Primoris Services Corporation

Good day and thank you for standing by. Welcome to the Prime Morris Services Corporation first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Brooke Wooten, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to Primor's earnings conference call. Joining me today are Tom McCormick, President and Chief Executive Officer, and Ken Dodgens, our Chief Financial Officer. Before I begin, I would like to make everyone aware of certain language contained in our safe harbor statements. and many cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. are forward-looking statements to represent our outlook only as of today. We disclaim any obligation to update these statements except as may be required by law. I would now like to turn this call over to our CEO, Tom McCormick.

Thank you, Brooke. Good morning and thank you for joining us today to discuss our first quarter results in our 2021 outlook. I would like to take this opportunity to welcome our new shareholders to the Morris family of companies and thank all of our shareholders for their continued support and confidence in our company's strategy and execution. We had a strong first quarter, reporting $818.3 million of revenue, which was a 10% increase over the prior year. This was despite incurring $13.9 million in transaction costs, most of which was associated with the acquisition of future infrastructure. as well as effectively a one-week shutdown of our operations across Texas and the Southeast due to the historic storm event that hit in mid-February. As a reminder, our first quarter has historically been a slow quarter for the company due to the seasonality of our clients' work. That historic freeze was a bad news, good news event for us. When we lost approximately a week of revenue, the event generated some storm repair work for us as well. More significantly for the long term, as Texas addresses the infrastructure gaps that led to the power failures, we believe there are opportunities for us with respect to power generation as well as transmission and possibly even in distribution. Our utilities and energy renewables segments led the growth in the quarter, producing strong revenues while the pipeline services segment performed as expected. Now let's look at the three segments in detail. As we previously announced in January, we reorganized our operating and reporting structure to function more efficiently, as well as to facilitate collaboration and cross-selling among our segments. Beginning with the first quarter of 2021, we are reporting under three segments, utilities, energy renewables, and pipeline services. We have updated our 2020 segment information to align with the segment changes. Our utility segment had strong first quarter performance with revenue coming in at $335 million, up 34% compared to the same period last year. This increase was primarily due to increased activity with our utility customers in North Carolina and Louisiana, and the addition of future infrastructure, which represented approximately $60 million of revenue for a portion of the quarter. With the integration progressing well, future infrastructure is already paying dividends to our operations as we reap the benefits of similar values, safety culture, quality standards, and operational synergies. This acquisition has become our gateway into the telecom industry, where demand for bandwidth continues to drive the majority of the work activities. We recently secured a $60 million telecom project to install fiber in the Gulf Coast region in connection with the Rural Digital Opportunity Fund. This fund was created and funded by the U.S. government, which intends to spend in excess of $20 billion over the next 10 years for the construction of rural broadband networks. We anticipate strong growth opportunities and increased demand for our in-market utility services as we work towards expanding future infrastructure across our nationwide footprint. During the quarter, our utility segment secured multi-year contracts with an estimated total contract value of over $525 million. The primary driver in this achievement was MSA activity, including a five-year term project in the Gulf Coast region valued at over $160 million with a large electrical utility customer. Additionally, we entered a new market in the Western US by securing an MSA with a new utility customer. In total, we signed or renewed 15 multi-year agreements for a mixture of natural gas, Electric Transmission and Distribution, Telecommunications, Surface Restoration, and other ancillary utility-related work. In addition to the MSA contracts, we closed another 24 fixed-price contracts, totaling close to $56 million. Turning to our energy and renewables segment, revenue increased 17% to $352.9 million for the quarter. The increase was mainly attributable to our renewable energy activity, which represented $80 million in the total. This was partially offset by lower revenue from substantial completion of an industrial project in Texas in the first half of 2020. We experienced higher costs associated with an LNG project in the Northeast in 2020 that impacted our margins. We expect that project to be complete in late Q3 or early Q4 this year. We continue to make solid progress on other projects within this segment. There's a great deal of discussion regarding renewable energy right now. It's currently a $225 billion market opportunity and has both regulatory and societal support that should have tailwinds beyond the next decade. We began increasing our activity in this area several years ago, even before the current administration. We have over $428 million in backlog heading into the second quarter for work associated with 2021 and 2022 solar projects. In addition, approximately $850 million in prospective projects have been unofficially awarded to us that should be finalized within the next three quarters. During the quarter, we began working on a new utility scale solar facility project. This 640 megawatt DC project is the third solar venture in which we have been chosen by this customer and is valued at approximately $220 million. Additionally, all other solar projects that we have underway are progressing to plan. Also on the renewables front, along with our solar, I want to highlight our expertise in hydrogen, which has been in the news recently. We have over 25 combined years of history and expertise working with standard gray hydrogen via steam methane reforming, and one of our engineering teams is currently working with clients to explore the viability of blue hydrogen, which includes carbon capture. We also have capabilities in dairy and landfill renewable natural gas that can be applied to hydrogen production as well. We are already working on other green energy projects. One of our green diesel projects in the Gulf Coast region is moving forward ahead of schedule. The civil business is now also part of our energy renewable segment, and during the quarter, we secured a $35 million heavy civil contract with TxDOT for the reconstruction of both frontage roads and main lanes of Interstate 20 in Midland, Texas. This project is scheduled to start in the second quarter. As we mentioned on our last call, our pipeline services segment had an exceptional year in 2020. Our expectations for 2021 will be more in line with their 2019 performance. Revenues came in at $130.5 million for the quarter, a decrease year over year, but closely in line with our expectations. Comparing pipeline revenues to the same period in 2019 of $134.8 million, it's easy to see they are tracking close to their 2019 performance, which is in line with what we were expecting for 2021. We have seen relatively consistent bid activity from our established customers in recent weeks, even though the pipeline construction market remains extremely competitive. We are repositioning this segment to take advantage of our integrity, maintenance, and field services capabilities in order to help our customers complete the work that they need to get done to meet current requirements. Moving beyond the segments to look at our business as a whole, our crews are performing well on projects across the board, focusing on both execution and safety, and our business development team is actively working to market our diverse capabilities across all segments. Our success is not just about being in the right market at the right time. It's about having a business model that works and applying that model across all of our segments. What makes Promores different from our competitors comes down to three elements. The first is investing in our people. We have our own training facilities and have spent a great deal of time and money developing and training our personnel. This includes cross-training our craftspeople so that we can utilize them across different industries and markets. The result of cross-training is a more consistent workload for our employees and a more consistent workforce for us. Knowing that we are investing in our employees' development builds on their engagement and loyalty to the Pomoros family of companies. The second is continuing to build strong relationships with our current clients. We strive to be a trusted partner to all our clients, and it starts by being safe, reliable, and responsive. The third element is being the right solution for existing and new customers. When we expand geographically and otherwise, it is accomplished with resources and capabilities to fill a specific client need. We don't go into an area and display some of them because our prices are cheaper. We earn new business by performing at a customer's level of expectation and supporting their growth. The success of our business model today gives me more confidence looking forward into the rest of 2021 and beyond, and I hope that it does the same for you. In terms of future prospects, as I've mentioned before, we see opportunities from the current presidential administration's focus on infrastructure, including replacement of aging pipelines, roads, and bridges, as well as the expansion of infrastructure for renewable energy and internet broadband. The Republicans' $568 billion counterproposal is more limited in scope and focuses on spending on traditional infrastructure, but regardless of which gets passed, we can benefit. Both proposals create more opportunities for us in every segment. Our energy renewable segment would be especially affected by the opportunities related to roads and bridges, as well as the opportunities that continue to present themselves with respect to renewable energy. Our utility segment is well positioned to participate in the broadband infrastructure investment component. There are even opportunities with our pipeline segment under the allotment for the Pipeline and Hazardous Material Safety Administration. We will keep a close eye on the progress of these legislative initiatives with great interest. We accomplished a great deal during the quarter, starting with the successful reorganization of our segments, followed by the completion of the acquisition of future infrastructure, and ending with the completion of the company's first secondary public offering. We now have a structured prime for success, as well as much more financial flexibility to not only support our organic growth, but to also provide us the optionality in the acquisition market. With that, I'll now turn it over to Ken.