Hello, and thank you for being here. My name is Regina, and I will be your conference operator today. I would like to welcome everyone to the Primoris Services Corporation Second Quarter 2024 Earnings Conference Call. I will now turn the conference over to Blake Holcomb, Vice President of Investor Relations. Please proceed.

Good morning, and welcome to the Primoris Second 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, August 6, 2024. We disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we may make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures is available on the Investors section of our website and our second 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 second quarter 2024 financial and operational results. In the second quarter, Primoris delivered double-digit growth in both revenue and profitability from the previous year. Our employees have taken ownership of driving our strategy to grow profitably with an emphasis on safety and cash flow generation. In recent quarters, we've been highlighting key drivers of the increased investment in infrastructure solutions including industrial reshoring, growing electricity demand and the transition to lower carbon energy sources. We are seeing these things play out in many of the markets we serve across North America, but perhaps there's no better example of this than in the state of Texas. The Electric Reliability Council of Texas, or ERCOT, recently increased its estimates for future power demand. The revised forecast predicts a more than 75% increase in demand from a peak load of 85 gigawatts in 2023 to 150 gigawatts by 2030. The increase is being driven by a rapidly growing population, the oil and gas industry transitioning their operations to run on electricity rather than gas or diesel, as well as large users of power, such as data centers powering artificial intelligence and cryptocurrency mining. We have already seen the impact of data center development in other parts of the country. And Primoris has a suite of critical services that we can provide for these projects. From high-voltage work and site preparation to later installation and power generation, we are well positioned to continue providing valuable services to the development of data centers. So far this year, we have been awarded or are in the process of constructing close to $400 million of work related to data centers and have identified more than $300 million of projects slated to be awarded in the next 12 months that we believe align well with our expertise. The projected growth will require significant investments in solar and natural gas generation resources as well as substations and transmission lines necessary to deliver the power to the ultimate end users. The state of Texas is encouraging investment in dispatchable resources through its Texas Energy Fund, which could provide up to $10 billion in loans and grants to finance and incentivize construction, maintenance, and modernization of facilities. Primoris has long-standing customer relationships in Texas and a track record of execution that we believe will make us well positioned to capitalize on solar and natural gas power generation as well as the associated power delivery needs. It is still in the early stages for how the Texas Energy Fund will be administered. We are currently evaluating roughly $500 million of natural gas simple cycle peaker facilities that are currently in the planning phases, and we anticipate that there will be more opportunities in the years ahead in Texas and other parts of the country that are expected to experience the same increase in electricity demand. Now let's look at our performance for the quarter by segment. In the Utility segment, revenues were lower compared to last year, driven primarily by lower activity in gas operations. While activity has been as expected or even better in the Midwest and Texas markets, we have seen a slower rollout of gas programs with customers on the West Coast. Some customers have had to modify their programs and lower costs as they work with regulators on rate case approvals, particularly in the California market. Although the delays led to a decline in revenue, we were able to quickly adjust our cost structure to hold margins relatively flat in the business. On the other hand, communications activity was higher from the previous year with more fiber-to-the-home activity in the Southwest. Profitability also improved as we did not have the adverse impacts of higher costs associated with a challenged project last year. The near-term outlook for communications continues to trend positively as opportunities to support the data center network build-outs of our hyperscaler customers increase. Power delivery revenue was fairly consistent compared to the previous year, but we did see profitability increase, driven by improved productivity and a small amount of storm response work that helped to offset the large substation project we constructed last year. I want to thank our employees who traveled from different parts of the country to assist our Texas neighbors who were impacted by Hurricane Beryl and other weather-related events. These men and women work long hours in challenging conditions to restore power to communities in their time of need. We value their contributions and their approach to performing their duties safely and efficiently. Moving over to the Energy segment. The ongoing success of our renewables and industrial construction businesses drove strong revenue and margin growth versus the prior year. In Renewables, the market for our solar EPC solution remained strong and we performed well during the quarter despite some weather-related delays. We also booked roughly $600 million of new projects in the quarter and added another $500 million earlier in the third quarter. These awards include approximately 800 megawatts of battery storage and span across multiple customers and states from California to New York. We are now on track to exceed our new business goals for the year and expect that total backlog in renewables will approach $3 billion by the end of the year, making us essentially booked for 2025 and establishing a solid foundation for growth in 2026 and beyond. In addition to growing our solar EPC backlog, we recently achieved a milestone of $55 million in bookings of our Premier PV electric balance of system or eBOS solutions. Premier PV is a small, but growing business within renewables that is focused on utility-scale products through its offering of combiner boxes, disconnects, wire harnesses and other products making it a complete eBOS solutions provider. Initially started as a value-add option for our customers in a way to avoid long lead times or supply chain disruptions, we are now selling to third parties that value our quality, reliability, and easy to install eBOS solutions. While Premier PV is still a relatively small part of the renewables business, we have made capital investments to grow our production capacity and build on the more than 10 gigawatts of eBOS products deployed since its inception. We believe that Premier PV aligns well with our strategy to expand the services we can offer our clients and has the potential to be a more meaningful contributor to our renewables profitability in the years ahead. In wrapping up renewables, I want to congratulate our team for being selected as the number two ranked solar EPC contractor nationally in Solar Power World's 2024 rankings and were also recognized as a top utility scale solar EPC service provider in several of the states in which we operate. This acknowledgment is well-deserved and evidence of the hard work and dedication of our people. In Industrial Services, we drove double-digit growth and improved margins on solid execution, particularly on projects in the Western U.S. and increased activity in the Gulf Coast region. During the quarter, we also made strides winding down or divesting certain non-core businesses in the segment that will enable us to focus our time and attention on driving margin expansion and cash flow. To summarize, it was a good second quarter in the first half of the year, and we are looking forward to continuing to take advantage of the tailwinds in our markets and delivering safe and consistent execution to our clients. Now, I'll turn it over to Ken for more on our financial results.

Thanks, Tom, and good morning, everyone. Our Q2 revenue was just under $1.6 billion, an increase of $150.3 million or 10.6% from the prior year, driven primarily by strong growth in our Energy segment. The Energy segment was up $194.8 million or 25% from the prior year, driven primarily by solar and industrial construction. The Utility segment was down $28.4 million or 4.4% from the prior year, primarily due to a decrease in gas operations activity and a major substation project that was completed in the prior year. These impacts were partially offset by increased transmission and substation work for our renewables customers and increased activity in communications. Gross profit for the second quarter was $186.7 million, an increase of $29.4 million or 18.7% compared to the prior year. This is primarily due to the increase in Energy segment revenue and improved margins in both segments. As a result, gross margins were 11.9% for the quarter compared to 11.1% in the prior year. Turning to our segment results. Utility segment gross profit was $64.1 million, down $2.4 million or 3.7% compared to the prior year due to the decrease in revenue. Despite lower revenue, gross margins improved slightly to 10.3% compared to 10.2% in the prior year due to improved operational productivity and cost management. We continue to prioritize improving margins in this segment through a combination of favorable project work, MSA rate increases, and higher productivity in our power delivery business. We expect to see some improvement for the full year 2024 compared to the prior year, and further margin expansion in the years ahead as we progress toward our goal to have this segment perform in the 10% to 12% range. However, for 2024, we still anticipate margins will be at the lower end of the 9% to 11% range. In the Energy segment, gross profit was $122.6 million for the quarter, a $31.9 million or 35.1% increase from the prior year due to both higher revenue and improved margins. Gross margins were 12.6%, up from 11.7% in the prior year. The improved margins were driven by strong execution on natural gas power plant projects in the Western U.S. and an increase in renewables revenue. Looking at SG&A, expenses in the second quarter were $100.1 million, an increase of $14.5 million compared to the prior year. The increase in SG&A is primarily due to increased personnel costs and technology investments to support our growth. As a percentage of revenue, SG&A was up slightly from the prior year to 6.4% of revenue due to the timing of certain expenses. But we expect SG&A will be down slightly in the third and fourth quarters as we trend towards the low 6% range for the full year. Net interest expense in the quarter was $17.1 million, up slightly from the prior year due to a $3.2 million unrealized gain on an interest rate swap in the prior year, mostly offset by lower average debt balances this year. Given that we've been able to fund our operations for the first half of the year without the need to draw on our revolver, we now anticipate that our full year interest expense will be between $71 million and $74 million. This is down from our previous estimate of $77 million to $82 million. Our effective tax rate was 29% for the quarter. We believe this rate will be consistent for the full year. Second quarter earnings showed solid improvement from the prior year. EPS increased by $0.19 per share and adjusted EPS was higher by $0.24 per share. Additionally, net income increased almost $11 million to just under $50 million and adjusted EBITDA increased to $117 million, up approximately $15 million or 14% compared to the prior year. Taking a look at cash flow. In Q2, we saw cash flow from operations of $16 million, which drove a small $12.4 million cash use year-to-date. This is a strong improvement over the almost $81 million of cash used through the first two quarters in the prior year. The primary drivers were an increase in deferred revenue related to upfront customer payments and higher operating income. Cash flow is a key focus for our leadership team, and we believe we are on track to see improvements in our working capital through the initiatives we are implementing. Moving over to the balance sheet. We maintained strong liquidity of $480 million, which includes $207 million of cash and $273 million in available borrowing capacity on our revolver. Our trailing 12-month net debt-to-EBITDA ratio, as defined by our debt covenants, dropped to 1.8x EBITDA at the end of Q2. This represents our lowest leverage ratio since the second quarter of 2022 just prior to the PLH acquisition. While our ratio can differ somewhat quarter-to-quarter based on working capital needs, we are trending towards our target ratio of 1.5x EBITDA. Our capital allocation priority continues to be paying down debt with free cash flow in the current interest rate environment. Total backlog at the end of Q2 was just under $10.5 billion, down around $440 million from the end of 2023. Fixed backlog was lower by $332 million from year-end, primarily due to the timing of solar and other energy segment bookings. As Tom mentioned, we closed another $500 million right after the end of the quarter, which tops us back up to where we started the year. MSA backlog was lower by about $109 million from year-end, driven by lower MSA work in Canada and lower pipeline MSA work, partially offset by almost $80 million in additional MSA backlog in utilities. We continue to see a lot of opportunity to win work across our end markets, and we are optimistic that we will build backlog in the second half of the year. Barring any unforeseen project delays or push-outs, we believe we can position ourselves to end 2024 with a higher backlog than we started the year. Before turning it back over to Tom, I'll close the financial overview with our updated guidance. We are raising our full-year EPS guidance to $2.70 to $2.90 per share, adjusted EPS guidance to $3.25 to $3.45 per share, and adjusted EBITDA guidance to $400 million to $420 million for the full year 2024. We are encouraged by our first half results and our outlook for the rest of the year, particularly in solar and industrial construction, along with lower interest expense. With continued safe and successful execution, we believe we are on the path to another record year of revenue and earnings in 2024. With that, I'll turn it back over to Tom.

Thank you, Ken. Prior to opening the line up for questions, I'd like to recap some of the key points of the quarter. First, demand for the services we provide remains high across our markets and is becoming increasingly important in the state of Texas. We have the relationships and experience to build solar and gas power generation, critical components of data centers, and the power delivery services required to connect them. Second, our renewables business continues to thrive and show signs of accelerating in the years ahead as we build backlog and grow our project management teams. The addition of ancillary services like battery storage, O&M, and eBOS solutions through Premier PV simplifies the construction process for us and our customers and expands our already strong relationships with them. Lastly, we are making progress in improving our utilities margins through improved mix, new MSA contracts, and increased productivity even as the timing of customer spending can fluctuate on a quarterly basis. Ultimately, we are confident that there is a lot of work that will be needed from our utility segment in the years ahead to meet the needs of the North American economy. We have a lot of opportunity ahead of us to drive profitability and cash flow higher. Success in these areas along with the continued capital discipline will take us further down the path of achieving our goal to be the best allocators of capital in our industry. In our view, this will allow Primoris to reach its potential to the benefit of our employees, our customers, and our shareholders. We will now open up the call for your questions.

Our first question comes from Jerry Revich with Goldman Sachs.

This is Adam Bubes on for Jerry Revich. In electric utilities, just wondering if you can speak to what customers are telling you about their investment plans over the next 2 to 3 years to prepare for the increased load growth? And what level of growth is at business today.

I'll let Tom talk about kind of what the customers are saying. In terms of revenue growth, for us, it's fairly low revenue growth right now. We're targeting single-digit growth this year, Adam, as we've talked about in the past, because we are more focused on margin improvement, and this is obviously the first of the three-year plan for us, focused on margin improvement. And then, Tom, you've probably been talking about customers.

What we're hearing from clients is a little bit different, depending on what part of the country we're in. I think some of them are waiting to see what happens in the election. The others are not, and others are planning for the growth here in Texas. For instance, our customers are expecting significant growth, and they're seeing their budgets increase year-on-year. So they're asking us to support that and grow with them. Other parts of the country, we're seeing the same. We're having very similar conversations. It's kind of a mixed bag.

And then shifting to utilities. What utility margins, what type of margin improvement are you now thinking about in 2025 versus 2024? And what inning are we currently in the renegotiating of MSA utility contracts flowing through?

I don't have specific margin targets for 2025 right now. Regarding what phase we are in, there are two parts to this. We've discussed this before. There's the ongoing aspect, where we renew contracts every year. Then there's the other part, focusing on better payment terms and related factors. We are likely in the second or third phase, and these developments will take place over 2024, 2025, and 2026 as well.

But the ones we've targeted, we're probably in the eighth or ninth inning of some of those negotiations, and those negotiations will finish soon, but the game starts over, right? Every time one expires. Every year, we have MSAs that expire or come up for renewal.

And last one for me. Is any of the year-to-date revenue growth in utilities attributable to intentional margin-accretive shedding in that business? Or is it really the lapping of the project that you referenced in gas operations, mainly?

It's a little bit of both.

It's Pete Lukas for Lee. I appreciate it, you guys covered a lot in the prepared remarks. Just two quick questions for you. You had spoken on your Analyst Day about wind-down of activities for a portion of the business. What, if any progress has been made on that front? And how are you thinking about expected proceeds and potential benefits to gross margins as a result of any actions?

We've actually been in the process of winding some businesses down even now and rather in divesting ourselves of others. The divestitures will take a little while, but we did just recently sell a smaller business, and the net proceeds from that were minimal, but they were positive. We sold some assets of another business that were winding down and some of that was fairly positive for us as well, and the rest will probably come even later this year or possibly go into 2025. Some of these are just going to take some time. Some of them we have actually buyers that are interested in the businesses, and those discussions will take time to evolve.

And last for me. Can you just talk about weather dynamics in the quarter and how this may have impacted the segments? And any read into how that's progressing in the current quarter?

We had some rain in the second quarter, obviously, that impacted some of our solar and heavy civil business. It's probably a little bit of our industrial businesses here on the Gulf Coast. Some of them will get some recovery from their clients just because of their name storms and the language in the contract will help us a little bit to cover some of the costs, not necessarily have any upsides, obviously. Others will not. The impacts were not as significant as we thought. We were able to get back to work pretty quickly on all of those sites. So it's been pretty good. We had a little bit of storm work that gave us a little bit of revenue in the second quarter and some early third quarter this year, again, not real material.

This is Alex Hantman on for Julio. First question on data centers. Are you seeing any trends around expansion in the size of projects or relative growth in your portfolio?

We are observing increased opportunities related to work that supports or is part of the construction of data centers, particularly in power generation. Currently, we are conducting several studies on projects like peak shavers in Texas to prepare for the future demand driven by data center construction. Additionally, we are engaged in fiber installations for clients and are also undertaking more projects in power generation linked to data centers, involving both solar and gas.

And then your question around the EPS guidance. Can you talk a little bit about some of the scenarios that might bring us to the low end versus the high end of the guidance?

Yes. I mean it's the normal opportunities, right? If we have any serious weather in the back half of the year, that could impact us from a cost perspective, or if winter sets in earlier in Q4 than we're expecting, that could take us to the lower end of the range. On the opposite side of the spectrum towards the top end of the range, good project closeouts, some storm work from named hurricanes during Q3 and early Q4. Those are the usual suspects that drive us toward the upper end of the range.

On for Steve Fisher. So yes, just back in margins for a second. Another quarter of robust profit in the Energy segment. I just want to understand how that compared to your expectations going into the quarter and maybe if you can give us a little bit more color as to what drove that? And then as we think about the second half, how much conservative and would you say you're baking into guidance? And what are the biggest swing uncertainties in your mind there?

Yes. There aren’t many uncertainties as we move into the second half of the year because we are primarily reducing our backlog. The margins were slightly higher than we expected due to the timing of a few minor project completions during the quarter and the fact that we generated a bit more revenue than we originally thought. Looking at the second half of the year, I believe it will be another strong finish for us. We are confident in our current position. While there are still some opportunities to pursue in a few of our businesses, they represent a relatively small portion of our overall workload.

And then in terms of the backlog, so I think we would have maybe expected a little bit stronger bookings for the Energy segment, especially when you called out the $700 million of awards there in Q2 with the July press release. So I know there's another $500 million that was booked in early July that we'll hit Q3. But can you discuss just some of the moving parts within backlog there? Like what were the ins and outs in terms of bridging backlog from Q1 to Q2?

I'm not sure if there's any specific strategy involved, but much of it comes down to timing. The same applies to the transition from Q2 to Q3. We could have easily recorded an additional $500 million that shifted into Q3 instead of late Q2. It all depends on when the contracts are signed, and we don't include it in our backlog until those contracts are finalized. We have many opportunities approaching the end of this year, with several projects in negotiation and indications that we are the lowest bidders. We are preparing to sign contracts that will happen throughout the third and fourth quarters, which will position us well for 2025. However, as we near the quarter's end, some of this gets delayed, and we have little control over that. Our expectation is that these will be added to our backlog as we enter 2025, which is what matters most to me.

It's Kevin on behalf of Adam. Could you discuss the energy margins for the quarter? They were quite strong. Do you think this trend can continue in the second half? That might push us towards the higher end of the guidance.

That's certainly a possibility. I mean, right now, most of the businesses in our Energy segment are performing well. Some of it is the timing of projects. If you got a project that we're just starting your margins, you're probably not going to see margins go up a great deal on projects that are in the early phases, but we also have projects that are closing out, and our guys continue to perform, which they have so far this year that there is potential for an upside.

Could we discuss the demand in communications? I understand you mentioned Southwest. Was that one specific customer influencing the demand? Also, how do you anticipate the second half of the year will look in Communications?

No, we still expect to see good improvement in performance by our communications group in the back half of the year. They performed extremely well since finishing out that problem project they had last year, and they've been very consistent. They're not growing at a rapid rate, but they are growing and they're performing well. And it's with a number of different clients in various different parts of the country.

And Arizona.

And Arizona.

There is definitely a Southwest trend. And then just quickly, there was a gain on sale rather sizable on the cash flow. Was that a particular divestment in the industrial stuff that you guys were mentioning?

Yes. It was a couple of divestments. When we sold one of our businesses, and the other one, we're winding a business down. And look, we sell equipment through this underutilized avenue that was there. It's kind of spread across all three of those.

I just had a couple of questions here. Tom, I think you guys made mention in the release in the past around some opportunities developing in the gas-fired power market. Be curious sort of what that competitive environment looks like, how do you manage your exposure to those sorts of risks and what will be a typical sized project for Primoris. It seems like that could be an interesting opportunity for you?

We're doing some of this work now in our union group out in California and out West. And they have an expertise in that. So they manage their risk extremely well, and they're performing really well. Yes, there are a number of competitors, other contractors they compete with, but we've won our share of the work. And one of the most recent jobs we were just basically awarded was negotiated. So there was no competition. Non-union, we have an expertise, but primarily more inclined to go with simple cycle or peak shavers, which are much smaller, maybe $300 million and down perhaps. And again, we know that work extremely well. We will rely on the expertise we have in the company. Actually probably not as much competition here in Texas in some of the areas in this region as we've seen in some other parts of the country.

Do you have any insight into how customers in the solar sector are reacting to the upcoming election? Is there any indication of a cautious approach to initiating new projects? It doesn't seem like there is, but I’m interested in your perspective.

The customers that we work with specifically, we have not. They're not really worried about what the next administration is going to do. They see investment in. They may possibly see a slowdown in the apparent demand for solar energy. But honestly, there is need for it to be a more conservative approach to how fast you can build these facilities anyway and they'll probably see that being more in line with what's realistic more so than being aggressive. So I think all of our customers, we negotiated about 90% of the work that we execute and all of our customers are very well-funded developers. So we haven't really seen anything.

But yes, just to add to that, we still see it growing. It just may not grow quite as quickly as it's been growing in the past couple of years.

Yes, just last one on the Utility segment. How much of the headwind is some of the softness in spending from gas utilities I guess, to the gross margin expansion story? In other words, can you still expand margins in the face of some of that sort of spending pressure near term?

Yes, I believe we can achieve that. I truly believe it's possible. Some of it depends on our performance; if we improve our productivity and efficiency on job sites, we can make progress. Some aspects involve negotiations, and clients are inclined to seek our services and are eager for our support. Our partners have been very open to negotiating adjustments to our rights and service agreements. However, some clients have reduced their spending, but they are likely spending more to achieve the same level of work. Therefore, their overall spending isn't decreasing; they are simply facing similar interest rates and impacts that we are experiencing.

That will conclude our question-and-answer session. I will now turn the call back over to Tom McCormick for closing remarks.

Thank you. And thank you for your questions and interest in Primoris. We're pleased with our results through the first half of 2024 and expect the second half of the year to put us on a positive trajectory for 2025. Thank you, and we look forward to updating you next quarter.

That will conclude today's call. Thank you all for joining. You may now disconnect.