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Nov 4, 2019

Primoris Services Corporation Announces 2019 Third Quarter Financial Results

  • Board of Directors Declares $0.06 Per Share Cash Dividend
  • Authorizes $50 Million Share Repurchase Plan

Financial Highlights

  • 2019 Q3 revenue of $865.1 million, compared to $908.9 million in 2018 Q3
  • Record 2019 Q3 net income attributable to Primoris of $35.6 million, or $0.70 per fully diluted share
    • Compared to $32.7 million, or $0.63 per fully diluted share, in 2018 Q3, a 9.0% increase
  • 2019 Q3 SG&A 5.8% of revenue, compared to 2018 Q3 5.7% of revenue
  • Total Backlog of $3.2 billion at September 30, 2019, a 16.3% increase over December 31, 2018
  • Successful resolution of various claims in the Civil segment
  • Strong Cash Flows from Operations
  • Reaffirmed 2019 EPS Guidance

DALLAS, Nov. 04, 2019 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its third quarter ended September 30, 2019.

The Company also announced that on October 31, 2019 its Board of Directors authorized a $50 million share repurchase plan and declared a $0.06 per share cash dividend to stockholders of record on December 31, 2019, payable on or about January 15, 2020. 

David King, Executive Chairman and Chief Executive Officer of Primoris, commented, “I am pleased to say that Primoris had another great quarter, with strong project execution and continued cost control leading to a record net income.  The lack of major storm repair work and project delays created a slight headwind compared to last year, but it was more than offset by benefits from the partial resolution of outstanding claims.  Over the past year we have seen our backlog grow 19%, growing both our Fixed and MSA backlog, thanks to the combined efforts of our dedicated sales and operations teams.  As expected, we saw a significant positive swing in our operating cash flow in the third quarter, allowing us to continue reducing our debt levels while maintaining a robust capital expenditure program, actively evaluating additional acquisition opportunities, and initiating a share repurchase program.”

Mr. King continued, “Primoris’ diverse end markets remain strong.  The forces driving demand for our utility work are creating long-term opportunities to improve our country’s electric and natural gas infrastructure.  The bidding activity in our renewables, petrochemical, and LNG end markets indicate strength in those markets as we head into 2020, and the pipeline market continues to provide multiple avenues for growth, notwithstanding individual project delays.  We expect our momentum to continue in the fourth quarter and well into 2020, delivering positive results for our customers and shareholders.”

2019 THIRD QUARTER RESULTS OVERVIEW

Revenue was $865.1 million for the three months ended September 30, 2019, a decrease of $43.8 million, or 4.8%, compared to the same period in 2018. The decrease was primarily due to lower revenue in our Pipeline segment, partially offset by growth in our Power and Utilities segments.  Gross profit was $108.4 million for the three months ended September 30, 2019, an increase of $1.9 million, or 1.8%, compared to the same period in 2018.  The increase was primarily due to increases in our Civil and Utilities segments, partially offset by lower gross profit in our Power, Transmission, and Pipeline segments. Gross profit as a percentage of revenue increased to 12.5% in the three months ended September 30, 2019 from 11.7% in the same period in 2018 due primarily to a favorable impact from partial claims resolution in our Civil segment associated with the Belton area projects, partially offset by higher costs associated with two industrial projects in our Power segment.

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

    For the three months ended September 30,
    2019   2018
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $ 200,657   23.2 %   $ 181,822   20.0 %
Pipeline     133,590   15.4 %     213,073   23.4 %
Utilities     281,561   32.6 %     269,652   29.7 %
Transmission     128,784   14.9 %     121,526   13.4 %
Civil     120,472   13.9 %     122,829   13.5 %
Total   $ 865,064   100.0 %   $ 908,902   100.0 %


    For the nine months ended September 30, 
    2019   2018
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $ 518,210   22.4 %   $ 515,378   25.0 %
Pipeline     405,647   17.5 %     361,261   17.5 %
Utilities     650,079   28.1 %     665,214   32.3 %
Transmission     382,581   16.5 %     163,980   7.9 %
Civil     360,034   15.5 %     355,975   17.3 %
Total   $ 2,316,551   100.0 %   $ 2,061,808   100.0 %


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

    For the three months ended September 30,
    2019   2018
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 15,525   7.7 %   $ 32,077   17.6 %
Pipeline     19,657   14.7 %     24,999   11.7 %
Utilities     48,892   17.4 %     35,348   13.1 %
Transmission     4,836   3.8 %     13,958   11.5 %
Civil     19,511   16.2 %     123   0.1 %
Total   $ 108,421   12.5 %   $ 106,505   11.7 %


    For the nine months ended September 30, 
    2019   2018
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 58,890   11.4 %   $ 76,674   14.9 %
Pipeline     46,204   11.4 %     43,568   12.1 %
Utilities     87,999   13.5 %     78,963   11.9 %
Transmission     21,664   5.7 %     19,679   12.0 %
Civil     26,655   7.4 %     3,600   1.0 %
Total   $ 241,412   10.4 %   $ 222,484   10.8 %

Power, Industrial, & Engineering Segment (“Power”):  Revenue increased by $18.8 million, or 10.4%, for the three months ended September 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 a carbon monoxide and hydrogen plant project that began in 2019. The overall increase was partially offset by the substantial completion of refinery projects in Southern California and our Carlsbad joint venture project in 2018.  Gross profit for the three months ended September 30, 2019, decreased by $16.6 million, or 51.6% compared to the same period in 2018.  The decrease is primarily due to a partial settlement in the third quarter of 2018 of a disputed receivable and higher costs associated with two industrial projects in the third quarter of 2019. Gross profit as a percentage of revenue decreased to 7.7% during the three months ended September 30, 2019, compared to 17.6% in the same period in 2018, primarily due to the reasons above and a strong performance and favorable margins realized by our Carlsbad joint venture project in 2018.

Pipeline & Underground Segment (“Pipeline”):  Revenue decreased by $79.5 million, or 37.3%, for the three months ended September 30, 2019, compared to the same period in 2018. The decrease is primarily due to the substantial completion of a major pipeline project in West Texas in the second quarter of 2019 and reduced activity on a major pipeline project in the Mid-Atlantic. These amounts were partially offset by a pipeline project in the Pacific Northwest that began in 2019.  Gross profit for the three months ended September 30, 2019 decreased by $5.3 million, or 21.4%, compared to the same period in 2018 due to lower revenue, partially offset by higher margins. Gross profit as a percentage of revenue increased to 14.7% during the three months ended September 30, 2019, compared to 11.7% in the same period in 2018, primarily due to the favorable impact from the closeout of multiple pipeline projects in 2019.
   
Utilities & Distribution Segment (“Utilities”):  Revenue increased by $11.9 million, or 4.4%, for the three months ended September 30, 2019, compared to the same period in 2018, primarily due to increased activity with two major utility customers in the Midwest and a utility customer in Texas, partially offset by decreased activity with a major utility customer in California.  Gross profit for the three months ended September 30, 2019, increased by $13.5 million, or 38.3%, compared to the same period in 2018, primarily due to higher revenue and margins. Gross profit as a percent of revenue increased to 17.4% during the three months ended September 30, 2019, compared to 13.1%, in the same period in 2018, primarily due to an increase in higher margin projects in 2019.

Transmission & Distribution Segment (“Transmission”): The Transmission segment was created in connection with the acquisition of Willbros in the second quarter of 2018. Revenue increased by $7.3 million, or 6.0%, for the three months ended September 30, 2019, compared to the same period in 2018 primarily due to increased activity with a major utility customer in the Midwest and Southeast, partially offset by the substantial completion of a major project in the Southeast in 2018.  Gross profit for the three months ended September 30, 2019, decreased by $9.1 million, or 65.4%, due primarily to lower margins, partially offset by higher revenue.  Gross profit as a percentage of revenue decreased to 3.8% during the three months ended September 30, 2019, compared to 11.5% in the same period in 2018, primarily due to a reduction in higher margin storm work, upfront costs to expand our operations, and relocation costs to move crews in 2019, along with strong performance on a major project in the Southeast in 2018.

Civil Segment (“Civil”):  Revenue decreased by $2.4 million, or 1.9%, for the three months ended September 30, 2019, compared to the same period in 2018. The decrease is primarily due to the substantial completion of an ethylene plant project in the second quarter of 2019 and lower Texas Department of Transportation volumes. These amounts are partially offset by a methanol plant project and a project with a major refining customer that both began in 2019 and higher Louisiana Department of Transportation volumes.  Gross profit increased by $19.4 million for the three months ended September 30, 2019, compared to the same period in 2018, primarily due to a favorable impact from the resolution of claims associated with three of the Belton area projects in 2019 and increased profit on Louisiana DOT projects. Gross profit as a percentage of revenue increased to 16.2% during the three months ended September 30, 2019, compared to 0.1% in the same period in 2018, due primarily to the reasons noted above.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses were $49.8 million during the three months ended September 30, 2019, a decrease of $1.8 million, or 3.4%, compared to 2018 primarily due to a $2.0 million decrease in compensation related expenses. SG&A expense as a percentage of revenue was consistent with the same period in 2018.

Interest expense for the three months ended September 30, 2019, decreased compared to the same period in 2018, due primarily to $2.3 million of additional interest during the three months ended September 30, 2018, related to the early extinguishment of senior notes, partially offset by a $0.6 million unrealized loss on the change in the fair value of our interest rate swap agreement during the three months ended September 30, 2019.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 29.0% for the nine months ended September 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 September 30, 2019 (in millions)   Backlog Revenue
Segment Fixed Backlog   MSA Backlog   Total Backlog   Recognition
Power $ 400   $ 112   $ 512     89 %
Pipeline   712     142     854     67 %
Utilities   57     708     765     100 %
Transmission   24     446     470     100 %
Civil   604     6     610     67 %
Total $ 1,797   $ 1,414   $ 3,211     83 %


At September 30, 2019, Fixed Backlog was $1.80 billion, compared to $1.48 billion at December 31, 2018.

At September 30, 2019, MSA Backlog was $1.41 billion, compared to $1.28 billion at December 31, 2018.  During the third quarter of 2019, approximately $367 million of revenue was recognized from MSA projects.  MSA Backlog represents estimated MSA revenue for the next four quarters.

Total Backlog at September 30, 2019 was $3.21 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

The Company’s Board of Directors has authorized a 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 $50 million.  The share repurchase program expires December 31, 2020.

CONFERENCE CALL

David King, Chairman and Chief Executive Officer; Tom McCormick, President; and Ken Dodgen, Executive Vice President and Chief Financial Officer, will host a conference call, Monday, November 4, 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 13695817, 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   Nine Months Ended
    September 30,    September 30, 
    2019     2018     2019     2018  
Revenue   $ 865,064     $ 908,902     $ 2,316,551     $ 2,061,808  
Cost of revenue     756,643       802,397       2,075,139       1,839,324  
Gross profit     108,421       106,505       241,412       222,484  
Selling, general and administrative expenses     49,827       51,604       141,477       132,049  
Merger and related costs           3,827             13,190  
Operating income     58,594       51,074       99,935       77,245  
Other income (expense):                        
Foreign exchange (loss) gain     (136 )     (69 )     (724 )     1,444  
Other income (expense), net     (2,928 )     32       (3,121 )     (751 )
Interest income     42       932       610       1,544  
Interest expense     (5,186 )     (6,448 )     (17,494 )     (11,637 )
Income before provision for income taxes     50,386       45,521       79,206       67,845  
Provision for income taxes     (14,560 )     (10,716 )     (22,620 )     (14,633 )
Net income     35,826       34,805       56,586       53,212  
                         
Less net income attributable to noncontrolling interests     (178 )     (2,114 )     (1,204 )     (8,118 )
                         
Net income attributable to Primoris   $ 35,648     $ 32,691     $ 55,382     $ 45,094  
                         
Dividends per common share   $ 0.06     $ 0.06     $ 0.18     $ 0.18  
                         
Earnings per share:                        
Basic   $ 0.70     $ 0.64     $ 1.09     $ 0.88  
Diluted   $ 0.70     $ 0.63     $ 1.08     $ 0.87  
Weighted average common shares outstanding:                        
Basic     50,976       51,403       50,887       51,471  
Diluted     51,215       51,735       51,210       51,760  
                         


CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)

             
    September 30,   December 31, 
    2019   2018
ASSETS            
Current assets:            
Cash and cash equivalents   $ 43,837     $ 151,063  
Accounts receivable, net     551,543       372,695  
Contract assets     331,910       364,245  
Prepaid expenses and other current assets     34,222       36,444  
Total current assets     961,512       924,447  
Property and equipment, net     379,739       375,884  
Operating lease assets     228,100        
Deferred tax assets     888       1,457  
Intangible assets, net     72,581       81,198  
Goodwill     215,103       206,159  
Other long-term assets     11,046       5,002  
Total assets   $ 1,868,969     $ 1,594,147  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable   $ 219,792     $ 249,217  
Contract liabilities     189,664       189,539  
Accrued liabilities     219,472       117,527  
Dividends payable     3,059       3,043  
Current portion of long-term debt     60,104       62,488  
Total current liabilities     692,091       621,814  
Long-term debt, net of current portion     307,397       305,669  
Noncurrent operating lease liabilities, net of current portion     162,418        
Deferred tax liabilities     3,611       8,166  
Other long-term liabilities     49,289       51,515  
Total liabilities     1,214,806       987,164  
Commitments and contingencies            
Stockholders’ equity            
Common stock     5       5  
Additional paid-in capital     146,765       144,048  
Retained earnings     507,269       461,075  
Accumulated other comprehensive loss     (338 )     (908 )
Noncontrolling interest     462       2,763  
Total stockholders’ equity     654,163       606,983  
Total liabilities and stockholders’ equity   $ 1,868,969     $ 1,594,147  
             


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

     
    Nine Months Ended
    September 30,
    2019   2018
Cash flows from operating activities:            
Net income   $ 56,586     $ 53,212  
Adjustments to reconcile net income to net cash used in operating activities (net of effect of acquisitions):            
Depreciation     55,936       47,708  
Amortization of intangible assets     8,617       8,287  
Stock-based compensation expense     1,218       748  
Gain on sale of property and equipment     (7,017 )     (3,212 )
Other non-cash items     240       180  
Changes in assets and liabilities:            
Accounts receivable     (177,942 )     (78,819 )
Contract assets     32,274       (85,817 )
Other current assets     1,219       11,061  
Other long-term assets     167       (957 )
Accounts payable     (29,757 )     24,099  
Contract liabilities     (3,915 )     (11,061 )
Operating lease assets and liabilities, net     (1,489 )      
Accrued liabilities     17,662       16,400  
Other long-term liabilities     6,085       5,298  
Net cash used in operating activities     (40,116 )     (12,873 )
Cash flows from investing activities:            
Purchase of property and equipment     (78,255 )     (80,766 )
Issuance of a note receivable           (15,000 )
Proceeds from a note receivable           15,000  
Proceeds from sale of property and equipment     24,393       9,655  
Cash paid for acquisitions, net of cash and restricted cash acquired           (111,030 )
Net cash used in investing activities     (53,862 )     (182,141 )
Cash flows from financing activities:            
Borrowings under revolving line of credit     212,880       170,000  
Payments on revolving line of credit     (212,880 )     (170,000 )
Proceeds from issuance of long-term debt     55,008       239,467  
Repayment of long-term debt     (55,824 )     (127,291 )
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 )     (8,750 )
Repurchase of common stock           (8,479 )
Dividends paid     (9,152 )     (9,271 )
Other     (328 )     (1,113 )
Net cash (used in) provided by financing activities     (13,516 )     84,861  
Effect of exchange rate changes on cash and cash equivalents     268       (193 )
Net change in cash and cash equivalents     (107,226 )     (110,346 )
Cash and cash equivalents at beginning of the period     151,063       170,385  
Cash and cash equivalents at end of the period   $ 43,837     $ 60,039  
             

PSC_Primoris.jpg

Source: Primoris Services Corporation