Primoris Services Corporation · NYSE:PRIM
Primoris Services — Investor Day (April 2024)
62 slides from Primoris Services's investor day presentation, Apr 3, 2024
Slide 1: Primoris 2024 Investor Day
Primoris 2024 Investor Day April 3, 2024 New York Stock Exchange
Slide 2: Notice to Investors
Notice to Investors This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements give the current expectations of the Company’s management. Words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”
Slide 3: Investor Day 2024 Agenda
Investor Day 2024 Agenda 10:00 AM – 10:05 AM 10:50 AM – 11:05 AM Welcome and Opening Remarks Supporting the Energy Transition Blake Holcomb, VP, Investor Relations Jeremy Kinch, President - Energy 10:05 AM – 10:20 AM 11:05 AM – 11:20 AM Strategic Priorities: Building on a Solid Foundation Creating V
Slide 4: Strategic Priorities: Building on a Solid Foundation
Strategic Priorities: Building on a Solid Foundation Tom McCormick President and Chief Executive Officer 4
Slide 5: Key Messages
Key Messages 1 Industry leader in utility, energy, and renewables infrastructure solutions Core services levered to large and growing end markets driven by 2 long-term secular macrotrends with multi-year growth runway Significant opportunity for implementing operational excellence and 3 best practic
Slide 6: Driven and Experienced Management Team
Driven and Experienced Management Team AN INDUSTRY- LEADING TEAM WITH A TRACK RECORD OF DRIVING GROWTH AND TRANSFORMATION Tom McCormick Ken Dodgen John Perisich Travis Stricker • Extensive public market President & Chief Chief Financial Chief Legal and Chief Accounting experience Executive Officer O
Slide 7: Since Last Investor Day in 2017
Since Last Investor Day in 2017 Key milestones, recognition, and achievements $2 billion Acquisitions of Willbros, Future Infrastructure, and PLH Group Surpassed $2 billion in to bolster Utilities segment Market Capitalization Improved Relisted on MSCI ESG Rating Ranked top five Specialty Contractor
Slide 8: Safety Performance
Safety Performance Primoris Historical Performance vs. Industry Average 3.5 40 3.0 3.0 2.8 35 3.2 3.1 2.5 2.5 2.4 30 2.5 2.4 25 2.0 • Lowered Total Recordable Incident Rate (“TRIR”) to 0.46, 20 or ~80% below the industry average 1.5 15 • Over 260 dedicated Health, Safety, and Environmental professio
Slide 9: The Next Chapter for Primoris
The Next Chapter for Primoris 2011-2017 2018-2023 2024-2026 “Gaining Scale” “Enter High Growth Markets” “Value Creation through Execution” Value creation through IPO in 2008; Established a presence in consistent execution, gaining scale was a primary focus Renewables, Power Delivery, focused capital
Slide 10: Period of Transformation
Period of Transformation Revenue 12-month Backlog Transformed to $5,715 $4,780 High Growth Markets Revenue and backlog shifted from primarily pipeline, heavy civil, and 45% industrial to higher growth utilities 16% 51% 15% and renewables CAGR CAGR Transformed Leadership Higher Growth Higher Growth E
Slide 11: Well-positioned in Markets with Strong Tailwinds
Well-positioned in Markets with Strong Tailwinds Energy Electrification and Reshoring and Transition Modernization Reindustrialization Transition to low-carbon Growing electrical demand Growth of domestic economy driving rapid and an aging grid driving industrial capacity driving adoption of utility
Slide 12: Primoris Strategy Statement
Primoris Strategy Statement Grow gross profit …by investing in growth engines …with consistent execution, at 9% to 12% compound while sustaining foundational focused capital allocation, and annual rate through 2026… business performance… purposeful customer growth Prioritizing profitability over All
Slide 13: Primoris Strategy Roadmap to 2026 Goals
Primoris Strategy Roadmap to 2026 Goals Drive Deliver Direct Operational Consistent Capital to Improvements Performance High Growth to Support in Foundational Opportunities Margins and Businesses Cash Flow Our foundational Operational excellence Strict capital allocation businesses with and efficien
Slide 14: Accelerating Our Strategy Through Disciplined Acquisitions
Accelerating Our Strategy Through Disciplined Acquisitions Legacy Primoris Inorganic Growth Go Forward M&A Strategy Evaluate and score targets Focus on supporting on key financial metrics growth businesses including: with bolt-on • Margin and cash flow acquisitions that Acquisitions Wealth of accret
Slide 15: Building Long-term, Collaborative, and Mutually Beneficial Customer Relationships
Strengthening Customer Centricity Target and Understand the Bid selectively Allocate people Execute with prioritize clients needs and deliver on and resources safety, quality, customers that and objectives commitments to expanding and productivity value our with discipline opportunities partnership
Slide 16: Investment Case in Primoris
Investment Case in Primoris 1 OPPORTUNITY TO EXPAND GROSS MARGINS in high growth markets 2 IMPROVING CASH FLOW PROFILE and leverage ratio 3 FOCUSED ALLOCATION of resources toward highest returns in service portfolio 4 ATTRACTIVE VALUATION compared to companies with comparable end markets Focused on
Slide 17: Key Takeaways
Key Takeaways 1 2 3 4 Industry leader Core markets levered to Significant opportunity Capitalizing on our in utility, energy, large and growing for implementing scale and financial and renewables end markets driven operational excellence position to continue infrastructure solutions by long-term sec
Slide 18: Capitalizing on Utility Megatrends
Capitalizing on Utility Megatrends Colt Moedl President – Utilities 18
Slide 19: Key Messages
Key Messages Positioned portfolio to benefit from investment trends in Power Delivery 1 and Communications Added talent and expertise to execute safe, quality and 2 productive performance 3 Improving mix of high demand and high margin project work Aligned commercial and sales efforts toward partner-
Slide 20: Evolution of Primoris Utilities End Markets
Evolution of Primoris Utilities End Markets Entered Power Delivery market in 2018 through Primoris Utilities Revenue by End Market Willbros acquisition $2,380 $2,024 Increased Master Service Agreement (“MSA”) exposure which has contributed to reduced earnings volatility $1,658 $1,384 $1,366 Entered
Slide 21: Positioning Utilities Segment to Capitalize on Megatrends
Positioning Utilities Segment to Capitalize on Megatrends Reorganized segment from geographic focus to business line and customer organization focus Colt Moedl, President - Utilities 19 years experience in Power Delivery Added talent and expertise with extensive experience in transmission, distr
Slide 22: Utilities Business Lines
Utilities Business Lines Power Delivery Gas Distribution Communications 22
Slide 23: Electrification Megatrends in the U.S.
Electrification Megatrends in the U.S. Power Gas Comms • Generation capacity to grow more than 300 GW (up 37%) by 2030 and 500 GW (up 53%) by 2035 • Retirement of aging plants and load growth driving capacity • Load growth driven by: ̶ Data centers to support emerging technologies ̶ Reshoring / Rein
Slide 24: Organizational Catalyst – Major Projects Team
Organizational Catalyst – Major Projects Team Power Gas Comms OBJECTIVE APPROACH OUTCOME Major Engineering, Assembled elite team Successful completion of Procurement and with years of large project the project to satisfaction Construction (“EPC”) experience of the customer greenfield substation proj
Slide 25: Organization Transformation – Commercial & Sales
Organization Transformation – Commercial & Sales Power Gas Comms The Reorganization Outcome Drivers of Change • Improved customer satisfaction • Customer feedback • Internal processes efficiency • Improved productivity • Prevented market share losses Actions Taken • Realigned commercial teams • Gain
Slide 26: Gas Operations
Gas Operations Power Gas Comms Market Trends Gas Operations Primary Service Markets 2023 Aging infrastructure in need of integrity and replacement work Complements Power Delivery with skilled union & non-union labor Well-established business and customer relationships Continue lower risk MSA work wh
Slide 27: Broadband Expansion on the Horizon
Broadband Expansion on the Horizon Power Gas Comms Communications Primary Service Markets 2023 Market Trends Federal stimulus improving economics for installation in underserved areas Hyper-scalers building and connecting large data centers in major cities Valued customer relationships pulling us to
Slide 28: Utilities Segment Objectives and Initiatives
Utilities Segment Objectives and Initiatives Power Delivery Revenue Mix - MSA/Project Segment Objectives • Allocate capital to high growth, high return opportunities 19% Up to 28% • Improve segment gross margins to 10% to 12% 40% Key Initiatives 81% 72% 60% to 70% • Accelerate Revenue Growth • Power
Slide 29: Key Takeaways
Key Takeaways 1 2 3 4 5 Positioned Added talent and Improving mix of Aligned Open to bolt-on portfolio to benefit expertise to high demand and commercial and acquisitions that from investment execute safe, high margin sales efforts toward increase craft trends in Power quality and project work partn
Slide 30: Maximizing Our Solar Potential
Maximizing Our Solar Potential Stephen Jones President – Renewables 30
Slide 31: Key Messages
Key Messages Opportunity to continue significant success in organic growth in utility-scale 1 solar EPC Best-in-class business model driven by high-functioning teams and 2 strong customer partnerships Substantial revenue growth opportunity through selling adjacent 3 services for future projects and
Slide 32: Renewables Overview
Renewables Overview Primoris Solar Projects Over 50 projects Growing completed or under opportunities construction for in Southwest, Midwest, a total of ~10.9 GW and the Northeast • Average project size over 280 MWdc Diverse range Activity in thirteen of customers states with highest with no single
Slide 33: The Primoris Solar Success Story
The Primoris Solar Success Story Solar Revenue Growth ($Bn) $1.4 $1.3 • Primoris renewables has grown revenue nearly 10x $1.2 since 2019 $1.0 $0.9 • Utility scale market a little over 10x 2x during the same period $0.8 Growth • We have grown from a single $0.6 customer to more than 14 at $0.5 year e
Slide 34: Success Starts with Building a Great Team
Success Starts with Building a Great Team • Senior leadership brings extensive expertise in renewable energy construction with a strong AT T R A C T focus on EPC projects in solar, battery storage, and wind • Attracting and retaining talent by a track record of safety, winning work and successful DE
Slide 35: Driving Growth through Strong Customer Partnerships
Driving Growth through Strong Customer Partnerships We listen to our customers’ needs and form a partnership around serving those needs • Most of our client relationships are 10+ years old • Our reputation and execution track record gains wallet share and allows us to be selective in new customer ad
Slide 36: How Our Unique Approach Creates Value for All Stakeholders
How Our Unique Approach Creates Value for All Stakeholders ACTION INTENDED OUTCOME We ensure safety, quality, productivity, manage Self-perform 90% of any given scope of work risk, and maintain standards Vigorously qualify our clients, focus on the Build a partnership that is right-fit and relations
Slide 37: Expanding Our Customer Offering
Expanding Our Customer Offering Strong customer relationships drive growth opportunities within existing installed base • Utility / Distributed Scale Solar ̶ Currently represents >90% of Renewables revenue • Battery Energy Storage Solutions (BESS) ̶ Over 1.7 GWh of projects completed or under constr
Slide 38: Case Study – Cross-Selling Services Project
Case Study – Cross-Selling Services Project OPPORTUNITY STRATEGY RESULT Customers developing Engaging our internal One single contract for more projects with businesses to build entire EPC scope need for high voltage these scopes substations and Exposes customer to transmission Package full-service
Slide 39: Maximizing Our Solar Potential
Maximizing Our Solar Potential • Targeting growth of $300M to $400M per year U.S. Utility-Scale Solar Installations (GWdc) 40 over the next three years with consistent margins 8% 30 CAGR • EPC project team growth of 3 to 5 teams per 20 year expected to achieve growth targets. Stay disciplined 10 in
Slide 40: Key Takeaways
Key Takeaways 1 2 3 4 5 Opportunity to Best-in-class Substantial Cross-selling Robust $8.0 continue significant business model revenue growth presents billion project success in organic driven by high- opportunity opportunity to sales funnel and growth in utility- functioning through selling improve
Slide 41: Supporting the Energy Transition
Supporting the Energy Transition Jeremy Kinch President – Energy 41
Slide 42: Key Messages
Key Messages Scope and timing of the energy transition in North America will require 1 continued investment in traditional power generation sources Supply chain reshoring and reindustrialization expected to drive 2 increased demand for manufacturing and safe, reliable energy Foundational businesses
Slide 43: Energy Business Overview
Energy Business Overview Energy Businesses Revenue by End Market $2,500 $1,900 $2,000 $2,000 • Operations consist of three main $1,583 $1,458 $1,329 business lines: Industrial $1,500 construction, Heavy civil and Pipeline $1,000 $500 • Industrial construction has seen strong growth off the 2021 low
Slide 44: Energy Transition in the U.S.
Energy Transition in the U.S. • U.S. has an ambitious goal to reduce Natural gas to remain 34% to 37% of emissions while meeting increasing U.S. generation through 2050, 41% in 2023 demand for energy • The transition will take time and require a Estimated $20 Billion of CO2 transport & storage and l
Slide 45: Enabling the Energy Transition
Enabling the Energy Transition • Increasing number of opportunities that support Natural gas North America’s transition to more efficient lower an attractive carbon sources of energy ~$27 Billion baseload in addressable generation • Growing demand for energy and government market alternative incenti
Slide 46: Case Study – Natural Gas Repowering
Case Study – Natural Gas Repowering ISSUE SOLUTION RESULT Community in need of Replace aged, unreliable, Client meets emissions more generation capacity inefficient, and high- goals, lowers maintenance to meet growing demand maintenance equipment costs, and reduces need to with new technology import
Slide 47: Industrial Reshoring in the U.S.
Industrial Reshoring in the U.S. • Global pandemic and geopolitical risks have led to industry and government supply chain rethinking Shorter lead times Over $1 trillion in • Federal legislation providing tax and more flexible immediate appropriations incentives and subsidies to make and responsive
Slide 48: Supporting Industrial Reshoring
Supporting Industrial Reshoring Early stages of reshoring • Reshoring themes are likely to benefit quality Multiple trend suggests contractors with available labor and Power industries multiple years Delivery capabilities including of investment technology, • Geographically well-positioned in areas
Slide 49: Case Study – Industrial Reshoring
Case Study – Industrial Reshoring PROBLEM SOLUTION BENEFITS Construct the only Developed detailed Key industry brought to the manufacturing facility of execution plan with client U.S. and is now operational graphite-based active anode material (AAM) in the U.S. Able to execute prevailing Only vertic
Slide 50: Energy Business Objectives
Energy Business Objectives • Capitalize on opportunities to enable the Energy Business Revenue Outlook energy transition and accelerate reshoring $2,500 of manufacturing -3% to 0% • Be selective on projects, exercise discipline $2,000 CAGR in bidding and deliver solid execution to prevent cost overr
Slide 51: Key Takeaways
Key Takeaways 1 2 3 4 5 Scope and timing Supply chain Foundational Extensive Well-positioned of the energy reshoring and businesses showing track record with transition in reindustrialization signs of improving of successful apprenticeship North America will expected to drive project activity constr
Slide 52: Creating Value through Disciplined Capital Allocation
Creating Value through Disciplined Capital Allocation Ken Dodgen Chief Financial Officer 52
Slide 53: Key Messages
Key Messages 1 Positioned for profitable growth and improved cash flow generation Focused on building our market-leading positions within the high growth 2 Renewables and Power Delivery markets Reinforcing our balance sheet strength to unlock future capital for growth 3 investments and returning cap
Slide 54: Positioned for Profitable Organic Growth
Positioned for Profitable Organic Growth • Strategy has positioned Primoris to Revenue Growth Target ($B) capitalize on growth trends in key $7.5 $6.4 to $6.8 4% - 6% markets $6.0 $5.7 CAGR • Revenue compound annual growth rate $4.5 $3.0 in the 4.0% to 6.0% range $1.5 ̶ Led by Renewables and Power D
Slide 55: Cash Flow Generation
Cash Flow Generation Operating Cash Flow ($M) and Margin (%) • Deliver operating cash flow $400 6.0% margin of 4% to 5% by 2026 $300 4.5% ̶ Favorable revenue mix 3.5% ̶ Contract terms ̶ Internal billing and $200 3.0% collection efforts 2.3% 1.9% • Net capital expenditures $100 1.5% expected to range
Slide 56: Capital Allocation Priorities
Capital Allocation Priorities Capital allocation focused on four primary areas to drive shareholder value: Support organic growth by disproportionately Investing in the allocating capital toward our most attractive markets Business of Renewables and Power Delivery Deploy cash flow to pay down debt,
Slide 57: Managing Leverage
Managing Leverage Achieving leverage ratio target will enable future investments 1 • Target trailing twelve-month Trailing 12-month Net Debt / Adjusted EBITDA Net debt / Adjusted EBITDA multiple of 1.5x 3.5x 3.0x • Working capital needs, seasonality or tuck-in acquisitions expected drivers of 2.5x a
Slide 58: Acquisition Drivers and Criteria
Acquisition Drivers and Criteria Acquisitions will continue to play a role in the growth of Primoris Financial Metrics Current Targets STRATEGIC FIT Accretive to Revenue Growth >7% Aligns with one or more Accretive to Operating Income Margins >5% strategic initiatives Cost Synergies Year 1 Attra
Slide 59: Summary of Target Financial Metrics 2024 to 2026
Summary of Target Financial Metrics 2024 to 2026 REVENUE GROSS PROFIT ADJUSTED TARGET GROWTH GROWTH EBITDA OPERATING NET DEBT / GROWTH OF CASH FLOW ADJUSTED 4% TO 6% 9% TO 12% MARGIN OF EBITDA TARGET 9% TO 12% UTILITIES 4% TO 5% OF 2% TO 4% BY 2026 1.5x ENERGY 8% TO 10% 59
Slide 60: Narrowing the Valuation Gap
Narrowing the Valuation Gap Primoris trades at a discount to companies with similar end markets, presenting an opportunity for share price appreciation through successful execution of our strategy 3Y CAGR (%) Primoris Peer Median 3Y Average (% of Revenue) Primoris Peer Median Revenue 27.8% 22.8% SG&
Slide 61: Investment Case in Primoris
Investment Case in Primoris 1 OPPORTUNITY TO EXPAND GROSS MARGINS in high growth markets 2 IMPROVING CASH FLOW PROFILE and leverage ratio 3 FOCUSED ALLOCATION of resources toward highest returns in service portfolio 4 ATTRACTIVE VALUATION compared to companies with comparable end markets Focused on
Slide 62: Q&A Panel Discussion
Q&A PANEL DISCUSSION 62