Primoris Services Corp Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Primoris had a strong finish to 2024, achieving best-ever revenue, earnings, backlog, and cash flow from operations.
• Since 2016, the company has grown revenue and operating income annually, expanding into solar, power delivery, and communications through acquisitions.
• Finished 2024 with $11.9B in total backlog, driven by over $7.7B in new work booked, 18% ahead of the goal.
• Safety performance was excellent, with total recordable incident rate well below industry average despite 37M work hours.
• Strategic divestments of subscale, low-margin, or non-core businesses will create a ~$160M revenue headwind in 2025 but expected margin benefit.
• Market demand for services to continue growing, particularly in power delivery, renewables, communications, and natural gas power generation.

Segment Performance

• Utilities Segment: Revenues were slightly up in 2024, primarily driven by growth in communications and a strong second half in gas operations. Power delivery was down slightly due to a completed $100M substation project in 2023. Utilities MSA revenue grew 10% from the prior year. Margins significantly improved, driven by a more active storm season and improved productivity in power delivery. Communications grew double digits in 2024 due to an expanding revenue base from data centers and fiber to the home.
• Energy Segment: Revenue grew over 20% largely due to strong renewables business, partially offset by lower pipeline activity. Renewables had growth approaching $2B in revenue in 2024 and booked nearly $900M in backlog in Q4. Industrial construction had a great year of operational performance and bookings. Heavy civil had a solid year, booking new projects at higher margins.
• Financial Details: Fourth quarter revenue was $1.7B, up 15% y/y. Gross profit improved $28M to ~$185M. Full year 2024 revenue was $6.4B, up $650M. Utilities gross profit increased $51M or 25%, and Energy revenue grew $686M, primarily from renewables and industrial businesses.

Guidance

• Earnings per fully diluted share expected to be between $3.70 and $3.90; adjusted EPS between $4.20 and $4.40.
• Adjusted EBITDA guidance: $440M to $460M for 2025.
• CapEx expected to be in the $90M to $110M range in 2025, with equipment accounting for $60M to $80M.
• Interest expense expected to be between $44M and $48M in 2025.
• Cash flow from operations expected to normalize to $200M to $225M in 2025.

Risks

• Trade and Regulatory Environment: Tariffs on key electrical components, metals, or other materials reliant on imports could present headwinds depending on scope and duration.
• Supply Chain Disruptions: Potential impacts from current proposed tariffs or regulatory changes on the supply chain, though Primoris anticipates majority of inflationary impacts could be passed to customers.

Question and Answer

Q: Steven Fisher asks about solar growth rate, booked backlog for 2025-2026.

A: Tom McCormick responds that 2025 is pretty booked, with some room for Q4 work, and 2026 bookings include work carrying into 2027, expecting solar growth in upper $300M to $400M range.

Q: Lee Jagoda asks about utilities and energy margins.

A: Ken Dodgen explains utilities margins were strong due to storm work and productivity, energy margins were impacted by weather and project closeouts but expected to normalize to 10%-12% range in 2025.

Q: Sanjida Jain asks about renewables backlog and natural gas power generation projects.

A: Tom McCormick mentions renewables backlog strength and natural gas power generation projects in Texas, Oklahoma, California, ranging $70M-$300M.

Q: Joseph Osha asks about cash flow outlook.

A: Ken Dodgen states Q4 cash flow was strong due to $100M pulled forward from Q1 2025 and good upfront payments, expecting 2025 cash flow to normalize to $200M-$225M.

Q: Adam Thalhimer asks about EBITDA guidance drivers.

A: Ken Dodgen mentions storm work benefit, strong renewables closeouts, and higher power delivery margins as potential upside drivers.

Q: Brent Thielman asks about shifting resources from power delivery to solar.

A: Tom McCormick explains it's for specific substation/interconnect work, which is margin-enhancing for power delivery craft.

Q: Jerry Revich asks about utilities margins and solar crew count.

A: Ken Dodgen talks about utilities margin potential and Tom McCormick mentions 18 teams with plans to build more, focusing on margin improvement.

Q: Drew Chamberlain asks about renewables auxiliary segments and Analyst Day targets.

A: Ken Dodgen says renewables auxiliary segments are ~10% of revenue, expecting 10% growth, and Tom McCormick states Primoris is on track or ahead of 2026 targets, looking ahead to 2027.

Q: Brian Russo asks about competitive position in gas-fired generation and margin drivers.

A: Tom McCormick highlights Primoris' expertise in gas-fired generation and Ken Dodgen mentions communications and power delivery as key margin drivers.