Primoris Services NYSE: PRIM reported lower second-quarter revenue and profitability as cost overruns and reduced activity in its renewables business weighed on results, while the company pointed to record bookings and backlog across utility, natural gas generation, pipeline and electrical construction markets.
Revenue for the second quarter was just under $1.7 billion, down approximately $200 million, or 10.7%, from the prior-year period. Chief Financial Officer Ken Dodgen said the decline was driven by a 19.2% decrease in energy-segment revenue, primarily reflecting lower renewable activity. Higher natural gas generation and pipeline activity, along with contributions from the PayneCrest acquisition during May and June, partially offset the decline.
The utility segment generated revenue growth of $19.6 million, or 2.8%, driven by gas operations and power delivery. That growth was partly offset by reduced communications revenue as fiber-to-the-home programs transition toward BEAD-funded projects.
Renewables Projects Continue to Pressure Margins
Gross profit fell to $82.4 million from the prior year, while gross margin declined to 4.9% from 12.3%. The energy segment posted slightly negative gross margin during the quarter, compared with 10.8% a year earlier, as renewable-project cost overruns and lower renewable revenue outweighed improvements in pipeline and contributions from PayneCrest.
President and Chief Executive Officer Koti Vadlamudi said the second quarter reflected “the majority of the impact” from a limited number of renewable energy projects experiencing margin pressure. The company identified six projects with cost overruns. Two are now complete, three are expected to reach substantial completion in the third quarter, and the final project is expected to achieve mechanical completion in early November and substantial completion by year-end.
Vadlamudi said the remaining renewables portfolio, which includes more than two dozen projects, is performing within expectations on average. He said many projects are delivering margins above their original estimates, while some are modestly below original margins. The six identified projects remain the focus of the company’s remediation efforts.
Primoris expects energy-segment gross margins of 6% to 8% for full-year 2026. Dodgen said margins are expected to improve sequentially, with energy margins in a 6% to 8% range in the third quarter and an 8% to 10% range in the fourth quarter. Management expects the segment to return to its historical 10% to 12% margin range in 2027.
Vadlamudi said the company has strengthened operational oversight, pre-construction planning, risk management and accountability in response to the renewable-project issues. He also said Primoris intends to maintain discipline in project selection, geographical markets and contract terms.
Record Backlog Supported by Gas Generation and Utilities
Primoris secured more than $3.9 billion in new awards during the quarter, including approximately $1.5 billion in the utility segment and $2.4 billion in the energy segment. Total backlog ended the quarter at just under $13.9 billion, a company record and an increase of roughly $2.2 billion from the first quarter.
Energy bookings were led by approximately $1.4 billion in natural gas power-generation awards. Vadlamudi said those awards were all for simple-cycle projects in Texas, Missouri and Nevada. The company’s natural gas generation opportunity funnel has grown to more than $8 billion, and management said customers are pursuing projects earlier because skilled labor and other resources are constrained.
Dodgen said Primoris expects natural gas generation revenue of about $500 million to $600 million in 2026 and expects revenue in the business to rise to roughly $800 million to $1 billion in 2027, supported by signed backlog and potential additional awards. The company has expanded its natural gas generation capabilities from roughly six teams last year to eight or nine teams currently, according to Vadlamudi.
The company said it also began the third quarter with additional bookings in natural gas generation and pipeline work that should support growth in 2027. Primoris’ pipeline opportunity funnel exceeds $7 billion in total contract value, with larger-diameter opportunities expected to ramp in late 2027 and early 2028.
In utilities, management cited continued demand for power-delivery work, including transmission, substation and distribution projects. MSA backlog increased about $700 million sequentially, primarily due to power-delivery activity. Power delivery posted higher revenue and margins year over year, supported by improved productivity and a favorable mix of transmission and substation work.
PayneCrest Exceeds Early Expectations
Electrical construction services acquired through PayneCrest exceeded Primoris’ expectations in its first two months within the company, management said. PayneCrest contributed approximately $200 million of backlog at quarter-end, while the company also referenced roughly $450 million of acquired PayneCrest backlog in discussing quarterly energy bookings. PayneCrest added $250 million in bookings during the quarter, according to Vadlamudi.
Management described the integration as a “light touch” approach, saying PayneCrest has historically operated conservatively and has attractive relationships with industrial customers and hyperscale data-center clients. Vadlamudi said the primary constraint on growth for the business is labor resources rather than demand.
Communications activity remained softer as customers transition traditional fiber-to-the-home programs toward BEAD funding. However, Primoris said it is tracking several hundred million dollars in BEAD-related opportunities and continues to pursue data-center fiber and connectivity work. The company’s communications business currently generates more than $400 million annually, according to management.
Guidance Maintained, Cash Flow Outlook Reduced
Primoris maintained its full-year 2026 outlook for EPS of $1.30 to $1.85, adjusted EPS of $2.05 to $2.60 and adjusted EBITDA of $275 million to $325 million. The company expects second-quarter results to represent the year’s low point and forecast adjusted EBITDA of $90 million to $110 million in the third quarter and $100 million to $120 million in the fourth quarter.
Dodgen said the company now expects free cash flow of approximately $150 million to $200 million for 2026, compared with its prior forecast of $350 million to $400 million, with the difference primarily attributable to the renewable projects.
Liquidity stood at $959 million at quarter-end, including more than $218 million of cash and approximately $741 million of available revolver capacity. Net debt to EBITDA was 1.6 times at the end of the second quarter. Management expects leverage to rise modestly in the third quarter before declining as earnings and cash flow improve in the fourth quarter and 2027.
About Primoris Services (NYSE:PRIM)
Primoris Services Corporation, a specialty contractor company, provides a range of construction, fabrication, maintenance, replacement, and engineering services in the United States and Canada. It operates through three segments: Utilities, Energy/Renewables, and Pipeline Services. The Utilities segment offers installation and maintenance services for new and existing natural gas distribution systems, electric utility distribution and transmission systems, and communications systems. The Energy/Renewables segment provides a range of services, including engineering, procurement, and construction, as well as retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, and maintenance services to renewable energy and energy storage, renewable fuels, petroleum, refining, and petrochemical industries, as well as state departments of transportation.
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