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Aug 6, 2019

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)

    For the three months ended June 30,
    2019   2018
            % of           % of
            Total           Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   172,170     21.8 %   $   167,001     25.7 %
Pipeline       137,243     17.4 %       90,605     14.0 %
Utilities       222,312     28.1 %       228,852     35.3 %
Transmission       135,354     17.1 %       42,454     6.5 %
Civil       122,850     15.6 %       119,875     18.5 %
Total   $   789,929     100.0 %   $   648,787     100.0 %


    For the six months ended June 30, 
    2019   2018
            % of           % of
            Total           Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   317,553     21.9 %   $   333,556     28.9 %
Pipeline       272,057     18.7 %       148,188     12.9 %
Utilities       368,518     25.4 %       395,562     34.3 %
Transmission       253,797     17.5 %       42,454     3.7 %
Civil       239,562     16.5 %       233,146     20.2 %
Total   $   1,451,487     100.0 %   $   1,152,906     100.0 %

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

    For the three months ended June 30,
    2019   2018
            % of         % of
            Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 23,167     13.5 %   $ 20,526     12.3 %
Pipeline       11,531     8.4 %       10,678     11.8 %
Utilities       30,866     13.9 %       34,564     15.1 %
Transmission     10,200     7.5 %        5,721     13.5 %
Civil       4,767     3.9 %       (70 )   (0.1 %)
Total   $   80,531     10.2 %   $   71,419     11.0 %


    For the six months ended June 30, 
    2019   2018
            % of           % of
            Segment           Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $   43,365     13.7 %   $   44,597     13.4 %
Pipeline       26,547     9.8 %       18,569     12.5 %
Utilities       39,107     10.6 %       43,615     11.0 %
Transmission       16,828     6.6 %       5,721       13.5 %
Civil       7,144     3.0 %       3,477     1.5 %
Total   $   132,991     9.2 %   $   115,979     10.1 %

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

                          Expected Next Four
                          Quarters Total
  Backlog at June 30, 2019 (in millions)   Backlog Revenue
Segment Fixed Backlog   MSA Backlog   Total Backlog   Recognition
Power $   380     $   119     $   499       78 %
Pipeline     784         82         866       32 %
Utilities     49         734         783       100 %
Transmission     28         445         473       100 %
Civil     574         2         576       71 %
Total $   1,815     $   1,382     $   3,197       73 %

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.


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



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

  Three Months Ended   Six Months Ended
  June 30,    June 30, 
  2019   2018   2019   2018
Revenue $   789,929     $   648,787     $   1,451,487     $   1,152,906  
Cost of revenue     709,398         577,368         1,318,496         1,036,927  
Gross profit     80,531         71,419         132,991         115,979  
Selling, general and administrative expenses     48,719         43,489         91,650          80,445  
Merger and related costs     —         7,668         —         9,363  
Operating income     31,812         20,262         41,341         26,171  
Other income (expense):                      
Foreign exchange (loss) gain     (403 )       1,256         (588 )       1,513  
Other income (expense), net     177         (771 )       (193 )       (783 )
Interest income     219         340         568         612  
Interest expense     (6,716 )       (3,191 )       (12,308 )       (5,189 )
Income before provision for income taxes     25,089         17,896         28,820         22,324  
Provision for income taxes     (7,265 )       (3,705 )       (8,060 )       (3,917 )
Net income     17,824         14,191          20,760         18,407  
                       
Less net income attributable to noncontrolling interests     (37 )       (2,476 )       (1,026 )       (6,004 )
                       
Net income attributable to Primoris $    17,787     $   11,715     $   19,734     $   12,403  
                       
Dividends per common share $   0.060     $   0.060     $   0.120     $   0.120  
                       
Earnings per share:                      
Basic $   0.35     $   0.23     $   0.39     $   0.24  
Diluted $   0.35     $   0.23     $   0.39     $   0.24  
Weighted average common shares outstanding:                      
Basic     50,912         51,531         50,841         51,505  
Diluted     51,228         51,793         51,208         51,770  
                               

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)

  June 30,    December 31, 
  2019   2018
ASSETS          
Current assets:          
Cash and cash equivalents $   54,114     $   151,063  
Accounts receivable, net     472,946         372,695  
Contract assets     415,142         364,245  
Prepaid expenses and other current assets     30,142         36,444  
Total current assets     972,344         924,447  
Property and equipment, net     377,147         375,884  
Operating lease assets     179,000         —  
Deferred tax assets     903         1,457  
Intangible assets, net     75,516         81,198  
Goodwill     215,103         206,159  
Other long-term assets     5,198         5,002  
Total assets $   1,825,211     $   1,594,147  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable $   218,263     $   249,217  
Contract liabilities     197,785         189,539  
Accrued liabilities     203,235          117,527  
Dividends payable     3,058         3,043  
Current portion of long-term debt     64,651         62,488  
Total current liabilities     686,992         621,814  
Long-term debt, net of current portion     347,397         305,669  
Noncurrent operating lease liabilities, net of current portion     124,894         —  
Deferred tax liabilities      3,610         8,166  
Other long-term liabilities     41,453         51,515  
Total liabilities     1,204,346         987,164  
Commitments and contingencies          
Stockholders’ equity          
Common stock     5         5  
Additional paid-in capital     146,064         144,048  
Retained earnings     474,684         461,075  
Accumulated other comprehensive loss     (172 )       (908 )
Noncontrolling interest     284         2,763  
Total stockholders’ equity     620,865         606,983  
Total liabilities and stockholders’ equity $   1,825,211     $   1,594,147  
               

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

  Six Months Ended
  June 30,
  2019   2018
Cash flows from operating activities:          
Net income $   20,760     $   18,407  
Adjustments to reconcile net income to net cash used in operating activities (net of effect of acquisitions):          
Depreciation     37,710         30,014  
Amortization of intangible assets     5,682         5,161  
Stock-based compensation expense     858         430  
Gain on sale of property and equipment     (4,713 )       (1,580 )
Other non-cash items     160          68  
Changes in assets and liabilities:          
Accounts receivable     (97,964 )       18,331  
Contract assets     (51,048 )       (64,074 )
Other current assets     5,309         (6,036 )
Other long-term assets     (137 )       (499 )
Accounts payable     (31,405 )       2,115  
Contract liabilities     4,205         (18,220 )
Operating lease assets and liabilities, net     (918 )       —  
Accrued liabilities     13,481         13,647  
Other long-term liabilities     1,496         1,520  
Net cash used in operating activities     (96,524 )       (716 )
Cash flows from investing activities:          
Purchase of property and equipment     (56,907 )       (46,107 )
Issuance of a note receivable     —         (15,000 )
Proceeds from a note receivable     —         15,000  
Proceeds from sale of property and equipment     21,196         5,811  
Cash paid for acquisitions, net of cash and restricted cash acquired     —         (111,030 )
Net cash used in investing activities     (35,711 )       (151,326 )
Cash flows from financing activities:          
Borrowings under revolving line of credit     140,000         170,000  
Payments on revolving line of credit     (85,000 )       —  
Proceeds from issuance of long-term debt     23,105         19,467  
Repayment of long-term debt     (34,320 )       (28,001 )
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 )       —  
Cash distribution to noncontrolling interest holders     (3,505 )       —  
Dividends paid     (6,094 )       (6,179 )
Other     (39 )        (47 )
Net cash provided by financing activities     34,432         156,738  
Effect of exchange rate changes on cash and cash equivalents     854         (185 )
Net change in cash and cash equivalents     (96,949 )       4,511  
Cash and cash equivalents at beginning of the period     151,063         170,385  
Cash and cash equivalents at end of the period $   54,114     $   174,896  
               

PSC_Primoris.jpg

Source: Primoris Services Corporation