Earnings call transcript Q1 2023

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Operator

Good morning. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primoris Services Corporation's First Quarter 2023 Earnings Conference Call. [Operator Instructions]. Blake Holcomb, Vice President, Investor Relations.

conference. your begin may You

Blake Holcomb

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

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

like to our in statement. Before we harbor begin, make aware language safe of everyone contained certain I'd

discussed The that projections and may results differ made from our certain our during forward-looking risks call are in Actual company are and subject with are uncertainties. expectations. filed cautions and uncertainties These and to statements the this various reports risks materially SEC.

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

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

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

Thomas McCormick

today for Good Blake. on performance you, Thank Primoris results, and quarter. an with solid market XXXX kicked our first us morning, our update operational a outlook. thank you first quarter XXXX financial off joining to and discuss

the jobs efficiently help safety, backlog. safely exceed executed teams to as for country profit revenue our record and goals as gross high for Our us and well around another their establish

high objectives. solid continue our of and in set proud these milestones their am likelihood year remainder increasing the of and institutions employees caused success. uncertainty horizon. efforts I first a the these quarter executing financial I level foundation challenges to accomplished annual We of on the to us a achieve failing our the in for the economic response face by for them want for recession and the to contributions at to of our a thank have Their

key segment, metrics. in the our Now more our at by and profit backlog. all the expectations Revenue, for quarter let's able Utility segment. Beginning operational outperform our were of we closely look with performance gross to

significant remainder year. of is winter The is of begins half due the the first customers milder from growth more often MSA integration our margin quarter Southern acquisitions, in the allocation and California in Stronger-than-anticipated and process. lowest and and us up in of saw work from where quarter. that from our ramp geographies weather We business in work revenue our other the to conditions power B and often solid legacy This execute that the in delays than PLH Comm allowed make the our progress we to to generally back weather communications contributions to complemented conditions anticipated. compared backlog on quarter to delivery continue

current negotiating combined in not operating the we smoothly, that and The are market. increases line are businesses with progress to MSA are in rates making

we high-profile segment renewals in backlog updated fact, In that million this in in These the quarter business resulted help booking $XXX submitted engagements market we during MSA power -- our the new will and future in delivery successful several during than customer quarter. other more our rates. cement

that to customers modifications more efficiently. operate organizational this to and some quarter the will structure made serve believe We our our us of in during better also needs the we segment allow

particularly in First, leadership we will additional our in that brought strengthen talent teams delivery. power

to of breadth rather commercial in our by order efforts better we our the target our than Second, customers' across needs geographies. to on region to and made align by changes focus lines product multiple leadership service

power work Finally, in focusing winning and delivery our more are project increased bidding attention we business. on

revenue drives our will MSAs us stability revenue all focus we that believe forward our comes over across going segment. and made in years mix remain of substantial This businesses. as has for of Primoris relationships progress this in establishing increasing our strong it customers the long-term with from and of predictability a

further we current of current which represent can of However, including less and be work projects, major substation backlog than XX% that believe optimized. our volume transmission

necessary specifically greater We our between work the delivery and opportunity our expand have operations. in segment relationships of balance client service work, in should market us MSA MSA both balance broadening market and power project enable our and expertise A our margins. offerings will and a project growing to to deepen by improve

compared solar We project from by driven seasonal Turning business, and our quarter to pipeline growth renewables, another services saw outperformance first the pipeline. a Energy of industrial, experiencing is we had quarter XXXX. which margin of top robust very execution from In line businesses segment. our similar to strong the and renewables, a solid

that to experience from some continue political road to industry strive achieve bumps We an continues to us outperformance both to will operate the and manner perspective. macro that a in market in allow in a

until a is at guidance the driver causing the full issued. overall, is in growth on anticipated reduction While still the hesitation years, delay term the of coming by our guidance in inflation customers near some

year. we of solid this guidance to our However, impact a our meet given projects, objectives not backlog performance do our this have to expect on material delayed ability

be We and expected increased backlog and the in of to guidance in we opportunities have the projects from will market quarters ahead. reaffirm anticipate issued the we'll the IRA the pipeline quarters the coming

still improvement tariff been mid-XXXX. months, module recent in Additionally, while the to some delays is there experiencing has early in market

work secure with remain to disciplined hard to projects. choose We have supply. and currently we module worked who I risk the significant see However, our to do in partners not

of expect chain continue to for the the improve modules course will we through that supply the year. Furthermore,

to due projects. the growth on there rapid movement the used price of in of the materials Finally, has market, been construction other

mitigate We prebuying self-performing market and risk to the have when allocations, lowering our pricing inflationary to materials prior a manufacturing due up these work executing for necessary, equipment and locking able clients our changes contract. impacts by to been

themselves transition energy opportunities our as to and more solar in Renewables looks continue present the sources. diverse we of less markets to outside economy also to serve carbon-intensive

will our opportunities engineering projects for be capture fit and carbon carbon lower During the will capabilities pipeline storage and many pipelines first with quarter, construction key part a CCUS. of we believe what well These future. and a can booked play the utilization in we or

In addition CCUS to opportunities.

and more that could of the XX funnel renewable hundreds sales hydrogen millions years. projects biomass a pursuing of of next than over revenue gas are several also in lead to natural more dollars We

Our of in to a strong services off also traditional is start energy portfolio XXXX.

are that to beginning market see bidding green We export activity. growing shoots infrastructure driving by and supported a Coast legislation increased the LNG Gulf investment in is

in our services. revenue, only remains believe pipeline we've the our it of seen trough While overall XX% we

seeing to following difficult positive the in a and small volumes medium In and in steady XXXX. projects fact, we are returned business margins bid a growth have for regional environment

challenges but margins optimistic are improvement further persist, we the horizon. remains in and to revenue market permitting The and on competitive

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

Kenneth Dodgen

Good morning, everyone.

up Primoris from $XXX for year, Our revenue year. million billion was of the prior XX% first Energy over of quarter segment from million by or $XXX was The a $X.XX segments. growth in the driven up record and our both prior

renewables over that businesses. Our industrial growth, pipeline of contributed $XXX business our million along with and

XX% higher an segment was growth quarter, $XXX million X.X% gross $XX the was growth higher improved mix the to delivery were which for saw margins. by prior up quarter million, margins improvement Utility revenue, from of profit the over an in driven businesses. due increase and year, primarily revenue X.X% the prior the Gross $XXX year. expected prior from strong first in also for Gross approximately year, of million, power and communications our

productivity. profit segment, to in over higher due slightly XX% Looking further milder delivery the some communications was weather margins at during this driven that year our better businesses, million, gross $XX.X along quarter was in revenue with see at gas power prior X.X%, improved segment our growth to results, and by and up allowed our top to Utility line gross compared the operations

As this our is following remainder X% for the to the XX% segment, QX. lows expect margins we to of improve achieve typical year see seasonal in in the gross to range

a from prior due result an we see In our quarter X/X a on Similar the in the pipeline and $XX revenue were $XX.X gross in the now in which as increase make the industrial which margins. continue is the in accounted at and margins for revenue Energy from X% to backlog year. margins and businesses. of profit to segment, higher quarters improved revenue improved renewables the margins gross includes progress and increase which million gross our segment, improved last pipeline, mix to coming quarter for The to improvement was renewables in million grow our higher of during we gradually work, business of Utility expect our came sizable year both from X.X%, the Gross profit, first segment. and our quarter, entire

PLH increase first at support prior a year of in SG&A is with over our Take our expenses to was the due SG&A $XX organic additional expectations. and in line growth. but million, quarter costs our primarily in The strong the million increase incremental look the almost SG&A to an $XX

of stronger revenue percent SG&A revenue, to a from X.X% growth, operating the improved declined X.X% leverage in due demonstrating in as quarter. prior to year However, the

We X% expect to for the the year SG&A low continue range. trend in to full

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

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

was per from for Earnings which year. across year on be to the per $X.XX board increased the rate for EPS expect we Our on $X.XX EPS in share. consistent diem expenses. and for and effective share the and work, XX% full improved adjusted quarter, of rate states this the components were by tax the increased quarter per depending nondeductible we by prior the

$X.X $XX.X $XX million, from the XXX.X% of More increased to EBITDA importantly, income year from prior net million prior of $X million, adjusted an and increase to million increased or increase an year. the over

higher cash revenue primary to growth. as accounts a unbilled of of significant revenue used saw next driver was operations $XXX.X result million. flow. Turning in The retention receivables, cash and QX

higher to assets. In terms accounts longer higher contributes which generally invoices, support addition, to customers and greater receivable our and documentation Utilities have contract require also payment

in We are to both cash. collections our maximize convert improve ability steps billing and revenue to order to taking to our

improved many reduce and upfront to payments for payment cash working of new in our mobilization include requirements, also are We contracts. or more terms retention demobilization

we confident initiatives are we flow. next working improved progress make balanced a as on well as years, cash the more as see over capital these couple of will that We position

liquidity was with of Borrowing provided $XXX.X debt the quarter total quarter $X cash capacity end. of We available and million net ended $XX.X of at revolver million approximately the under million our $XXX.X billion.

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

backlog convert We Utilities expect into Energy over our the revenue next XXX% of backlog our to XX% and quarters. of X

And earnings to our year full guidance. finally, turning

per of are We reiterating million full $X.XX guidance year $X.XX to full and year adjusted for guidance $X.XX $X.XX our $XXX EBITDA EPS million of of XXXX. share, adjusted per guidance XXX EPS the share to to

was portion projects that expectations, strong trend. year. to our our in we markets of exceeded this a we our of QX While higher ranges end positive continue guidance start revenue can it the to later with this expected if XXXX, driven that we move the toward end by But and optimistic are

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

Thomas McCormick

Ken. Thanks,

your up points areas and a of call of to questions, emphasis Before key to we couple the I'd for in Primoris like restate XXXX. open

and talent we are executing employer productivity grow believe attract to improve to companies, of grow committed and these to customers, to allow our our benefit all and areas our open existing customers us quality of will with the in in We shareholders. to that of door share the that safety, the new company the to be profitability choice across well order. to First, work top our

of beginning recent to are benefits to signs in of renewable we early grid electric energy and legislation investment federal Next, increase the and see infrastructure bridges, communications, highways the improvements.

the many be of Although a heading trend appears our still positive of administration awaiting direction to in and many financial cases, overall resources in in clarity markets.

and offer to structure customers commercial in of our than better the represents in operating segment. updated specifically This mix our labor. and project of which to have us half we service we power Utility increasing delivery, skilled work, more managing includes believe sales now Third, be our more will a segment, allow product strategy centric the productive and more line in and our

will free of cash backlog our year for the optimistic Finally, year Primoris. generating remains the priority through revenue of improving further that and flexibility our consistently us. combination be debt that set for paying potential we are XXXX and foundation reduction A reducing to a top flow. benefit investments but believe growth customers to us employees, profitability allocation We cash and a will new and down as of in Primoris company, also records in a leverage to the great debt make revenue Converting capital opportunity a lay for shareholders. to to with offer and our our

up open now questions. for will the We your call

Operator

[Operator Instructions].

Your question line the from UBS. Fisher first comes Steven of with

Steven Fisher

more desire talk Tom, have a little Can have? you to Is MSA mix to that about to you you're trying mentioned what you -- there? a a bit think project want versus you range it what the is achieve general target mix.

Thomas McCormick

small you what to will margins and Steve, margins more give XX-XX projects drive XX-XX, larger XX-XX in or it -- opportunity -- capital between it a XX% mix. cap provide project is your now, pencil said about on plus a And our bit Yes. do client that up. somewhere and about and the right operations we're your an keeps sharp they we management talked we've bit projects keeps little services is past, our the higher keen. to or people your something And little project

we'd bit to probably around somewhere that XX-XX, more I'd certainly, higher XX%, even a that. XX-XX, I than be would but like get So high, think, not go little as than ideal.

Steven Fisher

that to you're carbon any into capture elements Okay. And that good the of risk? talk you what how it's about extent backlog. and see first-of-a-kind to Can then to just kind there's managing project first-of-a-kind project

Thomas McCormick

XXX into to of is first-of-a-kind. is facilities, pipeline It's work see we a Probably project. pipelines. XX- or it's typically not doing a number bit it little diameter, tie-ins of but smaller It a ties the what pace XXX, really the XX-inch a that not we're more XX-inch it's lot gas about in of number Well, because miles. the

you. honest it's project with be for typical a pipeline pretty So us, to

Operator

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

Lee Jagoda

that Can submitted? give versus Just you've And you starting about on the you of scale the talked of that margin quantification and with the call. of in and potential you current the those that get us renewals the MSA some levels, kind assuming maybe expect you contracts? uplift what's size that timing the renewals

Kenneth Dodgen

million about outstanding $XX of Yes. Lee, respect would from that we've But be of go, we're X.X I I depending million improvement to to in heavy don't next coming to course most. points now, are already XXX know done quarter. least more how lifting, And over lot for full last contracts, margins, you. basis honest quarter, a probably because the customers. many at but any on in probably have right particular we've to with anywhere with still negotiating year quarter PLH to and $XX aggregate, the expect especially of as the at the hope got we years talked a the then

Lee Jagoda

up, of impact really within now whether rolled businesses Got meaningful takes them we you various more it. we've margins. there and kind puts -- segments the bit dive little are a can into any And then that can because just that we see the can't

anything or persist you outsized of So are as -- positive something be or over would couple as quarters is quarters? potential that next next either you that the to negative several there would that look there either the outsized beneficial at look could a headwind margins at

Thomas McCormick

one each of we're across I seeing the consistency think is within thing biggest now the segments.

some power more gas think improvements MSAs. power be I I just There's some well contribute some is you are will the latter balance there's improvements part and the those of going still about, Civil continue late but their communications talk made think of that actually Energy But That's talked the we factors. pipeline we're And benefit. will well. continuing the some of get And next in be there's the that delivery, perform Utilities, delivery in some performing segment. and to in and are to be as our about consistent think Ken be just to year I will it year, Energy the renewing into of performance. performance bringing business pretty of into in the some

Operator

of question the next Sean KeyBanc. with from comes Your Eastman line

Sean Eastman

just Maybe cash on on flow Are for to $XXX kind still that $XXX of I range? we cash. operating Firstly, missed it. pace million the million

Kenneth Dodgen

Yes. But quarter of A of are. absolutely Good it. question, just that yes, lot we're project this Yes, track timing right Sean. we impacted on was starting still for that.

Sean Eastman

Excellent. delivery Okay. then relative of on just to And commentary efforts. the some power development business the

what the the comes interesting about on just I could sure Some margin operation enhancement also And in guys make -- that strength if you I to are delivery highlighted in that to hear wanted quarter, trying to seems legacy the would that you comment first element of you understand do where new. from? as there, understand well. power the be

Thomas McCormick

on some MSA, I our is project taking about from that of the which percentage work, there's earlier. increasing spoke performance. come to going So improvement think versus then And more overall we

over and done, company. expect that regions Power Our And is need help see need would see has to And what some we they're some excellence, work, to those pockets of look say, needed if at of have we about some management -- you benefit taking to we will and an saw team, that we group joining areas where adding they you they -- these the talked delivery -- we've different very hope we strengthen -- I and improvement. the management in individuals that help. they that's and announcement, the areas and

renew from margins. more project So help their a we'll works, these take standpoint bit they them little expand that I as we think MSAs and

You're there. see improvement going to

Sean Eastman

having the of of the in to pipeline that I work, on terms there. taking more of function background of then project wanted kind work, project-based just And is firmed. a understand more

Thomas McCormick

the company type those we an for and the company. the with within it and in but we capabilities are we're to type had market, had do experience, grow takes not just that the do people work capabilities -- it. but there, enough the that grow on opportunities to some, looking perform have now, right that objective within just is specialty company. to at really Have It's of people EPC and take we The having of the a that doing to

Sean Eastman

Got it.

achieve big noise last correct? still that Is just sounds environment. that the to just then outlook are It operation. the for kind the saying guys track of like operating And relative you're quick Okay. growth to confirm, to question in solar you XX% plus on

Thomas McCormick

correct. is That

Operator

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

Julio Romero

Maybe you if on not solar staying the revenue I'm sure solar. was in the much broke guys how out quarter?

Thomas McCormick

said I revenue segment for about of it Energy. was X/X the

Julio Romero

speak to Got the Okay. same you see year? the expect of could of to we conversion progress as kind solar backlog throughout on we the if the rate it. should you rate And and did the

Kenneth Dodgen

great Yes. consistent Conversion about there. rate of has set been talked as Again, before, customers. we a we have very

every it's been of have think We the a stronger. adding maintained or don't year And anything, years. we've customers past gotten our seen rate. I few little conversion If for degradation bit any

Julio Romero

Got trend and just there? last delay guidance Can be -- still you just of issued might the give the talked you how to just hesitation solar some side. after on on you pent-up that might talk demand just a sense is IRA orders on it. us the is And much the maybe think about then one how causing IRA guidance,

Thomas McCormick

accelerate can the contractors be, are of -- you that I'm demand will those the Yes. clear our they expectations will how what opportunities requirements. understand definition definitely work meet give Once but much those what clients requirements they accelerate. with get can and I is expectation and sure might that a not

it expect accelerate. We to

Operator

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

Adam Thalhimer

expect into into bit take in set in place level to of year terms just QX. QX probably thinking and on QX little side. then you how then ramp you QX QX seasonal Can from a EBITDA I'm and the us the this falloff a

Kenneth Dodgen

Yes.

from of the cadence the I to I us. solar in normal give of some see be and years. good of exact but just move going have very that, a especially may have But don't in bit QX, year should QX for of it's mean, you like overall, projects, we On similar strong a EBITDA timing we projects, less be than as drop-off side, can't depending QX -- on the it I and little progressively we into higher previous the a

Adam Thalhimer

question we're the Okay. in Helpful. be May then MSAs. under guess now. would And second Utility your I

the cuts due to to So your are year? your seeing the a would lot for macro? work say from customers you any of of you rest budget still Or customers have get done

Thomas McCormick

any not cuts. We have seen

Our of a expectations clients the the of be by lot done end our is work that year. have to

Operator

Instructions]. [Operator

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

Brent Thielman

Ken, could range of end from this that you this various -- that still to and process upper guess, Or what Tom, getting that out think year as continues when of year? sounds ultimately like come year? margin contract keep other you about there sort the up. next process the I is the it way the renewal ask get into elements this you for to you segment of other get Utilities, contracts Does

Kenneth Dodgen

Yes.

sorry, looking two -- drive going and that what's to top Utilities range on us Just one. the other end at I on is our of Tom each things. to were Look,

negotiations. now, versus Tom it's project below our But First mix There's MSA of was work. level. one contract second is of all, what Right our referenced no question which the about continued target that.

mix -- of now, to the As XX% targeting that up range end as much like towards kind well. toward of margins right will from as the that upper trends up as XX% we're we as up the drive

Brent Thielman

And asking. guess, at year, that Ken, is there's that I'm shot still a this I what

Kenneth Dodgen

work project overall mean, high XX% to the above XX% pick could closer the kind our right able range. the we see to Xs of range, expecting we're year. of midpoint more this if year, trend now, the margins up around yes, for to Maybe toward definitely end probably XX.X% I some year. we're But the of

Thomas McCormick

year them as the progresses. see up should You trend

Brent Thielman

Yes.

I there. the Any having like PLH Okay. you few mean, And into views company? it's maybe you how integrating taking overall for feel just thoughts a owned a of now. do it quarters step guys' back,

Thomas McCormick

have craft management think I to of going are definitely team is the members equipment the happy and integration well. are their and the resources key We well. No, performing

that have performing are some better actually of business pockets had we than that expected. We

I So to Primoris. they it's welcome a are -- think addition

Brent Thielman

for how be? opportunities starting significant see these Okay. of And become you lastly, Coast LNG are the to could on just what Gulf And sort performance? available

Thomas McCormick

a Well, of comes it a contractor but LNG work for of it's when a some for number and general do, to large we're not do facilities, us. the contractors, number we created contract opportunities

standpoint a So of I Other on from opportunity think it's great specific businesses, won't a industrial the it's affect. it for our Energy side. group businesses,

Operator

back no this are at for questions call further to time. remarks. closing I There the turn over Tom

Thomas McCormick

key Thank you, from by I I'll operator. and quarter. investment Primoris. We appreciate recapping close as X questions your what this your see the for just takeaways

Our our We to growth achieving renewables, quarter tailwinds set offering see toward and power remain and in across goals. strong results will market diligent in of our XXXX on our in strategic finally, projects communications us flow. first of expertise solid through And a cash driven opportunities of and markets to allocation disciplined services execution we by customers leverage have the consistent path profitability advance secular that bid improve how segments. the generate our to mindful we resources work, deliveries, and

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

Operator

This for attending. Thank today's concludes you call. conference

may You now disconnect.

Primoris Services (PRIM) 10 May 232023 Q1 Earnings call transcript