Primoris Services Corporation Reports Fourth Quarter and Full Year 2021 Results
DALLAS–(BUSINESS WIRE)–Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or the “Company”) today announced financial results for its fourth quarter and full year ended December 31, 2021 and provided the Company’s outlook for 2022.
For the full year 2021, Primoris reported the following highlights (1):
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Revenue of $3.5 billion
- Utility Segment revenue up 21 percent
- Energy/Renewables Segment revenue up 15 percent
- Net income attributable to Primoris of $115.6 million, an increase of 10 percent over prior year
- Fully diluted earnings per share (“EPS”) of $2.17
- Adjusted net income attributable to Primoris (“Adjusted Net Income”) of $143.3 million
- Adjusted diluted earnings per share (“Adjusted EPS”) of $2.70
- Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) of $297.6 million
- Record Backlog of $4.0 billion, an increase of 44 percent over prior year
For the fourth quarter 2021, Primoris reported the following highlights(1):
- Revenue of $884.4 million
- Net income attributable to Primoris of $29.4 million
- Fully diluted earnings per share of $0.54
- Adjusted Net Income of $34.3 million
- Adjusted EPS of $0.63
- Adjusted EBITDA of $66.9 million
- Maintained quarterly dividend of $0.06
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(1) |
Please refer to “Non-GAAP Measures” and Schedule 1, 2 and 3 for the definitions and reconciliations of our Non-GAAP financial measures, including “Adjusted Net Income,” “Adjusted EPS” and “Adjusted EBITDA.” |
“We wrapped up 2021 with a record backlog over $4 billion, an increase of more than 40 percent compared to year-end 2020,” said Tom McCormick, President and Chief Executive Officer of Primoris. “During the fourth quarter we announced over $1.8 billion in Energy/Renewables and Utilities segment contracts. Of these, approximately $1 billion was directly related to utility-scale solar projects. Add this backlog to our strong revenue of $3.5 billion for the year, and it is clear that we are on solid ground with incredible momentum going forward.”
“We achieved these results despite headwinds in the first half of the year from weather events and supply chain and permitting challenges, all while maintaining our high standards for quality and safety,” McCormick added. “I particularly want to thank our Primoris crews for achieving our best-ever safety performance, with a Total Recordable Incident Rate of 0.49, well below our Corporate target, and the industry average.”
Summarizing the segment results for the year, McCormick noted: “Our Utilities segment led the revenue growth with a 21 percent increase compared to 2020, primarily due to the Future Infrastructure Holdings, LLC (“FIH”) acquisition and increased activity with utility customers in Texas and the Southeast. Utility-scale solar projects continued to drive progress in our Energy/Renewables segment. Revenue increased by 15 percent during 2021 compared to last year. Gross profit for the same segment increased by 58 percent during 2021 compared to 2020. The Pipeline segment revenue declined, although our gross profit, as a percentage of revenue, increased to 19 percent in 2021 compared to 11 percent in the previous year.”
Fourth Quarter 2021 Results Overview
Revenue was $884.4 million for the three months ended December 31, 2021, a decrease of $12.9 million, compared to the same period in 2020. The decrease was primarily due to a decrease in revenue in our Pipeline segment offset by growth in our Utilities and Energy/Renewables segments, including $68.1 million from our acquisition of FIH. Gross profit was $96.0 million for the three months ended December 31, 2021, a decrease of $1.7 million compared to the same period in 2020. The decrease was primarily due to a net decrease in revenue from the Company’s legacy operations, partially offset by an increase from the FIH acquisition ($11.6 million). Gross profit as a percentage of revenue, was consistent at 11 percent for the three months ended December 31, 2021 and 2020.
Beginning with the third quarter of 2021, the Company initiated the inclusion of Non-GAAP financial measures. The Company believes these measures enable investors, analysts and management to evaluate Primoris’ performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. In addition, management believes these measures are useful in comparing the Company’s operating results with those of its competitors. Please refer to “Non-GAAP Measures” and Schedule 1, 2 and 3 for the definitions and reconciliations of the Company’s Non-GAAP financial measures, including “Adjusted Net Income,” “Adjusted EPS” and “Adjusted EBITDA”.
During the fourth quarter of 2021, net income attributable to Primoris was $29.4 million compared to $31.8 million in the previous year. Adjusted Net Income was $34.3 million for the fourth quarter compared to $35.2 million for the same period in 2020. EPS was $0.54 compared to $0.66 in the previous year. Adjusted EPS was $0.63 for the fourth quarter of 2021 compared to $0.73 for the fourth quarter of 2020. Both EPS and Adjusted EPS in 2021 were affected by the 4.5 million shares from the secondary offering in the first quarter of 2021. Adjusted EBITDA was $66.9 million for the fourth quarter of 2021, compared to $68.8 million for the same period in 2020.
Beginning with the first quarter of 2021, the Company consolidated and reorganized its reportable segments. The three segments are: Utilities, Energy/Renewables and Pipeline Services. Revenue and gross profit for the segments for the three months ended December 31, 2021 and 2020 were as follows:
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Segment Revenue |
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(in thousands, except %) |
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(unaudited) |
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For the three months ended December 31, |
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2021 |
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2020 |
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% of |
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% of |
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Total |
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Total |
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Segment |
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Revenue |
|
Revenue |
|
Revenue |
|
Revenue |
||
|
Utilities |
|
$ |
442,870 |
|
50.1% |
|
$ |
362,353 |
|
40.4% |
|
Energy/Renewables |
|
|
369,311 |
|
41.8% |
|
|
333,406 |
|
37.2% |
|
Pipeline |
|
|
72,267 |
|
8.2% |
|
|
201,579 |
|
22.5% |
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Total |
|
$ |
884,448 |
|
100.0% |
|
$ |
897,338 |
|
100.0% |
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Segment Gross Profit |
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(in thousands, except %) |
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(unaudited) |
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For the three months ended December 31, |
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2021 |
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2020 |
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% of |
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% of |
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Segment |
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|
Segment |
|
Segment |
|
Gross Profit |
|
Revenue |
|
Gross Profit |
|
Revenue |
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|
Utilities |
|
$ |
52,007 |
|
11.7% |
|
$ |
47,550 |
|
13.1% |
|
Energy/Renewables |
|
|
38,461 |
|
10.4% |
|
|
24,314 |
|
7.3% |
|
Pipeline |
|
|
5,549 |
|
7.7% |
|
|
25,892 |
|
12.8% |
|
Total |
|
$ |
96,017 |
|
10.9% |
|
$ |
97,756 |
|
10.9% |
Utilities Segment (“Utilities”): Revenue increased by $80.5 million, or 22 percent, for the three months ended December 31, 2021, compared to the same period in 2020, primarily due to the FIH acquisition ($68.1 million) and increased activity with the Company’s gas and electric utility customers, partially offset by decreased activity from the impact of customer project and material delays. Gross profit for the three months ended December 31, 2021 increased by $4.5 million, or 9 percent, compared to the same period in 2020. The increase is primarily attributable to the incremental impact of the FIH acquisition ($11.6 million), partially offset by lower margins from our legacy operations. Gross profit as a percentage of revenue decreased to 12 percent during the three months ended December 31, 2021 compared to 13 percent for the same period in 2020, primarily due to customer project and material delays, a decrease in higher margin storm work in 2021 and strong performance and favorable margins realized on projects in the Southeast in 2020. These amounts were partially offset by the favorable margins realized by FIH.
Energy and Renewables Segment (“Energy/Renewables”): Revenue increased by $35.9 million, or 11 percent, for the three months ended December 31, 2021, compared to the same period in 2020, primarily due to increased renewable energy activity ($68.4 million), partially offset by the substantial completion of industrial projects in Louisiana and California in 2020. Gross profit for the three months ended December 31, 2021, increased by $14.1 million, or 58 percent, compared to the same period in 2020, primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 10 percent during the three months ended December 31, 2021, compared to 7 percent in the same period in 2020, primarily due to higher costs associated with a liquified natural gas (“LNG”) plant project in the Northeast in 2020.
Pipeline Services (“Pipeline”): Revenue decreased by $129.3 million, or 64 percent, for the three months ended December 31, 2021, compared to the same period in 2020. The decrease is primarily due to the substantial completion of several projects in 2020 and a decline in the overall midstream pipeline market demand from historically high levels, along with challenges in permitting new pipelines. Gross profit for the three months ended December 31, 2021 decreased by $20.3 million, or 79 percent, compared to the same period in 2020, primarily due to lower revenue and margins. Gross profit as a percentage of revenue decreased to 8 percent during the three months ended December 31, 2021, compared to 13 percent in the same period in 2020, primarily due to higher costs associated with unfavorable weather conditions experienced on a Louisiana pipeline project in 2021 and strong performance and favorable margins realized on a Texas pipeline project in 2020.
Full Year 2021 Results Overview
Revenue for the year ended December 31, 2021 increased by $6.1 million, compared to 2020. The increase was primarily due to growth in the Company’s Energy/Renewables and Utilities segments, including $266.6 million from its acquisition of FIH, partially offset by a decrease in revenue in the Company’s Pipeline segment.
For the year ended December 31, 2021, gross profit increased by $46.4 million, or 13 percent, compared to 2020. The increase was primarily due to the Company’s acquisition of FIH ($43.6 million) and an increase in margins from its legacy operations. Gross profit as a percentage of revenue increased to 12 percent from 11 percent in the same period in 2020.
During 2021, net income attributable to Primoris was $115.6 million compared to $105.0 million in the previous year, an increase of 10 percent. Adjusted Net Income was $143.3 million for the full year 2021 compared to $117.7 million for the same period in 2020. EPS was $2.17 compared to $2.16 in the previous year. Adjusted EPS was $2.70 for the full year of 2021 compared to $2.42 for 2020. Both EPS and Adjusted EPS in 2021 were affected by the 4.5 million shares from the secondary offering in the first quarter of 2021. Adjusted EBITDA was $297.6 million for 2021, an increase of 17 percent, compared to $253.8 million for the same period in 2020.
Revenue and gross profit for the Utilities, Energy/Renewables and Pipeline segments for the years ended December 31, 2021 and 2020 were as follows:
|
Segment Revenue |
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(in thousands, except %) |
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(unaudited) |
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For the year ended December 31, |
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2021 |
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2020 |
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% of |
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% of |
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Total |
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|
Total |
|
Segment |
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Revenue |
|
Revenue |
|
Revenue |
|
Revenue |
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|
Utilities |
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$ |
1,657,957 |
|
47.4% |
|
$ |
1,365,635 |
|
39.1% |
|
Energy/Renewables |
|
|
1,408,211 |
|
40.3% |
|
|
1,228,821 |
|
35.2% |
|
Pipeline |
|
|
431,464 |
|
12.3% |
|
|
897,041 |
|
25.7% |
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Total |
|
$ |
3,497,632 |
|
100.0% |
|
$ |
3,491,497 |
|
100.0% |
|
Segment Gross Profit |
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(in thousands, except %) |
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|
(unaudited) |
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|
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For the year ended December 31, |
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2021 |
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2020 |
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|
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% of |
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% of |
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|
Segment |
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|
Segment |
|
Segment |
|
Gross Profit |
|
Revenue |
|
Gross Profit |
|
Revenue |
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|
Utilities |
|
$ |
186,287 |
|
11.2% |
|
$ |
177,836 |
|
13.0% |
|
Energy/Renewables |
|
|
150,286 |
|
10.7% |
|
|
94,919 |
|
7.7% |
|
Pipeline |
|
|
80,087 |
|
18.6% |
|
|
97,459 |
|
10.9% |
|
Total |
|
$ |
416,660 |
|
11.9% |
|
$ |
370,214 |
|
10.6% |
Utilities: Revenue increased by $292.4 million, or 21 percent, during 2021 compared to 2020. The increase is primarily attributable to the FIH acquisition ($266.6 million) and increased activity with electric utility customers. These amounts were partially offset by lower activity with gas utility customers as well as the impact of customer project and material delays. Gross profit increased $8.5 million, or 5 percent, during 2021 compared to 2020. The increase is primarily attributable to the incremental impact of the FIH acquisition ($43.6 million), partially offset by lower margins from the Company’s legacy operations. Gross profit as a percentage of revenue decreased to 11 percent in 2021 compared to 13 percent in 2020 primarily due to unfavorable weather conditions, customer project and material delays and a decrease in higher margin storm work in 2021, as well as strong performance and favorable margins realized on projects in the Southeast in 2020. These amounts were partially offset by the favorable margins realized by FIH.
Energy/Renewables: Revenue increased by $179.4 million, or 15 percent, during 2021 compared to 2020, primarily due to increased renewable energy activity ($286.2 million), partially offset by the substantial completion of industrial projects in Texas, Louisiana, and California in 2020. Gross profit increased by $55.4 million, or 58 percent, during 2021 compared to 2020, primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 11 percent in 2021 compared to 8 percent in 2020 primarily due to favorable claims resolution on an industrial plant project in 2021. In addition, we experienced higher costs in 2020 associated with an LNG plant project in the Northeast. These amounts were partially offset by the favorable impact of the Canadian Emergency Wage Subsidy in 2020.
Pipeline: Revenue decreased by $465.5 million, or 52 percent, during 2021 compared to 2020. The decrease is primarily due to the substantial completion of pipeline projects in 2020 ($416.7 million) and a decline in the overall midstream pipeline market demand from historically high levels, along with challenges in permitting new pipelines. The revenue levels in 2021 are more consistent with those experienced historically and with the Company’s expectations for the Pipeline segment. Gross profit decreased by $17.4 million, or 18 percent, during 2021 compared to 2020, primarily due to lower revenue, partially offset by higher margins. Gross profit as a percentage of revenue increased to 19 percent in 2021 compared to 11 percent in 2020, primarily due to the favorable impact from the closeout of multiple pipeline projects in 2021 and higher costs on pipeline projects in Virginia and Texas in 2020, partially offset by strong performance and favorable margins realized on a Texas pipeline project in 2020. Gross profit as a percentage of revenue experienced in 2020 is more consistent with those experienced historically and with the Company’s expectations going forward for the Pipeline segment.
Other Income Statement Information
Selling, general and administrative (“SG&A”) expenses were $230.1 million during the year ended December 31, 2021, an increase of $27.3 million, or 13 percent, compared to 2020 primarily due to a $28.7 million increase in incremental expense from the FIH acquisition during the period. SG&A expense as a percentage of revenue increased to 6.6 percent in 2021 compared to 5.8 percent in 2020 primarily due to increased expense as the Company integrates FIH into its operations as well as lower revenue from its legacy operations.
Interest expense, net for the year ended December 31, 2021 was $18.5 million compared to $19.9 million for the year ended December 31, 2020. The decrease of $1.4 million was due to a $4.9 million unrealized gain in 2021 and a $2.8 million unrealized loss in 2020 on the Company’s interest rate swap, as well as a lower weighted average interest rate. This decrease was partially offset by higher average debt balances in 2021 from the borrowings incurred related to the FIH acquisition.
The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 23.8 percent for the year ended December 31, 2021. The decrease was primarily due to the temporary change allowing full deductibility of per diem expenses through 2022, partially offset by tax on increased pre-tax profits.
Outlook
The Company is providing its estimates for the year ending December 31, 2022. Net income attributable to Primoris is expected to be between $2.10 and $2.30 per fully diluted share. Adjusted EPS is estimated in the range of $2.39 to $2.59 for 2022.
The Company is targeting SG&A expense as a percentage of revenue in the low-to-mid six percent range for full year 2022. The Company estimates capital expenditures for 2022 in the range of $120 to $140 million, which includes $70 to $90 million for construction equipment. The Company’s targeted gross margins by segment are as follows: Utilities in the range of 12 to 14 percent; Energy/Renewables in the range of 9 to 12 percent; and Pipeline in the range of 9 to 11 percent. The Company expects its effective tax rate for 2022 to be approximately 27 percent but may vary depending on the mix of states in which the Company operates.
The guidance provided above constitutes forward-looking statements, which are based on current economic conditions and estimates, and the Company does not include other potential impacts, such as changes in accounting or unusual items. Supplemental information relating to the Company’s financial outlook is posted in the Investor Relations section of the Company’s website at www.primoriscorp.com.
| Backlog | |||||||||
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(in millions) |
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Backlog at December 31, 2021 |
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Segment |
|
Fixed Backlog |
|
MSA Backlog |
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Total Backlog |
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|
Utilities |
|
$ |
37 |
|
$ |
1,347 |
|
$ |
1,384 |
|
Energy/Renewables |
|
|
2,328 |
|
|
127 |
|
|
2,455 |
|
Pipeline |
|
|
114 |
|
|
50 |
|
|
164 |
|
Total |
|
$ |
2,479 |
|
$ |
1,524 |
|
$ |
4,003 |
At December 31, 2021, Fixed Backlog was $2.5 billion, an increase of $839.6 million, or 51 percent compared to $1.6 billion at December 31, 2020. MSA Backlog represents estimated MSA revenue for the next four quarters. MSA Backlog was $1.5 billion, an increase of 34 percent or $0.4 billion, compared to $1.1 billion at December 31, 2020. Total Backlog as of December 31, 2021 was $4.0 billion. The Company expects that during the next four quarters, the Company will recognize as revenue approximately 74 percent of the total backlog at December 31, 2021, comprised of backlog of approximately: 100 percent of Utilities; 57 percent of Energy/Renewables; and 97 percent of Pipeline.
Backlog, including estimated MSA revenue, should not be considered a comprehensive indicator of future revenue. Revenue from certain projects where scope, and therefore contract value, is not adequately defined, is not included in Fixed Backlog. At any time, any project may be cancelled at the convenience of the Company’s customers.
Liquidity and Capital Resources
At December 31, 2021, the Company had $200.5 million of unrestricted cash and cash equivalents. The Company had no outstanding borrowings under the revolving credit facility, commercial letters of credit outstanding were $42.0 million and the available borrowing capacity was $158.0 million.
Dividend
The Company also announced that on February 24, 2022, its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 31, 2022, payable on April 14, 2022.
The Company has paid consecutive quarterly cash dividends since 2008, and currently expects that comparable cash dividends will continue to be paid for the foreseeable future. The declaration and payment of future dividends is contingent upon the Company’s revenue and earnings, capital requirements, and general financial conditions, as well as contractual restrictions and other considerations deemed to be relevant by the Board of Directors.
Share Purchase Program
In November 2021, the Company’s Board of Directors authorized a $25.0 million share purchase program. During the year ended December 31, 2021, the Company purchased and cancelled 635,763 shares of common stock, which in the aggregate equaled $14.7 million at an average share price of $23.15. In February 2022, the Company’s Board of Directors replenished the limit to $25.0 million. The share purchase plan expires on December 31, 2022.
RESPONSE TO THE COVID-19 PANDEMIC
The Company continues to take steps to protect its employees’ health and safety during the COVID-19 pandemic. Primoris has a written corporate COVID-19 Plan in place, as well as Business Continuity Plans (by business unit and segment), based on guidelines from the U.S. Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, and their Canadian counterparts.
Conference Call and Webcast
As previously announced, management will host a teleconference call on Tuesday, March 1, 2022, at 9 a.m. U.S. Central Time (10 a.m. U.S. Eastern Time). Tom McCormick, President and Chief Executive Officer, and Ken Dodgen, Executive Vice President and Chief Financial Officer, will discuss the Company’s results and financial outlook.
Investors and analysts are invited to participate in the call by phone at 1-833-476-0954, or internationally at 1-236-714-2611 (access code: 1418976) or via the Internet at www.primoriscorp.com. A replay of the call will be available on the Company’s website or by phone at 1-800-585-8367, or internationally at 1-416-621-4642 (access code: 1418976), for a seven-day period following the call.
Presentation slides to accompany the conference call are available for download in the Investor Relations section of Primoris’ website at www.primoriscorp.com. Once at the Investor Relations section, please click on “Events & Presentations.”
Non-GAAP Measures
This press release contains certain financial measures that are not recognized under generally accepted accounting principles in the United States (“GAAP”). Primoris uses earnings before interest, income taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS as important supplemental measures of the Company’s operating performance. The Company believes these measures enable investors, analysts, and management to evaluate Primoris’ performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. In addition, management believes these measures are useful in comparing the Company’s operating results with those of its competitors. The non-GAAP measures presented in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, Primoris’ method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similarly titled measures as calculated by other companies that do not use the same methodology as Primoris. Please see the accompanying tables to this press release for reconciliations of the following non‐GAAP financial measures for Primoris’ current and historical results: EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS.
About Primoris
Primoris Services Corporation is a leading specialty contractor providing critical infrastructure services to the utility, energy/renewables and pipeline services markets throughout the United States and Canada. The Company supports a diversified base of blue-chip customers with engineering, procurement, construction and maintenance services. A focus on multi-year master service agreements and an expanded presence in higher-margin, higher-growth markets such as utility-scale solar facility installations, renewable fuels, electrical transmission and distribution systems and communications infrastructure have also increased the Company’s potential for long-term growth.
Contacts
Ken Dodgen
Executive Vice President, Chief Financial Officer
(214) 740-5608
kdodgen@prim.com
Brook Wootton
Vice President, Investor Relations
(214) 545-6773
bwootton@prim.com
