Primoris Services Corporation

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Primaries Services Corporation first quarter 2024 earnings conference call and webcast. 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Thank you. I would now like to turn the conference over to Blake Holcomb, Vice President of Investor Relations. Please go ahead.

Good morning. Welcome to the Bermuda's first quarter 2024 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 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. Our forward-looking statements represent our outlook as of today, May 9th, 2024. 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 investor section of our website in our first quarter 2024 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 first quarter 2024 financial and operational results. Comoros had a solid start to the year, delivering improved revenue and margins compared to the prior year. Our teams across the organization are engaged and focused on executing our strategy to improve profitability and cash flow while leading with safe and productive performance. We continue to see momentum driving increased investment in infrastructure solutions in North America in three primary areas that are having a positive impact on our business. The energy transition, growing electricity demand and grid modernization, and the increase in facility construction to support a shift in the supply chain. The transition to lower carbon emitting sources of energy is driving increased adoption of solar power generation, as well as natural gas generation to replace retiring coal plants and help bridge the energy transition. There is also a growing demand for electricity that is being driven by new facility construction, including data centers and chip manufacturing, which are supporting emerging technologies or adding critical component production capacity closer to the US. Many of these new sources of generation will need additional transmission lines and substations to connect them to a grid that is already in need of modernization in order to maintain reliability and support higher electrical demand. We believe that these themes are interconnected and will require sustained investment for an extended period of time, and we are well positioned to capitalize on these themes in the coming years. Now let's look at our performance for the quarter by segment. Starting with the utility segment, we had a couple of factors that led to lower revenue versus the prior year. First, we experienced more seasonal delays in the first quarter of 2024, driven by less favorable weather conditions in certain markets and a slower ramp-up in communications spending. Second, while our MSA revenue increased from the prior year, we executed less project work during the quarter. This was primarily due to a major substation project that we were constructing this time last year that was completed in 2023. Despite these impacts, we were able to deliver comparable margins, driven by good operational performance in gas operations and communications, which helped to offset a decline in the higher margin project work. Building our backlog and mix of project work remains a high priority for the utility segment to reach our target gross margin goals. Our project teams are actively evaluating a growing list of projects that we believe are well suited to our capabilities and address a market need for our customers. As we discussed on the fourth quarter earnings call, much of their focus right now is on supporting the power delivery needs of the renewables business. But this will continue to evolve as our teams estimate and bid more transmission and substation projects. Turning to the energy segment, we achieved significant top line growth and margin expansion driven by increased renewables and industrial construction activity. We initiated work on several new projects during that quarter that were awarded during our record-setting 2023. The growth in these businesses was able to more than offset the decline in pipeline revenues that we anticipated due to a lower backlog of projects to start the year. Heavy Civil also contributed to top-line growth and improved margins versus the prior year. In renewables, we began ramping up on three major projects, which are progressing at a high degree of efficiency, which helped drive the quarterly outperformance. This efficiency, combined with the timing of new project awards being pulled into Q4 2023, led to our revenue outpacing the booking of new work. We ended the quarter with a healthy backlog of $2.1 billion, albeit slightly down from year end. The solar portfolio of new projects remains robust, and we expect to see bookings pick up in the second quarter that will resume our backlog growth. In fact, we are evaluating a couple projects that, if awarded, would allow us to exceed our new business goals for the full year. Additionally, we are seeing increased revenue contribution from adjacent services like battery storage and O&M that accounted for roughly 7% of renewables revenue in the first quarter. These services, along with high voltage work provided by our power delivery business, are still in the early stages. Still, we are encouraged by the progress we are making and believe that they will continue to offer a competitive advantage for us with our solar customers going forward. Industrial construction was also a bright spot for the quarter. We had improved performance in our Canadian operations and commenced work on new projects in the western U.S. that led to improved margins in the quarter. These drivers offset the timing of work being pushed into Q2 in our Gulf Coast operations. The funnel of opportunities in the industrial business is higher than we've seen in recent years, and we believe we can continue to grow while being selective in the projects we choose to bid in the coming quarters. We expect that this will mitigate the loss of revenue from select subscale or low margin businesses that we will look to wind down or divest over the next several quarters. Overall, we are pleased with our performance in Q1, which is historically our lowest quarter for revenue and earnings due to seasonality, particularly in the utility segment. We are in close contact with our customers to ensure that we have the appropriate level of crews and equipment to help them meet their 2024 objectives. While still early in the year, we are optimistic that our full year margin and cash flow goals are achievable and potentially beatable with successful execution and continued investment in our growth markets of renewables and power delivery. Now I'll turn it over to Ken for more on our financial results.