Primoris Services Corp Q3 FY2024 earnings call

• Primoris set new records in Q3 across revenue, earnings, backlog, and cash flow from operations. Record revenue accompanied by higher operating income growth.
• Utilities segment margins improved, driven by improved work mix, gas operations margin strength, and power delivery margin improvement from storm response.
• Renewables market remains strong with record backlog, though Q3 margins lower due to weather and project delays.
• Industrial services saw revenue decrease but margin improvement on natural gas projects; non-union industrials awarded projects in Oklahoma and Texas.
• Pipeline business more profitable but revenue and margin down from prior year.
• Team deployed over 250 crews and 1,400 employees to restore power after storms, with emergency support set up for impacted employees.

Utilities Segment

• Revenues higher than last year, driven by increased communications and gas operations activity. Gas operation top line improvement due to increased equity in the Midwest, though expected to be slightly down year-over-year. California Public Utility Commission approved rate increases for 2 clients in Southern California for infrastructure upgrade. Communications activities saw significant increase from prior year due to fiber-to-the-home investments. Power deliveries revenue down year-over-year but margins improved due to downsizing underperforming areas and storm response.

Energy Segment

• Renewables: Revenue surpassed $1 billion, backlog nearly $2.9 billion, but margins lower in Q3 due to fewer project closeouts and unfavorable weather. Industrial services: Revenue lower due to decrease in Canadian operations and non-union businesses winding down, but margins improved on natural gas projects in Western U.S. Pipeline: More profitable and efficient but revenue and margin down from prior year due to a high-performing project in the Mid-Atlantic last year.

• Raised full year EPS guidance to $2.85 to $3 per share and adjusted EPS to $3.40 to $3.55.
• Modified adjusted EBITDA guidance to $405 million to $420 million.
• Q4 bookings expected to be right at 1x or slightly above 1x, with Q4 cash flow from operations lower than Q3 but still solid.
• Expect Utilities margins to have sequential improvement in 2025.

• Forward-looking statements subject to various risks and uncertainties discussed in SEC filings. Potential weather impacts on project productivity, market conditions affecting bookings and margins, and execution risks on large projects.

Q: How should we think about Q4 in terms of potential bookings given above 1x exiting the year?

A: Ken Dodgen says Q4 is expected to be down sequentially from Q3, right at 1x or slightly above 1x.

Q: Can you expand on the drivers of strong sequential margin improvement in Utilities versus normal seasonality?

A: Ken Dodgen states most quarterly improvement was seasonal, with about $5 million related to storm work which had equal negative impact on Energy side. Expect Utilities margins to improve sequentially in 2025.

Q: What's the outlook for Q4 EBITDA margins and cash flow?

A: Ken Dodgen says Q4 EBITDA margins driven by Utilities shutdown timing and Energy project closeouts. Q4 cash flow weaker than Q3 but still solid, with some pending contract signings potentially slipping to Q1.

Q: How much storm work is embedded in Q4 guidance?

A: Ken Dodgen says only a couple of million, mostly from Florida recovery which was quicker.