Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

Wednesday, May 6, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Koti Vadlamudi
  • Chief Financial Officer — Ken Dodgen

TAKEAWAYS

  • Revenue -- $1.6 billion, down $88.2 million or 5.4% due to lower Energy segment revenue, partially offset by Utility segment growth.
  • Utility Segment Revenue -- Up nearly $70 million or 12.3% with notable power delivery and gas operations expansion.
  • Energy Segment Revenue -- Down $152.9 million or 13.8% primarily from delayed renewables project starts, partially offset by pipeline growth.
  • Gross Profit -- $134.7 million, a decrease of $36 million or 21.1%, driven by reduced Energy segment margins.
  • Gross Margin -- 8.6%, versus 10.4% in the prior year, attributed to renewables cost overruns and delayed project execution.
  • Utility Segment Gross Profit -- $62 million, up $10.4 million; gross margin rose to 9.8% from 9.2% as a result of power delivery and gas operations.
  • Energy Segment Gross Profit -- $72.7 million, a $46.4 million decrease; segment gross margin dropped to 7.6% from 10.7% on renewables issues.
  • SG&A Expenses -- $105.8 million, up $6.3 million, mainly from higher personnel and stock compensation costs; 6.8% of revenue, versus 6% last year.
  • Net Interest Expense -- $4.6 million, down $3.2 million from lower debt balances; full-year expectation raised to $35 million–$38 million due to a $400 million term loan for Paynecrest acquisition.
  • Effective Tax Rate -- 12.7% for the quarter due to a one-time equity compensation benefit, with guidance for a 28%-29% full-year rate.
  • Operating Cash Flow -- Cash used in operations totaled $122.6 million, declining $188.8 million, impacted by lower operating income and accounts payable reductions.
  • Liquidity -- $676.5 million at quarter-end, with a revolver increased to $750 million and a net debt-to-EBITDA ratio below 1.5x following the Paynecrest acquisition.
  • Backlog -- $11.6 billion total, down from $11.9 billion at 2025 year-end; Utilities backlog up $476 million year over year, Energy segment backlog down $780 million mostly from timing of awards.
  • Renewables Revenue Forecast -- Expected to be roughly $2.3 billion for 2026 due to project timing shifts and delays.
  • Guidance -- Full-year EPS guided to $4.05-$4.25, adjusted EPS to $4.80-$5.00, and adjusted EBITDA to $480 million-$500 million, all including Paynecrest but excluding possible storm restoration upside.
  • Paynecrest Acquisition -- Closed May 1; adds robust data center and industrial end-market exposure, with about 40% of revenue from data centers and 40% from industrial, power, and renewables.
  • Verbal Awards and Project Funnel -- $1.1 billion in verbal awards and $2.8 billion in anticipated signed projects expected in the back half of the year across renewables and energy.
  • Risk Mitigation Actions -- Leadership changes, experienced hires, and avoidance of problematic geographies were explicitly implemented to address preconstruction and execution risks in renewables projects.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

  • Cost overruns and delayed project starts in a small number of solar projects directly lowered reported gross profit and margins, with "execution-related factors including specific labor issues, project redesigns, adjustments to sequencing, and weather-related disruptions" noted.
  • First-quarter operating cash flow fell by $188.8 million, driven by timing and lower operational results.
  • Full-year net interest expense guidance rose by $12 million due to the $400 million term loan used for the Paynecrest acquisition.
  • Quarterly backlog decreased by $300 million since year-end, mainly from the timing of Energy segment award conversions.

SUMMARY

Primoris Services Corporation (PRIM 49.34%) reported revenue and gross profit declines in the first quarter, attributable to renewables project challenges and revenue recognition delays, while the Utility segment posted notable year-over-year gains. The company completed the Paynecrest acquisition on May 1, integrating new capabilities in high-growth end-markets, especially data centers and industrials. An updated 2026 outlook incorporates adjusted revenue and margin targets, with executives highlighting a deep portfolio of verbal awards and a growing project funnel in renewables and gas power generation. Management outlined strategic remediation measures in risk assessment, project execution, and geographic discipline, aiming to restore margin performance and backlog conversion over subsequent quarters.

  • Koti Vadlamudi identified "preconstruction planning and the complexity associated with new geographic labor markets" as the primary drivers of renewable project underperformance.
  • Ken Dodgen quantified the negative financial impact from renewables at roughly $110 million, citing "about $45 million" from revenue pushout, "$35 million to $40 million" from Q1 cost overruns, and "$25 million or so" from lower margins as project completion continues.
  • Company leadership stated, "We have not executed any new contracts in these geographies since 2024," signaling a policy of geographic selectivity moving forward.
  • Primoris Services Corporation expects Utilities margins to trend toward the midpoint of its "10% to 12% range for the full year," with seasonality and improved project mix anticipated to drive the improvement.
  • Management signaled confidence in the renewables and gas generation backlog by reporting "verbal awards of $1.1 billion in the second half of this year, and another $2.8 billion that will sign."
  • Company representatives cited a growing battery energy storage system (BESS) pipeline, stating the funnel "has more than quadrupled year-over-year" and could more than double again.

INDUSTRY GLOSSARY

  • LNTP (Limited Notice to Proceed): Authorization to begin preliminary project activities prior to full contract execution, often used to advance critical work on large energy projects.
  • FNTP (Full Notice to Proceed): Customer approval enabling the contractor to commence full-scale construction activities, representing firm backlog conversion.
  • BEAD: Broadband Equity, Access, and Deployment program — a U.S. federal initiative funding broadband infrastructure, referenced in fiber build-outs.
  • BESS (Battery Energy Storage System): Grid-scale systems that store energy for later dispatch, relevant to the company’s renewables project pipeline.
  • 48E Tax Credit: Refers to Section 48E of the U.S. Internal Revenue Code, providing an investment tax credit for clean energy facilities, which impacts renewables project decisions and timing.
  • MSA (Master Service Agreement): Contractual framework governing recurring utility work, especially in power delivery and gas operations, contributing to revenue and backlog.
  • Mechanical Completion: Stage in project delivery where construction is considered finished and the facility is ready for commissioning or operation.
  • Hyperscaler: Large technology company operating massive data centers; a significant client segment for recent and future project growth.

Full Conference Call Transcript

Koti Vadlamudi: Thank you, Blake. Good morning and thank you for joining us today to discuss our first quarter 2026 financial and operational results. Our first quarter results reflected the impact of a small number of solar projects that experienced cost pressures resulting in lower reported gross profit and margins for the period. These impacts were driven by execution-related factors including specific labor issues, project redesigns, adjustments to sequencing, and weather-related disruptions. The majority of the impacted projects were subsequent to the project discussed in our Q4 earnings call, which experienced cost overruns driven by unforeseen underground conditions. Through our review, we identified two primary drivers behind these challenges: preconstruction planning and the complexity associated with new geographic labor markets.

The rapid pace of growth in the solar market placed increased demands on our organization and, in a limited number of cases, this resulted in gaps during the early planning, estimating, and construction phases. Importantly, since these contracts were executed in 2024, we have taken decisive actions to address these areas. We made targeted leadership changes and added experienced talent to strengthen our preconstruction, estimating, and project management functions. In addition, we have adjusted our market expansion approach and have not pursued new work in the geographies where first-time entry contributed to these outcomes. We are confident these actions position us well to mitigate similar risk on projects booked in 2025 and beyond.

All of the impacted projects are progressing toward completion and are expected to be substantially complete in 2026, with several concluding within the next month and the final project scheduled for completion in 2026. In addition to the margin impacts associated with these projects, we have also seen the timing of new project bookings and starts shift to the right. As a result, we now expect certain bookings originally anticipated in the second quarter to move into the third quarter, and revenue from projects booked late in 2025 to be recognized later than previously forecasted. Based on these timing dynamics, we now expect Renewables revenue to be approximately $2.3 billion for 2026.

Despite the challenges associated with this limited number of projects and the timing shift in new project starts, we remain very optimistic about the solar market outlook. We continue to see meaningful opportunities ahead this year and beyond to build backlog, and we are confident in our ability to put these issues behind us and return to our strong, consistent track record of delivering profitable projects supported by our industry-leading safety and quality performance. I will now provide additional comments on our segment performance for the quarter. Starting with the Utility segment, we had strong year-over-year top-line growth and solid operational performance leading to improved margins in the quarter.

The first quarter is typically a seasonal low point in utilities, so we would expect to see further revenue and margin expansion as activity accelerates in the second quarter. In gas operations, revenue was up double digits, supported by new awards in the Southeast and higher design-build volumes in the Midwest. Gross profit was also up, while margins were slightly lower due to a difference in project mix in 2026 compared to last year. In communications, revenues were mostly flat compared to the prior year, but profitability meaningfully improved driven by improved productivity and a reduction in indirect labor costs.

Communications continues to see increased opportunities in fiber associated with data center build-out and we are exploring new opportunities for splicing and fiber work within the facilities, which would further expand our addressable market. We do anticipate lower volumes in fiber-to-the-home programs beginning in the second quarter as we transition from legacy programs toward BEAD-related build-outs in certain markets. Power delivery continued its strong execution on increased activity with revenue and margins growing double digits. We are seeing meaningful volume increases in Texas and the Southeast, particularly in transmission and substation work, which is generally accretive to margins in the business.

To support this growth, we remain focused on attracting, developing, and retaining the skilled talent we need while maintaining the highest standards of safety and quality. The labor market is competitive, but our strong market position, culture, and robust backlog continue to be an asset attracting and retaining talent. Turning to the Energy segment, despite the challenges outlined in renewables, the rest of the segment delivered solid performance with increased gross profit year-over-year. Industrial margins improved meaningfully, driven by higher natural gas generation activity. Looking ahead, we expect a significant increase in project awards across both natural gas generation and solar in the coming quarters.

Most of these projects are in limited notice to proceed status, and we anticipate final awards beginning in the second quarter and accelerating further in Q3. The funnel of opportunities continues to expand, and these upcoming awards will help soften the impact of the troubled projects in 2026 and set us up for strong growth in 2027. Pipeline services also had a solid start to the year, with revenue and gross profit up more than 20%, indicating that we are on track to emerge from the cyclical trough we experienced in 2025. We are still expecting growth this year, with new awards beginning to materialize in the coming quarters.

That said, and as we have previously alluded, the more substantial revenue and margin growth opportunity is likely to come in 2027 and 2028 as the market strengthens and our backlog conversion ramps up. We successfully completed the acquisition of Paynecrest on May 1, in line with our expectations. As previously announced, Paynecrest is a St. Louis-based union electrical contractor that provides design, construction, and service solutions to a blue-chip customer base. Their customers span a diverse set of end markets including data centers, industrial, power and renewables, and commercial. Approximately 40% of revenue is generated from data centers with another 40-plus percent tied to industrial, power, and renewables infrastructure.

We believe this well-balanced mix of end markets and customers enhances opportunities for cross-selling across our platform and expands the breadth of services Primoris Services Corporation can deliver in these growing markets. While the majority of Paynecrest’s work is performed within a 500-mile radius of St. Louis headquarters, the company has successfully executed projects in more than 25 states, providing flexibility to expand geographically as opportunities arise. With the transaction closing within our anticipated time frame, our expectations for revenue and earnings contribution remain unchanged. That said, we see meaningful upside potential should additional scope with a large hyperscaler customer be finalized in the coming months.

We are excited to welcome the Paynecrest team to Primoris Services Corporation and see significant long-term growth potential for this business as part of our organization. In summary, we remain optimistic about the opportunities ahead despite the unexpected renewables execution challenges that impacted our first quarter results. I want to emphasize that the majority of our portfolio remains very healthy and we believe the underlying fundamentals of our business are strong. As projects continue to ramp, and near-term awards are finalized, we would expect to see improvement across revenue, margins, and backlog as we progress through 2026. Now I will turn it over to Ken to discuss our financial results.

Ken Dodgen: Thanks, Koti, and good morning, everyone. Revenue for the first quarter was $1.6 billion, a decrease of $88.2 million or 5.4% from the prior year. This was primarily driven by lower revenue in the Energy segment partially offset by solid growth in the Utility segment. The Energy segment was down $152.9 million or 13.8% from the prior year, primarily driven by the timing of renewables projects including slower-than-anticipated start of new projects, partially offset by growth in pipeline revenue. The Utility segment was up nearly $70 million or 12.3%, supported by continued growth in our power delivery and gas operations compared to the prior year.

Gross profit for the first quarter was $134.7 million, down $36 million or 21.1% from the prior year due to lower revenue and margins in the Energy segment partially offset by higher revenue and margins in the Utility segment. Gross margins were 8.6% for the quarter compared to 10.4% in the prior year. Turning to the segment results, in the Utility segment, gross profit was $62 million, up $10.4 million compared to the prior year. This improvement was driven by higher revenue in power delivery, supported by increased transmission and substation activity, as well as new service program awards for gas utilities. Gross margins in utilities increased to 9.8% from 9.2% in the prior year.

Margin expansion was driven by the revenue growth in both power delivery and gas operations, along with improved gross profit across all three business lines within the segment. We expect to see margins increase in Q2 and Q3 driven by normal seasonality and trend towards the midpoint of our target 10% to 12% range for the full year. In the Energy segment, gross profit was $72.7 million for the quarter, a $46.4 million decrease from the prior year. This decline was primarily driven by lower gross profit in our renewables business stemming from the previously discussed cost overruns and delays on certain projects and was partially offset by improved performance in our industrial and pipeline services businesses.

As a result, gross margin for the segment was 7.6% compared to 10.7% in the prior year. We anticipate Energy margins to begin improving in the second quarter supported by new project starts in natural gas and renewables as well as incremental contributions from the Paynecrest acquisition. For the full year, we expect Energy segment gross margins to be in the high-9% to low-10% range. Turning to SG&A, first-quarter expenses were $105.8 million, an increase of $6.3 million compared to the prior year. The increase was driven by higher personnel costs, including increased stock compensation expense. As a percentage of revenue, SG&A was 6.8% compared to 6% in the prior year, largely reflecting the decrease in revenue this quarter.

For the full year, we continue to expect SG&A to be in the mid- to high-5% range. Net interest expense for the quarter was $4.6 million, a decrease of $3.2 million from the prior year driven by lower debt balances. For the full year, we now expect net interest expense to be $35 million to $38 million compared to our prior guidance of $23 million to $26 million, reflecting the approximately $400 million increase in the term loan to fund the Paynecrest acquisition. Our effective tax rate was 12.7% for the quarter due to a one-time tax benefit on equity compensation recognized in the quarter.

Our second quarter tax rate is expected to be approximately 29% with a full-year effective tax rate around 28% to 29%. Moving on to cash flow for Q1, cash used in operations was $122.6 million, representing a year-over-year decline of $188.8 million. The decrease was primarily driven by a reduction in accounts payable as well as lower operating income during the quarter. Looking at the balance sheet, we maintained strong liquidity of $676.5 million at the end of the quarter. In conjunction with the close of the Paynecrest acquisition, we increased our revolver to $750 million and we expect our net debt to EBITDA ratio to remain just under 1.5x.

This positions us with a strong and flexible balance sheet, providing capacity to continue investing organically to support growth while also maintaining the flexibility to pursue strategic M&A opportunities that meet our financial and operational objectives. With respect to backlog, we ended the quarter with $11.6 billion in total backlog compared to $11.9 billion at year-end 2025. The Energy segment backlog decreased $780 million primarily due to the timing of new natural gas generation, pipeline, and solar awards, which we expected to be softer in Q1 after a strong Q4.

As Koti mentioned, we are confident we will see meaningful Energy segment bookings as natural gas generation and solar projects progress from limited notice to proceed to final contract awards this year. Historically, our conversion rate from LNTP to FNTP on these types of projects has been very high, even though the exact timing of contract execution can vary. Based on our current expectations for new award signings in the Energy segment, we anticipate our segment book-to-bill to exceed 1x for the full year 2026, with the majority of those bookings occurring in the second half of the year. Utilities backlog increased by $476 million year-over-year, driven by continued growth in MSA work.

We are seeing rising customer demand, particularly in power delivery, as utilities accelerate capital programs focused on grid reliability and capacity expansion, driving higher volumes and supporting backlog growth. Closing with guidance, we are updating our full-year outlook to reflect the lower revenue and margin impact discussed earlier and the inclusion of the Paynecrest acquisition. For the full year, we expect earnings per fully diluted share to be between $4.05 and $4.25 and our adjusted EPS to be between $4.80 and $5.00. Our adjusted EBITDA guidance is $480 million to $500 million for 2026.

Our guidance does not include the potential benefits from storm restoration work, which is typically accretive to margins, nor upside to our assumptions for Paynecrest revenue and adjusted EBITDA. We expect to see higher revenue and improving margins beginning in Q2, with continued improvement in the back half of the year as we reach substantial completion of the impacted renewables projects. While our first quarter results were below our expectations, we are encouraged by the strong demand environment across our end markets and by our ability to reestablish revenue growth and margin expansion in the quarters ahead. With that, I will turn it back over to Koti.

Koti Vadlamudi: Thanks, Ken. Prior to opening the call for questions, I want to recap the key takeaways from the quarter. First, I want to reiterate that we believe we have taken the necessary steps to improve performance going forward in solar with enhanced oversight in project planning and execution. We have also refined our geographic expansion approach to avoid locations that could present similar execution risks. We have not executed any new contracts in these geographies since 2024 and are confident in the leadership and talent additions we have made on the front end of projects, both within our existing backlog and work we expect to book in 2026.

Second, we are seeing a number of positive trends in the portfolio that we believe position us well to drive higher revenue and margins over time, including within our solar, battery storage, and EVOS businesses. Our Utility segment continues to perform at a very high level, and the tailwinds, particularly in power delivery, appear to be strengthening. In addition, we are experiencing the most favorable conditions for natural gas generation in more than a decade, along with an improving market for pipeline services, both of which we expect to be accretive to company revenue and margins. Finally, we expanded our electrical service platform through the acquisition of Paynecrest, which was well aligned with both our strategic and financial acquisition objectives.

The transaction adds accretive revenue and margin growth and exceeds our return thresholds. As Ken noted, we continue to maintain a strong balance sheet, providing significant flexibility and optionality in our capital allocation strategy, including the ability to pursue additional acquisitions that meet our disciplined criteria. Overall, I am confident in our team's ability to remain nimble and capitalize on favorable end market conditions, effectively navigate near-term challenges, and consistently deliver safe, high-quality service to our customers while generating long-term shareholder value. We will now open the call for questions.

Operator: At this time, I would like to remind everyone, in order to ask a question, simply press star then 1. Our first question is from the line of Lee Jagoda with CJS Securities. Please go ahead.

Lee Jagoda: [inaudible].

Ken Dodgen: Yeah, Lee. The $110 million, it is kind of in three buckets if you think about it. We talked about the revenue pushout and the lower revenue in renewables. That is about $400 million for the year, and so at kind of our normal gross margins, that is about $45 million, give or take. Then the cost overruns on the jobs in Q1 are about $35 million to $40 million of it. And then there is about another $25 million or so that will just be lower margins as we finish out the jobs over the course of Q2, predominantly Q2 and Q3. There is one job that will linger into Q4, but that is about it.

So those are really the three buckets.

Koti Vadlamudi: And then I think, as you can imagine, these jobs will still have a margin effect on our Q2 and then less so in Q3. So Q2 is going to be kind of a recovery quarter for us with respect to renewables. Q3 will be kind of gravitating back toward normal and ideally by Q4, we are back in that 10% to 12% range for renewables. On the renewable revenue forecast, the pull forward of that one project that we talked about all last year—one project that was supposed to be in 2026—got pulled forward to 2025. And then the balance of it, frankly, is mostly just continued ripple from all the disruption last year.

As we talked with our clients last year, we were under the impression from them that it would mostly be resolved by 2025. But unfortunately, clarification on what is qualified for the tax credits, the need to reengineer projects a second and a third time in light of safe harboring of certain panels, just involved our clients taking more time and having to delay the start of certain projects. The good news is the funnel is as strong as ever, and we have a large number of projects across renewables and energy where we have been verbally awarded and should sign in the next two to three quarters.

We have verbal awards of $1.1 billion in the second half of this year, and another $2.8 billion that will sign. So the end market in renewables is still very strong for us, and we have optimism for growth going forward.

Operator: Our next question is from the line of Adam Robert Thalhimer with Thompson Davis. Please go ahead.

Adam Robert Thalhimer: [inaudible].

Koti Vadlamudi: On power delivery, we have articulated in our growth strategy that we felt strong secular tailwinds, specifically around transmission and substation. We are seeing some anchor clients—customers that do capital planning on a longer cycle. What you are seeing in the MSA backlog improvement is a reflection of these customers’ CapEx, and then I will let Ken talk to the margins.

Ken Dodgen: The growth cadence is still similar to what we have seen in the past. We had a good Q1 that is reflecting that growth cadence as well as some good weather in the quarter. And the margins should be in line with what we have expected and, with some storm work, we could even end up in the upper half of our 10% to 12% range for the year.

Koti Vadlamudi: On Paynecrest and mix, first, we are excited about welcoming Paynecrest to the Primoris Services Corporation family. Often, the talking points are about the data center exposure, which we are certainly excited about—how they can bring their expertise inside the facility is a great opportunity for us to expand. But they also have industrial facility exposure, and their market and skill sets are fungible, so we are really excited about their opportunity to grow. With a particular hyperscale client that they have cultivated over the last few years, there are additional opportunities and line of sight to some major program spends that are well within their wheelhouse and geography, so we are excited about the opportunity for growth there.

Operator: Our next question is from the line of Sean Milligan with Needham & Company. Please go ahead.

Sean Milligan: [inaudible].

Koti Vadlamudi: We still have a deep conviction on the end market with gas power generation. Last quarter, we articulated that the overall funnel is actually up, and we are talking about verbal awards because we see near-term visibility to adding to backlog. Specifically in this end market, we have nearly $800 million in verbal awards that are imminent to be added to backlog. In 2026, that funnel is an additional $3 billion that we are pursuing. If I do not restrict that to 2026 and take it further out, that funnel is over $7 billion, up from $6 billion that we talked about last quarter.

So it is a really strong end market for us and we are excited about the opportunity to grow. We did see some project starts slip to the right. They have not been canceled—just delays due to clients doing more due diligence on cost and addressing investment decisions. On renewables revenue, with the pull-forwards last year, we had expected this year to be sort of flattish given that move to the left of those project accelerations. What we are seeing now is some project delays slipped to the right. We had some projects that we thought were going to be awarded that straddled the quarter.

We expected going into the year to be flat and now we see it is going to be a little bit down based on portfolio shifting to the right. Overall, that market remains very strong; the funnel we see in 2026 and beyond right now is over $15 billion. On confidence in the guide, we feel confident. We have risk-assessed the portfolio and identified the quantum for the projects that are in this distressed state. The projects last quarter where we identified subsurface conditions are now behind us; we achieved mechanical completion and are doing punch list items.

On the ones going forward, many of them reach substantial completion in the next few weeks, with the balance one project finishing at the end of this calendar year. We feel confident we have done appropriate risk assessment of the portfolio and we are excited about winning further backlog. We have also made changes in preconstruction planning, project management, project controls, and being more discriminating around geographies where we pursue work, all of which give us confidence in achieving our forecast targets.

Operator: Your next question is from the line of Julien Dumoulin-Smith with Jefferies. Please go ahead.

Julien Dumoulin-Smith: [inaudible].

Koti Vadlamudi: On the $1.1 billion of verbal awards and $2.8 billion that we said we will sign, some projects have slipped to the right, but what gives us confidence is that we are still working closely with our customers, often helping them with cost estimates and preconstruction planning, so we have good visibility to the near-term portfolio. It sets us up very well for 2026 and into 2027. We are also seeing an emerging growth trend in the BESS portfolio within renewables. Our BESS funnel, measured in megawatt-hours, has more than quadrupled year over year. We see that business with an aptitude to more than double going forward, which gives us renewed confidence despite the slip to the right.

On the project issues, these were all projects bid in 2024. The common themes were underappreciation of risk, including geographies where we were less familiar with labor markets and permitting, such as soil disturbance and stormwater runoff protection. Knowing what we know now, we will use better discrimination going forward. The additions in project leadership across preconstruction, project management, and project controls will enhance risk identification and mitigation. Regarding a multiyear view for gas generation, we are on a cadence of a three-year strategy refresh now and look forward to announcing an investor day where we will lay out targets for 2027 through 2029. The gas power generation portfolio is an exciting, dynamic part of our business.

Some programs we are discussing with customers are quite large. I have a CEO top-to-top next week with a customer looking at a combined-cycle plant—potentially multibillion-dollar investments—with clients seeking turnkey delivery to de-risk execution complexity. We will provide more color at investor day.

Operator: Your next question is from the line of Sangita Jain with KeyBanc Capital Markets. Please go ahead.

Sangita Jain: [inaudible].

Koti Vadlamudi: On the challenged geographies, we stopped taking new backlog in those areas in 2024. The total renewables funnel of roughly $15 billion gives us confidence we do not need to chase revenue in areas where we see further risk. We have strengthened our risk posture and do not need to bend it for growth’s sake. We do not believe this will impact our ability to hold and grow going forward.

Ken Dodgen: On margin guidance, the impact to renewables margins will be meaningful within renewables, but the overall Energy segment impact is moderated as renewables becomes a smaller percentage of Energy and the rest of Energy grows. I expect the Energy segment as a whole in Q2 to be in the upper single digits as we continue to work this off. In terms of confidence, as Koti mentioned, we have risked these jobs, evaluated them as much as possible, and baked in as much incremental cost as we believe we are going to incur. In a couple of cases, we have completed the jobs, and the rest will be completed for the most part within the next two to three months.

Operator: Your next question is from the line of Steven Fisher with UBS. Please go ahead.

Steven Fisher: [inaudible].

Koti Vadlamudi: On how many projects and geographies are involved, it is a small minority of the total renewables portfolio. We will be judicious in our geographic selection given the strength of the overall market. If a core client brings us to a new area, our learnings will inform the go/no-go decision and execution approach. Most of the projects that had margin compression are nearing substantial completion in the next few weeks, with one completing in the fourth quarter of this calendar year. We have risk-assessed the overall portfolio and feel confident we have addressed the issues on these projects that were bid in 2024.

Regarding risk versus reward in Utilities versus Energy, in power delivery we have anchor clients with long-term relationships. We have seats at the table with them in resource planning and execution model development. We also have organic opportunities with new customers who are looking to Primoris Services Corporation to ensure appropriate capacity. Given demand, we can be very careful and judicious about our risk posture and do not need to grow beyond our skis. Training and development of people is a key area for us, and we share lessons learned across segments so growth areas like renewables inform practices in utilities and gas generation.

Operator: Next question is from the line of Philip Shen with ROTH Capital. Please go ahead.

Philip Shen: [inaudible].

Koti Vadlamudi: Q1 was expected to be a softer booking quarter for renewables. The project delays are largely due to two buckets: certainty around the 48E tax credits, as customers assess how to maximize credits; and maturing engineering design for more predictability in cost and schedule. We think the added definition is ultimately a good thing. On 48E specifically, yes, that relates to the broader tax equity and implementation clarity dynamic. On the challenged projects and customer relationships, project outcomes for customers are very good—they are getting first-rate facilities and we have met our scope obligations. In some cases, we did have entitlement, but even with that, we did not meet our financial targets despite contingencies. Client relationships remain very positive.

Most of our work is repeat business, and our quality and execution credibility remain strong.

Operator: Your next question is from the line of Jerry Revich with Wells Fargo. Please go ahead.

Jerry Revich: [inaudible].

Koti Vadlamudi: On the gas power business beyond this year, we have verbal awards of nearly $800 million that we feel confident will add to backlog. If I unrestrict the funnel in terms of years, we have line of sight to $7.1 billion of identified opportunities beyond 2026. Regarding lead times, these investment decisions are large, so we often receive LNTPs to advance equipment orders and site work. Prior to full investment decisions, clients may augment our scope, and when the program is mature, we receive FNTP for the full amount. We can begin realizing revenue shortly after verbal and LNTP stages as clients mobilize resources quickly. On renewables projects with negative adjustments, there are six projects in total with margin compression.

Three will complete in the next few weeks, one in the next quarter, and one in Q4. We feel good about our risk assessment and target dates. Weather-related productivity is a remaining variable, but we believe we have appropriately vested the effort required in estimates to complete. We are not sharing prior-year revenue contribution for these specific projects at this time.

Operator: Next question is from the line of Steven Fisher with JPMorgan. Please go ahead.

Steven Fisher: [inaudible].

Koti Vadlamudi: We are not going to call out specific geographies. Predominantly, issues were around weather impacts. In some cases, we mobilized a workforce and then had to demobilize and remobilize. Many client contracts have schedule milestone conditions. When we remobilize but productivity is impacted by weather, we add field labor and sometimes work out of sequence, which increases hours and dollars—one thing piles upon another. In some jurisdictions, environmental requirements for ground disturbance, exacerbated by heavy rain, also impacted productivity and costs. We will record these as lessons learned and be more disciplined in growing from areas where we are more familiar with labor and environment.

On contract structures, it is more about disciplined project and geography selection and maintaining a disciplined risk posture. We walked away from a recent project where we could not come to terms on risk, despite being the preferred supplier. The market allows us to be disciplined based on our solution offering.

Operator: Your next question is from the line of Maheep Mandloi with Mizuho. Please go ahead.

Maheep Mandloi: [inaudible].

Koti Vadlamudi: Most of these are projects already awarded from 2024, so we are not seeing margin impacts contemplated for projects booked post-2024 delivering in 2027–2028.

Operator: Your next question is from the line of Manish Somaiya with Cantor Fitzgerald. Please go ahead.

Manish Somaiya: [inaudible].

Koti Vadlamudi: On Utilities margins moving from 9.8% toward the 10% to 12% range, power delivery provides optimism. We are executing well with current customers and seeing opportunities to be more efficient. We also have new opportunities with new customers, and based on market demand, pricing and mix allow us to deliver higher-quality margins. MSA backlog increased nicely quarter over quarter in Utilities, providing tailwinds enhanced by our operational improvements.

Ken Dodgen: Seasonality helps—Q1 and Q4 are shoulder quarters. Getting out of the gate earlier in Q1 is helpful to the upside. Our percentage of project work has started to gain traction; if that continues, it could help margins as well. Lastly, storm work during the year can provide additional upside. On operating cash flow, Q1 was heavily impacted by timing of payables and the timing of our check run—about a $100 million swing. That is mostly noise and will likely reverse some in Q2 or Q3 depending on month-end timing versus AP runs. Upfront mobilization payments also impacted BIE/contract liabilities sequentially given the cadence of new contract signings.

As the verbals Koti referenced turn into signings and mobilization over the balance of the year, that will drive cash. We are holding firm on our expectation for operating and free cash flow for the year; Q1 impacts were mostly timing.

Koti Vadlamudi: On capital allocation, our strategy is unchanged. We have $150 million of remaining share repurchase authorization. We are investing organically to capitalize on secular tailwinds, remaining very disciplined on leverage, and we will pursue strategic inorganic opportunities that can be catalysts for accelerated growth, evaluating them opportunistically based on market dynamics.

Operator: Next question is from the line of Adam Bubes with Goldman Sachs. Please go ahead.

Adam Bubes: [inaudible].

Koti Vadlamudi: In our existing portfolio, data center-related work tied to enabling infrastructure has been very solid. We booked over $400 million in Q1 related to that work compared to something over $800 million to $850 million for all of last year. Paynecrest gets us inside the facility, and roughly 40% of its portfolio is directed toward hyperscaler data center opportunities. At that percentage, that is about $112 million of the portfolio. We are building them into our plan, and recent hyperscaler CapEx announcements give us a lot of optimism as Paynecrest is a key supplier for one hyperscaler customer, creating opportunity to overdeliver versus our valuation case.

On risk profile for combined-cycle and simple-cycle gas generation versus core industrial, execution fundamentals are similar. We conduct rigorous reviews based on scope and design maturity. Combined-cycle is more complex and longer in schedule; we are seeing more simple-cycle opportunities driven by timeline-to-market. Our resume includes both. We typically do not put the turbines on our paper, which drives our contract value down, but we have strong OEM relationships and frequently pair with them as part of the EPC offering to improve predictability of orders converting.

Operator: And at this time, I would like to turn the call back over to Koti for closing remarks.

Koti Vadlamudi: Thank you. First, I would like to acknowledge and thank our employees at Primoris Services Corporation who enable us to deliver critically needed infrastructure solutions for our clients. Despite the challenges we had in renewables, I want to emphasize the strong fundamentals across our portfolio. We have intentionally shaped our business toward secular tailwinds in our end markets, setting us up for a strong second half and, more importantly, for 2027 and beyond. Thank you for joining us today, and we look forward to updating you as we progress.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you for joining. You may now disconnect.