Primoris Services Corporation

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Primoris Services Corporation fourth quarter and full year 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call over to Mr. Blake Holcomb, Vice President of Investor Relations. Sir, please go ahead.

Good morning. Welcome to the Morris fourth quarter and full year 2022 earnings conference call. Joining me today with prepared comments are Tom McCormick, President and Chief Executive Officer, and Kim Dodgen, Chief Financial Officer. Before we begin, I would like to make everyone aware of certain language contained in our Safe Harbor Statement. The company cautions that certain statements made during this call are forward-looking and 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. Our forward-looking statements represent our outlook as of today, February 28, 2023. We disclaim any obligation to update these statements except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investors section of our website and in our fourth quarter and full year 2022 earnings press release, which was issued yesterday. I would now like to turn the call over to Tom McCormick.

Thank you, Blake. Good morning and thank you for joining us today to discuss our fourth quarter and full year 2022 results and our business outlook for 2023. Morris achieved a record year in 2022 with revenue, backlog, and net income all achieving new highs at year end. We grew our revenue to $4.4 billion, up more than 26% from 2021, with 15% being organic. Growth was driven by our energy renewable segment, which was up 48%, primarily driven by the utility-scale solar market and our utility segment, which was up 22% from the previous year, driven by the expansion of our communications services, as well as the acquisition of PLH. Net income was up 15% from 2021 to $133 million, and our gas ETS increased to $2.47 per fully diluted share, marking the sixth consecutive year of EPS growth. We entered 2022 with just over $4 billion in backlog that served as the foundation for our revenue growth during the year. Now, as we begin 2023, we have expanded our backlog to $5.5 billion, an increase of over 36%, which puts us on the right track to continue our growth trajectory. These and other successes were achieved despite facing numerous challenges to our business in 2022. We faced economic uncertainty from the escalating war in Ukraine, lingering impact in Asia from the global pandemic, fuel and wage escalation and supply chain constraints, all of which we were able to overcome to deliver profitable growth. Now let's look at the three segments in detail. In our utility segment, we face significant challenges from fuel and labor escalation, particularly in the first half of the year. However, we responded quickly by negotiating with clients to recoup added costs and finish the second half of the year with improved margins. We are continuing to renegotiate our MSAs in 2023 with other customers and believe that we will see continued margin improvement in the segment as the year progresses. We were also able to build on our communications and power delivery service offerings with the acquisitions of BCOM and PLH. BCOM was a smaller strategic acquisition that supplemented our communication services with new customers in the rapidly growing Central Texas region. Since closing on PLH in August of 2022, we have been busy integrating them into our operations and we are on track with our plans. In part due to PLH being a cultural fit for Pomorris, we have been successful in retaining their top talent. These employees will help to maintain key relationships and preserve the safe, reliable operations that complement the other strategic attributes of the deal. As of today, we have made good progress integrating the various PLH entities across our utilities, energy renewables, and pipeline segments. This includes a significant portion of the human resources, safety, Fleet, Finance, and Marketing Functions, particularly into our power delivery and gas utilities businesses. Some parts of the integration process, such as information technology and certain union operations, will continue to be worked through in the coming quarters. But from a customer-facing and project standpoint, PLH will seamlessly operate alongside the rest of Pomoros by the end of Q1, and we will begin to realize estimated annualized synergies of over $10 million at the beginning of Q2. We are excited to have the PLH team on board and value their contributions toward meeting the goals of our organization. Power delivery and communications will remain two areas we plan to continue to build our size and scope. We have made some big entries into these markets the past several years with PLH and future. We will remain confident these markets are well positioned to benefit from multi-year tailwinds and billions of dollars invested across all the markets we serve. Through a combination of acquisitions and continuous operational improvement, as well as through education and training, we expect to further our reputation as one of the top specialty contractors in North America. Looking at the pipeline services segment, while we expected to see a decline in 2022, following strong years in 2020 and 2021, the industry-wide headwinds, including fewer large projects sanctioned and permitted, led to results falling below the expectations we had at the onset of the year. However, we secured a large pipeline project in third quarter valued at more than $120 million to help set us on a course back to profitability going into 2023. With a combination of disciplined execution and a more constructive outlook for the Texas and Louisiana shale markets, we are optimistic that we are beginning to emerge from the trough in this business. The energy renewable segment had another breakout year in 2022. achieving 41% organic revenue growth and 12% gross margins. This was driven by the rapid expansion of both our solar EPC business as well as the industrial business, which implemented key performance improvement initiatives to boost margins. Expanding on utility-scale solar EPC, we were able to achieve 85% top-line growth in 2022, despite being partially impacted by supply chain issues related to module delivery. While some of our customers experienced module delays, the business demonstrated the capability to adapt and overcome the slowdowns to beat their business plan. We have roughly $1.3 billion in backlog to start 2023, and current indications from our customers are that issues with the supply of modules are expected to alleviate in the back half of the year. There is progress being made on the importation of solar modules with a proper chain of custody documentation to allow them entry into the United States. Additionally, many of our customers have already secured domestic supply or are investing in domestic manufacturing of modules to ensure their projects are able to move forward, as well as to take advantage in the coming years of the Inflation Reduction Act legislation recently signed into law. In fact, we currently have over a billion dollars of projects in the award or contracting stage and a number of bids on projects valued at over $3.6 billion. We expect that a significant number of these projects will be added to our backlog in the coming years, which will further extend our backlog of projects as far out as 2026. These are encouraging signs that we believe will continue to drive more opportunities in large and small utility scale solar projects. To this end, we are growing several more large utility scale project teams and small scale teams in 2023 to meet this growing demand. Through organic growth and acquisitions, we continue to take significant steps to reposition Comoros for long-term success and higher growth, higher margin and markets across our segments. These markets are poised to benefit from the multi-year private and public sector investment required to meet the growing infrastructure needs in the areas we serve. Comoros is a different company than it was five years ago, and we are confident that we are moving in the right direction. We have transitioned from a big project industrial Heavy Civil, and Pipeline Company, to one with a greater emphasis on specialty contracting for less risky, smaller projects, and MSA contracts with less lumpiness in revenue and earnings. Given the shift in our business mix towards electric grid transformation, renewables, and expanding communications access, we made the decision to merge our pipeline services segment into our energy renewable segment to form our new energy segment effective January 1, 2023. Going forward, the two Primoris segments, utilities and energy, will each represent approximately half of our total revenue. These segments will better reflect the scope of our operations and the markets we serve. Primoris has never been better positioned to meet the demands of North America's growing and ever-changing needs in energy transformation, generation, and delivery. Now I'll hand it over to Ken for more on our financial results.