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Feb 25, 2020

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)

    For the three months ended December 31
    2019     2018  
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $ 211,138   26.7 %   $ 178,670   20.3 %
Pipeline     99,509   12.6 %     229,676   26.2 %
Utilities     236,425   30.0 %     237,558   27.1 %
Transmission     114,721   14.5 %     122,769   14.0 %
Civil     127,985   16.2 %     108,997   12.4 %
Total   $ 789,778   100.0 %   $ 877,670   100.0 %

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

    For the three months ended December 31
    2019     2018  
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 17,229   8.2 %   $ 33,115   18.5 %
Pipeline     15,346   15.4 %     23,034   10.0 %
Utilities     28,646   12.1 %     32,862   13.8 %
Transmission     916   0.8 %     12,225   10.0 %
Civil     27,377   21.4 %     2,017   1.9 %
Total   $ 89,514   11.3 %   $ 103,253   11.8 %

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)

    For the year ended December 31
    2019     2018  
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $ 729,348   23.5 %   $ 694,048   23.6 %
Pipeline     505,156   16.3 %     590,937   20.1 %
Utilities     886,504   28.5 %     902,772   30.7 %
Transmission     497,302   16.0 %     286,749   9.8 %
Civil     488,019   15.7 %     464,972   15.8 %
Total   $ 3,106,329   100.0 %   $ 2,939,478   100.0 %

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

    For the year ended December 31
    2019     2018  
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 76,119   10.4 %   $ 109,789   15.8 %
Pipeline     61,550   12.2 %     66,602   11.3 %
Utilities     116,645   13.2 %     111,825   12.4 %
Transmission     22,580   4.5 %     31,904   11.1 %
Civil     54,032   11.1 %     5,617   1.2 %
Total   $ 330,926   10.7 %   $ 325,737   11.1 %


BACKLOG

                    Expected Next Four
                    Quarters Total
  Backlog at December 31, 2019 (in millions)   Backlog Revenue
Segment Fixed Backlog   MSA Backlog   Total Backlog   Recognition
Power $ 401   $ 114   $ 515     88 %
Pipeline   743     119     862     42 %
Utilities   37     737     774     100 %
Transmission   23     444     467     100 %
Civil   555     4     559     62 %
Total $ 1,759   $ 1,418   $ 3,177     76 %

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.

Company Contact    
Ken Dodgen   Kate Tholking 
Executive Vice President, Chief Financial Officer   Vice President, Investor Relations
(214) 740-5608   (214) 740-5615
kdodgen@prim.com   ktholking@prim.com


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)
(Unaudited)

               
    Three Months Ended   Year Ended
    December 31   December 31
    2019     2018     2019     2018  
Revenue   $ 789,778     $ 877,670     $ 3,106,329     $ 2,939,478  
Cost of revenue     700,264       774,417       2,775,403       2,613,741  
Gross profit     89,514       103,253       330,926       325,737  
Selling, general and administrative expenses     48,574       49,957       190,051       182,006  
Merger and related costs           70             13,260  
Operating income     40,940       53,226       140,875       130,471  
Other income (expense):                        
Foreign exchange (loss) gain     34       (756 )     (690 )     688  
Other income (expense), net     (13 )     (57 )     (3,134 )     (808 )
Interest income     345       209       955       1,753  
Interest expense     (2,603 )     (7,109 )     (20,097 )     (18,746 )
Income before provision for income taxes     38,703       45,513       117,909       113,358  
Provision for income taxes     (11,192 )     (11,132 )     (33,812 )     (25,765 )
Net income     27,511       34,381       84,097       87,593  
                         
Less net income attributable to noncontrolling interests     (566 )     (2,014 )     (1,770 )     (10,132 )
                         
Net income attributable to Primoris   $ 26,945     $ 32,367     $ 82,327     $ 77,461  
                         
Dividends per common share   $ 0.06     $ 0.06     $ 0.24     $ 0.24  
                         
Earnings per share:                        
Basic   $ 0.53     $ 0.63     $ 1.62     $ 1.51  
Diluted   $ 0.53     $ 0.63     $ 1.61     $ 1.50  
Weighted average common shares outstanding:                        
Basic     50,478       50,993       50,784       51,350  
Diluted     50,711       51,397       51,084       51,670  


CONDENSED CONSOLIDATED BALANCE SHEETS

 (In Thousands)
(Unaudited)

               
    December 31   December 31
    2019   2018  
ASSETS              
Current assets:              
Cash and cash equivalents   $ 120,286     $ 151,063  
Accounts receivable, net     404,911       372,695  
Contract assets     344,806       364,245  
Prepaid expenses and other current assets     42,704       36,444  
Total current assets     912,707       924,447  
Property and equipment, net     375,888       375,884  
Operating lease assets     242,385        
Deferred tax assets     1,100       1,457  
Intangible assets, net     69,829       81,198  
Goodwill     215,103       206,159  
Other long-term assets     13,453       5,002  
Total assets   $ 1,830,465     $ 1,594,147  
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable   $ 235,972     $ 249,217  
Contract liabilities     192,397       189,539  
Accrued liabilities     183,501       117,527  
Dividends payable     2,919       3,043  
Current portion of long-term debt     55,659       62,488  
Total current liabilities     670,448       621,814  
Long-term debt, net of current portion     295,642       305,669  
Noncurrent operating lease liabilities, net of current portion     171,225        
Deferred tax liabilities     17,819       8,166  
Other long-term liabilities     45,801       51,515  
Total liabilities     1,200,935       987,164  
Commitments and contingencies              
Stockholders’ equity              
Common stock     5       5  
Additional paid-in capital     97,130       144,048  
Retained earnings     531,291       461,075  
Accumulated other comprehensive income (loss)     76       (908 )
Noncontrolling interest     1,028       2,763  
Total stockholders’ equity     629,530       606,983  
Total liabilities and stockholders’ equity   $ 1,830,465     $ 1,594,147  


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)
(Unaudited)

     
    Year Ended
    December 31,
    2019     2018  
Cash flows from operating activities:            
Net income   $ 84,097     $ 87,593  
Adjustments to reconcile net income to net cash provided by operating activities (net of effect of acquisitions):            
Depreciation     74,031       67,948  
Amortization of intangible assets     11,369       11,302  
Stock-based compensation expense     1,579       1,253  
Gain on sale of property and equipment     (11,947 )     (3,556 )
Other non-cash items     320       275  
Changes in assets and liabilities:            
Accounts receivable     (28,240 )     20,912  
Contract assets     19,677       (67,593 )
Other current assets     (7,248 )     (2,278 )
Net deferred tax liabilities (assets)     13,947       17,155  
Other long-term assets     1,249       244  
Accounts payable     (13,894 )     32,323  
Contract liabilities     (1,221 )     (43,801 )
Operating lease assets and liabilities, net     (3,191 )      
Accrued liabilities     (22,924 )     5,933  
Other long-term liabilities     377       (895 )
Net cash provided by operating activities     117,981       126,815  
Cash flows from investing activities:            
Purchase of property and equipment     (94,494 )     (110,189 )
Issuance of a note receivable           (15,000 )
Proceeds from a note receivable           15,000  
Proceeds from sale of property and equipment     28,621       11,657  
Cash paid for acquisitions, net of cash and restricted cash acquired           (110,620 )
Net cash used in investing activities     (65,873 )     (209,152 )
Cash flows from financing activities:            
Borrowings under revolving line of credit     212,880       190,000  
Payments on revolving line of credit     (212,880 )     (190,000 )
Proceeds from issuance of long-term debt     55,008       255,967  
Repayment of long-term debt     (72,077 )     (145,726 )
Proceeds from issuance of common stock purchased under a long-term incentive plan     1,804       1,498  
Payment of taxes on conversion of Restricted Stock Units     (1,519 )      
Payment of contingent earnout liability           (1,200 )
Cash distribution to noncontrolling interest holders     (3,505 )     (13,084 )
Repurchase of common stock from a related party     (50,000 )      
Repurchase of common stock           (20,000 )
Dividends paid     (12,211 )     (12,343 )
Other     (784 )     (1,173 )
Net cash (used in) provided by financing activities     (83,284 )     63,939  
Effect of exchange rate changes on cash and cash equivalents     399       (924 )
Net change in cash and cash equivalents     (30,777 )     (19,322 )
Cash and cash equivalents at beginning of the year     151,063       170,385  
Cash and cash equivalents at end of the year   $ 120,286     $ 151,063  

 

PSC_Primoris.jpg

Source: Primoris Services Corporation