Primoris Services Corporation Aktie

Hello, everyone. Thank you for joining us, and welcome to Primoris' Q2 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Blake Holcomb, SVP of Investor Relations. Blake, please go ahead.

Good morning, and welcome to the Primoris Second Quarter 2026 Earnings Conference Call. Joining me today with prepared comments are Koti Vadlamudi, President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer.

Before we begin, I would like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook only as of today, August 5, 2026. We disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investors section of our website and in our second quarter 2026 earnings press release, which was issued yesterday.

I would now like to turn the call over to Koti Vadlamudi.

Thank you, Blake. Good morning, and thank you for joining us today to discuss our second quarter 2026 financial and operational results. As we noted in our June operational update, our second quarter results reflect the majority of the impact from the limited number of renewable energy projects that have experienced margin pressure. Since that update, we have achieved mechanical completion on one additional project and we'll be submitting for mechanical completion on another this week. Importantly, we continue to expect that 3 projects will reach substantial completion during the third quarter of 2026. The sixth and final project remains aligned with our revised estimates, and we currently expect to achieve mechanical completion in early November, followed by substantial completion by year-end. I also want to emphasize that following our portfolio review, the remainder of the renewables projects on average are performing within our expectations.

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

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

In addition to our focused efforts to restore a positive trajectory in renewables, Primoris delivered record bookings and backlog in the second quarter, underscoring the strength and diversity of our platform. During the quarter, we secured more than $3.9 billion of new awards, including approximately $1.5 billion in the Utility segment and $2.4 billion in the Energy segment. The growth in our utilities backlog reflects both the favorable dynamics of our end markets and the confidence our customers place in our ability to execute critical infrastructure projects. Demand remains particularly strong in power delivery, and we are strategically expanding our workforce in key markets to support strategic customer relationships while also engaging with new customers seeking experienced partners for transmission, substation and distribution work. We see growing opportunities to build upon our established track record in transmission and substation work.

At the same time, we are investing in process improvements, operational rigor and talent development to enhance execution, improve profitability and expand our workforce of qualified field leadership, project management and supervisory personnel. Growth in our Energy segment backlog was primarily driven by natural gas power generation, which accounted for approximately $1.4 billion of the sequential increase during the quarter. In addition, we benefited from roughly $200 million of backlog associated with the PayneCrest acquisition as of quarter end and secured new awards across electrical construction services, industrial infrastructure and utility scale solar. We are still expecting renewables backlog to build in the second half of the year with the majority of awards coming in the fourth quarter. Looking beyond this year, we also see the potential for strong first quarter of 2027 for renewables awards, which would further support our confidence in returning the business to growth next year.

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

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

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

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

Overall, despite the challenges we experienced in renewables during the quarter, Primoris continues to benefit from strong underlying performance and favorable market fundamentals across multiple end markets, including power generation, pipeline infrastructure and electrical services. The strength of our record backlog, expanding opportunity pipeline and disciplined approach to project selection reinforces our confidence in the business.

I'll now turn it over to Ken for more on our financial results.

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

As a result, gross margin was 4.9% for the quarter compared to 12.3% in the prior year. Looking at our segment results. Utility segment gross profit was $85.1 million, down $12.4 million compared to the prior year. This was driven primarily by lower revenue and margin in the Communications business and lower margins in our gas operations business. This was partially offset by increased revenue and margins in power delivery. The decline in revenue and margin in Communications was due to a decrease in fiber-to-the-home activity as customers transition to BEAD programs, which we referenced in our first quarter call. It was also due to a shift in revenue mix toward more maintenance work. For gas operations, the lower margins were due to strong project closeouts in 2025 that didn't repeat in Q2 of this year. As a result, gross margin declined to 11.9% compared to 14.1% in the prior year.

We continue to see strong performance in power delivery, driven by improved productivity and a favorable mix of work, including substation and transmission scopes. This led to higher revenue and margins year-over-year. In the Energy segment, gross profit declined $136.9 million from the prior year due to lower revenues and margins in Renewables. Gross margins in the segment were slightly negative, which was down from 10.8% in the prior year. The decrease in margin was driven by project cost overruns and lower revenues in renewables, partially offset by improved revenue and margins in pipeline and the contributions from PayneCrest. We believe revenue and margins will trend up in the second half of 2026 as we complete the 4 remaining renewables projects and begin to ramp up on new solar and natural gas projects.

For the full year 2026, we are expecting gross margins in the Energy segment to be in the 6% to 8% range. SG&A expenses in the second quarter were $106.3 million, an increase of only $1.7 million compared to the prior year. As a percent of revenue, SG&A increased to 6.3% from 5.5% in the prior year due to lower revenue and increased amortization expense of the intangibles from the PayneCrest acquisition. SG&A is expected to trend higher in the second half of the year due to this increased amortization expense. As a result, we expect SG&A will be a little over 6% of revenue for the full year 2026. Net interest expense in the quarter was $10.6 million, up $3.1 million from the prior year due to higher average debt balances attributable to the PayneCrest acquisition, partially offset by lower interest rates. Based on current debt levels, we are updating our guidance for interest expense to be between $43 million and $47 million for the full year.

Our effective tax rate was elevated for the first 6 months of 2026, reflecting lower pretax profit and the impact of some discrete items in the first half of the year. Despite these impacts, we expect our full year effective tax rate to be in the 30% to 32% range. Moving to cash flow. Q2 cash used in operations was $8.7 million, which improved from the first quarter of 2026, but down from around $78 million provided by operations in the prior year. The decrease in cash from operations was largely driven by our lower net income. Transitioning over to the balance sheet. We maintained strong liquidity of $959 million, which includes a little over $218 million of cash and approximately $741 million in available borrowing capacity on our revolver.

Our trailing 12-month net debt-to-EBITDA ratio increased to 1.6x EBITDA at the end of Q2, primarily due to the acquisition of PayneCrest and the lower Q2 EBITDA. We expect our leverage ratio to tick up slightly in Q3, but should trend lower as we grow earnings and improve cash flow in Q4 and in 2027. We remain in a very good position with respect to our financial covenants and have substantial liquidity to continue investing organically as well as to pursue opportunistic share repurchases or tuck-in M&A in our key focus areas. Total backlog at the end of Q2 was just under $13.9 billion, an increase of approximately $2.2 billion sequentially from Q1 and a record for Primoris. Total fixed backlog was up $1.5 billion from Q1, primarily due to strong Energy segment bookings for natural gas generation, industrial and electrical construction services from PayneCrest. As Koti mentioned, we have also started Q3 with additional bookings in natural gas generation and pipeline that should support growth in 2027.

While we were awarded a solar project in the second quarter, we continue to expect renewables bookings of $1.5 billion to $2 billion in the second half of the year, primarily in Q4. Total MSA backlog increased about $700 million from Q1, driven primarily by increased activity in power delivery. Our growing funnel of opportunities across our services and our ability to win and execute on behalf of our customers gives us confidence we will return to revenue growth and margin expansion in 2027. Before turning it back over to Koti, I'll close with guidance. We are maintaining the guidance we provided in our operational update in June. EPS of $1.30 to $1.85 per fully diluted share, adjusted EPS of $2.05 to $2.60 per fully diluted share and adjusted EBITDA of $275 million to $325 million for the full year 2026. We expect our second quarter results to represent the low point for the year as we have recognized the cost impacts associated with the challenged renewable projects during the quarter.

Looking ahead, we anticipate sequential improvement in revenue and earnings through the remainder of 2026 with adjusted EBITDA expected in the range of $90 million to $110 million for the third quarter and $100 million to $120 million in the fourth quarter. As Koti mentioned, we continue to make solid progress in completing the remaining obligations on the renewables projects that have experienced cost overruns. At the same time, we expect activity to accelerate on several solar and natural gas generation projects during the second half of the year. Based on the momentum we are seeing and the opportunities ahead, we are encouraged by our outlook.

I'll now turn it back over to Koti.

Thanks, Ken. Prior to opening the call for questions, I'd like to recap the key takeaways from the quarter. First, the financial impact from the renewables business in the quarter and in 2026 overall is not representative of the performance standards we have historically defined at Primoris, nor is it acceptable to me as CEO. In response, we have taken decisive actions to strengthen our operational oversight, enhance our preconstruction planning and risk management processes and sharpen accountability throughout the organization. Our reputation, long-standing customer relationships and the attractive end markets we serve are too valuable to compromise by taking unnecessary risks or deviating from the disciplined execution that has differentiated Primoris. While project risk will always be part of our business, accountability starts with leadership, and I am committed to ensuring that we learn from these challenges and emerge as a stronger organization.

That said, we are progressing as expected to substantially complete the challenged projects by year-end. And as we move toward completion, we expect to see the impacts on our financial results continue to diminish in the back half of the year. Second, I want to emphasize that the underlying fundamentals of our business remain exceptionally strong as evidenced by our record bookings and backlog. I also want to recognize the teams across our organization who are working closely with our customers to plan and secure future projects, as well as the men and women in the field whose dedication, expertise and execution make our success possible every day. As we move through the balance of 2026 and into 2027, we will work to successfully complete the remaining renewables projects, execute with discipline across our portfolio, convert our growing backlog into profitable results and position Primoris to capitalize on the significant infrastructure investment opportunities ahead.

I remain confident in our team, confident in our strategy and confident in our ability to create long-term value for our customers, employees and shareholders. We will now open up the call for your questions.

[Operator Instructions] Your first question comes from the line of Steven Fisher with UBS.

Just a follow up on the renewables projects. It sounds like I think you said the remainder of those renewable projects on average are performing within expectations. Does the on average imply that some are above and some are below? I guess really the question is, are there risks that we have more charges here? If so, is that already captured in guidance? I guess I'm curious what some of the key assumptions you've made going forward about weather and labor productivity for the rest of these.

Yes. Thanks, Steve, for the question. Yes, and that comment is correct on average. In the portfolio, there's probably over 2 dozen projects. Many of them are delivering more than as sold margin and some are not material, but a little below the as sold margin. So we identified the 6 that were -- have the cost overruns, and those remain the 6 that we continue to be focused on. And as I said, 2 of those are now complete, 3 completing this quarter and the last one at the end of the year.

Okay. And you mentioned about returning to growth in 2027 in renewables. Just -- can you confirm that's just your base case at the moment? And if so, it sounds like the fourth quarter bookings there are going to be quite important. We're hearing that some of the projects in this planning stage might be running a bit behind and maybe at risk of being even rebid to others. Can you just sort of set the record straight on sort of the confidence in '27 and what's happening with those projects that you're in the planning stages on renewables?

Yes. Thanks, Steve. And back half of the year, in particular, Q4, the funnel for renewables remains strong, and we'll give very prescriptive color on 2027, where revenue burn will be on the top line. But very, very strong indication on the opportunity list in front of us for Q4, and it sets us up for a significant backlog going into '27. So what we would say is modest growth for '27 coming off of a reset year.

And just any comments on the work in the planning stages? Any comments on things being behind or kind of being rebid to others?

Yes. Thanks. I'm sorry, I didn't answer that piece. No significant changes. As the year has evolved, we previously articulated some projects did move to the right. And even in this quarter, one project signing that we anticipated happening in Q3 moved to Q4, but it isn't a significant shift in terms of our projected backlog, but no significant pushes to the right other than what we articulated previously. And still a strong demand market for us. Yes. As I mentioned before, the funnel of opportunities is still significant, total over $16 billion in renewables.

Your next question comes from the line of Sean Milligan with Needham & Company.

I guess, first off, in the Gas Power side, you added $1.4 billion in bookings this quarter. Just curious kind of current backlog in Gas Power and sort of how you see the slope of that over the next couple of years.

I don't know that I have the exact backlog on gas generation. Blake, do you have that?

Yes. Sorry, Sean, I don't have that in front of me right now. What was the rest of your question?

That was obviously a big bookings number. I think Gas Power is accelerating for you, but just curious kind of how the slope looks for you kind of back half of this year, '27, '28. Like when you talk about the $1.4 billion in bookings, how does that flow through?

Yes. No, good question. We -- so we're expecting growth in the back half of the year relative to the front half of the year. I think we're still on track for the full year to be kind of in the $500 million to $600 million range for nat gas generation and then comfortably growing next year based on the backlog we've signed so far and our view to potentially other signings in the back half of the year, $800 million to comfortably $1 billion in revenue next year.

Okay. Great. And then just a follow-up question on sort of Texas exposure. There was a, I guess, press release by Abbott earlier this week around pausing data centers. That seems to put more of an emphasis on bringing your own power. Just curious for you all in terms of like the addressable market, like one, is that -- do you think that slows down anything for you in Texas? Like how much of the revenue is coming from Texas currently? Or does that -- like as bring your own power becomes more important, does your revenue opportunity per data center go up?

Yes. Thanks for the question, Sean, and we saw that memo from the governor. And first, I think it's not surprising that an elected official is trying to guard against their constituencies paying more for utilities, whether it's water or power. So it's a trend that we're seeing across the country. And the first thing I'd say is there is a strong demand environment from -- created by AI data centers. We're seeing that CapEx play out, and we have a skill set that affords us the opportunity to grow there. Of our portfolio, it's not huge. At any given time, it's probably 10% to 15% of the total portfolio. So our exposure, we're not wedded completely to that, but we are tracking it. Most of the opportunities that we see anecdotally with the data center development are on-premise generation, so would address some of the concerns in the governor's memo [indiscernible].

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

It's Brian Russo on for Julien. Just on the PayneCrest integration, you said it's exceeding expectations. I'm just curious as to the core region in Missouri. We've seen a lot of activity with, I believe, a fairly significant customer of PayneCrest to Ameren. And I was also wondering about the relationship with Meta. I believe you had done work on a Nebraska data center project. I'm wondering if any of those customers are active right now in your backlog or soon to be.

Yes. Thanks, Brian. And we typically don't call out individual customers, but I will say the hyperscaler CapEx and PayneCrest resume in doing that work for customers is very relevant. The relationship that they have with one hyperscaler in particular, is given their track record in the region is what's allowing them to capture further work. Their meaningful gate to growth is resources, just like any of the end markets, most of the end markets we're in, they are labor resource constrained. So they're looking at the opportunity funnel in front of them and the hyperscaler gives them visibility to their projects and doing well to add that to backlog. Just in the quarter, PayneCrest, in addition to the backlog we acquired with the acquisition, on top of that, they added $250 million in bookings in the quarter. So a positive signal and trend for them.

Okay. Great. And then just a follow-up on the gas gen opportunity. It seems like a nice bookings quarter and more to come to what is a nice step-up in '27 revenue. Just curious, how many crews do you have currently? Or how many projects can you handle in any given year? And what's the kind of the long-term target to scale up that end market?

Yes. When I started last year, I think we were saying half a dozen teams. We've invested in that in the last several months. We're up to 8 or 9 unique teams. And we'll continue to -- it is a meaningful question given the demand for that expertise. So we continue to look for opportunities to add talent and create teams, but the funnel is -- again, as I said, the demand is outstripping supply there. But it's about 8 to 9 teams today.

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

If I can ask one on renewables, actually energy margins. I appreciate the updated margin range. I'm just trying to think of how we should think about the cadence in second half. Should we assume that energy margins go back to the 10% to 12% range by the fourth quarter? Or is it going to be more of an even split between 3Q and 4Q?

Sangita, we're not going to get back up to 10% to 12%. It will be sequential. I think Q3, and I'm kind of going off the top of my head right now, is going to be kind of in that 6% to 8% range. I think Q4 is going to be more kind of 8% to 10% range, and then we'll get back to full 10% to 12% next year.

Got it. And then on pipelines, I appreciate Koti's comments that you're looking at a lot of projects that could start bringing revenue in late '27, early '28. I'm just trying to understand better on what's kind of guiding that outlook? Is it pipeline -- pipe availability? Is it permitting? Or is it just you guys waiting for the right projects to come in?

Yes. I'd say, Sangita, the customers' procurement knowing that they're in an environment where resources are scarce and labor availability, they're just doing their procurements earlier in the cycle. I'd say from what we've seen historically, doing tender processes 1.5 years and potentially 2 years in advance is probably a longer cycle we've seen historically. But I think it's them just being more proactive on the securing those resources well in advance. And it is a competitive environment -- Yes, you bet. It is a differentiated market for us based on the larger diameter and longer spreads.

Your next question comes from the line of Lee Jagoda with CJS Securities.

I guess I'll start with utility because nobody seems to be going there yet. In terms of -- obviously, you mentioned the communications business, and that's the reason for the slowdown. Any color around growth either sequentially or year-over-year for the utility business in the balance of '26? And then bigger picture, just given the levels of demand that you see over a multiyear period for the utilities business, how should we think or how are you thinking about organic growth in the Utility segment over the medium term beyond this year?

Yes. Well, so on the com side, first, just that piece of it. We do see BEAD programs and line of sight to a few hundred million dollars that we're tracking in BEAD funding. There might be a little bit of a slowdown as programs switch to that BEAD funding. Overall, utilities, we're very optimistic, particularly around power delivery. We're seeing nice margin improvement. The demand side of that is very high. Customers are shifting their focus from distribution to transmission, substation. These are -- you saw the positive trend in backlog in our MSA movement, which is almost all utilities.

Last quarter, we had, I think, from memory, a $0.5 billion add and this quarter, another $1. 5 billion addition. So I think we see strength in that market. And again, it's another area where resources are tight. We're seeing customers that have current relationships with some of our peer set, and they're tapped out and they're looking for additional help and assistance. So I think we see organic opportunity with existing customers as well as business acquisition opportunities with new customers.

And then in terms of this year, just should we assume a normal seasonal cadence where Q3 is probably the peak and then kind of drops back down seasonally in Q4?

Yes. Yes, absolutely. That's what we're seeing this year as well, just like we have in previous years.

Okay. And then, Koti, I know you had engaged some third-party consultants and at least last update, they were still engaged to kind of go through the process with the remaining projects here. A couple of questions there. One, how much is the total expense from that expected in 2026? And is it your expectation that once these projects are done, you no longer need these third-party consultants to kind of be there?

Yes, Lee, it's compensation for one consultant. So it's insignificant to what we're talking about here. And the focus is really on the one project that has -- that completes at the end of the year. And that person, along with our leadership team was on site last week. So they're giving me sort of the weekly updates, but not a significant expense and very good investment of the skill set and expertise to give us better surety on hitting our milestones.

One more, if I can sneak it in. SG&A, you were commenting one of the, I guess, tailwinds is just lower incentive comp. Can you quantify that and then kind of give us a sense of incentive comp for the year or the variance year-over-year, just so we can understand what may be added back to next year's number?

Yes. I don't know that I have the exact number for the change in incentive comp this year. It's probably in the $5 million to $10 million range, would be a rough guess. And then just remember, the offset increased SG&A is a pretty significant amount of amortization related to PayneCrest this year that's driving it higher. And a lot of that will continue into next year, but it's noncash.

Your next question comes from the line of Adam Thalhimer with Thompson, Davis.

Also wanted to ask about the nat gas generation awards, the $1.4 billion. Two questions on that. Is it all Simple cycle? Geographically, where are those awards? And what does the funnel look like?

Yes. Yes, thanks for the question, Adam. These are all -- these all happen to be simple cycle. Most of the portfolio, as I said before, is simple cycle, and it's basically informed by time to market. I think we have a handful of projects that are combined cycle that are in the funnel, but not in backlog. And the geographies are Texas, Missouri, Nevada and various sizes of capacity.

And the funnel piece?

Yes, the funnel is very strong. Sorry, yes, funnel in that market has gone up. I think last quarter, it was a little over $6 billion. I think now it's over $8 billion...

$7 billion to $8 billion.

Yes, it's over $8 billion that we're tracking. Importantly, because the market is constrained in terms of resources, we're very, very diligent in customer selection and project selection. So we're very, very being -- remaining very disciplined in terms of risk posture and overall making sure our value proposition...

Okay. And then last one real quick. On the fiber side, you alluded to some big potential awards. How much revenue could those generate?

There's like $300 million or so in pursuits. We won't win all that work. But given the size of the portfolio today, I think we have aptitude for it to grow. The BEAD funding projects specifically that we're tracking, I think, amount to $300 million. As a business today, we do around $400 million plus. So it does give us line of sight to some projects. And there's the BEAD funding and there's also the fiber that interconnects data centers that's also a meaningful CapEx that we're trying to pursue. And this is how these data center clusters need to operate together requiring low latency. So that fiber spend is also something we're tracking.

Your next question comes from the line of Brent Thielman with Oppenheimer.

The pipeline of new award potential you talked about in renewables, are those more aligned with your traditional sort of markets and geographies? Is the company still kind of evaluating and pursuing newer geographies? And then, Koti, if you could just talk about like the risk parameters you've embedded in the pursuit process going forward for that piece of the business?

Yes. To the first part of your question, the answer is yes. All of our pursuits are in geographies where we have a resume, understand the labor posture, understand the jurisdictions having authority. And so very comfortable with those pursuits. And then the going forward from learnings from the past, it's to remain disciplined and not pursue work in areas or geographies where we don't have understanding of the local labor market or local conditions as well in terms of remaining disciplined on risk posture. I had mentioned before, I think it was in Q1, we did pass on an opportunity where terms and conditions didn't comport with our overall risk posture.

So that's really just a compass going forward to maintain that rigid discipline. But again, demand environment is very strong for our services. So we can be very disciplined and stick to our overall risk reward balance.

Okay. And then on PayneCrest, any strategic initiatives you're pursuing there now that it's a few more months under your ownership? I just I'm thinking along the lines of like a refocus of those operations away from any legacy pursuits that could be lower margin or something that doesn't align with your risk profile?

Yes. It's a good question, Brent. And actually, from our due diligence and then as we've done a couple of months of integration, it's actually the opposite. We want to make sure it's -- we call it a light touch integration and not getting in the way. They have been run historically as a conservative company and been very conservative in their approach and new acquisition of customers. Their exposure to the data center market, we like. It's not a majority of their portfolio. They have other industrial clients in their backyard where they have long-term relationships and good contract terms.

So it's a little bit of make sure they're integrated with the system. There are some revenue synergies in parts of our portfolio where we use subs, they have that expertise in-house. So we'll have the opportunity to bring them into the fold. But right now, I would describe it as a light touch integration and so far exceeding our expectations from performance.

Your next question comes from the line of Manish Somaiya with Cantor.

Ken, in terms of the EBITDA framework that you laid out, I get to an EBITDA of $282 million vis-a-vis the guidance of $275 million to $325 million. Did I miss something in terms of add-backs? Or are we kind of saying we're more comfortable with the low end and leaving room for upside?

Yes, it's the latter. We're just giving ourselves plenty of room to make sure we are comfortable with the numbers that we can make those numbers and potentially have some upside as we execute through Q3 and Q4.

And related to that, how should we think about the free cash flow framework in the second half?

Yes. Look, our forecast for the year was like $350 million to $400 million of free cash flow. I think basically, you can just subtract $200 million out of it. That's essentially the impact from the renewables projects. And so right now, we're looking at probably $150 million to $200 million for the full year.

Okay. So basically, a big catch-up in the second half, principally in the fourth, I would imagine.

Yes.

Okay. And Koti, I had a question for you on the telecom side. With BEAD funding moving to more technology-neutral framework, are you seeing customers rescoping projects away from fiber towards fixed wireless or satellite? Or is fiber still the primary opportunity in your core markets?

Yes. For where we play, it's fiber. And I think for us, yes, we're tracking the BEAD funding, but I also mentioned, Manish, the -- there's a lot of opportunity in the interconnects between these AI data centers.

Your next question comes from the line of Philip Shen with ROTH Capital Partners.

First one is a bit of a housekeeping one. Can you share what the backlog was for renewables at the end of Q2?

Yes, it was $2 billion.

Great. Okay. And then as it relates to back on renewables, how have compensation or incentive structures for project executives and estimators been adjusted, if at all? And then -- so that the more stringent risk/reward criteria are not undermined by traditional volume or booking-driven bonuses? And then what leading indicators do you think the Board and management will use in the next year to demonstrate that the new processes are actually improving bid quality and execution consistency?

Yes. And so Phil, there's discretion in compensation at my level. And what we've done is incent the project teams, in particular field leadership and some of their comp is cash, but some of their comp is also going forward in RSUs, restricted stock that vest over time. And theory there is we want them to be aligned to value creation that the company creates in project execution. And then I'd say for leading indicators going forward, the compensation mechanisms that are in place today do have both long-term mechanisms around value creation.

And so I think they're aligned from an accountability standpoint. I think from a go-forward standpoint, what we do with the field teams and deeper reaching and RSUs and stock ownership is a lever for us to maybe draw down a little bit harder driving forward.

And just to be clear, these are changes that have been made since the problems surfaced.

Yes. And what I was looking at there, Phil, in particular, is that some of these teams are -- were not the people that caused the problems. These are the people we're relying on in the face of adversity are now being so resilient and driving under the reforecast to predictable execution month-to-month, week-to-week. And so I want to make sure they're incented appropriately. So it's more along those lines around the changes.

Your next question comes from the line of Maheep Mandloi with Mizuho Capital.

Just a question on the renewables business, given the backlog visibility you have and potential for new growth on bookings this year and later next year. How should we think about the 2027 growth versus '26 or '25 compared to what you've said in the past?

Maheep, I'm trying to make sure I understood the question. Are you looking at revenue growth into '27 relative to '26?

Yes. And so I think what we said in an earlier Q&A there is that historically, we've grown exponentially in the Renewables segment. When I look at '24 to '25, I think it was $2 billion to $3 billion. '26 is a bit of a reset year. We're looking at second half of this year, and particularly Q4. The funnel for renewables opportunities is pretty strong. And where we sit at backlog and I look at burn and then we factor in what we're going to be potentially awarded, that will inform our '27 guide for the Renewables segment. At this time right now, just being pragmatic, we think it could potentially be a modest growth off of '26. But we'll give more prescriptive color as we see that trend in backlog.

That's helpful. And on the balance sheet side, I know you kind of talked about the -- in terms of the free cash flow and the renewables impact. But how should we think about leverage for next year and potential capital for additional M&A going forward?

Yes, I touched on this a little bit in my comments. We're at about 1.6x EBITDA right now. We'll trip up to probably a little under 2, I'm guessing right now in Q3. And then from there, we'll start declining back down, both based on debt payoff and EBITDA growth. I expect us to probably comfortably be back down to 1.5x by the end of the year and then over the course of '27 trend down to 1x again, which between that and availability on our revolver and our cash balances gives us plenty of capital to continue to support organic growth, to do opportunistic acquisitions and to the extent the Board wants to pull that lever to do additional stock buyback.

Your next question comes from the line of Joseph Osha with Guggenheim.

I had two questions. First, returning to the simple-cycle gas business. Obviously, that's doing great. One risk factor there that does pop up every once in a while is whether your customers actually do have those turbine slots secured. So I did want to check to understand if you've gone out and talked to your customers and made sure that, that process is derisked. And then I do have a follow-up.

Yes, Joe, I'll answer that. It is one of the criteria for us when we evaluate customers and project selection is that they're in the queue. And our relationships with those OEMs is pretty significant. So we -- in some cases, they're actually the ones that are making the market for us, they'll pair us with a potential client. But yes, we have visibility to that. And the other piece of that is purchase power agreements and seeing where they are in -- with respect to that piece of it, too.

Okay. So you're -- because there's a bit of a gold rush going on there at the moment, obviously, you're confident that, that pipeline has been derisked for you guys?

That's correct. Yes.

And we have -- when we do the limited notice to proceed with the client and building the project schedule, obviously, we have full visibility to the delivery of that piece of equipment. We're focused on the balance of plant, but we're definitely working with the customer and have line of sight to those -- the orders.

Okay. And then to return to renewables, sorry to ask yet another question. Just if I hear what you're saying, you've got this $2 billion backlog you're going to burn. It sounds like you're kind of reopening the funnel to booking as we get into the second half of the year. But just timing-wise, I mean, anything you booked late this year probably isn't going to start to burn until late '27, '28. So it sounds like I heard what you said earlier, moderate growth, but it sounds like the business doesn't really kind of get back on to a more normal cadence relative to history until 2028. Is that a fair observation?

I don't think -- I would disagree, Joe, with that observation. I think we're probably being a little bit conservative. We have seen some projects move to the right. And so predicting that timing is probably weighing in. I think when there is a significant funnel for us and irrespective of timing, I think it shapes well for us trying to predict in each quarter when we land this stuff in backlog is sometimes a little tricky. But given -- and I looked at historical quarters over the last year, where we sat with backlog and what we burned, and there is a general track record there, which is why I think we're looking at the opportunity in Q4. And as we sit at the end of the year, it will give us a good projection on '27.

Your next question comes from the line of Adam Bubes with Goldman Sachs.

This is Anuj on behalf of Adam. So in light of recent cost overruns in renewables, should we expect any changes to the contract structures or targeted margin profile on future projects?

No. I think what I said before is just more rigidity and discipline in risk identification and the contract terms we take on. So that's about the pursuits, making sure we've done good discrimination of the portfolio and not got into geographies that are uncertain for us or we don't have experience. So that's that piece. And on the contract terms, there are some learnings. We'll probably be stricter in some terms in the contract from a language standpoint that allow us more favorable -- more favorable climate for recovery if we've given reasonable methods for -- from a construction execution approach. But nothing specific to comment here. It's probably just more discipline going forward.

Got it. And on the Energy segment, so pretty strong bookings in this quarter. So can you please parse out the awards by end market?

Could you repeat the question? I didn't hear it.

So on the Energy segment, bookings were strong in this quarter. So I was hoping if you can shed some light on the awards by different end markets within the Energy segment?

Yes. Thanks. I got it. Yes. So it was $3.9 billion was additional backlog, $2.4 billion of that was energy, $1.5 billion utilities. Your question is of the $2.4 billion, how does that break down? $1.4 billion of that was in the gas power generation, which we talked about. They were mostly -- those are all simple cycle projects that were awarded. The balance, the $1 billion is comprised of about $450 million from PayneCrest, some of that backlog came with the acquisition, but importantly note, they had $250 million on top of that they booked in the quarter. So nice significant contribution from PayneCrest. And the balance would be in the rest of energy, industrial, including pipeline.

Your next question comes from the line of Jerry Revich with Wells Fargo.

This is Andrew Azzi on for Jerry Revich. I just wanted to hone in. It sounds like there's some modest growth baked in for the base case next year. With the full year guide and all the 2027 commentary so far, I'm trying to think what that might imply for Energy segment margins off the 4Q exit rate and what might be like a reasonable starting point for '27? Any color there would be much appreciated.

Yes. Look, on the margins, we will have the last of these projects, renewables projects done in Q4. So our full expectation as of right now is that the cadence for 2027 is going to be in that normal 10% to 12% range that we previously occupied.

Was there a follow-up? Or is that it?

So sorry, I was on mute. A lot of technical issues this call. So I think last quarter, you guys referenced something like $1 billion in renewables verbal awards and close to $3 billion expected to sign in the second half. Would love to kind of get an update on that and see how much of that's converted or what's subject to close and how that might translate to next year's revenue?

Yes. I think it was $2 billion, not $3 billion. And that cadence is -- we're still on track. I think we mentioned kind of $1.5 billion to $2 billion, just as things have kind of moved around a little bit. And as we mentioned in the call -- in our scripted notes, I think most of that's going to be in Q4 this year.

And we did have one in Q2 that was a couple of hundred million dollars.

We have reached the end of the Q&A session. I will now turn the call back to Koti Vadlamudi for closing remarks.

Thank you, and thank you all for joining, your engagement in Q&A. I want to close by thanking our employees, the men and women in the field that are on behalf of our customers, driving execution and really pleased with the quarter's trend in backlog and looking forward to engaging with you all going forward. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

All right. Good morning, everybody. This is day 2 of the JPMorgan Natural Resources Conference. My name is Mark Strouse. I cover clean energy and power infrastructure at the firm. This next session is with Primoris. So we've got Koti Vadlamudi, President and CEO; and Ken Dodgen, CFO. Gentlemen, welcome. Thanks for coming.

Thanks, Mark.

So I imagine there's a lot of questions in the audience. I promise you we will have plenty of time. Koti, maybe let's just start with kind of the elephant in the room, kind of the press release that you guys put out on Monday. We'll come back to the gas business, but maybe starting with renewables. Just kind of give us an update on that press release.

Yes. Thanks, Mark, for the opportunity of hosting us. And -- so I guess what I'd start with is, first, and I said this in the press release, very disappointed in the results and in a short period of time, a fairly dramatic revision to the guidance. What drove the changes was as we remobilized site, encountered field rework, remediation, weather impacts that manifested itself in cost and productivity impacts that previously were not forecasted. With those changes, had to take some accountability measures and previously announced a leadership change. With the leadership change also utilized the expert of an outside consultant with 50 years' experience to do a review of the portfolio. I suppose one silver lining is that we had previously indicated it was 6 projects in the portfolio that were distressed. That is the case as a result of the review.

It is ring-fenced to these 6 projects that came into the portfolio circa 2024. So it remains those 6. As we indicated in the press release, 2 have -- we've satisfied our obligations and hit substantial completion. One will hit the same milestone substantially complete in a few weeks. And the 3, the remaining 2 will finish hit substantial completion in mid-September, and the last one is tracking for the end of the year. So we are very focused on now the 4 remaining projects in the portfolio and looking forward to achieving those milestones and then putting them in the rearview mirror.

Okay. Great. Thank you. So I think the obvious question is, I mean, how do we all take comfort that things don't get worse or expand from here? I mean I do -- you go back to the 4Q call and the 1Q call, I mean, there was confidence then that things were ring-fenced, but now you bring in the third-party expert. Just kind of maybe talk about the approach to guidance that you've taken, how conservative you've been here.

Yes, you bet. And of course, again, very disappointed that we had to, in a short period of time, revise guidance downward. But when it was -- when we saw the indication that the reforecast was going to drive a different number than we previously reforecast, -- we did, again, made the leadership change with the leadership change and the outside consultant did a deeper review of the estimates to complete, not just on the 6, but the entirety of the portfolio. So they did a review of the physical progress percent complete. They looked at the productivities to date. They looked at the craft labor ramp.

They looked at the milestone schedules and matched all that up to inform the quantum of effort that was left to go. And that effort then led to a review of the SG&As, the business funnel. I should mention that the impact that we're talking about largely is the margin erosion. There is some impact to deferral of projects that were slated to start and they've moved a little bit to the right. So there is some impact from that. But we tried to holistically look at the entirety of the portfolio. And the rest of the business outside of renewables were static.

So the change is focused on primarily in renewables. So we feel confident. We did put some cushion to give us further confidence that we'll hit our revised guidance and very, very focused. I have the consultant still in doing his work and sort of focusing his efforts going forward on the remaining -- it's really 3 projects because the third one will hit substantial completion, but really focusing on the other 3 and making sure we hit the milestones going forward.

Is there one project that was particularly larger or more kind of detrimental to earnings than the others?

Yes. There's the one in particular, and it's the one that has the least maturity in terms of field and the one that we [ removed ] this late spring, and that's the one that's slated for completion at the end of December, a large amount of the revision was in the estimate to complete on that project. The good news is that we have a really strong -- we've upgraded our -- not just the leadership that I previously talked about, but we have a field superintendent there that's one of the strongest in the team. He's directing the workforce.

We have a big -- in front of us, we have the summer months where what was plaguing from a weather standpoint and impacting productivity. We're looking forward to a little bit more inertia and having good progress percent complete in the summer months. And visibility so far shows that we're turning things around. So giving us more confidence with the additional scrutiny.

So I think all of these 6 projects originated in the second half of '24. I mean what was unique about that time frame? Was there kind of a management change? Did you change your approach to contracting? I mean I don't know, talk about that. And then for the projects that have been originated since, if anything has changed since those?

Yes. I think the way I would characterize it, and it's pre my tenure, but I did ask a lot of these questions. And in -- as that business was growing at a pretty good clip, in 2025, we hit a peak of nearly $3 billion in revenue. So a lot of projects happening concurrently. 2025 was also -- we saw some acceleration. A client came to us and wanted to do 2 projects in parallel that were supposed to be staggered.

So it sort of contributed to this sort of inflated burn rate and revenue. In that 2024 time frame where these 6 projects came into the portfolio, and I'm not using the word bid because these were negotiated awards. It wasn't a case where the team was trying to underprice somebody to get the work. This was client relationships that informed and at their behalf said, hey, in some of the locations, we hadn't -- we don't have a track record and didn't know the labor force very well or the jurisdictions having authority. But despite those risks, the team thought they had those captured and the client relationships suggested, hey, can you help us and we went there.

So I think there was probably a little bit of risk reward balance that was underappreciated. Terms and conditions weren't terribly different than what we have in place today. I'd say there's a little bit more -- there's a fair bit more rigor in staying disciplined on that risk/reward balance. I think I noted previously in a forum in Q1, we had an opportunity with a client. It was a couple of hundred million dollar engagement. We were the selected -- #1 selected firm to do the work. We turned it down and declined it on the basis that the terms and conditions were too risky for our risk posture.

So I think there's a lot to be in staying -- remaining disciplined in what we bid and no bid. And then in addition, in 2024, we added a lot to the indirects. I talked about the steep ramp in the renewables business -- as they grew, they were slow to increase functions like project controls, preconstruction, estimating, project management. So that increase from '24 to '25 in the functions I described was a net increase of 40% of the revenue. So significant adds to leadership in terms of giving more predictability and execution in the portfolio.

And then I'd finish by saying when we did this exhaustive review of the projects to give us the conclusion that it is just the 6 projects that are ring-fenced. There are other projects in the portfolio that are earlier in their stage of execution. We feel very confident that -- and we're doing a review to make sure we have the right project leadership in place, but it's a little bit more of a proactive measure just to make sure we don't have any other surprises. So there are things that are happening that are informing upgrades to teams and making sure we have the right reviews and processes in place to give us more predictable execution.

Okay. How committed are you to the renewables market over time?

I did -- given some of the changes, Denver is sort of our headquarter center of gravity for our renewables business. Over the last couple of weeks, I've spent a fair bit of time there doing town halls with the team, meeting with senior management as early as last week, I did a funnel review. funnel is what we call our pipeline of opportunities. We have a pretty robust CRM tool that we use to track opportunities and pursuits. That totals over $15 billion, which gave me an indication the market is really strong. We went line by line by customer, by opportunity to make sure we're how we're synced up from an executive standpoint with the client relationships.

And that's a proactive measure given that we've made some changes. We want to make sure that we've got good solid client relationships in place. So I walked away from that with a very, very deep conviction that the market is very strong. We still have a very strong footprint in the business, and we'll build off that. So -- and I said that to the team, and it was about committing to that group that we remain a big player in this space.

We've enjoyed 14 gigawatt hours of installed capacity in this space. So we're a well-known player given the $15 billion-plus funnel, which is not just a market outlook, that's discrete opportunities that we see. We won't go after and win all of that, but it does give me confidence that we should stay in that market, and we have the talent to bid, win and execute in that space.

Okay. Can you talk about go-forward bookings? Are you kind of purposely pulling back on bookings until some of these issues are fixed? Any comment on 2Q or fiscal '26?

Yes, good question. And we're not artificially restraining in terms of what we're putting into backlog given the funnel and the opportunity and line of sight to projects, I would say we are being very disciplined. I go back to the engagement that we decided not to sign, and that was remaining steadfast on the risk reward posture. The market is strong, so we should be sensible and positively discriminatory in what we put into backlog. So we'll be committed there and use that as a filter, but we're not artificially restraining growth. I do think as the projects come off the -- come out of our backlog, a lot is in Q2 in terms of margin erosion given one project significantly taking some degraded margin.

So we're looking forward to restore the margins in quarters as those projects come off the books. It is -- the market is a little bit back half weighted for us from a calendar year standpoint, the renewables team. We always thought Q1, Q2 would be a little bit lighter, but see a couple of billion back half of the year, which will set us up well for 2027.

Okay. Yes. On that point, I mean, I know you're not going to guide to '27, but you've taken down the numbers for '26. Do you expect just general growth next year in this business?

I think it will be modest. I think, again, in the press release, we talked about a $2.1 billion number for renewables for 2026. I think, practically speaking, 2027 will be a modest growth from that, flat to modest for 2027. But the market is there. And given back half of the year, the bookings, which we always knew we were going to be a little bit weighted that way, we think we're set up to drive better margins given that these projects will come off the books and feel confident going forward that, that's achievable.

Okay. All right. Now going back to Monday's press release, there was also an update on the gas generation business. Can you just give us more color on what you're seeing there?

Yes. And we've previously talked about our overall portfolio, and I think Primoris did really well in shaping what end markets we were playing in. Gas power generation driven by this strong secular trend for need for power to satiate in large part, AI data centers, but it's also onshoring of other manufacturing. And so this need for power and our skill set and ability to deliver that in a self-performing EPC turnkey solution, I think, is needed. And so there is -- it's not a super crowded space. I mean you look at the players that are out there that have the wherewithal to self-perform on an EPC basis.

So I think what you saw in the positive trend in backlog is what we previously narrated as the opportunity was in front of us from a gas power generation standpoint. I do want to point out here from a risk standpoint because this question has been asked before is, given the size of those projects, from a risk standpoint, what pitfalls might exist that is there some learnings from the portfolio. And I do just want to point out there, the execution approach there is far different than what we do in renewables.

We start out open book. It's a reimbursable contract with the client. They'll give us a limited notice to proceed to enable us to do early long lead -- order early long-lead equipment. We'll sufficiently progress the engineering to enable us to do detailed material takeoffs. As we buy down, we know with some level of precision what the cost estimate is going to be. We work with the client on the investment decision, both for cost and schedule. And then only then when we're at that sort of mature engineering scope defined phase, do we lock in a fixed price lump sum guaranteed maximum price.

So it is a fairly risk-averse profile. And given the amount of work that's in the market, we think the way we're approaching it is a sensible approach, and we'll positively discriminate again on the funnel of opportunity where our execution approach aligns with the client. So we were excited to announce that. There were a couple of other areas in those bookings, industrial as well as I'll maybe provide a little bit of color on the data center market. But that's a booming market. You've seen the hyperscale investments in that space that are buoying the CapEx in a big way. And so with the acquisition of PayneCrest, we are seeing a lot of opportunity in the hyperscale space.

They have a really good resume with one client in particular, in the geographies where they've already been. They're utilizing craft labor force and have work -- subsequent phases of work. So they're essentially getting in a position where they're sole-sourced work with that customer. And then they have other industrial work in their backyard that's also opportunity for them to grow. So we're only a little bit over a month into the integration, 1.5 months into the integration with them, but showing really positive trends for growth and excellent cultural fit.

Okay. Are your gas gen projects simple cycle or CCGT?

Most of the projects are simple cycle, and it's not -- our competency is in all types of scopes. So we do have a number of opportunities, I think 3 at the moment that are combined cycle. They're larger in scale, so our fee and engagement will be higher on the combined cycle. But the vast majority of our pipeline is informed by Simple cycle. And if I didn't say it here, we don't put the turbines on our paper. We're not procuring that or warranting or putting performance guarantees around that. That's owner furnished equipment. We're a necessary stakeholder in building the schedule together. But from a risk standpoint, we don't think it makes sense for the owner or for us to take that on. So that's not part of our fee engagement. But to your question, the vast majority is in the simple cycle area. And most of that is driven by time to market. Everybody just needs these AI data centers, the developers are just looking for how fast they can get power, power delivery.

Yes. Okay. Can you talk about the transmission business, how that's going? I think you've got some new customer relationships there.

Yes. Another great secular trend for us, and we're well placed. The power delivery piece of our utilities business is largely MSA driven. I'm pointing that out because, again, from a risk standpoint, it's lower risk. The MSAs are informed by multiyear relationships with the client. They have -- some of the utility clients have CapEx cycles that are quite -- are longer compared to others. So we have good visibility in terms of resource planning and capacity. I think the bias is going from distribution to transmission substation. That's a nice portfolio mix for us because it is healthier margins in the distribution side. It doesn't mean we can forgo the distribution side. You have to do that work to have the ability to pivot to that other transmission substation.

But it is a nice trend in the backlog. We have current customers that where we've been working with them for a very, very long period of time. They, in some cases, do the engineering themselves and we're the construction partner. They know based on the volume of work they have to do, they're switching to an EPC model. So we're already in discussions with the client about how we do a turnkey delivery project execution model for them. And then we have some new customers that are seeing their overall supply chain tapped out. And so they need to explore other options, and we have the requisite skill sets to bring our expertise to them.

So seeing a nice organic play there and really excited about the opportunity to grow in that space. And really consistent with -- you've got power generation, you need to be able to move the electrons. So that space, the substation build-outs. And then though we haven't talked about it, it's also the natural gas that you have to move to enable to fuel up the turbines. pipeline.

Yes. Okay. Thank you. Any questions?

In terms of the problem projects that you're dealing with, thank you for a lot of color on that and what went on and how you're resolving it. Could you also talk to what the cadence of the rest of the year would look like? The guidance was helpful. But in terms of margin erosion, you mentioned 2Q will be the bulk of it. But then there are still a few more projects. So when should we expect sort of to have these projects in rearview?

Yes. So you're right to characterize the bulk of the impact is in Q2. And maybe I'll let Ken give a little more color on that as it progresses through the year.

Yes. I mean what it looks like right now because of the write-downs will all be in Q2. Q2 will most likely from an EBITDA perspective, be about breakeven, and then we'll be sequentially growing from there. We did $60 million of adjusted EBITDA in Q1. I expect Q3 will be somewhere in the $80 million to $100 million range, and then Q4 will be a little bit north of that in order to get in that EBITDA range that we talked about. And then with respect to with the projects themselves, most of them will be burning it -- of the 3 that will be remaining in Q3 and Q4, will be burning at 0 gross margin. The other 2 will just be revenue burned at very low gross margin.

I think in the guidance cut, there's a revenue cut. If I understood correctly, that's due to the project pushout. I just want to confirm that has nothing to do with the 6 projects. Then on top of that, obviously, we always know the project pushout has been a constant theme in the renewable space. It happens all the time. So I wonder how do you think about that going forward?

Do you want to just confirm that is the case.

Yes. And it's not uncommon for this to happen. This is a little bit of a unique situation because of everything that's happened over the course of the past year to 1.5 years with the tariff interruption, the OB3 that was passed last year, the treasury regulations that came out and then now getting clarity on what the 48E requirements are with respect to labor.

So what it's caused is not necessarily any problems with us. It's our customers now having to either resequence projects based on panels and other things like that, that are safe harbored or redesign or reengineer projects in order to get the best use out of the safe harbor panels and make sure that we collectively between our customer and ourselves, have the right labor force and have everything set up properly so that they will get the best benefit from the tax credits. It's a bit of an unusual situation that we've seen in the entire time that we've had our renewables business and been building these. We've never seen anything as disruptive as what we saw over the course of the past 5 years. We were fortunate it didn't have much impact last year. The residual effect into this year is what's driving that revenue push out, though.

So just as a follow-up, obviously, it's out of your control. So I just wonder, going forward, how would you factor those into your guidance or your communication with the market?

I think based on the client relationships and we are knowing what sort of the move -- what's making them move, Ken talked about 48E, tax incentives, if they have a PPA that's in place, the timing of all of those things and the -- how much in order to maximize the tax incentive, what do they have to do? Do they have to reengineer that kind of stuff. So I think what informs from a timing standpoint when they hit our portfolio, it's the customer relationship piece. It is the hardest part for us, but we do it as a business, not just in renewables, but we have to predict when things time in order to reserve capacity so that we have the field resources in order to do the work. We largely get it right. That's why we're relevant in the space, but we are -- we do have some dependency with the customers, and that's why we're -- we talk with them regularly.

Sure Is there any concern around the data damages given the timeline of the projects and so is that baked into the current guidance? Or is that something.

Yes. And I'm presuming it's on the 6 projects you're talking about. Yes. There are -- all the contracts do have milestones that impose liquidated damages, and we took a view on those conservatively to bake that in. But we're progressing them so those don't get imposed.

Just to make sure I have the numbers right. Is it $300 million of revenue push out this year. But I think you took down the guidance by $200 million. So what's the difference there?

Yes. The offset is just the timing of burn of other projects that are actually going to make up another $100 million of to that. So the project pushouts, though, it's a combination of those -- the gross margin not being there because of the pushouts as well as a little bit of under-absorption of indirect and overhead. We're hoping to rightsize that over the course of the balance of the year, as Koti mentioned earlier, and maybe get some of that back. But as of right now, we haven't built that into the guidance reduction.

Can you talk about the kind of plans with the buyback with the stock pulling back like it has?

Yes. So we did announce and we had a previous authorization for $150 million in stock repurchase that the Board authorized. We implemented in the quarter $50 million of that. And given the valuation today, we do think that's a lever that we'll deploy. And so we'll provide updates as we go there. But that, I think, given capital allocation strategies that is probably increasing priority given where we are.

Last chance? Okay. We can wrap. Koti, Kim, thank you so much.

Thank you all.

Thanks, Mark. Appreciate it.

Welcome to the Primoris Services Corporation First Quarter 2026 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. Welcome to the Primoris First Quarter 2026 Earnings Conference Call. Joining me today with prepared comments are Koti Vadlamudi, President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer.

Before we begin, I would like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook only as of today, May 6, 2026. We disclaim any obligation to update these statements, except as may be required by law.

In addition, during this conference call, we'll make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investors section of our website and in our first quarter 2026 earnings press release, which was issued yesterday.

I would now like to turn the call over to Koti Vadlamudi.

Thank you, Blake. Good morning, 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 2 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 the second half of 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 risks 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 concluded within the next month, and the final project scheduled for completion in the fourth quarter of 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 and consistent track record of delivering profitable projects supported by our industry-leading safety and quality performance.

I'll now provide additional comments on our segment performance for the quarter. Starting with the Utilities segment, we had a 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 the first quarter of 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 the indirect labor costs. Communications continues to see increased opportunities in fiber associated with data center build-outs, 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 the 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 in 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 trouble 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 can deliver in these growing markets.

While the majority of PayneCrest 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 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'll turn it over to Ken to discuss our financial results.

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 Utilities 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. This was partially offset by growth in pipeline revenue.

The Utilities 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. This was due to lower revenue and margins in the Energy segment, partially offset by higher revenue and margins in the Utilities segment. Gross margins were 8.6% for the quarter compared to 10.4% in the prior year.

Turning to the segment results. In the Utilities 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 3 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 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. This 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 onetime 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 the end of 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 type 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 from year-end, 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 impacts 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 per share and our adjusted EPS to be between $4.80 and $5 per share. 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'll turn it back over to Koti.

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 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 the second half of 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 eBOS businesses. Our Utilities 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 up the call for your questions.

[Operator Instructions] Your first question is from the line of Lee Jagoda with CJS Securities.

So I guess just starting with the project issues. I guess, versus prior guidance, if we take out PayneCrest, it's about $110 million EBITDA reduction at the midpoint. Can you sort of put that $110 million into various buckets and bridge the gap for us? And then, any help we can get in terms of how we should think about the cadence of the year, particularly in Q2?

Yes, Lee, the $110 million, it's kind of in 3 buckets, if you think about it. We talked about the revenue pushout and the lower revenue in Renewables. That's about $400 million for the year. And so at kind of our normal gross margins, that's about $45 million, give or take. Then the cost overruns on the jobs in Q1 is about $35 million to $40 million of it. And then there's 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's one job that will linger into Q4, but that's about it. So those are really the 3 buckets.

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're back in that 10% to 12% range for Renewables.

Got it. And then just one follow-up. Just in terms of the renewable revenue forecast, it looks like the new forecast is down about $700 million year-over-year and versus our prior expectation of around flat. Can you give us a little more detail around what's causing the magnitude of the decline and kind of talk to what Renewables backlog is today? Because my assumption would have been if you have the backlog, then why wouldn't you be able to perform the work?

Yes. Look, $300 million to $400 million is the pull forward of that one project that we talked about all last year, one project that was supposed to be in '26 and got pulled forward to '25. And then the balance of it, frankly, is mostly just continued ripple effects 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 the end of '25. But unfortunately, clarification on what's 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've been verbally awarded and should sign in the next 2, 3 quarters.

Koti, I don't know if you want to add anything.

Yes. Yes, just on those verbal awards, we've got verbal awards of $1.1 billion and second half of this year, another $2.8 billion that we'll sign. So the end market in Renewables is still very strong for us and have optimism for growth going forward.

Your next question is from the line of Adam Thalhimer with Thompson, Davis.

Hoping you can update us -- you mentioned Power Delivery a few times in the script. Just kind of bring all that together and talk about growth rates and margins in that segment.

Yes. I'll just talk about the end market. We've had articulated in our growth strategy before that we felt strong secular tailwinds in Power Delivery, specifically around transmission and substations. So we're seeing some anchor clients. These are customers that do capital planning on a longer cycle. I would say we're -- what you're seeing in the MSA backlog improvement is a reflection of these customers' CapEx.

And then I'll let Ken talk to the margins.

Yes. Look, the growth cadence, I think, is still similar to what we've seen in the past. We had a good Q1 that's reflecting that growth cadence as well as just some good weather in the quarter. And the margins are -- should be in line with what we've expected. And with some storm work, we could even end up in the upper half of our 10% to 12% range for the year.

Got it. And then, Koti, second one for me would be just a question on PayneCrest and how you might want to change their mix over time. And I think you said something about a potential hyperscaler opportunity there.

Yes. Thanks for the question, Adam. So first, we're excited about welcoming PayneCrest to the Primoris family. Often the talking points are about the data center exposure, which we're certainly excited about, how they can bring their expertise inside the facility. So a great opportunity for us to expand. But they also have their industrial facility exposure in their market, and the skill sets are fungible. So we're really excited about their opportunity to grow. With a particular hyperscale client that they've 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 excited about the opportunity for growth there.

Our next question is from the line of Sean Milligan with Needham & Company.

I think you walked through on the Renewable side, the kind of pipeline that you're seeing. But I was hoping you could do that on the gas side, too, because I think in gas power, previously, you talked about pretty aggressive growth this year, like, maybe 50% this year and kind of the same thing next year or doubling that business to next year. So any commentary on the pipeline of bids you had outstanding and, like, kind of, conversion rates there would be helpful.

Yes. Thanks for the question. And yes, we still have a deep conviction on the end market with gas power generation. Last quarter, I think we articulated the funnel. That overall funnel is actually up. And we're talking about verbal awards because we see near-term visibility to adding the backlog.

I wanted to speak specifically in this end market that we have nearly $800 million in verbal awards that are imminent to be added to backlog. And in '26, that funnel is an additional $3 billion that we're pursuing in 2026. If we -- if I don't restrict that to '26, if I take it in perpetuity, that funnel is nearly -- over $7 billion, up from $6 billion that we talked about last quarter. So really, really strong end market for us and excited about the opportunity to grow.

We did see some project starts slip to the right. They haven't been canceled, just delays, and that's due to clients doing more due diligence on cost and addressing investment decisions.

Okay. That's really helpful. And then I wanted to circle back on the Renewables piece. So I think the question earlier was the expectation was kind of $3 billion in revenue this year, now at $2.3 billion. I understand the pushouts. But the pull forward from last year, is that -- like, was the expectation previously that you were going to have new awards to fill that pull forward? I'm just trying to understand the gap with the pull forward from last year and not having that, like, the $700 million variance in the Renewables business.

I think -- yes, that, good question. I think we -- with the pull forward last year, we had expected this year to be sort of flattish given that sort of move to the left of all those project accelerations. And what we're seeing now is some project delays slip to the right. We had some projects that we thought were going to be awarded that just moved that straddle over the quarter. But I would say we expected going into the year to be flat. And now what we see is it's going to be a little bit down based on portfolio shifting to the right.

Overall, that market, though, I want to emphasize, is -- the funnel we see, '26 and beyond, right now, is over $15 billion. So still a very, very strong end market for us to attack.

Okay. Is there -- and then just like confidence in the guide. I mean you've obviously guided Renewables a lot lower this quarter. I'm just kind of trying to understand the audit process there with the projects you had and then like maybe things that could go right against that guide, like if it's picking up more storage business now that you have some capacity or something with that aspect that could go right for your guide?

Yes. I think we feel confident. We've risk-assessed the portfolio. We have identified the quantum for the projects that are in this sort of distressed state. So we feel confident going forward. There are always risks. I'll mention the projects. Last quarter, the client program that we identified the subsurface conditions with, those are now behind us. We achieved mechanical completion or just doing some punch list items. On the ones going forward, many of them reached substantial completion in the next few weeks and the balance one project finishing at the end of this calendar year.

So we feel confident we've done appropriate risk assessment of the portfolio and really excited about the opportunity of winning further backlog. And I'll reiterate again the changes we made in terms of preconstruction planning, project management, project controls and additionally being better about discrimination around the geographies where we pursue work, all give us confidence in achieving our targets -- forecasted targets.

Our next question is from the line of Julien Dumoulin-Smith with Jefferies.

A couple of things to follow up on what's been responded here. First, timing-wise, I mean, look, just to come back to the $1.1 billion of verbal awards and the $2.8 billion that you said you'll sign. When you say it's getting pushed to the right, how would you set expectations for what you're seeing in kind of an FY '27 context? I mean, is this kind of a shift out of some of the $700 million going to -- such that you get kind of an unusual jump in '27? Or how would you just set expectations, time line-wise, for some of those awards to be recognized in '27, '28?

And then at the same time, if I can come back to the question, the core $110 million and the way that you broke down the impacts from the Renewable business. Can you speak a little bit to what you've done to mitigate the impacts and speak a little bit more to what those impacts are? Is there a consistency with a single counterparty or geography that really stands out? If you can give us a little bit more details about just where these issues manifested themselves? Why now, maybe said differently?

Yes. Thanks for the question, Julien. Let me -- I'll take it, and I'll let Ken additionally weigh in. I think on the Renewables portfolio, overall, is a go-forward, some projects that have slipped to the right. What gives us confidence is that I talked about these verbal awards of $1.1 billion. We're still working with our customers and in many cases, helping them with the cost estimates and the preconstruction planning. So have really good visibility to near-term portfolio. So I think it sets us up very well for second half of '26 and into '27.

I would also talk specifically about an emerging growth trend in the BESS portfolio. Within the Renewables segment, our BESS offering, this time last year, if you took a megawatt hours, our funnel was about 18-ish megawatt hours. That now is more than quadrupled. So we see a business there with an aptitude to more than double going forward. So it gives us renewed confidence. Despite the slip to the right, it does tee us up very well for the back half of '26 and into '27.

On the question of the projects and the gap in the delivery, these were -- all of these were projects that were bid in 2024. And I would say the common themes here were under-appreciation of risk. We previously talked about the geographies in -- geographic. We have places where we're more familiar with the labor market, and it gives us an indication of productivity issues. We have geographies where we have a better appreciation for permitting, whether it's soil disturbance or storm water runoff protection. These are things we, probably, in 20/20 hindsight, went to areas where knowing what we know now, we'll use better discrimination going forward.

And I think the additions in project leadership with respect to preconstruction planning, project management and project controls will inform risk and risk mitigation going forward. So we feel confident that these measures will remediate the issues that plague these particular basket of projects.

Got it. And then just if I can flip over to the gas side of the equation, the gas gen. I mean how are you thinking about coming back later this year, presumably in terms of providing like a more holistic update on a multiyear view. Again, I get that the world has changed a little bit for you guys. But how do you think about the prospects of providing that side of the equation? And specifically, what do you see the ramp on the gas generation side looking like through the decade here? I mean some of your peers are providing multiyear views this year on what they see as possible. Obviously, with the renewable roll-off as is abundantly clear, some of your peers are pivoting rapidly in the gas gen space and seeing an uptick into the end of the decade. I'm just curious how you guys and when you guys intend to come back with a little transparency around that. And what...

Yes. Sure, you bet. And just more broadly speaking, we're on a cadence of doing a 3-year strategy. So we're refreshing that strategy as we speak now and look forward to announcing Investor Day where we'll look about our targets for '27 through '29. The gas power generation portfolio and our experience in this is an exciting part of the portfolio and very dynamic. Some of the programs that we're currently talking with customers are quite large. I have a CEO top-to-top next week with a customer that's looking at a combined cycle plant. And potentially, these are multibillion-dollar investments, and the clients really, really are looking forward to a turnkey delivery to derisk the execution complexities. So yes, we'll look forward to Investor Day and providing more color around all our end markets, including the gas power gen portfolio.

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

So Koti, can I ask you a question on how we should reconcile the fact that you stopped taking new backlog in these challenged geographies in 2024 with the issues that you're facing in 2026 and whether those issues will be ring-fenced in 2026 and you can return to your $3 billion-plus growth cadence in 2027? I'm just trying to figure out how contained this issue is versus whether you're structurally abandoning new geographies that will slow the Renewables base going forward.

Yes. Good question, Sangita. I think overall market, what we see, and I described that sort of total funnel unrated or undiscounted of $15 billion, that gives us confidence that we don't need to chase revenue in areas where we see further risk. I would also emphasize we do have a lot of discipline about our risk posture. And even if we know a geography, we don't feel like we need to bend our risk posture to go after and chase revenue for the sake of growing. So just given the strength of the end market, our positive discrimination on where we go, we don't think it's going to impact our ability to hold and grow on a go-forward basis.

Got it. And then on the margin guidance for this year. I appreciate all the color on the revenue being $2.3 billion for Renewables. But how comfortable can you -- do you feel about your margin guidance? It's come down a little bit, not a whole lot, given that you're still working through these challenged projects through the rest of this year.

Yes. Ken, do you want to take that?

Yes. Sangita, I think the margin guidance reflects a couple of different things. First of all, the fact that as a percentage of Energy, Renewables is now smaller, partially because Renewables has shrunk a little bit, but also because the rest of our Energy segment is growing. So it will be a meaningful impact to Renewables margins, but not as impactful to the rest of the segment. In fact, I expect the rest of -- the entire segment as a whole in Q2 to probably be in the upper single digits as we continue to work off -- work this off.

But then in terms of confidence, I think it goes back to what Koti talked about a couple of questions ago, which is, we've worked through these. We have risked them. We've tried to evaluate them as much as possible and baked in as much incremental cost as we believe we're going to incur. And then lastly, I think it's also the fact that in a couple of cases, we've completed the jobs. We've got -- and then the rest of them will be completed, for the most part, within the next 2 to 3 months.

Your next question is from the line of Steven Fisher with UBS.

Just a follow-up on Sangita's first question there. On the Renewables side, I'm not sure if I heard you say how many projects and geographies are actually involved here. Curious of kind of what percent of the solar portfolio was represented there? And then I guess, how you're thinking about the balance there of -- now you have experience in these geographies, does it make sense to take those lessons learned and do it differently and more successfully in those geographies as we've seen some other contractors do? Or is there something specific to these geographies that just -- the risk has to go on to the contractors?

Yes. Thanks for the question, Steven. I think I'll just go backwards in your questions. I think on the geography question, we because of the strength of the overall market and our offering, we can be pretty judicious in terms of risk assessment and overall risk posture, to say where we're going to play. Should -- in any market, should we be brought -- should a core client bring us to an area, we will have those learnings to inform should we decide to go, no-go and go into an area. I think those will be -- we'll have best practices that will inform better execution going forward. But overall, because of the size of the market and our ability to grow in areas where we better appreciate risk, I don't think this is an area where it's going to detract from our ability to grow going forward.

And then overall, in the Renewable, I said we risk-assessed the portfolio overall. It's a small minority of the total portfolio of Renewables. Most of the projects that had this margin compression are nearing substantial completion in the next few weeks and one in fourth quarter at the end of this calendar year. So we feel pretty confident going forward that we've addressed the issues on these projects that were bid in 2024.

Okay. And I want to just follow up and stay with this topic of risk management. And I'm curious how you see the balance of risk versus reward in Utilities versus Energy. Because we've talked a lot about transmission and Power Delivery on this call and the opportunities there, but I think what might come with that is some new relationships, some new territories, new types of projects. I guess I'm curious how you see the risk versus reward in Utilities and Power Delivery versus what you see in the Energy side of the business? And how are you approaching that so that we can make sure we have a very stringent process at the front-end of the Power Delivery cycle here going forward?

Yes, great question. So I'll just speak to it. And from a leadership standpoint, we feel very good, both internally and with our customers in the Utilities segment. When we talk about the transmission and substation scope of work with Power Delivery, we have some anchor clients that have long-term relationships. They've been -- we've had seats at the table with them in terms of resource planning and helping them develop the execution model going forward. So a lot of planning and time spent with customers that were very intimate with their CapEx going forward.

We do also have some additional organic growth opportunities with new customers that are really, frankly, looking to Primoris because they're looking at their overall supply chain and need appropriate capacity. So given the demand environment, we can be very careful and judicious about our risk posture overall. And we don't need to sort of grow beyond our skis, look at the opportunity and make sure we're taking appropriate risk in those portfolios.

The other thing I'll mention is, training and development of people is a big -- is a key area for us. So we're looking at programs in terms of talent development and giving people the appropriate skills in their personal development so we can execute these appropriately. But -- and then the other thing I'll mention is that -- when we do lessons learned in project execution, those are shared across the business segments. So when one group, like in Renewables, saw that very steep climb in growth, they were able to share their execution challenges with both our Utilities segment leaders as well as our gas power generation as we see their growth. So lots of good learnings there for us to take forward.

Your next question is from the line of Philip Shen with ROTH Capital.

Another follow-up on Renewables. I know you've said a lot here, but I was wondering if you could share the root cause for the delays in the bookings. You've talked a lot about why the Q1 performance was weak, but the bookings were also light. And the reason why you said was due to project delays. But I was wondering if you could give us some of the rationale for the delays? Specifically, is the tax equity pause, did that impact things or the permitting freeze? And so would you expect those delays to sustain? I know you talked about book-to-bill being greater than 1x for the balance of the year for renewables. But could we see book-to-bill less than 1x in Q2, for example?

Yes, I'll start with that. And Ken actually talked a little bit about this. But first, I'll say, Q1, we always had expected to be a softer booking quarter for Renewables. The project delays are probably 2 buckets. One is certainty around the tax credits around 48E and customers looking at their scope on how they could build into their plan to maximize the credits under the -- that act. And then the second area is around just having more clarity and definition of engineering. And we actually think that's a good thing. I think maturing the design solution, so there's a little bit more predictability, one, in the cost; and two, in the schedule. So those are probably the main things that drove pushes to the right in the bookings.

Got it. And on that first point, certainty around the 48E, that is tied to the tax equity pause, if that's fair. Is that right?

That's correct. Yes.

Okay. Great. For my follow-up here, I'd like to, on the same topic of Renewables, checking with you on these challenged projects that you guys have had. You guys experienced some of the pain as it relates to margins and so forth. But I was wondering if you could share some color on the customer side of these projects. Was it also painful for those customers? Or did you guys absorb all the pain? Or did you share that pain with them? And would you expect repeat business, for example, with these customers? And how does that -- this kind of situation ultimately impact your ability to win new jobs?

Yes. Thanks for the question. And the answer is the project outcomes are very good for the customers. They're getting excellent first-rate facilities. So we met all our obligations on the scope. In some cases, we did have some entitlement. But unfortunately, even with that, we are -- we don't meet our financial targets on the projects despite having vested contingencies. And then on the client relationship side, very, very positive. Most of the work we do is repeat business with customers. So thankfully, there is strong credibility in the quality of the execution of the work, notwithstanding we underappreciated the risk in the quantum of effort that was required to do the projects.

Our next question is from the line of Jerry Revich with Wells Fargo.

Let me just ask on the power part of the business. Can you talk about what the multiyear pipeline could look like? Koti, I appreciate the comments that you mentioned on the funnel over the course of this year. We're seeing lead times for equipment broadening out into '28 and '29. So I'm wondering if you could just talk about what your pipeline for business could look like beyond the time period that you mentioned? And at which point, do you think we could be talking about your lead times extending into that time horizon?

Yes. I mean -- and when you say power, you're talking about the gas power generation?

Yes, that's right.

Yes. Yes, as I said before, I'll reiterate again, we have verbal awards of nearly $800 million in that end market. So I really feel confident with that and look forward to that adding to backlog. As I mentioned before, if I unrestrict the funnel in terms of years, we see -- we have visibility, line of sight to $7.1 billion of identified opportunities. So this is beyond 2026. So feel really good about the overall market.

With respect to lead times, one of the interesting things, because these investment decisions for these clients are so large, often, we will get limited notices to proceed so that we're able to start advancing, ordering of equipment, site work. And often prior to the client making a full investment decision, they'll keep augmenting our scope and moving it along. And in some cases, even when the program is super, super mature, we'll finally get the FNTP order for the full amount. So there is a reasonable amount of -- we're starting to realize revenue almost on the heels of the verbal and the limited notice to proceed. So it's sort of the cadence of flow here, is the clients don't get a lot of time. Once they feel like the program is going to go, they want to mobilize resources quickly.

Okay. And can we just shift gears to talk about the Renewables projects? Just to maybe put a finer point on it. How many projects are we talking about that have had negative adjustments? How many of them are in a loss position? Have there been, to the 2 projects we spoke about, geology issues last quarter? Have those projects had additional costs? And Koti, you mentioned you applied a rigorous framework to evaluate the whole portfolio. What number of projects are there in those same markets that are performing well for now, but you're monitoring because they are in the same markets?

Yes. And I'll just address. So it's 6 projects in the total portfolio that are in this margin compression scenario. 3 will complete in the next few weeks, 1 in the next quarter and then 1 in Q4. So we feel pretty good about risk assessment of the overall portfolio and our ability to hit those target dates. I will say, some of the conditions around risk and understanding now going forward are weather-related. And so we could see some productivity impacts overall, but we feel we've appropriately vested the right amount of quantum of effort in the estimates to complete.

Okay. And sorry, what was the revenue contribution of these projects in 2025, if you willing to share that?

Yes, we're not going to share that information at this time.

Your next question is from the line of Mark Strouse with JPMorgan.

This is Michael Fairbanks on for Mark. We're wondering if you could talk about maybe which geographies are causing the issues in these projects and then maybe some more detail on what really makes them different from the other geographies that you've historically operated in? And then also, are these problem projects with customers that you've worked with before? Or are these relatively newer customers?

Yes. So we're not going to call out the specific geographies. I think, earlier question about would we take the learnings and apply those to those markets going forward? So rather than box us in, I think we're going to record those learnings going forward so that we can apply them should we have an interest with the core client going there. But predominantly, I'd say the issues are around weather impacts. And in some cases, we mobilized a workforce, then had to demob and remob. And most of these clients -- most of the client contracts have conditions around scheduled milestones. So when we remob the -- if we're having productivity impacts due to weather, we're adding field labor, in some cases, doing work out of sequence, sort of exacerbates and creates more effort hours in the field, more dollars and sort of one thing piles upon the other. So I think going forward, we'll be much more conscientious. In some jurisdictions, the environmental requirements for ground disturbance, which were exacerbated by lots of rain, also informed the productivity and the labor impacts and the cost overruns.

So rather than box us in and precluding us from -- or having defend why we might go into geography down the road, I think we're just going to record those as lessons learned and be much more disciplined in getting our growth from areas where we're more familiar with, both the labor and the environment.

Got it. And then maybe as a follow-up, are you contemplating any changes to kind of contract structures or risk sharing with customers in Renewables going forward? Or is this more of a disciplined project and geography selection approach?

More of the latter. But I will say we remain very disciplined in terms of what work we take on and the risk posture overall and that balance. There was, just anecdotally, a project that we bid. We were probably the preferred supplier, couldn't come to terms around the risk and this quarter, decided to walk away from that one. And so we'll be very, very disciplined and overall, I think, the market allows us to be so based on our solution offering.

Our next question is from the line of Maheep Mandloi with Mizuho.

Just on the Renewable projects, curious if there are any margin impacts for projects for next year or '28 based on these learnings, the changes you have to go back and make on those bids or those projects there?

Did you say 2028? What was the question again?

For next year or -- like, for projects which were booked post 2024 are delivering in '27, '28?

No. Most of these are projects that were already bid and awarded from the 2024. So nothing in the future.

Your next question is from the line of Manish Somaiya with Cantor Fitzgerald.

Koti, I was focused on the Utilities segment where you did do quite well. Margins were at 9.8%. And then looking at your guidance, 10% to 12% gross margin for the year, I'm just trying to reconcile how do we get to that upside? What's the pathway to getting us to the high end of that guidance in Utilities?

Yes, I'll answer it, and then I'll let Ken additionally respond. But I think -- yes, I'm glad to take that question because sometimes I think the overall portfolio is overshadowed by some of these challenges we had in Renewables. But the Power Delivery portfolio within Utilities gives us a lot of optimism. You see the margin improvement. Some of that is on work that we're executing with current customers and seeing opportunities to be more efficient in project execution and applying those going forward.

We also have new opportunities with new customers, and we're able to, based on market demand, price [indiscernible] allows us to deliver that higher quality margin going forward. And then I think that also manifests itself. I talked about the client relationships. The MSA backlog went up nicely quarter-over-quarter in -- specifically in Utilities. And so it does give us some positive tailwinds going forward, again, enhanced by some of the improvements we've made in projects.

Ken, anything else to add on margin?

Yes. Look, Manish, the only other thing I would add to what Koti said is, there's a lot of dynamics here going on. Q1 and Q4 traditionally kind of shoulder quarters for us. So the fact that we were able to get out of the gate a little bit earlier in Q1 and do as well as we did, I think, is helpful to the upside. Our percentage of project work, which we've been talking about the past couple of years, has started to gain some traction. And so that -- to the extent that continues throughout the rest of the year, that could be helpful too. And then lastly, I mentioned this earlier, storm work and what type of storm work we get during the course of the year.

And then just as a follow-up, Ken, on the operating cash flow, which was negative in Q1, how should we think about the cash conversion for the balance of '26? And then maybe for Koti, I believe there's still $150 million share buyback authorization. So how should we think about that vis-a-vis deleveraging, further M&A? If you can just help us understand that.

Yes, maybe I'll take that. Go ahead, Ken, sorry.

Yes, I was just going to comment on the first part, the cash flows. Yes, look, the cash flows this quarter were pretty heavily impacted just by the timing of payables. And when we kind of did our check run, that was a $100 million swing this quarter, for example. So I think that's just noise in the grand scheme of things that will probably turn sometime in Q2 or Q3, depending on the timing of the end of the month relative to when we run an AP run.

The last part, I think, is driven by upfront mobilization payments from customers. So our BIE/contract liabilities were down this quarter sequentially because of the cadence of new contract signings. So it's that -- it's all those verbals that Koti was talking about earlier start turning into contract signings and mobilization payments over the course of the balance of the year, that will also drive cash. So a long way of answering your question, which is, we're still holding firm on our expectation for operating and free cash flow for the year. The Q1 impacts were, we think, just mostly timing, and that's it.

Yes. And as far as the capital allocation strategy, it really hasn't changed. We do have authorization for buyback at $150 million. We are making investments organically in the business to capitalize on the secular tailwinds in our end markets. We will remain very, very disciplined in terms of our leverage ratio and also look at opportunities that strategically -- inorganic opportunities that will strategically be a catalyst for accelerated growth. So we'll evaluate those and be opportunistic based on dynamics in the market.

Your next question is from the line of Adam Bubes with Goldman Sachs.

We've seen really strong data center revenue growth and margin expansion from the public electrical and mechanical contractors. Can you just talk about what the backlog and margin trajectory has looked like at PayneCrest? What does backlog growth look like on a year-over-year basis? And just how are you thinking about the growth outlook for that business over the next 12 to 24 months?

Yes. Well, first, in our existing portfolio, that's -- it's been a strong -- the data center related piece of our portfolio was really more around the enabling infrastructure, has been very, very solid. I think we booked over $400 million just in Q1 related to that type of work compared to all of last year that was something like over $850 million. So solid opportunity for us to grow in that market and where we currently play.

PayneCrest, of course, gets us inside the facility, and roughly 40% of their portfolio is directed towards hyperscaler data center development opportunities. From a revenue perspective, if you do that percentage, I think, that's about $112 million of the portfolio. And then as far as color going forward, we're building them into our plan, but you've seen the CapEx portfolios for hyperscaler customers that have come out within the last 3 months. It does give us a lot of optimism as they are a key electrical supplier for one of those hyperscaler customers. So lots of opportunity for us to see growth and over-deliver on what was baked into our valuation.

Great. And then how does the risk profile on combined cycle and simple cycle gas generation projects compared to your core industrial business? What risk parameters give you comfort in pursuing larger opportunities in those areas?

Yes. I think just overall risk assessment and project execution, the fundamentals aren't different. We'll do a rigorous review based on scope and maturity of design. The combined cycle opportunities are a little bit more complex and longer delivery in terms of schedule. And it's why I think we're seeing more single simple cycle opportunities just based on time line to market. But overall, from an execution delivery standpoint, we have a resume that includes both. And as I mentioned earlier on the call, have one very large opportunity in front of us with a customer that is looking for a turnkey delivery.

So in terms of risk assessment, there's nothing fundamentally different. We tend not to put the turbines on our paper, which is different from some of our customers. So it would drive our contract value down. But that said, we have very, very strong relationships in our overall supply chain with those OEMs. And often, they bring our -- they're part of our sort of extended business development team because their order book often -- when they get serious with a customer that's going to buy that equipment, they're trying to pair them up with an EPC. So there's a little bit more predictability in terms of the orders coming to fruition.

And at this time, I'd like to turn the call back over to Koti for closing remarks.

Yes. Thank you. First, I wanted to acknowledge and thank our employees at Primoris that enable us to do the critically needed infrastructure solutions services on behalf of our clients.

And lastly, I want to close out with despite these challenges that we had in Renewables, I want to emphasize overall the strong fundamentals in the portfolio. We feel we did a really, really intentional good job in shaping the portfolio towards these strong secular tailwinds in these end markets. We think that is setting us up for a really good second half and more importantly, '27 and beyond.

So thank you for engaging today and look forward to updates as we go forward.

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect. And the line is now clear. Thank you all so much.

Good morning, ladies and gentlemen. Thank you for standing by. My name is [ Parilla ], and I will be your conference operator today. Welcome to the Primoris Services Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call and webcast. [Operator Instructions]

I would now like to turn the conference over to Blake Holcomb, Vice President of Investor Relations, you may begin.

Good morning, and welcome to the Primoris Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today with prepared comments are Koti Vadlamudi, President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer.

Before we begin, I'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 are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook only as of today, February 24, 2026. We disclaim any obligation to update these statements, except as may be required by law.

In addition, during this conference call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investors section of our website in our fourth quarter and full year 2025 earnings press release, which was issued yesterday.

I would now like to turn the call over to Koti Vadlamudi.

Thank you, Blake. Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2025 results, and our initial outlook for 2026. Prior to reviewing our 2025 performance, I want to begin by providing a few thoughts and impressions from my first several months as CEO.

To start, Primoris is a great company because it has great people that embody a great culture. I have spent much of my time learning from and engaging with our employees whose efforts are essential to our past and future success. There is a culture of safety and caring that promotes the health and well-being of our fellow employees. This has consistently placed Primoris well below the industry average in terms of recordable incidents even while working more than 40 million hours in 2025. There is always more work to be done to achieve zero incidents, but those who [ fit invest ] at Primoris place a priority on visualizing and assessing risks to prevent injuring themselves or others.

There was also the recently launched Primoris Promise, a nonprofit charity to support our people, communities and the causes that matter, which is funded by voluntary employee contributions, company donations and public support. These aspects of our culture help build morale, attract and retain talent, execute consistently and uphold trust with our customers.

I have also witnessed a culture of innovation and an entrepreneurial spirit that keeps us nimble to adapt to our dynamic end markets, more growth, drive productivity and provide solutions to customers as a valued partner. This manifests itself in providing the existing service to a nontraditional customer, such as building a major substation for a chip manufacturer, or developing a new service for existing customers in need of a solution in the case of Premier PV.

This culture has also exhibited in the utilization of digital tools and technologies. Our teams are using and developing tools that can assist our teams in managing project risk and contracts, improving cost estimates and scheduling, and are increasing our productivity and predictability in the benefit of Primoris and our clients.

Engaging with our customers has been another focus for me and I am impressed with the collaboration and kind partnerships that have been nurtured to achieve ambitious plans in the coming years. The scope and scale of projects specifically in solar, natural gas generation and power delivery continue to increase, and the need for trusted, experienced and quality contractors is only becoming more critical. Primoris is in a prime position to be a provider of solutions to these customers and to form partnerships with new customers we may not have historically served.

In summary, I'm excited and privileged to be in a position to lead Primoris in this next chapter of growth and value creation. I want to thank the Primoris Board of Directors for entrusting me with this responsibility and thank our Chairman, David King for stepping in during that transitional period last year.

With that, I'll move on to the highlights of our 2025 performance and the [indiscernible] markets. Primoris delivered another strong year of operational and financial performance in 2025, achieving record revenue, earnings and backlog. We also generated strong cash flow that improved our liquidity and bolstered our balance sheet. This positions us to continue deploying capital to organically grow and expand our capabilities through acquisitions.

We finished the year with over $11.9 billion in total backlog, including booking nearly $3 billion of new work in the final quarter of the year. This is a testament to the tireless efforts of our employees, our valued client partnerships and the strength of our end markets. For most of the previous 2 decades, power demand has remained relatively flat. We are now seeing projections that suggest power demand could grow by 50% over the next decade and potentially double over the next 15 years.

There are several reasons driving these higher estimates, including data centers, increased electrification and onshoring of critical parts of the supply chain. While the rate of growth could ebb and flow based on energy efficiency gains or other factors, there is certainly evidence that our utility customers and hyperscalers are making investments in energy infrastructure to support a significant increase in loan demand. The average increase in CapEx by our largest utility customers suggests that around a 50% increase in spending over the next 5 years, compared to the previous 5 years.

Replacing infrastructure that has passed its intended lifespan, hardening the grid to be more resilient to weather events, and building or upgrading power infrastructure to support growing demand are all high priorities for these customers. The hyperscalers project plans for cloud computing and artificial intelligence are expected to result in trillions of dollars of investment and a substantial amount of power. We believe that the power generation needed to support the expected demand growth will require all of the above energy source solution, including solar, natural gas, nuclear and others. Primoris is well positioned to assist our clients in generating power to associate the growing demand and also provide the transmission and distribution solutions needed to deliver energy where it is needed.

Given the trends we are seeing Primoris has been, and will continue to be, focused on attracting, retaining, training and developing our people to help meet the ambitious goals of our clients and community shareholders. Our employees are essential to our success and our most valuable asset. To help support our growth, we increased our labor force by more than 2,800 people in 2025 and remain committed to attracting and retaining the brightest and best in the industry.

While some industry labor market are tighter than others, such as certified [ journey man ] alignment, we have been successful in attracting qualified craft and field labor to meet our clients' needs. We have also focused on bringing in experienced project managers and developing new project leadership in anticipation of increased demand for projects not yet in our backlog. There is growing interest in the labor market to join organizations like Primoris that have strong secular tailwinds and are doing important work that improves the lives of our communities and supports economic growth in North America. We believe our ability to self-perform the vast majority of our work will continue to be an advantage for Primoris, and we are confident that we'll have a fungible labor force continue to grow and service our customers safely timely and with the highest quality.

Now let's look at the operating segment performance in more detail. In the Utility segment, revenue and backlog both increased double digits for the year. The revenue growth was driven by better-than-anticipated activity in gas operations and continued strength in our delivery and communications. Power delivery contract renewals and rising demand led to MSA backlog growth as we continue to see market activity accelerate to upgrade, expand and maintain the electric grid.

Margins in the Utility segment also rose for the second consecutive year despite a decrease in storm response work in 2025, which is particularly accretive to power delivery margins. We continue to focus on our growing mix of project work and increasing productivity, specifically in power delivery to improve our margins. In 2025, we made progress in both, with non-MSA revenues increasing almost 30% in the segment, and with increased efficiency and utilization in several key geographies. We still have work to do in getting our margins in power delivery where we aspire to be in certain areas, but I want to credit our leadership and employees who have taken ownership in achieving this goal. We have made and continue to make investments in people and equipment to prepare for what we are expecting to be a significant increase in transmission and substation opportunities in the coming years.

In gas operations, we exceeded our growth expectations, reaching $1 billion in revenue for the first time. Market share gains and capital program expansions, particularly in the Midwest and Southeast drove our record revenues and did more favorable weather conditions for much of the year. Although we are not expecting a similar growth rate in 2026 due to several large projects not expected to recur, the business is in a solid position and operating at a high level.

Communications had a year of double-digit growth through market share gains and further success in winning and executing large-scale network, long-haul builds tied to data center development. We are seeing this trend continue in Q4 and year-to-date receiving $100 million in new awards that we referenced in our third quarter call. The favorable trend in this market appears to be accelerating as we are seeing more opportunities to bid over the last few months than we had seen in previous years. Our ability to sustain success in this market and perform to our standard will help support revenue and margins in this segment.

Moving over to the Energy segment. Revenue grew almost 25%, primarily driven by renewables, partially offset by another challenging year in Pipeline services. We are optimistic that 2025 will represent a trough in the cycle for pipeline as our funnel of opportunities has increased dramatically over the past year to over $3 billion. In recent years, we have seen our funnel trend around 1/3 of this value. However, with the rising need for natural gas to fuel power generation, increasing LNG production and a more favorable regulatory environment, we believe that our pipeline activity is poised to accelerate.

This is specifically true for large diameter pipeline construction where we typically excel from execution and margin standpoint. Contrary to many other projects in the Energy segment, pipeline projects tend to mobilize to the construction phase more quickly upon contract signing and can often be complete within the calendar year depending on the scope. This leads us to be optimistic that pipeline could see meaningful improvement in 2026 and heading into 2027.

Industrial Construction had a solid year of performance, highlighted by natural gas generation which contributed $480 million in revenue. This helped to keep revenue mostly flat at just over $1 billion despite lower activity in Canada and the divestiture of a noncore business in Q4, 2024 that created a $75 million revenue headwind in 2025. As I alluded to earlier and in previous comments, Primoris is excited about our potential growth in natural gas generation in the coming years. We are actively engaged in discussions, or bidding on $1.5 billion to $2 billion of awards in the first half of this year, and our conversations with clients suggest the list of opportunities will continue to grow.

We are prepared with project managers and skilled labor necessary to take on more work, and we are confident that our expertise and relationships will result in a strong booking year for natural gas generation in 2026. We remain disciplined in the types of projects we are pursuing and the terms we are willing to accept to balance risk more equitably between contractor and client, and ensure the jobs are completed successfully and on schedule.

Heavy Civil continued its high performance in 2025, contributing solid margins and cash flow. While not a primary driver of top line growth, the team has delivered consistent execution and is directing their efforts on projects that align with their expertise and delivering margins above their historical average. Finishing the Energy segment with [ renewables ], it was another year of record revenue and operating income despite having to navigate an uncertain trade and regulatory environment for much of the year. These conditions led to several delays, project specification changes and redesigns. But in the end, our teams were able to respond to our customers' needs and closed out the year by booking over $1.6 billion in new projects during the fourth quarter.

A huge accomplishment by our sales and support teams to get these contracts signed and over the finish line to help our clients move these projects forward. We also helped our clients accelerate project time lines and break ground on projects ahead of schedule during the year to meet their needs. A testament to the valued partnerships we have with our clients and vendors, and our team's willingness to deliver our best when called upon. Of course, we did face some operational challenges during the year as well that led to higher-than-expected costs on certain projects that contributed to lower margins during the fourth quarter.

One project required additional equipment and materials to overcome challenging underground conditions that were drastically different from the conditions on an adjacent project we had previously constructed. These situations can happen when you work on as many projects as we do. We believe we have worked past most of the excess costs on these projects and would expect to see margins improve in 2026, and return to the norms we expect. We have also continued to add quality people and management oversight to assist with upfront engineering, design and estimating work that will help mitigate excursions in the future.

Ultimately, the demand for our solar solutions remains high, and our customers have an extensive volume of projects, safe harbored in accordance with the treasury guidance. We are seeing our average project size increase and new customers continue to engage with us to build their projects. We saw tremendous growth in our battery storage business in 2025 to over $250 million, and believe the market is poised to continue being a growth driver in renewables. Solar, and specifically solar with battery storage, remains one of the lowest cost and fastest to market sources of power generation, which, in our view, makes it a crucial part of helping to meet the energy demands of the future. We also recently commissioned our remote operations control center that adds asset management capacity for our O&M business. It also opens the door for deeper engagement with our clients, should remediation be needed on facilities, damaged by weather events or replacement of updated components.

Our eBOS business, Premier PV built on its success in 2025, supplying components to the projects we construct and to the market. We plan to invest in a new facility for this business line in 2026 that will increase our capacity to service the market and add additional products to our portfolio to align with customer demand and preferences.

Overall, Primoris had an exceptional 2025 and is set up for a successful year in 2026. We the demand backdrop for our services is as good as we've seen as a company, and we are focused on the people, equipment and expertise to help our customers succeed.

Now I'll hand it over to Ken for more on our financial results.

Thanks, Koti, and good morning, everyone. Our fourth quarter revenue was almost $1.9 billion, an increase of $116.4 million, or almost 7% compared to the prior year. The increase was driven by growth in both the Energy and Utilities segments. Gross profit for the fourth quarter declined by $9.6 million, or approximately 5% to $175 million due to lower gross margins in both segments. Overall, gross margins in the fourth quarter were 9.4%, compared to 10.6% in the prior year.

Looking at our results by segment. The Utility segment revenue was up nearly $34 million compared to the prior year. The growth was across all business lines, led by increased gas operations in the Midwest and power delivery and communications activity in Texas and the Southeast. Gross profit decreased approximately $7 million, or about 8% compared to the prior year due to lower gross margins. Gross margins were 10.5%, down from 12.1% in the prior year. Lower gross margins were due to a decrease in storm work in the power delivery business, partially offset by higher margins in communications. Excluding storm work, utility margins were comparable to Q4 in the prior year.

Energy segment revenue increased $88 million compared to the prior year primarily due to growth in our Renewables business, partially offset by lower industrial and pipeline revenue. Gross profit decreased $2.8 million compared to the prior year as lower gross margins offset the higher revenue. Gross margins fell to 8.5% compared to 9.5% in the prior year. The lower gross margins were primarily related to certain renewables projects that experienced cost overruns due to unanticipated rock and soil conditions, which required additional labor and equipment. We believe that we've accounted for all of these increased costs and expect renewables margins to improve as we progress into 2026. Partially offsetting these declines was strong performance in our natural gas generation, Industrial and Heavy Civil businesses.

For the full year 2025, revenue was up $1.2 billion to almost $7.6 billion, primarily driven by double-digit growth in both segments. Gross profit increased by $110 million, or approximately 16%, primarily driven by higher revenue in both segments and improved margins in our Utility segment.

Turning to performance by segment for the year. Utilities revenue was up $253 million, or a little over 10% from the prior year, driven by growth across all business lines. Gross profit increased $51 million, or almost 20%, due to the improved gross margins, particularly in power delivery. The improvement in power delivery margins came even though gross profit from storm work declined by $18 million in 2025, compared to the prior year. Revenue growth and improved margins in our gas operations and communications businesses also benefited overall segment margins.

Energy revenue grew by almost $1 billion, or around 25% this year, primarily driven by growth in our renewables and natural gas generation businesses, partially offset by a decline in pipeline revenue and the wind down, or [ divestiture ] of noncore industrial businesses. Renewables grew over 50% in 2025 as we had over $500 million of revenue pulled forward into 2025 from 2026, due to project resequencing at the request of the customer and accelerating project execution.

Gross profit increased by $59 million, or 13% compared to the prior year, primarily due to higher revenue partially offset by a decline in gross margins to 10.1% versus 11% in the prior year. The gross margin decline was mainly due to lower margins on certain renewables projects partially offset by strong performance in our natural gas generation, Industrial and Heavy Civil businesses. SG&A expense in the fourth quarter was just over $97 million, essentially flat compared to the prior year. For the full year, SG&A was 5.3% of revenue, down from 6% in prior year.

We have prioritized leveraging our SG&A cost base to improve operating margins, and we are pleased with the progress we made in 2025. We plan to invest with discipline in our information technology and personnel to support growth while continuing to drive efficiencies across the organization. For 2026, we expect that our SG&A will be in the mid- to high 5% range.

Net interest expense in the fourth quarter was $6.4 million, compared to $12 million in the prior year, and full year net interest expense was down almost $37 million from the prior year to just under $29 million. These decreases were due to lower debt balances and lower interest rates along with higher interest income. Given our current debt level, we expect interest expense for 2026 to be between $23 million and $26 million. Our effective tax rate in 2025 was 28.4%, and we expect it to be 29% for 2026, but it may vary depending on the mix of tax jurisdictions in which we operate.

Operating cash flows in the fourth quarter were approximately $143 million, and over $470 million for the full year, demonstrating another solid year of working capital management and cash conversion, along with a little over $100 million of cash collections pulled forward from Q1 '26 into Q4. We have exceeded our operating cash flow margin goal of 4% to 5% in the last 2 years through a combination of improved billing and collections, and upfront payments on new awards. Although we expect some continued progress in these areas, we anticipate cash flow from operations as a percentage of revenue is likely to trend more toward our target range of 4% to 5% in 2026.

Continuing with CapEx, we invested $21.8 million in the fourth quarter and about $130 million for the full year. Consistent with 2025, we expect 2026 CapEx to be between $120 million to $140 million with equipment accounting for $90 million to $110 million and the balance spent on facilities and IT upgrades.

Moving over to the balance sheet and liquidity. We ended the year with cash of $536 million, up from $456 million at the end of 2024. Total long-term debt was $470 million at year-end, giving us a net cash positive position to begin 2026. Our strong balance sheet has us well positioned to meet our working capital needs, deploy capital to our higher growth, higher margin businesses and pursue acquisitions that align with our strategic and financial goals. These include targets that augment our power delivery capabilities and enhance our service offering on industrial, power generation and data center projects.

Transitioning to backlog. We closed the year with a very strong fourth quarter of bookings like we expected that brought total backlog to over $11.9 billion. Total MSA backlog was up over 20% compared to the prior year, driven by contract renewals and anticipated spend by customers in the utility segment, specifically in power delivery. We see exciting potential for further backlog growth in the coming quarters across natural gas generation, renewables and pipeline construction that will drive growth in 2026, and set us up for further growth in 2027.

I will conclude with our earnings guidance for 2026. We expect earnings per fully diluted share to be between $5.35 and $5.55, and our adjusted EPS to be between $5.80 and $6 per share. Our adjusted EBITDA guidance is $560 million to $580 million for '26. I want to point out that this guidance does not include potential benefits from storm work which contributed around $12 million of adjusted EBITDA in 2025. Additionally, our first quarter is typically our lowest quarter of the year for both revenue and net income due to seasonality, which primarily impacts our utility segment. As a result, we expect our utility segment margins to be in the 10% to 12% range for the full year with Q1 in the 7% to 9% range. And for our Energy segment, we expect gross margins to be in the 10% to 12% range for the full year.

And with that, I'll turn it back over to Koti.

Before we open up the call to your questions, I'd like to reiterate some of our key takeaways from prepared comments today. First, I am [indiscernible] part of Primoris and help support our leadership team build on our successful foundation. I look forward to fostering our culture and expanding our horizons of who we can be, and who we can serve as an organization. I believe we are doing work that matters to grow the economies of North America and better the lives of the communities we serve. I also look forward to engaging with our analysts and investors, and sharing with our vision for the future of Primoris in the years to come.

Second, we are energized to tackle the tremendous opportunities ahead of us across our end markets. The Energy infrastructure needed to not only support innovative technologies, but to sustain, upgrade or replace aging and updated infrastructure is enormous. We believe Primoris will have an integral and vitally important role to play in supporting this demand.

Finally, in pursuit of these objectives, we remain committed to improving margins, generating cash flow and being the best allocators of capital in our industry. We are exceeding the goals we laid out in 2024 and are looking forward to establishing new targets and strategic initiatives as we approach the latter part of the decade. It is our view that the success in these areas and remaining nimble and adaptable to changes in our markets are the best ways to create long-term value for our employees, our customers and our shareholders.

And with that, I'll now open it up for questions.

[Operator Instructions] With that, your first question comes from the line of Philip Shen with ROTH Capital.

First one is on the gas gen business. You talked about then the activity being in the $1.5 billion to $2 billion. I was wondering how much of that might be converted to revenues in '26 and '27?

Yes. Thanks for the question, Philip. I can take that. And yes, as I said in prepared remarks, the funnel of opportunities in gas generation power are really solid. The $1.5 billion to $2 billion is notionally first half of the year and would have a meaningful burn in '26. In the overall funnel, it's probably a little bit more weighted to the back half of the year with line of sight to nearly $6 billion. So really strong end market with strong capital CapEx.

Great. Thanks, Koti and welcome to the Primoris as well. And Second question here on renewables. You guys gave us some color on the margin performance in Q4. Just was wondering if you could share a little bit more on like when you guys kind of learned about the challenges? And what gives you confidence that this won't happen again? And ultimately, what ranges have you guys made to avoid this from happening again?

Yes. I'll take that one, Philip, and then Ken can add some more color. But these were projects -- a project in an environment where we underappreciate the geotech and soil conditions from an estimate standpoint. And mitigation measures we took didn't prove efficacious and then that cascaded with equipment and labor escalation. Despite that, this particular program is sort of at the midpoint of construction. So we feel like we have a really, really good understanding of what's left to complete.

In terms of additional measures as we looked at in detail auditing the project and what was left to go, we put more investment in project leadership. This was a program in a hot market where we did have some turnover in the project staff. So with that additional focus, we feel pretty confident the remedial measures we've taken that it will come in as we forecasted.

And your next question comes from the line of Steven Fisher with UBS Financial.

Congrats, Koti on taking the role. I just wanted to follow up on that last question. I mean just more broadly about execution as you move through 2026. Just curious how much of a focus or a priority for you is that in your list? One other thing -- what are some of the things you're doing more broadly just beyond that solar project? Just curious, it sounds like you have quite a bit of great prospects, I think we're just looking for more confidence in the execution as we've had a little bit of pickup in the last couple of quarters.

Yes. Thanks for the question, Steve. And so we highlighted the performance execution, scrutiny in the renewable segment. There are some other areas that I would say would fall in the basket of efficiency gain in -- through project execution. And that guts down to better estimating, better project controls, better change management. These are particular levers that will help drive better gross -- project [indiscernible] and ultimately better predictable execution. So it will be a focus area across the enterprise.

But I would have a lot of confidence based on the length of some of these client relationships. Customers that are [indiscernible] and giving us continuing ongoing work as well as the deep confidence we have and the services we provide.

Okay. And then just as a follow-up. As it relates to your guidance, just curious for your perspective on the coverage that you have on that in your backlog. Curious what you still think you need to book in order to hit the guidance? And then just any areas within the guidance you felt like you maybe needed to leave a little room for any particular uncertainties that you see over the course of the year?

I'll let Ken take that one.

Yes, Steve, [indiscernible] question. Look, I mean, we feel as comfortable with our guidance this year as we probably have any other year, strong backlog helps with that. But just like any year, we still have to book a little bit in order to make that. And just like in every other year, we always feel like we've got some upside to our guidance as well. So I wouldn't view our guidance this year as any [indiscernible] any other year from a pluses and minuses standpoint.

But the one area where we probably still need to focus on some bookings to the second part of your question, is in pipeline. As you know, those tend to be pretty quick book and burn type projects. We have all that in backlog yet. We would like to get a little bit more in backlog. But in general, between the MSA and the project work, we feel like we're right where we need to be for this year.

And your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Koti, looking forward to working with you as well. Can you talk a little bit about, both what's forthcoming here on the utility side. Obviously, you've got some neighbors here in your hometown that could be announcing some big things here in the short order. Can you talk a little bit about what you expect on the back of developments in Texas? I know your prepared remarks some commentary there. How do you expect that to shape especially as you think about like backlog, what is more importantly what is not reflected?

And then separately, you also had some comments in the prepared remarks around communications activity. Can you comment a little bit about what you're seeing materialize there? Also, again, in the vein of trying to understand what is not in the backlog this far, and specifically around [indiscernible] there.

Sure. Thanks for the question. And I'll first start out by saying Texas is a really fertile location for the Energy markets, and we certainly see a lot of opportunity for power generation [indiscernible] attracting data center clients and hyperscalers. So with that, we have a high conviction on the relationships we've established here locally, specifically the distribution space and substation build, we see meaningful capital where we can be a partner in the delivery of those programs on EPC basis. So feel really strong about the backlog and the opportunity funnel.

I think we highlighted in the presentation deck, the portion of our backlog of the $11.9 billion that's MSA related. I think that's about $7 billion. The majority, I think 90% of that is in the Utility segment. So sort of highlights the strength of our relationships as well as the market funnel.

With respect to communications, we're seeing some really good indications at the start of this year with some new wins, a couple of hundred million in bookings and line of sight to additional opportunities in the year. So feel pretty good about the fiber business and the communications market in general.

Got it. Excellent. And then just going back to the gas gen side of the equation, obviously, fairly lumpy opportunity set here. Can you comment a little bit about what you're seeing on that front? Just set expectations accordingly in what you're seeing perhaps in the near term for bookings? Obviously, there's a lot of projects that could come into your fold here. But I just want to make sure I'm hearing right how you would set those expectations specifically in the coming couple of quarters on those kind of lumpier awards? And when those might translate into revenue given the protracted timing [indiscernible]?

Sure. And I think you are correct, characterized it as lumpy because these opportunities are pretty big. The investments are from a scale standpoint, measured a gigawatts. So they're multibillion-dollar investments.

On the one hand, you have this push to define scope and get the estimate right. And so we're working with the clients sitting at the table with them, trying to nail down scope definition and the appropriate commensurate cost. That takes time. And then you have a driver in the other way, which is the ultimate customer is usually a power-hungry data center that has milestones for server op readiness. And so you have that push in the other way. But sort of a way of saying that there is some lumpiness to this.

What gives me confidence is that we've got line of sight to that $1.5 billion, $2 billion near term. Of course, the book-to-bill is quite influenced in the quarter by -- if it crosses over the milestone at the end of the quarter, that book-to-bill could be quite skewed. So we like to look at it more like a trailing 12-month which kind of eliminates that waviness.

And your next question comes from Lee Jagoda with CJS Securities.

Welcome Koti. Just, I guess, starting with the Energy segment and the building blocks there in 2026. It sounds like implicit in the guidance is pretty nice growth in natural gas power, pretty nice growth in pipeline. How should we think about the growth in renewables in 2026?

Yes. So the first thing I'd say is we -- of course, last year saw a steep incline as projects accelerated and reflected in the burn. So we enjoyed a quick ramp. And those are projects that are on the books. They just hit the field earlier and we bought equipment and ramped up labor pretty quick.

Still a really strong end market for us. As I indicated in the prepared remarks, in Q4, $1.6 billion of the $3 billion in new bookings was Renewables. So I think it's -- it underpins our conviction that this is a market that will continue to grow. I said also in prepared remarks that it's now often a combined scope of the best -- the battery storage with the solar modules. So our expertise -- the strength of our share in this market sort of underpins our conviction and confidence that we'll continue to grow more than our fair share in this growing space.

Got it. And then I think you mentioned you're about -- you're midway through the project that had some of those issues in Q4. And you gave us sort of the look at what margin should be in the Utility segment for Q1. Can you kind of give us any guidance on what the Q1 energy margins might look like, again, getting to that 10% to 12% for the year?

I'll let Ken...

Yes. Yes. Lee, look, we think we've got most of that behind us. What we are going to see in Q1, though, is the projects running at those lower margins and burning off and getting wrapped up. Most of it should be wrapped up by the end of Q1. So I think in Q1 for the Energy segment, we will still be in that 10% to 12% range, but we'll definitely be in the bottom end of that range, as we get that worked off. And then kind of starting in Q2 for the rest of the year sequentially, kind of getting back up in that 10% to 11.5% range with the opportunity to get above that where we have good project closeouts.

And if I could just sneak one more in on margins. Just the -- given that in the Energy segment, some of the mix, it sounds like it could be shifting a little bit more towards natural gas power, more towards pipeline. Can you just refresh us on a normalized basis, what do gross margins look like in the various businesses? And if the mix does shift towards a little more natural gas power, a little more pipeline, I assume that should give us more confidence in that guidance range.

Yes, it should. Lee, but as you know, I mean, our bid margins are generally running in that 10% to 12% range for the segment that we talk about. Where we always have the upside opportunity is in project closeouts. And so gas generation pipeline and in renewables always have that upside opportunity. It really just depends on which quarter we wrap up the job in, or reach certain milestones in, and where we are on actual costs relative to bid costs. But across all 3 of them, we always have the opportunity to exceed -- or at least come to the upper end of the range, or exceed the 10% to 12%.

And your next question comes from Sangita Jain with KeyBanc Capital Markets.

If I can ask a follow-up on the gas generation question that came up earlier. Can you help us understand if you're looking still at simple cycle or maybe [indiscernible] and what the average product size may be in that $1.5 billion to $2 billion number that you gave us, Koti?

Yes, sure. Good to hear your voice again, Sangita. Yes. On the gas generation side, it's -- we're not just looking at symbol cycle. It's probably notionally -- probably a majority in that type of scope. But just anecdotally, just a few weeks ago, we were looking at an estimate for a 1.6 gigawatt combined cycle plant, and it's early, early phases. But we have a resume for both, but notionally, I'd say the vast majority of the ones we're looking at are single cycle.

And then the second part of your question, I forgot say again, please?

The average project size that you -- maybe...

I don't have -- we don't keep a metric on average size, but just from a capacity standpoint, they're measured in gigawatts in terms of services revenue that we might burn, that's probably a few hundred million.

Got it. And then on capital allocation Koti, there was a quote from you in the press release that talked about using the balance sheet to create value. So hoping to get a color from you on where you think the capital is best going to be used and what [indiscernible] you're thinking about as you make these decisions for M&A?

Sure. First, I'll say I'm really pleased to come into a position where the balance sheet is strong, and that really is a testament to the management team's execution on [indiscernible] So really, really strong cash flow generation, good position from a bridge standpoint. It does give us a lot of levers.

We talked about in an earlier question, execution efficiency. So there are opportunities to invest in ourselves to the extent that people and systems and tools as we've grown can be improved to deliver more predictable execution and improve gross margins. That said, there are areas that will be catalysts for growth either in markets where we're subscale, and we think we can accelerate our growth through acquisition and position the balance sheet to the best of our advantage. That said, we will bias our lens -- our lens and [indiscernible] will be on looking for opportunities that are driven by high sustainable growth trajectory, as well as cultural fit to Primoris and the way we execute work in our markets.

And your next question comes from Adam Thalhimer with Thompson Davis.

Congrats on the Q4 beat and Koti welcome to the call. Koti, I was hoping you could just, from a high level, give us a sense for what are some of your goals for Primoris over the next few years?

Yes, great question. And first, I'll double down on my earlier comments. I'm really excited to come to an organization that foundationally has a great culture. And I spoke to -- from the work we do in partnering with our clients from a safety standpoint, and attention to detail and quality. I've really been encouraged that this is a foundational aspect.

The company also has this spirit of entrepreneurship from segment presidents to job super attendants. They're looking to do the right thing for our clients and help us as grow. I think we talked about the balance sheet. It's really exciting to me to come in with a company with such a strong foundational culture that we can now nurture with the health of the balance sheet to drive further growth. I'm really excited about the end markets and where we play. I like the geographies. I think North America, it's our backyard to continue to drive growth in these exciting growing end markets. So really, really excited about the prospect to take us on the journey to the next step of growth.

Okay. And then I wanted to ask about backlog growth potential this year from the standpoint of -- if you go back to 2023 and 2024, you guys grew backlog, kind of linearly throughout the year, whereas in '25 Q1, Q2, Q3 backlog flat, but then you had a surge in Q4. Just curious how you see 2026 playing out from that standpoint?

Yes. I think on the last -- of course, I wasn't on the last quarter call. There's a lot of focus on the backlog, and then we had indicated in narrative that Q4 would be a pretty strong bookings quarter and notionally show that quarter-over-quarter growth. That did prove out. I will go back to my earlier comment, because the size of the projects are quite large. Sometimes the investment decisions and the selection take a little bit longer. And if they cross over the quarter, they do make for a little bit of lumpiness. So you need to sort of smooth that out, and look at it sort of more on a trailing 12 with respect to book-to-bill.

Overall backlog, we feel pretty strong on the end markets, as we covered earlier, and we think should drive solid revenue growth as we implied from our EBITDA margin growth ambitions.

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

Welcome Koti as well. I just wanted to ask on -- I mean you've done really well in terms of driving margins higher in the Utility segment over the last few years. So it still seems like it could be a lever for you. As you go forward, can you talk through some of the key things that need to happen in order for you to continue to drive those margins higher over time?

Yes. I think it's a good question. And Ken, you can add some color based on history. But the team has [indiscernible] management team specifically looked in areas where we can make improvements. Power delivery is an area where the team has been working over the past year at how we execute in the field from upfront planning to site logistics and execution, productivity. All of those are enhancements that we think are going to drive margin improvement in power delivery.

This past year, we enjoyed on the gas operations on the utility side, some strong growth where we've been presence in that for a long time with our customers and drove some really, really healthy margin, which improved quality of margin in the segment. So overall, I think margin efficiency in addition to growing the top line will be a focus for us going forward.

Yes. The only thing I would add is same thing, Brent, that we talked about in the past, it's also a mix issue, especially within power delivery, where we're still predominantly distribution, which is a great business. There's a ton of money being spent there. But it doesn't have the same margins as the project work on the substation and transmission side. So we've started adding leadership who has the ability to win and execute that work. And as we continue to grow that over the course of the next few years, I think that's going to also contribute to margin enhancement.

Okay. Maybe one more just on the battery side, recognize the scheme of your total revenue, it's not the big, but it's growing a lot. I mean any sort of thought on where that can go in 2026, '27?

Yes. I think I called in the comments, nearly $250 million or more this past year. We do think that's a solid market for us often. It's now been combined with the solar module solution in installation. So do see a lot of opportunities. Most of the on-premise solutions that the hyperscale is looking at include some form of battery storage. It wouldn't -- I think over the next couple of years, seeing that the business double in size, I think, is within line of sight.

Your next question comes from Adam Bubes with Goldman Sachs.

Look forward to working together, Koti. One follow-up on the Utilities margins. I think you're targeting normalized 10% to 12% in 2026 versus 11.5% in gross margins in 2025. How are you just thinking about the different puts and takes for utilities margins in '26 versus '25 and potential to get back up to the high end of that range? What could be the tailwind from more project work? Conversely, could you see any mix headwind given the strong growth in gas in 2025?

Yes. Good question, Adam. Look, I think it's purely going to be a mix issue in power deliveries. We continue to work on that. But from a margin perspective, our gas business and our communications business were as strong, if not stronger, than our power delivery margins. And that's fairly consistent with our past. So as gas and communications grow they tend to be just as accretive to margin and if not more so, sometimes than power delivery, given our mix right now.

Got it. And then based on the 10-K, it looks like your hourly workforce increased 22% in 2025. We hear a lot about labor constraints. What's allowed you folks to be so flexible growing headcount? And what type of employee growth are you budgeting for in 2026?

Yes. I'll take -- in general, it is a constrained market for labor. This -- in my short tenure, have been involved in estimate reviews and go-no-gos on project decisions. And one thing I'm very pleased with is the team has really good discipline in looking at the labor posture and understanding what we need to do to mobilize workforce when it's required.

Look at our past history and I asked the team about this. We have not been on projects we've bid, won and executed, gated by the ability to attract the workforce. And I think that's a testament to the credibility we have in the market. So going forward, we think while that's a challenge in a constrained market, we have the wherewithal to address that challenge.

Furthermore, we are making investments in creating some bench specifically in gas generation and power delivery to enable in advance of the pipeline coming to fruition. We've got the project teams that we can mobilize to support and execute.

And your next question comes from Jerry Revich with Wells Fargo Securities.

Koti, congratulations, and welcome. I wanted to ask in terms of the seat that you folks have at the table on the power side is really interesting, just given the breadth of capabilities that you folks have from behind meter turbines signal cycle. Can you just talk about the mix of work that you're looking at the $6 billion number that you mentioned and what proportion of that is behind the meter? And as you folks think about the projects that you're bidding on, how do you see Bridge Power versus Island Power developing for data centers? What's your take on what's going to be permanent within that [indiscernible] setup?

Yes, Jerry, thanks for the question. I haven't analyzed the exact split between behind the meter and the rest. So we could follow up on that. But -- there is -- on the data center piece of it, there is a meaningful demand as you would expect as people read and talk about. From a data center perspective, last year, I think we narrated what was it, $850 million in work related to -- mainly around enabling infrastructure for data center.

I'll just give more of an anecdotal just in the short start of this year, we're at $350 million against $850 million, which was a full year. So just give a little bit of color the attitude of our clients to make these investments and partner with Primoris to get that piece of the equation in place for data center development. And we can follow up on the split on the on-premise. It's probably notionally around 25% to 30%-ish.

Very interesting. And then can we shift gears a little bit here to talk about on the renewable side. You folks have gained significant share and have generally had positive project closeouts. The problem project that we're talking about this quarter? Is it still in a -- is it still in a profit position? Can you just give us an update on that, Ken? And just put it in perspective for us, I feel like this is the first time you called out negative variance on the project. What the scoreboard look like in terms of positive closeouts versus negative closeouts for that line of business just to put today's news into perspective?

Yes. Look, the vast majority of our Renewables projects are very good performers have and either meet as bid margins or above as-bid margins. So we -- and in those cases, as you know, we have good project closeouts to the upside.

As Koti pointed out earlier, this was an unusual situation. A couple of projects, a couple of sister projects being built right next to each other where we literally ran into more -- the subservice conditions is basically a lot of rock underneath, and we ran into more rock than we've ever seen on any project we've ever executed. So it's very unusual situation. The sister projects, one is actually in a slight loss position. The other one is still a positive margin. Again, these are 2 sister projects out of 25 or 30 projects that we have ongoing at any point in time that are all, for the most part, executing very well. It just happens that these had some larger dollars on the cost side than anything we've ever experienced in this type of situation. But in general, the renewables business is still a very solid business, and we expect really good execution in '26.

And your next question comes from Manish Somaiya with Cantor.

Just a couple of things from me. First, Ken, on the working capital front, where you benefited this quarter and pull forward some working capital from Q1, '26. Is that going to be a headwind for us in '26 when we think about cash flows?

And then secondly, for Koti, of course, let me add my welcome as well. Just wanted to get your thoughts around M&A versus organic growth. Obviously, you've -- lot of opportunities. You talked about the opportunities that you have in front of you. How do you intend to, sort of, close them, especially where you feel that the company is subscale? So maybe just give us some context around the size of acquisitions that might be on the table and how that would kind of relate to the debt target of 1.5x that you've kind of put out?

Yes. Well, let me just address the sort of that strategic question around capital allocation, specifically M&A. And then Ken can take the second half, the other part of the question on cash flow.

But -- the first, I'd say, is the way we look at M&A is that it has to [indiscernible] with our strategy. We're not doing M&A just to grow top line. As I mentioned before, we're really excited about the portfolio. And over the past few years, we've intentionally biased to end markets that we think show demonstrative sustainable growth. There are some areas where we are trying to grow organically and are subscale. That said, we are prepared to put our capital to play organically where it makes sense and drive growth, albeit maybe at a slower cadence.

There is opportunity, again, with the health of the balance sheet to look at M&A. There is no shortage of deal flow. I think it is a fertile market for opportunities for us. I think from a size and color standpoint, we have a lot of latitude given the growth we've seen organically over the past year. So our appetite is pretty wide and varied. I think it will be biased to end markets that were either subscale, or we think with the proper investment will catalyze or accelerate growth. Again, this has to be done with a view that there's proper cultural fit, as well as really extreme good diligence and filtering out opportunities.

Yes. And then on the cash side. Look, we had 2 great years. We honestly expect to have another good, solid year in '26. I don't expect it to be down or below our target range just because we had a good strong '25. If anything, as I said in my prepared comments, I expect it to be just another good solid year.

Operating cash flow came in at 4% to 5% of revenue range. And in general, on a free cash flow perspective, our goal is to be, kind of at least 50% of adjusted EBITDA, if not higher, based on the working capital trajectory that we have.

And your next question comes from the line of Maheep Mandloi with Mizuho.

I'll just keep it quick. On the Premier PV or the eBOS business, can you talk about the growth there? What do you see in 2026? And then any thoughts on -- of the OEMs kind of trying to get into that business and how do you see that competition over there?

Yes, I'll take the first part of it. I think we are investing in that business with increasing manufacturing capacity. So it's sort of underpins our confidence that that's a sector where we can deploy the manufacture that product for our own use as well as for our clients, and it's a profitable segment.

I'll let Ken maybe give a little bit of color on...

Yes. On the growth, honestly, we ran pretty close to capacity during '25. We expect to be at capacity during '26. That's the reason we previously talked about the investments that we're making in '26 in order to expand capacity. So from '25 to '26 sequentially, we're going to be relatively flat it's not going to be till '27 that we're going to see the next phase of growth in our eBOS solution as that expansion comes online, most likely in Q4 of '26.

And that concludes our question-and-answer session. I would like to turn it back to Koti Vadlamudi for closing remarks.

Thank you, operator. I want to again congratulate our employees who contributed to an outstanding year in 2025. It's the more than 20,000 men and women of Primoris that enable us to do what we do. Their focus on safety, operational and financial performance are the reasons for our success, and I look forward to their continuing contributions in 2026 and beyond. Thank you to those who joined us today. We appreciate your time and interest in Primoris and we look forward to updating you on the business next quarter. Thank you.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

Well, good afternoon, everyone. Thank you for taking the time for joining us today. Some of you probably already know, I'm Atidrip Modak. I cover Energy Services here at Goldman. I'm joined with Adam Bubes, he covers machinery and infrastructure on the industrial side. And of course, we've got David Watson, President and CEO of Argan; and Jeremy, President and CEO of -- COO, I'm sorry, of Primoris.

Thank you so much for taking the time to join us today.

My pleasure.

I guess the first question I want to start with is strategically on a high level. Obviously, this year, you've got continuation of a lot of the trends from the last few years here, but would love to hear how you're thinking about the strategy for this year and the next few years in the context of what's going on in the space? And how you want investors to view the relative positioning that you provide in terms of the exposure across the industry? Maybe Jeremy, you start...

Okay, sure. Yes, I think the overriding story for us, I mean, our business lines touch really a lot of critical infrastructure and particularly critical energy infrastructure. So that's really the message underpinned by this continuing growth in energy demand. And so that in a nutshell, we got a lot of active businesses in that area. But power gen in the solar and gas space, transmission, distribution, substation work, highways and bridges and oil and gas pipelines as well.

We see -- because part of the reason we're up here today, the gas power gen has come to the forefront in the last couple of years, and that's an area that we've been historically active in, maintain the capability, and that's going to be a growth driver for us in the coming years, certainly. Yes, really strategically beyond that, it's -- we want to be the best allocators of capital in our space. And so looking to support our organic growth and also M&A where it makes sense.

David?

And a lot like what Jeremy just said, Argan is maybe a little more specific in that we are really focused on power gen, and that's what we've been doing since 2006 with one of our key subsidiaries, building gas-fired power plants, specifically combined cycle power plants as well as peaking plants. And also, we have a renewable element to our business as well. We don't have the T&D that our friends here have but we also have an industrial segment where we -- again, I guess, taking a step back to the mission statement for Argan is to safely build the energy and industrial base that them are all essential to economic prosperity here in the United States, and I think we're really well positioned to do that, especially on the power gen side. And so looking forward to -- in short, we're a bit of a pure play in that we build the big guys and we look forward to building for the next 20 years.

David, Jeremy, we tend to spend a lot of time with still one-on-one kind of conversation. So maybe I thought it might be helpful if you could spend a few minutes talking about the evolution of each of your stories. And then in the near term, help place on the map, right? You've got a lot of solar, you've got mostly CCGT. In this power team, how should we think about where you land exactly and what that looks like going forward?

Sure. Did you want me to talk a bit about the history on it?

Yes.

And so again, Primoris came out of a company called ARB in California, which has a long history in construction of gas power generation pipelines and other things. And it really kind of grew and diversified over the last 30 years, really through acquisition. Going back about 2.5 to 3 years ago, we set out on a new strategic plan to kind of reconcile our portfolio and really get concentrating on areas that we saw as high growth, higher margins and businesses that were good cash generators are foundational, we would keep. And anything that was underperforming, we would divest or shut down. And so that really began in earnest probably 2 years ago and 2026 represents kind of the final year of that plan. We're largely done with the divestitures. And we've, in turn, allocated capital into growing our solar business. We've been improving the performance in our power delivery business. Now we're pretty heavily weighted to distribution versus transmission and substation at that point, but that's an area that we're targeting for further growth. And then the gas power gen really the reemergence there, it kind of fit with the skill set that we've maintained, and we're able to put resources to it and saw the trend coming and had teams ready when the opportunities came forward. So we're one of the larger players in the solar space in the country right now, I would say, on the gas power gen, really a little more niche. We're very focused right now in simple cycle. And ultimately, that may change as the opportunities develop over time. But really, we're comfortable in that space right now, and it's working out well for us.

Got it. David?

My story is a little more boring than your story, Jeremy. We -- we like to buy businesses and a whole lot to them forever pretty much. We -- our transformative transaction occurred in 2006 when we acquired Gemma Power Systems, who has been building power plants, biomass plants, biofuel plants, solar wind, though the renewable sector is significantly smaller than the Primoris team, all this time. And there's been a few moments where there's been pockets of very little work for us. But at this point, we've been in this business for 20-plus years. Gemma Power has not had a lost job in 20-plus years in a space that has -- is not without risk and it has been very difficult to build these projects with the right terms and conditions with the right pricing with the right partners with the right ecosystem of subcontractors, vendors, the OEMs, the various configurations of these types of power plants out there. And sometimes when you're building projects in the Northeast, it's a little bit different than building a project in Texas.

So -- we have a fair amount of variability in our ability to build these power plants throughout the United States. We do have a subsidiary that we acquired in 2015 based out of Limerick, Ireland, where we are also building power plants in the Irish and U.K. market. We've learned a couple of lessons over there that we've been able to apply here in the United States. And -- but the bulk of our business, the bulk of our story, the bulk of Argan story is building this combined cycle power plants, peaking plants here in the United States. And then the Industrial segment is a growing piece. It's about 20% of our business. We have utilized some of our industrial group to help with the power, right, given that there is such a meaningful vacuum here for the supply imbalance of -- the supply/demand imbalance of EPCs and power plants that need to be built, we're looking to optimize our structure to be able to do as much as we can and it's not easy. If I had a magic wand, I've been telling folks, like I would add 10 project teams, but they just don't exist nor do they have the process procedures relationships, the culture that we've built, and I know you guys have built a great culture as well.

So we haven't done a lot of M&A. Most of our focus has been organic growth. We constantly look at M&A. We haven't had to do any divestitures as of recent. And frankly, we've rotated our industrial group and telecommunications group where we're getting involved a lot more in the data center part of the industrial complex. And we historically with industrial, it's been pulp and paper. It's been petrochemical. It's been pharmaceutical, but just basically working on large industrial projects throughout the Southeast, which is where we're primarily based for that portion of our business.

And then, Jeremy, you talked about an evolution of the business, gas generation now being a key focus for the next leg of growth in solar having been a focus of capital allocation. So I would love to dive into those two businesses further. Solar, I think you've grown from 0 in 2017 to a $3 billion business today. So how are you thinking about the trajectory from here? And then on the gas generation side, I think that's around $400 million. Tell us a little bit more about your scope of work on gas generation and the trajectory on that side?

Yes. Starting with the solar, I heard a great term in one of our meetings earlier today, which was the solar [ coaster ] of 2025. So that was at and heard it before. But certainly, there was a lot of uncertainty throughout last year and us as well as our clients trying to figure out where things were going to land. And I think we're largely past that our clients understand what's available in terms of timing, tax credits and tariffs, et cetera. And it's -- we're able to actually now plan out the rest of their near-term portfolio. We had a -- as we've been growing, of course, it gets harder to grow at the same rate, and we've been forecasting kind of a moderation in the growth of that business and have been wrong in the last 2 years. And got some unusual circumstances last year that contributed to a bunch of '26 work being pulled forward into 2025 and that was about $0.5 billion. So our growth -- our near-term '26 growth prospect in the solar PV EPC side as we're looking at it kind of flattish to maybe even down a bit relatively speaking, is that kind of reconciles, but then returning to growth in '27. So we still see that as a growth business for us, but certainly not at the same rate, kind of the other end of the scale, in the gas power business starting from a small base, but we've been able to -- I understand what you're saying about trying to find qualified project teams. But we say, took the chance or wisely made the investments as we saw the opportunities developed back a couple of years ago instead of hiring people in advance of having work and reallocating people with power experience that have been deployed, building the classic air separation. Our industrial business in the Gulf Coast did a lot of work for the industrial gas companies. A lot of my other favorite term, -- a lot of those skills are at the trades level are fungible translate into power projects. And so we've been able to supplement existing project teams that have some power experience with some new folks and move the trades over and it's turned into a real good growth story for us that I think going back to 3 years ago when we started our plan that wasn't factoring in at anywhere near the same rate. It was an important kind of smallest part of our business, but it's turned into a real growth story for us.

And then I think in gas generation, to date, you've been focused mostly on simple cycles.

That's correct.

Why is that the right strategy for you today? How does that strategy and your scope of work evolve from here?

Yes. So part of it is circumstance and those have been the opportunities that have come up. And as we've been growing, a lot of the growth has been coming out of our nonunion business, which doesn't have the track record that ARB does. So smaller or less risky projects. That's good for us, and it also gives us a chance to build up a resume with some of the clients. But for Primoris in general, unlike your business is, David, we generally -- we don't do kind of $1 billion projects typically, like, well, that kind of $80 million to $400 million is kind of our sweet spot, and we're finding the opportunities with the simple cycle projects that are falling into that category. And so it helps us manage risk and the burn time on those jobs is kind of in the area we know how to manage and downside as you need more teams to do the same amount of revenue or to grow. But again, I think on the whole, we've been able to manage that well, and we've been able to attract people. And frankly, we'll grow in line with our ability to execute with surety. It's we don't want lost projects, and you can erase a lot of good work with a bad job. So it's making sure that we're growing with the assurance around our execution, that remains a priority.

David, you're on the other side of this, you do mostly combined cycle power plants, have the capacity to do single cycle as well. Can you talk about the opportunity set why CCGT makes a lot of sense for you where you are and what the industry looks like as you think about your business?

Absolutely. Just one thing I wanted to follow on with Jeremy is, I'm just happy to hear like we're looking in every nook and cranny, utilizing our industrial group to do some power work utilizing some of our renewable teams that have some gas experience and basically rotating them back in the gas. It is all hands on deck. I think by all the EPCs out there being able to build these power plants that this country desperately needs. So I think we're all on the same page there even if it might come at the detriment of some of our other businesses, right? It's highest and best use for the organization and creating the most value for our shareholders. For us, again, creating the most value for our shareholders, combined cycles, that's just what -- we've got that experience, right? We've seen every configuration. We -- it is a risk. It's clearly a riskier project. Simple cycle, you're not -- this is hard, but you're putting a turbine -- you're attaching the turbine to the ground and you're blowing and going versus the multiple other steps of like capturing the waste heat, blowing the water and steam, steam turbine cycle, condensing the water. All that can create a lot of challenges although it's a much more efficient product in the long run. Speed to market, though, and this is why Jeremy has seen a lot of peak plans is peaking plants. And then obviously, there's a desperate need for power by data centers, by hyperscalers and just in general for this country.

So we do embrace the big jobs. We completed the Guernsey Power Station in Ohio, which was 1.85 gigawatts. So we don't think there is any limitation on the size that we can do. It does allow me to utilize a project manager over a larger revenue contract to be able to scale value for my shareholders. But there clearly is a meaningful risk component to it, and we've done a really good job of managing that over the years. We've seen a lot of things go wrong over the years, and we've just continuously -- as I know, the Primoris team does continuously incorporate those lessons learned and incorporate them in your processes and procedures. And we have a blueprint that has worked for us. And I think there's also a little bit more of a -- dare I say, a little bit more of a moat around the combined cycles because a lot of folks don't. There is, again, a meaningful risk element to it. And unless you really have the comfort and the muscle that you've been flexing over all these years of working on those types of projects. It's something that we've had some really good peers lose a little bit of money on in the past years.

But do you want to talk about the opportunity set as well, where you're seeing in terms of -- I know if you want to put a gigawatt number out there on a per year basis, but where you are today versus where you could be in a few years' time?

Right. We're excited. We're working on 6 gigawatts of power right now, 5.5% of that relates to gas or biofuel, which is basically gas. And 5 jobs in the United States averaging over 1 gigawatt each, even though one of them is actually a peaking plant. It's just a really large one, 860 megawatts. So record backlog for us, $3 billion. We've never been near that. And then frankly, so we have an expectation of our revenue cadence. Again, these are relatively long-term jobs, right, 3.5 to 4 years. Peaking plants are a little bit shorter in duration. And so we feel like we have really good certainty for our investors that we're going to translate that $3 billion into profitable revenue. And so there's -- so the question is, okay, David, how are you going to increase your capacity? And how are you going to -- what's your pipeline look like?

And given the supply/demand imbalance for EPCs, it is a bit of triage. We inbound requests and we're always focused on finding the right job with the right price, the right location with the right customer and with the right contract with the right terms and conditions, which are critical in this business. It's not for the faint of heart. There's always going to be a conflict, and we are blessed to have a lot of repeat customers because they know how we work. They know we get the job done. They know we usually get the job done early -- on time, if not early. And so where we want to be 3, 4, 5 years from now, I honestly think of terms in 10 years. Like we're obviously in a demand -- increasing demand environment for electricity consumption. But we're also going to be going into in the 2030s in a little bit of a replacement cycle given the fact that almost 50% of the gas fleet was built in 2000 to 2004. So we believe at Argan that we're looking at a 10-, 15-year run here. And so we're acting as such. And again, a holistic focus on increasing our capacity and that's going to take time. I mean we're at 10 to 12. And making sure that we make the right capital investments. And to Jeremy's point earlier, yes, we're at the highest amount of employees that we've ever had at [indiscernible] We've been investing for the last 3 years on that. So continue to focus on being able to improve our capacity and focus on that space that we're in.

Before I turn it back to Adam, Jeremy -- David, you have 2 businesses that people don't usually talk about as much on the industrial side and on the telecom side. I find the telecom side opportunity to be very interesting, especially given the recent changes that you've been working on and the strategy change that you want to highlight something there?

Yes. No, I appreciate that question, Ati. It's -- no one really talks about my telecom because it's less than 2% of our business. And obviously, the driver of value has been the Gemma asset that we have. But I'm really excited about telecom. We've got a new leadership team in place. Again, it comes down to people, it comes down to the management teams and having the right leaders in place at each of your business segments. And we believe we've found that. It's taken 15 years to find that, but we believe we're there. And their ability to not just lay the fiber rings, but the amount of work that you can do inside of data centers. I mean we've had our telecom business team work on jobs or industrial segments have been working on. They've worked on power gen jobs. You've got the BEAD funding opportunities out there. It's -- and they also have done a fair amount of work since they're located in the D&B or in the Washington, D.C. area on a number of government installations and on top secret clearance and whatnot, and that's been very beneficial. And then the whole hardening of the grid bearing paralyzes, we do a lot of that.

So a lot of opportunity there for the telecom business, not just in their specific footprint, but also together with our other businesses. And on industrial, that's been a really exciting story for us. They're based out of the Southeast. Most of the work is done in the Southeast. They've largely come out of working at the pulp and paper and doing civil, doing mechanical, electrical, saltier type -- we have a fabrication facility, pipe fabrication, vessel fabrication. We're doing a lot of that, not just for power plants, but also for data centers. So there's a lot of opportunity for growth in that business segment as well for us.

Jeremy, we talked about your solar and gas generation business on the energy side, but let's talk more directly about your power delivery business on the utility side. In utilities, you consolidate gas, power and telecom. So it's a little hard to discern the side of that business. What's the size of power today? And then can you talk about what the growth trajectory has looked like over the last year, how you think that business trend going forward?

Sure. So that business is about 45% of our utility segments, so roughly $1.2 billion a year top line. Heavily weighted on distribution work at this point, probably 80% of their revenues coming from distribution. So the trend -- the Primoris story there in terms of growth opportunities, we're seeing transmission substation grow at a faster pace than distribution although there's growth on the distribution side as well. So that's an opportunity for us to grow both organically and inorganically if the right opportunity presents itself. But this is another case where labor theoretically becomes a constraining factor in that. And that you've got linemen. It's kind of the opposite of the fungible workforce that's highly specialized, takes a number of years for somebody to develop from an apprentice to a full journeyman. So you can't just create them and train them up very quickly. Now we're investing pretty heavily in training, especially in Texas, building a new facility. But I think part of this as well for us is looking at markets that maybe aren't as active and importing from outside of our client systems to do this work. And then again, if we get an opportunity to be acquisitive with the right company that's got the labor force in the transmission substation space, then that's probably our #1 priority on the acquisition side at this point.

And then can you just talk about competitively how you see your positioning in power? And then if we could circle back to the gas generation side, I'd be interested to hear you're working, I think, on the Stargate project on the gas generation side, what's allowed you to win awards so far in that space? I imagine there are larger players you're competing against.

Sure. Coming back to the power delivery side again, I think to some extent, there's a bit of a rising tide lifts all boats in this and that our key clients, particularly the ones that we're heavily engaged with through MSAs are telling us that they've got very aggressive growth plans. And so it's incumbent on us to get the resources in place to meet that. Getting in on the gas side, I think one area that -- again, we were well positioned with the history coming out of ARB, long-standing relationships with the turbine suppliers and a good source of inbound opportunity for us has, in fact, been from the turbine manufacturers who understand, obviously, where they're selling their equipment and where there's clients that they believe are a good match with our capability and fit. They've made introductions and that has turned into real jobs and real opportunities. So higher demand environment certainly helps. It's a little bit of an even in the simpler projects, a little bit of a barrier to entry there right now. And we're very fortunate we maintained that skill set. But having the long-standing multi-decade relationships from our work on the West Coast with both utility clients and a turbine suppliers has been key for us in acquiring new work.

And then I also wanted to touch briefly to smaller business, but midstream. It's historically been volatile, but it sounds like there's some opportunities coming up here as investments are shifting downstream for gas infrastructure. Can you just talk about where you play in midstream and how that could turn out for 2026?

Yes, absolutely. So historically, Primoris and going back to again to the ARB days was -- it came out of Bakersfield as a kind of a pipeline company. So that's part of our heritage. And going back 5 years ago, it was 25-ish percent of our revenue coming from kind of the cross-country pipeline type work. And of course, the bottom really fell out of that market during COVID. And has stayed pretty depressed up until the last 12 to 18 months, and we're starting to see that come back. So we've seen that go from a $900 million a year business down to roughly $300 million. We're seeing opportunities to get to $500 million to $600 million by the end of this year if we're able to land some of the larger jobs that are out there. And we're certainly seeing a healthier opportunity funnel than we've seen in the past. And I'll just distinguish as well, what I'm talking about there, again, it is the midstream, the high-pressure steel pipelines, larger diameter. We also have a gas distribution business, which is on -- in our Utility segment, low pressure, more urban environment, but we report that separately.

And then, Jeremy, maybe I'd ask you to expand on one other topic you touched on briefly, and I also love to hear your perspective, David, but there's been the persistent theme around labor availability in construction. So to what extent are you seeing that play a role in your capacity to do work today where are the constraints most acute? And what strategy do you both have to alleviate that?

Yes. It again comes back to alignment would be the most critical for us, both because of the demand and just because of the persistent lack of capacity in that labor force for a number of years. So again, coming back, the part we can do is try to make more, which is investing in training and continuing to be really committed to that. And again, looking to see if we can recruit from out of our service area from areas that maybe aren't as active to try to pull new resources in. If I look at the other parts of our business, I'm really less concerned the midstream side, that business can flex up and down very, very quickly, and it's been historically lumpy. So the workforce is used to being called to work and they finish your job and go home. On our industrial gas power, I mentioned our ability to transfer people from other parts of our industrial business has really helped supplement and allowed us to meet the growth there, but we're continuing to hire. And we're hiring teams in advance of opportunities. So a little -- probably fishing in a bit of a different pond than you, David, not looking for the $1 billion project manager, but project teams that can execute a $150 million job. And we're bringing those people on, in some cases, up to a year before they have a project to go to and just looking at that as an investment, and that's time for us to teach them our systems and processes and culture gives them soak time if they're able to look at these opportunities in advance of the work being awarded, and it generally helps with the execution there. But on the trade side in the industrial space, we've been able to stay ahead of that very well with the current growth.

Can I -- sorry...

We're hiring. Lot of the same stuff, right? I mean literally creating training career paths, not just for your leadership or your higher level folks, but all the way down to your welders, like -- how to develop that path because a lot of our best project managers are organically grown just as Jeremy said. Hiring from outside the organization. Obviously, we have to utilize that. But a lot of -- and also sharing resources amongst our various businesses. There is a fair amount of synergy there. They're not as specialized as say, alignment. And in corporate giving yourself engaged with local welding schools, donating welding equipment, working with apprenticeships, having internships like all of the above, it's all hands on deck. And we work -- we have a lot of folks since we've never left the space, follow us from job to job. We have labor brokers, and then I know Jeremy does, too. It's all -- it's one of our human capital is our biggest constraint to growth. The biggest bottleneck to more project is project -- site project leadership teams.

Going off of these comments, as we think about margins, in particular, I mean, I know a lot of people would just love to go out there and put a 25%, 30% EBITDA margin in their models. How should we think about the levers? What are -- is this creating a situation where pricing power is so strong that you can go out and bid and get projects at very reasonable margins? What are the levers that you guys are pulling? And how should we think about it?

Do you want to start with that?

You can take the lead.

All right. I think the first step and where we're seeing in, call it still maybe in emerging early days in the gas power market is just a more equitable allocation of risk in our contracts. So that doesn't necessarily translate to higher bid margins, but it enables us to price effectively not overprice risk that we can't quantify that keeps the price down for the client, but it also means that we're not get solved with potentially margin stopping issues that are beyond our control. Delivery time on equipment would be a good example or subsurface conditions. So I think really, we're seeing that in real time right now with the new contracts that we're signing, and that's been the case in the power space for the last couple of years. But it is not, at this point, translated into us jacking up our margins because we're able to. But we get the opportunity to improve after as-bit to build on -- to -- I'm sorry, improve on our as-bid margins based on the fact that we're not getting exposed to the same amount of risk.

David?

All things being equal, if every single contract term was exactly the same 3 years ago versus today, of course, pricing is up. But exactly to Jeremy's point, we are in the business of pricing risk. And in the event that we are able to -- if with price -- we needed to be a successful project for our customers as well. And so in the event that there is some pricing considerations, well, yes, we are willing to take this risk, this risk and this risk, put it on your shoulders, not mine, and I've derisked my job, and I've reduced a lot of the terms like scheduled liquidity and damage or whatever to make it successful for both of us to make it work. So yes, is there pricing to be had? The answer is yes. Does that -- but does it always translate to price? Or does it translate in part to terms and conditions and scope and risk allocation. So we -- again, it's a good market to be in right now, but we also want this market to be -- we want to be in this market 15 years from now.

To that tune, 15 years from now, how do you think about the CapEx requirements today, capital allocation strategy, M&A opportunities. The market is pretty fragmented across various of these end markets. What's the best way to think about all of that and return of capital? Maybe start with you, David.

Yes. So clearly, Argan hasn't been nearly as acquisitive as Primoris has from an M&A standpoint. We've been a little bit more of a organic growth story. We kind of stuck with it. Maybe you can say we've stuck our head in the sand because we just -- we're plotting along, right? And then obviously, we're focused on growing. Investment in people, right, human capital. You don't see that as M&A. But to me, that's M&A. I mean, we grew renewable business out of nothing, right? Commitment to the dividend. We've grown the dividend 3 times in the last 3 years, commitment to our buyback. I mean we realize we have a meaningful -- and to us, it's a competitive advantage, our balance sheet. It makes us a very bankable EPC when it comes to folks trying to get financing for their projects. They know that Gemma or Argan is going to be there for the next 4 years. Frankly, we're going to be there for the next 15 years. And so that's been very beneficial for us. But -- and M&A is part of our model, but it's not necessarily -- it's not like I -- I don't have a burning hole in my pocket to go do an M&A. I'm not -- and there's not a mandate to have to go do M&A, but it's that absolutely something that we can consider.

Very similarly and contrary to the history, we kind of prioritize it the same. So the first priority for us for capital allocation is organic growth, and that's in people, that's in equipment. And it's a lot less risky way when the market allows it to grow the business. Second has been servicing our debt, which we really have in the last several years, if you've been following it with increased focus there. Our leverage is extremely low right now, that ties us into the third priority, which would be looking at an acquisition, and we're well positioned to do that right now, but we're going to be pretty specific about the areas. It's going to be high growth, accretive margin in areas like power delivery, electrical C&I, for example. And finally, we have a modest dividend and an authorization at this point for share buyback should the opportunity arrive and makes sense. But for us, again, it really is coming down to prioritizing organic growth as the #1.

Great. Gentlemen, thank you so much for a great conversation. Really appreciate it. Rest have a good...

Thank you. Appreciate it.

Thank you so much.

Good morning, and welcome, everyone, to the Primoris Services Corporation Third Quarter 2025 Earnings Conference Call and Webcast. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Blake Holcomb, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to the Primoris Third 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 would like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook only as of today, November 4, 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 and in our third 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 third quarter 2025 operational and financial results.

Primoris had another great quarter, once again delivering record revenue, operating income and earnings. I am proud of our employees and their ability to execute at a high level, while providing our customers with safe, reliable service and driving profitable growth. Operating cash flow was also a highlight in the third quarter and further demonstrates the hard work we have put in to improve in this area.

As a result of this emphasis, we have been able to make tremendous progress in delevering the balance sheet and allowing us to invest in the business to be well prepared for the surge in demand we are currently seeing across our end markets. I am particularly proud of how we have generated free cash flow and set new highs on our return on invested capital since making these metrics a priority.

We are a company focused on the development of quality people and delivering quality projects for our clients. We continue to allocate our time and resources to capitalize on what we believe is a generational opportunity for our infrastructure solutions that will drive value for our shareholders. Last quarter, I discussed the significant demand on the horizon for power generation and the growing prospect of providing more services, which support the development of data centers. I want to reiterate that these and other opportunities remain squarely in front of us.

The ramp-up in revenue, combined with the delay of a couple of larger dollar value projects, led to a higher-than-anticipated backlog burn rate in the Energy segment. The timing of when projects are signed and placed into backlog can [be due to] a number of factors, including changes in scope and design and the shifting of supply chain schedules. We continue to direct our attention toward the things we can control during the process and providing our customers with the resources they need from us to get the projects built timely.

I want to emphasize that our lower than forecasted bookings in Q3 were not a result of projects being canceled or awarded to other service providers, but are instead being impacted by other circumstances that can affect the timing of executed contracts. Because of this, we remain highly confident that we will sign several high-value Energy segment projects in the coming quarters that will set us up for another successful year in 2026.

I'll now turn to our performance for the quarter by segment. In the Utility segment, third quarter revenue was up double digits from the prior year. We also had double-digit backlog growth in utilities as demand for power, gas and communication services continues to surge. Leading the revenue growth was gas operations, where activity and margins remain resilient. We are seeing increased customer spend on development programs in the Midwest, Southeast and Texas that have enabled us to step up and capitalize on these trends. In regions with more variable activity, we have controlled costs to maintain solid margins.

While the fourth quarter can bring unpredictable weather that can impact work schedules, our gas utility business appears to be on track for a record year in 2025. Communications revenue and margins were also up from the prior year driven by broadband expansion and an increase in major project build-outs. We believe the emergence of larger EPC network bills tied to data centers will continue to support growth in our Communications business. We are targeting over $100 million of these projects over the next few quarters, which if successful, would complement our fiber-to-home new build and maintenance programs.

We are also monitoring how states are managing the potential for federal funds to further build out networks in underserved areas, which could be a catalyst in the Communications business that we are not currently building into our plans. Power Delivery had its best revenue quarter in recent years as demand is rapidly increasing in key geographies. More clients are releasing work orders from engineering at a faster pace, which is leading to increased activity and more favorable mix of work. These trends and customer conversations on upcoming plans helped to drive Utility segment backlog up from the prior quarter to an all-time high of nearly $6.6 billion.

Margins continue to trend in the right direction for Power Delivery but were lower compared to the prior year as we did not have the benefit of storm work we had in 2024. We have more progress to make to achieve our longer-term Power Delivery goals, but I am pleased with the accomplishments of our teams and leaders over the past two years. We're in a great position to benefit from the expansion and hardening of the electric grid in many of the regions where it is most needed. And I believe our safety culture, expertise and ability to invest in the business will open the door for further growth across transmission, substation and distribution.

Turning to the Energy segment. The Renewables business had a record revenue quarter as Utility-scale EPC and battery storage continued to accelerate. The higher-than-expected revenue growth in Renewables has been a main driver of the decrease in backlog and an area that has seen project signings push out a quarter or two. However, as mentioned earlier, we remain highly confident that we will sign several high-value projects in the coming quarters that will set us up for another successful year in 2026.

The signing of the One Big Beautiful Bill and the subsequent treasury department guidance has allowed our customers to have a substantial volume of projects safe harbored for the next several years. This has provided increased stability and visibility to this market. However, customers are still navigating some uncertainty on tariffs that has slowed down the process of pricing and therefore, the signing of certain projects. The funnel of projects remains very healthy and is expanding with new Tier 1 customers wanting to work with us on their high-value projects. Based on our conversation with customers, we view this as a near-term adjustment to the timing of bookings and believe we will see backlog begin to build over the next few quarters.

The battery storage market outlook is also beginning to improve after a couple of quarters of uncertainty. We're seeing the increased adoption of battery storage on upcoming projects, adding storage to previously constructed projects and a growing number of stand-alone projects as well. This is giving us increased confidence that we can have continued success and an attractive market growth.

Industrial Services also saw impressive revenue growth from the prior year as natural gas generation activity has risen to a level not seen in over a decade. Primoris' track record for successful execution on gas generation projects has helped us earn an excellent reputation in the market. This has put us in a position of being a leader in the construction of gas-fired power facilities where growth is driven by the further electrification of the industry and data centers.

We continue to take a disciplined approach to growth in this market but expect to have some sizable awards in the fourth quarter and into 2026 that will set us up for meaningful growth and accretive margins with good execution. The Pipeline business has faced challenges this year as revenues and margins partially offset the strong results in the quarter. Despite the recent headwinds in the business, our leadership has done well in managing the costs and keeping crew members active as we anticipate what appears to be an emerging upcycle.

Headwinds impacting pipeline services have quickly reversed, and we're beginning to see tailwinds develop in this business line. We are seeing bids materialize for several large projects, and we anticipate the trend to shift toward the positive with awards as soon as this quarter. It would only take a few awards to see a revenue and margin benefit in the Energy segment and we are optimistic that 2026 will serve as the starting point.

In summary, Primoris continues 2025's momentum with a record third quarter and we are energized about the future opportunities we have to take advantage of the significant tailwinds across our end markets.

I'll now turn it over to Ken for more on our financial results.

Thanks, David, and good morning, everyone.

Our Q3 revenue was nearly $2.2 billion, an increase of $529 million or 32% compared to the prior year, driven by double-digit growth in both the Energy and Utility segments. The Energy segment was up $475 million or 47% from the prior year, driven by increased renewables and industrial activity. In Renewables, project progress continues to accelerate resulting in revenue outpacing our expectations by over $400 million for the quarter and by over $900 million year-to-date. We have seen significant revenue pulled forward from Q4 and from 2026 driven by strong project execution and early delivery of major materials. We now expect Renewables revenue to be closer to $3 billion for the full year 2025, up from our previous estimate of $2.6 billion.

Additionally, our Industrial business was up over $100 million compared to Q3 2024, driven by strong execution on gas power generation and other industrial work. The Utility segment was up over $70 million or 10.7% from the prior year, driven by higher activity across all service lines, led by Gas Operations and Power Delivery. Gross profit for the third quarter was $235.7 million, an increase of $37.2 million or 18.7% compared to the prior year. This was attributable to increased revenue partially offset by lower margins in both segments. As a result, gross margins were 10.8% for the quarter compared to 12% in the prior year.

Looking at our segment results. The Utility segment gross profit was $86 million, essentially flat compared to the prior year, resulting in gross margins decreasing to 11.7% compared to 13.1% in the prior year. The lower gross margins were mainly due to a significant decrease in higher-margin storm work in the current quarter compared to the prior year. In fact, the benefit from storm work in Power Delivery is about a third of what we saw in Q3 of the prior year. Excluding storm work, utilities margins were comparable to the prior year.

Despite not realizing this margin benefit, we are seeing quality performance in Power Delivery and the rest of Utility segment, including an increase in non-MSA work compared to the prior year, which is a strategic priority for us as we seek to improve margins in this segment.

In the Energy segment, gross profit was $149.7 million for the quarter, an increase of $38.1 million or 34.2% from the prior year primarily due to higher revenue. Gross margins in the segment were 10.1%, down from 11% in the prior year. The decrease in margin was driven by fewer project closeouts in 2025 compared to the prior year. Pipeline margins were also a drag on margins during the quarter due to lower revenue and gross profit compared to Q3 of 2024. However, we are expecting to see some margin improvement in the segment as we close out the year and move into 2026.

Looking at SG&A. Expenses in the third quarter were $97.7 million, which was in line with the prior year. As a percentage of revenue, SG&A declined 140 basis points from the prior year to 4.5%. This was driven by our record revenue and ongoing efforts to control administrative costs and improve our operating leverage. While SG&A could tick up slightly as we wrap up the year, we expect SG&A as a percent of revenue to be in the mid- to high 5% range for the full year.

Net interest expense in the quarter was $7 million, down $10.9 million from the prior year, partly due to lower average debt balances and lower interest rates. Based on current trends and expectations, we are updating our guidance for interest expense to be between $30 million to $32 million for the full year, down from the $33 million to $37 million guidance we provided last quarter. This is due to our continued reduction in debt and lower interest rates.

Our effective tax rate was down slightly because of some discrete tax impacts during the quarter. We now expect that our effective tax rate for the full year will be approximately 28.5%.

Net income increased to $94.6 million or $1.73 per fully diluted share, both up around 61% from the prior year. Adjusted EPS increased by over 54% to $1.88 per fully diluted share, and adjusted EBITDA was $168.7 million, up 32% compared to the prior year, setting us on a course to achieve record earnings per share and adjusted EBITDA for the full year 2025.

Transitioning to cash flow, Q3 cash from operations was a little over $180 million, bringing our year-to-date cash flow to more than $327 million. This represents a $117 million improvement in operating cash flow compared to the first 9 months of the year. The increase was driven by higher net income and a continued focus on working capital efficiency.

Turning to the balance sheet. We closed Q3 with approximately $431 million of cash and total liquidity of $746 million. We also paid down $100 million on our term loan during the quarter, helping to lower our trailing 12-month net debt-to-EBITDA ratio to 0.1x EBITDA. Our balance sheet strength allows us to invest in the resources required to meet our increasing organic opportunities, while allowing flexibility to add scale or new services through M&A that meet our financial and strategic criteria.

A disciplined approach to accretive M&A remains a focus for us, and we are encouraged by the quality of acquisition targets we are currently seeing in the market.

Total backlog at the end of Q3 was around $11.1 billion, down around $430 million sequentially from Q2. Fixed backlog was lower by about $921 million due to a combination of higher revenue burn and the timing of Energy segment bookings. As David mentioned, we have seen the signing of some contracts pushed to the right about 3 to 6 months as our customers navigated through all of the volatility and change during the past 3 quarters. But our large funnel of high-quality opportunities is still very strong, and we view this backlog decline as temporary.

Although bookings and our progress on work and backlog will vary quarter-to-quarter, we have a high degree of visibility to new awards in the coming quarters for the Energy segment across solar and natural gas generation and midstream pipeline.

MSA backlog is up $492 million from Q2, driven by increased activity across our utilities businesses and particularly Power Delivery as customer investment in the power grid ramps.

Before turning it back over to David, I'll close with our updated guidance. We are increasing EPS guidance to $4.75 to $4.95 per fully diluted share and adjusted EPS guidance to $5.35 to $5.55 per fully diluted share. And even though we had about $10 million of adjusted EBITDA pulled forward from Q4 into Q3, we are also raising our adjusted EBITDA guidance to $510 million to $530 million for the full year 2025, with the opportunity to achieve the upper end of that range with good weather in Q4.

Additionally, we are increasing the range of our gross capital expenditures by $10 million at the midpoint to $110 million to $130 million to support this continued growth.

We have had an excellent first 3 quarters of the year generating cash flow, paying down debt and growing earnings. As we move to close out the year, we are confident that we will finish strong and carry positive momentum into 2026.

I'll now turn it back over to David.

Thanks, Ken. Before we open the call for questions, I'd like to recap a couple of key points of the quarter. First, Primoris is operating at an extremely high level, and we are seeing the results. We have tailored our strategy to emphasize improved margins, earnings growth, cash flow generation and the efficient allocation of capital and we are experiencing success in each of these areas. This is a direct result of our company culture and the dedication of our people in the field and those who support them.

Second, the outlook for Primoris remains as good as we have seen and we have the people and our customer relationships to take advantage of the opportunities ahead of us. In all areas of our business, we will continue to work with and on behalf of our customers to develop the solutions to meet the infrastructure needs of the communities we serve. There's a lot of work to be done, and we are in a prime position to be a major contributor to the growth and modernization of the utility and energy infrastructure in North America.

Lastly, I want to thank the people at Primoris for their support and efforts during my time as interim CEO. It has been a privilege to work alongside them for these past few quarters, and I'm grateful to have had the opportunity to play a role in transitioning Primoris into its next chapter led by Koti Vadlamudi. Koti is a talented and tenured executive that meets all the criteria we are looking for in the next leader of Primoris. I and the rest of the Board are pleased to have him join us, and we look forward to supporting him. It is an exciting time to be in our industry and especially to be part of the Primoris team.

I have a high degree of confidence that the best years of Primoris are in front of us. I want to encourage our teams to maintain the high standard of execution they have through the first 9 months of the year and close out 2025 strong with a look to the future.

We will now open up the call for your questions.

[Operator Instructions] We'll take our first question from Philip Shen at ROTH Capital Partners.

You guys had previously expected fiscal '25 order intake to be back-half weighted. Dave, you just shared in your prepared remarks that you expect Energy bookings to improve in the coming quarters. Can you provide some additional color on how bookings might look so far in this quarter, Q4? And then additional color on how they might trend?

Sure, Philip. Thanks for the question. Yes, we've indicated even in some of my opening remarks that some of the timing for some of the energy segment jobs were probably going to be pushed into this Q4 timeframe. And indeed, we've seen that. I'll let Ken kind of give you some rough numbers in a moment, but I would tell you that we're looking to have a very good book-to-bill in our Energy segment and possibly in other areas. Also in this Q4, we've already booked some pretty nice awards and currently doing some paperwork to continue firming up some additional awards in Q4. So just as [indiscernible] said, I'm pretty comfortable with where we're going to end up relative to Q4 bookings. So Ken?

Yes. Phil, the other thing I would add is while we definitely entered the year thinking that it would be back-half loaded, what we weren't anticipating is all the noise from tariffs and OB3 and everything else. So all that's done in this kind of as we mentioned in our opening comments, is kind of shift everything out a quarter to as much as 2 quarters in a few cases. But looking at Q4 already, just for the Energy segment alone, we've already booked over $600 million. We have another $600 million that should book within the next 30 days. And for the Energy segment, we're expecting a book-to-bill well north of 1 for Q4, maybe as high as 1.2 or 1.3, depending on how the rest of the quarter closes out.

Great. That color is very helpful. And shifting over to -- or staying with the Energy segment. Book-to-bill was 0.3x. You just talked about how that could be strong. How much of the $300 million Q3 revenue in the Energy segment was attributable to a pull forward of demand timing? And what do you think Q4 Energy revenue looks like? You talked about bookings, but let's talk about the revenue now.

Yes. The pull forward on revenue was at least $100 million. And I don't have the exact numbers in front of me right now, but I know there was comfortably $100-plus million of revenue that was pulled forward that led to the EBITDA pull forward as well. Revenue for Q4, I've got a ballpark number of about $1.2 billion for Energy in Q4.

We'll take our next question from Sangita Jain at KeyBanc Capital Markets.

So I know you have discussed a lot about the renewables bookings being pushed out. Can we talk about the gas generation bookings, maybe how the funnel of opportunities looks there? And if there were any delays in bookings in that subsegment?

Sure, Sangita. Thanks for the question again. Yes, there was a little bit that kept being pushed out. Remember, we're trying to work with our customers to get that price, that fixed price and some of the delays relative to some of the materials that needed in the project, getting firm pricing and things like that kind of pushed them a little bit to the right on us. But as Ken mentioned, we're seeing those now become bookings.

And so again, I'm seeing that delay in some of those bookings getting behind us, especially in the Q4. And then we're still looking at fairly strong bookings in Q1 and Q2 also.

Got it. And then on the comment in your press release about weather impacting some of your projects in 3Q. Are those projects all done? Or should we expect more kind of like margin leakage from those into 4Q?

Yes. So Sangita, I think the -- so the short answer is not all the projects are done. It was pretty heavily focused on the pipeline part of our business and just a couple of projects there. As those projects finish in Q4 and burn-off, we may have a little bit of margin drag in Q4, but that should be it.

Next, we'll move to Lee Jagoda at CJS Securities.

I guess for starters, David, it was fun the second time around and if Koti listening, he's going to have to work on his southern accent a little bit.

I agree, Lee. I agree.

If we can start with the utility side of the business, you've had 4 straight quarters of double-digit top line organic growth. And obviously, the backlog both on a year-over-year basis and a sequential basis has improved somewhere between 10% and 20%, depending on which metrics you're looking at. If you're sitting here today, how sustainable is that double-digit organic growth on the utility side as we move, not just into Q4 but as we look out into 2026?

Well, let me start out, and then I'll let Ken add some more color as he sees fit. We did increase our range for those utilities between that 10% and 12% for the year, as you know, we mentioned that last time. I do think those are sustainable going in. The demand, as you've seen, Lee, has been pretty strong in our Utility segment. We're still seeing good build-outs on the communication side and the utilities, good build-outs on the gas side -- gas utility side of it. So I would say that I'm still feeling pretty comfortable that we can maintain those.

Well, that's just on the margin side, that 10% to 12%. I'm more talking on the revenue side. You've done 10% plus the last 4 quarters in a row -- no, no, no, topline growth.

Okay. On the top line. Yes, the revenue growth has been strongly aided by the gas and communication strength that we're seeing. And again, we're still seeing just on the revenue side, a tremendous demand out there for our services, continuing to build teams, continuing to train personnel. So I still see that as a pretty strong market for us to continue to grow in.

And then one more, and I'll hop back in the queue here. So Ken, I think you mentioned $1 million of pull forward year-to-date in Energy. And as we continue to pull forward, some of that's got to come from the future beyond 2025. So despite all these large bookings, and I guess, under the framework, we had been expecting $300-ish million of revenue improvement from Energy each of the next couple of years, how does that set up for revenue growth within the Energy segment and Renewables specifically in 2026?

Yes. Look, the vast majority of that is in the Renewables business. So as we started talking about last quarter, I think our revenue growth is going to be much less for Renewables going into '26, probably a couple of hundred million or something like that is my best guess right now. We're still firming up our '26 numbers. Where we see the revenue growth opportunity still remaining strong, though, going into '26 is in our Industrial part of our business, predominantly the gas generation that we've been talking about and in Pipeline. Despite some of the margin issues we experienced this quarter, Pipeline -- the pipeline opportunities for revenue growth are pretty significant right now.

So we could see $100 million to $200 million of revenue growth just in Pipeline alone going into next year.

Yes. And Lee, I would add one more thing on Ken's comments. The kind of pipeline projects we're looking at now are really down the fairway for us through the larger diameter pipeline projects. So I feel like we'll perform better on those in the future than what we've been struggling with on some of the work that we've seen over this last year or so.

We'll take our next question from Julien Dumoulin-Smith at Jefferies.

Koti, welcome to the crew and it's been a pleasure otherwise. Look, let me -- if I can come back to what you were saying just there a second ago. I mean, what's like the rate of growth there on the Pipeline side of the business? I mean, it seems like what you just said a moment ago implies a pretty steep ramp versus where you're starting. And then also maybe to go back to another comment from earlier. Given some of the delay in just booking some of these Renewable projects, for instance, what does that say about the cadence of revenue growth here over the next few years on Renewables? Is it more back-end weighted to '27, '28 versus '26? Or how would you set expectations? I know you guys used to have those long-term Renewable revenue growth targets.

Yes. So I'll go in reverse order. On the -- on the Renewable side, look, I think the cadence is actually coming down for '26, as I mentioned. And then we're looking for kind of a return to normal going into '27 and '28. The softness in '26 is pretty heavily driven by the delay in bookings for renewals tied to all the noise that we've had this year. The good news is, as we've been talking about is, that funnel is as strong as ever, and our customer base is -- has a lot of projects they want us to build.

Just switching back to your first question on Pipeline. Pipeline is right now in '25, a $300 million to $350 million revenue business for us. All it takes is one or two of those projects that David is talking about for it to jump $100 million to $150 million going into '26.

And then just given the size of those businesses there, what does that do for operating for margins here in operating margins in terms of as you think about scaling up on that front, especially -- well, I'll leave it there.

Yes. I mean nothing really on the renewable side since it's already a fairly scaled business. On the Pipeline side, that's where there's some margin accretion opportunity going into '26 as we get that business back up to scale.

And Julien, my comment also add, and I've added it each time is on the pipeline side of the business, those book and burn very quickly. So they'll -- usually what you book in 1 quarter, you're going to burn over the next 3 to 4 quarters. So it burns very quickly.

Yes. Absolutely. I hear you. Excellent. Actually, just to clarify your earlier comment, do you think it's the top of the cycle of '28? Are you seeing incremental interest in '29 and '30 given the safe harbor comments you made there? Does it stay at that '28 level or even compound?

I don't know if it compounds, but yes, we expect strong bookings and revenue kind of through the end of the safe harbor period.

Okay. Excellent. I appreciate the forward-looking view.

Next, we'll move to Joseph Osha at Guggenheim Partners.

First, David, congratulations on your interim stewardship here. It's been great working with you. Two questions. Just following up a bit on Julien's question. Are you guys any -- or do you think you're going to see any attempt to surge solar completions in '27 as people try and get in under this place in service deadline? Or is there enough safe harbor that, that just doesn't matter? And then I have a follow-up.

Yes, Joe. On the safe harbor side, no, we've got -- all of our customers are telling us they've got enough safe harbor that they don't see any issues with that.

All right. So no kind of '27 surge that you see, everybody is just plowing ahead because they've got enough safe harbor.

Correct.

Correct.

And then you guys have talked a little bit about some of the single cycle gas business you've got in particular behind defense. I think you said Stargate, I'm just wondering, as you think about your single-cycle gas business going forward, how does that break down between kind of traditional front of the meter peak or and some of these opportunities sitting next to data centers inside defense? And how big could that get?

Well, we're currently working on about four projects, not all of them in data centers, but we all -- we obviously are working on Stargate. We've been awarded and it's been announced also that we're starting to do the Power Gen side on the FERMI project, the one went up there in the Amarillo, Texas area. And so that market for us on the simple cycle can continue to grow. In fact, we've built out several teams getting ready for that surge, and we see a tremendous funnel of opportunities in front of us. I'll let Ken kind of mention a number in a moment because we've looked at potentially how big we think that revenue could get in that market for us next year.

Yes. Joe, I think next year, we grow top line $100 million to $150 million easily, maybe with a little upside to that. And just to kind of firm up what David was saying, there's a lot of moving pieces right now, but I -- going forward, I think it's probably going to be about a third behind the meter. That's a ballpark number and two-thirds stand-alone more brownfield sites that are just either merchant or contracted.

Okay. And guys, can I ask one very quick follow-up. I'm really sorry. As you look at turbine supply, are you finding you have to kind of go to sort of Cat or Atlas Copco or something? Or are you able to -- are your customers able to get turbines from the Big 3?

They're getting in from the Big 3 and from Cat and others. So it depends on the type of turbines and size of turbines they're getting and where they are in the stack.

And next, we'll go to Brent Thielman at D.A. Davidson.

I had a question on the Utility backlog growth has been pretty notable. It looks like Power Delivery a decent part of that this year. And I guess my question, Ken, is, as we think about that becoming potentially a bigger piece of the segment as you convert that business, why wouldn't it be accretive to the margin profile as we look out 12, 24-plus months?

Yes. It will be accretive to the margin profile, especially as we continue to build out our project capabilities that we've talked about. A big chunk of the backlog growth we've seen thus far has been really on the distribution side, which tends to be a little bit lower margin for us. But the project work is coming and it is growing. Some of it's going to be done within the MSAs and some of it's going to be done outside the MSAs.

Got it. And David, since I think you commented on it, that the relationship with FERMI, is a portion of that already in the backlog? Is there more to come? If you could just expand on that, that would great.

No, it wasn't in the backlog. We were awarded on LNTP. It will be in Q4 backlog. So that was part of the projects I was mentioning that we just got awarded in Q4.

We'll go next to Sean Milligan at Needham.

Two questions. The first one real quick on the gas power side and margin expectations there. As you grow that business, do we think about margins being accretive to energy margins on the gross side?

They will be accretive. They're running upper end of that 10% to 12% range.

Okay. Great. And then on the data center piece, I know last quarter, you kind of outlined some of the pipeline there and the bids you had outstanding. And you commented that, I guess, it's mostly outside the box work. Curious about as you transition '26, '27, are you looking at getting inside the box? Can you do that organically by maybe repositioning teams? Or do you need to do that inorganically?

To answer your question, yes, we are looking at getting inside the box. That was one of the strategic initiatives that we put underway that might be a nice type of an acquisition. But from an organic standpoint, we could limitedly get into that. That's probably not the most optimum route for us to get inside that box. And so that's why we're -- we've got that as a strategic from an acquisition perspective.

We'll move next to Adam Thalhimer at Thompson Davis.

Heck of a beat in Q3, congrats. I wanted to ask what you are seeing in the pipeline bidding market and what the potential for Primoris could be there in 2026?

Wow. Well, let me mention this way. I was looking at a sales information the other day, some marketing data and where we might have been seeing -- and I mentioned this on my call, where we might have been seeing $200 million type of opportunities for us for several quarters. If that thing has now went to well over $1 billion to $2 billion plus of types of opportunities in our funnel for the Pipeline side. We are optimistic that we might be able to close some pipeline projects as early as this Q4 and then also some additional ones coming in that Q1, Q2.

So as I mentioned in the comments, what was a headwind has rapidly turned to a tailwind and we're being selective on which ones we actually want to go after to obviously produce the best margin performance we can.

Sounds great. And then in the prepared comments, you also mentioned, I think it was a couple of hundred million of projects for the next couple of quarters, broadband expansion, major network build-outs. So I was hoping you could expand on that also.

Yes. We are seeing more of that. There's a lot of -- in the data center side, there's a lot of fiber in the data center and getting it to the fiber networks. The fiber-to-home is going to slow down a little bit, but we are seeing a tremendous ramp up in the other types of fiber network build outs. So that's looking positive for us to grow that business again next year.

Yes, Adam, that's the fiber loop we've been talking about, the day loops and then also the middle mile stuff that we started doing.

Okay. And the last one for me was just like your traditional civil business. What kind of trends you're seeing there, demand trends?

I love that question because our groups have done a tremendous job in making that unit a very profitable business unit for us. We kept the revenue top line in that -- Ken, do you want to mention it?

Yes, Adam, the revenues have been just kind of gradually growing like $30 million a year. We'll do $550 million to $575 million this year. Next year, we'll probably do $600 million to $625 million or something like that. As we talked about, it's just a good solid cash cow for us. It's generating very good margins, and we just kind of let it run its thing.

The teams that we've got right now, Adam, are performing extremely well in the markets they're in. And like I say, we'll grow the top line a little bit each year and just making sure that, that teams can continue to handle and build out as necessary to keep those margins where we want them. So it's really controlling the margin level more than it is the top line.

[Operator Instructions] Next, we'll go to Avi Jaroslawicz at UBS.

So just in terms of the timing delays of signing awards in Energy, was that pretty even across the verticals? Or was there noise that led to more delays for renewables or pipelines? Is it just around the tariff cost uncertainty? Or were there other factors?

I'll start out and then anything Ken can add as he needs to. But I would tell you, it's more on the Renewables side. As we were looking -- as you know, all that noise that we were getting out there on the One Big Beautiful Bill and the tariffs, it was causing some of our customers to look at a lot of different supply chains, which meant that we had to redo some engineering and look at -- before we could really firm up our cost to them. And so it wasn't a matter, I think I said on my earnings call, that we lost any projects or any projects were delayed or not delayed, but any projects were canceled, it was a matter of we needed that extra timing and so did our customers to get the right supply chain in, so we could firm up the price and get ready to sign those projects. And then indeed, that's what we're talking about happening in Q4 and then also in Q1.

Okay. Got it. And then, Ken, I think you noted that good weather in Q4 could allow you to hit the upper end of guidance. Is there anything that could push you above the upper end? How are you thinking about that? And also, do you have any storm restoration work in Q4 embedded in the guidance?

Yes. We never put storm restoration in any of our forecasts. So there's none in there. And then look, to the upside, it's going to be a weather issue. It's going to be project closeouts, other things like that, that will drive us to the upper end.

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 third quarter and year-to-date 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.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.