Primoris Services Corporation

Ladies and gentlemen, good day and thank you for standing by. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Primoris Services Corporation third 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 that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Blake Holcomb, Vice President of Investor Relations. You may begin.

Good morning, and welcome to the Primoris Third Quarter 2024 Earnings Conference Call. Joining me today with prepared comments are Tom McCormick, President and Chief Executive Officer, and Ken 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, November 5, 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 third quarter 2024 earnings press release, which was issued yesterday. I would now like to turn the call over to Tom McCormick.

Thank you, Dwight. Good morning, and thank you for joining us today to discuss our third quarter 2024 financial and operational results. Remora set new records in the third quarter across several key financial metrics, including revenue, earnings, backlog, and cash flow from operations. More importantly, our record revenue was accompanied by a higher growth rate and operating income. We have often discussed our objective to not only grow, but to grow profitably, and this quarter demonstrates success in achieving this goal. We have positioned the company in recent years to have exposure to some very favorable macro tailwinds that can help drive quality revenue growth. I am proud of our teams for focusing their attention on growing in the right end markets with the right customers and executing at a high level of safety and productivity. Our record backlog was a result of roughly $2.5 billion of new work booked, driven primarily by wins in our solar and industrial businesses. Despite the timing of certain awards booked later in the year than expected, We are on track to exceed our bookings target for the year and entered 2025 in a great position. Lastly, record cash flow from operations in the quarter drove us to more than $200 million for the first nine months of the year and higher than our full year 2023 cash flow from operations. Even with lower than expected upfront payments in Q4, we believe we remain on track for a very good year in cash flow and are progressing well toward our near-term objectives. These milestones are only made possible by our employees and their commitment to safely serving our customers. I want to thank them for their hard work and dedication to keeping themselves, their coworkers, and the public safe, and encourage them to continue to set more records in these metrics in the quarters ahead. Now let's look at our performance for the quarter by segment. In the utility segment, revenues were higher compared to last year, driven primarily by increased communications and gas operations activity. Gas operations top line improvement was driven primarily by increased activity in the Midwest. Despite the stronger performance in Q3, we still expect to see the gas business be slightly down this year, but the team has performed very well in maintaining margins despite the decreased revenue. On a positive front, the California Public Utility Commission recently approved rate increases for two of our clients in Southern California to upgrade aging infrastructure and help modernize the system for improved safety and integrity. is an encouraging sign, and while we are still in the early stages of our planning process, we are optimistic that the gas operations business could trend modestly upward next year as a result of these CPUC approvals. In communications, activity saw a significant increase from the prior year, driven by an increase in fiber-to-the-home investments and network build-outs by hyperscalers. There was also a considerable slowdown in activity in the back half of 2023 that we aren't seeing this year. Profitability and cash flow were also better in communications due to the mix of work with customers with higher MSA rates and better payment terms. Growth outlook in our communications business continues to look favorable despite the delay in rolling out federal spending programs on rural fiber networks, which has yet to materialize. Power deliveries revenue was down compared to the prior year, but margins were significantly improved. This is in part due to downsizing our presence in some geographic areas with underperforming contracts and focusing resources on areas with customers that offer better returns. Margins also benefited from an increase in storm response compared to last year. The months of September and October were extremely challenging for our employees and the communities we serve. Three named storms led to not just the loss of power, but the loss of property, and more tragically, the loss of lives. We are very proud to serve our customers, communities, and employees by restoring their power as safely and quickly as possible. In total, Chemours deployed over 250 crews and more than 1,400 employees to the regions impacted by these storms. These employees worked over 185,000 work hours to help restore power to more than 3.8 million people tragically impacted across Louisiana, Florida, Georgia, and the Carolinas. This required working long hours in harsh conditions and the use of specialized equipment in order to get these communities back online. We even had employees leave their own homes in disrepair in order to travel to other parts of the country to help their neighboring communities. To assist these employees and their families, we set up an emergency storm team call center that employees could contact to request Primoris' assistance in obtaining food, water, generators, or to report damage to their homes in order to receive additional support in an effort to get them back in order. I want to congratulate all the Pomoros employees who served in response to these storms and thank them again for truly demonstrating the power of Pomoros. Turning now to the energy segment, the renewables business was the primary driver for the increase in segment revenue, surpassing the billion-dollar mark for the quarter. In renewables, the market for our solar EPC services and product solutions continues to see very high demand. We believe we are one of the best performing service providers in the market and continue to have very strong customer relationships that have allowed us to successfully navigate challenges that some in the industry have been experiencing. While we saw some contract signings push out in the first half of this year, this was largely due to customer-driven design changes or switching modules that extended the planning phases. However, during the third quarter, we booked nearly $1.1 billion in backlog to finish the quarter at $2.9 billion in renewables. This includes approximately $250 million in backlog for Premier PV, battery storage, and our O&M business. These three businesses also accounted for over 8% of the renewables revenue generated in the third quarter, and we are confident that we will continue to capitalize on growing these lines of business that help supplement our EPC work. We did experience lower margins in the business from the third quarter compared to last year, due primarily to fewer project closeouts and unfavorable weather conditions that negatively impacted our productivity on several projects. In all instances, these productivity challenges are short-lived and most of our contracts contain provisions for named storms or customer-driven delays. In industrial services, revenue was lower, driven mostly from a decrease in activity in our Canadian operations, as well as in our non-union industrial businesses where we are winding down or divesting certain subscale or low margin businesses. On the other hand, margins did improve due to strong execution on natural gas projects in the western U.S. and improved bid margins on work booked over the last 12 to 18 months. The non-union industrial business was recently awarded a power generation expansion in Oklahoma in the fourth quarter, and has the potential to close on a second project in Texas that will support the energy needs of newly constructed data center. We continue to be excited about the opportunities ahead for natural gas power generation and have built a strong team with experience in building dozens of large and small-scale gas power projects throughout their careers. We are also adding additional experience resources to further build out these teams. The pipeline business, while operating much more profitably and efficiently due to cost control efforts, did see some revenue and margin decline from the prior year due to a very high performing project in the mid-Atlantic we were executing in the third quarter of last year. In summary, it was another solid quarter where our utility segment was able to drive higher margins to compensate for some challenges in our energy segment margins, which puts us in a great position to not only finish with a strong Q4, but to achieve our operational financial targets for the year. Now I'll turn it over to Ken for more on our financial results.