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    PRIM
    Earnings call· Jun 2026(Q2 FY26)

    Primoris Services Q2 FY26 earnings call PRIM

    Aug 5, 2026 Source

    Executive summary

    Primoris Q2 FY26 — Record Backlog Amidst Renewables Challenges

    Primoris reported record bookings and backlog in Q2 FY26, driven by strong demand in Utilities and natural gas power generation, and the successful integration of Pain Crest. However, financial results were significantly impacted by cost overruns in a limited number of renewables projects, leading to lower revenue, gross profit, and free cash flow. Management is implementing stricter risk management and expects sequential improvement in the second half of the year as these projects near completion.

    Highlights

    5

    • Secured over $3.9 billion in new awards, including $1.5 billion in Utilities and $2.4 billion in Energy.

    • Total backlog reached a record of just under $13.9 billion, increasing $2.2 billion sequentially.

    • Pain Crest acquisition exceeded expectations, contributing $200 million to backlog and $250 million in new bookings in the quarter.

    • Utilities segment revenue increased 2.8% year-over-year, driven by growth in gas operations and power delivery.

    • Pipeline business delivered double-digit revenue growth with substantial margin improvement.

    Concerns

    5

    • Q2 revenue decreased 10.7% year-over-year to $1.7 billion, primarily due to lower Energy segment activity.

    • Gross profit decreased $149.3 million year-over-year to $82.4 million, resulting in a gross margin of 4.9% (down from 12.3% in prior year).

    • Energy segment gross margins were slightly negative, a significant decline from 10.8% in the prior year, due to renewables project cost overruns.

    • Cash used in operations was $8.7 million, a decrease from $78 million provided by operations in the prior year.

    • Full-year free cash flow guidance was reduced from $350 million-$400 million to $150 million-$200 million.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full-year 2026 EPS
    $1.30 to $1.85
    high materiality
    High
    Full-year 2026 Adjusted EPS
    $2.05 to $2.60
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $275 million to $325 million
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $90 million to $110 million
    medium materiality
    High
    Q4 FY26 Adjusted EBITDA
    $100 million to $120 million
    medium materiality
    High
    Full-year 2026 Energy segment gross margins
    6% to 8%
    medium materiality
    High
    Full-year 2026 SG&A as % of revenue
    a little over 6%
    low materiality
    High
    Full-year 2026 Net interest expense
    $43 million to $47 million
    medium materiality
    High
    Full-year 2026 Effective tax rate
    30% to 32%
    low materiality
    High
    Full-year 2026 Free cash flow
    $150 million to $200 million
    high materiality
    High
    H2 2026 Renewables bookings
    $1.5 billion to $2 billion
    medium materiality
    High
    2027 Natural gas generation revenue
    $800 million to $1 billion
    high materiality
    High
    2027 Energy segment gross margins
    10% to 12%
    high materiality
    High
    Q3 FY26 Leverage ratio (net debt-to-EBITDA)
    a little under 2x
    medium materiality
    High
    FY26 Leverage ratio (net debt-to-EBITDA)
    1.5x
    medium materiality
    High
    2027 Leverage ratio (net debt-to-EBITDA)
    1x
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Utilities
    Driven by higher activity in gas operations and power delivery, partially offset by lower communications revenue and margins due to decreased fiber-to-the-home activity and a shift to maintenance work. Power delivery showed strong performance with improved productivity and a favorable mix of work, including substation and transmission scopes.
    Gross profit change YoY: down $12.4 millionGross margin: 11.9%Gross margin change YoY: down from 14.1%
    		up $19.6 million2.8%—$85.1 million gross profit
    Energy
    Primarily due to decreased renewables activity, project cost overruns, and lower revenues in renewables. Partially offset by increased natural gas generation and pipeline activity, and contributions from Pain Crest. Pipeline delivered double-digit revenue growth with substantial margin improvement.
    Gross profit change YoY: declined $136.9 millionGross margin change YoY: down from 10.8%
    		down $236.9 million19.2%—slightly negative gross margin

    Operational metrics

    19
    Revenue
    $1.7 billiondown 10.7% YoY
    Q2 FY26

    Driven by lower revenue in the Energy segment.

    Gross profit
    $82.4 milliondown $149.3 million YoY
    Q2 FY26

    Driven by lower revenue and margins in the Energy segment and lower margins in the Utilities segment.

    Gross margin
    4.9%down from 12.3% YoY
    Q2 FY26

    Impacted by lower revenue and margins in the Energy segment and lower margins in the Utilities segment.

    SG&A expenses
    $106.3 millionup $1.7 million YoY
    Q2 FY26

    Increased due to amortization expense of intangibles from Pain Crest acquisition.

    SG&A as % of revenue
    6.3%up from 5.5% YoY
    Q2 FY26

    Due to lower revenue and increased amortization expense.

    Net interest expense
    $10.6 millionup $3.1 million YoY
    Q2 FY26

    Due to higher average debt balances attributable to the Pain Crest acquisition, partially offset by lower interest rates.

    Cash used in operations
    $8.7 milliondown from $78 million provided YoY
    Q2 FY26

    Largely driven by lower net income.

    Total liquidity
    $959 million
    Q2 FY26 end

    Includes cash and available borrowing capacity on revolver.

    Cash balance
    $218 million
    Q2 FY26 end

    Part of total liquidity.

    Available borrowing capacity on revolver
    $741 million
    Q2 FY26 end

    Part of total liquidity.

    Trailing 12-month net debt-to-EBITDA
    1.6x
    Q2 FY26 end

    Increased due to Pain Crest acquisition and lower Q2 EBITDA.

    Energy segment pipeline funnel
    over $7 billion
    multi-year

    Multi-year addressable project funnel.

    Natural gas power generation funnel
    over $8 billionup from $6 billion last quarter
    current

    Very strong funnel, with diligent customer and project selection.

    Renewables opportunities funnel
    over $16 billion
    current

    Across core geographic markets.

    Communications BEAD funding tracked
    $300 million
    current

    Line of sight to these programs as traditional fiber-to-the-home transitions.

    Communications business current revenue
    $400 million+
    current

    Current run rate for the business.

    Pain Crest bookings
    $250 million
    Q2 FY26

    New bookings added in the quarter, on top of acquired backlog.

    Incentive compensation reduction
    $5 million to $10 million
    YoY

    Rough estimate for the change in incentive comp this year.

    Natural gas power generation teams
    8 to 9up from half a dozen last year
    today

    Investment in teams due to demand for expertise; demand outstripping supply.

    Industry KPIs

    4
    MetricValueDetails
    Total backlog$13.9 billionUSD
    End market pipeline$16 billionUSD
    Acquisition contribution$200 millionUSD
    Craft skilled labor headcount capacity8 to 9teams

    Orderbook & backlog

    6
    Total backlog$13.9 billionQ2 FY26 end

    up $2.2 billion sequentially

    Record for Primoris.

    Total fixed backlogup $1.5 billionQ2 FY26 end

    from Q1

    Primarily due to strong Energy segment bookings for natural gas generation, industrial, and electrical construction services from Pain Crest.

    Total MSA backlogup $700 millionQ2 FY26 end

    from Q1

    Driven primarily by increased activity in power delivery.

    Renewables backlog$2 billionQ2 FY26 end
    New awards (total)$3.9 billionQ2 FY26

    Includes $1.5 billion in Utilities and $2.4 billion in Energy.

    New awards (Energy segment)$2.4 billionQ2 FY26

    Comprised of approximately $1.4 billion in natural gas power generation, $200 million from Pain Crest acquisition (as of quarter end), and the balance from electrical construction services, industrial infrastructure, and utility scale solar.

    Deals & partnerships

    1
    Pain CrestElectrical Construction Services

    Integrated for two months in Q2 2026. Exceeded expectations in performance. Strategic and cultural fit. Seeing positive momentum through backlog growth and robust pipeline of opportunities with existing customers.

    Risks & headwinds

    4
    Renewables project cost overrunsImpacted Q2 2026, expected to diminish in H2 2026.

    Caused Q2 Energy segment gross margins to be slightly negative (down from 10.8% YoY); decreased gross profit by $136.9 million YoY in Energy segment; reduced full-year FCF guidance by $150 million-$200 million.

    Mitigation: Strengthening operational oversight, enhancing preconstruction planning and risk management processes, sharpening accountability, disciplined project selection, and stricter contract terms. Three projects expected to complete in Q3, final one by year-end.

    Communications business slowdownQ2 2026, expected to ramp up later in 2026.

    Lower revenue and margin YoY in Utilities segment.

    Mitigation: Transitioning to BEAD-funded projects, tracking $300 million in BEAD funding, pursuing data center fiber and connectivity work.

    Labor resource constraintsOngoing.

    Stated as a 'meaningful gate to growth' for Pain Crest and a general constraint in end markets.

    Mitigation: Strategically expanding workforce in key markets, investing in talent development, looking for opportunities to add talent and create teams (e.g., 8-9 gas generation teams).

    Elevated effective tax rateH1 2026.

    Elevated for the first 6 months of 2026.

    Mitigation: Expected full-year effective tax rate to be in the 30% to 32% range.

    What to watch in Q3 FY26

    5

    Renewables project completion

    Q3 2026
    Current2 of 6 projects mechanically complete, 3 expected substantial completion in Q3, final one by year-end.
    TargetSubstantial completion of 3 projects in Q3 2026.

    Why it matters

    Completion of these projects is key to reducing financial impact and restoring profitability in the renewables segment.

    Importantly, we continue to expect that 3 projects will reach substantial completion during the third quarter of 2026.

    Q&A highlights

    7

    Clarification on 'on average' performance of renewables projects, risk of further charges, and assumptions for weather/labor.

    Koti clarified that 'on average' means some projects are performing above and some below expectations, but the six identified projects with cost overruns remain the focus. He confirmed no significant new project delays or re-bids beyond what was previously articulated.

    “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 rest hold margin. So we identified the 6 that were -- have the cost overruns, and those remain the 6 that we continue to be focused on.”

    asked by Steven Fisher · answered by Koti Vadlamudi

    2 min read6 chapters

    Detailed Narrative

    01

    Renewables Project Challenges and Mitigation

    Primoris' Q2 FY26 results were significantly impacted by margin pressure from a limited number of renewables projects. Of the six challenged projects, two have achieved mechanical completion, three are expected to reach substantial completion during Q3 2026, and the final project is anticipated to achieve mechanical completion in early November, followed by substantial completion by year-end. Management is implementing decisive actions to strengthen operational oversight, enhance preconstruction planning and risk management processes, and sharpen accountability to prevent future occurrences.

    02

    Record Bookings and Backlog Growth

    Despite the renewables challenges, Primoris delivered record bookings and backlog in Q2 FY26, underscoring the strength and diversity of its platform. The company secured over $3.9 billion in new awards, comprising approximately $1.5 billion in the Utilities segment and $2.4 billion in the Energy segment. This led to a record total backlog of just under $13.9 billion, representing a sequential increase of approximately $2.2 billion from Q1.

    03

    Utilities Segment Performance and Outlook

    The Utilities segment saw a 2.8% year-over-year revenue increase, driven by strong performance in gas operations and power delivery. Communications revenue and margin were lower as expected, due to a transition from traditional fiber-to-the-home to BEAD-funded projects. However, management is optimistic about the segment's future, with significant bidding activity in communications for late 2026 and 2027, and continued strong demand in power delivery, particularly for transmission and substation work.

    04

    Energy Segment Strength Beyond Renewables

    Outside of the renewables challenges, the Energy segment demonstrated solid operational performance. The Pipeline business delivered double-digit revenue growth with substantial margin improvement, and its multi-year addressable project funnel now exceeds $7 billion. Electrical Construction Services, acquired through the Pain Crest transaction, exceeded expectations, contributing $200 million to backlog and securing an additional $250 million in new bookings during the quarter, with a robust pipeline of opportunities.

    05

    Natural Gas Power Generation Opportunities

    Natural gas power generation was a significant growth driver, accounting for approximately $1.4 billion of the sequential increase in Energy segment backlog. The addressable funnel for this market now exceeds $8 billion. The company expects full-year 2026 revenue for natural gas generation to be in the $500 million to $600 million range, with comfortable growth to $800 million to $1 billion in 2027, supported by early customer procurement and disciplined project selection.

    06

    Strategic Focus and Market Leadership

    Primoris remains committed to successfully completing the remaining renewables projects, maintaining disciplined preconstruction planning, and positioning the business for profitable, sustainable growth. The company sees over $16 billion in solar and battery storage opportunities across its core geographic markets and is leveraging its market leadership, operational capabilities, and customer partnerships to capitalize on significant infrastructure investment opportunities.

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