crews customers are our close We to them of and have help objectives. level we with ensure appropriate equipment

the in still renewables While achievable execution power of that successful flow with optimistic goals margin year our full and beatable our and cash investment continued and growth year, are markets potentially delivery. are and early in we

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

good Thanks, everyone. Tom, and morning,

XX.X% in that solar from growth Our and some up pulled was or segment billion, prior was $XXX by growth XX.X% Energy an industrial or Energy $X.X over million driven The forward the construction QX. as of QX QX revenue and increase was $XXX million in by year, strong the segment. work primarily strong from prior as our driven year, well from

slightly to The was over decline partially year a due slower in communications, $XX a of was prior by year XXXX. in Utilities substation work MSA down the project start due to the project work to segment little of revenue. increased project large majority a the million the in offset and decrease The completion a from during

choppiness We on expect continue mix to we our in some as quarterly to in preferred toward project basis revenue of grow a the work see segment. project

material how want reported a the to eliminations revenue. of change in revenue Historically, we segment point revenue. segment it I report intersegment to out net wasn't we since we've that made total our also

showing segment gross then showing quarter, revenue are this and each for we separately revenue starting intersegment deduction. the However,

segments. We growth our benefit our growing substations and example better revenue gross illustrates of of renewable our each believe the segment this of lines more group customers. and delivery and services accurately reports this revenue building transmission power between An cross-selling the is for

X.X% year, the approximately increase prior revenue the year. profit of Gross primarily due the for million to $XX million, prior for $XXX margins from compared the were and X.X% improved Gross revenue quarter quarter an to higher was in mix.

In down This million prior lower to was Utilities work gross to amount driven by prior project and communications year. slower segment, the Looking was start further at $XX.X our year. compared segments. million, the of work compared the in the $X.X profit the

below the of prior Gross margins X% primarily to the by in X% X%. year, still in driven expected the work our of were of range lower the project middle but X.X% slightly

remaining into the expect range to see move the to X% We for of margins year. quarters our XX%

and The for profit million gross In XX.X%, the industrial a the improved improved work of prior and in result up due mix renewables the $XX.X U.S. quarter, an X.X% were businesses in were from in revenue our million Canada year. gross western from margins margins. margins the and prior margins $XXX.X a higher from was improved Energy year higher to both segment, increase the Gross in

line the increase with costs quarter Turning our due Expenses to in The were to prior to first growth. $XX.X compared million $XX.X personnel the of expectations. is SG&A. support but increased year to our primarily increase SG&A in in an million,

full in expect year flat SG&A a to the the prior X% range. low of for revenue, As year, SG&A essentially remain to the percent and we was

by was first debt from $XX the prior $X.X average the lower result a in average of quarter The year. expense Net interest rates. partially around interest higher down decrease million, offset million was balances,

effective the for significant higher. depending believe Our and and share, saw rate per increased in components nondeductible of consistent by EPS rate full the the tax share was quarter, we adjusted diem $X.XX quarter and year. year, per Earnings XX% will on which improvement be $X.XX EPS work the per for this prior states expenses. we was for from a the

from million, net the or to $XX an up of the EBITDA prior to $XX.X from $XX million, almost increased And income year. million adjusted Additionally, million prior year. just XX% under increase increased $XX.X

we projects to QX, our cash operating revenue The increase This related Taking in the of a million for was year. flow and in income. prior at higher drivers for of from used million. saw future improvement $XX.X $XX around were look an cash payments operations deferred upfront an primary

trailing on we capital Xx but strong of back ratio available $XXX balance trend Looking XX-month the our our sheet. $XXX still the at And end the million of end includes million, the revolver. working million on net see steady of the of at capacity into then could our We liquidity borrowing debt-to-EBITDA based and in near down QX as tick which seasonal We $XXX QX held cash year. quarter. at ratio and up needs maintained

was growth new awards ended million end we at and coming $XX of billion new Utilities. quarters. QX, year-end, MSA of a quarter-to-quarter, see expect due during projects total booking driven with the typically to strong in backlog decreased $XX.X variability We Transitioning the in new XXXX. We backlog of following to fourth $XX.X growth awards. up quarter by compared to from of in industrial backlog primarily the timing $XXX backlog. backlog from quarter to million solar billion Fixed backlog $XXX million resume in the and

And now turning to our guidance.

continue We our for share, $X.XX million EPS $X.XX $X.XX EPS year per we start the full increased the to $X.XX of if gives per across and The guidance of end to guidance markets. to to higher positive strong adjusted share, are XXXX. momentum year see guidance adjusted is end million the year range $XXX us to full EBITDA our guidance maintaining of that confidence of our achievable $XXX

will of as specific and the about further and more awards. guidance we We new unfolds assess XXXX timing learn scope our

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

Thank you, Ken.

for at our key the we call up the want Before questions, for recent Investor our X will open to out strategy drive points years. decision-making the of laid next that highlight we I Day

Our operating grow improve and to to at gross X% X% XXXX to annual objective a profit is XX% revenue. X% cash to flow of rate through

We purposeful this businesses growth allocation, in delivery our consistent and investing capital engines while execution, and through focused growth. our sustaining performance will renewables power accomplish by customer foundational

begins right customers. the the with in profitable growth prioritizing right This markets with

with our our to to all capital our portfolio. highest generate in service We in shareholders deploying not do largest best what aim customers, our going be allocators will do best to the of for We say order but employees, goal of to markets, resources and the be the returns. continue we're to returns is the in may the we provider of

to customers and and initial look right We employees to teams we stages benefit results a by we We high-quality the our and are toward but of cash to the margin operational further start our strong in to these safe, starting place driving flow believe shareholders. improvements XXXX. in consistent, of see still these have forward and the for execution to longer-term the goals, meet initiatives with of continue our goals are marching

We will questions. for now your open call up the

CJS Securities. [Operator comes with first Instructions] line Jagoda Your from question the Lee of

like to a So be It million $XXX about and call, think Tom, would and that talked sound the million certainly business in the growth Analyst in Energy to you I -- earlier Day, that headwind the $XXX segment. revenue doesn't of in at would the all that a sense questions that it that I and of it. And do we expect guess of timing on be in QX. structure margin One, this to of occurred the of couple then year? helpful. occur any any

by be about very that us The $XXX of businesses. should close Lee, $XX completely down on take balance Yes. of will end XXXX. those million to million working it it of we're X wound of probably year. or Roughly this the into

And and even interest looks it your Okay. QX of terms QX, above than had parts then decline balance QX going Ken, we the like in from expense, the that to there? being rate run it expecting guidance the in is you kind year? back moving flat, up the of more the were through should debt what be are was despite the And why sequential of

to, working better work need main even expected. below. it and Lee, and need as were on than to draw as our that. through QX that's we the planned in not Obviously, capital, order peaks original parts, flows revolver to forecast, the we whether revolver on the QX be didn't especially cash are Yes, QX. In during so going reason we We came are early to in had to the or draw seasonal

So the originally at we guided to our to. are, we able what expense trend if we're had below rate continue may interest

one year? net is to guidance, the And or sales gross should a CapEx extent that offset and the number the is more about equipment number? how during a back a for to that that just I'll number, And think in. we The hop me gross

high gross million million year, a been had less million-plus as last we're it And sales It's in than nowhere year. the they maybe we like $XX to always million $XX somewhere the probably $XX the as $XX near is. for to past, the but expecting much in range that be number have

Next from with Steven of question Fisher line comes the UBS.

So segment. obviously, robust profit Energy a the quarter pretty in

that you positive U.S. you that and momentum. kind the was to execution more raise. might pretty You of mentioned How just But continue? of kind it end you range know related of rest that need or year how the if And sustainable see need it's that Canada needed the is western year in I you for you Where potential that one-off of a do you more more were there's mix see in this, the thought where on need and booked you to solar, be? I bookings the of renewables might those for see projects. comfort momentum bookings? said upper well to for this to maybe you and think

bookings. -- think don't I Steve, about we're not worried

what It I performing, and think answer is, we across our so do It's last when I'll the your to of to you can across say perform? question consistency continue first. -- just we going and all board continuing to do businesses. we're

think Canada now. right where they very sustainable are is I with

worried nice certainly I carry to workload, got western backlog the think of XXXX, has -- nice going so they've that's a a through not that. them U.S. I'm about work

bit that to can continues so business more little XX%, been, grow going XX% to it depending Renewables lines what And do. a other maybe their as has be it's on to

to during to improve meeting. to businesses other the that to up set their getting bring that continue the performance margins targets in we it's our So and execution

Okay.

we've One distribution your heard the have territories telling of about the what transmission. second shift spending your base kind electric is half exposure and customers are And you bunch seeing that of the about are that to? year? a regional What customer of things in to you the you in

seeing we're on country is the client the in. still but the you're the part and of we're it in half now, what first right Well, depends that

going everything We through but have going be permitting of work in, the to distribution some they their obviously get work. have the else. They have new and clients, some majority is to transmission

announced recent X they've as what ago. they demands other had their grown just as energy having have months that forecasted beyond We recently clients

with there's of be quite going transmission distribution. more along and bit a so to And that also

that what So different it each delivery just Transmission see depends and is the our on client. little both what a for Distribution, a part We in and bit lot of country and power group opportunities client. of in it for

Goldman line the from comes with question Jerry Sachs. Next Revich of

you I'm can running on now are performance update the could last folks in us many solar about had? growth trajectory the talk the we you And us crew wondering of versus the business the to if update how crews and you quarter. just

question, start So last I'll too, your with Jerry.

teams. now, have project We XX we have -- right

We project a we'll other will that of have have XX. total place XX% the X in so we teams of have

in of awards We've end confidence get September. announce for in Our just they a second we'll probably now. here by of quarter. performance new We're target is perform group, a the performance execution. a that And clients clients' extremely Renewables And the function to lot got lot of some there far that and as our our work of the as is of continue the to well. doing

was what renewables the in solar the performance top And for and line quarter?

$XXX A little million. over

then start the And Okay. margin standpoint. to from strong really year a

usually anything about step in XQ, quarter seasonally of that pretty mind it's we of margin the we we what XQ As significant across into on keep based but you've out so up, cadence normally nice see pickup think margin portfolio, a the seen versus far? a should

No, I don't.

you're see I year Utilities of going targets we've to that think over the the improvement carrying XXXX. into the in on continued course set and towards our then

field. is I of and as we going more and as perform work have, continue also more to work that industrial of in they up should pick part see our think move to they to the the Renewables

the We're Pipeline, in here And -- months. opportunities field jobs quick. hopefully pretty seeing those coming some you know, that to as in will the too, realized become be move

the the sure right right So that on taking doing right for type work work we've make careful of in the clients. the work, about bid very we we're been business to

as there benefit should then well. if so And some that's too, realized we see

of with comes Davidson. from question Next Thielman Brent D.A. the line

Energy thought lot than overall just When the guess, at look the what year backlog the sequencing Tom revenue, segment off. in growth start to or better I I the year. projects we today guess should kick Ken, and revenue be the of would going Great we to you a a can the here? quarter pull lowest you're of likely still of this have in Did you up you still to pick kind year buildup expect than to and thought? work from forward, more the see

It's should we the work be pull yes, We should thought. of quarter Energy bit more But did the both. lowest than segment a of -- in be year. the for this little

communications we slower little see higher maybe of Okay. I it for Utilities, sort Should rest sounds that the through progress guess And as expectations the the then year? inflect business to back What's a in start your like of that side. from we here?

I so. think No, don't

I we're move hyperscaling seeing, the Deployment there, that forward Equity, think coming and we've really wanting the the that money of clients Access, to out with projects. some got a lot BEAD, are there that's with out and Broadband

think end of the see group. in good seen we've second it's going I year, may to communications their our uptick going down think quarters. we're and the an of So third slow year last them what in the I be years but is of communications, typical probably in which We see the a spend for at to couple

Tom, you're couldn't that of you optimism help to business? And the could a you just I see maybe but starting Okay. exactly lastly, business Maybe there. the what more did share and little in just mention Pipeline side

more It's activity. bid

your your that historical you So work. our at rates, of and win rates we should win win share look

it's just those bid projects. But which know that, and been in don't have it's the to work forecast we're they not year it can be down that of fact projects activity awarded. their me be we're to just positive. like haven't years. it's feel couple It's a awarded an the just we going expertise has we for have and type now, the be in we on still that that going We if we've competitively We is short-listed as been of drive last for years some Pipeline the to on, because going going increase to competitive,

Company. line comes Sidoti Romero from question Julio Next the with & of

on is Julio. Alex This for Yes.

of are low help delivery? PLH contracts and Is the a the What thinking or Utilities mix Utilities margin Just appreciate renegotiation high biggest you about of segment. get it gross the First the your levers power question increased on of end to to it. range?

to that it some pretty that -- that effect to got April. up. go to can right got quarter. renewal it drive project execute we into MSA XX%-XX% that recently, bid that The for be going You we're effect into off some better second contracts we -- much had will order also and more sooner in up successfully, -- number work. late we're negotiating more we some picking or the and that MSA be that into that in we they want project it's the win XX-XX. But mid- have went now now we business. renewed, if sometime work go And we to late project effect, just in We We it's range,

I appreciate a activity you I mentioned release it industrial context. the just curious remarks, the on context. bit earlier and could And you for higher but in a expand construction think press U.S.? little the bit western the more in

-- lot life and were long or work and client. that I've this and with as is it's it able almost them work power of years. we generation have came been we serve power with that actually X generation to to repowering one facilities, negotiate year, get for died, permitted, X a A didn't -- or of about back and project the as pursuing stations just compressor so And it and it win been the company, it's

And it's forward. so now moving

fast. and we're in a new putting a is it's there well, and transition out that one not demand West the from going And there as going is again, energy project out turbines just away fossil other to to for quite happen out energy isn't renewables fuels as The client.

power got feed. there have that demand still they to they a So out

and closer And valuations criteria? question you capital just pipeline to any allocation, whether speak your are us. lately the meeting M&A could that. from On last Appreciate to selection

the it valuation M&A. we've is the as we're opportunities fit right Yes. I not that -- for it's as are to we lot a look, said, of much looking mean, what see just And we we're for as or for. really continually a quality looking issue continue that finding to us,

right and serious So We're and It's purely -- it's we're we to a We're opportunity issue. with conversations but in pursue to acquisitions. fit various valuation not now. a anyone continue look evaluate, not continuing in issue.

more -- for us. it's opportunity seeing we're have be And just going to right activity. to It's the

Instructions] [Operator

comes Adam from Thalhimer line Your Thompson, the of last with Davis. question

Great you couple quarter. you're jobs Why were Tom, mentioned a that solar that I bidding, that, is of large. think? particularly

to know, Well, activities needs one, the area, large, with the fits what's in selection place are. in projects. the and that have capability since just familiar because what been particularly very we're the craft it into familiar we the expertise very it, very clients the work good we familiar $XXX it, wheelhouse. -- relationship have with And with. We've and our do and $XXX site these with that have million site, involved when to But are do took I the large, we we're range a just large, million not million, to chasing that billion-dollar $XXX say we with

a data for hot guys? that centers you for topic. Great. Is Power is an opportunity

It is, a work doing We're it now. is. them of for some little

our initiatives one that in and that our one to of -- and business market. Our of grow grow objectives is

the region? work I Southwest. that Do know on power gas anything outside plants do you you do of in

simple have East -- cycle yes, power in do We in the generation facilities. done some West, we some

yes, we our But the that the that successful. We so the confines and that into want we're expertise market. make have to and sure our stay we're capabilities of looking it, as we Again, do within we're Southeast. it's in well, East the looking at in work to -- expertise

much at then you again I Day, and And don't it how call, you to about too. mentioned the dispositions you want but talked on lastly, know that say the Analyst

that. maybe on curious, Just like just timing

timing. know Really, Tom year that's are. businesses alluded $XX is to, shows this we've all the The small main thing how we'll million they That X revenue that we're of on as or across down. focusing about X. winding And X be we collectively don't -- small those

of million $XX revenue.

Okay, great.

McCormick, call over further at back time. Tom I no the to are Mr. turn this you. questions There

Thank key you the questions you, Thank for Primoris. and the close recapping interest ma'am. by for just I'll in your takeaways quarter.

quarter in favorably strong on Strong to have conversations ongoing continue a leading infrastructure investment solutions, with annual indicators first our clients. in toward solid based achieving Our particularly grid given expected modernization driving targets. market us results and power increased trending generation are and foundation our tailwinds

And drive that generate the resources and finally, our businesses improved to our the will we cash on best are profitability and capital focused in on returns flow. allocating portfolio

look to Thank you we you, forward next and updating quarter.

concludes today's This conference call.

You may disconnect. now