Greetings. And welcome to the Primoris reports 2018 third quarter financial results call. At this time, all participants are in a listen-only mode and a brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Kate Tholking, Director of Investor Relations. Please go ahead.

Thank you, Rob. Good morning, everyone. Thank you for joining us today. Our speakers for the day will be David King, President and Chief Executive Officer; Pete Moerbeek, our Executive Vice President and Chief Financial Officer, and Ken Dodgen, Executive Vice President and Corporate Controller. In addition to this morning's press release, we've posted slides on the website that highlight key points we plan to discuss on this call. You can access them by going to our corporate website, www.prim.com, then selecting Investors. Once on the Investors site, you'll find the slides in the “Events & Presentations” section, next to the webcast link for today's call. Before we begin, 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 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, our Form 10-Q which was filed last night, 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 third quarter results. As I begin my remarks, I'd like to first give a special thanks to Pete Moerbeek, our CFO, who has announced his retirement plans. Pete has served this company and its shareholders well since he became our CFO almost 10 years ago. Our words cannot express our gratitude for Pete and his contribution as we have grown from the third quarter 2009 revenues of $111 million to today's record $909 million. Also, on the call with us today is Ken Dodgen, Executive Vice President and Corporate Controller. Before I begin my normal segment comments, I want to share a few recent highlights from some of our projects. While we obviously benefit from a large pipeline and other industrial construction projects, Primoris continues to generate revenue and profits from other end markets. Some of the highlights include Primoris has begun a pilot program at multiple locations on the West Coast for a major utility. The program is developing electrical vehicle charging stations for both residential and commercial applications. Primoris also achieved mechanical completion with 500-megawatt gas-fired peaking plant for all five GE gas turbine generator blocks at Carlsbad. Primoris also used a very creative execution approach to successfully complete a major horizontal drill underneath the Carquinez Strait in California. Primoris also reached mechanical completion on the largest solar project in the State of Texas. The Midway Solar farm project installed more than 680,000 solar panels on almost 1,500 acres of land in Pecos County. Primoris also completed 40 miles of high-voltage transmission line in West Texas, while in Iowa, also installing over 14 miles of 69 KV and 11 miles of distribution underbuilds. Primoris was also a part of the hurricane relief efforts for Hurricane…

Thank you, David. And good morning, everyone. I want to highlight the results of our record-setting financial performance for the third quarter, without repeating all the numbers which are included in both our earnings release and Form 10-Q, which we filed yesterday evening. I also want to close out some open items. Revenues in the 2018 third quarter were $909 million compared to $608 million in the 2017 third quarter. Third quarter revenues increased significantly in three of our segments, remained flat in the Civil segment and included the results of the newly formed Transmission & Distribution segment, created after the June 1, 2018 acquisition of Willbros. During the quarter, three large utility customers represented a combined $202 million or 22.2% of our revenues. The third quarter is historically the strongest for our utility work. And this year, we were able to add the revenue contributions of a third large utility, now part of the newly-formed Transmission segment. That utility represented $55 million or 6.1% of total third quarter revenue. Even with the increase in revenues, we were able to improve our gross profit to 11.7% of revenues compared to 11.6% of revenues in the 2017 third quarter. Selling, general and administrative expenses in the 2018 third quarter were $52 million compared to $42 million in the 2017 third quarter. On last year's third quarter earnings call, I said that our goal was to reduce our SG&A expenses as a percent of revenues to the 6% to 6.5% range. Despite Tahira's incredulity and, obviously, benefiting from the record earnings, we achieved an all-time low of SG&A expenses at 5.7% of revenues. We have now proved that we can exceed our goal. Merger-related expenses in the third quarter were $3.8 million and $13.2 million for year-to-date. The third quarter included retention…

Thank you. [Operator Instructions]. The first question today is coming from the line of Brent Thielmann with D.A. Davidson. Please proceed with your question.

Great. Thanks. Good morning. And, Pete, all the best to you as well.

Thank you.

You guys are putting up some really solid results here in the Power, Industrial & Engineering business side. I know we're not talking about 2019 quite yet, but could you talk qualitatively about how you're thinking about the segment and the business into next year? Is next year a kind of rebuilding year in terms of bookings, backlog, for resumption in growth in 2020 or can we continue to grow off of these pretty strong levels?

Yes. I'll start out with that, Brent. This is David. Let me segment between our west – or the union shop and then the open. On the west, as I mentioned in the comments, we've been able to get through that SB 100. We've been able to get some MSA work, some maintenance work, some of those kind of things, but they are not the big projects like the power project. The power project, I think, that we've kind of been verbally awarded, but yet certainly not ours to share, is going to go through a few more phases. We're hopeful that that will get released sometime in 2019. But, as I said, most of that revenue borrowing will really take place mostly in 2020. So, I think what you're going to see on the west is some of the smaller projects. But we're certainly out there, certainly getting our fair share, and I think we'll do quite well out there. When you get to the open shop, it's a little bit different scenario. We've been waiting for some of that pent-up demand to break loose on the Gulf Coast. We’ve continued to see some of the refining in petrochem, more of the petrochem side of it than the refining side of it. But, as you know, there's some fairly large petrochem projects that we're well positioned for that we think we're going to get early in 2019 that will burn very quickly for us. We're already beginning to see through some of the actions of our engineering efforts. We're already beginning to see some of the site work break loose for Jonas' group. We're already doing some site work on some facilities. And then, of course, we're tracking quite a few of the LNG-related projects and things like that. So, we actually feel that those will start to come to fruition also. And, in fact, out there, we're working on one currently, although albeit in a very small role right now. So, I think what you're going to see in the open shop is a much more robustness of the bigger projects, quicker than you will on the west side.

Okay. Thanks for that, David. And then, on Civil, it sounds like there's more sort of disruptive forces in the quarter than anything else on the margin. Do you feel good about getting that business back to kind of a mid-single-digit run rate in the near term?

Yes, we do. In fact, I think we've mentioned this for several quarters. And every time, we have meetings with investors, we’re going to open that spigot pretty much any time we want and gain in revenue. But we've intentionally kept that unit at pretty flat, okay? Even though the rest of the organization has been growing, we've intentionally kept that flat to make sure that we got our estimating and management and execution skills and superintendent levels trained and everything the way we wanted them to, so that we’d get the performance off the work that we wanted. So, yeah. And then, if you remember, we're still burning off quite a bit of revenue that had zero margin with it. And so, as these other jobs are performing better, they are getting masked over by the fact of some of the revenue burn with zero margin performance So, yeah, I guess, in summary, I would say I do see that continuing to get better. And once we're confident that – and we wouldn't have taken this recent job that we mentioned had Tom and myself not been very confident in that execution approach as well as the estimate and the team that we put on it. But as we get more confident in that, we'll begin to grow that business unit again.

Okay. And just last one, if I could. It sounds like you got debt down. Willbros integration seems to be going pretty smoothly. Are you starting to kind of cultivate the acquisition pipeline again and thinking about that or do you want to take a little more time and integrate this Willbros transaction?

Well, believe it or not, I never turned it off. Obviously, you want to digest what you've got, but we continued to look at some opportunities out there. We didn't find one that we really liked. We've always been a very acquisition-oriented organization. You won't see that change at all. I can tell you that I will get hungrier and hungrier for acquisitions as the quarters go on. So, yeah, I was pretty focused – or the company was pretty focused, keeping our eye on the execution side of the company; at the same time, doing the integration of the acquisition. And I think, by our results, you've seen that we didn't take our eyes off the ball. But, yeah, I'll start, after the first year, getting pretty hungry for another acquisition, but it will have to be the proper one.

Okay, great. Thank you.

Yes, sir. Thank you.

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

Hey, good morning, guys. Nice quarter.

Thank you, Adam.

Pete, I'm really going to miss you. Congratulations.

Thank you.

Can’t believe it. Can’t believe it’s been 10 years.

I can, Adam. I’ll say that. I'm just having fun with Pete. I'm only joking, Adam.

I think, Pete, you touched on it. I'm still trying to figure out the annual guidance and kind of how we get there for Q4. The one piece that you mentioned, I think you said you got $12 million in October from the legal settlement. So, is that included at some kind of a gross profit margin in Q4?

No. That actually related to Q3. We didn't get the cash until Q4, and that's why the numbers are what they are. What I said was that we fully anticipate that we should be able to get to a resolution of that matter some time during the fourth quarter at this point, and so there is some potential upside there.

But is that kind of baked into your outlook for Q4 or no?

I think we are expecting some positive outcome, yes. And I can't tell you the specific number, Adam, because we're in litigation. But I think there is some upside from that, yes.

So, okay. So, we can put that in the Power segment. But then, is the Pipeline segment, is that – did the margins jump up a lot in Q4 versus Q3?

We should definitely see some of that, Adam, because of – I think I mentioned to you, we've got the Primoris Pipeline jobs going on out in West Texas. Now, we're going to have some rain, and so let's bar – let's make a comment barring any weather-related issues. And I think, hope to God, they’ve had enough rain out in West Texas by now. But that job was originally scheduled to be finished by the end of the year, but because it got hit by that rain, a little bit, as I mentioned, will bleed over into the first part of next year. But that one is going to be blowing and going as fast as we can. As we mentioned, there's nothing holding us back now in ACP, both in North Carolina and Virginia. And typically, weather doesn't bother you too much up in North Carolina and Virginia. And as I mentioned, we pulled out of West Virginia because of the weather issues there in the hills. So, yeah, I think you are going to see some movement in the Pipeline side. And I think we also talked about the Field Services side that Jeff Bridges is handling for us. That business unit has been adding quite a bit of backlog, so we should burn fairly well there also.

Okay. So, Field Services is good as well. And then, what about Transmission? Maybe there's some pull-through of some storm work in Q4 on the profit side?

Well, we still have some that comes in because of the work that was done in October. So, yes, there’ll be some in there. I never want to pray for a storm. So, I hope we don't have any more storms that the guys have to go do in the month of November or December. But, yeah, you will see a little bit of the uptick there from their October. Now, typically, November and December is a slowdown for them as far as their market is concerned. So, there may be a balancing effect there.

Okay. But if I'm reading you right, it seems like relative to this full year guidance of the $1.50 to $1.70, you'd be more comfortable if we were kind of at the low end or maybe even a little bit below the low end going into the Q4 or forward?

Well, I try not to say too much on that, Adam, because, obviously – sure, I guess, I'd always prefer you come in on the low side. That way, if I come in up on the high side, you give me credit for it. And I think Pete said it very well in his comments. Adam, there's a lot of moving parts and pieces. When you're down to the last quarter – as you know, we used to give rolling four quarters, and so now on an annual basis, when you're at the really last quarter, everything has to click together. And there's just a lot of moving parts and pieces in our organization. That's why we left it and maintained it where it was at.

Okay. Good. Okay, thanks again.

Thank you, Adam.

The next question is from the line of Tahira Afzal with KeyBanc. Please proceed with your question.

Hi, folks. Congrats on the quarter.

Thanks, Tahira.

Thanks, Tahira.

You spoke to us, with the ACP, $35 million reduction. But it seems you guys were able to more than make up for it. So, congrats on that. I guess, my first question is really in regards to Golden Pass. You said you started some work on that already, David?

A very small portion, Tahira. We're doing some side road work and things. Very minor. I want to make sure you realize it's very minor, but it was an indication for us to get on sides and things. We certainly do not have the selection for anything other than that at this point in time. We are certainly trying to get it, but – so, yeah, we are out there with – in a small form currently.

So, I guess, I'm asking because it seems from all the calls you've had with some of the larger E&Cs, they're pretty overwhelmed. In the past, that's translated into a whole bunch of orders for yourself, David. Is there any reason that would be different this time?

Ask that question again, Tahira, because I didn't hear the very last part. Sorry, say that again.

So, I was just trying to figure out – typically, with these mega projects, if my larger E&C names start to get a little overwhelmed. That typically means business trickles down to you to $300 million type of orders. Is there any reason it would be different this time over the next six to nine months?

No. Now, I understand your question. I think you're absolutely right, Tahira. That's typically what happens, is it will start trickling down to us and then you slowly build from there. That was why I was interested in us getting out there and doing a little bit of current work that we're doing. So, I anticipate it's going to be very much the same way.

Got it, okay. And then, I know your U&D operations, very solid in the quarter. Sometimes they don't get that much love from us on the Street. But 9% year-on-year growth, how much of that is sustainable? We have seen utilities moving more towards accelerating some of the aging pipe replacements. Is this sort of feeding into this trend or is there something else that we should consider one-time in this quarter?

No. I don't think you should consider any of what we've got on as one-time, especially not on the Utilities & Distribution side. I think, if you remember, when we went through the due diligence and the acquisition on Willbros on the T&D side, I think we mentioned to you that, one of the things that we found very exciting about it was once we got into the T&D, we found a substantial portion of revenue. I want to say it was in that $60 million, $70 million run rate on an annualized basis. That really was not T&D. It was gas U&D work. And through this quarter, we have sequentially been moving that gas Utilities & Distribution work out of T&D and over into our U&D space because it was coming to that T&D group by default. In other words, they really weren't going out there trying to sell it, but they were in there during the T&D portion, so the U&D portion kind of came with it. So, what we're still continuing to see, Tahira, is utilities ask us more and more to come in and bid some of both their U&D work and their T&D work. When we bought the organization in Florida, we've continued to see that one grow. And we've got Florida companies now asking us, entities like NextEra asking us to come in and start bidding some additional work for them on the U&D side that we had previously not done. And I was looking for a statistic – I think I can find it here quickly – that I was kind of interested in sharing. It came out through a publication the other day that natural gas utilities add an average of 1 new customer every minute nationwide. So, I don't see that slowing down currently, Tahira.

Got it, okay. And last question for me, and that's really in regards to ACP. It seems you have around $550 million of revenues in 2019. We see line three as still very much needed, given the binding commitments out there, maybe even we need some more lines. And then, of course, the Permian cycle seems to be doing its own thing. As you look at 2020, do you feel you can keep your main line revenues flat to even up?

I tell you what? Right now, with the opportunities we're seeing, I think we can keep it flat. I think it's too early for me to say that it would go up because I know, off of ACP, that we're going to be – except for the additional line that we added on Rockford, that we're going to be pretty full with work in 2019. And I'm sure you saw Dominion's announcement that they’ve actually lengthened the project out to mid-2020. And so, that leaves us about half a year to fill for Rockford. And I think we will definitely fill that. That's the reason I'm saying I feel comfortable about that staying flat. And I certainly see what's going on out in the Permian relative to Primoris Pipeline and Field Services. So, too early for me to tell you that that would grow, but continuing to run with a good 2019 and 2020. I think we've got visibility therein.

Okay. Pete, we’re going to miss you a lot. Thank you for all the patience and hand-holding through tough times. And, hopefully, we’ll find a reason to visit you in sunny San Diego.

Thanks, Tahira. I will say this, by the way, that, no, we’re not giving guidance for 2020.

I try. Take care.

The next question is from the line of Lee Jagoda with CJS Securities. Please proceed with your question.

In fairness, I was on another call. Heard you guys were talking about me and I hopped on.

Safe place.

So, first and foremost, a huge congratulations and a thank you, Pete, for everything over the years. Secondly, if I ask anything that's been asked, I apologize. So, first and foremost, in terms of the acquisition-related expenses that hit the quarter, do you have an estimate of what will be in Q4 that's implied in guidance?

Yeah. Somewhere between $1 million and $2 million.

Okay. And then, related to Carlsbad, where are we in the time line there? I think it was supposed to end this quarter, but I don't know if it's got more to go and…

Yeah. We did reach mechanical completion and everything on it. We've got a few cleanup things to do. But, basically, it's substantially complete. But there’ll still be a little bit of revenue burning this fourth quarter, Lee.

And, generally, when projects get to substantially complete, you tend to release profitability. Is there any profitability remaining that we should expect in Q4?

There will be some that will come out.

Okay. And I take it you’ve already said Willbros is performing on plan with the original expectations. Given that it feels like we're at least a little ahead versus where we thought we'd be at this point, is there any update to the original guidance for EBITDA for the acquisition?

Well, Lee, I promise never to give EBITDA guidance again and I made it almost all the way through the call. I think, Lee, that what we're seeing is we're already at the point of positive pre-tax earnings. We expect that we will do better than what we said. I'm not sure if we have a pencil to it yet. We're in the midst of doing our 2019 plans now, but we expect that by the end of this – it's profitable now. It will continue profitability in the fourth quarter. And we still have some opportunities to reduce costs and continue to integrate the businesses. So, I think we'll end up doing better than the $25 million that we had forecast in March.

Well, and with you leaving, I probably should have asked it, as would anyone else would like to give EBITDA guidance. That’s all I have. Thank you, guys, again. And, Pete, I'm sure we’ll talk soon.

Okay. Thanks, Lee.

Thanks, Lee.

Thank you. The next question is from the line of Adam Thalhimer with Thompson Davis. Please go ahead with your question.

Thanks for letting me come back in here. Just wanted to ask, for 2019, in the Power segment, kind of high level, it just seems like there's a lot of moving pieces with some projects getting pushed. What are your high-level thoughts for Power in 2019?

And you specifically want to talk Power, and not Power & Industrial? So just Power-related projects?

No. The whole segment. Whole segment.

Okay, okay. Just want to make sure. But I'm going to segment it a little bit. We're still seeing some very good opportunities on some of the solar projects that we're chasing. I'm optimistic, but guardedly optimistic that another one of those Midway-type projects will come our way very, very quick. As I mentioned, the gas-fired stuff on the West Coast, that's going to be a little bit more delayed. And any revenue there, I don't think would come about until 2020. As far as Power, over in the Southeast area, although we've got a few opportunities we're chasing, I don't see anything major there that will break quickly on just pure Power. Now when we start talking Industrial, we've already began to see some of the industrial gas organizations begin to start looking to release projects on their industrial gas site, whether it be hydrogen-related or air separation projects, things of that nature. We are in the throes of talking with a major petrochem company. And that would be a substantial – for Jonas' group, could be another one of the ethane cracker-type projects that we could get in our backyard. And then, obviously, these LNG facilities, when you look at the three or four that we are certainly chasing, every one of those are in our back doorstep down there in Louisiana, close to our main headquarters in between Houston and Baton Rouge. So, Industrial-wise, I think you're going to see some pretty good uptick from a business development perspective, probably fairly quick in the first quarter. And then, I will also say that the little engineering company we've always had, OnQuest, that we started 10 years ago, we are doing quite well on the peak shaving plant that they are executing currently up in the Northeast. There's another identical plant to that that could materialize early in the first quarter. That would keep that business unit running quite well. And then, our PD&C group that we started in Tyler, they are a front-end engineering and design. I mentioned that some of that work has already begun to pay off, that Jonas Beatty's group – I think we announced it, a $20 million-plus work that they got because of the engineering efforts therein. And that engineering group has got three other front-end engineering and design projects that they're doing, that we know the FIDs are there for those projects. So, I expect that Jonas' group and then Conrad's group will get some work off of those facilities also fairly early into the, say, first or second quarter of next year.

Okay. I appreciate that. Thanks, David.

Yes, sir.

Thank you. I'll now turn the floor back to David King for closing remarks.

Well, everyone, as I said, I really hate to see Pete go, but I know Ken Dodgen can do a good job for us. And I want to appreciate you participating in our third quarter call. We really do appreciate your interest and your questions. I want you to have a great day. And I ask again that everybody – encourage everyone to go out and vote. I think freedom to vote is a much-cherished part of the freedom we have in this country. And thank you for participating in today's call. Good day.

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.