Market Overview

Primoris Services Corporation Announces 2017 First Quarter Financial Results

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Board of Directors Declares $0.055 Per Share Cash Dividend

Financial Highlights

  • 2017 Q1 revenue of $561.5 million, a 30% increase over 2016 Q1
  • 2017 Q1 net income attributable to Primoris of $7.7 million, a 186% increase over 2016 Q1.  Earnings per share of $0.15 increased by $0.10 from 2016 Q1
  • 2017 Q1 cash flow from operations of $49.1 million, compared to use of cash by operations of $35.6 million in 2016 Q1
  • Total backlog of $2.8 billion at March 31, 2017, a 28% increase over 2016 Q1

DALLAS, May 08, 2017 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ:PRIM) ("Primoris" or "Company") today announced financial results for its first quarter ended March 31, 2017.

The Company also announced that on May 5, 2017 its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on June 30, 2017, payable on or about July 15, 2017. 

David King, President and Chief Executive Officer of Primoris, commented, "We have started this year with record revenue for the first quarter, while strong bookings during the quarter have kept our backlog at a record high.  Despite the traditional weather-related slow start to the year for our Utilities and Distribution segment, our revenue and earnings improved significantly from last year's first quarter driven by the performance of our Pipeline and Underground segment.  We experienced an increase in earnings in our Power, Industrial, & Engineering segment and expect that the power market will continue to improve over the course of the year, with the continued low cost of natural gas a key driver for the pipeline, power, and industrial markets.  In April, our Board of Directors determined to end the process for a potential sale of our Texas Heavy Civil division, and while the Civil segment struggled in the first quarter, we are anticipating profit improvements in the segment by the end of this year."

Mr. King continued, "We have maintained a strong balance sheet and currently have our lowest debt to equity ratio in almost four years.  We continue to be very active in looking for the right acquisition and are beginning to see opportunities to buy the right company at the right price.  Combining acquisitive growth with the growth opportunities for our current business units, we feel confident in the long-term outlook and performance for Primoris."

2017 FIRST QUARTER RESULTS OVERVIEW

Revenues in the first quarter 2017 increased by $131.1 million to $561.5 million from $430.4 million for the same period in 2016.  The primary reason for the increase was two large pipeline projects in the Pipeline & Underground ("P&U") segment.  Gross profit for the first quarter 2017 increased by $15.8 million to $55.1 million from $39.3 million for the same period in 2016.  Gross profit as a percentage of revenue increased to 9.8% for the first quarter 2017, compared to 9.1% for the same period in 2016, reflecting the impact of the two large pipeline project in the P&U segment as well as improved margins on power and industrial work in the Power, Industrial, and Engineering ("PI&E) segment.

SEGMENT RESULTS

Through the end of the year 2016, Primoris segregated its business into three reportable segments: the Energy segment, the East Construction Services segment, and the West Construction Services segment.  In the first quarter 2017, Primoris changed its reportable segments to match the changes in the Company's realigned internal organization and management structure.  A Form 8-K was filed on April 7th containing historical revenue, margin, and backlog information for the new segments.

  • Power, Industrial, and Engineering - The Power division of the PI&E segment includes ARB Industrial, Primoris Power, ARB Structures, and Primoris Renewable Energy.  The Industrial division of this segment includes Primoris Industrial Constructors, Primoris Fabrication, and Primoris Mechanical Contractors.  The Engineering division of this segment includes OnQuest and PD&C.
  • Pipeline and Underground – The P&U segment includes Rockford, Vadnais Trenchless, Primoris Field Services, and Primoris Pipeline.
  • Utilities and Distribution – The U&D segment includes ARB Underground, Q3C, and Primoris AV.
  • Civil – The Civil segment includes Primoris Heavy Civil, Primoris I&M, and BW Primoris.

Segment Revenues
(in thousands, except %)

    For the three months ended March 31,
    2017
Unaudited
  2016
Unaudited
        % of       % of
        Total       Total
Segment   Revenue   Revenue   Revenue   Revenue
             
Power, Industrial, & Engineering   $ 131,240   23.4 %   $ 138,638   32.2 %
Pipeline & Underground     183,445   32.7 %     54,336   12.6 %
Utilities & Distribution     116,980   20.8 %     103,754   24.1 %
Civil     129,837   23.1 %     133,718   31.1 %
Total   $ 561,502   100.0 %   $ 430,446   100.0 %
                         

Segment Gross Profit
(in thousands, except %)

    For the three months ended March 31,
    2017
Unaudited
  2016
Unaudited
        % of       % of
    Gross   Segment   Gross   Segment
Segment   Profit   Revenue   Profit   Revenue
             
Power, Industrial, & Engineering   $ 15,524   11.8 %   $ 11,585   8.4 %
Pipeline & Underground     28,125   15.3 %     4,999   9.2 %
Utilities & Distribution     8,273   7.1 %     11,885   11.5 %
Civil     3,131   2.4 %     10,808   8.1 %
Total   $ 55,053   9.8 %   $ 39,277   9.1 %
                 

Power, Industrial, & Engineering Segment:  Revenue for the Power, Industrial, & Engineering segment decreased by $7.4 million in the first quarter 2017, compared to the same period in 2016.  The primary reason for the decline in revenue was the completion of several wastewater treatment plants and a parking structure project in 2016, as well as decreased volume at a large petrochemical project.  Partially offsetting the decreases was increased revenue from power projects.  Gross profit for the Power, Industrial, & Engineering segment increased by $3.9 million in the first quarter 2017, compared to the same period in 2016.  The increase in gross profit was primarily the result of higher revenue from power projects.

Pipeline & Underground Segment:  Revenues for the Pipeline & Underground segment increased by $129.1 million in the first quarter 2017, compared to the same period in 2016.  The increase in revenue was primarily from two large Rockford pipeline projects in Florida, partially offset by reduced revenue at Primoris Field Services after the completion of a large project in 2016.  The gross profit for the Pipeline & Underground segment increased by $23.1 million in the first quarter 2017, compared to the same period in 2016, primarily as a result of the higher revenue from the two Florida pipeline projects.

Utilities & Distribution Segment:  Revenue for the Utilities & Distribution segment increased by $13.2 million in the first quarter of 2017, compared to the same period in 2016.  The increased revenue was driven by increased volume at each of the segment's business units. The gross profit for the Utilities & Distribution segment decreased by $3.6 million in the first quarter 2017, compared to the same period in 2016, primarily as a result of the decreased revenue for a major ARB Underground utility customer and less profitable type of work performed for a major Q3C utility customer.

Civil Segment:  Revenue for the Civil segment decreased by $3.9 million in the first quarter of 2017, compared to the same period in 2016.  The decreased revenue was driven by lower revenue from departments of transportation at Primoris Heavy Civil, partially offset by increased airport revenue, and by lower Primoris I&M revenue at a large petrochemical project.  The gross profit for the Civil segment decreased by $7.7 million in the first quarter 2017, compared to the same period in 2016, primarily as a result of the decreased  revenue at the large petrochemical project and productivity issues on Arkansas Department of Transportation projects.

Selling, general and administrative expenses ("SG&A") were $39.9 million, or 7.1% of revenues for the first quarter 2017, compared to $32.7 million, or 7.6% of revenues for the first quarter 2016.  The increase in SG&A for the quarter was primarily due to a $4.6 million increase in compensation related expenses, a $0.9 million benefit in the prior year from an adjustment to the pension withdrawal liability, and a $1.1 million reserve for an account receivable and note receivable.

Operating income for the first quarter 2017 was $15.2 million, or 2.7% of total revenue, compared to $6.6 million, or 1.5% of total revenue, for the same period last year.

Net non-operating items in the first quarter 2017 resulted in expense of $2.2 million, compared to $1.9 million in net expense in the first quarter 2016.

The provision for income taxes for the first quarter 2017 was $4.5 million, for an effective tax rate on income attributable to Primoris of 37.0%, compared to $1.8 million, for an effective tax rate on income attributable to Primoris of 40.5%, in the first quarter 2016.

Net income attributable to Primoris for the first quarter 2017 was $7.7 million, or $0.15 per diluted share, compared to net income attributable to Primoris of $2.7 million, or $0.05 per diluted share, in the same period in 2016.

Fully diluted weighted average shares outstanding for the first quarter 2017 decreased slightly to 51.85 million from 51.88 million in the first quarter 2016.

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at March 31, 2017 included cash and cash equivalents of $148.5 million, working capital of $269.4 million, total debt and capital leases of $253.4 million and stockholders' equity of $501.6 million.  Primoris' tangible net worth at March 31, 2017 was $341.3 million. 

Based on expected start dates for current projects in backlog, anticipated levels of customer maintenance, MSA spending, and new project awards, and given the continued uncertainty caused by the energy markets, the Company estimates that for the four quarters ending March 31, 2018, net income attributable to Primoris will remain between $1.00 and $1.20 per fully diluted share.

BACKLOG

    Backlog at March 31, 2017 (in millions)  
Segment   Fixed Backlog   MSA Backlog  
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