Primoris Services Signals Growth Despite Margin Headwinds

Primoris Services ((PRIM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Primoris Services’ latest earnings call struck a notably upbeat tone, underscoring powerful multi‑year demand drivers, record revenue and backlog, and robust cash generation. Management acknowledged margin pressure and execution hiccups in a handful of projects, but emphasized that a strong balance sheet, quality backlog and planned process improvements position the company for healthier profitability by 2026.

Record Revenue, Earnings and Backlog

Full‑year 2025 revenue climbed to nearly $7.6 billion, up about $1.2 billion or 18.8% from the prior year, while gross profit rose $110 million, an increase of roughly 16%. Total backlog ended the year above $11.9 billion, with nearly $3.0 billion of new bookings in the fourth quarter alone, reinforcing visibility into future growth.

Fourth Quarter Revenue Momentum

Despite margin pressure late in the year, Primoris delivered a solid top line in the fourth quarter, with revenue approaching $1.9 billion. That marked an increase of about $116 million, or roughly 7% compared with the same period in 2024, demonstrating continued demand across key end markets.

Utilities Segment Growth and Margin Gains

The Utilities segment delivered another year of steady expansion, with revenue rising by roughly $253 million, more than 10% year over year. Full‑year Utilities gross profit increased about $51 million, or around 20%, helped by stronger power delivery margins and continued strength in gas operations and communications work.

Energy Segment and Renewables Expansion

Energy revenue surged about 25% in 2025 to nearly $1.0 billion, powered by growth in renewables and natural gas generation projects. Renewables revenue alone grew more than 50% versus 2024, boosted in part by roughly $500 million of work that was pulled forward from 2026 into the current year.

Gas Operations Reach $1 Billion Milestone

Primoris’ gas operations business crossed the $1.0 billion revenue mark for the first time, highlighting the scale of growth in this franchise. Management attributed the milestone to market share gains and expanded capital programs, particularly in the Midwest and Southeast regions where utility investment remains strong.

MSA Backlog Underpins Backlog Quality

Management highlighted the quality of the company’s backlog, pointing to multi‑year master service agreements that provide recurring work. MSA backlog increased more than 20% year over year to roughly $7 billion, representing a substantial portion of the total backlog and underpinning long‑term visibility in Utilities.

Cash Generation and Net Cash Balance Sheet

Operating cash flow reached about $143 million in the fourth quarter and exceeded $470 million for the full year, underscoring improved cash conversion. With $536 million of cash at year‑end and $470 million of long‑term debt, Primoris enters 2026 in a net cash positive position, offering flexibility for investment and risk management.

Improved Financial Efficiency

The company continued to squeeze more efficiency from its cost structure, with SG&A falling to 5.3% of revenue, down from 6.0% a year earlier. Net interest expense also improved meaningfully, decreasing by nearly $37 million to just under $29 million in 2025 thanks to lower debt levels and more favorable rates.

Strategic and Operational Investments

Primoris is investing heavily to support future growth, having increased headcount by more than 2,800 employees during 2025 to staff expanding programs. For 2026, planned capital expenditures are pegged at $120–$140 million, including $90–$110 million for equipment and targeted spending on eBOS capacity and a remote operations control center for O&M.

Battery Storage Emerges as a Growth Driver

Battery storage is becoming a meaningful contributor within the renewables portfolio, with the business growing to more than $250 million in revenue in 2025. Management framed storage as a continuing growth driver that complements solar and other renewable offerings as grid operators look for more flexibility and resilience.

Fourth Quarter Margin Pressure

Despite the strong top line, profitability in the final quarter came under pressure, with gross profit declining $9.6 million, or about 5%, to $175 million. Consolidated gross margin slipped to 9.4% from 10.6% in the prior‑year quarter, highlighting execution challenges in a limited set of projects.

Segment‑Level Q4 Margin Declines

Within Utilities, fourth‑quarter gross profit fell about $7 million, an 8% decline, as segment margins eased to 10.5% from 12.1%. The Energy segment also saw pressure, with Q4 gross profit down roughly $2.8 million and margins dipping to 8.5% from 9.5% in the prior year period.

Renewables Cost Overruns on Select Projects

The main pain point was a few renewables projects where unexpected rock and soil conditions forced extra labor and equipment, driving cost overruns and lower margins in Q4. Management noted that one “sister” project is now in a slight loss position while the other remains profitable, and they believe most of the incremental costs are now captured with margins expected to improve in 2026.

Impact of Reduced Storm Work

Another headwind was a decline in high‑margin storm response work in 2025, which previously bolstered power delivery profitability. Storm work generated about $12 million of adjusted EBITDA in 2025, but management is not assuming any similar storm benefits in its 2026 outlook, making guidance appear relatively conservative.

Pipeline Services in a Cyclical Trough

Pipeline services remained a weak spot, with 2025 described as another trough year and revenue declining for the segment. Management pointed to a larger opportunity funnel of about $3 billion but acknowledged that a rebound in bookings will be needed in 2026 for this business to contribute more meaningfully.

Divestiture and Non‑Core Exit Headwind

Results also reflect the deliberate decision to simplify the portfolio, including the sale of a non‑core industrial business in late 2024. That divestiture created an approximate $75 million revenue headwind in 2025, but it removes lower‑priority operations and allows more focus on core growth platforms.

Short‑Term Execution and Staffing Challenges

Some execution issues traced back to project staff turnover and underappreciated geotechnical risks on certain jobs, which required remedial measures. In response, Primoris is investing in project leadership, front‑end engineering and tighter estimating and controls to reduce the chance of similar surprises on future work.

Seasonality and Working Capital Timing

Management reminded investors that the first quarter is typically the lowest for revenue and net income, especially in the Utilities segment, so results may appear softer early in the year. They also noted that about $100 million of cash collections were pulled into Q4 from Q1 2026, which may shift the timing of working capital and cash flow next year.

Forward‑Looking Guidance and Outlook

For 2026, Primoris guided to GAAP EPS of $5.35–$5.55, adjusted EPS of $5.80–$6.00 and adjusted EBITDA of $560–$580 million, with Utilities and Energy gross margins targeted at 10–12% for the year. Management expects interest expense of $23–$26 million, an effective tax rate around 29%, SG&A in the mid‑to‑high‑5% of revenue range, CapEx of $120–$140 million and operating cash flow trending toward 4–5% of revenue.

Primoris’ call painted a picture of a company balancing near‑term margin volatility against powerful structural growth and a strengthened balance sheet. Record revenue, expanding Utilities and Energy platforms, and rising high‑quality backlog are set against isolated project issues and cyclical pipeline weakness, leaving investors with a cautiously optimistic story as the company targets improved profitability in 2026 and beyond.