Primoris Services Corporation Announces 2019 Second Quarter Financial Results

• Board of Directors Declares $0.06 Per Share Cash Dividend
• Tom McCormick appointed to Board of Directors

Financial Highlights

• 2019 Q2 revenue of $789.9 million, compared to $648.8 million in 2018 Q2, a 21.7% increase
  - 2019 Q2 MSA revenue of $348.3 million, a 46% increase over 2018 Q2 MSA revenue
• 2019 Q2 net income attributable to Primoris of $17.8 million, or $0.35 per fully diluted share
  - compared to $11.7 million, or $0.23 per fully diluted share, in 2018 Q2, a 52% increase
• 2019 Q2 SG&A 6.2% of revenue, compared to 2018 Q2 6.7% of revenue
• Record Total Backlog of $3.2 billion at June 30, 2019, a 15.9% increase over December 31, 2018

DALLAS, Aug. 06, 2019 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its second quarter ended June 30, 2019.

The Company also announced that on August 2, 2019 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on September 30, 2019, payable on or about October 15, 2019. 

The Board also voted to appoint Primoris’ President Tom McCormick to the Board of Directors, increasing the size of the Board from eight to nine members.  Mr. McCormick’s appointed term will expire at the 2020 Annual Meeting, at which time he will be up for re-election.  Mr. McCormick joined Primoris in 2016 as Chief Operating Officer and was promoted to President in April 2019.

David King, Executive Chairman and Chief Executive Officer of Primoris, commented, “We are extremely proud of Primoris’ second quarter results, with both revenue and net income exceeding expectations and setting a new record backlog that surpassed $3 billion for the first time in Primoris’ history.  Continued implementation of our strategic plan has helped us achieve 22% year over year growth in revenue and 46% year over year growth in MSA derived revenue while de-risking our diverse portfolio of services.  Strong project execution and a continued focus on controlling SG&A expense contributed to our robust second quarter.  While the wet weather presented some headwinds for our pipeline and utility businesses, we benefited from the diversity of our business model and the overall strength of our end markets.  We are proud of our employees’ dedication and our management’s demonstration of their ability to generate consistent and predictable results.”

Mr. King continued, “We believe the stability and consistency of our earnings history lies in our focus on relationships and in performing good quality, on-time, safe work for our clients.  The demand for our services combined with our growing project opportunity funnel continues to allow us to achieve new records in backlog growth.   As we look to the future, we are very comfortable with the risk profile of Primoris’ revenue compared to many of our peers.  The majority of our contracts are either cost reimbursable or unit price, and our average project value is less than $10 million.  Almost half of Primoris’ revenue is generated from long-term MSA relationships with blue chip gas and electric utility customers, and less than 25% of our contract revenue is derived from fixed price contracts.  With the exception of a few Canadian projects, all of our work is performed in the United States, we do not have a material exposure to tariffs, and we have a long history of good relations with our craft labor.  We believe our strategy of disciplined growth combined with our conservative culture will continue to benefit Primoris, our employees, and our shareholders.”

2019 SECOND QUARTER RESULTS OVERVIEW

Revenue was $789.9 million for the three months ended June 30, 2019, an increase of $141.1 million, or 21.8%, compared to the same period in 2018. The increase was primarily due to incremental revenue from the Willbros acquisition and organic growth in the Pipeline segment. Gross profit was $80.5 million for the three months ended June 30, 2019, an increase of $9.1 million, or 12.8%, compared to the same period in 2018.  The increase was primarily due to revenue growth. Gross profit for the three months ended June 30, 2019 from the Willbros acquisition totaled $7.7 million. Gross profit as a percentage of revenue decreased to 10.2% in the three months ended June 30, 2019 from 11.0% in the same period in 2018 due primarily to unfavorable weather conditions in the Transmission, Utilities, and Pipeline segments.

Segment Revenues
(in thousands, except %)
(unaudited)

Segment Gross Profit
(in thousands, except %)
(unaudited)

Power, Industrial, & Engineering Segment (“Power”):  Revenue increased by $5.2 million, or 3.1%, for the three months ended June 30, 2019, compared to the same period in 2018. The increase is primarily due to a West Texas solar facility project that began in 2019 and revenue from the acquisition of Willbros in June of 2018. The overall increase was partially offset by the substantial completions of our Carlsbad joint venture project and a West Texas solar facility project in 2018 and lower revenue from a LNG plant project in the Northeast in 2019. Gross profit for the three months ended June 30, 2019, increased by $2.6 million, or 12.9% compared to the same period in 2018.  The increase is primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 13.5% during the three months ended June 30, 2019, compared to 12.3% in the same period in 2018 primarily due to favorable margins realized by our solar project in 2019 as compared to 2018.

Pipeline & Underground Segment (“Pipeline”):  Revenue increased by $46.6 million, or 51.5%, for the three months ended June 30, 2019, compared to the same period in 2018. The increase is primarily due to increased pipeline maintenance, facility construction, and specialty services activity and progress on a major pipeline project in West Texas that began in June 2018.  Gross profit for the three months ended June 30, 2019 increased by $0.9 million, or 8.0%, compared to the same period in 2018 due to revenue growth, partially offset by lower margins. Gross profit as a percentage of revenue decreased to 8.4% during the three months ended June 30, 2019, compared to 11.8% in the same period in 2018 primarily due to unfavorable weather conditions on a West Texas pipeline project and the impact of a client delay on a project in Southern California.

Utilities & Distribution Segment (“Utilities”):  Revenue decreased by $6.5 million, or 2.9%, for the three months ended June 30, 2019, compared to the same period in 2018 primarily due to decreased activity with a major utility customer in California and unfavorable weather conditions experienced in the Midwest. Gross profit for the three months ended June 30, 2019 decreased by $3.7 million, or 10.7%, compared to the same period in 2018. The decrease is primarily due to lower revenue and margins from unfavorable weather conditions experienced in the Midwest. Gross profit as a percent of revenue decreased to 13.9% during the three months ended June 30, 2019, compared to 15.1%, in the same period in 2018 primarily due to a shift in the mix of work performed and unfavorable weather conditions experienced in the Midwest.

Transmission & Distribution Segment (“Transmission”): The Transmission segment was created in connection with the acquisition of Willbros in the second quarter of 2018. Revenue and gross profit for the three months ended June 30, 2018, represent results from June 1, 2018, the acquisition date, to June 30, 2018. Revenue increased by $92.9 million for the three months ended June 30, 2019, compared to the same period in 2018 primarily due to incremental revenue from the acquisition of Willbros in June of 2018.  Gross profit for the three months ended June 30, 2019, increased by $4.5 million, due primarily to higher revenue, partially offset by lower margins. Gross profit as a percentage of revenue decreased to 7.5% during the three months ended June 30, 2019, compared to 13.5% in the same period in 2018 primarily due to a shift in the mix of work performed, unfavorable weather conditions experienced in 2019, and upfront costs to expand our operations.

Civil Segment (“Civil”):  Revenue increased by $3.0 million, or 2.5%, for the three months ended June 30, 2019, compared to the same period in 2018. The increase is primarily due to a project with a major refining customer that began in 2019 and progress on a port project and an ethylene plant project that began in 2018, partially offset by lower Texas Department of Transportation volumes. Gross profit increased by $4.8 million for the three months ended June 30, 2019, compared to the same period in 2018 primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 3.9% during the three months ended June 30, 2019, compared to (0.1%) in the same period in 2018 due primarily to higher costs on an airport project in the second quarter of 2018.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses were $48.7 million during the three months ended June 30, 2019, an increase of $5.2 million, or 12.0%, compared to 2018 primarily due to $3.7 million of incremental expense from the Willbros acquisition and a $1.7 million increase in compensation related expenses, including discretionary incentive compensation. SG&A expense as a percentage of revenue decreased to 6.2% compared to 6.7% for the corresponding period in 2018 due to increased revenue.

Interest expense for the three months ended June 30, 2019 increased compared to the same period in 2018 due to higher average debt balances and weighted average interest rates in 2019. In addition, we had a $2.7 million unrealized loss on the change in the fair value of our interest rate swap agreement during the three months ended June 30, 2019.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 29.0% for the three months ended June 30, 2019.  The rate differs from the U.S. federal statutory rate of 21.0% primarily due to state income taxes and nondeductible components of per diem expenses.

OUTLOOK

The Company reaffirms its estimate that for the fiscal year ending December 31, 2019, net income attributable to Primoris is expected to be between $1.60 and $1.80 per fully diluted share.

BACKLOG

At June 30, 2019, Fixed Backlog was $1.82 billion, compared to $1.48 billion at December 31, 2018.

At June 30, 2019, MSA Backlog was $1.38 billion, compared to $1.28 billion at December 31, 2018.  During the second quarter of 2019, approximately $348 million of revenue was recognized from MSA projects, a 46% increase over second quarter 2018 MSA revenue.  MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at June 30, 2019 was $3.20 billion, compared to $2.76 billion at December 31, 2018. 

Backlog, including estimated MSA revenue, should not be considered a comprehensive indicator of future revenues.  Revenue 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 our customers.

CONFERENCE CALL

David King, Executive Chairman and Chief Executive Officer; Tom McCormick, President; and Ken Dodgen, Executive Vice President and Chief Financial Officer, will host a conference call, Tuesday, August 6, 2019 at 10:00 am Eastern Time / 9:00 am Central Time to discuss the results. 

Interested parties may participate in the call by dialing:

• (877) 407-8293 (Domestic)
• (201) 689-8349 (International)

Presentation slides to accompany the conference call are available for download in the Investor Relations section of Primoris’ website at www.prim.com.  Once at the Investor Relations section, please click on “Events & Presentations”.

If you are unable to participate in the live call, a replay may be accessed by dialing (877) 660-6853, conference ID 13693173, and will be available for approximately two weeks. The conference call will also be broadcast live over the Internet and can be accessed and replayed through the Investor Relations section of Primoris' website at www.prim.com.

ABOUT PRIMORIS

Founded in 1960, Primoris, through various subsidiaries, has grown to become one of the larger publicly traded specialty contractors and infrastructure companies in the United States. Serving diverse end markets, Primoris provides a wide range of construction, specialty services, fabrication, maintenance, replacement, and engineering services to major public utilities, petrochemical companies, refiners, energy companies, municipalities, state departments of transportation, and other customers. The Company's national footprint extends from Florida, along the Gulf Coast, through California, into the Pacific Northwest and Canada. For additional information, please visit www.prim.com.

FORWARD LOOKING STATEMENTS

This press release contains certain forward-looking statements, including with regard to the Company’s future performance. Words such as "estimated," "believes," "expects," "projects," “may,” and "future" or similar expressions are intended to identify forward-looking statements.  Forward-looking statements inherently involve known and unknown risks, uncertainties, and other factors, including without limitation, those described in this press release and those detailed in the "Risk Factors" section and other portions of our Annual Report on Form 10-K for the period ended December 31, 2018, and other filings with the Securities and Exchange Commission.  Given these 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)