Primoris Services Corporation Reports Fourth Quarter and Full Year 2022 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, 2022 and provided the Company’s initial outlook for 2023.
For the full year 2022, Primoris reported the following highlights (1):
- Revenue of $4,420.6 million, up $923.0 million, or 26.4 percent, compared to the full year of 2021 driven by strong growth in the Utilities and Energy/Renewables segments, including $516.8 million, or 14.8 percent, revenue growth excluding acquisitions
- Net income of $133.0 million, or $2.47 per diluted share, up 14.9 percent from the full year of 2021
- Adjusted net income of $135.8 million, or $2.53 per diluted share, a decrease of 5.6 percent from the full year of 2021
- Record backlog of $5.5 billion, up 37.0 percent from 2021 year end, including Master Service Agreements (“MSA”) backlog of $1.9 billion
- Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) of $283.4 million.
For the fourth quarter 2022, Primoris reported the following highlights(1):
- Revenue of $1.3 billion, up $444.7 million, or up 50.3 percent, compared to the fourth quarter of 2021 driven by strong renewables growth, primarily design and construction of utility scale solar facilities, and $227.8 million from acquisitions
- Net income of $41.5 million, or $0.77 per diluted share, up 40.5 percent from the fourth quarter of 2021
- Adjusted net income of $50.2 million, or 0.93 per diluted share, up 46.0 percent from the fourth quarter of 2021
- Adjusted EBITDA of $95.6 million, or 7.2 percent of revenue, up 42.6 percent, from the fourth quarter of 2021
- Fourth quarter net cash provided by operating activities of $185.4 million driven primarily by favorable changes in working capital
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(1) |
Please refer to “Non-GAAP Measures” and Schedules 1, 2, 3 and 4 for the definitions and reconciliations of our Non-GAAP financial measures, including “Adjusted Net Income,” “Adjusted EPS” and “Adjusted EBITDA.” |
“We exited 2022 on a great trajectory for the future of Primoris. During the year we grew revenue to a record $4.4 billion, including 15 percent growth excluding acquisitions, and our backlog to a record $5.5 billion, including 21 percent growth excluding acquired backlog, which will serve as the basis for our continued progress in 2023,” said Tom McCormick, President and Chief Executive Officer of Primoris.
“We navigated through the challenges of economic uncertainty, fuel and wage inflation, supply chain constraints and a difficult pipeline environment to deliver profitable growth for the sixth consecutive year. We worked with our customers to respond to rapidly changing labor and fuel costs and with suppliers to ensure we had the necessary materials to deliver customer projects on time. We strengthened our capabilities in power delivery with the acquisition of PLH, further expanded our communications market presence and significantly grew our renewables franchise. I am proud of our employees’ efforts to achieve these results while making it a priority to perform our jobs safely and to the customers satisfaction.”
“Looking ahead into 2023, I believe we are well-positioned for another successful year with a strong backlog and improving demand outlook for our services. While there are still uncertainties and the potential for further inflation and supply chain impacts, I am confident that we will successfully execute on our strategic priorities to deliver positive outcomes for our customers, employees and shareholders.”
Fourth Quarter 2022 Results Overview
Revenue was $1,329.1 million for the three months ended December 31, 2022, an increase of $444.7 million, compared to the same period in 2021. Revenue increased across all segments driven by an increase in the design and construction of utility scale solar facilities, the commencement of a large pipeline project and $227.8 million from the PLH and B Comm acquisitions. Gross profit was $153.4 million for the three months ended December 31, 2022, an increase of $57.4 million compared to the same period in 2021. The increase was primarily due to improved margins in solar and industrial projects in the Energy/Renewables segment, higher communications revenue mix and $28.6 million from the PLH and B Comm acquisitions. This was partially offset by an unfavorable mix of lower margin work in the Pipeline Services segment. Gross profit as a percentage of revenue increased to 11.5 percent from 10.9 percent for the same period in 2021.
This press release includes 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 Schedules 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 2022, net income was $41.5 million, or $0.77 per diluted share, an increase of 40.5 percent compared to $29.5 million, or $0.55 per diluted share, in the previous year. Adjusted Net Income was $50.2 million, or $0.93 per diluted share, for the fourth quarter, an increase of 46.0 percent compared to $34.3 million, or $0.63 per diluted share, for the fourth quarter of 2021. Adjusted EBITDA was $95.6 million for the fourth quarter of 2022, an increase of $28.6 million, or 42.6 percent, compared to $67.1 million for the same period in 2021.
The Company’s three segments are: Utilities, Energy/Renewables and Pipeline Services. Revenue and gross profit for the segments for the three months ended December 31, 2022 and 2021 were as follows:
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Segment Revenue |
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(in thousands, except %) |
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(unaudited) |
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For the three months ended December 31, |
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2022 |
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2021 |
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% of |
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% of |
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Total |
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Total |
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Segment |
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Revenue |
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Revenue |
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Revenue |
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Revenue |
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Utilities |
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$ |
576,450 |
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43.4% |
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$ |
442,870 |
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50.1% |
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Energy/Renewables |
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|
641,646 |
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48.2% |
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369,311 |
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41.7% |
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Pipeline |
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|
111,042 |
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8.4% |
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|
72,267 |
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8.2% |
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Total |
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$ |
1,329,138 |
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100.0% |
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$ |
884,448 |
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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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2022 |
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2021 |
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% of |
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% of |
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Segment |
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Segment |
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Segment |
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Gross Profit |
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Revenue |
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Gross Profit |
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Revenue |
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Utilities |
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$ |
69,917 |
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12.1% |
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$ |
52,007 |
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11.7% |
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Energy/Renewables |
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|
79,663 |
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12.4% |
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|
38,461 |
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10.4% |
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Pipeline |
|
|
3,804 |
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3.4% |
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|
5,549 |
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7.7% |
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Total |
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$ |
153,384 |
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11.5% |
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$ |
96,017 |
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10.9% |
Utilities Segment (“Utilities”): Revenue increased by $133.6 million, or 30.2 percent, for the three months ended December 31, 2022, compared to the same period in 2021, primarily due to $144.6 million from the PLH and B Comm acquisitions and increased activity with communications customers. Gross profit for the three months ended December 31, 2022 increased by $17.9 million, or 34.4 percent, compared to the same period in 2021. The increase is primarily attributable to the incremental impact of $15.1 million from the PLH and B Comm acquisitions, partially offset by lower margins related to higher cost inflation compared to the previous year. Gross profit as a percentage of revenue increased to 12.1 percent during the three months ended December 31, 2022 compared to 11.7 percent for the same period in 2021.
Energy and Renewables Segment (“Energy/Renewables”): Revenue increased by $272.3 million, or 73.7 percent, for the three months ended December 31, 2022, compared to the same period in 2021. The increase year-over-year was primarily due to increased renewable energy activity of $166.0 million, $55.9 million from the PLH acquisition and industrial activity in California and the Gulf Coast. Gross profit for the three months ended December 31, 2022, increased by $41.2 million, or 107.1 percent, compared to the same period in 2021, primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 12.4 percent during the three months ended December 31, 2022, compared to 10.4 percent in the same period in 2021, primarily due to the contribution from higher margin renewables work and improved margins in the industrials business.
Pipeline Services Segment (“Pipeline”): Revenue increased by $38.8 million, or 53.7 percent, for the three months ended December 31, 2022, compared to the same period in 2021. The increase is primarily due to $27.3 million from the PLH acquisition and progress made on a Texas pipeline project awarded in the third quarter of 2022. Gross profit for the three months ended December 31, 2022 decreased by $1.7 million, or 31.4 percent, compared to the same period in 2021, primarily due to the unfavorable mix of work and fewer project closeouts compared to the fourth quarter of 2021. Similarly, gross profit as a percentage of revenue decreased to 3.4 percent during the three months ended December 31, 2022, compared to 7.7 percent in the same period in 2021.
Full Year 2022 Results Overview
Revenue for the year ended December 31, 2022 increased by $923.0 million, compared to 2021. The increase was primarily due to growth in the Company’s Energy/Renewables and Utilities segments, including $406.2 million from its acquisition of PLH and B Comm, partially offset by a decrease in revenue in the Company’s Pipeline segment.
For the year ended December 31, 2022, gross profit increased by $40.2 million, or 9.7 percent, compared to 2021. The increase was primarily due to $46.4 million from the Company’s acquisition of PLH and B Comm and an increase in margins from its Energy/Renewables segment driven by growth in solar projects and improved margins on industrial projects. This was partially offset by negative gross profit in the Pipeline Services segment due to the steep decline in pipeline projects sanctioned and permitted in 2022. Gross profit as a percentage of revenue decreased to 10.3 percent from 11.9 percent in the same period in 2021. The decline in gross profit margin was primarily due to the decline in high margin pipeline work as well as wage and fuel inflation impacts, particularly in the first half of the year.
For the full year 2022, net income was $133.0 million, or $2.47 per fully diluted share, compared to $115.7 million, or $2.17 per fully diluted share, in the previous year, an increase of 14.9 percent. Adjusted Net Income was $135.8 million, or $2.53 per fully diluted share, for the full year 2022 compared to $143.4 million, or $2.70 per fully diluted share, for the same period in 2021. Adjusted EBITDA was $283.4 million for 2022, a decrease of 4.8 percent, compared to $297.7 million for the full year 2021.
Revenue and gross profit for the Utilities, Energy/Renewables and Pipeline segments for the years ended December 31, 2022 and 2021 were as follows:
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Segment Revenue |
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(in thousands, except %) |
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(unaudited) |
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For the year ended December 31, |
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2022 |
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2021 |
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% of |
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% of |
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Total |
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Total |
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Segment |
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Revenue |
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Revenue |
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Revenue |
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Revenue |
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Utilities |
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$ |
2,024,307 |
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45.8% |
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$ |
1,657,957 |
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47.4% |
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Energy/Renewables |
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|
2,087,489 |
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47.2% |
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|
1,408,211 |
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40.3% |
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Pipeline |
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|
308,803 |
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7.0% |
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|
431,464 |
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12.3% |
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Total |
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$ |
4,420,599 |
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100.0% |
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$ |
3,497,632 |
|
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 year ended December 31, |
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2022 |
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2021 |
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% of |
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% of |
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Segment |
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|
Segment |
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Segment |
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Gross Profit |
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Revenue |
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Gross Profit |
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Revenue |
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|
Utilities |
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$ |
210,672 |
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10.4% |
|
$ |
186,287 |
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11.2% |
|
Energy/Renewables |
|
|
252,872 |
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12.1% |
|
|
150,286 |
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10.7% |
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Pipeline |
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|
(6,659) |
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(2.2%) |
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|
80,087 |
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18.6% |
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Total |
|
$ |
456,885 |
|
10.3% |
|
$ |
416,660 |
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11.9% |
Utilities: Revenue increased by $366.4 million, or 22.1 percent, during 2022 compared to 2021. The increase is primarily attributable to $260.7 million from the PLH and B Comm acquisitions and increased activity with customers across our power delivery and communications markets. Gross profit increased $24.4 million, or 13.1 percent, during 2022 compared to 2021. The increase is primarily attributable to $26.2 million in incremental impact of the PLH and B Comm acquisitions and an increase in communications activity, partially offset by lower margins from the impacts of wage and fuel inflation. Gross profit as a percentage of revenue decreased to 10.4 percent in 2022 compared to 11.2 percent in 2021. This decline in gross profit as a percent of revenue was primarily due to the rapid increase in fuel and labor costs in 2022 that in some cases exceeded the contractual caps of some of our master service agreements with customers. We successfully renegotiated a number of our major MSA contracts to address fuel and labor costs on future work and saw the improvement in Utilities gross profit as a percentage of revenue in the second half of 2022.
Energy/Renewables: Revenue increased by $679.3 million, or 48.2 percent, during 2022 compared to 2021, primarily due to a $430.1 million increase in renewable energy activity, $106.4 million from the PLH acquisition and increased project work on electric power and hydrogen plants. Gross profit increased by $102.6 million, or 68.3 percent, during 2022 compared to 2021, primarily due to higher revenue and margins. Gross profit as a percentage of revenue increased to 12.1 percent in 2022 compared to 10.7 percent in 2021 primarily due to contributions from higher margin solar projects, favorable mix of industrials projects and a decrease in the impact of higher costs associated with a liquified natural gas plant project in the Northeast experienced in 2021.
Pipeline: Revenue decreased by $122.7 million, or 28.4 percent, during 2022 compared to 2021. The decrease is primarily due to the substantial completion of pipeline projects in 2021 and a decline in the overall midstream pipeline market demand from historically high levels, along with challenges in permitting new pipelines. This was partially offset by $39.0 million of revenue from the PLH acquisition. Gross profit decreased by $86.7 million, or 108.3 percent, during 2022 compared to 2021, primarily due to lower revenue and margins. Gross profit as a percentage of revenue decreased to negative 2.2 percent in 2022 compared to 18.6 percent in 2021, primarily due to higher costs on a pipeline project in the Mid-Atlantic from unfavorable weather conditions experienced in 2022 and lower than anticipated volumes in 2022, which led to higher relative carrying costs for equipment and personnel. In addition, we had a favorable impact from the closeout of multiple pipeline projects in 2021 that did not reoccur in 2022.
Other Income Statement Information
Selling, general and administrative (“SG&A”) expenses were $281.6 million during the year ended December 31, 2022, an increase of $51.5 million, or 22.4 percent, compared to 2021 primarily due to a $28.3 million increase in incremental expense from the PLH and B Comm acquisitions as well as increased costs to support our strong organic growth. SG&A expense as a percentage of revenue decreased to 6.4 percent in 2022 compared to 6.6 percent in 2021 primarily due to increased revenue.
Interest expense, net for the year ended December 31, 2022 was $39.2 million compared to $18.5 million for the year ended December 31, 2021. The increase of $20.7 million was due to an increase in term loan debt of $439.5 million related to the PLH acquisition and higher weighted average interest rates, partially offset by a $5.6 million unrealized gain on the Company’s interest rate swap. Interest expense for the year 2023 is expected to increase to approximately $73 to $77 million due to higher debt balances and higher interest rates.
The effective tax rate was 16.5 percent for the year ended December 31, 2022. The decrease from 23.8 percent for the year ended December 31, 2021 was primarily due to the release of capital loss valuation allowances during 2022 and tax credits.
Outlook
The Company is providing its estimates for the year ending December 31, 2023. Net income is expected to be between $2.10 and $2.30 per fully diluted share. Adjusted EPS is estimated in the range of $2.50 to $2.70 for 2023. Adjusted EBITDA for the full year 2023 is expected to range from $350 million to $370 million.
The Company is targeting SG&A expense as a percentage of revenue in the low six percent range for full year 2023. The Company estimates capital expenditures for 2022 in the range of $80 to $100 million, which includes $40 to $60 million for construction equipment. The Company’s targeted gross margins by segment are as follows: Utilities in the range of 9 to 11 percent; Energy in the range of 10 to 12 percent. The Company expects its effective tax rate for 2022 to be approximately 28 percent but may vary depending on the mix of states in which the Company operates.
Adjusted EPS and Adjusted EBITDA are non-GAAP financial measures. Please refer to “Non-GAAP Measures” and Schedules below for the definitions and reconciliations. The guidance provided above constitutes forward-looking statements, which are based on current economic conditions and estimates, and the Company does not include other potential impacts, such as changes in accounting or unusual items. Supplemental information relating to the Company’s financial outlook is posted in the Investor Relations section of the Company’s website at www.prim.com.
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Backlog |
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(in millions) |
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Backlog at December 31, 2022 |
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Segment |
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Fixed Backlog |
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MSA Backlog |
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Total Backlog |
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Utilities |
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$ |
183 |
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$ |
1,650 |
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$ |
1,833 |
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Energy/Renewables |
|
|
3,003 |
|
|
162 |
|
|
3,165 |
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Pipeline |
|
|
389 |
|
|
97 |
|
|
486 |
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Total |
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$ |
3,575 |
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$ |
1,909 |
|
$ |
5,484 |
At December 31, 2022, Fixed Backlog was $3.6 billion, an increase of $1.1 billion, or 44 percent compared to $2.5 billion at December 31, 2021. MSA Backlog represents estimated MSA revenue for the next four quarters. MSA Backlog was $1.9 billion, an increase of 0.4 billion, or 25 percent, compared to $1.5 billion at December 31, 2021. Total Backlog as of December 31, 2022 was $5.5 billion. The Company expects that during the next four quarters, the Company will recognize as revenue approximately 73 percent of the total backlog at December 31, 2022, comprised of backlog of approximately: 100 percent of Utilities; 56 percent of Energy/Renewables; and 85 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, 2022, the Company had $248.7 million of unrestricted cash and cash equivalents. The Company had $100.0 million in outstanding borrowings under the revolving credit facility, commercial letters of credit outstanding were $47.3 million and the available borrowing capacity was $177.7 million. In 2022, capital expenditures were $94.7 million, including $48.5 million in equipment purchases.
Dividend
The Company also announced that on February 22, 2023, its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 31, 2023, payable on approximately April 14, 2023.
Share Purchase Program
In November 2021, the Company’s Board of Directors authorized a $25.0 million share purchase program. In February 2022, the Company’s Board of Directors replenished the limit to $25.0 million. During the year ended December 31, 2022, the Company purchased and cancelled 277,200 shares of common stock, which in the aggregate equaled $6.0 million at an average share price of $21.61. As of December 31, 2022, we had $19.0 million remaining for purchase under the share purchase program and the plan expires on December 31, 2023.
Other Business Updates
Beginning with the first quarter of 2023, the Company will consolidate and reorganize its operating segments. The two reorganized segments will be Utilities and Energy.
Conference Call and Webcast
As previously announced, management will host a conference call and webcast on Tuesday, February 28, 2023, at 9:00 a.m. U.S. Central Time (10:00 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 business outlook.
Investors and analysts are invited to participate in the call by phone at 1-888-330-3428, or internationally at 1-646-960-0679 (access code: 7581464) or via the Internet at www.prim.com. A replay of the call will be available on the Company’s website or by phone at 1-800-770-2030, or internationally at 1-647-362-9199 (access code: 7581464), for a seven-day period following the call.
Presentation slides to accompany the conference call are available for download under “Events & Presentations” in the “Investors” section of the Company’s website at www.prim.com.
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, power delivery systems and communications infrastructure have also increased the Company’s potential for long-term growth. Additional information on Primoris is available at www.prim.com.
Forward Looking Statements
This press release contains certain forward-looking statements, including the Company’s outlook, that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including with regard to the Company’s future performance.
Contacts
Ken Dodgen
Executive Vice President, Chief Financial Officer
(214) 740-5608
kdodgen@prim.com
Blake Holcomb
Vice President, Investor Relations
(214) 545-6773
bholcomb@prim.com
