TechDogs-"Primoris Services Corporation Reports Second Quarter 2023 Results"

Manufacturing Technology

Primoris Services Corporation Reports Second Quarter 2023 Results

By Business Wire

Business Wire
Overall Rating

DALLAS--(BUSINESS WIRE)--Primoris Services Corporation (NYSE: PRIM) (“Primoris” or the “Company”) today announced financial results for its second quarter ended June 30, 2023 and provided comments on the Company’s operational performance and outlook for 2023.

For the second quarter of 2023, Primoris reported the following highlights (1):

  • Revenue of $1,413.4 million, up $390.4 million, or 38.2 percent, compared to the second quarter of 2022 driven by strong growth in both the Utilities and Energy segments and in part by the PLH and B Comm acquisitions;
  • Net income of $39.0 million, or $0.72 per diluted share, a decrease of $11.1 million, or $0.21 per diluted share, from the second quarter of 2022, primarily due to a $40.1 million gain on sale and leaseback transaction in 2022;
  • Adjusted net income of $43.4 million, or $0.80 per diluted share, an increase of $17.3 million, or $0.32 per diluted share, from the second quarter of 2022;
  • Backlog of $6.6 billion, up 44.1 percent from the second quarter of 2022, including Master Service Agreements (“MSA”) backlog of $2.0 billion, up 15.9 percent from the second quarter of 2022;
  • Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) of $102.4 million, up $46.2 million, or 82.3 percent, from the second quarter of 2022.
  • Raised EPS and Adjusted EPS guidance ranges to $2.15 to $2.35 and $2.60 to $2.80 per diluted share, respectively.

(1)

Please refer to “Non-GAAP Measures” and Schedules 1, 2, 3 and 4 for the definitions and reconciliations of our Non-GAAP financial measures, including “Adjusted Net Income,” “Adjusted EPS” and “Adjusted EBITDA.”

“Our second quarter results once again established new records for Primoris, including total backlog and revenue generation,” said Tom McCormick, President and Chief Executive Officer of Primoris. “The growth we continue to see across our businesses indicates that we are well-positioned in the right end markets and that our customers value the quality service and execution provided by our employees.”

“In addition to ongoing success in our strategic markets of renewables, power delivery and communications, we are seeing improved demand for our industrial and pipeline services, which are moving past many of the headwinds experienced during 2022,” he added. “We are encouraged by customer sentiment regarding their upcoming plans, and their interest in an ongoing partnership with Primoris as they continue investing in the years ahead to strengthen North America’s infrastructure.”

“Looking forward to the second half of 2023, I am confident in our teams’ abilities to successfully execute on our expanding backlog of projects safely, efficiently and to the satisfaction of our customers. As a result, I have increasing confidence that we are well-positioned to exceed our goals for 2023 and set a solid foundation for an even stronger year in 2024.”

Second Quarter 2023 Results Overview

Revenue was $1,413.4 million for the three months ended June 30, 2023, an increase of $390.4 million, or 38.2 percent, compared to the same period in 2022. The increase was primarily due to strong growth across our renewables, industrial and pipeline businesses, as well as contributions from the PLH and B Comm acquisitions. Gross profit was $157.3 million for the three months ended June 30, 2023, an increase of $65.2 million, or 70.7 percent, compared to the same period in 2022. The increase was primarily due to an increase in revenue, master service agreement rate increases to mitigate inflationary pressures, primarily in the Utilities segment, and improved margins across several businesses in the Energy segment. Gross profit as a percentage of revenue increased to 11.1 percent for the three months ended June 30, 2023, compared to 9.0 percent for the same period in 2022, primarily as a result of improved margins in the utilities, pipeline services and renewables businesses.

During the second quarter of 2023, net income was $39.0 million compared to net income of $50.2 million in the prior year. Diluted earnings per share (“EPS”) was $0.72 for the second quarter of 2023 compared to $0.93 for the same period in 2022. The decrease in net income and diluted earnings per share from the previous year can be largely attributed to a $40.1 million gain on sale and leaseback transaction realized in the second quarter of 2022. Adjusted Net Income was $43.4 million for the second quarter, compared to $26.1 million for the same period in 2022. Adjusted diluted EPS was $0.80 for the second quarter of 2023, compared to $0.48 for the second quarter of 2022. The increase in adjusted net income and adjusted diluted EPS was due to increased revenue, including contribution from the PLH and B Comm acquisitions, and improved profitability across multiple end markets in the Energy segment and the Utilities segment. Adjusted EBITDA was $102.4 million for the second quarter of 2023, compared to $56.1 million for the same period in 2022.

In the first quarter of 2023, we changed our reportable segments in connection with the realignment of our internal organization and management structure, and now we report in two segments: Utilities and Energy. Revenue and gross profit for the segments for the three and six months ended June 30, 2023 and 2022 were as follows:

Segment Revenue

(in thousands, except %)

(unaudited)

For the three months ended June 30,

2023

2022

% of

% of

Total

Total

Segment

Revenue

Revenue

Revenue

Revenue

Utilities

$

640,236

45.3%

$

476,121

46.5%

Energy

773,141

54.7%

546,827

53.5%

Total

$

1,413,377

100.0%

$

1,022,948

100.0%

For the six months ended June 30,

2023

2022

% of

% of

Total

Total

Segment

Revenue

Revenue

Revenue

Revenue

Utilities

$

1,169,128

43.8%

$

834,849

46.2%

Energy

1,501,145

56.2%

972,484

53.8%

Total

$

2,670,273

100.0%

$

1,807,333

100.0%

Segment Gross Profit

(in thousands, except %)

(unaudited)

For the three months ended June 30,

2023

2022

% of

% of

Segment

Segment

Segment

Gross Profit

Revenue

Gross Profit

Revenue

Utilities

$

66,510

10.4%

$

40,356

8.5%

Energy

90,754

11.7%

51,753

9.5%

Total

$

157,264

11.1%

$

92,109

9.0%

For the six months ended June 30,

2023

2022

% of

% of

Segment

Segment

Segment

Gross Profit

Revenue

Gross Profit

Revenue

Utilities

$

100,081

8.6%

$

62,709

7.5%

Energy

156,916

10.5%

85,885

8.8%

Total

$

256,997

9.6%

$

148,594

8.2%

Utilities Segment (“Utilities”): Revenue increased by $164.1 million, or 34.5 percent, for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to the acquisitions of PLH and B Comm and increased activity in our legacy power delivery and gas operations markets. Gross profit for the three months ended June 30, 2023 increased by $26.2 million, or 64.8 percent, compared to the same period in 2022. The increase in gross profit is primarily attributable to the higher revenue and the impact of improved rates on power delivery services to offset inflation pressures primarily experienced during 2022. Gross profit as a percentage of revenue increased to 10.4 percent during the three months ended June 30, 2023 compared to 8.5 percent for the same period in 2022.

Energy Segment (“Energy”): Revenue increased by $226.3 million, or 41.4 percent, for the three months ended June 30, 2023, compared to the same period in 2022. The increase year-over-year was primarily due to increased pipeline and renewables project work, increased industrial activity in the Gulf Coast region and contributions from the PLH acquisition. Gross profit for the three months ended June 30, 2023, increased by $39.0 million, or 75.4 percent, compared to the same period in 2022, primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 11.7 percent during the three months ended June 30, 2023, compared to 9.5 percent in the same period in 2022. The increase in gross margin is primarily due to strong execution on a pipeline project in the mid-Atlantic in 2023, higher relative carrying costs for equipment and personnel in 2022 caused by lower than anticipated pipeline volumes.

Other Income Statement Information

Selling, general and administrative (“SG&A”) expenses were $85.6 million during the quarter ended June 30, 2023, an increase of $25.8 million, or 43.3 percent, compared to 2022. The increase year-over-year was primarily due to the acquisitions of PLH and B Comm. Also contributing to the increase was higher incentive compensation costs associated with improved operational performance and an increase in headcount to support revenue growth. SG&A expense as a percentage of revenue increased to 6.1 percent in the second quarter of 2023, compared to 5.8 percent in the second quarter 2022.

Interest expense, net for the quarter ended June 30, 2023 was $16.9 million compared to $4.7 million for the quarter ended June 30, 2022. The increase of $12.2 million was due to higher average debt balances from the borrowings incurred related to the PLH acquisition and higher average interest rates, partially offset by a $3.2 million unrealized gain on our interest rate swaps in 2023. Interest expense for the full year 2023 is expected to increase to approximately $73 to $77 million due to higher average debt balances and higher interest rates.

The effective tax rate on income for the six months ended June 30, 2023 of 29.0% differs from the U.S. federal statutory rate of 21.0% primarily due to state income taxes and nondeductible components of per diem expenses. We recorded income tax expense for the six months ended June 30, 2023 of $16.5 million compared to $12.5 million for the six months ended June 30, 2022. The $4.0 million increase in income tax expense is primarily driven by a higher effective tax rate in 2023, partially offset by a $4.2 million decrease in pretax income.

Outlook

The Company is raising its estimates for the year ending December 31, 2023. Net income is expected to be between $2.15 and $2.35 per fully diluted share. Adjusted EPS is estimated in the range of $2.60 to $2.80 for 2023. Adjusted EBITDA for the full year 2023 is expected to range from $360 million to $380 million.

The Company is targeting SG&A expense as a percentage of revenue in the low six percent range for full year 2023. The Company’s targeted gross margins by segment are as follows: Utilities in the range of 9 to 11 percent and Energy in the range of 10 to 12 percent. The Company expects its effective tax rate for 2023 to now be approximately 29 percent, but it may vary depending on the mix of states in which the Company operates.

Adjusted EPS and Adjusted EBITDA are non-GAAP financial measures. Please refer to “Non-GAAP Measures” and Schedules 1-4 below for the definitions and reconciliations. 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 or unusual items. Supplemental information relating to the Company’s financial outlook is posted in the Investor Relations section of the Company’s website at www.prim.com.

Backlog

(in millions)

Backlog at June 30, 2023

Segment

Fixed Backlog

MSA Backlog

Total Backlog

Utilities

$

150.7

$

1,829.2

$

1,979.9

Energy

4,394.3

215.0

4,609.3

Total

$

4,545.0

$

2,044.2

$

6,589.2

At June 30, 2023, Fixed Backlog was $4.5 billion, an increase of $1.0 billion compared to our backlog at March 31, 2023 and December 31, 2022. MSA Backlog was $2.0 billion, flat compared to backlog on March 31, 2023 and up $0.1 billion from December 31, 2022. MSA Backlog represents estimated MSA revenue for the next four quarters. Total Backlog as of June 30, 2023 was $6.6 billion, which represented a new record for the Company. The Company expects that during the next four quarters, the Company will recognize as revenue approximately 71 percent of the total backlog at June 30, 2023, comprised of backlog of approximately: 100 percent of the Utilities segment and 59 percent of the Energy segment.

Backlog, including estimated MSA revenue, should not be considered a comprehensive indicator of future revenue. Revenue from certain projects where scope, and therefore contract value, is not adequately defined, is not included in Fixed Backlog. At any time, any project may be cancelled at the convenience of the Company’s customers.

Balance Sheet and Capital Allocation

At June 30, 2023, the Company had $122.7 million of unrestricted cash and cash equivalents. In the second quarter of 2023, capital expenditures were $28.5 million, including $16.6 million in construction equipment purchases. Capital expenditures for the six months ended June 30, 2023 were $42.4 million, including $21.0 million in construction equipment purchases. The Company estimates capital expenditures for the full year 2023 to total between $80 million and $100 million, which includes $40 million to $60 million for equipment. For the remaining six months of 2023, capital expenditures are expected to total between $40 million and $60 million, which includes $20 million to $40 million for equipment.

The Company also announced that on August 2, 2023, its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on September 29, 2023, payable on approximately October 13, 2023. During the six months ended June 30, 2023 the Company did not purchase any shares of common stock under its share purchase program. As of June 30, 2023, the Company had $19.0 million remaining for purchase under the share purchase program. The share purchase plan expires on December 31, 2023.

Conference Call and Webcast

As previously announced, management will host a conference call and webcast on Tuesday, August 8, 2023, 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.

Investors and analysts are invited to participate in the call by phone at 1-888-330-3428, or internationally at 1-646-960-0679 (access code: 7581464) or via the Internet at www.prim.com. A replay of the call will be available on the Company’s website or by phone at 1-800-770-2030, or internationally at 1-647-362-9199 (access code: 7581464), for a seven-day period following the call.

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 premier specialty contractor providing critical infrastructure services to the utility, energy, and renewables markets throughout the United States and Canada. Built on a foundation of trust, we deliver a range of engineering, construction, and maintenance services that power, connect, and enhance society. On projects spanning utility-scale solar, renewables, power delivery, communications, and transportation infrastructure, we offer unmatched value to our clients, a safe and entrepreneurial culture to our employees, and innovation and excellence to our communities. To learn more, visit www.prim.com and follow us on social media at @PrimorisServicesCorporation.

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; 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; increases in interest rates and slowing economic growth or recession; the instability in the banking system as a result of recent bank failures; 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, 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, 2022, 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.

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

Revenue

$

1,413,377

$

1,022,948

$

2,670,273

$

1,807,333

Cost of revenue

1,256,113

930,839

2,413,276

1,658,739

Gross profit

157,264

92,109

256,997

148,594

Selling, general and administrative expenses

85,571

59,730

163,581

115,184

Transaction and related costs

898

5,199

3,593

5,522

Gain on sale and leaseback transaction

(40,084)

(40,084)

Operating income

70,795

67,264

89,823

67,972

Other income (expense):

Foreign exchange gain, net

376

560

1,302

444

Other income, net

713

155

1,044

146

Interest expense, net

(16,884)

(4,705)

(35,349)

(7,581)

Income before provision for income taxes

55,000

63,274

56,820

60,981

Provision for income taxes

(15,968)

(13,120)

(16,478)

(12,501)

Net income

39,032

50,154

40,342

48,480

Dividends per common share

$

0.06

$

0.06

$

0.12

$

0.12

Earnings per share:

Basic

$

0.73

$

0.94

$

0.76

$

0.91

Diluted

$

0.72

$

0.93

$

0.75

$

0.90

Weighted average common shares outstanding:

Basic

53,301

53,263

53,243

53,251

Diluted

54,324

53,852

54,083

53,815

PRIMORIS SERVICES CORPORATION

CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

June 30,

December 31,

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

122,692

$

248,692

Accounts receivable, net

818,284

663,119

Contract assets

786,909

616,224

Prepaid expenses and other current assets

142,949

176,350

Total current assets

1,870,834

1,704,385

Property and equipment, net

480,598

493,859

Operating lease assets

249,609

202,801

Intangible assets, net

237,945

249,381

Goodwill

857,650

871,808

Other long-term assets

25,388

21,786

Total assets

$

3,722,024

$

3,544,020

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

513,412

$

534,956

Contract liabilities

417,995

275,947

Accrued liabilities

278,432

245,837

Dividends payable

3,199

3,187

Current portion of long-term debt

76,151

78,137

Total current liabilities

1,289,189

1,138,064

Long-term debt, net of current portion

1,036,971

1,065,315

Noncurrent operating lease liabilities, net of current portion

171,477

130,787

Deferred tax liabilities

30,223

57,101

Other long-term liabilities

44,626

43,915

Total liabilities

2,572,486

2,435,182

Commitments and contingencies

Stockholders’ equity

Common stock

6

6

Additional paid-in capital

269,031

263,771

Retained earnings

881,628

847,681

Accumulated other comprehensive income

(1,127)

(2,620)

Total stockholders’ equity

1,149,538

1,108,838

Total liabilities and stockholders’ equity

$

3,722,024

$

3,544,020


Contacts

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


Read full story here

First published on Tue, Aug 8, 2023

Liked what you read? That’s only the tip of the tech iceberg!

Explore our vast collection of tech articles including introductory guides, product reviews, trends and more, stay up to date with the latest news, relish thought-provoking interviews and the hottest AI blogs, and tickle your funny bone with hilarious tech memes!

Plus, get access to branded insights from industry-leading global brands through informative white papers, engaging case studies, in-depth reports, enlightening videos and exciting events and webinars.

Dive into TechDogs' treasure trove today and Know Your World of technology like never before!

Disclaimer - Reference to any specific product, software or entity does not constitute an endorsement or recommendation by TechDogs nor should any data or content published be relied upon. The views expressed by TechDogs’ members and guests are their own and their appearance on our site does not imply an endorsement of them or any entity they represent. Views and opinions expressed by TechDogs’ Authors are those of the Authors and do not necessarily reflect the view of TechDogs or any of its officials. All information / content found on TechDogs’ site may not necessarily be reviewed by individuals with the expertise to validate its completeness, accuracy and reliability.

Tags:

Digital FactoryPrimoris Services Corporation Critical Infrastructure Services Maintenance Services

References:

Join The Discussion

  • Dark
  • Light