Primoris Services Corporation Announces 2018 Third Quarter Financial Results

Board of Directors Declares $0.06 Per Share Cash Dividend

Financial Highlights

• 2018 Q3 revenues of $908.9 million, record level and a 49% increase over 2017 Q3 revenues
• 2018 Q3 operating income of $51.1 million, a 83% increase over 2017 Q3 operating income
• 2018 Q3 net income attributable to Primoris of $32.7 million, or $0.63 per fully diluted share, a record level and a 59% increase over 2017 Q3 net income attributable to Primoris
• 2018 Q3 SG&A expenses at 5.7% of revenue an improvement of 1.3% over 2017 Q3 at 7.0% of revenue
• Total backlog of $2.7 billion at September 30, 2018, compared to $2.6 billion at December 31, 2017

DALLAS, Nov. 06, 2018 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its third quarter ended September 30, 2018.

The Company also announced that on November 2, 2018 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on December 31, 2018, payable on or about January 15, 2019. 

David King, President and Chief Executive Officer of Primoris, commented, “Primoris had an excellent quarter, achieving record quarterly revenues and record earnings per share while maintaining a strong backlog.  Our third quarter results highlight the strength of the Primoris model of serving diverse end markets.  We achieved our record revenue and profitability despite permitting challenges and seemingly unending rain.  We have continued our focus on execution excellence, client development, and cost reduction programs that reduced our SG&A expenses to 6.4% of year-to-date revenue.  Our power, industrial and pipeline projects continue to be meaningful contributors to our success and both gas and electric utility-based MSA work provide a stable recurring, and growing, revenue base.  Our new business opportunities are spread across multiple business units, and they are not limited to just a few mega projects but multiple projects for many different customers.” 

Mr. King continued, “Our end markets remain fundamentally strong.  We continue building upon our strategy of being a leader in building America’s infrastructure driven by strong performance across our operating segments.   Our backlog remains near record levels.  We are already reducing the debt incurred from our most recent acquisition, and our balance sheet is prepared to support healthy growth in 2019.  We have made significant progress in integrating Willbros’ operations, and we are now benefitting from profitable geographic diversification.  We continue to see significant opportunities for our services in the next few quarters as we continue expanding our footprint.”

2018 THIRD QUARTER RESULTS OVERVIEW

Revenue was $908.9 million for the three months ended September 30, 2018, an increase of $300.6 million, or 49.4%, compared to the same period in 2017. The increase was primarily due to incremental revenue from acquisitions, progress on major pipeline projects on the Atlantic Coast and in West Texas, and a refinery project in Southern California. The overall increase was partially offset by the substantial completion of a petrochemical plant project in 2017. Gross profit was $106.5 million for the three months ended September 30, 2018, an increase of $36.1 million, or 51.2%, compared to the same period in 2017.  The increase was primarily due to revenue growth. Incremental gross profit in the three months ended September 30, 2018 from acquisitions totaled $19.5 million. Gross profit as a percentage of revenue increased slightly to 11.7% in the three months ended September 30, 2018 from 11.6% in the same period in 2017.

SEGMENT RESULTS

• Power, Industrial, and Engineering (“Power”) - The Power segment operates throughout the United States and Canada and specializes in a range of services that include full EPC project delivery, turnkey construction, retrofits, upgrades, repairs, outages, and maintenance for entities in the petroleum, petrochemical, water, and other industries.

• Pipeline and Underground (“Pipeline”) – The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction, pipeline maintenance, pipeline facility work, compressor stations, pump stations, metering facilities, and other pipeline related services for entities in the petroleum and petrochemical industries. 

• Utilities and Distribution (“Utilities”) – The Utilities segment operates primarily in California, the Midwest, and the Southeast regions of the United States and specializes in a range of services, including utility line installation and maintenance, gas and electric distribution, streetlight construction, substation work, and fiber optic cable installation.

• Transmission and Distribution (“Transmission”) – The Transmission segment operates primarily in the Southeastern and Gulf Coast regions of the United States and specializes in a range of services in electric and gas transmission and distribution, including comprehensive engineering, procurement, maintenance and construction, repair, and restoration of utility infrastructure.

• Civil – The Civil segment operates primarily in the Southeastern and Gulf Coast regions of the United States and specializes in highway and bridge construction, airport runway and taxiway construction, demolition, heavy earthwork, soil stabilization, mass excavation, and drainage projects.

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

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

Power, Industrial, & Engineering Segment:  Revenue increased by $27.6 million, or 17.9%, for the three months ended September 30, 2018, compared to the same period in 2017. The growth is primarily due to a refinery project in Southern California and the acquisition of Willbros, partially offset by the substantial completion of a large petrochemical plant in Louisiana in 2017. Gross profit for the three months ended September 30, 2018, increased by $13.2 million, or 70.2% compared to the same period in 2017.  The increase is primarily due to revenue growth and higher margins. In addition, gross profit increased by $6.2 million from a partial settlement in the third quarter of 2018 of a disputed receivable related to a project completed in 2014.  Gross profit as a percentage of revenue increased to 17.6% during the three ended September 30, 2018, compared to 12.2% in the same period in 2017 primarily due to a strong performance and favorable margins realized by our Carlsbad joint venture project and the partial settlement of the disputed receivable.

Pipeline & Underground Segment:  Revenue increased by $128.7 million for the three months ended September 30, 2018, compared to the same period in 2017. The increase is primarily due to major pipeline projects on the Atlantic Coast and West Texas that began in 2018 and incremental revenue from the Willbros acquisition, partially offset by the completion of a pipeline job in West Texas in 2017.  Gross profit for the three months ended September 30, 2018 increased by $12.9 million compared to the same period in 2017 primarily due to revenue growth, partially offset by lower margins. Gross profit as a percent of revenue decreased to 11.7% during the three months ended September 30, 2018, compared to 14.3% in the same period in 2017 primarily due to favorable performance on the West Texas job in 2017.

Utilities & Distribution Segment:  Revenue increased by $23.1 million, or 9.4%, for the three months ended September 30, 2018, compared to the same period in 2017 primarily due to higher revenue with a major utility customer in the Midwest. Gross profit for the three months ended September 30, 2018 decreased by $0.7 million, or 2.0%, compared to the same period in 2017. The decrease is primarily due to the mix of work associated with new Master Service Agreement (“MSA”) projects in the Midwest. Gross profit as a percent of revenue decreased to 13.1% during the three months ended September 30, 2018, compared to 14.6% in the same period in 2017 primarily due to the mix of work.

Transmission & Distribution Segment: The Transmission segment was created in connection with the acquisition of Willbros. Revenue and gross profit represent results from June 1, 2018, the acquisition date, to September 30, 2018.

Civil Segment:  Revenue for the three months ended September 30, 2018 was comparable to the same period in 2017. Significant activity included the substantial completion of a methanol plant project and a large petrochemical plant project in 2017 as well as lower Arkansas DOT volumes. The overall decrease was offset by higher Louisiana DOT volumes, an ethylene plant project that began in 2018, and increased Florida mine work. Gross profit decreased by $3.3 million for the three months ended September 30, 2018, compared to the same period in 2017 primarily due to favorable performance on the methanol plant and petrochemical plant projects in 2017. Gross profit as a percent of revenue decreased to 0.1% during the three months ended September 30, 2018, compared to 2.8%, in the same period in 2017 due primarily to the favorable performance on the methanol plant and petrochemical plant projects in 2017.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses were $51.6 million during the three months ended September 30, 2018, an increase of $9.3 million, or 21.9%, compared to the third quarter of 2017 primarily due to $9.7 million of incremental expense from the businesses we acquired during the period. SG&A expense as a percentage of revenue decreased to 5.7% compared to 7.0% for the corresponding period in 2017 due to increased revenue.

Merger and related expenses were $3.8 million for the three months ended September 30, 2018, compared to $0.2 million in the same period in 2017. The increase is primarily from the expenses associated with the acquisition of Willbros. These expenses included severance and retention bonus costs for certain employees of Willbros, professional fees paid to advisors, and exiting or impairing certain duplicate facilities.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 24.5% for the nine months ended September 30, 2018.  The rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, investment tax credits, and nondeductible components of per diem expenses.

OUTLOOK

Based on expectations of normal weather, anticipated MSA spending, the contributions of the Willbros’ businesses and anticipated progress on claims resolution, the Company estimates that for the fiscal year ending December 31, 2018, net income attributable to Primoris is expected to be between $1.50 and $1.70 per fully diluted share. 

BACKLOG

At September 30, 2018, Fixed Backlog was $1.6 billion, compared to $1.8 billion at December 31, 2017.

At September 30, 2018, MSA Backlog was $1.1 billion, compared to $775 million at December 31, 2017.  MSA Backlog represents estimated MSA revenues for the next four quarters.

At September 30, 2018, Total Backlog was $2.7 billion, compared to $2.6 billion at December 31, 2017. 

Backlog, including estimated MSA revenues, should not be considered a comprehensive indicator of future revenues.  There is a certain percentage of total revenues from projects such as cost reimbursable and time-and-materials projects that do not flow through backlog.  Any project may still be cancelled at the convenience of our customers.

CONFERENCE CALL

David King, President and Chief Executive Officer, Peter J. Moerbeek, Executive Vice President and Chief Financial Officer, and Ken Dodgen, Executive Vice President and Corporate Controller, will host a conference call today, Tuesday, November 6, 2018 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 13684431, 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. Once at the Investor Relations section, please click on "Events & Presentations”.

ABOUT PRIMORIS

Founded in 1960, Primoris, through various subsidiaries, has grown to become one of the largest construction service enterprises in the United States. Serving diverse end markets, Primoris provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater, and engineering services to major public utilities, petrochemical companies, energy companies, municipalities, 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, 2017, 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)