Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primoris Services Corporation Second Quarter 2025 Earnings Conference Call and webcast. [Operator Instructions] I would now like to turn the call over to Blake Holcomb, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to the Primoris Second Quarter 2025 Earnings Conference Call. Joining me today with prepared comments are David King, Chairman and Interim President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer. Before we begin, I'd like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and therefore subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook as of today only, August 5, 2025. We disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investors section of our website in our second quarter 2025 earnings press release, which was issued yesterday. I would now like to turn the call over to David King.

Thank you, Blake. Good morning, and thank you for joining us today to discuss our second quarter 2025 financial and operational results. Primoris had a record second quarter, achieving new highs in the revenue, operating income and earnings. Our results exhibit the effectiveness of our financial and operational strategy to grow profitably through disciplined capital allocation. Even amid an unpredictable tariff and regulatory environment, our portfolio of essential infrastructure solutions continues to thrive. This is a testament to our hardworking teams across the United States and Canada. Their commitment to safe, productive and quality execution as well as a customer-centric approach serve as a foundation of our success. We see the opportunity to build on this success in the years ahead as Primoris plays a key role in providing solutions to the infrastructure needs in North America. We have highlighted in the past the growing need for power generation and the means to deliver that power to the end user. We have the capability to do both and execute very well. In addition to increased industrial and residential power demand, emerging technologies and data center development are driving the growth in power generation and consumption. While less than 10% of our revenue today is directly tied to data centers, we see significant opportunities on the horizon to increase our exposure. We are currently evaluating nearly $1.7 billion of work related to data centers estimated to be contracted by year-end, and we are optimistic that we will win our fair share of this work. Primoris offers a variety of services to these projects, including early-stage site preparation, power generation, utility infrastructure and fiber network construction. Essentially, we are a premier partner for comprehensive solution outside the walls of the data center and a market experiencing very tight supply for these services.…

Thanks, David, and good morning, everyone. Our Q2 revenue was just under $1.9 billion, an increase of $327 million or 20.9% from the prior year, driven by double-digit growth in both the Energy and Utilities segments. The Energy segment was up $263.3 million or 27% from the prior year driven by increased renewables activity as we had over $100 million of revenue pulled forward from the second half of 2025 and almost $50 million pulled forward from 2026. This was partly offset by lower pipeline activity. The Utilities segment was up $72.2 million or 11.6% from the prior year, driven by higher activity across all service lines, gas, communications and power delivery. Gross profit for the second quarter was $231.7 million, an increase of $45 million or 24.1% compared to the prior year. This is primarily due to increased revenue in both segments and improved margins in the Utilities segment. As a result, gross margins were 12.3% for the quarter compared to 11.9% in the prior year. Turning to our segment results. Utilities segment gross profit was $97.5 million, up $33.5 million or 52.3% compared to the prior year. This was driven by improved profitability across all service lines, but particularly in power delivery, where gross profit more than doubled from Q2 of the prior year. As a result, gross margins improved to 14.1% compared to 10.3% in the prior year. We are seeing the positive results of our strategic efforts to improve margins in the Utilities segment. Increased customer activity, a favorable mix of project work and improved productivity are all contributing to higher revenue and margins in the segment. While we are always mindful of our normal seasonal decline in Q4, our year-to-date results and current outlook give us confidence that utilities margins will be in the 10%…

Thanks, Ken. before we open the call for questions, I'd like to recap a few of the key points of the quarter. First, the demand backdrop for Primoris is the best we've experienced as a company. Our portfolio of services and strong customer relationships will allow Primoris to meet the critical infrastructure needs of North America for years to come. Everything we do in some way, help our communities have the energy they need and support economic growth. Second, the prospects for providing services in the data center market are vast, and we are still in the initial stages of demonstrating our capabilities in this area. We believe companies like Primoris that can offer a range of services to these projects will benefit as the customers look to build these facilities quickly and efficiently. Lastly, our strategy to improve utilities margins is showing results, and the end markets are looking more favorable than a year ago across the 3 business lines in this segment. Our customers have big plans and value the safe, dependable and quality services we can provide. We look forward to partnering with them and providing them with the solutions they need to make these plans a reality. We are excited about our potential to grow, and we will do so in a safe and efficient manner. A focus on disciplined bidding and project execution, while managing risk will enable us to expand margins and increase cash flow. We are confident that our success in these areas will allow us to generate long-term value for our employees, customers and shareholders. We will now open up the call for your questions.

[Operator Instructions] And your first question comes from the line of Lee Jagoda of CJS Securities.

It's Peter Lukas for Lee. Just starting on the energy side of the business. When the year started, you guys were telegraphing a back-end loaded order book in terms of new awards. As we sit today, is that expectation shifted at all? Or should we still expect to see a robust end to the year from an order perspective? And maybe if you could talk how much of this would come from renewables versus natural gas power or other? Just a little color there.

Sure. It's Dave. Yes, we're still predicting currently that we're going to be more back half loaded. We've started off, and I'll let Ken give you some breakouts between the renewables maybe and the gas, at least as best we can. But we started off good and we're still seeing Q3 shaping up the way we thought and maybe even heavier bookings in Q4. We're still seeing -- we've had some bookings already in the first month of Q3. And a lot of LNTPs beginning to sign that kind of moves through the process to set them up for the latter half of Q3 and into Q4. So still pretty -- feel pretty good about those bookings in that space.

Yes. And Pete, with respect to renewables versus the rest of energy, I think the predominance of it will be renewables the way it's looking right now. We do expect to sign some more gas generation projects in the back half, but I don't have any solid numbers on that right now. So we'll have to get back to you on that.

Great. Just one more. You guys did touch on it, but on the Utilities segment, performed well so far this year, performing well. How much of this overall demand stems from MSA customers versus the timing of spend? And as we look out the next 12 to 24 months, how do you see demand levels trending for your customers?

Well, a lot of it on the MSA side, obviously, on the gas utilities and the electric utilities, it's pretty much all driven by MSA work for us. I think we said we were -- we had some initiatives underway to improve margins. We did have some favorable closeout on a couple of projects. But we still see the improvement in margins holding for us. We've got some more work to do there in. Our crew productivities have improved and still feel pretty good about where we're sitting in that space. Operator Your next question comes from the line of Julien Dumoulin-Smith of Jefferies.

It's Brian Russo on for Julien. Just to follow up on the Utilities segment. You upped the gross margin target for 2025 to 10% to 12%. I think that was versus the prior 9% to 11%. And I'm wondering, is that a structural shift due to all the initiatives you previously mentioned and that we're kind of seeing a step-up in the sustainability, at least 100 basis points at the midpoint for that segment, mostly power delivery.

Yes. It's exactly what we've been talking about. So we expect to start seeing that benefit back half of this year and into next year. And based on the strength of this quarter and a lot of initiatives driving that, it looks like we've accelerated that a little bit, and that's given us the confidence to not only be 10% to 12% this year, but sustaining going forward.

Okay. Great. And just obviously, very strong solar revenue and bookings, right? You've increased -- it looks like the full year to $2.5 billion. How much of that was realized in the first half?

How much of renewables was realized in the first half?

Yes, out of the $2.5 billion.

How much of the $2.5 billion?

On the top line...

About $1.4 billion.

Okay. And so how does that tie into the $200 million to $250 million revenue target, I think you had previously for FY '25 and then the $300 million to $400 million longer-term annual run rate? And are you seeing any pull forward from the recent OBBB?

Yes. So we're upping our expectation for growth this year to about $300 million to $400 million from the original $200 million to $250 million, and there's a chance we may exceed that. On a go-forward basis, long-term basis, I think we're still targeting that $300 million to $400 million range. This year, it's a pull forward from not only -- there's about $100 million pull forward in the back half of the year about $50 million pull forward from next year to the first half of the year. And really none of it is due to OB3 or to tariffs. It's purely just been to good performance and timing of execution on the jobs.

Your next question comes from the line of Sangita Jain of KeyBanc Capital Markets.

This is Maddy Lehan on for Sangita.

Do you have a question?

Yes, you mentioned closeout payments in the Utilities segment in 2Q. Can you maybe quantify that for us and the impact that they may have had on margins in the quarter?

Yes. The main closeouts were with respect to some gas utility projects, and they contributed about $6 million of incremental gross profit during the quarter.

And your next question comes from the line of Brent Thielman of D.A. Davidson.

Great quarter. You actually wanted to dive a little bit more into -- obviously margins were great in Utilities, but the bookings were really fantastic. And wanted to piece that apart a little bit more. What were the big levers in the quarter for that segment?

Brent. Look, I don't know if there are any specifically big levers. It was really -- it was all MSA driven, and it was spread across predominantly power delivery and multiple customers there. but also a little bit in gas and comms. I think what's surprising us is -- the main surprise there is not the growth in power delivery bookings as much as -- if you go back to our Analyst Day last year, we expected low single-digit growth in gas and communications. We're now looking at closer to mid-single-digit growth in gas and communications for both this year and probably next year as well. So encouraged by the upside that we've seen in both of those areas.

Yes. Brent, I'll add a little bit. Obviously, the big spend in the T&D that everybody is talking about, but we're seeing some of our dual service utility companies actually put in some very attractive spending programs on the gas side of their business also. And I think we weren't expecting that to be quite as much of a dramatic spend program. So that's boosting us also.

Okay. And so this is really absent maybe some of the fixed project -- fixed-price power delivery projects I know you guys are pursuing on the smaller side. That really hasn't kicked in here yet. Is that fair?

That is correct.

Okay. And I imagine that pipeline is still relatively interesting. Is there any comments you can make on that? And kind of how you could see that -- we could see that play out over the next kind of 12, 18 months?

No. The only thing I would say is it's still very robust out there, and we're still pretty confident in some of our bookings coming either late Q3 or into Q4 on some of the power gen side, and they'll be nice bookings. And then obviously, the funnel for us in '26 even looks pretty nice also. So I think we'll end out '25 with some good bookings in that power side also on the gas side.

Okay. And then just on pipeline. I mean it sounds like we're nearing an inflection here in the business just based on what you guys seem to be seeing going forward. David, I guess part one is, maybe there was a thought to manage this around $500 million in revenue. Does that go away and you're comfortable letting this be a larger business? And two, maybe the size and scale of some of the things that you're seeing in the pipeline, no pun intended, coming down the way here.

Yes, Brent, the short answer is we're going to be opportunistic around pipeline. We're going to scale up. We're not going to let it get out of control, and we're going to always be disciplined in what we bid. And so yes, could I see it getting up to $500 million next year or maybe $600 million? Yes, it's all just going to depend on the opportunities and whether we get the ones that we want.

Yes. And then Brent, I'll add, we've already picked up a really small one, but it's so small. It's not worth really talking too much about. But it kind of shows you that the gates beginning to open on some of those. And the funnel relative to some of the larger ones that we see are shaping up nicely. Again, I think even last call, we told you, and I don't think we have anything really different here that we're seeing. I think it's going to be more of a 2026 play than anything and then into '27.

And your next question comes from the line of Joseph Osha of Guggenheim Partners.

I have 2 questions. First, it does sound to me on the power delivery side, like you're still saying you're going to try and stick with 380 kVa and below market? Am I kind of reading your comments correctly? Or might we see you get after some 765? And I have one other question.

Sure. I think you're reading it correctly. We have got some customers that are asking us to do small portions of a 765 for the purposes of maintenance and other storm-related work in the future. But again, we've got plenty of opportunities in those lower voltage ranges. So I think you're reading that exactly correct.

Yes. And obviously, I think the concern there had been about getting into a really -- a big -- a bigger high-risk project. And that's -- I'm hearing that that's not going to happen, so that's good. And then yes. Just wondering, can I think of renewables? Obviously, it's growing, but is that subsegment may be perhaps a little bit margin dilutive on that side of the business, just looking at how the margin trended there and the revenue?

Yes. Joe, I think it was a little bit dilutive for the quarter just because of the weather impacts that I mentioned in my prepared comments. But in general, no, not dilutive at all.

And is there any -- just as a follow-up there, I mean, do you guys see any kind of potential for organic improvement in renewables gross margin going forward?

Yes, we always see opportunity there. And as you know from in the past, it's usually in conjunction with project closeout. So we will always see better margins or almost always see better margins in renewables in quarters where we have more project closeouts, which is not unlike what we saw a year ago at this time.

But that's kind of a one-off. I mean just more generally, I mean, is there a potential for those margins to get better more generically or they kind of are what they are.

I see what you're saying. Yes. No, they are what they are. We've always had strong margins in renewables. We expect to continue having strong margins, but I don't know that going forward, there's going to be opportunity to actually get better than what we've been experiencing.

Your next question comes from the line of Avi Jaroslawicz of UBS.

So I know we've already discussed the margins in Utilities a little bit. But just in terms of your guidance, the midpoint, there seems to indicate margins down a decent bit year-over-year in the second half of this year, even excluding some of the benefit from storm work last year. So I was just wondering if you could share how you approach the guidance for the second half for the Utilities segment?

Yes. Look, we had outsized margins in Q2. So while we still expect to have strong margins in Q3 in Utilities, I think sequentially, they're going to be down from Q2 as a result of how good Q2 was and some of the onetime items that happened in there. And then, of course, sequentially, we're going to be -- we're expecting to be down in Q4. Q4 as you know, is always kind of a swing quarter for us. We generally expect it to be down because of seasonality and weather. It could be just that way this year or it could be better than that like we saw in Q4 last year based on weather and the timing of projects.

Okay. And then I think you also noted opportunities in fiber for data centers. So just wondering, would we see those awards come into the fixed backlog in Utilities? Or would it be in the MSA work?

It will be in both. It will be in both. Our communications business is a combination of MSA and project work on the margin, more MSA work than project work. And so you'll see it in both areas.

And your next question comes from the line of Adam Thalhimer of Thompson, Davis & Company.

Congrats on a strong quarter, and it's good to see the stock above $100 million for the first time.

We would agree with those comments. Thank you.

I was hoping to touch on your data center comments. You said you were tracking $1.7 billion worth of work. What would be the average size or your content within those jobs? Just curious, maybe you can comment on how many projects you see in that space?

Typically, we're seeing values of the sections that we handle, $100 million in under. Now having said that, we may see multiple projects within that one data center. So we may have more than $100 million involved in that one data center. But I think we've mentioned, we do a lot of different things in those data centers, everything outside the box, the power generation, the fiber, the interconnects, everything. And as far as the numbers of projects, Oh, gosh, they're almost -- they're not unlimited, obviously, but there's just hundreds if not thousands of those data centers, things out there for us that we're looking at. So -- I don't know if I answered your question or not.

Perfect. Yes. And then I was actually going to go to the very next thing you said after that, David, which was the $2.5 billion of natural gas generation. Can you give a historical perspective around that? I mean what that was a year ago and 6 months ago and how that backlog has -- or how the pipeline is filled there?

Yes. Let me let Ken on the backlog part. We have been increasing, obviously, because most of the -- on the power gen side, not all of them have been data center related. I want to make sure you realize that. I think we talked last quarter that we're working on something like 5 of them, and I think one of them was only data center-related at that time, and we are seeing more of the data center. But historically, Ken, I don't know if you have any comments...

Sorry, Adam, I don't know what that backlog was a year ago, so it's hard to give you specifics. I can tell you it has definitely grown over the course of the past 12 months. And as David said, we're seeing opportunities around both in and outside of data centers.

Your next question comes from the line of Drew Chamberlain of JPMorgan.

First one, I just kind of want to follow up on the data center trend here. You guys trying to put into perspective a little bit of like that $1.7 billion or -- so I guess on that $1.7 billion, what do you think is achievable for you to book this year? And then how should we think about that revenue volume. Is that all incremental to like your base plan here? Or is that work that maybe 2 years ago, you would have thought would have been used for a different application is now transitioning to data center? Or is that just all on top?

Well, let me start out talking about the $1.7 billion. Obviously, we're not going to get all of the $1.7 billion. We have submitted bids and been shortlisted and selected on a good portion of that. I would tell you, of that portion that we've been shortlisted on, it's somewhere in the $400 million to $500 million. That doesn't mean that we're not going after the rest of it. It's kind of in a staged approach. So feel good about that work. That work is expected to be contracted by year-end. So we'd expect the funnel to continue to grow in the quarters ahead. I think that should give you enough, Drew, but if not, ask another question there and I'll see if I can answer it.

Yes. Sorry. And then just the other part being, is that incremental to what your kind of base plan assumed? Or is this kind of repurposing teams for data center work?

No. Most of it is incremental to what we'd originally put in our plan last year at our Analyst Day. So it's been great to see that materialize. And as we talked about before, it touches a number of different parts of our business. Those opportunities around data centers are both in transmission and substation and in fiber and in generation.

And Drew, your comment on repurposing, I'll make this comment. I think we've said before the type of works that we're doing in those data center areas, especially on the power side, our workforce in our industrial segment is very spongeable there in. So it's the same types of work. So we're certainly not seeing any shortage of the ability to handle those projects.

All right. Just one more for me. Cash coming in keeps outpacing cash going out. So I'm just wondering if there's any thoughts on latest capital allocation priorities and maybe just thoughts on what's changed in the last 3 months in your mind on how you wanted to deploy cash?

Yes. Drew, really no change at all. We're continuing to focus on working capital improvement. We're continuing to build cash and pay down debt. And then, obviously, M&A positioning the balance sheet for M&A is the next priority, and then, of course, return of capital. So we continue to look for M&A opportunities. We continue to focus on paying down debt and growing the business.

And that concludes our Q&A session. I will now turn the conference back over to David King for closing remarks.

Thank you for your questions and interest in Primoris. We are pleased with our first half results and look forward to carrying this momentum in the remainder of the year and into 2026. Thank you, and we look forward to updating you next quarter.

Ladies and gentlemen, that concludes today's call. Thank you, everyone, for joining. You may now disconnect.