Greetings. And welcome to Primoris Services Corporation 2018 Second Quarter Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kate Tholking, VP of Investor Relations.

Thank you, Dena. Good morning, everyone. Thank you for joining us today. Our speakers for the day will be David King, President and Chief Executive Officer; and Pete Moerbeek, our Executive Vice President and Chief Financial Officer. In addition to this morning’s press release, we have also posted slides on our website that highlight key points we plan to discuss on the call. You can access them by going to our corporate website, www.prim.com, then selecting Investors. Once on the Investors site, you will find the slides in the Events & Presentations section next to the webcast link for today’s call. Before we begin, I would 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 estimates, 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, 2017 and the 10-Q, which was filed this morning. 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 securities laws. I would now like to turn the call over to our CEO, David King.

Good morning, everyone. Thank you for joining us today to discuss our second quarter results. I could summarize our second quarter results by saying that we completed the Willbros acquisition and the ACP project that did not start as quickly as we had hoped. But that summary does not give credit to the hard work and positive results from the rest of the Primoris team. So, as I begin my remarks, I wanted to first congratulate all of our employees and stakeholders for a great first 10 years as a publicly traded company. It is only fitting that we celebrate our 10th year anniversary on NASDAQ with the Opening Bell Ceremony last Friday. Since its inception dating back to the 1960s, our organization has completed 26 acquisitions, started up three new business units and with our latest acquisition has reached a new record backlog backed by solid MSA foundation. Since going public, Primoris’ revenues have achieved an impressive growth rate. I want to say thank you to our shareholders, clients, financial partners and employees in helping Primoris continue to set and achieve our strategic goals of becoming the best-in-class in all of our business segments. Well, we are off to a good start in the second quarter with our power job delivering strong results, our engineering work picking up, and our gas and utility electric work continuing to show steady growth. Our pipeline work was down significantly as we not only had a tough comparison with last year’s second quarter, but the delay in the ACP project revving up this quarter. We view the delay as a timing issue for the ACP project and remain confident in the strength of both the large and smaller diameter pipeline market in the future. The newly acquired Willbros businesses are running as planned…

Thank you, David, and good morning, everyone. Since, I have been the CFO for most of the 10 years that Primoris has been a publicly traded company, it was an honor to be included in the NASDAQ Opening Bell Ringing Ceremony last Friday. I agree with David’s sentiments about our progress. This past quarter was made interesting by the purchase accounting for the Willbros acquisition. But our financial team worked diligently so that we could file our Form 10-Q last night, between it and this morning’s earnings press release, you have all the numbers, but I want to provide some color starting with the Willbros acquisition. We closed the Willbros acquisition on June 1, 2018 by paying $38.4 million for 100% of the shares of Willbros stock, a $123.2 million to settle Willbros’ bank debt and $3.1 million to pay for Willbros legal fees associated with the merger agreement. That totals $165 million, which we funded from our commercial revolving credit facility. Prior to the closing, Willbros repaid us the $15 million plus accrued interest that we had advanced under our temporary credit agreement. After those payments, Willbros still had $54 million of cash. That’s our net cash purchase price was $111 million. During the second quarter, we negotiated with our commercial banks to establish a Term Loan for the Willbros acquisition and in July we completed a $220 million refinancing that allowed us to pay off our Senior Secured Notes in full and reduced our $200 million revolver outstanding balance to $35 million. We expect to repay the amounting revolver balance by the end of August. The Term Loan requires that we make quarterly principal payments of 1.25% of the original amount for the first three years and quarterly principal repayments of 1.875% of the original amount for years…

[Operator Instructions] Our first question comes from the line of Lee Jagoda from CJS Securities. Please proceed with your question.

Hi. Good morning.

Good morning, Lee.

Just starting with the guidance, Pete, which Q2 EPS number is included in the $1.50 to $1.70?

The full GAAP number, so the $0.23.

Okay. And then, if I look back at a couple of these awards, so starting with the ones that were awarded to Willbros back in July, can you talk about whether those were new customers for Willbros, new customers for Primoris and sort of how the acquisition of Willbros by Primoris should ultimately be beneficial to the comp, to the combined entity?

Yeah. Lee, this is David. I will take that one. They were not new customers to either of us. In the electrical sector, obviously, they were new to Primoris, but this particular client we have done some other types of projects with them before. We did announce some of the overhead work with them. I am quite confident we will get some other work out of them on some Underground and some other things. What we did during the diligence if you remember on some of our discussion both myself and Tom McCormick, our Operating Officer went with Johnny and met with basically all of the major customers that Willbros had. And as I mentioned in my comments some of them were a little resitant -- hesitant I should say, to actually let them go ahead and award some work, so they were kind of on standby waiting to see. They had no concern about the T&D Group performing the work. They only had concern about the financial viability of them in their parent company at that time. So, yeah, those are customers that we know quite well in other arenas, but they are not new customers to the T&D Group.

Got it. And then, Pete, could you help us try to figure out some of the seasonality of the Willbros business and then maybe break up the revenues into the various reportable segments?

After all a one month of ownership, the T&D business itself tends to be slightly different seasonality than what we are used to with the gas distribution. The primary electric companies want to use their system when they have the opportunity during the end of May through sometime in September, because especially where Willbros is located in the Southeast, there is tremendous demands for air conditioning. So their work tends to be a little bit skewed more towards the back half of the year and hopefully some into the first quarter. The Canadian work is somewhat seasonal strictly, because of the fact that you are not going to do a lot of work in Canada in the winter. So it’s kind of -- it will be somewhat like Q3C and the work that we have picked up from the facilities type work that’s going to be very much similar to what we do with our Primoris Field Services. So if you look at it in total, you are going to see, it is really early in the estimating game, but you are going to see that you are going do have strong third and fourth quarters.

Lee, let me add one more thing for you relative to the customers. The one project MSA that we announced was for a major customer. One of the other major customers gave us a smaller order that doesn’t hit our radar screen relative to above $10 million as far as announcing it and then we actually had a third customer that started leaking out awards to us also. So we have actually had three of those customers that we went through in the due diligence that now have fallen through on, exactly what they said was once the viability was there financially they would begin placing awards. The bigger one was obviously announced. The other two have not been announced.

Perfect. I will hop back in queue and give others a chance. Thanks.

Our next question comes from the line of Tahira Afzal from KeyBanc Capital Markets. Please proceed with your question.

Hi, guys. How are you doing?

Good morning.

Good morning, Tahira.

First of all, congratulations to everyone at Primoris on the Bell Ringing. I saw your interview, David.

Well, thank you. Sometimes I don’t know how I came across in those interviews and it was a little bit impromptu for me. So, hopefully, it wasn’t too bad to look at.

No. You did a good job. I guess, I was doing some math into 2019 and correct me where I am wrong, I mean, as you said and as I tried there seemed to be several petchem sort of projects and LNG projects that do carry pretty high visibility for you into 2019. To your point, don’t know when they come across exactly in the second half of the year. And then, on the pipeline side, just wanted to get a sense, if I look at your revenues for next year, it’s tough to get below $700 million, right, because you have -- your original bookings for ACP was $680 million. If you are burning around $190 million this year and the project is slated for completion and you take your base load business over there as it’s going right now, it’s tough to get below $700 million. And I guess the point I am getting to is if I put your revenue bridge and assume no growth really in PI&E and Civil, you will get to around $2.7 billion in revenues and that is not including Willbros. I would love to get your commentary on how you see your revenue bridge as of right now.

Well, I will let Pete talk about the revenue bridge for you in a moment. I will -- let me talk some specifics on the projects. I think you are very close where I think we have mentioned before on what we see as the revenue burn. Hopefully, if ACP continues or gets really burning like we are talking about that $190 million-ish type number that you are talking about. And yeah, they are scheduled to complete next year, so I can certainly see and agree with you on your kind of numbers therein, obviously, I don’t want to see ACP slip much further. I can tell you, obviously, we are working on the one spread 2A and then looking at starting some work in North Carolina, some of the other Virginia work is still going to be slowed down through some of this process.

All right.

So predicated on that not slipping further, I would agree with our numbers on the revenue bridge. Pete can talk specifically about the dollars or the figure, the actual math side of it. I will tell you on the petchem side. We have tracked those jobs. We are very much dedicated subs on several of them. So I do look for some of those to begin to break in the second half and definitely in 2019. So I am probably not as concerned about our Industrial sector and Civil sector on the I&M side of the Civil, mainly because I do see some of those begin to break. So, Pete, do you want to comment on the actual revenue numbers?

Yeah. Tahira, we have said couple of years ago that our goal was $3 billion by ‘19 and I think that if you look at the sort of numbers that you are seeing already on the pipeline at Willbros to it and then some of the rest of our business, there is no reason that we can’t get there, but I am not giving guidance.

Okay. Okay, Pete. I thought I would try my luck over there. I guess just on the pipeline side. Do you have Chinook the two spreads to one in your bookings or not yet?

We just announced it this morning and we…

Okay.

… although we had been verbally awarded. You now my rule here is until I have really got the ink on the paper, even if I have got a limited notice to proceed, I don’t announce and we may start work on a limited, but I don’t want to announce and just announced that in this morning. So, yeah, they would be in our, we do look for those to burn. I think our announcement said that most of that will burn all throughout the latter half of this year. So that will burn very quickly for us over the next six months and it is the two spreads.

All right. Okay. And last question and then I will hop back into the queue. When you look at your SP petchem and LNG opportunities, do shape up for you, if I look at Sasol as an example, David, they can be pretty sizable. If you look at the underutilization you have in that segment right now, what is the upside on the revenue side on an annual basis versus what your utilization is right now if all else plays out really well?

Oh! That’s a good question to hear. I don’t know that I have actually put a pen and pencil to it to try to say what’s the upside on the revenue for it? I don’t know that I could really answer that right, Tahira, maybe I can give you this kind of a feel for it. We are probably running at -- my guess is somewhere around that 50% and maybe in the I&M Group actually less than 50% utilization and on our Industrial side definitely around that 50% or underutilization. So the revenue run rate we are running at we could easily double those, but I haven’t put up a piece or pen and pencil to it and that would be without really trying to hire and grow, and we definitely can expand well past what our capacity is right now.

Got it.

We were able...

Yeah.

Yeah. We were to accomplish about $500 million in revenues on Sasol in a couple of years and there is nothing that says we couldn’t do that again.

Got it. Okay. Thank you, Pete. Thank you, David.

Yes.

Our next question comes from the line of Adam Thalhimer from Thompson Davis. Please proceed with your question.

Hey. Good morning, guys.

Good morning, Adam.

Good morning, Adam.

I just want to start off on ACP. I am curious the Court of Appeals ruling that came through yesterday afternoon, just curious how that might impact the timing.

Oh! We are still looking at that. I will tell you -- we -- as I mentioned on my prepared remarks, we have already got certain things and there is a certain amount of work that’s already been released up there that that’s really not going to affect. Now will that have an effect if it continues to stay the course longer and delay it? Sure. But at this time, Adam, I don’t think we see that much of an effect occurring at least what’s been released to us. It may affect it, as I say, some of the work that we are looking to do in the latter half versus -- and push it over into 2019. I will also make a comment that, as we were looking at ACP, we actually added to the additional spread capacity to our Rockford Group, added a new superintendent and complete spread capacity, which will allow us to continue to go after work that’s non-ACP related in the event that ACP does slow down some. So I am trying to use that as a backstop if we do get some slowdown on ACP.

Okay. And then what are your thoughts on Civil margins going forward?

They need to get better. The answer is that I think what we are seeing is for the jobs that we did and started in the last couple of years, we appear to be doing much better on the margins. We obviously still need to get out of the jobs that we are. I would expect that starting by next year you are going to see us get to positive margins and then hopefully by the end of the year, we get closer to the 4% to 5% that we believe that margin should be for the Heavy Civil. And then the Civil, if you include I&M that’s probably going to depend on when they can pick up some additional work if they get some of this big work that would be very useful.

Okay. And then you have had some recent awards for the T&D Group. What are your thoughts on the revenue capacity on an annual basis for that Group?

I think we originally, Pete, looked at that...

Yeah. We originally thought it would be in the $450 million to $500 million range.

Yeah.

To be honest, Adam, there is nothing that says we can’t grow beyond that. We appeared to have the attention of the customers and the interest of the customers. Our challenge is we will be bringing equipment online when it’s needed. And then we have the same challenge in electric T&D that all of our competitors and peers do, which is making sure that we can replenish and find qualified Lineman, Journeyman that can do the work. So, I think, the limitations are not as likely to be the customers as they are, our ability to bring to bear both new equipment and new people.

And, Adam, adding on what Pete was saying on both the equipment and the people, obviously, the equipment as we have mentioned, we are beginning to put some CapEx in there in strategic locations, where we think we will get the biggest bang for the buck quickest. And then on the people, we have actually met again, Tom McCormick has done most of it for me. But meeting with the different customers and looking at the training programs they have -- that they have in place at some of the community college and also the Southeast Lineman School in the Southeast U.S. And we are getting relationships established with each of those community organizations, as well as the Southeast Lineman to train the craftsman that we think necessary in this in lineman’s field to make sure we have got adequate resources.

Okay. Great. Thanks, guys.

Thank you, Adam.

[Operator Instructions] Our next question comes from the line of Bill Newby from D.A. Davidson. Please proceed with your question.

Good morning, guys. Thanks.

Good morning.

Good morning.

Just a few -- you have all done a little bit more on ACP, you guys haven’t talked about enough yet. I guess, any color on that contract structure, David, and I guess, is it -- I mean are there contingencies or compensation things built into that if you do see further delays?

Yes. On from a consortium basis, first of all, the contingencies risk with the customer. We make sure that the new contracting philosophy allowed the customer to take advantage of any savings that there might be in their own contingencies. As we move the equipment in, the customer pays the cost of the equipment and the rates therein, and then, in any standby time if the project is delayed, the customer pays the standby time. So I am not concerned about us not making money relative to standing by, I think, that’s covered, obviously, we don’t burn the revenue when we are on standby and we are just like the customer, we would rather be burning the revenue with the customer than get -- than getting paid for standby. But, yeah, there is standby provisions in the contract.

Okay. I didn’t figured it out. I just want to double check.

Yes. Sure.

And then, you mentioned you brought on some extra team for this ACP project. I guess, how mobile is that team if you do want to move them to another project. Can you move them all the way into the Permian or...

Yes. And I didn’t say I brought them in for the ACP project. What I did was we wanted to add another spread capability, because we pretty much got the spread bosses and things that Rockford had committed on the ACP projects. So I am -- I don’t tell a customer one thing and then pull and run the other direction. So what we did from a management perspective, we said, look, let’s add one more spread capability, so that other customers that we have that want Rockford to do projects, we could actually move or spread for them without affecting ACP. I can pretty much move them around the country. You do have to realize that there is an open shop versus a union aspect of that. Most of the work are going to be done in the Permian Basin is going to be open shop, not union. It doesn’t mean I can’t go out there and do it union. It’s just that the cost parameters there may end may not be as effective as an open shop.

Got it. I appreciate it. That’s all I got. I will get back in queue.

Thanks.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to David for closing remarks.

Well, we certainly appreciate your continued interest in Primoris. We do have planned Investor Relation trips to Boston, New York and Chicago -- hopefully we will see some of you soon and answer some additional questions. We appreciate your time today and have a good day.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.