Greetings and welcome to the Primoris Services Corporation 2016 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd now like to turn the conference over to Kate Tholking. Thank you. Please go ahead.

Thank you, Brenda. Good morning, everyone, and thank you for joining us today. Our speakers for today's call will be David King, President and Chief Executive Officer; and Pete Moerbeek, Executive Vice President and Chief Financial Officer. Before we begin, as always, I'd like to remind everyone that statements made during today's call may contain certain forward-looking statements, including with regard to the company's future performance. Words such as estimated, believes, expects, projects, may and future, or similar expressions are intended to identify forward-looking statements. Forward-looking statements inherently involve risks and uncertainties, including without limitation those discussed in this morning's press release and those detailed in the Risk Factors section and other portions in our annual report on Form 10-K for the period ending December 31, 2016, which was filed this morning, and other filings with the SEC. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable security laws. I'd now like to turn the call over to our CEO, David King.

Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and 2016 full-year results. I'm extremely pleased with how the 2016 year wrapped up. We finished strong in the fourth quarter with revenues in Q4 2016 as compared to Q4 2015. During the fourth quarter, we continued to reduce our SG&A cost by an additional $1.2 million, which contributed to a total of $10.9 million reduction in SG&A cost for the year. We generated an additional $12 million in cash flow from operations in the fourth quarter and we were free cash flow positive for both the quarter and the full year, ending the year with a strong $136 million cash balance. Q4, 2016 saw us continue to build our backlog both in MSA and project work, and it now stands at $2.8 billion, a 34% increase over 2015's year-end backlog and a record for our company. And as you can tell form the recent announcements we've been making, the trend continues into 2017. We've already announced an additional $459 million in new awards so far in the first quarter. Our opportunity list is as strong as I've ever seen it and the quality of those prospects is very good. We were able to close out the year exceeding our new awards goals and are off to a great start in 2017. We continue to selectively choose which projects we should pursue and which clients we work with for the best success and margin performance. We also experienced an 18% reduction in our 2016 OSHA recordable incidents and had zero loss time incidents for the entire year. I'm proud of the many safety awards our various businesses have been receiving. This outstanding safety culture was recently recognized on our Florida LNG project by the ENR…

Thank you, David, and good morning, everyone. We filed our form 10-K this morning. Since it took us about 58 days to write it, I don't expect that anyone listening has had a chance to memorize it, but the information is now out there for your reading pleasure. Completing the filing also means that I can limit my remarks to just a few highlights. Our 2016 fourth quarter revenues were $601.9 million, a 21% increase over 2015's fourth quarter revenues. The revenue increase was driven by increased revenues in the West segment as our large Florida pipeline jobs took the top two spots for customer revenue for the quarter. We also saw revenues from two of our large utility customers, one in California and one in the Midwest, increase. Unfortunately, revenues in both the East and Energy segments declined, driven primarily by a decrease in total revenue of almost $15 million at the Lake Charles, Louisiana petrochemical construction site, but also driven by closeouts of projects at James Industrial and OnQuest prior to this year's fourth quarter. Our TXDOT revenues increased by $10 million to almost $52 million for the quarter. We are still in a process for our planned divestiture of our JCG Heavy Civil division and we expect that we will have enough information to make a decision within the next two months. Gross margins in the 2016 fourth quarter were 11.4% compared to 12.8% in 2015's fourth quarter. While the West gross margin remained strong at 14.9%, it was down slightly from 2015, when we benefited from closeouts on large projects at both Rockford and ARB Industrial. Gross margins in the East were impacted by both the reduced revenues at I&M as well as the continued challenges in the Texas Heavy Civil division, although to a significantly…

Thank you. Our first question comes from the line of Stefan Neely with Avondale Partners. Please go ahead with your question.

Hey. Good morning, folks. Thanks for taking my question.

Good morning.

So, I wanted to start off, I had a little bit of a question. I wanted to clarify, for Carlsbad, how you're including that in the full-year guidance. You said three-quarters. Are you excluding three-quarters of the project or is that just the three-quarters of the year over next four years – next four quarters (21:35).

No, when we are – we're not really looking at much slope (21:42) coming out of the ground. So I think you'll see our operations start ramping up throughout the year, but the project goes into next year obviously, into 2018.

Okay. Perfect. Thanks. And I was also curious, if you could give us a little bit of an update on the kind of the pipe integrity business in California. I know you had said that there was kind of a slowdown in spending, particularly in Southern California, that you were seeing. How is that progressing for you?

Well, I think, as I've mentioned even on the last call, we've continued to add MSA work out there. So, our potential for more work of that type and nature in California continues to grow. We've got one customer, who slows down, but that's very typical of that business in California. You have some customers that will exceed it forward (22:39), some that slow down. It goes back and forth. We've always made comments that it is still California on some of that spending. But for us right now, that's still a very healthy market and we're still seeing it very healthy.

Okay. Excellent. Now, the last question is just quickly, I know speaking of California, it seems they've had a lot of rain out there so far in Q1. Is that anything you guys are seeing any impact from at all?

We've seen some impact from it. I wouldn't say it's been a major impact on us. Obviously, on our utilities and distribution side, Scott Summers, his group's out there, we've had some days that they couldn't get in there and do the work. And since we were beginning to come out of the ground, on our NRG power plant project, obviously, that was a hole filled with water that we had to pump out and start over. So, we have had some effect, but I would not call it a major effect on us.

Okay. Excellent. Thanks a lot. I'll get back in queue.

Thank you.

Thank you. Our next questions come from the line of Matt Duncan with Stephens. Please go ahead with your questions.

Hey, good morning, guys.

Good morning, Matt.

First question I've got is just on the West segment. So, really strong revenue quarter there, obviously. I'm trying to get a feel for how much of the improvement we saw there, sequentially. Was the pipeline projects in Florida kind of kicking into full gear? And I think you guys mentioned that there might have been a weather benefit there too. If you could quantify what that might have been that'd be helpful.

I'm not sure that I would call it (24:11)...

Yeah, I'm sorry...

...weather benefit. What you're looking at is very strong contribution, as we noted that the two biggest jobs that we had for the quarter came out of Florida. So, that obviously is a major contributor. And we also benefited a little bit from the fact that it didn't snow quite as early in Denver and Minnesota as it traditionally does. So, we were able to work a little bit later in December.

Got it.

But the biggest impact came out of Florida.

Yeah. The weather was the mild winter for Q3C, that's where we got the benefit. Q3C was able to work a little longer in the winter than they typically do.

Got it. Okay. And then, it's interesting that you guys are assuming that there is not much for Rockford after the Florida jobs. I certainly understand it so you know what there is, it's safe to be conservative there. But it sounds like that market is pretty strong. Some of the projects you guys are looking at for after Florida is done, beyond just Atlantic Coast, what's the timeline look like on that stuff? Are there some smaller projects that you could fill the back half of this year? Just give us some thoughts on what the market looks like from a timing perspective?

Definitely, Matt. By the way, it doesn't mean that our Rockford guys are not working as they come down off that Florida project. We've actually got some small projects booked in there, they just won't be at full utilization. We've talked the last two quarters, we knew that they might not be at full utilization toward the latter half of this year. So, we actually went out – and again, we want to be very selective on which projects we go after so that we get a good customer and a good terms and conditions, but also it fits that latter half of 2017 timeframe that we're looking at. I don't want to individually talk projects, Matt, but I'll talk some customer names and things like that. We do a lot of work with the Enterprises and the Williams, and some other people like that. And they've obviously got projects that, I believe, will award and execute in that timeframe toward the latter half of 2017, as well as several other customers. So, we're – as I mentioned in some of my comments, I'm fairly optimistic that we will pick up one or two of those projects and be able to use that utilization. But being very cautious right now before we say we're filing that utilization up.

Sure. Makes perfect sense. And then last thing, I'll hop back in the queue, just on some of the small pipe work. Now that we've flipped the calendar to 2017, your energy customers are obviously in the new budgets, which I would think will be a little bit helpful. So, have you begun to see actual demand improve? I know your customers are likely going to be more optimistic. But is it resulting in a move higher in revenues for that Energy segment as you've gone here into 2017?

Yeah, let me make this comment. Our estimating group on the smaller-diameter pipeline projects is as busy as they've ever been in the last – literally the last couple of years. A lot of bidding opportunities, a lot of pretty good projects coming up. And in fact, Patrick McRae (27:26), who runs a lot of that Primoris – runs the Primoris Pipeline Group for us, told me the other day that he actually had 10 bids in the first two months of this year versus 20 bids for all of 2016. So maybe that will give you a flavor for how the market's turning around from a demand standpoint as far as the request for bids are concerned. Now, some of those, not all those, will materialize. But we track those jobs very closely and I can tell you we look at the goes (28:02) on those projects and obviously the get percentages and things. I do feel that you're going to see more announcements from us with regard to the small-diameter pipeline business in 2017.

Great. Good news. All right. Thanks, guys.

Our next questions come from the line of Ryan Cassil with Seaport Global. Please go ahead with your questions.

Good morning.

Good morning, Ryan

I guess, just going back to your comments on the pipeline market, you talked in the last call about $6 billion award funnel, lot of small and medium sized projects. It seems consistent today, but are you seeing projects skew a little bit larger or is it still real healthy market of the smaller work out there?

On the large diameter, we're still seeing the skew to fairly large projects. There are some smaller ones out there, but on the large-diameter pipeline business, those skew to the heavier, larger projects. On the – interesting on the small diameter, Ryan, some of these small-diameter projects that are going in are long distances. So, they will be fairly large projects from a spend perspective. Even though they're small diameter, but they're going quite long distances; 500 miles, 600 miles, 700 miles, 800 miles on some of them. But at the same time, the laterals that come off of them (29:25) and some of the other interconnect lines obviously spur some of the smaller pipeline jobs also. So, I hope that answered your question, but that's kind of what we're seeing.

Okay. Great. And then you've talked about you've got Sasol project coming off and we've seen some nice industrial awards here recently as well. I mean, are things picking up in the industrial petrochemical market? Can you talk about just kind of what you're seeing there?

Well, we never really saw – and now when I talked the industrial, petrochem market, let me kind of separate that a little bit by really – further. When you really look at the petrochem side, we never really saw much of a drop-off on the petrochem side. That natural gas prices at the level they're at continue to spur a lot of those projects. A lot of those projects are the size of that Lake Charles facility, so they're mega billions of dollars. And so, it takes longer for the customers to materialize those projects. In other words, the germination period, I guess, is a lot longer on them. But we still have seen a lot and you've seen us amass them (30:39) even last year a lot of the smaller projects on the petrochem side, the methanol projects and some of the hydrogen-related projects and things of that nature. They're not the mega billions of dollars of projects. So, we never really saw the petrochem side drop off. What we're seeing now that we probably didn't see last year is much of – is some of the other types of projects that are more the refining-based projects and as well as the petrochem projects and we're beginning to see a little bit more – and I want to separate the LNG market into two categories. We're beginning to see a little bit more activity from customers on the large LNG projects that of course we're just a subcontractor that perform field services work on those. And then, obviously, we're still seeing the small LNG projects that we do the engineering and construction on. So, we're absolutely seeing more uptick, interest in those kind of projects also.

Great. Thanks. I'll turn it back.

Our next questions come from the line of Lee Jagoda with CJS Securities. Please go ahead with your question.

Hi. Good morning.

Good morning, Lee.

So just starting with MSA side of the business, how much additional capacity do you think you have within your current footprint to add to the MSA work on an ongoing basis? And then what's the pipeline for acquisitions in that side of the business looks like given that that's been one of your areas of emphasis?

What I don't really look at is as capacity limited. Obviously, there is a capacity that you have from a limit standpoint. But the way I tend to look at our capacity on this MSA work is – and I can go to our Q3C group as kind of an explanation of why I feel this way. As those MSAs or as those customers want us to do additional work, we add on additional resources, we grow organically into the area they want us to grow. And so, we just keep expanding as we go. And as you can see, we've done that with Q3 from maybe a $90 million revenue entity to a $300 million type revenue entity. So, I don't really categorize there as having a capacity limit. Same thing is true with our ARB Underground Group. They continue to grow each and every year in our MSA working capacity. Now, when you start looking at acquisition base, obviously when we're not in a geographic area that either ARB touches or Q3C touches and is not a neighboring state that would make it easy from an organic growth area, then we do look at expanding into those areas. And although I'm not ready to make any formal announcements, I can tell you we've had some very serious discussions on another acquisition that's an MSA-based utilities and distribution organization. If I can leave it just at that, I will make a comment, generally, that they're in an area that we currently don't cover. We've been trying to find an entity like this in that particular region for probably the last year to year-and-a-half. And finally, I think we've got the right entity. So, you'll probably be hearing us talk about that sometime in the next couple of months or so.

Okay. Great. And then, one for you Pete, just on Carlsbad. Can you just remind us of the size of that opportunity and how the math works with regard to the non-controlling interest?

It's right at a little over $200 million and it's a 50/50 JV with Burns & Mc. We do all the – we'll recognize 100% of the revenue in the non-controlling interest line, all the way at the bottom of the income statement, is where we take out their half.

Got it. Perfect. And then one more for me and I'll hop back in. Just as it relates to the East and the shortfall in profitability, is there a way for you to breakout the TXDOT-related issues versus the rest of the business, and then maybe highlight if there were one or two other issues that impacted that?

Well, we – I think David said that on the area that we've had the challenges, which is the Belton corridor where we took the huge loss in third quarter. They finished two other jobs, we lost or expensed about $3.4 million on those jobs in fourth quarter. We do believe that we have the opportunity now to go back in on those two jobs and start negotiations with TXDOT on claims and all sorts of a wonderful long-term negotiations that we actually have begun. The operations in the rest of Texas outside of that corridor were profitable for the quarter, and Louisiana was slightly profitable for the quarter.

Yeah. Let me add a little bit more color for you, Lee, if I can, on what Pete just said (35:59). In our Texas Heavy Civil, we had that I-35 corridor, those Belton projects, those were the areas that we struggled on. When you look at the rest of what we have in the Texas Heavy Civil, the airport work, some other municipality work, city works, things of that nature, all of that has been performing very well and looks like it will continue to perform well. The issue on that I-35 corridor has to do more with – and it's the way we have always – I guess, Brian used to use the old comment, take your S81s (36:39) type thing, but those contracts don't allow you to settle up on your claims and extensions and things of that nature until the projects are complete. And so, that's why I mentioned on my prepared notes that we've closed out two of those jobs, which now allows us to go forth with some of those claims and change order request. But again, we're way too early in that process for me to report any positive news therein.

Okay. Great. Thanks very much.

Our next questions come from the line of Bobby Burleson with Canaccord. Please go ahead with your question.

Yeah. Good morning. So just curious on Texas Heavy Civil, what the bid pipeline looks like there and if you're seeing any benefits from Prop 7?

Yes. What Prop 7 is going through right now is more – is still in the engineering stages of it, but we're beginning to see some early indications of some of the smaller spend on that and some very small highway sections. Now, we've been – because of the issues we've had with those jobs in TXDOT, we've been very selective on what type of margins and contingencies and which projects we go after, and whether or not we figure that TXDOT has got all that prepared right-of-ways and permitting and things of that nature so that we don't fall victim, like we did before, in some of that I-35 corridor work. But we are beginning to see some of that. But remember, some of my comments on the last couple of calls relative to Texas Heavy Civil, we really began refocusing that group almost a year ago to go after more airport work and municipality work, which has a higher-margin benefit to it than going after some of the TXDOT work.

Okay. And then just on with some of the other new markets you're work – you're moving into with some of the petrochem opportunities that you're starting to look at, what are the prospective margins there relative to kind of your corporate average?

Well, again, we're changing the way we segment. But if you remember, the old segments in the East, the petrochem business is pretty much, the percentages that we talk about from a gross margin percentage from the Energy segment is pretty consistent with what we'd see on that type of work.

And we tend to be in the low teens.

Yeah.

Okay. Great. Thanks.

Our next questions come from the line of Jason Wangler with Wunderlich. Please go ahead with your questions.

Good morning. I was curious as we look at the guidance in kind of what you talk about with some of these larger projects kicking off, and obviously Carlsbad as well here pretty soon, do you see the same type of seasonality, you think, in the business as far as, as we should look at the modeling perspective with the guidance you gave? Or do you think there is maybe going to be a little bit more of a smoothing effect because of those larger projects?

I'll let Pete address it, but I believe there's going to be more of a smoothing effect. But Pete, talk about that.

Yeah, I'm not sure if I want to call it smoothing, and I think you're going to see stronger revenue and profitability in the first two quarters because of the large jobs that Rockford has in Florida. Then obviously you're going to see the stronger MSA work in the second part. I don't know yet – and I think we've kind of alluded that, we're not sure how strong Rockford will be in the third and fourth quarters. On the other hand, you are starting to see by then the NRG job come out of the ground. So, it's hard to say that it's going to be perfectively smooth, but I don't think you're going to see as big the drop-off as we have in the past in the first and second quarters.

Okay. And just maybe one on Carlsbad, specifically, the $200 million or so, and you've got three quarters of work there. I think you're trying to finish it by third quarter of 2018. Just should we look at that as basically being, you should have about half of the work done this year, half of the work next year, or just maybe the cadence of that?

As you build up on that, when you come out of the ground, obviously, your cost are not as high as once you come out of the ground, and you're doing lot of the mechanical, and piping, and civil, and instrumentation electrical. So, if you trying to weight it over that 18-month period, you're probably talking about 30% or 40% in the first nine months and 60% to 65% in the second nine months would be a pretty good weighting.

Great. Thank you. I'll turn it back.

Our next questions come from the line of Brent Thielman with D. A. Davidson. Please proceed with your questions. Brent Edward Thielman - D. A. Davidson & Co.: Thanks. Good morning.

Good morning, Brent. Brent Edward Thielman - D. A. Davidson & Co.: Yeah. Kind of back on the LNG opportunities out there, any sense on kind of how the micro to midsize facilities kind of coming for you in 2017? Are they sort of front half, back half weighted bookings opportunities? And then, kind of for the larger plants, is that something that looks more like a 2018 event for you in terms of doing some work on those or could that come sooner?

Let me talk about the small to midsized first. Most of what we'll be chasing at the start is going to be more feed type work, not really the procurement in the construction side of some of those small to midsize projects. So, I think what you're going to see us in 2017 relative to that market we're beginning to chase is going to be fairly small from the standpoint of a revenue generation. I think then those kind of projects materialize into the full EPC work. So, those would be more of a 2018 effect on us. As far as the large petrochem projects and things, a lot of those larger petrochem projects as they develop are not going to be go into finalization until the latter part of this year. However, the upfront, some of the offsite (42:56) work that typically our I&M group and Civil groups do would potentially start in the latter half of this year. So...

Yeah. And obviously we do have the benefit of the job that we announced recently, the $100 million job for OnQuest, so that is starting now.

Yeah. The LNG project that we mentioned for OnQuest is a full EPC job for us. Brent Edward Thielman - D. A. Davidson & Co.: Okay. Okay. That's helpful. And then, I guess, on the East segment, any comments on the pipeline of upcoming work you're seeing for the non-Texas Civil business?

We just announced a good-size I-10 project and we think there are some other ones that, hopefully, Louisiana will be in a position to start increasing their lettings. We've always – we've traditionally been first or second in awards, but being first or second is a much smaller pond isn't quite as exciting. I think we're starting to see more opportunities in Louisiana. We have done work in Mississippi and Arkansas. We'll just kind of have to wait and see, as the year goes on, certainly, if there are going to be any other infrastructure projects announced by the new administration that could be a real positive. There certainly are projects needed in the Louisiana area. Brent Edward Thielman - D. A. Davidson & Co.: Okay. Thanks, guys.

Thank you.

Thank you. Our next questions come from the line of Tahira Afzal of KeyBanc. Please go ahead with your question.

Morning, folks.

Good morning, Tahira. Good to hear your voice again.

Same here. And Pete, good to know you haven't lost your wonderful sense of humor.

That isn't what Brian used to call it.

So, I guess first question is, it seems like, as I look beyond 2017, 2018 is shaping up really nicely from the pipe side, both on the integrity side and the large pipe side. And it's seems on the industrial side, you're going to be kicking into high gear again as well. So, is there a change that if execution goes well, you could end up again at that 6.5% operating margin sort of profile in 2018, or do we need to have some more power gen replacements coming through to really get there?

You just put us right on the spot with that question, didn't you?

I did (45:41).

I'll let Pete comment on the margin performance in a moment, but the market is shaping up, I do feel that. Obviously, we're being cautious because some of these large projects on this industrial side, these mega billion ones that I talk about that will drive some revenue and margin performance for us, have not yet been sanctioned, although I think the dynamics are there and they're certainly moving in that direction. And I would say the percent goal on them (46:10) is very high. So, I'm a little cautious to start waving the flag too much just yet, Tahira. You're right, I do see the large-diameter pipe business and the MSA work shaping up fairly nicely, going all the way into 2018. We certainly see enough opportunities to have that robust growth in the industrial market. As far as the performance, Pete – I can tell you my perspective, Tahira, the jobs we're going after, we've really tightened the belt relative to terms and conditions and payment arrangements, and things of that nature, and obviously project controls around the projects and things of that nature. So, as I said here today, you can never predict that you're not going to have something that doesn't go wrong, but I certainly think that the chances of anything going wrong on similar of our projects is very, very low. But Pete, what do you think on her other question?

I think, I'll avoid the litany of all the issues associated with new revenue recognition standards and all those sort of wonderful things and say that we think that our SG&A is under control. We think that we have the ability and the opportunities are there. Not sure if we're ready to commit to whether that's a 6% or a 6.5%. I think we probably need to get a little bit more operating room at kind of where we are currently, but I don't think it's impossible for us to start approaching those sort of numbers.

Okay. Great. And I guess, the second question is, how are you all looking at labor inflation in the Gulf area, especially into next year? You have the gathering work picking up again and I assume that would soak up some of the basic labor pool out there, and God knows, you might have a big wall coming up that might soak up some labor. So, would love to get a perspective on the pipe fitters, et cetera, which is more specialized and really the basic labor pool as well?

It's interesting question, Tahira. We watch that – trust me, we watch that almost daily, but we haven't seen it yet. Even a few years ago, when everybody talked about, oh no, her it comes, it really never did materialize because a lot of those projects didn't hit at the same time. I'm suspecting that may be the same case that happens here. There will be some pockets – on these major multi-billion-dollar projects, there will be some pockets that have a little bit of a higher labor rate, but some of those people will travel, some won't. And so, in some of the other areas, we probably won't see as much of a labor inflation. We put escalators in our contract to try to cover us on those things. But I know your question is more are we actually seeing some of that right now, and we're really not just yet. Same thing with materials. We haven't seen an increase in material prices yet. No matter what the material is, we really haven't seen an increased cost with that (49:20). If it occurs, I don't think it would occur until really late in 2017 or maybe not even until mid-2018, in my opinion.

Got it. Okay. And then I guess last question is on the buyback, seems a little on the small side, David and Pete. Any thoughts around if that could be expanded or in terms of cash allocation what you guys are thinking?

So just because I started off by saying at this time, the current buyback represents – Tahira, we go through quite regularly with the board and look at what are we going to do. We have cash and obviously our first priority remains finding good accretive profitable acquisitions. We've obviously not done a great job with that over the last couple of years. We think we have some opportunities now. I think that if this year progresses as we expect it to, then that will take some of the cash. If that doesn't happen, I think you'll see us doing two things. One, we'll probably increase the dividend that's not a material change as far as cash is concerned. And yes, the board would seriously consider and has in the past talked about doing a stock buyback that would be a larger number. We're kind of used to Brian having 20% ownership and I think we're all afraid of him owning much more.

Fair enough. Well, Pete, you can buy some too, so..

That's a good question.

Thanks.

Thanks, Tahira.

Thanks.

Thank you. Since we have no further questions at this time, I'd like to turn the floor back to David King for closing comments.

Well, thanks everyone for participating on the call today. I'm pleased with the revenues and the profitability momentum that we're experiencing, and the record backlog that the company has achieved. The momentum to build America's infrastructure for us continues to grow and we see multiyear opportunities ahead for Primoris. Again, we appreciate your participation on the call and have a good day.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day.