Primoris Services Corporation Reports Third Quarter 2022 Results

DALLAS--(BUSINESS WIRE)--Nov 7, 2022--

Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or the “Company”) today announced financial results for its third quarter ended September 30, 2022 and confirmed the Company’s outlook.

For the third quarter 2022, Primoris reported the following highlights (1):

• Revenue of $1,284.1 million, up $370.9 million, or 40.6 percent, year-over-year driven by strong growth in the Utilities and Energy/Renewables segments, including $155.7 million from the PLH acquisition
• Delivered net income of $43.0 million, or $0.80 per diluted share, and adjusted net income of $60.4 million, or $1.12 per diluted share
• Generated adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) of $109.0 million
• Increased backlog to a record $5.5 billion, up 99.8 percent from the third quarter of 2021, including Master Service Agreements (“MSA”) backlog of $2.1 billion
• Annual 2022 guidance range for earnings per share (“EPS”) updated to $2.31 to $2.51 to reflect incremental depreciation, amortization of intangibles, and transaction, integration and related costs associated with the PLH acquisition
• Maintained Adjusted EPS guidance range of $2.39 to $2.59

“Our third quarter results demonstrate another significant step in executing our long-term growth strategy. We saw record revenue and backlog for the second consecutive quarter, including significant organic revenue growth in our Utilities and Energy/Renewables segments and a near doubling of our backlog compared to the previous year,” said Tom McCormick, President and Chief Executive Officer of Primoris.

“As we advance through the fourth quarter and into 2023, we remain confident in the outlook for our business as we work to further grow our backlog of projects across our segments and provide quality service to our customers that will lead to reliable and profitable growth.”

2022 Third Quarter Results

Revenue was $1,284.1 million for the three months ended September 30, 2022, an increase of $370.9 million, or 40.6 percent, compared to the same period in 2021. The increase was primarily due to organic growth of $197.3 million, or 21.6%, in the Energy/Renewables and Utilities segments on higher solar construction, power delivery, and communications services, as well as approximately $173.6 million in revenue contribution from the PLH and B Comm acquisitions. Gross profit was $154.9 million for the three months ended September 30, 2022, an increase of $27.5 million, or 21.6 percent, compared to the same period in 2021. The increase was primarily due to higher revenue and a favorable mix of business in the Energy/Renewables and Utility segments and approximately $16.0 million from the acquisitions of PLH and B Comm, partially offset by gross profit declines in the Pipeline Services segment. Gross profit as a percentage of revenue decreased to 12.1 percent for the three months ended September 30, 2022, compared to 14.0 percent for the same period in 2021 driven primarily by lower Pipeline Services margins and inflation.

This press release includes Non-GAAP financial measures. The Company believes these measures enable investors, analysts and management to evaluate Primoris’ performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. In addition, management believes these measures are useful in comparing the Company’s operating results with those of its competitors. Please refer to “Non-GAAP Measures” and Schedules 1, 2 and 3 for the definitions and reconciliations of the Company’s Non-GAAP financial measures, including “Adjusted Net Income,” “Adjusted EPS” and “Adjusted EBITDA”.

During the third quarter of 2022, net income was $43.0 million compared to $44.1 million in the previous year. Adjusted Net Income was $60.4 million for the third quarter compared to $48.5 million for the same period in 2021. Diluted earnings per share (“EPS”) was $0.80 compared to $0.81 in the previous year. Adjusted EPS was $1.12 for the third quarter of 2022 compared to $0.89 for the third quarter of 2021. Adjusted EBITDA was $109.0 million for the third quarter of 2022, an increase of $14.2 million, or 15.1 percent, compared to $94.7 million for the same period in 2021.

The Company’s three segments are: Utilities, Energy/Renewables and Pipeline Services. Revenue and gross profit for the segments for the three and nine months ended September 30, 2022 and 2021 were as follows:

Utilities Segment (“Utilities”): Revenue increased by $158.4 million, or 34.8 percent, for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to organic growth of 10.3 percent from increased activity across the power delivery and communications markets and a $111.3 million revenue contribution from the acquisitions of PLH and B Comm. Gross profit for the three months ended September 30, 2022, increased by $14.3 million, or 22.5 percent, compared to the same period in 2021, primarily due to a $10.0 million incremental impact from the PLH and B Comm acquisitions and $4.3 million from organic revenue growth in the segment. Gross profit as a percentage of revenue decreased slightly to 12.7 percent during the three months ended September 30, 2022, compared to 14.0 percent in the same period in 2021, primarily due to higher costs caused by supply chain disruptions and inflationary pressure on labor and fuel. Gross profit as a percentage of revenue in the Utilities segment improved from 8.5 percent for the second quarter of 2022 as a result of actions taken by the Company to mitigate the impacts of inflation it experienced in the second quarter. The Utilities segment represented 46.8 percent of total Company revenue and 12.7 percent of the total Company gross profit for the three months ended September 30, 2022.

Energy and Renewables Segment (“Energy/Renewables”): Revenue increased by $249.4 million, or 71.1 percent, for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to organic growth of 56.7 percent driven by a 98.9 percent increase in solar construction related work, higher electric power activity and $50.5 million contribution from the PLH acquisition. Gross profit for the three months ended September 30, 2022, increased by $44.2 million, or 123.1 percent, compared to the same period in 2021, primarily due to improved mix of revenue from solar activity growth and $6.6 million in contribution from PLH. Gross profit as a percentage of revenue increased to 13.3 percent during the three months ended September 30, 2022, compared to 10.2 percent in the same period in 2021, primarily due to the previously noted higher margin solar projects and lower costs from the non-recurrence of project impacts associated with a liquified natural gas plant project in the Northeast in 2021. The Energy/Renewables segment represented 46.8 percent of total Company revenue and 13.3 percent of the total Company gross profit for the three months ended September 30, 2022.

Pipeline Services (“Pipeline”): Revenue decreased by $36.9 million, or 34.3 percent, for the three months ended September 30, 2022, compared to the same period in 2021. The decrease is primarily due to the substantial completion of pipeline projects in 2021 and a decline in midstream pipeline projects driven in part by decreased permitting for interstate pipelines, partially offset by a $11.8 million contribution from PLH. Gross profit for the three months ended September 30, 2022, was negative $3.3 million, a decrease of $31.1 million compared to the same period in 2021, primarily due to the lower revenue from the decrease in activity and under absorption of carrying costs related to equipment and personnel. Gross profit decreased to a negative 4.6 percent as a percentage of revenue during the three months ended September 30, 2022, compared to a gross profit of 25.8 percent as a percentage of revenue in the same period in 2021 due to the negative impacts to lower revenue and unabsorbed fixed costs previously noted. The Pipeline Services segment represented 5.5 percent of total Company revenue and negative 5.3 percent of the total Company gross profit for the three months ended September 30, 2022. The Company was awarded a pipeline project valued over $120 million in the third quarter of 2022 that is expected to drive revenue and gross profit improvement in the Pipeline Services segment in the fourth quarter of 2022.

Other Financial Information

Selling, general and administrative (“SG&A”) expenses were $75.7 million during the three months ended September 30, 2022, an increase of $14.0 million, or 22.7 percent compared to 2021, primarily due to $13.4 million of incremental expense from the acquisitions of PLH and B Comm. SG&A expense as a percentage of revenue decreased to 5.9 percent compared to 6.8 percent for the corresponding period in 2021, primarily due to growth in revenues outpacing incremental SG&A expenses.

Transaction and related costs were $12.7 million for the three months ended September 30, 2022, an increase of $12.3 million compared to 2021, primarily due to professional fees paid to advisors associated with the PLH acquisition in 2022.

Interest expense, net for the three months ended September 30, 2022, was $13.1 million, an increase of $8.4 million compared to the same period in 2021, primarily due to higher average debt balances from the borrowings incurred related to the PLH acquisition and a higher weighted average interest rate.

The Company recorded income tax expense for the three months ended September 30, 2022, of $9.8 million compared to $16.7 million for the three months ended September 30, 2021. The effective tax rate was 19.6 percent for the three months ended September 30, 2022. The decrease in income tax expense year-over-year was primarily driven by the release of a valuation allowance and a reduction in the Company’s effective tax rate.

During the three months ended September 30, 2022, the Company spent approximately $9.9 million for capital expenditures, which decreased in the third quarter as the Company moves to a more balanced leased versus owned equipment strategy.

Outlook

The Company estimates that its EPS for the year ending December 31, 2022, will range between $2.31 and $2.51, reflecting its current expectations for the increase in depreciation, amortization of intangibles, and transaction, integration costs from the PLH acquisition. The Company is maintaining its Adjusted EPS estimate for the year ending December 31, 2022, in the range of $2.39 to $2.59 per share. The Company’s targeted gross profit as a percentage of revenue for the fourth quarter of 2022 by segment is as follows: Utilities in the range of 9 to 11 percent; Energy/Renewables in the range of 10 to 12 percent; and Pipeline in the low to mid-single digit percent range.

The Company is targeting SG&A expense as a percentage of revenue in the low six percent range for the 2022 calendar year. The Company expects its effective tax rate on net income for the full year 2022 to be approximately 19.0 to 20.0 percent but may vary depending on the mix of states in which the Company operates. Capital expenditures for the fourth quarter are expected to total between $20.0 million and $30.0 million, which includes $15.0 million to $25.0 million for construction equipment.

The guidance provided above constitutes forward-looking statements, which are based on current economic conditions and estimates, and the Company does not include other potential impacts, such as changes in accounting, acquisitions or dispositions or unusual items. Supplemental information relating to the Company’s financial outlook is posted in the “Investors” section of the Company’s website at www.prim.com.

Backlog

As of September 30, 2022, Fixed Backlog was $3.4 billion and MSA Backlog was $2.1 billion, a year-over-year increase of 166.1 percent and 41.4 percent, respectively. Total Backlog at the end of the third quarter 2022 was $5.5 billion or an increase of 99.8 percent from the third quarter of 2021. MSA Backlog represents estimated MSA revenue for the next four quarters. The Company expects that during the next four quarters, the Company will recognize as revenue approximately 76 percent of the total backlog as of September 30, 2022, comprised of backlog of approximately: 100 percent of Utilities; 60 percent of Energy/Renewables; and 83 percent of Pipeline.

Backlog, including estimated MSA revenue, should not be considered a comprehensive indicator of future revenue. Revenues from certain projects, such as cost reimbursable and time-and-materials projects, do not flow through backlog. At any time, any project may be cancelled at the convenience of customers.

Liquidity and Capital Resources

At September 30, 2022, the Company had $111.9 million of unrestricted cash and cash equivalents. The Company had $150.0 million in outstanding borrowings under the revolving credit facility, commercial letters of credit outstanding were $48.4 million and the available borrowing capacity was $126.6 million.

Dividend

The Company also announced that on November 3, 2022, its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on December 30, 2022, payable on January 13, 2023.

Share Purchase Program

In November 2021, the Company’s Board of Directors authorized a $25.0 million share purchase program. In February 2022, the Company’s Board of Directors replenished the limit to $25.0 million. During the three months ended September 30, 2022, the Company purchased and cancelled 129,200 shares of common stock, which in the aggregate equaled $2.6 million at an average share price of $20.28. As of September 30, 2022, we had $19.0 million remaining for purchase under the share purchase program. The share purchase plan expires on December 31, 2022.

As previously announced, management will host a conference call and webcast on Tuesday, November 8, 2022, at 9:00 a.m. U.S. Central Time (10:00 a.m. U.S. Eastern Time). Tom McCormick, President and Chief Executive Officer, and Ken Dodgen, Executive Vice President and Chief Financial Officer, will discuss the Company’s results and business outlook.

Conference Call and Webcast

Presentation slides to accompany the conference call are available for download under “Events & Presentations” in the “Investors” section of the Company’s website at www.prim.com.

Non-GAAP Measures

This press release contains certain financial measures that are not recognized under generally accepted accounting principles in the United States (“GAAP”). Primoris uses earnings before interest, income taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS as important supplemental measures of the Company’s operating performance. The Company believes these measures enable investors, analysts, and management to evaluate Primoris’ performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. In addition, management believes these measures are useful in comparing the Company’s operating results with those of its competitors. The non-GAAP measures presented in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, Primoris’ method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similarly titled measures as calculated by other companies that do not use the same methodology as Primoris. Please see the accompanying tables to this press release for reconciliations of the following non‐GAAP financial measures for Primoris’ current and historical results: EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS.

About Primoris

Primoris Services Corporation is a leading specialty contractor providing critical infrastructure services to the utility, energy/renewables and pipeline services markets throughout the United States and Canada. The Company supports a diversified base of blue-chip customers with engineering, procurement, construction and maintenance services. A focus on multi-year master service agreements and an expanded presence in higher-margin, higher-growth markets such as utility-scale solar facility installations, renewable fuels, power delivery systems and communications infrastructure have also increased the Company’s potential for long-term growth. Additional information on Primoris is available at www.prim.com.

Forward Looking Statements

This press release contains certain forward-looking statements, including the Company’s outlook, that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including with regard to the Company’s future performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “projects”, “should”, “will”, “would” or similar expressions. Forward-looking statements include information concerning the possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results may differ materially as a result of a number of factors, including, among other things, customer timing, project duration, weather, and general economic conditions; changes in the mix of customers, projects, contracts and business; regional or national and/or general economic conditions and demand for the Company’s services; macroeconomic impacts arising from the long duration of the COVID-19 pandemic, including labor shortages and supply chain disruptions; price, volatility, and expectations of future prices of oil, natural gas, and natural gas liquids; variations and changes in the margins of projects performed during any particular quarter; increases in the costs to perform services caused by changing conditions; the termination, or expiration of existing agreements or contracts; the budgetary spending patterns of customers; inflation and other increases in construction costs that the Company may be unable to pass through to customers; cost or schedule overruns on fixed-price contracts; availability of qualified labor for specific projects; changes in bonding requirements and bonding availability for existing and new agreements; the need and availability of letters of credit; costs incurred to support growth, whether organic or through acquisitions; the timing and volume of work under contract; losses experienced in the Company’s operations; the results of the review of prior period accounting on certain projects and the impact of adjustments to accounting estimates; developments in governmental investigations and/or inquiries; intense competition in the industries in which the Company operates; failure to obtain favorable results in existing or future litigation or regulatory proceedings, dispute resolution proceedings or claims, including claims for additional costs; failure of partners, suppliers or subcontractors to perform their obligations; cyber-security breaches; failure to maintain safe worksites; risks or uncertainties associated with events outside of the Company’s control, including severe weather conditions, public health crises and pandemics (such as COVID-19), war or other armed conflict (including Russia’s invasion of Ukraine), political crises or other catastrophic events; client delays or defaults in making payments; the availability of credit and restrictions imposed by credit facilities; failure to implement strategic and operational initiatives; risks or uncertainties associated with acquisitions, dispositions and investments; possible information technology interruptions or inability to protect intellectual property; the Company’s failure, or the failure of the Company’s agents or partners, to comply with laws; the Company's ability to secure appropriate insurance; new or changing legal requirements, including those relating to environmental, health and safety matters; the loss of one or a few clients that account for a significant portion of the Company's revenues; asset impairments; and risks arising from the inability to successfully integrate acquired businesses. In addition to information included in this press release, additional information about these and other risks can be found in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the Company’s other filings with the U.S. Securities and Exchange Commission (“SEC”). Such filings are available on the SEC’s website at www.sec.gov. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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CONTACT: Ken Dodgen

Executive Vice President, Chief Financial Officer

(214) 740-5608

kdodgen@prim.com

Blake Holcomb

Vice President, Investor Relations

(214) 545-6773

bholcomb@prim.com

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: ARCHITECTURE OTHER ENERGY UTILITIES OIL/GAS ALTERNATIVE ENERGY ENERGY OTHER CONSTRUCTION & PROPERTY COMMERCIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY ENGINEERING URBAN PLANNING BUILDING SYSTEMS MANUFACTURING

SOURCE: Primoris Services Corporation

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