Primoris Services Balances Solar Setback With Growth

Primoris Services ((PRIM)) has held its Q1 earnings call. Read on for the main highlights of the call.

Primoris Services’ latest earnings call struck a cautious but constructive tone as management balanced near-term pain with longer-term promise. A handful of troubled solar jobs dented revenue, margins, and cash flow, yet executives leaned on strong Utilities and pipeline trends, a major acquisition, and a deep project funnel to argue that the setback is temporary rather than structural.

Solid Utility Segment Growth

Primoris’ Utility segment was a clear bright spot, with revenue rising nearly $70 million year over year, a 12.3% increase that outpaced the broader company. Gross profit improved by $10.4 million and segment margin ticked up to 9.8% from 9.2%, helped by double-digit growth in power delivery and gas operations supported by expanding MSAs and robust utility CapEx.

Pipeline Services and Industrial Momentum

Pipeline services continued to gain traction, posting revenue and gross profit growth of more than 20% versus last year. Industrial margins improved meaningfully as natural gas generation work ramped, reinforcing management’s view that these businesses will help offset renewables weakness and underpin stronger Energy segment performance ahead.

Completed Strategic Acquisition — Paynecrest

The company closed its acquisition of Paynecrest on May 1, adding a diversified electrical and industrial contractor with a sizable data center footprint. Paynecrest’s revenue mix is roughly 40% data centers and more than 40% industrial, power, and renewables, and Primoris expects the deal to be accretive to both revenue and margins, with additional upside tied to a large hyperscaler client.

Strong Liquidity and Conservative Leverage

Primoris emphasized its balance sheet strength, ending the quarter with $676.5 million of liquidity and expanding its revolver to $750 million. Net debt to adjusted EBITDA is expected to sit just under 1.5 times, giving the company ample flexibility to fund organic growth and pursue additional M&A despite higher interest costs from the new term loan.

Maintained Full‑Year Financial Guidance

Despite a tough first quarter, management reaffirmed its full-year adjusted targets, including EBITDA of $480 million to $500 million and adjusted EPS of $4.80 to $5.00. GAAP diluted EPS is forecast in the $4.05 to $4.25 range, reflecting confidence that revenue and margins will recover starting in the second quarter and accelerate into the back half of 2026.

Robust Opportunity Funnel and Backlog Support

The company highlighted a substantial opportunity funnel, with renewables and energy work referenced at about $15 billion and broader line-of-sight opportunities above $7 billion. Management cited nearly $1.1 billion of verbal awards in the second half and around $2.8 billion expected to sign, plus close to $800 million of near-term gas generation awards, supporting an Energy book-to-bill above 1.0 for 2026.

BESS Growth and Data Center Exposure

Battery Energy Storage System opportunities are expanding rapidly, with the funnel measured in megawatt-hours more than quadrupling year over year, and management sees potential for it to more than double again. The company also booked over $400 million of data-center enabling work in the quarter, while Paynecrest adds significant inside-the-facility data center exposure at roughly 40% of its revenue base.

Q1 Revenue and Gross Profit Declines

Headline results were soft, with total Q1 revenue falling 5.4% to $1.6 billion and gross profit dropping 21.1% to $134.7 million. Consolidated gross margin slid to 8.6% from 10.4% a year earlier, underscoring how a relatively small cluster of problem solar projects can heavily impact profitability in a project-driven business.

Energy Segment Weakness Driven by Renewables

The Energy segment bore the brunt of the damage, with revenue down $152.9 million, a 13.8% year-over-year decline. Gross profit fell by $46.4 million and segment margin compressed to 7.6% from 10.7%, primarily due to cost overruns and delays on a small set of renewables projects rather than broad-based deterioration.

Renewables Execution Issues and Financial Impact

Management called out about six solar projects that experienced execution issues, including labor challenges, redesigns, sequencing problems, and weather disruptions. The combined hit is estimated at roughly $110 million, including revenue pushouts, $35 million to $40 million of direct cost overruns, and about $25 million of incremental margin erosion, though renewables revenue is still forecast at around $2.3 billion for 2026.

Backlog and Timing Shifts

Total backlog slipped to $11.6 billion from $11.9 billion at the end of 2025, but the decline was largely about timing rather than demand. Energy backlog fell by $780 million as natural gas, pipeline, and solar awards shifted into later 2026 starts, while Utilities backlog actually increased by $476 million, highlighting ongoing strength in regulated spending.

Operating Cash Flow and Working Capital Pressure

Cash flow was a weak spot, with operations using $122.6 million of cash in the quarter, a deterioration of $188.8 million versus last year. Management attributed most of this to working capital swing factors, particularly reduced accounts payable and lower operating income, describing it as timing noise though it clearly weighed on near-term liquidity metrics.

Higher SG&A and Increased Interest Guidance

Overhead costs inched higher as SG&A rose by $6.3 million to $105.8 million, representing 6.8% of revenue versus 6.0% a year ago. At the same time, net interest expense guidance was raised to $35 million to $38 million from $23 million to $26 million due to an approximate $400 million term loan used to finance the Paynecrest acquisition.

Near‑Term Margin Pressure Expected in Renewables

Primoris warned that renewables margins will take time to normalize, with Q2 expected to show partial recovery and Q3 moving toward normal levels. By the fourth quarter, management aims to approach the 10% to 12% target range, while full-year Energy segment margins are still expected in the high-9% to low-10% area despite drag from the problematic projects.

Forward-Looking Guidance and Outlook

Looking ahead, Primoris reiterated its 2026 framework, including GAAP EPS of $4.05 to $4.25, adjusted EPS of $4.80 to $5.00, and adjusted EBITDA of $480 million to $500 million. Utilities margins are expected to trend toward a 10% to 12% target from the current 9.8%, Energy margins should land in the high-9% to low-10% range, and leverage is projected to stay below 1.5 times even with higher guided interest expense.

Primoris’ call laid out a story of near-term execution headaches but intact demand and strategy, which will matter for investors weighing the stock’s risk-reward. Troublesome solar projects hurt Q1 metrics and will pressure margins in coming quarters, yet strong Utilities and pipeline trends, expanding BESS and data center exposure, and the Paynecrest acquisition collectively support a recovery thesis into 2026 and 2027.