Primoris Services Corporation

My name is Prilla, and I will be your conference operator today. Welcome to the Primora Services Corporation fourth quarter and full year 2025 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 the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star one again. Thank you. 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 fourth quarter and full year 2025 earnings conference call. Joining me today with prepared comments are Cody Badlamudi, President and Chief Executive Officer, and Ken Dodgen, Chief Financial Officer. Before we begin, I'd 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 24, 2026. 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 fourth quarter and full year 2025 earnings press release, which was issued yesterday. I would now like to turn the call over to Cody Badlamudi.

Thank you, Blake. Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2025 results. and our initial outlook for 2026. Prior to reviewing our 2025 performance, I want to begin by providing a few thoughts and impressions from my first several months as CEO. To start, Primorus is a great company because it has great people that embody a great culture. I have spent much of my time learning from and engaging with our employees whose efforts are essential to our past and future success. There is a culture of safety and caring that promotes the health and well-being of our fellow employees. This has consistently placed Primorus well below the industry average in terms of recordable incidents, even while working more than 40 million hours in 2025. There was always more work to be done to achieve zero incidents, but those who fit in best at Primorus placed a priority on visualizing and assessing risks to prevent injuring themselves or others. There was also the recently launched Primorus Promise, a nonprofit charity to support our people, communities, and the causes that matter, which is funded by voluntary employee contributions, company donations, and public support. These aspects of our culture help build morale, attract and retain talent, execute consistently, and uphold trust with our customers. I have also witnessed a culture of innovation and an entrepreneurial spirit that keeps us nimble to adapt to our dynamic end markets, promote growth, drive productivity, and provide solutions to customers as a valued partner. This manifests itself in providing the existing service to a non-traditional customer, such as building a major substation for a chip manufacturer or developing a new service for existing customers in need of a solution in the case of Premier PV. This culture is also exhibited in the utilization of digital tools and technologies. Our teams are using and developing tools that can assist our teams in managing project risk and contracts, improving cost estimates and scheduling, and are increasing our productivity and predictability in the benefit of Primorus and our clients. Engaging with our customers has been another focus for me. and I am impressed with the collaboration and client partnerships that have been nurtured to achieve ambitious plans in the coming years. The scope and scale of projects, specifically in solar, natural gas generation, and power delivery, continue to increase, and the need for trusted, experienced, and quality contractors is only becoming more critical. Primorus is in a prime position to be a provider of solutions to these customers and to form partnerships with new customers we may not have historically served. In summary, I'm excited and privileged to be in a position to lead Primorus in this next chapter of growth and value creation. I want to thank the Primorus Board of Directors for entrusting me with this responsibility and thank our chairman, David King, for stepping in during that transitional period last year. With that, I'll move on to the highlights of our 2025 performance and the state of our end markets. Primorus delivered another strong year of operational and financial performance in 2025, achieving record revenue, earnings, and backlog. We also generated strong cash flow that improved our liquidity and bolstered our balance sheet. This positions us to continue deploying capital to organically grow and expand our capabilities through acquisitions. We finished the year with over $11.9 billion in total backlog. including booking nearly $3 billion of new work in the final quarter of the year. This is a testament to the tireless efforts of our employees, our valued client partnerships, and the strength of our end markets. For most of the previous two decades, power demand had remained relatively flat. We are now seeing projections that suggest power demand could grow by 50% over the next decade and potentially double over the next 15 years. There are several reasons driving these higher estimates, including data centers, increased electrification, and onshoring of critical parts of the supply chain. While the rate of growth could ebb and flow based on energy efficiency gains or other factors, there is certainly evidence that our utility customers and hyperscalers are making investments in energy infrastructure to support a significant increase in load demand. The average increase in capex by our largest utility customers suggests that around a 50% increase in spending over the next five years compared to the previous five years. Replacing infrastructure that is past its intended lifespan, hardening the grid to be more resilient to weather events, and building or upgrading power infrastructure to support growing demand are all high priorities for these customers. The hyperscalers project plans for cloud computing and artificial intelligence are expected to result in trillions of dollars in investment and a substantial amount of power. We believe that the power generation needed to support the expected demand growth will require an all of the above energy source solution, including solar, natural gas, nuclear and others. Primorus is well positioned to assist our clients in generating power to satiate the growing demand. and also provide the transmission and distribution solutions needed to deliver energy where it is needed. Given the trends we are seeing, Primaris has been and will continue to be focused on attracting, retaining, training, and developing our people to help meet the ambitious goals of our clients and community shareholders. Our employees are essential to our success and our most valuable assets. To help support our growth, we increased our labor force by more than 2,800 people in 2025 and remain committed to attracting and retaining the brightest and best in the industry. While some industry labor markets are tighter than others, such as Certified Journeyman Alignment, we have been successful in attracting qualified craft and field labor to meet our clients' needs. We have also focused on bringing in experienced project managers and developing new project leadership in anticipation of increased demand for projects not yet in our backlog. There is growing interest in the labor market to join organizations like Primoris that have strong secular tailwinds and are doing important work that improves the lives of our communities and supports economic growth in North America. We believe our ability to self-perform the vast majority of our work will continue to be an advantage for Primorus, and we are confident that we'll have a fungible labor force to continue to grow and service our customers safely, timely, and with the highest quality. Now let's look at the operating segment performance in more detail. In the utility segment, revenue and backlog both increased double digits for the year. The revenue growth was driven by better than anticipated activity in gas operations and continued strength in power delivery and communications. Power delivery contract renewals and rising demand led to MSA backlog growth as we continue to see market activity accelerate to upgrade, expand, and maintain the electric grid. Margins in the utility segment also rose for the second consecutive year, despite a decrease in storm response work in 2025. which is particularly accretive to power delivery margins. We continue to focus on our growing mix of project work and increasing productivity, specifically in power delivery, to improve our margins. In 2025, we made progress in both, with non-MSA revenues increasing almost 30% in the segment and with increased efficiency and utilization in several key geographies. We still have work to do in getting our margins and power delivery where we aspire to be in certain areas, but I want to credit our leadership and employees who have taken ownership in achieving this goal. We have made and continue to make investments in people and equipment to prepare for what we are expecting to be a significant increase in transmission and substation opportunities in the coming years. In gas operations, we exceeded our growth expectations, reaching $1 billion in revenue for the first time. Market share gains and capital program expansions, particularly in the Midwest and Southeast, drove our record revenues, as did more favorable weather conditions for much of the year. Although we are not expecting a similar growth rate in 2026 due to several large projects not expected to recur, the business is in a solid position and operating at a high level. Communications had a year of double-digit growth through market share gains and further success in winning and executing large-scale network long-haul builds tied to data center development. We are seeing this trend continue in Q4 and year-to-date receiving $100 million in new awards that we referenced in our third quarter call. The favorable trend in this market appears to be accelerating as we are seeing more opportunities to bid over the last few months than we had seen in previous years. Our ability to sustain success in this market and perform to our standard will help support revenue and margins in this segment. Moving over to the energy segment, revenue grew almost 25%, primarily driven by renewables, partially offset by another challenging year in pipeline services. We are optimistic that 2025 will represent a trough in the cycle for pipeline as our funnel of opportunities has increased dramatically over the past year to over $3 billion. In recent years, we have seen our funnel trend around one-third of this value. However, with the rising need for natural gas to fuel power generation, increasing LNG production, and a more favorable regulatory environment, we believe that our pipeline activity is poised to accelerate. This is specifically true for large diameter pipeline construction where we typically excel from execution and margin standpoint. Contrary to many other projects in the energy segment, pipeline projects tend to mobilize to the construction phase more quickly upon contract signing and can often be completed within the calendar year, depending on the scope. This leads us to be optimistic that pipeline could see meaningful improvement in 2026 and heading into 2027. Industrial construction had a solid year of performance, highlighted by natural gas generation, which contributed $480 million in revenue. This helped to keep revenues mostly flat at just over a billion dollars despite lower activity in Canada and the divestiture of a non-core business in Q4 2024 that created a $75 million revenue headwind in 2025. As I alluded to earlier and in previous comments, Primorus is excited about our potential growth in natural gas generation in the coming years. We are actively engaged in discussions. We're bidding on $1.5 to $2 billion of awards in the first half of this year, and our conversations with clients suggest the list of opportunities will continue to grow. We are prepared with the project managers and skilled labor necessary to take on more work, and we are confident that our expertise and relationships will result in a strong bookings year for natural gas generation in 2026. We remain disciplined in the types of projects we are pursuing and the terms we are willing to accept to balance risk more equitably between contractor and client and ensure the jobs are completed successfully and on schedule. Heavy Civil continued its high performance in 2025, contributing solid margins and cash flow. While not a primary driver of top line growth, the team has delivered consistent execution and is directing their efforts on projects that align with their expertise and delivering margins above their historical average. Finishing the energy segment with renewables, it was another year of record revenue and operating income, despite having to navigate an uncertain trade and regulatory environment for much of the year. These conditions led to several delays project specification changes, and redesigns. But in the end, our teams were able to respond to our customers' needs and closed out the year by booking over $1.6 billion in new projects during the fourth quarter, a huge accomplishment by our sales and support teams to get these contracts signed and over the finish line to help our clients move these projects forward. We also helped our clients accelerate project timelines and break ground on projects ahead of schedule, during the year to meet their needs. A testament to the valued partnerships we have with our clients and vendors and our team's willingness to deliver our best when called upon. Of course, we did face some operational challenges during the year as well that led to higher than expected costs on certain projects that contributed to lower margins during the fourth quarter. One project required additional equipment and materials to overcome challenging underground conditions that were drastically different from the conditions on an adjacent project we had previously constructed. These situations can happen when you work on as many projects as we do. We believe we have worked past most of the excess costs on these projects and would expect to see margins improve in 2026 and return to the norms we expect. We have also continued to add quality people and management oversight to assist with upfront engineering, design, and estimating work that will help mitigate excursions in the future. Ultimately, the demand for our solar solutions remains high and our customers have an extensive volume of projects safe harbored in accordance with the Treasury guidance. We are seeing our average project size increase and new customers continue to engage with us to build their projects. We saw tremendous growth in our battery storage business in 2025 to over $250 million and believe the market is poised to continue being a growth driver in renewables. Solar, and specifically solar with battery storage, remains one of the lowest cost and fastest to market sources of power generation, which in our view makes it a crucial part of helping to meet the energy demands of the future. We also recently commissioned our Remote Operations Control Center that adds asset management capacity for our O&M business. It also opens the door for deeper engagement with our clients should remediation be needed at facilities damaged by weather events or replacement of outdated components. Our eBoss business, Premier PB, built on its success in 2025, supplying components to the projects we construct and to the market. We plan to invest in a new facility for this business line in 2026 that will increase our capacity to service the market and add additional products to our portfolio to align with customer demand and preferences. Overall, Primorus had an exceptional 2025 and is set up for a successful year in 2026. The demand backdrop for our services is as good as we've seen as a company, and we are focused on the people, equipment, and expertise to help our customers succeed. Now I'll hand it over to Ken for more on our financial results.