Primoris Services Corporation Reports Second Quarter 2024 Results

Primoris Services Corporation (NYSE: PRIM) (“Primoris” or the “Company”) today announced financial results for its second quarter ended June 30, 2024 and provided comments on the Company’s operational performance and outlook for 2024.

For the second quarter of 2024, Primoris reported the following highlights ⁽¹⁾:

• Revenue of $1,563.7 million, up $150.3 million, or 10.6 percent, compared to the second quarter of 2023 driven by strong growth in the Energy segment;
• Net income of $49.5 million, or $0.91 per diluted share, an increase of $10.5 million, or $0.19 per diluted share, from the second quarter of 2023;
• Adjusted net income of $57.1 million, or $1.04 per diluted share, an increase of $13.7 million, or $0.24 per diluted share, from the second quarter of 2023;
• Adjusted earnings before interest, income taxes, depreciation, and amortization (“Adjusted EBITDA”) of $117.1 million, up $14.7 million, or 14.4 percent, from the second quarter of 2023.
• Raising EPS and Adjusted EPS guidance ranges to $2.70 to $2.90 and $3.25 to $3.45 per diluted share, respectively.

“Primoris delivered another excellent quarter achieving solid revenue growth and improved profitability,” said Tom McCormick, President and Chief Executive Officer of Primoris. “The demand for our services remains strong across many of our end markets and we continue to win work with our customers, who value our partnership to provide safe and quality performance on their projects.”

“We are growing profitability and cash flow through focused capital allocation, and our second quarter results demonstrate early success toward achieving our objectives. We are capitalizing on the growing trend for additional solar and natural gas power generation sources while helping build and maintain our power delivery, gas, and communications infrastructure,” he added. “Primoris is well-positioned to grow and serve our customers in the years ahead as they invest to meet the infrastructure needs of North America that will support emerging technologies and drive economic growth.”

“As we progress through the second half of the year, I am confident we will stay focused on safely and efficiently serving our customers to exceed our goals for 2024 and move us further down the path toward our strategic goals.”

Second Quarter 2024 Results Overview

Revenue was $1,563.7 million for the three months ended June 30, 2024, an increase of $150.3 million, or 10.6 percent, compared to the same period in 2023. The increase was primarily due to strong growth across our renewables and industrial construction businesses, partially offset by lower activity in pipeline and gas utilities. Gross profit was $186.7 million for the three months ended June 30, 2024, an increase of $29.4 million, or 18.7 percent, compared to the same period in 2023. The increase was primarily due to an increase in Energy segment revenue and improved margins in both segments. Gross profit as a percentage of revenue increased to 11.9 percent for the three months ended June 30, 2024, compared to 11.1 percent for the same period in 2023. The increase was primarily as a result of a favorable mix of higher margin renewable work, a strong performance in the industrial businesses, and improved execution in the Utilities segment.

During the second quarter of 2024, net income was $49.5 million compared to net income of $39.0 million in the prior year. Diluted earnings per share (“EPS”) was $0.91 for the second quarter of 2024 compared to $0.72 for the same period in 2023. The increase in net income and diluted earnings can be largely attributed to higher operating income from higher revenue and improved margins in both segments. Adjusted Net Income was $57.1 million for the second quarter, compared to $43.4 million for the same period in 2023. Adjusted diluted EPS was $1.04 for the second quarter of 2024, compared to $0.80 for the second quarter of 2023. The increase in adjusted net income and adjusted diluted EPS was due to higher net income and an unrealized gain on interest rate swap recognized in the second quarter of 2023. Adjusted EBITDA was $117.1 million for the second quarter of 2024, compared to $102.4 million for the same period in 2023.

The current reportable segments include the Utilities segment and the Energy segment. Revenue and gross profit for the segments for the three and six months ended June 30, 2024, and 2023 were as follows:

Utilities Segment (“Utilities”): Revenue decreased by $28.4 million, or 4.4 percent, for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to the substantial completion of a major substation in our power delivery business in 2023 and lower activity in gas operations. These impacts were partially offset by increased renewable energy transmission and substation projects and increased activity in communications. Gross profit for the three months ended June 30, 2024, was lower by $2.4 million, or 3.7 percent compared to the same period in 2023 on lower revenue. Gross profit as a percentage of revenue was 10.3 percent for the three months ended June 30, 2024, up slightly from 10.2 percent for the same period in 2023.

Energy Segment (“Energy”): Revenue increased by $194.8 million, or 25.0 percent, for the three months ended June 30, 2024, compared to the same period in 2023. The increase was primarily due to increased renewables and industrial construction activity, partially offset by lower pipeline activity. Gross profit for the three months ended June 30, 2024, increased by $31.9 million, or 35.1 percent, compared to the same period in 2023, primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 12.6 percent during the three months ended June 30, 2024, compared to 11.7 percent in the same period in 2023. The increase in gross margin is primarily due to strong execution on natural gas generation projects in the western U.S. and the increase in renewables revenue.

Other Income Statement Information

Selling, general and administrative (“SG&A”) expenses were $100.1 million during the quarter ended June 30, 2024, an increase of $14.5 million, or 17.0 percent, compared to 2023. The increase was primarily due to an increase in personnel costs to support revenue growth and higher technology costs associated with ongoing initiatives. SG&A expense as a percentage of revenue increased to 6.4 percent in the second quarter of 2024, compared to 6.1 percent in the second quarter 2023.

Interest expense, net for the quarter ended June 30, 2024, was $17.1 million compared to $16.9 million for the quarter ended June 30, 2023. The increase of $0.2 million was primarily due to a $0.4 million unrealized loss on our interest rate swap in 2024 compared to a $3.2 million unrealized gain in 2023, mostly offset by lower average debt balances. Interest expense for the full year 2024 is expected to be $71 to $74 million due to lower average debt balances.

The effective tax rate on income for the six months ended June 30, 2024, of 29.0% differs from the U.S. federal statutory rate of 21.0% primarily due to state income taxes and nondeductible components of per diem expenses. We recorded income tax expense for the six months ended June 30, 2024, of $28.0 million compared to $16.5 million for the six months ended June 30, 2023. The $11.5 million increase in income tax expense is driven by higher pre-tax income.

Outlook

The Company is raising its estimates for the year ending December 31, 2024. Net income is expected to be between $148.5 million and $159.5 million, or $2.70 and $2.90 per fully diluted share. Adjusted EPS is estimated in the range of $3.25 to $3.45 per fully diluted share. Adjusted EBITDA for full year 2024 is expected to range from $400 million to $420 million.

The Company is targeting SG&A expense as a percentage of revenue in the low six percent range for full year 2024. The Company’s targeted gross margins by segment are as follows: Utilities in the range of 9 to 11 percent and Energy in the range of 10 to 12 percent. The Company expects its effective tax rate for 2024 to be approximately 29 percent, but it may vary depending on the mix of states in which the Company operates.

Adjusted EPS and Adjusted EBITDA are non-GAAP financial measures. Please refer to “Non-GAAP Measures” and Schedules 1 - 4 below for the definitions and reconciliations. The guidance provided above constitutes forward-looking statements, which are based on current economic conditions and estimates, and the Company does not include other potential impacts, such as changes in accounting or unusual items. Supplemental information relating to the Company’s financial outlook is posted in the Investor Relations section of the Company’s website at www.prim.com.

At June 30, 2024, total Fixed Backlog was $4.9 billion, flat compared to March 31, 2024, and a decrease of $0.3 billion, or 6.4 percent compared to December 31, 2023. Total MSA Backlog was $5.6 billion, a decrease of $0.2 billion, or 3.4 percent, compared to March 31, 2024, and $0.1 billion, or 1.9 percent, compared to December 31, 2023. Total Backlog as of June 30, 2024, was $10.5 billion, including Utilities backlog of approximately $5.3 billion and Energy backlog of $5.2 billion. The decrease in backlog sequentially and from year end 2023 is primarily due to the timing of fixed backlog awards in the Energy segment.

Backlog, including estimated MSA revenue, should not be considered a comprehensive indicator of future revenue. Revenue from certain projects where scope, and therefore contract value, is not adequately defined, is not included in Fixed Backlog. At any time, any project may be cancelled at the convenience of the Company’s customers.

Balance Sheet and Capital Allocation

At June 30, 2024, the Company had $207.4 million of unrestricted cash and cash equivalents. In the second quarter of 2024, capital expenditures were $24.2 million, including $9.6 million in construction equipment purchases. Capital expenditures for the six months ended June 30, 2024, were $34.6 million, including $14.5 million in construction equipment purchases. For the remaining six months of 2024, capital expenditures are expected to total between $45.0 million and $65.0 million, which includes $5.0 million to $25.0 million for equipment.

The Company also announced that on July 31, 2024, its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on September 27, 2024, payable on approximately October 11, 2024. During the six months ended June 30, 2024 the Company did not purchase any shares of common stock under its share purchase program. As of June 30, 2024, the Company had $25.0 million remaining for purchase under the share purchase program. The share purchase plan currently expires on December 31, 2024.

Conference Call and Webcast

As previously announced, management will host a conference call and webcast on Tuesday, August 6, 2024, at 9:00 a.m. U.S. Central Time (10:00 a.m. U.S. Eastern Time). Tom McCormick, President and Chief Executive Officer, and Ken Dodgen, Executive Vice President and Chief Financial Officer, will discuss the Company’s results and business outlook.

Investors and analysts are invited to participate in the call by phone at 1-800-715-9871, or internationally at 1-646-307-1963 (access code: 1324356) or via the Internet at www.prim.com. A replay of the call will be available on the Company’s website or by phone at 1-800-770-2030, or internationally at 1-609-800-9909 (access code: 1324356), for a seven-day period following the call.

Presentation slides to accompany the conference call are available for download under “Events & Presentations” in the “Investors” section of the Company’s website at www.prim.com.

Non-GAAP Measures

This press release contains certain financial measures that are not recognized under generally accepted accounting principles in the United States (“GAAP”). Primoris uses earnings before interest, income taxes, depreciation, and amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS as important supplemental measures of the Company’s operating performance. The Company believes these measures enable investors, analysts, and management to evaluate Primoris’ performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. In addition, management believes these measures are useful in comparing the Company’s operating results with those of its competitors. The non-GAAP measures presented in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, Primoris’ method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similarly titled measures as calculated by other companies that do not use the same methodology as Primoris. Please see the accompanying tables to this press release for reconciliations of the following non‐GAAP financial measures for Primoris’ current and historical results: EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS.

About Primoris

Primoris Services Corporation is a leading provider of critical infrastructure services to the utility, energy, and renewables markets throughout the United States and Canada. Built on a foundation of trust, we deliver a range of engineering, construction, and maintenance services that power, connect, and enhance society. On projects spanning utility-scale solar, renewables, power delivery, communications, and transportation infrastructure, we offer unmatched value to our clients, a safe and entrepreneurial culture to our employees, and innovation and excellence to our communities. To learn more, visit www.prim.com and follow us on social media at @PrimorisServicesCorporation.

Forward Looking Statements

This press release contains certain forward-looking statements, including the Company’s outlook, that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including with regard to the Company’s future performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “projects”, “should”, “targets”, “will”, “would” or similar expressions. Forward-looking statements include information concerning the possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results may differ materially as a result of a number of factors, including, among other things, customer timing, project duration, weather, and general economic conditions; changes in the mix of customers, projects, contracts and business; regional or national and/or general economic conditions and demand for the Company’s services; price, volatility, and expectations of future prices of oil, natural gas, and natural gas liquids; variations and changes in the margins of projects performed during any particular quarter; increases in the costs to perform services caused by changing conditions; the termination, or expiration of existing agreements or contracts; the budgetary spending patterns of customers; inflation and other increases in construction costs that the Company may be unable to pass through to customers; cost or schedule overruns on fixed-price contracts; availability of qualified labor for specific projects; changes in bonding requirements and bonding availability for existing and new agreements; the need and availability of letters of credit; increases in interest rates and slowing economic growth or recession; the instability in the banking system; costs incurred to support growth, whether organic or through acquisitions; the timing and volume of work under contract; losses experienced in the Company’s operations; the results of the review of prior period accounting on certain projects and the impact of adjustments to accounting estimates; developments in governmental investigations and/or inquiries; intense competition in the industries in which the Company operates; failure to obtain favorable results in existing or future litigation or regulatory proceedings, dispute resolution proceedings or claims, including claims for additional costs; failure of partners, suppliers or subcontractors to perform their obligations; cyber-security breaches; failure to maintain safe worksites; risks or uncertainties associated with events outside of the Company’s control, including conflicts in the Middle East and between Russia and Ukraine, severe weather conditions, public health crises and pandemics, political crises or other catastrophic events; client delays or defaults in making payments; the cost and availability of credit and restrictions imposed by credit facilities; failure to implement strategic and operational initiatives; risks or uncertainties associated with acquisitions, dispositions and investments; possible information technology interruptions, cybersecurity threats or inability to protect intellectual property; the Company’s failure, or the failure of the Company’s agents or partners, to comply with laws; the Company's ability to secure appropriate insurance; new or changing political conditions and legal requirements, including those relating to environmental, health and safety matters; the loss of one or a few clients that account for a significant portion of the Company's revenues; asset impairments; and risks arising from the inability to successfully integrate acquired businesses. In addition to information included in this press release, additional information about these and other risks can be found in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and the Company’s other filings with the U.S. Securities and Exchange Commission (“SEC”). Such filings are available on the SEC’s website at www.sec.gov. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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