Good day, and thank you for standing by. Welcome to the Primoris Services Corporation First Quarter 2021 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brook Wootton, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Primoris' earnings conference call. Joining me today are Tom McCormick, President and Chief Executive Officer; and Ken Dodgen, our Chief Financial Officer. Before we begin, I would like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook only as of today. We disclaim any obligation to update these statements, except as may be required by law.

Thank you, Brook. Good morning and thank you for joining us today to discuss our first quarter results and our 2021 outlook. I would like to take this opportunity to welcome our new shareholders to the Primoris family of companies, and thank all of our shareholders for their continued support and confidence in our company's strategy and execution. We had a strong first quarter of reporting $818.3 million of revenue, which was a 10% increase over the prior year. This was despite incurring $13.9 million in transaction costs. Most of which was associated with the acquisition of Future Infrastructure. As well as effectively, a one-week shutdown of our operations across Texas and the Southeast due to the historic storm event that hit in mid-February. As a reminder, our first quarter has historically been a slow quarter for the company due to the seasonality of our clients work. That historic freeze was a bad news, good news event for us, where we lost approximately a week of revenue. The event generated some storm repair work for us as well. More significantly for the long-term, as Texas addresses the infrastructure gaps that led to the power failures. We believe there are opportunities for us with respect to power generation as well as transmission and possibly even in distribution. Our Utilities and Energy/Renewables segments led the growth in the quarter, producing strong revenues while the Pipeline Services segment performed as expected. Now let's look at the three segments in detail. As we previously announced in January, we reorganized our operating and reporting structure to function more efficiently, as well as to facilitate collaboration and cross-selling among our segments. Beginning with the first quarter of 2021, we are reporting under three segments: Utilities, Energy/Renewables and Pipeline Services. We have updated our 2020 segment information to align with the segment changes. Our Utility segment had strong first quarter performance with revenue coming in at $335 million, up 34% compared to the same period last year. This increase was primarily due to increased activity with our utility customers in North Carolina and Louisiana, and the addition of Future Infrastructure, which represented approximately $60 million of revenue for a portion of the quarter. With the integration progressing well, Future Infrastructure is already paying dividends to our operations. As we read the benefits of similar values, safety culture, quality standards, and operational synergies. This acquisition has become our gateway into the telecom industry, where demand for bandwidth continues to drive the majority of the work activities.

Thank you, Tom, and good morning, everyone. Let me begin with our key financial metrics for the first quarter. And then I'll move into the details of our balance sheet, cash flows and backlog. Then I'll wrap up with our updated 2021 guidance before moving on to your questions.

Thank you. Your first question comes from the line of Lee Jagoda with CJS Securities. Your line is open.

Good morning. So just starting with the Energy segment gross profit, can you break out the revenue and gross profit that you got from the resolution on the industrial project, just so we can understand what normalized margins look like this quarter?

Yes. Lee, the P&L impact was really only about $3 million for that. And I don't think there was really any revenue impact at all.

Okay. So margins still would have been well above expectations there in this quarter. But I think, if I look at your margin ranges for that segment, they come down from where we were in Q1. Is there anything else in there causing the positive bumping Q1? Or how should we think about the balance of the year there?

I think it's just continued strong execution on a lot of those renewable projects that we've been talking about, the solar work, especially.

Even with the industrial group, the projects that they have other than one troubled project that we've noted in our call – in our announcement, the other projects are actually performing very well.

Got it. That's very helpful. And then just turning to the Future acquisition, obviously, Q1 had a bunch of weather impact in it. How should we think about the catch-up there in terms of, has it already had a chance to kind of catch up towards the run rate that you gave when you close the acquisition? Or should it be more of a gradual ramp as we get to the end of the year? And then just a follow-up to that is, has the expectations of kind of consistent revenue with what we were thinking on a trailing basis changed at all, since you bought the business?

Yes. I'll let Tom talk about the catch-up. The revenue, no, has not changed at all, relative to what we'd previously talked about.

And as far as their revenue, I think second quarter, third quarter, you're going to see a ramp up. The first quarter was a slow start. It didn't help. You were still in a pandemic situation, coming out of a new year and then we have the weather, but we’re starting to see a lot more activity right now.

That's great. One more for me and I'll hop back in queue. Just the MSA backlog from Future was about $250 million bucks. Is there any way to see sort of what that MSA backlog looked like this time last year to kind of get a trend line there?

To be honest with you, I don't have that information for this time last year, because we didn't know them, so.

Okay. Fair enough. Thanks very much.

Your next question comes from the line of Sean Eastman with KeyBanc. Your line is open.

Good morning, guys. I was hoping we could just, you can maybe this bridge us from the new guidance range from the old guidance range. I mean we've got the obvious dilution from the equity deal. But what else moved? I mean, you guys talked about maybe the quarter coming in better than internal expectations, maybe interest expenses coming down, if you could just give us that bridge. That'd be helpful.

Yes, I think you've covered it all. From a dilution standpoint, 4.5 million shares issued, right. That's kind of 9% to 10% dilution if you will, from where we originally were. So if you take the midpoint of our range, recognizing that it is a range, but if you take the midpoint of our previous range from a couple of months ago at $2.50, roughly 9% to 10% dilution is call it $0.23 to $0.25 and then offset by call it, $0.10 to $0.15 better than expected in Q1.

Okay. Okay. Got you. And the LNG project in the Northeast, I think you guys said the timeline is, end 3Q or early 4Q completion. I think last quarter we were talking end 2Q completion if I recall correctly. So just wondering if that timeline shifted out and whether that increases the risk that we might see another cost to complete estimate revision come in there?

Eastman, here I'll tell you, we think we've captured the risks. We've always had money in the forecast to commission and startup that facility. But when we were looking and discussing before, we were looking at mechanical completion. We were talking about done-done dates, walk-off days. Projects like this, so you never know, there's always going to – you'll always see some – they seem to be the gifts that keep on giving. I can sit here and tell you today, I think we've captured all of them, but engineering is done. Most of the mechanical and structural work is done. We're in the electrical and instrumentation part of the project. We've started to test systems. So all things looked good, but I wouldn't sit here and tell you we're not going to see something. I think it would be minor that I think it's still – there's still probably some costs that we may see.

Okay, fair enough. And then pipeline revenue down 32% year-over-year in the first quarter. Is that a good way to think about it for the full year? And then I know…

Go ahead, I'm sorry, finish your question.

Well, I was just going to say, I know you guys don't guide on revenue, but just from a high level, do you think the business grows organically ex-future for the full year?

I think, first, let me talk about pipeline. The pipeline is back to closer to what they did in 2019. And we expect them to perform to those levels both revenue and profit, but maybe down a little bit from that. But that's kind of where they're trending right now. And that's really 2020 was an exceptional year for them. If you remember, they got several projects. So they kicked off at the beginning of the year and they ran all the way through the end of the year, burning revenue and making higher than expected margins, I would expect them to go back to that traditional. The company as a whole, I think, we'll see some growth. I think we're really riding on the back of Renewables. I think we're going to have to start picking up some more work in our industrials. And we're starting to see more activity, although it's as expected. It's just not at levels. It's been in the past years. But I think that it will still grow. I think you'll see a little bit of both.

Okay, terrific. I'll hand it over there. Thanks guys.

Your next question comes from Adam Thalhimer with Thompson, Davis. Your line is open.

Good morning, guys. Great quarter, I don't know why the stock is down, but maybe we can fix that.

I was hoping you could tell me, Adam.

I don't know, maybe machines are just picking up on, it looks – because it makes it look like a guidance decrease, but I don't think that's really the case.

I agree with you.

I want to start on the – actually, I want to start on RDOF project. $60 million seems pretty big, curious how many projects are out there like that. And then when do you think you actually start to see revenue from that?

Yes. We'll see revenue in the coming quarter. I think we will even see revenue this quarter in that. And there's a number of projects we're looking at right now in other $350 million opportunity associated with RDOF. And as I said in my call that they're spending $20 billion over the next 10 years on that work and there's – they're probably even going to be more coming out of these new bills – this new bill to expand broadband. So I think there's a lot of opportunities for us and companies like us. We’ve just won this one, we're chasing another one that looks very promising and there's more out there.

Okay. And pricing on these things is pretty good?

Yes. I mean, it's a competitive market, but the pricing is in line with what we would expect.

Got it. One of the concerns out there, and that really came up this week for solar was semiconductor availability. Curious if you have any thoughts on availability of panels? Or even for wind projects, if you're seeing any availability issues?

I haven't heard of anything for wind. With solar, we've seen – we haven't had any impacts yet. Most of our clients on the projects that we're executing at 2021 and even 2022 have gotten out ahead of it. I think that's one reason that we've seen a number of limited notice to procedure or progression on projects to the point that a client is buying the equipment. So I don't – I'm not aware of any impacts right now for any of our ongoing projects. I would expect that people are looking at that on projects going forward and making sure they get out ahead of it and buy timely. So that may actually help us get more awards and accelerate a little bit.

Okay. Any sign that pipe bottoms in 2021?

You know what, I'm hoping that there's no size, where we're seeing a little bit of activity, I think, and again, it's smaller. You're not going to see a large cross-country pipelines, and even if you do it, they may come up, you might not see them in the press until they're announced. The indications are that we think we'll see more activity as this year progresses. Some of them will be for work and, hopefully, we'll have revenue burn this year and some of -- more of it will be for next year. But I'm with you. I think the bottom is going to be this year, but it really just depends on what the misdirection does. And you hear about all these jobs, these pipeline projects being canceled. There's a lot of pressure now and a lot of publicity about the jobs are being lost because of them. So we'll see.

Okay. And leverage down – with the equity rate leverage down at 1.5 times, just lastly curious what your thoughts are on M&A going forward?

Yes. I mean, part of the reason we did that was so that we could delever and be ready for the next opportunity. So we continue to look at opportunities. The pipeline is full with a lot of stuff, small, medium, and large. I don't expect us to jump into another large one, probably the size of a Future just yet. I'd probably like to kind of see what happens and also continue to delever. But we're definitely looking and with the continued focus on utilities, telecom, essentially solar and renewables, like we've been talking about every single quarter.

I think one thing that Future acquisition did for us, it demonstrated that we will pay higher multiples and we'll pay more for a company if it's worth it. And we think Future was a good buy-in. It was well worth it. We've seeing a lot more activity, a lot more opportunities to come our way. We just got to find the right one.

Okay. Thanks guys. I'll talk to you later.

There are no further questions at this time. I will now turn the call back to Tom McCormick for closing remarks.

Thank you, Mariama. I'll just conclude by saying that we're off to a strong start in 2021 and are looking forward to seizing the opportunities as the rest of the year brings. Thank you all for joining us today.

This concludes today's conference call. Thank you for participating. You may now disconnect.