Greetings and welcome to the Primoris Reports 2019 Fourth Quarter and Full Year Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Kate Tholking, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Doug. Good morning everyone. Thank you for joining us today. Our speakers for the day will be Tom McCormick, President and Chief Executive Officer; and Ken Dodgen, 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 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, 2019, which was filed this morning and other filings with the Securities and Exchange Commission.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 maybe required under applicable securities laws.I'd now like to turn the call over to our CEO, Tom McCormick.

Thank you, Kate. Good morning and thank you for joining us today to discuss our fourth quarter and full-year results.Primoris' full-year revenue surpassed $3 billion for the first time in the company's history, an achievement that is a result of hard work by all our men and women in the field as well as our project supervisors, back office support staff and our leadership team. The team I'm extremely proud to lead.In the fourth quarter, we were negatively impacted by severe weather and a few project delays. But we also benefited from strong execution in our solar pipeline field services in Canadian markets. As expected, our fourth quarter cash flows from operations were extremely strong. So we're able to complete our entire $50 million share repurchase program, benefiting Primoris and our shareholders and end the year with a solid balance sheet.Our backlog at year-end remains strong with 44% from long-term MSAs and our current bidding activity makes us confident about 2020. We're continuously reviewing our bidding procedures, looking for ways to refine the process, and ensure we are targeting the right projects with the right customers. Our funnel of prospects is very promising for bright start to 2020.Our focus on SG&A continues and we continue to be disciplined about where and how we spend our money, focusing on initiatives that can improve efficiency at the business unit, segment, and corporate levels, while also making sure our people in the field have the tools and equipment they need to be successful.Our earnings for the fourth quarter of $0.53 per share, allowed us to achieve our fiscal year earnings guidance despite the headwinds of pipeline delays, and the disappointing performance of our transmission segment, as we realigned and renegotiated for the future. I'm very pleased that we achieved our targeted guidance range,…

Thank you, Tom, and good morning, everyone.I'll focus on our fourth quarter results as well as our balance sheet, cash flows, and backlog, and then I will wrap-up with our 2020 guidance before moving on to your questions.Our fourth quarter 2019 revenue was $789.8 million compared to $877.7 million in the fourth quarter of 2018. The decrease was primarily due to the expected decline in revenue in the Pipeline segment, as a result of projects deferred until early 2020. This was slightly offset by our revenue growth in the Power and Civil segments.Our largest customers in the quarter were three large utility customers who accounted for a combined 21.4% of our revenue and a renewable energy company that accounted for 5.6% of our revenue. And our top 10 customers now account for less than 50% of our revenue. They accounted for only 44.8% of revenue in the fourth quarter, and 47.2% of revenue for the full-year.Gross profit in the fourth quarter 2019 was $89.5 million compared to $103.3 million in the fourth quarter 2018. The decline in gross profit was largely due to lower profit margins in the Power and Transmission segments and the lower revenue in the Pipeline segment. If your recall in Q4 2018, the Power segment had the benefit of a large settlement on a disputed receivable as well as the benefit of a successful close-out on large power project. In 2019, the segment didn't had any settlements or close-outs, and instead had two challenging industrial projects on the Gulf Coast that Tom previously mentioned. This combination drove this significant profit reduction from 2018 to 2019.And Tom has already mentioned the issues we are dealing with in the Transmission segment, I'll echo his comment that we are continuing to make organizational and operational improvements to return this…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions].Our first question comes from the line of Lee Jagoda with CJS Securities. Please proceed with your question.

They got it close, good morning.

Good morning, Lee.

So just taking into account on the pipeline side, the $260 million of work you won in late January, how much additional capacity do you have to take on additional work prior to the potential start of ACP in Q4?

We had -- it's really -- it depends on the size of the project and the timing of the project. I mean, as you know, the pipeline prices are quick burns. So from the time of award to mobilization is fairly quick, we're already in the field on those projects. If we can fit them in our schedule, we have a capacity to do probably as many as five spreads at any given time depending on the type of work. So it just depends on the mix and the respective size and schedules.

And then I know you kind of explicitly took ACP out of the guidance range as it relates to Q4, but what are you assuming in terms of backfilling work in Q4 to get to that guidance range?

I want to make sure I understand your question, Lee. What exactly are you asking?

Sorry, if you take ACP out of Q4 and your guidance is $1.70 to $1.90 presumably you'll be doing some more as it relates to Rockford in that quarter.

Yes.

So what's assumed in terms of backfilling for Q4?

Less than $30 million of revenue.

Okay.

We had not expected, even if ACP gets approved this year, we had not expected to be able to do a lot of work this year. I mean we falling of trees made clearance more right away, the West Virginia you're not going to do any work in the winter; you're going to be in the winter by the end, especially if it's a late third quarter notice to proceed. We could do some work in the Carolinas or perhaps it's more than that. And I believe we had less than $30 million in our original plan for ACP.And let me touch on this too, let me just step back to your last question for a second. I was talking primarily of Rockford even with their -- with respect to their capacity. We have a non-union company that also has a CAT capacity to take on multiple spreads and they're actually doing extremely well.

Got it. And then just one more related to transmission. I know you mentioned a couple of issues that cause the margin shortfall this quarter. Can you talk a little bit about the MSA renewal and on an apple-to-apples basis assuming things don't get better, which I think they will, but assuming they don't get better, how much the new -- the renewal of this MSA is additive to margins, hopefully beginning in Q1?

Let me think about how I can answer that question without the details of that MSA, I would expect it on a percentage basis; I'm not sure how to answer that question. Be honest with you. That 200, roughly represents about $208 million worth of work that we should be able to get through the course of this year, our margins will be let me just say in the 8% to 10% well actually gross margins will be in the 14% to 16% range on that work. So does that answer your question without really giving you a lot of details on that MSA.

That's super helpful. I guess is there any way to put that in compare it to what that work would have done this year?

If we were just doing work for that same client this year at those same levels, those margins would be low single-digits.

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

First one for me is just on the industrial projects in the Gulf Coast. I think last quarter; you guys had said you expected the drag there to be contained in the third quarter. It sounds like one of the projects is now done in the fourth quarter. But when is the next one completing? And I'm just curious, does this continue to be a drag in early 2020 or does the outlook reflect a return to normalized margin performance there coming out of the gate?

So let me just answer your question, I'll address the one that the project is finishing fourth quarter. Unfortunately for projects that go bad, they're -- kind of we look at them as the gift that keeps on giving. And it took a little bit longer to get that project finished. The second project is gone into 2020 primarily because of that, you heard me talk about design changes and client led changes. They've continue to see -- we've seen multiple changes on this project that have pushed the work scope out and the schedule out.We'll finish that here in the next couple of weeks. So that project would be finished the next couple of weeks. We were talking to the client now about selling our clients and all the discussions are going positively. So that we look to have that behind us here within the next two to three weeks. New projects actually to kick-off the year that that particular group is doing pretty well. They've been successful in winning some work and their performance so far this year is good.We bought -- like I said in my statement earlier that we bought in some new key people, primarily field level type people to help make sure we get the right skill sets in place. Not that we didn't have some good people but we would like somebody to concentrate on managing their contracts a little bit better. And let some people concentrate on some work in the field. And we're seeing the benefit of that now. So I think you're going to see a return to traditional performance here in the coming weeks, we're seeing it now actually.

Okay, great. That's helpful. And then on the Civil claims side, would you guys be able to quantify how much that helped relative to internal expectations in the fourth quarter? And then are the claims resolutions there all done at this point or is there more to come in 2020? And is there some of that built into the 2020 outlook?

Yes, Sean. We don't really comment on individual customers in non-claims realization especially at this point in the process. But with respect to resolution it is in the CCC process and Tom jump in here, wherever you want to. But that is a legal process that we have no control over unless TxDOT chooses to pull it out and settle with us.

Yes, our expectation was -- our hopes would be that we could settle these two claims this year. If they don't go well, I guess that could go on for probably the course of another year. But our expectation is that we set a precedent in the resolution of the first three claims. And we're talking to TxDOT now and we'll enter into some more detailed discussions here in the coming months about Trump pulling those possible -- the possibility of pulling those out of the CCC process and selling them based on the precedent that was set in our three earlier claim settlements.

Got it. And then as we think about this visibility around this initial 2020 outlook, what would be some of the major things that have yet to happen to hit sort of the mid-point like for example, I think the big solar projects flowing through right now complete mid-year, do we need to see another big solar win in the first half to hit the outlook or any kind of color on maybe the chunkier project side developments there?

Well, I'll kind of touch on three, our pipeline both our union and non-union pipeline groups are continuing to be successful on bids. Although we haven't announced them that we haven't signed the contracts yet, we've been informed that we're either shortlisted the low bid or verbally awarded the work. And just now got to work through contract terms on several projects in excess of a couple hundred million dollars, as well as our Field Services Group that's also part of that Pipeline segment is having some successes that we haven't yet finalized the contracts in 2020. But we expect those to be announced here in the coming weeks -- finalized and announced in the coming weeks.And then we have received a limited notice to proceed on a large solar project that we're also now moving forward on that once we've signed that contract, we'll formalize it and announce, and it's a fairly sizable project as well. So we're seeing, we've had a very good start to 2024 for -- when it comes to a new business taken.

And I guess just to wrap that up, if we see those pipe projects in final negotiations mobilize and if we see this large solar project mobilize, is that indicative of upside to the outlook or are those things already built in?

Well, it's really too early. We're talking to you in February right now to even say but we would be in probably in better position in any year that I've -- since I've been with this company than we have in the past. So it'd be a great start to the year to have that much work in backlog moving forward because basically what that would do, it would reserve space for the ACP project were to move forward in the fourth -- third or fourth quarter, but it would basically give out -- put both our pipeline groups add capacity, which we haven't seen in past years.

Our next question comes from the line of Brent Thielmann with D.A. Davidson. Please proceed with your question.

A question or follow-up question on the transmission business. How quickly do you expect those margins to kind of come back to the levels you were talking about? Or is it you think it kind of comes in phases this year?

Well, again, their business is cyclical, like some of our other businesses they rely heavily on MSA work. So the first quarter is going to kind of be slow as clients start ramping up, coming up and getting approval on their budgets and rolling out their budgets and going out that work. I think it's going to be again, second, third and fourth quarter is when we expect to see it.

Okay. Okay. And then on the U&D segment, I think this is the first year in a while we haven't seen it grow and I understand there's been some sort of extraordinary reasons for that this year. How do you think about that business reversing that trend in 2020? What kind of growth do you think it can see? I mean in a scenario whether it's in complex and all those other factors are kind of out?

Well, I don't think you're going to see a lot of growth in California, I think if we can continue to just maintain what the work that we have out there. I think that's great. Where we'll see growth is the opportunities for Q3C and PDS which are two of the other business units in that segment to go into different regions. And win MSA -- continue to win MSA work and to renew some of their MSA work, I think that's where the opportunities are and that's the expectation for both of those business units this year as well.

Okay. And the feedback from the California customers is more just a return to normal for the year after?

Well, when you're doing replacement work at some point in time you work your way through some of that and we have with some of the clients and we're doing some new work out there for those clients. It's just -- it's being able to balance that workload, then being able to get the workout through their engineers and get the work released also has some impact on it. But it's just -- we've been working out in that California market for a long-time and at some point in time that work would -- is going to flatten out a little bit.

Okay. And then the Power, industrial business, I mean you had really strong bookings here in 2019. It sounds like maybe some of the larger maybe Gulf Coast opportunities that are out there shifted right a little bit. Maybe you could talk a little bit about what you're seeing that's in your wheelhouse in that region, and I guess can you imagine sort of level of bookings in 2020?

Well, let me go out to California first for union part of that, that segment. They were able to actually last year, although they had a little bit; they fell a little bit short of the revenue. They actually did extremely well last year on winning work. And it was -- they didn't have one large projects that they won. It was all in the backlog of MSA work and small capital projects. I think you'll see the same with them this year, although they have a couple opportunities right now project that they're shortlisted on. They win, it's fairly sizable, it's north of $100 million. We expect to hear back about it here in the coming weeks.If I go to the Gulf Coast there's still opportunities to grow that business. We're seeing a lot of opportunities, prospects of lot opportunities to bid work. We're just trying to be careful about making sure that we have the right teams in place. And then we have the right execution strategy to make sure that those projects are successful. And I don't think it's -- there's not a limit right now that we're seeing in the Texas, Louisiana area for work, it's making sure that we're pursuing the right projects with the right customers and I think there are going to be some more LNG projects going forward. There's some chemical projects and petrochemical projects also that we've been talking to clients for a long-time on projects that we expected to be awarded in 2019 that have pushed and I think we've a --- we're in pretty good favor -- pretty good position on those projects, and we're ready to go-forward in 2020.

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

What is sold out in union and non-union pipe? What does revenue look like for that P&U segment in that scenario?

I will let Ken answer that, he has got.

You are talking about for 2020?

No, not even 2020 just like if you had full utilization for a year, how much revenue could you do?

Well, let's see, we finished the year with a little over $500 million in that segment, full-bore going probably $800 million to $900 million.

Okay.

And that's with all the spreads working like Tom was talking about and kind of sequence stuff nicely. So that we have jobs finishing up and crews rolling on to other jobs as well.

That didn't include the Field Service Group, which could be another $250 million.

Correct.

You literally doubled that segment versus 2019?

Yes, I will be careful about saying that but all everything would have to hit just right.

Exactly.

But I think there's certainly there's opportunity for growth there.

And how much of --

And to Tom's point about the Field Services business, right. That's not a segment type business like it is on the mainline pipeline construction, it is all about work crews who are onsite at various facilities and small to medium-sized projects that average anywhere from $3 million to $4 million on the small side up to $12 million to $15 million on the large side.

But with jobs you've already announced plus these verbal awards. You think you're on the run rate towards peak at the end of the year?

Maybe not peak but definitely toward the higher end of the range.

Yes, okay. And then if ACP?

That's just gravy.

That's actually good. Okay, I get it. And then -- that California T&D contract you won, has that ramped up yet? It was an MSA with the big California utility on the Power side.

Well, it’s working. It's not -- it's not ramped up again first quarter slow, things might just start getting approved. But I know at the end of last year, we probably had 35, 40 crews. They wanted us to ramp-up to probably twice that. But we reserve the right to limit that until they can show us the backlog of work. And probably in that same mode this year, so I think it's going to be a little bit slow in the first quarter it'll ramp-up in the second, third, and fourth quarter. So we're looking forward to seeing that grow.

Okay. And then on the Underground, on the pipe side, the distribution work in California has that -- you said they told you is going to ramp in Q1. But have you seen that yet?

No. We don't expect to really just see a lot of that until Q2. As far as, no we got a pipeline project out there. There's a smaller project that will be handled by that Underground group that will kick-off but I think it's very typical for a lot of that word not to start picking up into Q2.

Okay. So you say, California overall, the gas utility and electric utility good demand outlook, but it really takes up Q2 and then in the back half?

Yes, it really starts ramping up towards the end of Q2, and Q3 and Q4.

Okay, that's helpful. And then last one for me the solar contracts, I guess haven't fully fleshed out that opportunity. But you sound very upbeat, like, what are you seeing on the bidding side? And what's the typical size of these jobs to Primoris?

They are anywhere from $50 million to north of $280 million. We have -- we think we fit a real good niche in that $100 million to $250 million, $280 million range. There's inordinate amount of opportunities there, you just have to partner up with or match up with the right client, or the right partner. So a lot of these are developers chasing PPAs and we make sure that our pricing is in line with what their expectations are. We have several that we've done work for that have other opportunities. They've been very pleased with our performance. So I think you could go out and get -- there's enough out there for us -- any contractor that has this experience to go out and get themselves in trouble if they were wanting to take on too much work.Yes, would be careful to make sure that you have the right staffing levels to put on those projects because they're quite different than our industrial construction projects. And they're much more of a production facility type of project than they are an industrial project. So the different type of mindset it takes to do that type of work.

How quickly do they burn?

Once you get through engineering, I mean you'll typically finish one at about a year-and-a-half a larger scale project, the Roadrunner project will have been in the field for probably about a year-and-a-half, and phase 2 finishes in this summer.

[Operator Instructions].Our next question comes from the line of Julio Romero with Sidoti & Company. Please proceed with your question.

Hi Julio.

Hey, good morning, everyone. So just piggybacking on that last question about solar and maybe renewable in general, seems like one thing that may set you apart is your ability to maybe offer more of a comprehensive solution than some peers in the space. Can you just talk about that? And if that's a differentiator as those renewable jobs get more competitive over time?

We think it is because we can get up involved up front with a client and look at us -- go look at a site, put a price on that site, help them develop their scope, help them determine what that cost per megawatt, maybe to make sure it fits in their model and then move forward with detailed design.We have companies in our I&M Group and our heavy Civil groups and projects have done the site clearing and grading and they saw stabilization, built the roads up to the top of Mesa for a project. We can do, we can build the substations form, we can run the transmission lines and do the interconnects for them and then we can build the solar, design and build the solar plant. So I mean, really and truly, we're effectively, not that all clients use all our services, but we're one-stop-shop with respect to that.

Got it. That's helpful. And just housekeeping question I think you mentioned, we should assume, similar to 2019 $20 million or so of proceeds from equipment sales for 2020?

Well, yes, I don't know that we can assume 28 because we don't know what that right-sizing is going to be. But it would not surprise me to see us have higher levels of proceeds from equipment sales in 2020 than we have historically. Historically we've kind of been in that $9 million to $12 million range. And so whether or not it'll be 28 or not, I don't know, but it should be higher than that $9 million to $12 million that we've historically experienced prior to 2019.

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Well, first of all thank you, everybody for joining us. It was a -- 2019 was a successful year, we had some -- some opportunities and things that we need to work on and improve on. I think we're well -- we got those well underway and looking forward to a successful 2020 for all our Primoris family of companies. Thanks for joining us.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.