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    Primoris Services (PRIM)

    PRIM Q2 2025: $1.7B Data Center Pipeline; 10–12% Margin Guidance

    Reported on Aug 6, 2025 (After Market Close)
    Pre-Earnings Price$108.59Last close (Aug 5, 2025)
    Post-Earnings Price$108.77Open (Aug 6, 2025)
    Price Change
    $0.18(+0.17%)
    • Expanding Data Center Opportunity: Management highlighted a $1.7 billion work pipeline in the data center space, with an already shortlisted portion of about $400–$500 million expected to contract by year-end. This incremental opportunity, which is above original base plan assumptions, underscores strong growth potential in a rapidly expanding market.
    • Robust Utility Segment Performance: The utility segment is benefiting from strong MSA-driven work—especially in Power Delivery—resulting in improved margins and increased customer spend even amid seasonality. This momentum indicates that the business is well positioned for continued margin expansion and revenue growth.
    • Disciplined Capital Allocation and Growing Order Pipeline: Continued focus on working capital improvements, debt reduction, and strategic M&A, alongside a robust backlog in gas, renewables, and pipeline projects, supports a bullish view on future cash flows and overall growth prospects.
    • Margin Pressure & Seasonality: The transcript noted that Q2 margins were boosted by one‐off items (e.g., $6,000,000 from project closeouts) and cautioned that Q3 and especially Q4 (a traditionally weak quarter) may experience lower margins due to seasonality and reduced closeout effects.
    • Uncertainty in Incremental Revenue Sources: While there is promise in the $1,700,000,000 data center pipeline and $2,500,000,000 renewables target, much of this work is bid-based and incremental relative to previous expectations, which creates uncertainty on whether these opportunities will fully materialize or could be delayed.
    • Pipeline & Project Execution Risk: Comments on pipeline activity indicated potential variability in project load, with some projects only in the early stages of bidding and a cautious outlook for pipeline revenue growth, suggesting risks that not all forecasted projects will convert as expected.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    EPS Guidance

    FY 2025

    $3.70 to $3.90 per share

    $4.4 to $4.6

    raised

    Adjusted EPS Guidance

    FY 2025

    $4.20 to $4.40 per share

    $4.9 to $5.1 per share

    raised

    Adjusted EBITDA Guidance

    FY 2025

    $440 million to $460 million

    $490,000,000 to $510,000,000

    raised

    SG&A as a Percent of Revenue

    FY 2025

    approximately 6% of revenue

    Just below 6%

    lowered

    Gross Capital Expenditures

    FY 2025

    no prior guidance

    $100,000,000 to $120,000,000

    no prior guidance

    Interest Expense Guidance

    FY 2025

    no prior guidance

    $33,000,000 to $37,000,000

    no prior guidance

    Operating Cash Flow

    FY 2025

    no prior guidance

    $250,000,000 to $300,000,000

    no prior guidance

    Utility Segment Gross Margin

    FY 2025

    no prior guidance

    10% to 12%

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Renewables Growth

    Consistently highlighted in Q1 2025, Q4 2024, and Q3 2024 with record revenues, strong backlog and high market demand even as battery storage and weather impacts were noted

    Q2 2025 emphasized robust revenue growth fueled by renewables with a pull‐forward of revenue and noted challenges such as deceleration in battery storage due to tax credit and material supply issues

    Stable growth with positive outlook yet moderated by near-term battery storage concerns.

    Pipeline Development

    In Q1 2025 and Q4 2024, pipeline segments were described as under pressure with revenue declines or low activity, while Q3 2024 noted cost controls and efficiency gains despite lower margins

    Q2 2025 reports improving near-term outlook for pipeline projects with signals from large-diameter projects and expected activity in 2026, though current performance remains below prior year levels

    Gradually improving with cautious optimism as opportunities are emerging.

    Utility Segment Performance and Margin Expansion

    Earlier periods (Q1 2025, Q4 2024, Q3 2024) showed strong operational performance, with significantly improved margins driven by better rates, storm-related work and higher productivity in power delivery, communications, and gas operations

    Q2 2025 demonstrates continued margin expansion, with the Utility segment posting stronger gross margins and revised upward guidance supported by better closeout revenues and higher customer activity

    Consistently strong with further margin improvements and positive sentiment.

    Order Pipeline Dynamics: Robust Bookings vs. Execution Risks

    Q1 2025 and Q4 2024 reported robust bookings and record backlog numbers, while also acknowledging risks such as tariff uncertainty, weather-related delays and competitive bidding; Q3 2024 noted record backlog boost alongside execution timing challenges

    Q2 2025 continues to highlight a robust order pipeline with strong bookings (including significant data center-related work) and reinforces disciplined bidding and execution risk management

    Steady emphasis on strong bookings with ongoing vigilance over execution risks.

    Capital Allocation, Debt Reduction, and Strategic M&A

    Q1 2025 discussed a new share purchase program, debt paydowns and selective M&A, Q4 2024 noted significant debt reduction and readiness for acquisitions, and Q3 2024 emphasized organic growth and dividend enhancements

    Q2 2025 reaffirms a focus on organic investment, robust liquidity with improved net debt metrics and an opportunistic M&A strategy to support long-term growth

    Consistently strong financial management with a maintained focus on balance sheet strength and strategic opportunities.

    Margin Performance and Seasonality: Shifting Sentiment

    Q1 2025 reported improved margins with expectations for sequential gains, Q4 2024 noted utilities benefited from one-off storm work while energy margins faced headwinds, and Q3 2024 recognized strong seasonal Q3 performance but warned of lower Q4 margins

    Q2 2025 reveals robust Utility margins driven by growth and improved productivity, while Energy margins dipped due to weather impacts; management warned that Q2’s one-off benefits might not recur in Q3/Q4 due to seasonality

    Solid overall with recognition that one-off benefits and seasonal factors may temper future margins.

    Regulatory and Tariff Uncertainties Impacting Costs and Revenue Timing

    Q1 2025 confirmed tariffs were not materially impacting operations and contract execution; Q4 2024 acknowledged potential tariff headwinds with most effects expected to pass through to customers; Q3 2024 did not address this topic

    Q2 2025 continues to note a variable tariff and regulatory environment especially impacting the solar market and battery storage, with some revenue pull-forward effects, yet no major project delays observed

    Consistent cautious approach with steady mitigation measures, though ongoing regulatory clarity remains key.

    Dependence on One-Off Benefits Affecting Future Margins

    Q4 2024 clearly identified one-off benefits such as storm work and cash flow pull-forward, and Q3 2024 acknowledged storm work and sales gains as nonrecurring drivers, while Q1 2025 did not explicitly discuss reliance on one-offs

    Q2 2025 explicitly notes Q2 margins were outsized due to one-time items and expects sequentially lower margins as these benefits fade, indicating caution going forward

    Greater emphasis on the temporary nature of recent margin boosts, with expectations for normalization.

    Emerging Data Center Opportunity as a New High-Impact Growth Driver

    Q1 2025 detailed a significant pipeline in data center projects and strong industrial bookings; Q4 2024 emphasized data center and fiber opportunities in communications; Q3 2024 mentioned supportive fiber infrastructure and power generation for data centers

    Q2 2025 strongly underlines an emerging data center opportunity with nearly $1.7 billion in potential work, broad service offerings and cross-segment growth opportunities, reinforcing its role as a high-impact driver

    Increasing prominence with highly positive sentiment and expanded opportunity across services.

    Management Transition Risk (Previously Mentioned, Now Less Emphasized)

    Q1 2025 included discussion about the search for a permanent CEO with a focus on strategic continuity, while Q4 2024 and Q3 2024 did not address it

    Q2 2025 does not mention management transition risk, indicating a deemphasis on the topic

    Diminished emphasis; the focus on management transition has receded compared to earlier periods.

    1. Margin Outlook
      Q: Are utility margins sustainable post Q2?
      A: Management confirmed that after a robust Q2 driven by improved Power Delivery initiatives, the elevated 10–12% margin guidance is expected to hold over time, even though seasonal factors may reduce margins sequentially.

    2. Energy Orders
      Q: Will the energy order book remain back loaded?
      A: Management reiterated that the back‐end loaded order book strategy remains intact, with renewables dominating most orders and natural gas projects playing a supportive role.

    3. Utility Orders
      Q: Is utility demand driven by MSA work?
      A: Management explained that the bulk of utility segment revenue comes from MSA contracts, reflecting steady demand and improved margins from recurring work.

    4. Pipeline Outlook
      Q: What is the outlook for pipeline revenue?
      A: Management noted that the pipeline segment remains robust and, with disciplined bidding, could generate around $500–600M next year, supporting future growth.

    5. Data Center Deals
      Q: What is the typical size of data center deals?
      A: Management indicated that data center orders usually fall under $100M per project, though multiple projects can occur within a single center, adding incremental value.

    6. Capital Allocation
      Q: How is cash being deployed going forward?
      A: The team emphasized a steady focus on improving working capital, reducing debt, and pursuing strategic M&A while also considering capital returns.

    7. Closeout Impact
      Q: How did project closeouts affect margins?
      A: Management highlighted that recent closeouts, notably in gas utility projects, contributed about $6,000,000 in incremental gross profit for the quarter.

    Research analysts covering Primoris Services.