Thank you all for joining us. I would like to welcome everyone to the Primoris Services Corporation First Quarter 2024 Earnings Conference Call and Webcast. I will now hand it over to Blake Holcomb, Vice President of Investor Relations. Please proceed.

Good morning, and welcome to the Primoris First Quarter 2024 Earnings Conference Call. Joining me today with prepared comments are Tom McCormick, President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer. Before we begin, I would like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook as of today, May 9, 2024. We disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures is available on the Investors Section of our website in our first quarter 2024 earnings press release, which was issued yesterday. I would now like to turn the call over to Tom McCormick.

Thank you, Blake. Good morning, and thank you for joining us today to discuss our first quarter 2024 financial and operational results. Primoris had a solid start to the year, delivering improved revenue and margins compared to the prior year. Our teams across the organization are engaged and focused on executing our strategy to improve profitability and cash flow while leading with safe and productive performance. We continue to see momentum driving increased investment in infrastructure solutions in North America in three primary areas that are having a positive impact on our business: the energy transition, growing electricity demand and grid modernization, and the increase in facility construction to support a shift in the supply chain. The transition to lower carbon-emitting sources of energy is driving increased adoption of solar power generation as well as natural gas generation to replace retiring coal plants and help bridge the energy transition. There's also a growing demand for electricity that is being driven by new facility construction, including data centers and chip manufacturing, which are supporting emerging technologies or adding critical component production capacity closer to the U.S. Many of these new sources of generation will need additional transmission lines and substations to connect them to a grid that is already in need of modernization in order to maintain reliability and support higher electrical demand. We believe that these themes are interconnected and will require sustained investment for an extended period, and we are well-positioned to capitalize on these themes in the coming years. Now let's look at our performance for the quarter by segment. Starting with the Utilities segment, we had a couple of factors that led to lower revenue versus the prior year. First, we experienced more seasonal delays in the first quarter of 2024 driven by less favorable weather conditions in certain markets and a slower ramp-up in communication spending. Second, while our MSA revenue increased from the prior year, we executed less project work during the quarter. This was primarily due to a major substation project that we were constructing this time last year that was completed in 2023. Despite these impacts, we were able to deliver comparable margins driven by good operational performance in gas operations and communications, which helped to offset a decline in the higher-margin project work. Building our backlog and mix of project work remains a high priority for the Utilities segment to reach our target gross margin goals. Our project teams are actively evaluating our growing list of projects that we believe are well-suited to our capabilities and address a market need for our customers. As we discussed on the fourth quarter earnings call, much of their focus right now is on supporting the power delivery needs of the Renewables business, but this will continue to evolve as our teams estimate and bid more transmission and substation projects. Turning to the Energy segment, we achieved significant top-line growth and margin expansion, driven by increased renewables and industrial construction activity. We initiated work on several new projects during that quarter that were awarded during our record-setting 2023. The growth in these businesses was able to more than offset the decline in pipeline revenues that we anticipated due to a lower backlog of projects to start the year. Heavy Civil also contributed to top-line growth and improved margins versus the prior year. In Renewables, we began ramping up on three major projects, which are progressing at a high degree of efficiency, which helped drive the quarterly outperformance. This efficiency, combined with the timing of new project awards being pulled into Q4 2023 led to our revenue outpacing the booking of new work. We ended the quarter with a healthy backlog of $2.1 billion, albeit slightly down from year-end. The solar portfolio of new projects remains robust, and we expect to see bookings pick up in the second quarter that will resume our backlog growth. In fact, we are evaluating a couple of projects that, if awarded, would allow us to exceed our new business goals for the full year. Additionally, we are seeing increased revenue contribution from adjacent services like battery storage and O&M that accounted for roughly 7% of Renewables revenue in the first quarter. These services, along with high-voltage work provided by our power delivery business are still in the early stages. Still, we are encouraged by the progress we are making and believe that they will continue to offer a competitive advantage for us with our solar customers going forward. Industrial Construction was also a bright spot for the quarter. We had improved performance in our Canadian operations and commenced work on new projects in the western U.S. that led to improved margins in the quarter. These drivers offset the timing of work being pushed into Q2 in our Gulf Coast operations. The funnel of opportunities in the Industrial business is higher than we've seen in recent years, and we believe we can continue to grow while being selective in the projects we choose to bid in the coming quarters. We expect that this will mitigate the loss of revenue from select subscale or low-margin businesses that we will look to wind down or divest over the next several quarters. Overall, we are pleased with our performance in Q1, which is historically our lowest quarter for revenue and earnings due to seasonality, particularly in the Utilities segment. We are in close contact with our customers to ensure that we have the appropriate level of crews and equipment to help them meet their 2024 objectives. While still early in the year, we are optimistic that our full-year margin and cash flow goals are achievable and potentially beatable with successful execution and continued investment in our growth markets of renewables and power delivery. Now I'll turn it over to Ken for more on our financial results.

Thanks, Tom, and good morning, everyone. Our Q1 revenue was $1.4 billion, an increase of $156 million or 12.4% from the prior year, primarily driven by strong growth in our Energy segment. The Energy segment was up over $245 million or 33.4% from the prior year, driven by strong growth in solar and industrial construction as well as some work that was pulled forward from Q2 and Q3. The Utilities segment was down a little over $48 million from the prior year due to a decrease in project work and a slightly slower start to the year in communications, partially offset by increased MSA revenue. The majority of the decline in project work was due to the completion of a large substation project during 2023. We expect to see some choppiness in project revenue on a quarterly basis as we continue to grow toward our preferred mix of project work in the segment. I also want to point out that we made a change in how we report segment revenue. Historically, we've reported segment revenue net of the intersegment eliminations since it wasn't material to our total revenue. However, starting this quarter, we are showing gross revenue for each segment and then separately showing the intersegment revenue deduction. We believe this more accurately reports the gross revenue and revenue growth of each segment and better illustrates the growing benefit of cross-selling services between our segments. An example of this is our power delivery group building substations and transmission lines for our renewable customers. Gross profit for the quarter was approximately $133 million, an increase of $34 million from the prior year, primarily due to higher revenue and improved revenue mix. Gross margins were 9.4% for the quarter compared to 7.9% in the prior year. Looking further at our segments. In the Utilities segment, gross profit was $29.5 million, down $4.1 million compared to the prior year. This was driven by the lower amount of project work and the slower start in communications work compared to the prior year. Gross margins of 6% were slightly below the 6.2% in the prior year, primarily driven by the lower project work but still in the middle of our expected range of 5% to 7%. We expect to see margins move into our 9% to 11% range for the remaining quarters of the year. In the Energy segment, gross profit was $103.9 million for the quarter, a $37.7 million increase from the prior year due to both higher revenue and improved margins. Gross margins were 10.5%, up from 8.9% in the prior year. The higher gross margins were a result of an improved mix from renewables work and improved margins in our industrial businesses in Canada and the western U.S. Turning to SG&A. Expenses in the first quarter were $88.6 million, an increase of $10.6 million compared to the prior year but in line with our expectations. The increase in SG&A is primarily due to increased personnel costs to support our growth. As a percent of revenue, SG&A was essentially flat to the prior year, and we expect SG&A for the full year to remain in the low 6% range. Net interest expense in the first quarter was $18 million, down around $0.5 million from the prior year. The decrease was a result of lower average debt balances, partially offset by higher average interest rates. Our effective tax rate was 29% for the quarter, and we believe this rate will be consistent for the full year, depending on the states in which we work and nondeductible components of per diem expenses. Earnings for the quarter saw a significant improvement from the prior year. EPS increased by $0.33 per share, and adjusted EPS was $0.29 per share higher. Additionally, net income increased to just under $19 million, an increase of almost $18 million from the prior year. And adjusted EBITDA increased to $73.8 million, up $20.9 million or 40% from the prior year. Looking at cash flow for Q1, we saw our cash used in operations of $28.5 million. This was an improvement of around $87 million from the prior year. The primary drivers were an increase in deferred revenue related to upfront payments for future projects and higher operating income. Looking at the balance sheet. We maintained strong liquidity of $451 million, which includes $178 million of cash and $273 million in available borrowing capacity on our revolver. And our trailing 12-month net debt-to-EBITDA ratio held steady at 2x at the end of the quarter. We could still see our ratio tick up into Q2 and Q3 based on seasonal working capital needs but then trend back down as we near the end of the year. Transitioning to backlog, we ended the quarter with $10.6 billion in total backlog compared to $10.9 billion at the end of 2023. Fixed backlog decreased $359 million during Q1, primarily due to the timing of booking new solar and industrial projects following a strong fourth quarter of new awards. We typically see variability in new awards from quarter to quarter, and we expect to resume backlog growth in the coming quarters. MSA backlog was up $86 million from year-end, driven by $182 million of backlog growth in Utilities. And now turning to our guidance. We are maintaining our full year EPS guidance of $2.50 to $2.70 per share, adjusted EPS guidance of $3.05 to $3.25 per share, and adjusted EBITDA guidance of $395 million to $415 million for the full year 2024. The strong start to the year gives us increased confidence that the higher end of our guidance range is achievable if we continue to see positive momentum across our end markets. We will further assess our guidance as 2024 unfolds and we learn more about the specific timing and scope of new awards. With that, I'll turn it back over to Tom.

Thank you, Ken. Before we open up the call for questions, I want to highlight key points of the strategy we laid out at our recent Investor Day that will drive our decision-making for the next three years. Our objective is to grow gross profit at a 9% to 12% annual rate through 2026 and improve operating cash flow to 4% to 5% of revenue. We will accomplish this by investing in our renewables and power delivery growth engines while sustaining our foundational businesses' performance through consistent execution, focused capital allocation, and purposeful customer growth. This begins with prioritizing profitable growth in the right markets with the right customers. We will continue to do what we say we're going to do for our customers, employees, and shareholders with the goal of deploying resources to the highest returns in our portfolio. We may not be the largest service provider in all of our markets, but our aim is to be the best allocators of capital in order to generate the best returns. We are still in the initial stages of driving operational improvements to meet our longer-term margin and cash flow goals, but we are starting to see the results of these initiatives with a strong start to 2024. We believe we have the right teams in place to continue marching toward these goals and look forward to further safe, consistent, and high-quality execution by our employees for the benefit of our customers and shareholders. We will now open up the call for your questions.

Your first question comes from the line of Lee Jagoda with CJS Securities.

So Tom, earlier in the call, and certainly at the Analyst Day, you discussed that $200 million to $250 million in business that could act as a headwind to growth in the Energy segment. It seems that none of that happened in Q1. I have a couple of questions about it. First, do we anticipate it will occur this year? Also, any insights on the timing of that and the margin structure of that revenue would be appreciated.

Yes. Lee, we're working on about three of those businesses. Roughly $90 million of that $200 million should be completely wound down or very close to it by the end of this year. The balance of it will probably take us into 2025.

Okay. And then in terms of interest expense, Ken, it looks like your guidance is above the run rate that you had in Q1, and even the sequential decline from Q4 to Q1 was more than we were expecting despite the debt kind of being flat, what are the moving parts there? And why should it be going back up through the balance of the year?

Yes, the main parts, Lee, are going to be working capital, especially during Q2 and Q3 are seasonal peaks and whether or not we need to draw on the revolver in order to work through that. In our original forecast, we had planned to draw on the revolver even as early as Q1. Obviously, cash flows were better than we expected. We didn't need to, so that's the reason it came in below. So if we're able to continue at the rate we are, our interest expense may trend below what we had originally guided to.

And just one more for me and I'll hop back in. The CapEx guidance, is that a gross number or a net number? And to the extent that is a gross number, how should we think about the equipment sales to offset that during the year?

It's a gross number like it always is. And we're expecting sales to be much less than they have been in the past, probably somewhere in the $30 million to $35 million range for the year, maybe as high as $40 million but nowhere near the $60 million-plus that we had last year.

Next question comes from the line of Steven Fisher with UBS.

So obviously, a pretty robust profit quarter in the Energy segment. You mentioned kind of a mix of renewables in Canada and western U.S. projects. How kind of one-off was this or how sustainable might that be? And related to this, I know you said there's potential for the upper end of the range for the year if you see positive momentum. Where do you think you need to see that momentum continue? I thought you were pretty well booked on solar, and that maybe it's just more execution that you needed to see more comfort in for the rest of the year to raise. But is it more bookings that you need and where might you need those bookings?

Steve, I’m not concerned about bookings. To address your last question first, we can definitely continue to perform. It’s all about consistency and fulfilling our commitments across all our businesses. Canada is in a very sustainable position currently. The western U.S. has a solid workload and a nice backlog that will support them until 2025, so there’s no concern there. Renewables continues to grow as expected, accounting for about 20% to 30% of our business, potentially a bit more depending on how well the other business lines perform. Our focus now is on improving performance and execution across the other businesses to meet the margin targets we established during that meeting.

Okay. One of the things that we've heard a bunch about is the shift in electric distribution spending to transmission. What are you seeing in your customer base and kind of regional territories that you have exposure to? And what are your customers telling you about the second half of the year?

Well, we're still in the first half right now, but what we're seeing is it depends on the client and the part of the country that you're in. We have some clients, the majority of their work is going to be distribution work. They have some new transmission going in, but they obviously have to get through the permitting and everything else. We have other clients that they've just recently announced their energy demands having grown beyond what they had forecasted as recent as three months ago. And so there's going to be quite a bit of transmission and also along with that more distribution. So it just depends on what part of the country and what client. We see a lot of opportunities in that for our power delivery group in both transmission and distribution, and it is a little bit different for each client.

Next question comes from the line of Jerry Revich with Goldman Sachs.

I'm wondering if you could just talk to us about the performance of the solar business in the quarter. And can you update us on how many crews you folks are running now and the crew growth trajectory versus the last update we had?

I'll start with your last question, Jerry. Right now, we have 16 project teams in place and expect to have 50% of the other two teams ready, which will bring us to a total of 18. Our goal is to achieve this by the end of September. Regarding the performance of the Renewables group, they continue to excel. We are currently working on several projects for clients and anticipate announcing some new awards in the second quarter. Much of this success stems from our clients' trust in our performance and execution.

And what was the top line performance for solar and renewables in the quarter?

A little over $400 million.

Okay. And then really strong start to the year from a margin standpoint. As we think about the margin cadence into Q2, it's usually a quarter of nice step up, but across the portfolio, anything we should keep in mind versus a pretty significant margin pickup that we normally see seasonally based on what you've seen out of Q2 so far?

I don’t think so. I believe you will see ongoing improvement in our Utilities throughout the year towards the goals we’ve established, continuing into 2025. I expect Renewables to maintain their performance, and we should observe increased activity in the industrial sector as they take on more projects and move into the field. We’re also noticing some potential opportunities in Pipeline that we hope to see materialize in the upcoming months. As you know, those projects move into the field quickly. Therefore, we've been very selective in the type of work we bid on in that area to ensure we are taking on the right projects for the right clients. If those opportunities come to fruition, we should see additional benefits as well.

Next question comes from the line of Brent Thielman with D.A. Davidson.

Great start to the year. I guess, Tom or Ken, the Energy segment revenue, I guess overall growth a lot better than we thought just to kick the year off. When you look at the sequencing of projects in the backlog today and what you're likely to kind of pick up going forward, should this still be the lowest revenue quarter of the year and we can still expect to see a buildup from here? Did you pull in more work than you would have thought?

It's a little bit of both. We did take on more work than we anticipated. However, this should be the lowest quarter of the year for the Energy segment.

Okay. And then I guess back to Utilities, it sounds like maybe a little slower start in the communications side. What's your expectations for that business as we progress through the rest of the year? Should we see that sort of inflect higher from here?

No, I don't think so. I think that we're seeing, with the hyperscaling and the BEAD, the Broadband Equity, Access, and Deployment money that's coming out there, we've got a lot of clients out there that are really wanting to move forward with some projects. So I think we're probably going to see an uptick in the second and third quarters. We may see them slow their spend down at the end of the year, which is typical of what we've seen in the last couple of years in communications, but I think it's going to be a good year for our communications group.

Okay. And just lastly, Tom, I couldn't help but you did mention the Pipeline business and maybe a little more optimism there. Maybe you could just share what exactly you're starting to see in that side of the business?

It's more bid activity. So you look at your win rates, your historical win rates and we should win our share of that work. We have some projects that we've competitively bid that we're shortlisted on now, they haven't been awarded. We don't know if we're going to be awarded those projects. But just the fact that, that activity is going on, and it's the type of work in which we have expertise and we feel like we can be competitive, it's just positive. It's not going to drive me to increase their forecast for the years just because it's still going to be a down year for Pipeline as it has been in the last couple of years.

Next question comes from the line of Julio Romero with Sidoti & Company.

Yes. This is Alex on for Julio. First question on the Utilities segment. What are the biggest levers to get you to the high and low end of the Utilities gross margin range? Is it a renegotiation of PLH contracts or increased mix of power delivery? Just appreciate your help thinking about it.

We have some Master Service Agreements that are currently in renewal. We recently renewed some that went into effect in April, and we are negotiating others that should take effect in the latter half of the second quarter. The sooner these agreements become active, the better for our business. We are also looking to increase our project work, aiming for a balance of 65%-35% between MSA and project orders, or 60%-40%. The more project work we can successfully bid for, win, and execute, the higher that percentage will rise.

I appreciate the context. And could you expand a bit on the higher industrial construction activity in the western U.S.? I think you mentioned it in the press release and earlier remarks, but just curious for a little bit more context.

Much of the work involves power generation and compressor stations that support power generation facilities. One of the projects is a repowering initiative that we have been working on for nearly seven or eight years. It was not permitted at first, but it revived this year, and we successfully negotiated and secured that project with the client. We are also starting a project out West where we are installing new turbines for a client. The demand for energy in that area remains strong, and the transition from fossil fuels to renewable energy will take time, so there is still a significant power demand that needs to be met.

Appreciate that. And last question from us. On capital allocation, could you just speak to the M&A pipeline lately and whether valuations are any closer to meeting your selection criteria?

Yes, we have consistently mentioned that we are seeing a lot of mergers and acquisitions. For us, it's not really about valuation; it's more about finding suitable opportunities that meet our quality standards. We are actively looking for different acquisitions. Currently, we are not in serious discussions with anyone, but we are continuing to evaluate options. The focus remains on fit and opportunity rather than valuation.

We are seeing increased activity, but it needs to be the right opportunity for us.

Your last question comes from the line of Adam Thalhimer with Thompson, Davis.

Great quarter. Tom, you mentioned a couple of solar jobs that were particularly large. Why is that, that you're bidding, I think?

We have the ability and expertise to take on significant projects, although we are not pursuing billion-dollar ventures. By significant, I mean projects in the range of $350 million to $420 million, with clients we know well and have established relationships with. We’ve been involved from the site selection phase and are very familiar with the location and its requirements. This aligns perfectly with our capabilities.

Great. Power for data centers is a hot topic. Is that an opportunity for you guys?

We are working on some projects for a few clients at the moment. One of our goals and initiatives is to expand that business and increase our presence in that market.

I know you do work on gas power plants in the Southwest. Do you do anything outside of that region?

We have indeed engaged in power generation in the East at some simple cycle facilities. We have the necessary expertise and are exploring that market. However, we want to ensure that we remain within our areas of expertise and capabilities to be successful. We are also considering opportunities in the Southeast.

And then lastly, I don't know how much you want to say on the call, but you mentioned dispositions again and you talked about that at the Analyst Day, too. Just curious, maybe just like timing on that.

Really, we don't know the timing. The main focus for this year will be on the two or three small businesses that we are winding down. As Tom mentioned, those businesses collectively generate about $90 million in revenue, highlighting their small size.

$90 million of revenue. Okay, great.

There are no further questions at this time. Mr. Tom McCormick, I turn the call back over to you.

Thank you, ma'am. Thank you for your questions and interest in Primoris. I'll just close by recapping the key takeaways for the quarter. Our strong first quarter results have given us a solid foundation toward achieving our annual targets. Strong tailwinds driving increased investment in infrastructure solutions, particularly in power generation and grid modernization are expected to continue trending favorably based on leading market indicators and our ongoing conversations with clients. And finally, we are focused on allocating our resources to the businesses in our portfolio that will generate the best returns on capital and drive improved profitability and cash flow. Thank you, and we look forward to updating you next quarter.

This concludes today's conference call. You may now disconnect.