Primoris Services Corporation Announces 2019 Fourth Quarter and Full Year Financial Results

• Board of Directors Declares $0.06 Per Share Cash Dividend
  
• Authorizes $25 Million Share Repurchase Program

2019 Full Year Financial Highlights

• Record 2019 revenue of $3.1 billion, compared to $2.9 billion in 2018
• Record 2019 net income attributable to Primoris of $82.3 million, or $1.61 per fully diluted share, compared to $77.5 million, or $1.50 per fully diluted share, in 2018
• 2019 cash flows from operations of $118.0 million
• Total Backlog of $3.2 billion at December 31, 2019, compared to $2.8 billion at December 31, 2018
  • Record MSA Backlog of $1.4 billion at December 31, 2019
• Cash balance of $120.3 million at December 31, 2019

2019 Q4 Financial Highlights

• 2019 Q4 revenue of $789.8 million, compared to $877.7 million in 2018 Q4
• 2019 Q4 net income attributable to Primoris of $26.9 million, or $0.53 per fully diluted share, compared to $32.4 million, or $0.63 per fully diluted share, in 2018 Q4
• 2019 Q4 cash flows from operations of $158.1 million

DALLAS, Feb. 25, 2020 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its fourth quarter and year ended December 31, 2019.

The Company also announced that on February 21, 2020 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 31, 2020, payable on or about April 15, 2020. 

Tom McCormick, President and Chief Executive Officer of Primoris, commented, “I’m very pleased with Primoris’ finish to 2019, marking our first fiscal year with revenue above $3 billion and revenue from Master Service Agreements (“MSA’s”) accounting for an impressive 44% of our total 2019 revenue, all in line with our Strategic Plan. We saw strong execution on projects across a range of end markets, from our solar project in West Texas, to pipeline field services projects and our Canadian operations. We also continue to see improving performance in the Civil segment. Our total backlog remains strong at $3.2 billion, with a healthy mix of MSA and project-based work. As expected, our fourth quarter cash flow was impressive, allowing us to complete our entire $50 million share repurchase and still end the year with a strong cash balance and a healthy balance sheet.”

Mr. McCormick continued, “As we look to 2020, we continue to be excited about the opportunities for both gas and electric utility work. While acknowledging that our 2019 results in the electric utility market did not meet our initial expectations, we believe that we have addressed the issues and we enter 2020 with our electric utility business ready for a more successful year. We also remain very positive on pipeline opportunities in 2020. Primoris has large pipeline projects already underway, and we continue to see active demand and new awards for both our pipeline and field services work. The bidding activity remains extremely strong. With the heavy civil claims resolution largely behind us, the Civil segment is poised to return to our targeted margin range and be a positive contributor in 2020. And finally, the growth potential in the renewables market is immense. Our team has built an outstanding resume of successful, large-scale solar projects and is poised for continued growth. The opportunities for our recurring, service-oriented revenue and for targeted projects lay the foundation for 2020 to be another successful year for Primoris.”

2019 FOURTH QUARTER RESULTS OVERVIEW

Revenue for the fourth quarter 2019 was $789.8 million, compared to $877.7 million in the fourth quarter 2018. The decrease was primarily due to lower revenue in the Pipeline segment, partially offset by increased revenue in the Power and Civil segments. Gross profit in the fourth quarter 2019 was $89.5 million, compared to $103.3 million in the fourth quarter 2018. The decrease was primarily due to lower gross profit in the Power and Transmission segments, partially offset by an increase in the Civil segment. Gross profit as a percentage of revenue was 11.3% in the fourth quarter 2019, compared to 11.8% in the fourth quarter 2018.

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

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

Power, Industrial, & Engineering Segment (“Power”): Revenue in the Power segment increased by $32.5 million in the fourth quarter 2019, compared to the same period in 2018. The increase in revenue was primarily due to increases from a major solar project in West Texas and from the Company’s Canadian operations, partially offset by the 2018 substantial completion of our Carlsbad joint venture project and refinery projects in Southern California and the collection on a disputed receivable in the fourth quarter 2018 related to a major project completed in 2014. Segment gross profit decreased by $15.9 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to the 2018 collection of the disputed receivable and the completion of the Carlsbad joint venture, as well as higher costs associated with two industrial projects in the Gulf Coast. The decline in gross profit was partially offset by higher gross profit on our solar project. Gross profit as a percentage of revenue decreased to 8.2% in the fourth quarter 2019, compared to 18.5% in the same period in 2018, primarily due to the reasons noted above. As previously stated, we did not expect the profit margins for the Power segment to remain at the elevated levels seen in the fourth quarter 2018.

Pipeline & Underground Segment (“Pipeline”): Revenue in the Pipeline segment decreased by $130.2 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to reduced activity on major pipeline projects in the Mid-Atlantic and West Texas that began in 2018. Segment gross profit decreased by $7.7 million in the fourth quarter 2019, compared to the same period in 2018, primarily as the result of the decreased revenue, partially offset by higher margins. Gross profit as a percentage of revenue increased to 15.4% in the fourth quarter 2019, compared to 10.0% in the same period in 2018. The increase in gross profit as a percentage of revenue is primarily due to the favorable impact from closeout of pipeline projects and favorable payment terms on a project in the Mid-Atlantic. 

Utilities & Distribution Segment (“Utilities”): Revenue in the Utilities segment decreased $1.1 million in the fourth quarter 2019 compared to the same period in 2018, primarily due to decreased activity with two major utility customers in California, mostly offset by increased activity with utility customers in Texas and the Midwest. Segment gross profit decreased by $4.2 million in the fourth quarter 2019, compared to the same period in 2018, primarily as a result of extreme weather conditions experienced in certain regions in the fourth quarter 2019. Gross profit as a percentage of revenue decreased to 12.0% in the fourth quarter 2019, compared to 13.8% in the same period in 2018, primarily due to the reasons noted above.

Transmission & Distribution Segment (“Transmission”): Revenue in the Transmission segment decreased by $8.0 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to a major project in the Southeast that completed during 2018. Segment gross profit decreased by $11.3 million in the fourth quarter 2019, compared to the same period in 2018. The decrease in gross profit was primarily due to higher equipment and labor costs in the fourth quarter 2019, as well as the strong performance on the major project in the Southeast and Hurricane Michael storm work in the fourth quarter 2018. Gross profit as a percentage of revenue decreased to 0.8% in the fourth quarter 2019, compared to 10.0% in the same period in 2018, primarily due to the reasons noted above.

Civil Segment (“Civil”): Revenue in the Civil segment increased by $19.0 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to a liquified natural gas plant project and a methanol plant project that both began in 2019, and higher Louisiana Department of Transportation & Development volumes. The overall increase was partially offset by the substantial completion of an ethylene plant project in the second quarter of 2019. Segment gross profit increased by $25.4 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to increases in expected claims recovery on the two remaining Belton corridor projects and increased revenue on higher margin industrial projects. Gross profit as a percentage of revenue increased to 21.4% in the fourth quarter 2019, compared to 1.9% in the same period in 2018, primarily due to the reasons noted above.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses were $48.6 million during the fourth quarter 2019, a decrease of $1.4 million, compared to the fourth quarter 2018. SG&A expense as a percentage of revenue increased to 6.2% compared to 5.7% for the corresponding period in 2018 due to decreased revenue.

Interest expense for the three months ended December 31, 2019, decreased by $4.5 million compared to the same period in 2018, due primarily to a $1.3 million unrealized gain on the change in the fair value of our interest rate swap agreement during the three months ended December 31, 2019 compared to a $2.8 million unrealized loss during the same period in 2018.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 29.3% for the three months ended December 31, 2019. The rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes and nondeductible components of per diem expenses.

2019 FULL YEAR RESULTS OVERVIEW

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

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

BACKLOG

At December 31, 2019, Fixed Backlog was $1.76 billion, compared to $1.48 billion at December 31, 2018.

At December 31, 2019, MSA Backlog was $1.42 billion, compared to $1.28 billion at December 31, 2018. During 2019, approximately $1.36 billion of revenue was recognized from MSA projects, a 20.2% increase over 2018 MSA revenue. MSA Backlog represents estimated MSA revenue for the next four quarters.

Total Backlog at December 31, 2019 was $3.18 billion, compared to $2.76 billion at December 31, 2018. 

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

SHARE REPURCHASE PLAN

On October 31, 2019, the Company’s Board of Directors authorized a share repurchase program for up to $50.0 million of our outstanding common stock. As of December 31, 2019, we had repurchased all $50.0 million of common stock authorized under the share repurchase program.

The Company’s Board of Directors has authorized a new share repurchase program under which Primoris may, from time to time and depending on market conditions, share price and other factors, acquire shares of its common stock on the open market or in privately negotiated transactions up to an aggregate purchase price of $25 million. The share repurchase program expires December 31, 2020.

OUTLOOK

Based on current backlog, the level of bidding activity, and an anticipated corporate tax rate of 29%, the Company estimates that for the fiscal year ending December 31, 2020, net income attributable to Primoris is expected to be between $1.70 and $1.90 per fully diluted share. This estimate excludes the potential positive impact of a third quarter 2020 remobilization date for a major pipeline project in backlog.

CONFERENCE CALL

Tom McCormick, President and Chief Executive Officer, and Ken Dodgen, Executive Vice President and Chief Financial Officer will host a conference call, Tuesday, February 25, 2020 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 13699137, 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 leading providers of specialty contracting services operating mainly in the United States and Canada. Primoris provides a wide range of specialty construction services, fabrication, maintenance, replacement, and engineering services to a diversified base of 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, 2019, 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)