Skip to content
    PRIM
    Earnings call· Mar 2026(Q1 FY26)

    Primoris Services Q1 FY26 earnings call PRIM

    May 6, 2026 Source

    Executive summary

    Primoris Services Corporation Q1 FY26 — Renewables Challenges Offset by Strong Utility Performance and Strategic Acquisition

    Primoris Services Corporation faced headwinds in Q1 FY26 due to cost overruns and timing shifts in a limited number of solar projects, leading to reduced gross profit and a lowered full-year outlook. However, the Utility segment delivered strong top-line growth and improved margins, while the strategic acquisition of PayneCrest expanded capabilities in high-growth end markets like data centers. Management is confident in addressing the renewables issues and leveraging strong demand across other segments for a stronger second half of 2026 and beyond.

    Highlights

    5

    • Utility segment revenue up 12.3% year-over-year, driven by Power Delivery and Gas Operations.

    • Utility segment gross margins increased to 9.8% from 9.2% in the prior year.

    • Pipeline Services revenue and gross profit up more than 20%, indicating emergence from cyclical trough.

    • PayneCrest acquisition closed, adding accretive revenue and margin growth, with 40% of revenue from data centers.

    • Strong liquidity of $676.5 million at quarter-end, with net debt-to-EBITDA ratio expected to remain just under 1.5x.

    Concerns

    5

    • Gross profit down 21.1% year-over-year to $134.7 million due to renewables project cost pressures.

    • Gross margins declined to 8.6% from 10.4% in the prior year.

    • Renewables revenue expected to be approximately $2.3 billion for FY26, a reduction from prior expectations.

    • Energy segment gross profit decreased $46.4 million year-over-year, with margins at 7.6% compared to 10.7% prior year.

    • Full-year adjusted EPS guidance lowered to $4.80-$5.00, reflecting a $110 million EBITDA reduction at the midpoint versus prior guidance.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year Diluted EPS
    $4.05-$4.25
    high materiality
    High
    Full-year Adjusted EPS
    $4.80-$5.00
    high materiality
    High
    Full-year Adjusted EBITDA
    $480M-$500M
    high materiality
    High
    Full-year Renewables Revenue
    approximately $2.3B
    high materiality
    High
    Full-year Net Interest Expense
    $35M-$38M
    medium materiality
    High
    Q2 Effective Tax Rate
    approximately 29%
    low materiality
    High
    Full-year Effective Tax Rate
    around 28%-29%
    low materiality
    High
    Full-year SG&A as % of Revenue
    mid- to high 5% range
    medium materiality
    High
    Energy Segment Gross Margins
    high 9% to low 10% range
    medium materiality
    High
    Utility Segment Gross Margins
    10%-12% range
    medium materiality
    High
    Energy Segment Book-to-Bill
    exceed 1x
    medium materiality
    High
    Operating and Free Cash Flow
    holding firm on our expectation
    medium materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Utility
    Strong year-over-year top line growth and solid operational performance. Improvement driven by higher revenue in power delivery and new service program awards for gas utilities. Margins increased from 9.2% in prior year. Expects margins to increase in Q2 and Q3 due to normal seasonality and trend towards 10%-12% full-year target.
    Gross profit: $62MGross margin YoY change: +0.6 percentage points
    		$630.9M12.3%—9.8%
    Utility - Gas Operations
    Supported by new awards in the Southeast and higher design build volumes in the Midwest. Margins slightly lower due to project mix.
    Gross profit: up
    		—double digits—slightly lower
    Utility - Communications
    Profitability driven by improved productivity and reduced direct labor costs. Seeing increased opportunities in fiber associated with data center build-outs. Anticipates lower volumes in fiber-to-the-home programs starting Q2 as they transition to BEAD-related build-outs.
    		mostly flat——meaningfully improved
    Utility - Power Delivery
    Strong execution on increased activity. Seeing meaningful volume increases in Texas and the Southeast, particularly in transmission and substation work, which is generally accretive to margins.
    		double digits——double digits
    Energy
    Primarily driven by lower revenue and gross profit in renewables due to cost overruns and delays. Partially offset by improved performance in industrial and pipeline services. Expects margins to begin improving in Q2, supported by new project starts and PayneCrest contribution, targeting high 9% to low 10% for the full year.
    Gross profit: $72.7MGross profit YoY change: -$46.4MGross margin YoY change: -3.1 percentage points
    		$978.1M-13.8%—7.6%
    Energy - Industrial
    Driven by higher natural gas generation activity.
    		———improved meaningfully
    Energy - Pipeline Services
    On track to emerge from the cyclical trough experienced in 2025. Expecting growth this year with new awards materializing in coming quarters, with more substantial growth in 2027 and 2028.
    		up more than 20%——up more than 20%

    Operational metrics

    17
    Revenue
    $1.6B-5.4%
    Q1 FY26

    Decrease of $88.2 million from prior year, primarily driven by lower revenue in the Energy segment, partially offset by solid growth in the Utility segment.

    Gross Profit
    $134.7M-21.1%
    Q1 FY26

    Down $36 million from prior year, due to lower revenue and margins in the Energy segment, partially offset by higher revenue and margins in the Utility segment.

    Gross Margin
    8.6%vs 10.4% prior year
    Q1 FY26

    Decline from prior year due to renewables project issues.

    SG&A Expense
    $105.8M+$6.3M
    Q1 FY26

    Increase driven by higher personnel costs, including increased stock compensation expense.

    SG&A as % of Revenue
    6.8%vs 6% prior year
    Q1 FY26

    Largely reflecting the decrease in revenue this quarter.

    Net Interest Expense
    $4.6M-$3.2M
    Q1 FY26

    Decrease from prior year driven by lower debt balances.

    Effective Tax Rate
    12.7%
    Q1 FY26

    Due to a one-time tax benefit on equity compensation recognized in the quarter.

    Cash Used in Operations
    $122.6M-$188.8M
    Q1 FY26

    Primarily driven by a reduction in accounts payable as well as lower operating income during the quarter. Management expects this to be mostly timing related.

    Liquidity
    $676.5M
    Q1 FY26 end

    Maintained strong liquidity.

    Net Debt-to-EBITDA Ratio
    just under 1.5x
    post PayneCrest close

    Expected to remain just under 1.5x after the PayneCrest acquisition and increased revolver.

    Renewables Verbal Awards
    $1.1B
    near-term

    Verbal awards expected to be signed in the second half of 2026.

    Renewables Funnel
    over $15B
    2026 and beyond

    Undiscounted total funnel, indicating strong market outlook.

    Gas Power Generation Verbal Awards
    $800M
    imminent

    Verbal awards expected to be added to backlog imminently.

    Gas Power Generation Funnel
    $3B
    FY26

    Additional funnel being pursued in 2026.

    Gas Power Generation Funnel
    over $7Bup from $6B last quarter
    in perpetuity

    Overall funnel of identified opportunities, showing strong market.

    Data Center Related Bookings
    over $400M
    Q1 FY26

    Related to enabling infrastructure, compared to over $850 million for all of last year.

    Share Buyback Authorization
    $150M
    current

    Remaining authorization for share repurchases.

    Industry KPIs

    4
    MetricValueDetails
    Total backlog$11.6BUSD
    Book to bill ratioexceed 1xx
    End market pipelineover $15BUSD
    Acquisition contributionPayneCrest

    Orderbook & backlog

    4
    Total Backlog$11.6BQ1 FY26 end

    vs $11.9B at 2025 end

    Energy Segment Backlogdecreased $780MQ1 FY26 end

    Primarily due to timing of new natural gas generation, pipeline, and solar awards, which were expected to be softer in Q1 after a strong Q4.

    Utilities Backlogincreased $476MQ1 FY26 end

    from year-end

    Driven by continued growth in MSA work, rising customer demand, particularly in power delivery as utilities accelerate capital programs.

    Energy Segment Book-to-Billexceed 1xFY26

    Anticipated for the full year 2026, with the majority of bookings occurring in the second half of the year.

    Deals & partnerships

    1
    PayneCrestAcquisition of a St. Louis-based Union electrical contractor providing design, construction, and service solutions.

    Closed on May 1, 2026, in line with expectations. Enhances opportunities for cross-selling and expands service breadth. Has flexibility to expand geographically. Potential for meaningful upside should additional scope with a large hyperscaler customer be finalized.

    Risks & headwinds

    4
    Renewables project cost pressures and execution challengesQ1 FY26, with lingering effects into Q2 and Q3, one project into Q4 FY26

    Impacted Q1 gross profit and margins; $35M-$40M in Q1 cost overruns, plus $25M in lower margins to finish jobs.

    Mitigation: Targeted leadership changes, added experienced talent to preconstruction, estimating, and project management. Adjusted market expansion approach to avoid new work in problematic geographies. No new contracts in these geographies since H2 2024. Risk-assessed portfolio.

    Timing shifts in new project bookings and revenue recognitionQ2-Q3 FY26

    Certain bookings originally anticipated in Q2 moved to Q3; revenue from projects booked late 2025 recognized later. Renewables revenue expected to be ~$2.3B for FY26 (down from prior expectations).

    Mitigation: Strong funnel of opportunities and verbal awards in Energy segment expected to convert to bookings in H2 2026. LNTP status allows for early work and equipment ordering.

    Complexity associated with new geographic labor marketsH2 2024 projects, impacting Q1 FY26 results

    Contributed to cost overruns and execution issues on renewables projects.

    Mitigation: Adjusted market expansion approach; not pursuing new work in geographies where first-time entry contributed to issues. Will use better discrimination going forward.

    Uncertainty around tax credits and project re-engineering in renewablesOngoing, impacting 2026 bookings and revenue recognition

    Caused delays in project starts and bookings.

    Mitigation: Working with customers on cost estimates and preconstruction planning. Maturing design solutions for better predictability in cost and schedule.

    What to watch in Q2 FY26

    5

    Renewables project completion

    Q2 FY26
    Current6 projects in margin compression scenario, 3 completing in next few weeks, 1 in next quarter, 1 in Q4 FY26
    TargetSubstantial completion of projects as scheduled

    Why it matters

    Successful completion of these projects is key to mitigating further margin impacts and demonstrating the effectiveness of new risk management strategies.

    Most of the projects that had this margin compression are nearing substantial completion in the next few weeks, and 1 in the fourth quarter at the end of this calendar year.

    Q&A highlights

    5

    Asked for a breakdown of the $110 million EBITDA reduction from prior guidance and clarification on the $700 million year-over-year decline in renewables revenue, specifically regarding backlog conversion.

    Ken Dodgen attributed the EBITDA reduction to $45 million from renewables revenue pushout, $35-$40 million from Q1 cost overruns, and $25 million from lower margins on project completion. Koti Vadlamudi explained the renewables revenue decline was due to a $300-$400 million pull-forward of a project into 2025 and continued ripple effects from 2025 disruptions (tax credit clarity, project re-engineering). He noted $1.1 billion in verbal awards and $2.8 billion in H2 2026 signings for renewables.

    “Yes, look, $300 million to $400 million is the pull forward of that 1 project that we've talked about all last year, 1 project that was supposed to be end 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.”

    asked by Lee Jagoda · answered by Ken Dodgen

    3 min read6 chapters

    Detailed Narrative

    01

    Renewables Project Challenges and Mitigation

    Primoris experienced cost pressures and lower gross profit in Q1 FY26 due to a small number of solar projects. These issues stemmed from execution factors like labor issues, project redesigns, sequencing adjustments, and weather disruption🌐s, primarily on projects executed in H2 2024. Management identified preconstruction planning gaps and complexity in new geographic labor markets as key drivers. Decisive actions include leadership changes, strengthening preconstruction and project management functions, and adjusting market expansion to avoid high-risk geographies. The majority of impacted projects are expected to be substantially complete in 2026, with one lingering into Q4.

    02

    Utility Segment Outperformance

    The Utility segment delivered strong year-over-year top-line growth and solid operational performance, leading to improved margins in Q1. Gas operations saw double-digit revenue growth supported by new awards and higher design-build volumes. Power Delivery continued strong execution with double-digit revenue and margin growth, driven by increased transmission and substation work in Texas and the Southeast. The segment expects further revenue and margin expansion in Q2 and Q3 due to seasonality and increased activity, targeting the midpoint of its 10%-12% full-year margin range.

    03

    Energy Segment Performance (Ex-Renewables) and Pipeline

    Despite renewables challenges, the rest of the Energy segment performed solidly. Industrial margins improved meaningfully due to higher natural gas generation activity. Pipeline Services saw revenue and gross profit up over 20%, signaling emergence from a cyclical trough. The company anticipates a significant increase in project awards across natural gas generation and solar in coming quarters, with many projects in limited notice to proceed (LNTP) status. Management expects final awards to accelerate in Q3, setting up strong growth for 2027.

    04

    PayneCrest Acquisition and Strategic Rationale

    Primoris successfully completed the acquisition of PayneCrest, a St. Louis-based Union electrical contractor, on May 1. PayneCrest provides design, construction, and service solutions across diverse end markets, with approximately 40% of revenue from data centers and another 40%+ from industrial, power, and renewables infrastructure. The acquisition enhances cross-selling opportunities, expands service breadth, and offers significant long-term growth potential, particularly with a large hyperscaler customer. Expectations for revenue and earnings contribution remain unchanged, with potential upside from additional scope.

    05

    Capital Allocation and Financial Flexibility

    The company maintains a strong balance sheet with $676.5 million in liquidity at quarter-end. The revolver was increased to $750 million in conjunction with the PayneCrest acquisition, with the net debt-to-EBITDA ratio expected to remain just under 1.5x. This provides flexibility for organic growth investments and strategic M&A. Primoris has a $150 million share buyback authorization and remains disciplined in its leverage ratio and evaluation of inorganic opportunities that align with strategic and financial objectives.

    06

    Market Outlook and Future Growth

    Despite near-term renewables challenges, Primoris remains optimistic about the solar market outlook, with a total funnel of over $15 billion. The gas power generation market is also very strong, with $800 million in verbal awards and a $7.1 billion funnel beyond 2026. The company is refreshing its 3-year strategy and plans an Investor Day to discuss targets for FY27-FY29, highlighting confidence in its ability to capitalize on secular tailwinds and deliver long-term shareholder value.

    AI-generated summary of the company’s earnings call. Not investment advice.