Primoris Services Corporation 2026 Q2 Earnings Call

Welcome to the Primoris second quarter 2026 earnings conference call. Joining me today with prepared comments are Koti Vadlamudi, President and Chief Executive Officer, and Ken Dodgen, 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, August 5th, 2026. We disclaim any obligation to update these statements except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures.

A reconciliation of these non-GAAP financial measures are available on the investors section of our website and in our second quarter 2026 earnings press release, which was issued yesterday. I would now like to turn the call over to Koti Vadlamudi.

Thank you, Blake. Good morning. Thank you for joining us today to discuss our second quarter 2026 financial and operational results. As we noted in our June operational update, our second quarter results reflect the majority of the impact from the limited number of renewable energy projects that have experienced margin pressure. Since that update, we have achieved mechanical completion on one additional project and will be submitting for mechanical completion on another this week. Importantly, we continue to expect that three projects will reach substantial completion during the third quarter of 2026. The sixth and final project remains aligned with our revised estimates, and we currently expect to achieve mechanical completion in early November, followed by substantial completion by year-end. I also want to emphasize that following our portfolio review, the remainder of the renewables projects, on average, are performing within our expectations.

While these projects have presented challenges, we are making meaningful progress toward completing them and reducing their impact on our business. I am particularly encouraged by the commitment, resilience, and execution of our teams across Primoris. Their focus and determination have been instrumental in advancing these projects toward completion while continuing to deliver the high-quality generation assets our customers expect and that have helped establish Primoris as a trusted leader in the renewables marketplace. As we move forward, our priorities are clear: successfully complete these projects, maintain disciplined pre-construction planning and risk posture across the portfolio, and position the business for profitable, sustainable growth. As we have stated previously, the opportunity set within our renewables business remains substantial.

Today, we see more than $16 billion of opportunities for solar and battery storage across our core geographic markets, where we benefit from longstanding customer relationships, a proven track record, and deep operational expertise. We remain selective in the opportunities we pursue, maintaining a disciplined approach to risk assessment, contract structure, and project execution. Our strong customer base, experienced teams, and history of successfully delivering high-quality generation assets positions us well to compete for and win attractive work in these markets. Looking ahead, we remain confident in the long-term fundamentals of the renewables business and in Primoris' ability to leverage its market leadership, operational capabilities, and customer partnerships to drive profitable growth. In addition to our focused efforts to restore a positive trajectory in renewables, Primoris delivered record bookings and backlog in the second quarter, underscoring the strength and diversity of our platform.

During the quarter, we secured more than $3.9 billion of new awards, including approximately $1.5 billion in the utility segment and $2.4 billion in the energy segment. The growth in our utilities backlog reflects both the favorable dynamics of our end markets and the confidence our customers place in our ability to execute critical infrastructure projects. Demand remains particularly strong in power delivery, and we are strategically expanding our workforce in key markets to support strategic customer relationships while also engaging with new customers seeking experienced partners for transmission, substation, and distribution work. We see growing opportunities to build upon our established track record in transmission and substation work. At the same time, we are investing in process improvements, operational rigor, and talent development to enhance execution, improve profitability, and expand our workforce of qualified field leadership, project management, and supervisory personnel.

Growth in our energy segment backlog was primarily driven by natural gas power generation, which accounted for approximately $1.4 billion of the sequential increase during the quarter. In addition, we benefited from roughly $200 million of backlog associated with the PayneCrest acquisition as of quarter end and secured new awards across electrical construction services, industrial infrastructure, and utility-scale solar. We are still expecting renewables backlog to build in the second half of the year, with the majority of awards coming in the fourth quarter. Looking beyond this year, we also see the potential for strong first quarter of 2027 for renewables awards, which would further support our confidence in returning the business to growth next year. Beyond renewables, we continue to see encouraging opportunities across several energy end markets.

As we look to the second half of 2026, we see additional upside potential in both pipeline and natural gas power generation opportunities, particularly for projects expected to ramp up in late 2027 and early 2028. Taken together, the strength of the customer demand, the breadth of opportunities across our end markets, and the quality of our project funnel support our view that Energy Segment is positioned to benefit from a favorable multi-year investment cycle. Our focus remains on pursuing the right opportunities, maintaining disciplined project selection, and converting this robust set of opportunities into profitable growth. I'll now turn to our segment performance for the quarter. The Utility Segment was up from the prior year, driven by growth in gas operations and power delivery. While Communications revenue and margin were lower year-over-year, as expected.

As we discussed in our Q1 call, we anticipated a softer near-term environment in Communications as traditional fiber-to-the-home program build-outs transition toward BEAD-funded projects. While this affected activity levels in Q2, we continue to believe these opportunities will begin to ramp up later this year. In the meantime, data center fiber and connectivity work remain an important growth driver for the business. We are also encouraged by the level of bidding activity we are seeing, which has the potential to materialize in late 2026 and extending into 2027. Our gas operations business continues to perform well, exceeding market revenue growth expectations in the quarter. We are also actively pursuing new programs in the Midwest and Southern regions that would further support revenue in the business. While a lower level of higher-margin project work impacted margins compared to the prior year, the business delivered another solid quarter.

Strong productivity, effective execution, and high equipment utilization continue to support healthy operating performance and have us well-positioned as we move through the remainder of the year. In the Energy Segment, operational performance during the quarter was solid outside of the previously discussed challenges within renewables. Pipeline delivered another quarter of double-digit revenue growth with substantial margin improvement. The recovery from the cyclical trough experienced in 2025 continues to gain momentum and market activity remains constructive. Furthermore, we believe that the larger diameter opportunities are still on the horizon with a multi-year addressable project funnel that now exceeds $7 billion in total contract value. In electrical construction services acquired through the PayneCrest transaction, performance has already exceeded our expectations. During the two months the business was part of Primoris in the quarter, it delivered stronger than anticipated revenue and margins.

We are encouraged by the strategic and cultural fit, as well as the early operating results. We are already seeing positive momentum through backlog growth and a robust pipeline of opportunities with existing customers. Several of these pursuits could convert into awards by year-end, further enhancing our growth outlook for this business. In Industrial, which includes our natural gas power generation activities, revenue was modestly lower year-over-year, primarily due to the timing of project completions and the commencement of new work. Despite this temporary timing impact, demand remains strong and project activity continues to develop as expected. As a result, we remain on track to exceed our expectations for the full year, supported by a meaningful ramp in activity during the second half of 2026.

Overall, despite the challenges we experienced in renewables during the quarter, Primoris continues to benefit from strong underlying performance and favorable market fundamentals across multiple end markets, including power generation, pipeline infrastructure, and electrical services. The strength of our record backlog, expanding opportunity pipeline, and disciplined approach to project selection reinforces our confidence in the business. I'll now turn it over to Ken for more on our financial results.

Thanks, Cody, and good morning, everyone. Our Q2 revenue was just under $1.7 billion, a decrease of about $200 million or 10.7% from the prior year, driven by lower revenue in the energy segment. The energy segment was down $236.9 million, or 19.2% from the prior year due to decreased renewable activity. This was partly offset by increased natural gas generation and pipeline activity and the addition of PayneCrest for May and June. The utility segment was up $19.6 million, or 2.8% from the prior year, driven by higher activity in gas operations and power delivery, partially offset by lower communications revenue. Gross profit for the second quarter was $82.4 million, a decrease of $149.3 million compared to the prior year. This was driven by lower revenue and margins in the energy segment and lower margins in the utility segment.