Primoris Services Corporation Q3 2021 Earnings Call Nov. 8, 2021 Notice to Investors This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company's management. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe," or "project" and similar expressions are used to identify forward-looking st ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . Commission file number 001-34145 Primoris Services Corporation (Exact name of registrant as specified in its charter) Delaware 20 ...

Primoris Services Corporation Investor Presentation September 2021 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company's management. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe," or "project" and similar expressions are used to identify forward-l ...

Primoris Services Corporation Investor Presentation September 2021 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company's management. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe," or "project" and similar expressions are used to identify forward-l ...

Financial Data and Key Metrics Changes - Year-to-date revenue increased by over $48 million compared to the previous year, reaching a record $1.7 billion for the first six months despite adverse weather conditions in Q2 [6][31] - Q2 revenue was $881.6 million, a decrease of $26.6 million year-over-year, primarily due to a significant decline in the Pipeline segment [31] - Gross profit for Q2 was $113 million, an increase of $12.1 million or 12% compared to the prior year, with gross margins rising to 12.8% from 11.1% [32][33] Business Line Data and Key Metrics Changes - **Utility Segment**: Revenue was $425.4 million, up 25% year-over-year, driven by increased activity with a major utility customer in California and contributions from Future Infrastructure [8][9] - **Energy Renewable Segment**: Revenue increased by 20% to $335 million, primarily due to renewable energy activities, with gross profit rising to $33.2 million [14][33] - **Pipeline Services Segment**: Revenue decreased to $121.2 million, reflecting a competitive market and project delays, with gross profit of $30.9 million [21][33] Market Data and Key Metrics Changes - The company reported a total backlog of $2.9 billion, down approximately $219 million from Q1, with MSA backlog at a record $1.5 billion, representing 52% of total backlog [38] - The renewable energy market is projected to be a $225 billion opportunity, with global energy investments rebounding to $1.9 trillion in 2021 [15] Company Strategy and Development Direction - The company is focusing on master service agreements (MSAs), with 52% of the current backlog being MSA-based work [7] - Strategic moves include geographic expansion and enhancing service offerings to include engineering and maintenance work [22][25] - The company aims to transition into higher growth markets, including telecom and renewables, while reducing risks associated with large lump-sum projects [24][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges due to weather-related delays and supply chain issues impacting project releases, particularly in the utility segment [12][42] - The outlook for the second half of the year remains cautious, with expectations of lower to mid-range earnings guidance of $2.30 to $2.50 per share [38][85] - Management expressed confidence in the company's business model and the ongoing transition to sustainable energy and infrastructure development [26][27] Other Important Information - The company invested $43.7 million in CapEx during Q2, primarily for construction equipment, with total debt at $654.8 million [38] - The effective tax rate for Q2 was approximately 27.3%, with expectations for the full year around 27.5% [37] Q&A Session Summary Question: How are customer-driven delays affecting project cadence? - Management noted that slow project releases were due to engineering delays and supply chain issues, particularly in telecom and electrical T&D [42][43] Question: Can you quantify revenue lost due to material delays? - Management indicated that while they do not have exact figures, it could be in the range of $10 million to $20 million [51][53] Question: What is the outlook for the Future acquisition's revenue? - Management expects Future's revenue to be down $20 million to $40 million from last year's $340 million, with growth anticipated in future years as the business expands outside Texas [64][66] Question: What are the expected margins in the utility segment for Q3 and Q4? - Management anticipates sequential improvement in Q3 margins, with a typical seasonal decline in Q4 [110] Question: What is the outlook for free cash flow in the back half of the year? - Free cash flow is expected to be similar to 2019 levels, potentially reaching $100 million to $150 million [103]

Primoris Services Corporation 2Q 2021 Earnings Call August 3, 2021 Notice to Investors This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company's management. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe," or "project" and similar expressions are used to identify forward-looking ...

[Part I. Financial Information](index=2&type=section&id=Part%20I.%20Financial%20Information) This section provides the company's unaudited condensed consolidated financial statements and related notes for the periods ended June 30, 2021, and December 31, 2020 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, stockholders' equity statements, and cash flow statements, along with detailed notes explaining the company's business, accounting policies, acquisitions, revenue recognition, goodwill, debt, derivatives, income taxes, dividends, equity, leases, commitments, and segment information for the periods ended June 30, 2021 and December 31, 2020 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (In Thousands) | ASSETS (In Thousands) | June 30, 2021 | December 31, 2020 | | :---------------------- | :------------ | :------------------ | | Cash and cash equivalents | $177,979 | $326,744 | | Accounts receivable, net | $479,013 | $432,455 | | Contract assets | $386,702 | $325,849 | | Total current assets | $1,094,413 | $1,115,266 | | Property and equipment, net | $432,200 | $356,194 | | Intangible assets, net | $176,810 | $61,012 | | Goodwill | $582,106 | $215,103 | | Total assets | $2,493,807 | $1,969,580 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $265,633 | $245,906 | | Contract liabilities | $213,479 | $267,227 | | Total current liabilities | $758,675 | $764,415 | | Long-term debt, net of current portion | $592,402 | $268,835 | | Total liabilities | $1,557,317 | $1,254,788 | | Total stockholders' equity | $936,490 | $714,792 | | Total liabilities and stockholders' equity | $2,493,807 | $1,969,580 | - Total assets increased by approximately **$524.2 million** from December 31, 2020, to June 30, 2021, primarily driven by increases in property and equipment, intangible assets, and goodwill, largely due to the FIH acquisition. Total liabilities also increased significantly, mainly due to long-term debt, while total stockholders' equity grew by **$221.7 million**[9](index=9&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section details the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Income (In Thousands, Except Per Share Amounts) | (In Thousands, Except Per Share Amounts) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $881,610 | $908,216 | $1,699,939 | $1,651,459 |\n| Gross profit | $113,026 | $100,967 | $193,207 | $148,777 |\n| Operating income | $54,799 | $49,545 | $67,652 | $52,967 |\n| Net income attributable to Primoris | $36,290 | $32,959 | $42,140 | $29,222 |\n| Basic EPS | $0.68 | $0.68 | $0.82 | $0.60 |\n| Diluted EPS | $0.67 | $0.68 | $0.81 | $0.60 | - For the three months ended June 30, 2021, revenue decreased by **2.9% YoY**, while gross profit increased by **12.0%** and net income attributable to Primoris increased by **10.1%**. For the six months ended June 30, 2021, revenue increased by **2.9% YoY**, gross profit increased by **29.9%**, and net income attributable to Primoris increased by **44.2%**. Basic EPS for the six months increased from **$0.60 to $0.82**[10](index=10&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the total comprehensive income, including net income and other comprehensive income items, reflecting all changes in equity during the period Condensed Consolidated Statements of Comprehensive Income (In Thousands) | (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $36,295 | $32,962 | $42,143 | $29,228 |\n| Foreign currency translation adjustments | $632 | $552 | $1,093 | $(1,185) |\n| Comprehensive income attributable to Primoris | $36,922 | $33,511 | $43,233 | $28,037 | - Comprehensive income attributable to Primoris increased by **10.2%** for the three months ended June 30, 2021, and by **54.2%** for the six months ended June 30, 2021, primarily driven by higher net income and positive foreign currency translation adjustments in 2021 compared to a loss in 2020[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's equity, including common stock, additional paid-in capital, and retained earnings - Total stockholders' equity increased from **$714.8 million** at December 31, 2020, to **$936.5 million** at June 30, 2021. This increase was primarily due to net income of **$42.1 million**, issuance of shares (net of costs) totaling **$149.3 million** from a secondary offering, and **$28.7 million** from issuance of shares to employees and directors, partially offset by dividends declared[12](index=12&type=chunk)[13](index=13&type=chunk)[118](index=118&type=chunk) Condensed Consolidated Statements of Stockholders' Equity (In Thousands, Except Share Amounts) | (In Thousands, Except Share Amounts) | December 31, 2020 | June 30, 2021 | | :----------------------------------- | :---------------- | :------------ | | Common Stock Shares Outstanding | 48,110,442 | 53,731,206 |\n| Additional Paid-in Capital | $89,098 | $274,008 |\n| Retained Earnings | $624,694 | $660,385 |\n| Total Stockholders' Equity | $714,792 | $936,490 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities, providing insight into liquidity Condensed Consolidated Statements of Cash Flows (In Thousands) | (In Thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------- | :----------------------------- | :----------------------------- | | Operating Activities | $5,593 | $60,651 |\n| Investing Activities | $(659,195) | $(9,617) |\n| Financing Activities | $504,252 | $(15,266) |\n| Net change in cash and cash equivalents | $(148,765) | $35,384 |\n| Cash and cash equivalents at end of period | $177,979 | $155,670 | - Net cash provided by operating activities significantly decreased from **$60.7 million** in H1 2020 to **$5.6 million** in H1 2021, primarily due to unfavorable changes in assets and liabilities. Net cash used in investing activities surged to **$659.2 million** in H1 2021, mainly driven by the **$607.0 million** acquisition of FIH. Financing activities provided **$504.3 million** in H1 2021, primarily from debt issuance and common stock issuance to fund the acquisition, contrasting with cash used in H1 2020[18](index=18&type=chunk)[214](index=214&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk) [Note 1—Nature of Business](index=12&type=section&id=Note%201%E2%80%94Nature%20of%20Business) This note describes the company's core business activities and its reportable segments - Primoris Services Corporation is a leading provider of specialty contracting services in the US and Canada, offering construction, fabrication, maintenance, replacement, and engineering services across three segments: Utilities, Energy/Renewables, and Pipeline Services. The company realigned its reportable segments in Q1 2021 from five to these three, reflecting a focus on end-user markets[21](index=21&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 2—Basis of Presentation](index=12&type=section&id=Note%202%E2%80%94Basis%20of%20Presentation) This note explains the accounting principles and conventions used in preparing the interim condensed consolidated financial statements - The interim condensed consolidated financial statements are unaudited and prepared in accordance with Rule 10-01 of Regulation S-X. The company's top ten customers generated approximately **42.3%** and **43.6%** of total revenue for the three and six months ended June 30, 2021, respectively, with no single customer exceeding **10%** of total revenue in 2021. In contrast, for the same periods in 2020, top ten customers accounted for **52.3%** and **50.7%** of revenue, with one pipeline customer representing **15.6%** and **13.6%** respectively[27](index=27&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 3—Recent Accounting Pronouncements](index=14&type=section&id=Note%203%E2%80%94Recent%20Accounting%20Pronouncements) This note discusses the adoption of new accounting standards and their impact on the financial statements - The company adopted ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," on January 1, 2021, on a prospective basis. This adoption did not have a material impact on its consolidated financial position, results of operations, or cash flows[32](index=32&type=chunk) [Note 4—Fair Value Measurements](index=14&type=section&id=Note%204%E2%80%94Fair%20Value%20Measurements) This note provides information on how the company measures the fair value of its financial instruments Fair Value Measurements (In Thousands) | (In Thousands) | June 30, 2021 | December 31, 2020 | | :------------- | :------------ | :---------------- | | Cash and cash equivalents (Level 1) | $177,979 | $326,744 |\n| Interest rate swap (Level 2) | $6,950 | $9,205 | - The company measures its interest rate swap at fair value using the income approach, primarily utilizing indirectly observable inputs (Level 2). The fair value of the interest rate swap liability decreased from **$9.2 million** at December 31, 2020, to **$6.95 million** at June 30, 2021[35](index=35&type=chunk)[37](index=37&type=chunk) [Note 5—Acquisitions](index=16&type=section&id=Note%205%E2%80%94Acquisitions) This note details significant business acquisitions, including purchase price allocation and financial impact - On January 15, 2021, Primoris acquired Future Infrastructure Holdings, LLC (FIH) for approximately **$604.7 million** (net of cash acquired). FIH, a provider of maintenance, repair, upgrade, and installation services to telecommunication, gas utility, and infrastructure markets, was integrated into the Utilities segment. The acquisition was funded by existing cash, term loan, and revolving credit facility borrowings, with secondary offering proceeds used for repayment[38](index=38&type=chunk)[158](index=158&type=chunk) FIH Acquisition Financial Impact (In Thousands) | FIH Acquisition Financial Impact (In Thousands) | Amount | | :-------------------------------------------- | :----- | | Total purchase consideration | $615,249 |\n| Net cash paid | $604,724 |\n| Goodwill recognized | $367,003 |\n| Customer relationships acquired | $118,000 |\n| Tradenames acquired | $4,400 |\n| FIH revenue contribution (3 months ended June 30, 2021) | $72,700 |\n| FIH gross profit contribution (3 months ended June 30, 2021) | $10,700 |\n| FIH revenue contribution (Jan 15 - June 30, 2021) | $133,400 |\n| FIH gross profit contribution (Jan 15 - June 30, 2021) | $20,500 | - Goodwill from the FIH acquisition, totaling **$367.0 million**, primarily reflects expected benefits from expanding into the telecommunications market and geographic presence, as well as the value of the assembled workforce. Intangible assets acquired include **$118.0 million** in customer relationships (amortized over 19 years) and **$4.4 million** in tradenames (amortized over one year)[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 6—Revenue](index=18&type=section&id=Note%206%E2%80%94Revenue) This note describes the company's revenue recognition policies and disaggregates revenue by type and segment - The company recognizes revenue over time for contracts with adequately defined scope, using an input measure (costs incurred to date). For contracts with undefined scope, revenue is recognized based on contract costs incurred. As of June 30, 2021, remaining performance obligations totaled **$1.5 billion**, with **73%** expected to be recognized as revenue in the next four quarters[53](index=53&type=chunk)[57](index=57&type=chunk) MSA and Non-MSA Revenue (In Thousands) | MSA and Non-MSA Revenue (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | MSA Revenue | $413,200 | $335,311 | $751,463 | $605,719 |\n| Non-MSA Revenue | $468,410 | $572,905 | $948,476 | $1,045,740 |\n| Total Revenue | $881,610 | $908,216 | $1,699,939 | $1,651,459 | Contract Assets and Liabilities (In Thousands) | Contract Assets (In Thousands) | June 30, 2021 | December 31, 2020 | | :----------------------------- | :------------ | :---------------- | | Unbilled revenue | $257,927 | $192,176 |\n| Retention receivable | $109,979 | $115,877 |\n| Contract materials | $18,796 | $17,796 |\n| Total Contract Assets | $386,702 | $325,849 |\n| **Contract Liabilities (In Thousands)** | | |\n| Deferred revenue | $202,122 | $252,781 |\n| Accrued loss provision | $11,357 | $14,446 |\n| Total Contract Liabilities | $213,479 | $267,227 | [Note 7—Goodwill and Intangible Assets](index=26&type=section&id=Note%207%E2%80%94Goodwill%20and%20Intangible%20Assets) This note provides details on the company's goodwill and other intangible assets, including changes and amortization Goodwill by Segment (In Thousands) | Goodwill by Segment (In Thousands) | December 31, 2020 | June 30, 2021 | | :--------------------------------- | :---------------- | :------------ | | Utilities | $96,344 | $463,347 |\n| Energy/Renewables | $66,344 | $66,344 |\n| Pipeline | $52,415 | $52,415 |\n| Total Goodwill | $215,103 | $582,106 | - Goodwill increased by **$367.0 million** during the six months ended June 30, 2021, primarily due to the FIH acquisition, which added **$367.0 million** to the Utilities segment. Total intangible assets, net, increased from **$61.0 million** to **$176.8 million**, with customer relationships being the largest component. Amortization expense for intangible assets was **$8.8 million** for the six months ended June 30, 2021, up from **$4.7 million** in the prior year[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 8—Accounts Payable and Accrued Liabilities](index=27&type=section&id=Note%208%E2%80%94Accounts%20Payable%20and%20Accrued%20Liabilities) This note details the composition of accounts payable and various accrued liabilities Accrued Liabilities (In Thousands) | Accrued Liabilities (In Thousands) | June 30, 2021 | December 31, 2020 | | :--------------------------------- | :------------ | :---------------- | | Payroll and related employee benefits | $105,872 | $81,088 |\n| Current operating lease liability | $67,577 | $73,033 |\n| Casualty insurance reserves | $5,251 | $8,365 |\n| Corporate income taxes and other taxes | $17,917 | $13,783 |\n| Other | $17,325 | $24,404 |\n| Total Accrued Liabilities | $213,942 | $200,673 | - Accounts payable included retention amounts of **$16.3 million** at June 30, 2021, an increase from **$12.6 million** at December 31, 2020. Total accrued liabilities increased by **$13.3 million**, primarily due to higher payroll and related employee benefits[81](index=81&type=chunk)[82](index=82&type=chunk) [Note 9—Credit Agreements](index=27&type=section&id=Note%209%E2%80%94Credit%20Agreements) This note provides information on the company's debt facilities, including terms, covenants, and outstanding balances Long Term Debt (In Thousands) | Long Term Debt (In Thousands) | June 30, 2021 | December 31, 2020 | | :---------------------------- | :------------ | :---------------- | | Term loan | $535,094 | $192,500 |\n| Commercial equipment notes | $86,283 | $85,783 |\n| Mortgage notes | $38,144 | $38,795 |\n| Total debt, net | $654,799 | $316,557 |\n| Current portion | $(62,397) | $(47,722) |\n| Long-term debt, net of current portion | $592,402 | $268,835 | - Total debt, net, significantly increased from **$316.6 million** at December 31, 2020, to **$654.8 million** at June 30, 2021, primarily due to a **$400.0 million** increase in the Term Loan to finance the FIH acquisition. The weighted average interest rate on total debt decreased from **3.7% to 2.9%**. The company was in compliance with all covenants under the Amended Credit Agreement at June 30, 2021[83](index=83&type=chunk)[87](index=87&type=chunk)[90](index=90&type=chunk)[95](index=95&type=chunk) [Note 10—Derivative Instruments](index=31&type=section&id=Note%2010%E2%80%94Derivative%20Instruments) This note describes the company's use of derivative financial instruments to manage market risks - Primoris uses an interest rate swap to manage exposure to variable interest rates on its Credit Agreement, effectively converting variable-rate debt to a fixed rate. The fair value of the interest rate swap, recorded as an other long-term liability, was **$6.95 million** at June 30, 2021, down from **$9.21 million** at December 31, 2020. For the six months ended June 30, 2021, the company recognized a **$2.3 million** unrealized gain on the swap, compared to a **$4.9 million** unrealized loss in the prior year[101](index=101&type=chunk)[103](index=103&type=chunk) [Note 11—Income Taxes](index=31&type=section&id=Note%2011%E2%80%94Income%20Taxes) This note provides information on the company's income tax expense, effective tax rate, and deferred tax assets and liabilities - The effective tax rate on income attributable to Primoris was **27.5%** for the six months ended June 30, 2021, compared to **29.0%** for the same period in 2020. This rate differs from the U.S. federal statutory rate of **21.0%** primarily due to state income taxes and nondeductible per diem expenses. The company deferred **$43.5 million** in FICA tax payments under the CARES Act, with half due by December 31, 2021, and the other half by December 31, 2022[106](index=106&type=chunk)[109](index=109&type=chunk) [Note 12—Dividends and Earnings Per Share](index=33&type=section&id=Note%2012%E2%80%94Dividends%20and%20Earnings%20Per%20Share) This note details dividend declarations and the calculation of basic and diluted earnings per share Dividends Per Common Share | Dividends Per Common Share | 2021 | 2020 | | :------------------------- | :--- | :--- | | Q1 Dividend | $0.06 | $0.06 |\n| Q2 Dividend | $0.06 | $0.06 |\n| Total (Six Months) | $0.12 | $0.12 | Earnings Per Share (EPS) | Earnings Per Share (EPS) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.68 | $0.68 | $0.82 | $0.60 |\n| Diluted EPS | $0.67 | $0.68 | $0.81 | $0.60 | - The company maintained a quarterly cash dividend of **$0.06 per share** in both 2021 and 2020. Basic EPS for the six months ended June 30, 2021, increased to **$0.82** from **$0.60** in the prior year, while diluted EPS rose to **$0.81** from **$0.60**[110](index=110&type=chunk)[113](index=113&type=chunk) [Note 13—Stockholders' Equity](index=34&type=section&id=Note%2013%E2%80%94Stockholders'%20Equity) This note provides further details on changes in stockholders' equity, including share issuances and repurchases - In March 2021, Primoris completed a public offering of **4.5 million common shares** at **$35.00 per share**, generating net proceeds of approximately **$149.3 million**. These proceeds were used to repay a portion of the borrowings incurred for the FIH acquisition. Additionally, **1,038,309 shares** were purchased by FIH employees at a **15% discount**, resulting in **$28.9 million** in proceeds and **$5.1 million** in stock compensation expense[117](index=117&type=chunk)[118](index=118&type=chunk) - The company's share repurchase program, authorized for **$25.0 million** in February 2020, expired on December 31, 2020. In the six months ended June 30, 2020, Primoris repurchased **519,562 shares** for **$8.3 million** at an average price of **$16.06**[119](index=119&type=chunk) [Note 14—Leases](index=35&type=section&id=Note%2014%E2%80%94Leases) This note outlines the company's lease arrangements, including lease expense and liabilities Lease Expense (In Thousands) | Lease Expense (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease expense | $21,168 | $23,153 | $42,824 | $46,131 | Operating Lease Liabilities (In Thousands) | Operating Lease Liabilities (In Thousands) | June 30, 2021 | December 31, 2020 | | :--------------------------------------- | :------------ | :---------------- | | Accrued liabilities | $67,577 | $73,033 |\n| Noncurrent operating lease liabilities | $123,638 | $137,913 |\n| Total Operating Lease Liabilities | $191,215 | $210,946 | - Operating lease expense decreased for both the three and six months ended June 30, 2021, compared to the prior year. Total operating lease liabilities decreased from **$210.9 million** at December 31, 2020, to **$191.2 million** at June 30, 2021[123](index=123&type=chunk)[124](index=124&type=chunk) [Note 15—Commitments and Contingencies](index=36&type=section&id=Note%2015%E2%80%94Commitments%20and%20Contingencies) This note discloses the company's various commitments and potential liabilities arising from legal claims and other obligations - The company is subject to various legal claims and proceedings, for which it accrues costs when a loss is probable and estimable. Management believes the outcome of these claims will not materially adversely affect financial results. As of June 30, 2021, bid and completion bonds totaled approximately **$2.6 billion**, with remaining performance obligations on bonded projects at **$566.8 million**[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) [Note 16—Reportable Segments](index=36&type=section&id=Note%2016%E2%80%94Reportable%20Segments) This note provides financial information for the company's operating segments, including revenue and gross profit - In Q1 2021, Primoris realigned its reportable segments from five to three: Utilities, Energy/Renewables, and Pipeline. The Utilities segment now includes telecommunications and natural gas/electric utility distribution/transmission. The Energy/Renewables segment covers engineering, procurement, construction, and maintenance for renewable energy, fuels, and petrochemical industries. The Pipeline segment focuses on pipeline construction, maintenance, and facility services[128](index=128&type=chunk)[129](index=129&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) Segment Revenue (In Thousands) | Segment Revenue (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Utilities | $425,421 (48.3%) | $340,123 (37.4%) | $760,433 (44.7%) | $590,077 (35.7%) |\n| Energy/Renewables | $335,010 (38.0%) | $278,534 (30.7%) | $687,874 (40.5%) | $580,300 (35.1%) |\n| Pipeline | $121,179 (13.7%) | $289,559 (31.9%) | $251,632 (14.8%) | $481,082 (29.2%) |\n| Total | $881,610 (100.0%) | $908,216 (100.0%) | $1,699,939 (100.0%) | $1,651,459 (100.0%) | Segment Gross Profit (In Thousands) | Segment Gross Profit (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Utilities | $48,849 (11.5%) | $55,837 (16.4%) | $70,565 (9.3%) | $62,151 (10.5%) |\n| Energy/Renewables | $33,232 (9.9%) | $18,100 (6.5%) | $75,904 (11.0%) | $43,104 (7.4%) |\n| Pipeline | $30,945 (25.5%) | $27,030 (9.3%) | $46,738 (18.6%) | $43,522 (9.0%) |\n| Total | $113,026 (12.8%) | $100,967 (11.1%) | $193,207 (11.4%) | $148,777 (9.0%) | [Note 17—Subsequent Events](index=39&type=section&id=Note%2017%E2%80%94Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On August 3, 2021, the Board of Directors declared a cash dividend of **$0.06 per share** of common stock, payable on or about October 15, 2021, to stockholders of record as of September 30, 2021[141](index=141&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, recent acquisition, material trends and uncertainties, seasonality, critical accounting policies, and a detailed analysis of consolidated and segment-specific financial performance, backlog, liquidity, capital resources, cash flows, off-balance sheet transactions, and the effects of inflation [Forward Looking Statements](index=40&type=section&id=Forward%20Looking%20Statements) This section highlights the inherent uncertainties and risks associated with the company's future projections and business outlook - This report contains forward-looking statements regarding future results, business strategies, and financial plans, which are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially. Key risks include customer timing, project duration, weather, economic conditions, changes in customer mix, price volatility of oil/gas, cost increases, contract terminations, labor availability, bonding requirements, acquisition risks (like FIH integration), and the ongoing impact of the COVID-19 pandemic[144](index=144&type=chunk)[145](index=145&type=chunk) [Introduction](index=42&type=section&id=Introduction) This section provides an overview of Primoris Services Corporation, its business model, and recent strategic realignments - Primoris Services Corporation is a leading specialty contracting services provider in the US and Canada. In Q1 2021, the company realigned its five reportable segments into three: Utilities, Energy/Renewables, and Pipeline Services, to better reflect its end-user market focus. The company serves major utility, refining, petrochemical, power, midstream, and engineering companies, with projects ranging from daily work orders to 36 months or longer[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [Acquisition of Future Infrastructure Holdings, LLC.](index=44&type=section&id=Acquisition%20of%20Future%20Infrastructure%20Holdings,%20LLC.) This section discusses the strategic acquisition of Future Infrastructure Holdings, LLC, and its expected impact on the company's operations and market position - On January 15, 2021, Primoris acquired Future Infrastructure Holdings, LLC (FIH) for approximately **$604.7 million**, net of cash acquired. This acquisition, integrated into the Utilities segment, expands service lines into telecommunication, regulated gas utility, and infrastructure markets, aligning with the strategy to grow in higher-growth, higher-margin markets and enhance utility services capabilities. The purchase was financed through existing cash, term loan, and revolving credit facility, with secondary offering proceeds used for partial repayment[158](index=158&type=chunk) [Material trends and uncertainties](index=44&type=section&id=Material%20trends%20and%20uncertainties) This section identifies key external and internal factors that could significantly influence the company's future financial performance and operational stability - The company's revenue depends on spending in telecommunications, gas and electric utilities, energy, chemical, oil and gas, and transportation sectors. The COVID-19 pandemic has caused project interruptions, delays, and inefficiencies, though services are generally deemed essential. While a rebound is anticipated post-vaccination, continued adverse economic impacts are possible. Fluctuations in oil and gas prices create uncertainty for pipeline services, and regulatory changes can delay or cancel projects, though increased demand for renewable resources is creating new opportunities[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [Seasonality, cyclicality and variability](index=46&type=section&id=Seasonality,%20cyclicality%20and%20variability) This section explains how seasonal weather patterns, economic cycles, and project-specific factors contribute to fluctuations in the company's financial results - The company's results are subject to quarterly variations due to weather impacts (rain, ice, snow, storms) affecting construction and specialty services, and client budget cycles. Higher revenue and earnings are typically experienced in the third and fourth quarters compared to the first two. Project values range widely, and the cyclical nature of the business means financial results can fluctuate significantly quarter-to-quarter[167](index=167&type=chunk)[168](index=168&type=chunk) [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the accounting policies that require management's most difficult, subjective, or complex judgments and estimates - The preparation of financial statements requires significant estimates and assumptions, particularly for long-term contracts, where unforeseen events can alter cost and profit estimates. There have been no material changes to the critical accounting policies since December 31, 2020[169](index=169&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance over the reporting periods, discussing key revenue and expense drivers [Consolidated Results](index=47&type=section&id=Consolidated%20Results) This subsection provides an overall analysis of the company's consolidated financial performance, including revenue, gross profit, and expenses Consolidated Results (In Thousands) | (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $881,610 (-2.9%) | $908,216 | $1,699,939 (+2.9%) | $1,651,459 |\n| Gross Profit | $113,026 (+12.0%) | $100,967 | $193,207 (+29.9%) | $148,777 |\n| Gross Profit % | 12.8% | 11.1% | 11.4% | 9.0% |\n| SG&A Expenses | $57,747 (+12.3%) | $51,422 | $111,179 (+16.0%) | $95,810 |\n| SG&A % Revenue | 6.6% | 5.7% | 6.5% | 5.8% |\n| Transaction Costs | $480 | — | $14,376 | — |\n| Interest Expense | $(4,825) | $(3,690) | $(9,546) | $(12,802) |\n| Income Tax Expense | $(13,597) | $(13,463) | $(15,984) | $(11,936) | - Consolidated revenue decreased by **2.9%** for the three months ended June 30, 2021, but increased by **2.9%** for the six months, driven by growth in Utilities and Energy/Renewables (including FIH acquisition) offsetting Pipeline segment declines. Gross profit margins improved significantly for both periods (**12.8% vs 11.1%** for Q2; **11.4% vs 9.0%** for H1), partly due to the FIH acquisition and improved legacy margins. SG&A expenses increased due to the FIH acquisition and integration costs. Transaction costs of **$14.4 million** were incurred in H1 2021, primarily for the FIH acquisition. Interest expense decreased for the six-month period due to a favorable interest rate swap impact, despite higher debt balances[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Segment results](index=50&type=section&id=Segment%20results) This subsection provides a detailed breakdown of financial performance across the company's Utilities, Energy/Renewables, and Pipeline segments Utilities Segment (In Thousands) | Utilities Segment (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $425,421 (+25.1%) | $340,123 | $760,433 (+28.9%) | $590,077 |\n| Gross Profit | $48,849 (-12.5%) | $55,837 | $70,565 (+13.5%) | $62,151 |\n| Gross Profit % | 11.5% | 16.4% | 9.3% | 10.5% | - Utilities segment revenue increased significantly (**25.1%** for Q2, **28.9%** for H1) due to the FIH acquisition (**$72.7 million** in Q2, **$133.4 million** in H1) and increased activity in California. However, Q2 gross profit decreased by **12.5%** due to lower legacy margins, unfavorable weather, and customer material delays, leading to a margin drop from **16.4% to 11.5%**. H1 gross profit increased by **13.5%**, but margin decreased from **10.5% to 9.3%** for similar reasons, partially offset by FIH's favorable margins[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) Energy/Renewables Segment (In Thousands) | Energy/Renewables Segment (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $335,010 (+20.3%) | $278,534 | $687,874 (+18.5%) | $580,300 |\n| Gross Profit | $33,232 (+83.6%) | $18,100 | $75,904 (+76.1%) | $43,104 |\n| Gross Profit % | 9.9% | 6.5% | 11.0% | 7.4% | - Energy/Renewables segment revenue increased by **20.3%** for Q2 and **18.5%** for H1, primarily driven by increased renewable energy activity. Gross profit surged by **83.6%** for Q2 and **76.1%** for H1, with margins improving significantly (**9.9% vs 6.5%** for Q2; **11.0% vs 7.4%** for H1). This improvement was attributed to higher revenue, better margins, and favorable claims resolution on an industrial plant project in 2021, contrasting with higher costs on specific projects in 2020[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) Pipeline Segment (In Thousands) | Pipeline Segment (In Thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $121,179 (-58.2%) | $289,559 | $251,632 (-47.7%) | $481,082 |\n| Gross Profit | $30,945 (+14.5%) | $27,030 | $46,738 (+7.4%) | $43,522 |\n| Gross Profit % | 25.5% | 9.3% | 18.6% | 9.0% | - Pipeline segment revenue decreased substantially (**58.2%** for Q2, **47.7%** for H1) due to the substantial completion of large pipeline projects in 2020. Despite lower revenue, gross profit increased by **14.5%** for Q2 and **7.4%** for H1, leading to a significant margin expansion (**25.5% vs 9.3%** for Q2; **18.6% vs 9.0%** for H1). This margin improvement was primarily due to favorable closeout of multiple pipeline projects in 2021 and startup costs on projects in 2020[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) [Geographic area financial information](index=53&type=section&id=Geographic%20area%20financial%20information) This section provides a breakdown of the company's financial performance based on its geographic operating regions - The majority of Primoris's revenue is derived from customers in the United States. Approximately **4.0%** of revenue for the six months ended June 30, 2021, was generated from sources outside the U.S., primarily Canada[198](index=198&type=chunk) [Backlog](index=53&type=section&id=Backlog) This section defines and reports the company's backlog, providing an indicator of future revenue from existing contracts - Backlog is defined as anticipated revenue from uncompleted portions of existing contracts with defined scope (Fixed Backlog) and estimated revenue from Master Service Agreements (MSA Backlog) for the next four quarters. Total backlog at June 30, 2021, was **$2.87 billion**, a decrease from **$2.78 billion** at December 31, 2020. Approximately **86%** of the total backlog at June 30, 2021, is expected to be recognized as revenue in the next four quarters[199](index=199&type=chunk)[205](index=205&type=chunk) Backlog (In Millions) | Backlog (In Millions) | December 31, 2020 | June 30, 2021 | | :-------------------- | :---------------- | :------------ | | Fixed Backlog | $1,639.6 | $1,376.2 |\n| MSA Backlog | N/A | $1,493.8 |\n| Total Backlog | $2,776.6 | $2,870.0 | - Fixed Backlog decreased by **$263.4 million (16.1%)** from December 31, 2020, to June 30, 2021. MSA Backlog at June 30, 2021, was **$1.49 billion**, including **$210.9 million** from the FIH acquisition. Backlog is not a comprehensive indicator of future revenue as some projects are not included, and contracts can be terminated[202](index=202&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash to meet its financial obligations and fund operations - Primoris's primary liquidity sources are cash balances and cash flows from operating activities, supplemented by credit facilities. At June 30, 2021, available borrowing capacity under the Revolving Credit Facility was **$151.1 million**. The company increased its Term Loan by **$400.0 million** to **$592.5 million** to finance the FIH acquisition, and raised **$149.3 million** net proceeds from a secondary common stock offering in March 2021 to repay a portion of these borrowings. Cash and cash equivalents totaled **$178.0 million** at June 30, 2021, down from **$326.7 million** at December 31, 2020. The company expects sufficient liquidity for the next twelve months[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) - Capital expenditures for the six months ended June 30, 2021, were **$62.8 million**, primarily for construction equipment. Anticipated capital expenditures for the remaining six months of 2021 are between **$20.0 million** and **$40.0 million**[212](index=212&type=chunk) [Cash Flows](index=56&type=section&id=Cash%20Flows) This section provides a detailed analysis of cash generated from or used in operating, investing, and financing activities Cash Flows (In Thousands) | Cash Flows (In Thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------ | :----------------------------- | :----------------------------- | | Operating Activities | $5,593 | $60,651 |\n| Investing Activities | $(659,195) | $(9,617) |\n| Financing Activities | $504,252 | $(15,266) |\n| Net change in cash | $(148,765) | $35,384 | - Net cash provided by operating activities decreased significantly to **$5.6 million** in H1 2021 from **$60.7 million** in H1 2020, mainly due to unfavorable changes in assets and liabilities, despite increased net income. Investing activities used **$659.2 million**, primarily for the **$607.0 million** FIH acquisition and **$62.8 million** in property and equipment purchases. Financing activities provided **$504.3 million**, driven by proceeds from the amended term loan (**$395.1 million**) and common stock issuance (**$178.7 million**), partially offset by debt repayments and dividends[214](index=214&type=chunk)[215](index=215&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk) [Off-balance sheet transactions](index=60&type=section&id=Off-balance%20sheet%20transactions) This section describes the company's off-balance sheet arrangements, including letters of credit and bonding obligations - Primoris engages in off-balance sheet arrangements, including **$49.2 million** in outstanding letters of credit at June 30, 2021, used for insurance reimbursement and customer guarantees. The company also had approximately **$2.6 billion** in bid and completion bonds outstanding, with **$566.8 million** in remaining performance obligations on bonded projects. Other potential obligations include contributions to multi-employer pension plans and employment agreement payments[225](index=225&type=chunk)[227](index=227&type=chunk) [Effects of Inflation and Changing Prices](index=60&type=section&id=Effects%20of%20Inflation%20and%20Changing%20Prices) This section discusses how inflation and changing prices for labor, equipment, and materials may impact the company's operations and financial results - The company's operations are affected by increases in prices for labor, equipment, fuel, and materials. Primoris attempts to mitigate these impacts through price escalation provisions in contracts, considering estimated effects when bidding, or entering into back-to-back contracts with suppliers. To date, operations have not been materially impacted by price increases[226](index=226&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily related to fluctuations in interest rates, and its strategies for managing these risks, including the use of financial derivative instruments [Interest rate risk](index=62&type=section&id=Interest%20rate%20risk) This subsection details the company's exposure to interest rate fluctuations and its hedging strategies - Primoris is exposed to interest rate risk due to variable-rate borrowings under its Revolving Credit Facility and term loan. To manage this, the company uses interest rate swaps; as of June 30, 2021, **$140.3 million** of its variable rate debt was economically hedged. A **1.0%** change in interest rates would impact annual interest expense by approximately **$3.9 million**[230](index=230&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Disclosure Controls and Procedures](index=62&type=section&id=Disclosure%20Controls%20and%20Procedures) This subsection describes the company's controls designed to ensure timely and accurate disclosure of financial and non-financial information - As of June 30, 2021, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level. These controls ensure that information required for SEC filings is recorded, processed, summarized, and reported timely, and communicated appropriately to management[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) [Changes in Internal Control Over Financial Reporting](index=62&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This subsection reports on any material changes to the company's internal control over financial reporting during the reporting period - There were no changes to the company's internal control over financial reporting practices or processes during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[235](index=235&type=chunk) [Part II. Other Information](index=42&type=section&id=Part%20II.%20Other%20Information) This section includes additional information not covered in Part I, such as legal proceedings, exhibits, and required signatures [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 15 of the financial statements for information on legal proceedings, commitments, and contingencies - Information regarding legal proceedings is incorporated by reference from Note 15, "Commitments and Contingencies," in the unaudited notes to the condensed consolidated financial statements[236](index=236&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including merger agreements, certifications, and XBRL documents Exhibits | Exhibit Number | Description | | :------------- | :---------- | | 2.1 | Agreement and Plan of Merger, dated December 14, 2020 |\n| 2.2 | Amendment No.1 to Agreement and Plan of Merger, dated as of January 11, 2021 |\n| 31.1 | Rule 13a-14(a)/15d-14(a) Certification by the Registrant's Chief Executive Officer |\n| 31.2 | Rule 13a-14(a)/15d-14(a) Certification by the Registrant's Chief Financial Officer |\n| 32.1 | Section 1350 Certification by the Registrant's Chief Executive Officer |\n| 32.2 | Section 1350 Certification by the Registrant's Chief Financial Officer |\n| 101 INS | Inline XBRL Instance Document |\n| 104 | Cover Page Interactive Data File | [Signatures](index=44&type=section&id=Signatures) This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its submission on behalf of Primoris Services Corporation - The report was signed on August 3, 2021, by Kenneth M. Dodgen, Executive Vice President, Chief Financial Officer (Principal Financial Officer) of Primoris Services Corporation[241](index=241&type=chunk)

Primoris Services Corporation Investor Presentation June 2021 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company's management. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe," or "project" and similar expressions are used to identify forward-lookin ...

Primoris Services Corporation Q1 2021 Earnings Call May 5, 2021 Notice to Investors This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company's management. Words such as "could," "will," "may," "assume," "forecast," "strategy," "guidance," "outlook," "target," "expect," "intend," "plan," "estimate," "anticipate," "believe," or "project" and similar expressions are used to identify forward-looking sta ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company reported a net income of $5.8 million in Q1 2021, a significant turnaround driven by revenue growth and the acquisition of Future Infrastructure Holdings (FIH) Condensed Consolidated Statements of Operations Highlights (Q1 2021 vs Q1 2020) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Revenue** | $818,329 | $743,243 | | **Gross Profit** | $80,181 | $47,810 | | **Operating Income** | $12,853 | $3,422 | | **Net Income (Loss) Attributable to Primoris** | $5,850 | $(3,737) | | **Diluted EPS** | $0.12 | $(0.08) | Condensed Consolidated Balance Sheet Highlights (As of March 31, 2021) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $212,770 | $326,744 | | Goodwill | $588,845 | $215,103 | | Intangible assets, net | $181,226 | $61,012 | | **Total Assets** | **$2,515,434** | **$1,969,580** | | Long-term debt, net | $592,087 | $268,835 | | **Total Liabilities** | **$1,614,070** | **$1,254,788** | | **Total Stockholders' Equity** | **$901,364** | **$714,792** | Condensed Consolidated Statements of Cash Flows Highlights (Q1 2021 vs Q1 2020) | Cash Flow Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,514 | $(5,467) | | Net cash used in investing activities | $(630,211) | $(2,409) | | Net cash provided by (used in) financing activities | $508,464 | $(19,195) | | **Net change in cash and cash equivalents** | **$(113,974)** | **$(26,812)** | [Note 1: Nature of Business & Segment Reorganization](index=10&type=section&id=Note%201%E2%80%94Nature%20of%20Business) Primoris realigned its structure into three new market-focused segments: Utilities, Energy/Renewables, and Pipeline Services - In Q1 2021, the company reorganized its reportable segments from five to three: **Utilities, Energy/Renewables, and Pipeline Services**[22](index=22&type=chunk)[23](index=23&type=chunk) [Note 5: Acquisitions](index=14&type=section&id=Note%205%E2%80%94Acquisitions) The company acquired Future Infrastructure Holdings, LLC (FIH) for approximately $611.2 million, integrating it into the Utilities segment - Acquired Future Infrastructure Holdings, LLC (FIH) on January 15, 2021, for approximately **$611.2 million**, net of cash acquired[36](index=36&type=chunk) - The acquisition resulted in the recognition of **$373.7 million in goodwill** and **$122.4 million in identifiable intangible assets** (customer relationships and tradename)[38](index=38&type=chunk)[40](index=40&type=chunk) - For the period from January 15 to March 31, 2021, FIH contributed **$60.7 million in revenue** and **$9.8 million in gross profit**[40](index=40&type=chunk) - Acquisition-related costs of **$13.5 million** were recorded in the quarter[41](index=41&type=chunk) [Note 6: Revenue](index=18&type=section&id=Note%206%E2%80%94Revenue) Remaining performance obligations stood at $1.7 billion, with Master Service Agreement (MSA) revenue growing to 41.3% of the total - As of March 31, 2021, the company had **$1.7 billion of remaining performance obligations**, with approximately 83% expected to be recognized as revenue over the next four quarters[47](index=47&type=chunk) Revenue by MSA and Non-MSA (in thousands) | Segment | MSA Revenue Q1 2021 | Non-MSA Revenue Q1 2021 | MSA Revenue Q1 2020 | Non-MSA Revenue Q1 2020 | | :--- | :--- | :--- | :--- | :--- | | Utilities | $277,967 | $57,045 | $185,785 | $64,169 | | Energy/Renewables | $42,586 | $310,278 | $37,891 | $263,875 | | Pipeline | $17,710 | $112,743 | $46,732 | $144,791 | | **Total** | **$338,263** | **$480,066** | **$270,408** | **$472,835** | [Note 9: Credit Agreements](index=26&type=section&id=Note%209%E2%80%94Credit%20Agreements) The company amended its credit agreement to finance the FIH acquisition, increasing its term loan by $400.0 million - On January 15, 2021, the company amended its credit agreement, increasing its term loan by **$400.0 million** to a total of **$592.5 million** to finance the FIH acquisition[74](index=74&type=chunk) - As of March 31, 2021, available borrowing capacity under the $200.0 million revolving credit facility was **$148.9 million**[76](index=76&type=chunk) [Note 13: Stockholders' Equity](index=32&type=section&id=Note%2013%E2%80%94Stockholders'%20Equity) A public offering of 4.5 million shares generated net proceeds of approximately $149.4 million to repay acquisition-related debt - In March 2021, the company completed a secondary offering of 4,500,000 shares, raising net proceeds of approximately **$149.4 million**[103](index=103&type=chunk) - The net proceeds from the offering were used to repay a portion of the debt incurred under the Amended Credit Agreement for the FIH acquisition[103](index=103&type=chunk) [Note 16: Reportable Segments](index=36&type=section&id=Note%2016%E2%80%94Reportable%20Segments) The Energy/Renewables segment became the largest revenue contributor, and consolidated gross margin improved to 9.8% Revenue by Segment (in thousands) | Segment | Q1 2021 Revenue | % of Total | Q1 2020 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | Utilities | $335,012 | 40.9% | $249,954 | 33.6% | | Energy/Renewables | $352,864 | 43.2% | $301,766 | 40.6% | | Pipeline | $130,453 | 15.9% | $191,523 | 25.8% | | **Total** | **$818,329** | **100.0%** | **$743,243** | **100.0%** | Gross Profit by Segment (in thousands) | Segment | Q1 2021 Gross Profit | % of Segment Revenue | Q1 2020 Gross Profit | % of Segment Revenue | | :--- | :--- | :--- | :--- | :--- | | Utilities | $21,716 | 6.5% | $6,314 | 2.5% | | Energy/Renewables | $42,672 | 12.1% | $25,004 | 8.3% | | Pipeline | $15,793 | 12.1% | $16,492 | 8.6% | | **Total** | **$80,181** | **9.8%** | **$47,810** | **6.4%** | [Management's Discussion and Analysis (MD&A)](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Consolidated revenue grew 10.1% due to the FIH acquisition and strong segment performance, increasing total backlog to $3.1 billion [Results of Operations](index=48&type=section&id=Results%20of%20Operations) Consolidated revenue rose 10.1% to $818.3 million, and gross profit surged 67.7% with margins improving to 9.8% - Revenue increased by **$75.1 million (10.1%)** YoY, primarily due to growth in Energy/Renewables and Utilities segments, including **$60.7 million** from the FIH acquisition[158](index=158&type=chunk) - Gross profit increased by **$32.4 million (67.7%)** YoY, with gross margin expanding to **9.8%** from 6.4%, reflecting the FIH acquisition and improved margins in legacy operations[159](index=159&type=chunk) - Transaction and related costs of **$13.9 million** were incurred in Q1 2021 related to the FIH acquisition[161](index=161&type=chunk) [Segment Results](index=50&type=section&id=Segment%20results) The Utilities and Energy/Renewables segments drove growth, offsetting a decline in the Pipeline segment, with all segments showing improved gross margins - **Utilities:** Revenue increased **34.0%** YoY, driven by the FIH acquisition ($60.7 million), and gross margin improved to **6.5%** from 2.5%[169](index=169&type=chunk)[170](index=170&type=chunk) - **Energy/Renewables:** Revenue increased **16.9%** YoY, driven by increased renewable energy activity, and gross margin improved to **12.1%** from 8.3% due to favorable claims resolution[171](index=171&type=chunk)[172](index=172&type=chunk) - **Pipeline:** Revenue decreased **31.9%** YoY due to the completion of large projects in 2020, though gross margin improved to **12.1%** from 8.6% due to strong performance on a Texas project[173](index=173&type=chunk)[174](index=174&type=chunk) [Backlog](index=53&type=section&id=Backlog) Total backlog increased to $3.09 billion, bolstered by a $248.8 million contribution from the FIH acquisition Total Backlog by Segment (in millions) | Reportable Segment | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Utilities | $1,388.3 | $1,045.2 | | Energy/Renewables | $1,386.4 | $1,353.7 | | Pipeline | $313.7 | $377.7 | | **Total** | **$3,088.4** | **$2,776.6** | - The FIH acquisition added approximately **$248.8 million** of MSA backlog to the Utilities segment[181](index=181&type=chunk) - The company defines backlog as a combination of Fixed Backlog (uncompleted portions of existing contracts) and MSA Backlog (estimated revenue from MSA work for the next four quarters)[176](index=176&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $212.8 million in cash after financing the FIH acquisition through debt and a subsequent equity offering - At March 31, 2021, cash and cash equivalents were **$212.8 million**, and available borrowing capacity was **$148.9 million**[188](index=188&type=chunk)[184](index=184&type=chunk) - The FIH acquisition was financed via a **$400 million** term loan increase, and a portion of this debt was repaid with **~$149.4 million** from a secondary stock offering[185](index=185&type=chunk)[186](index=186&type=chunk) - Capital expenditures for the remaining nine months of 2021 are expected to be between **$60 million and $80 million**[189](index=189&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuation on its variable-rate debt, partially mitigated by an interest rate swap - The primary market risk is **interest rate risk** from variable-rate debt[208](index=208&type=chunk) - As of March 31, 2021, **$142.3 million** of variable rate debt was economically hedged with an interest rate swap[208](index=208&type=chunk) - A **1.0%** increase or decrease in interest rates would change annual interest expense by approximately **$4.0 million**[208](index=208&type=chunk) [Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - Management, including the CEO and CFO, concluded that as of March 31, 2021, the company's disclosure controls and procedures were **effective**[211](index=211&type=chunk) - **No material changes** were made to internal control over financial reporting during the quarter ended March 31, 2021[213](index=213&type=chunk) [Part II. Other Information](index=62&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) The company faces various legal proceedings in the ordinary course of business but does not expect them to have a material adverse effect - Management believes that the reasonably possible outcome of current claims and legal proceedings will **not have a material adverse effect** on the company's consolidated results of operations, financial condition, or cash flow[112](index=112&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been made to the risk factors disclosed in the company's most recent Annual Report on Form 10-K - The company states that there have been **no material changes** to the risk factors discussed in its most recently filed Annual Report on Form 10-K[215](index=215&type=chunk) [Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including key agreements and certifications