Primoris Services Corporation

Ladies and gentlemen, thank you for standing by. My name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the Primoris Services Corporation fourth quarter and full year 2024 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, Investor Relations. You may begin.

Good morning, and welcome to the Bermuda's fourth quarter and full year 2024 earnings conference call. Joining me today with the 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 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 only as of today, February 25th, 2025. 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 and in our fourth quarter and full year 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 fourth quarter and full year 2024 results and our initial outlook for 2025. Promorys has a strong finish to 2024 that drove our best year in the company's history for revenue, earnings, backlog, and cash flow from operations. Since 2016, we've grown revenue and operating income each year by transforming Promorys into the company it is today. Over the past eight years, we've expanded into the solar, our delivery and communications markets through strategic acquisitions, which are some of the fastest growing in our service portfolio. We have also continued to execute well in our foundational businesses, which have been critical to our success in growing profitability, backlog, and cash flow. We finished the year with $11.9 billion in total backlog, which was driven by our booking more than $7.7 billion of new work during the year. This is more than $1.2 billion or 18% ahead of our goal for the year. This is a credit to our business development teams, as well as our project teams whose commitment to safe and high quality project execution has led to high customer satisfaction and strong mutually beneficial relationships. I also want to recognize the performance employees that enabled us to achieve record cashflow from operations in 2024. Generating more than $500 million was a significant milestone for our company and a key part of our strategy that we have been emphasizing over the past couple of years. Improving the consistency of our cash flow is a responsibility that our employees have taken ownership of, and we are seeing the results. Whether it's upfront payments from customers to procure equipment and materials and mobilize on a project, or improving our process for timely and accurate billings and collections, their efforts are clearly having an impact. I want to thank them all for their commitment in this important area of emphasis for Morris. Our record results in 2024 demonstrate that we have positioned for Morris as a premier solutions provider with a broad geographic footprint and the technical expertise to meet the needs of our customers. Our customers are leaders in the development, expansion, and modernization of infrastructure in North America. Emerging technologies, increased electrification of industry, and a growing interest in onshore and critical aspects of the supply chain are driving a demand for power generation that hasn't been seen in decades. While much of the focus has been on the power demands of data centers, and rightfully so, a significant amount of demand is expected to come from other industrial, commercial, and residential power generation needs. Our view is that these trends will continue to require an extensive amount of generation from a wide range of sources and Promorse will play an important role in helping meet this demand safely, efficiently, and with the highest quality possible. Regarding our safety performance, we had another great year with a total recordable incident rate well below the average in our industry and our company target. This was accomplished despite working more than 37 million work hours during the year. I want to congratulate and thank our employees in the field and in our offices across North America for their commitment to keep one another safe while helping our clients achieve their business goals. I am convinced that our safety performance is an integral part of maintaining strong customer relationships and attracting talent to join the Promorys team. Now let's look at our operating segment performance in more detail. In the utility segment, revenues for the year were up slightly. primarily driven by growth in communications and a strong second half of the year in gas operations. Power delivery was down slightly compared to the prior year as we anticipated, primarily due to a $100 million substation project that we completed in 2023. We made the decision to focus our transmission and substation resources toward our renewables projects, which led to an increase in intersegment revenue. At the same time, we grew utilities MSA revenue by 10% from the prior year. We remain committed to growing our mix of project work, specifically in power delivery, as it will lead to a more balanced mix of project and MSA revenue and improved margins. While the utility segment revenue was up modestly, we significantly improved margins compared to the prior year. This was driven by a more active storm season in the second half of the year, as well as by improved productivity and power delivery. Leadership across the organization has done a great job of aligning our resources toward customers and markets where we see the most opportunity, while de-emphasizing some areas that pose more of a challenge to efficiency and profitability. We also benefited from several rate case decisions that drove increased spend in some markets toward the end of the year, had several new MSA contracts renewed at higher rates. This included an MSA with our largest power delivery customer that went into effect on January 1st of this year, should help in our progress for further margin improvement in 2025 and going forward. In gas operations, we continue to execute well and maintain solid margins despite the overall slow growth in the market the past couple of years. We did see some pickup late in the year with favorable weather and the rate case decisions we mentioned last quarter providing support to the business as we move further into 2025. Communications grew double digits in 2024 due to an expanding revenue base from data centers and traditional investments in fiber to the home. The growth in the market and our skilled labor force have provided an opportunity to be more selective with customers and projects. This dynamic will allow us to continue delivering solid margins and improve our cash conversion in the coming years as it did in 2024. Turning to the energy segment, we grew revenue over 20% largely due to another strong year in the renewables business that was partially offset by lower pipeline activity. We had anticipated a lower year in pipeline activity after work we picked up during 2023 drove revenue and margins higher, but we also faced some performance challenges that weighed on margins late in the year. Bidding market for pipeline also remained slow and extremely competitive. However, we are optimistic that an increase in LNG production and natural gas power generation could lead to more projects being awarded in 2025. We believe that if this trend plays out and we see improvement in the federal permitting process, our pipeline business could begin to see a pickup in activity by the end of this year and heading into 2026. Industrial construction also had a great year of operational performance and bookings, including the two projects we mentioned during the third quarter call. We had excellent performance on several gas generation projects during the year and are seeing more opportunities to bid and win work. We expect to see more opportunities in the coming quarters, but will remain disciplined in the types of projects we pursue. We have been a consistent performer in the construction of natural gas power generation projects over the years and will continue to target opportunities that fit well within our capabilities. We have brought in additional talent that will allow us to manage more projects while staying disciplined in the scope of projects we take on to ensure that we pursue profitability over revenue growth. The heavy civil business had another solid year in 2024 as well, looking several new projects at higher margins and benefiting our cash flow through upfront mobilization payments. Although typically a lower margin business, the team has consistently performed very well in their execution, which has enabled them to improve margins from last year. In 2024, we also took meaningful steps on our strategic plan to divest or unwind certain businesses or service lines that we viewed as subscale, low margin, or non-core to remorse going forward. While these actions will create roughly $160 million revenue headwind in 2025, we should see a benefit in operating margins. This will also allow our management teams to allocate their time and resources to other areas of their businesses. Wrapping up the segment with renewables, we had another impressive year of growth approaching almost $2 billion in revenue in 2024. We also booked nearly $900 million of backlog in the fourth quarter to close out the year with approximately $3.1 billion, exceeding our target for the year and setting another all-time high for the business. These results included contributions from the products and services that complement our solar EPC business, including Premier PV, battery storage, and O&M, which are approaching 10% of renewables revenue. The demand for our solar services remains high, and we continue to look to add quality teams and new customers. Our proven track record, the strength of our client relationships, and rapidly expanding ancillary solar businesses provides us the ability to have ongoing success in renewables, despite some near-term uncertainty in the market. Much of the uncertainty in renewables and in other parts of Comoros' businesses centers around a rapidly changing trade and regulatory environment. The impact of tariffs on the supply chain for key electrical components, metals, or other materials that are more reliant on imports could present a headwind, depending on the scope and duration. Based on our conversations with customers across our service lines, we do not anticipate that the currently proposed tariffs or regulatory changes will have a meaningful impact on our expectations for 2025. The majority of the inflationary impacts from tariffs could be passed through to the customer, and items we procure that could be subject to tariffs are unlikely to have a material impact on the total cost of the projects. However, we will continue to engage with our customers in order to better understand how their plans could potentially change based on changes to tariff or regulatory policy. We will be better equipped to assess the potential impacts and adjust our plans accordingly when there is more clarification on these policies. In the meantime, there could be volatility in our quarterly bookings in the first half of the year. Overall, Primor is in an outstanding year in 2024. has set us on a great trajectory toward achieving our 2026 goals. We have an extensive backlog of projects across our businesses and have the experienced teams necessary for us to deliver successful results for our customers. Many of our services, including power delivery, renewables, and power generation, remain in high demand, particularly in Texas where we have a strong position. The Texas market is growing rapidly, The most recent report from the Electric Reliability Council of Texas suggests a significant amount of additional generation resources will be needed to meet the demand. This could potentially lead to an expansion of the Texas Energy Fund in the upcoming legislative session to help facilitate the billions of dollars of investment in power generation and transmission that could be required. To summarize, it is our view that the demand for our services should continue to grow over the next several years. While there could be inflationary pressure on certain items our customers procure for the projects we construct, we feel confident that the market will be able to adapt to any changes to meet the infrastructure demands of the growing North American economy. Now I'll hand it over to Ken for more on our financial results.