Primoris Services Corporation Q2 FY2025 earnings call

• Primoris had a record second quarter with new highs in revenue, operating income, and earnings, demonstrating the effectiveness of its financial and operational strategy.
• There are significant opportunities in data centers, with an estimated $1.7 billion of work related to data centers expected to be contracted by year-end. Primoris offers various services for these projects.
• Power generation and electric utility needs are substantial, with over $2.5 billion in natural gas generation projects and $20 billion - $30 billion of solar projects planned through 2028.
• In the Utility segment, initiatives to improve margins are showing results, with increased customer activity and favorable project mixes contributing to higher revenue and margins.
• In the Energy segment, renewables are on track to exceed initial projections, and industrial services are growing driven by natural gas generation activity, though pipeline business is down but outlook improving.

Utility Segment: Revenues were up double digits from the prior year. Gas operations saw significant improvement in revenue and margins due to new projects on the West Coast and increased MSA work in the Midwest. Communications revenue and margins were also up double digits from the prior year driven by fiber-to-the-home programs and network bills for data centers. Power delivery top line revenue increased from the prior year, and margin improvement was noted with better rates on renewed MSA contracts and increased transmission/substation work.

Energy Segment: Renewables business was the main driver of revenue growth, on track to generate close to $2.5 billion compared to initial outlook of $2.2 billion - $2.3 billion. Industrial Services were up driven by natural gas generation activity. Pipeline business was down from the prior year but near-term outlook improving for large diameter pipelines for natural gas and gas liquids.

• Increased EPS guidance to $4.40 to $4.60 per fully diluted share.
• Adjusted EPS guidance increased to $4.90 to $5.10 per fully diluted share.
• Adjusted EBITDA guidance raised to $490 million to $510 million for the full year 2025.
• Gross capital expenditures midpoint increased by $10 million to $100 million to $120 million, primarily for equipment to support growth.

• Unpredictable tariff and regulatory environment.
• Variable tariff and regulatory environment affecting the battery storage business, though it represents a small percentage of renewables revenue.
• Seasonality and weather impacts on Q4 margins in the Utilities segment, with Q4 generally expected to be a swing quarter due to these factors.

Q: On the energy side, is the expectation still for a back-end loaded order book, and how does it break down between renewables and other?

A: Still predicting a back-end loaded order book, with predominance of renewables currently, though some gas generation projects expected in the back half but no solid numbers yet.

Q: On the Utilities segment, how much of the overall demand stems from MSA customers versus timing of spend, and trend of demand for customers?

A: A lot of demand on MSA side, initiatives underway to improve margins, crew productivities improved, and still see margin improvement holding with more work to do.

Q: On the Utilities segment gross margin target increase, is it a structural shift?

A: Yes, due to initiatives and strength of the quarter, expecting benefit back half of year and into next year, accelerating the margin improvement.

Q: On solar revenue and bookings, how much was realized in the first half out of $2.5 billion?

A: About $1.4 billion was realized in the first half. Expect growth this year to $300 million to $400 million from original $200 million to $250 million, with pull forward from good performance and execution.

Q: On Utilities segment closeout payments and impact on margins, how much and effect?

A: Main closeouts from gas utility projects contributed about $6 million of incremental gross profit during the quarter.

Q: On Utilities segment bookings levers and gas/communications growth expectation?

A: Predominantly MSA driven, spread across power delivery, gas, and comms; originally expected low single-digit growth in gas and communications, now looking at closer to mid-single-digit growth for this year and next.

Q: On pipeline comments and playout over next 12-18 months?

A: Pipeline is robust, confident in some bookings late Q3 or into Q4 on power gen side, funnel looks nice for 2026 and beyond.

Q: On power delivery side and sticking to 380 kVa and below market?

A: Still sticking to 380 kVa and below market, though some customers asking for small portions of 765 for maintenance/storm work.

Q: On renewables gross margin potential, generically?

A: Always see opportunity, usually with project closeout, but generally expect strong margins but no guarantee of better than experienced.

Q: On Utilities segment second half guidance and margins?

A: Q2 had outsized margins, so Q3 margins strong but sequentially down from Q2, Q4 expected to be down due to seasonality and weather, though could vary.

Q: On fiber for data centers and where it falls in backlog?

A: Will be in both MSA work and fixed backlog, as communications business has a mix of MSA and project work.

Q: On data center work, average size of jobs and content?

A: Typically seeing values of sections handled at under $100 million, multiple projects within one data center possible, and hundreds if not thousands of data center projects in the space.

Q: On $2.5 billion natural gas generation, historical perspective and backlog?

A: Backlog has been increasing, with most not data center related, and seeing more opportunities around both in and outside data centers.

Q: On data center work being incremental to base plan and repurposing workforce?

A: Most is incremental to base plan, touches various parts of the business, and workforce in industrial segment is spongeable for data center work as it's similar types of work.

Q: On capital allocation priorities and cash deployment change in last 3 months?

A: No change, continuing to focus on working capital improvement, building cash and paying down debt, positioning for M&A, and return of capital.