Primoris(PRIM) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The fourth quarter revenue was almost $1.9 billion, an increase of $116.4 million or almost 7% compared to the prior year, driven by growth in both the Energy and Utility segments [26] - Gross profit for the fourth quarter declined by $9.6 million, or approximately 5% to $175 million, with overall gross margins at 9.4%, compared to 10.6% in the prior year [26][27] - For the full year 2025, revenue was up $1.2 billion to almost $7.6 billion, primarily driven by double-digit growth in both segments [28][29] Business Line Data and Key Metrics Changes - In the Utility segment, revenue was up over 10% from the prior year, driven by growth across all business lines, with gas operations and power delivery leading the growth [30] - The Energy segment revenue grew almost 25%, primarily driven by renewables, partially offset by lower industrial and pipeline revenue [17][28] - Renewables grew over 50% in 2025, with significant revenue pulled forward into 2025 due to project resequencing [31] Market Data and Key Metrics Changes - The total backlog at year-end was over $11.9 billion, with total MSA backlog up over 20% compared to the prior year [35] - The average increase in CapEx by the largest utility customers suggests a 50% increase in spending over the next five years compared to the previous five years [11] - The demand for power generation is projected to grow by 50% over the next decade, driven by data centers and increased electrification [10][11] Company Strategy and Development Direction - The company aims to improve margins, generate cash flow, and be the best allocators of capital in the industry, focusing on attracting and retaining talent [39] - There is a commitment to investing in people and systems to enhance execution efficiency and improve gross margins [87] - The company is positioned to assist clients in generating power and providing transmission and distribution solutions to meet growing demand [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong end markets and the company's ability to adapt to changes, emphasizing the importance of relationships with clients [62] - The company expects to see improvements in margins and cash flow in 2026, with a focus on executing projects effectively [22][37] - Management highlighted the importance of maintaining a strong balance sheet to support growth and pursue acquisitions [35][88] Other Important Information - The company increased its labor force by more than 2,800 people in 2025 to meet client needs [13] - The company plans to invest in a new facility for its Premier PV business line in 2026 to increase capacity and align with customer demand [24] Q&A Session Questions and Answers Question: On the gas generation business, how much of the $1.5 billion-$2 billion bidding activity might convert to revenues in 2026 and 2027? - Management indicated that the funnel of opportunities in gas generation is solid, with a meaningful burn expected in 2026, and a line of sight to nearly $6 billion in opportunities [41][42] Question: Can you share more on the challenges faced in renewables and what changes have been made to avoid them in the future? - Management acknowledged underestimating geotechnical conditions in certain projects, leading to cost overruns, and emphasized investments in project leadership to mitigate future issues [45][47] Question: What is the focus on execution moving into 2026? - Management highlighted the importance of better estimating, project controls, and change management as key areas to improve execution across the enterprise [52][53] Question: What is the coverage on guidance and what areas need more bookings to hit targets? - Management expressed confidence in their guidance, noting that while strong backlog supports it, additional bookings in pipeline projects are still needed [56][58] Question: Can you discuss the opportunities in the utility side, especially in Texas? - Management noted Texas as a fertile location for energy markets, with strong relationships and opportunities for power generation and data center clients [61][62]