Q3 2020 Primoris Services Corp Earnings Call
Greetings and welcome to promote our services Corporation.
Reports 2023rd quarter results.
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It is now my pleasure to Peter if your host Kate Tholking, Vice President of Investor Relations. Thank you you may begin.
Thank you Doug.
Good morning, everyone and thank you for joining us today, our speakers for today will be Tom Mccormick from Morris, President and Chief Executive Officer, and Ken Dodging Executive Vice President and Chief Financial Officer. In addition to yesterday Afternoon's press release, we've also posted slides on our website that highlight key points, we plan to discuss on this call.
Well you can access them by going to our corporate website Www Dot prim Dot Com then selecting investors once on the Investor site, you will find the slides on the events and presentations section next to the webcast link for today's call I'd like to remind everyone that statements made during today's call may contain forward looking statements.
Including with regard to the Companys future performance words, such as estimates believes expects projects may and future or similar expressions are intended to identify forward looking statements.
Forward looking statements inherently involve risks and uncertainties, including without limitation those discussed in yesterday's press release and those detailed in the risk factor section and other portions in our annual report on form 10-K for the period ending December 31st 2019, and other filings with the Securities and Exchange Commission Primoris does not.
Undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise, except as may be required under applicable securities laws before.
Before I turn the call over to our CEO, Tom Mccormick I'd like to introduce Primoris is new Vice President of Investor Relations Brook, Wootton Brook has a long history as an Investor Relations officer, and the utility and energy markets she'll be taking over the role for me as I transition into a new opportunity of course is finance department.
Ive really enjoyed getting to know our analysts investors over the years I missed seeing at our investor events, but I'm confident Brook will do a great job going forward it'll be a smooth transition so.
So now I'd like to turn the call over to our CEO Tom Mccormick.
Thanks, Jay Good morning, everyone and thank you for joining us today to discuss our third quarter results.
This was a record quarter for Morse and there is all the more impressive given the challenges of the countries facing from a pandemic reduced energy prices and widespread economic uncertainty.
The third quarter was a continuation of things we saw in the second quarter sustained strong performance in margins in our heavy civil and electric utility work demonstrating that we have definitely turned the corner and those businesses continued strength in our gas utility markets growth in our pipeline business driven by non Union field services work and a renewables market that is drawing driving sales.
Strong performance through multiple solar Babu Park projects.
We achieved these results while continuing our focus on safety working.
Working over 20 million work hours and keeping our total recordable incident rate below our companywide target level.
I'm incredibly grateful to all our employees across the country for their commitment to maintaining a safe work environment and executing their work successfully despite all the distractions that they have had to deal with this year.
Even with record revenue burn in the quarter, we were able to maintain a healthy backlog.
Ending the quarter at 3 billion in total backlog.
Which excludes the HCP project now that Weve received the formal notice of termination from our client.
Our backlog reinforces the strength of our business across our end markets, as particularly particularly in our gas and electric utilities markets as well as the <unk> renewables market [laughter]. Thanks to strong project execution project controls and continue to see in a discipline, our cash flow remains robust and our balance sheet is stronger than ever.
We're using some of that cash for internal embraced or I T and HR systems and tools investments, we expect will pay dividends in the long run.
As part of our growth strategy. We are also actively looking at potential acquisitions.
In October we were pleased to see Primoris be included in the in our top 600 specialty contractors list entering the list number six.
Moving from that more general EGPC contractors list to the specialty contractors list more closely reflects our business model and lower risk profile that confirms what we've always known that Primoris is one of the top specialty contractors in the country.
Let's take a look at the third quarter segment results, starting with the civil segment.
This segment benefited from the final resolution of the last two belt Mary claims, but even without the settlement. We had strong results from solid execution on our current heavy civil projects, we see opportunities for heavy civil growth and asphalt paving and heavy structures, particularly in west, Texas. The management team remains focused on project execution.
And is paying dividends on the <unk> side.
Management team is executing extremely well and what is a challenging market and they more than offset the revenue decline with higher margins from strong execution and project controls.
The solar market is creating some positive momentum, but we expect overall demand in the industrial market will continue to face headwinds until a global pandemic some sites and the economy picks up.
[noise] within the power industrial Engineering segment.
We are facing similar headwinds as I mentioned on the last call. We expect the Gulf industrial market to remain tight for the rest of the year, particularly in the refining and chemical markets.
The impact of the pandemic has led to a glut of fuel and a sharp reduction in a refinery demand.
The segment has also been challenged as we work to complete some difficult projects the largest of which you wrap up in the second quarter of next year, after which I would expect to see margin improvement.
Execution on more recent awards under the New management team continues to build on the momentum we saw last quarter with positive feedback from our clients and profitable margins.
We also continue to pursue smaller capital projects and maintenance works, along the Gulf Coast and in California, which will provide a more stable base level of revenue for the segment. Although work is slower and our Canadian markets. We continue to operate a profitable levels.
Where we see the most opportunity for the segment is in the renewables markets.
We are executing well on the 200 million dollar plus Biofuels project in California that we announced earlier this year retrofitting an existing refinery to accept vegetables.
We're also seeing renewable diesel and biomass opportunities for both our engineering teams and non union construction business in the Gulf Coast.
And the solar market continues to be one of our biggest growth opportunities for the segment with our teams exceptional performance exceeding our expectations on all of their projects to date.
In the third quarter, we completed the largest solar facility in Texas for square miles containing 1.2 million double face panels.
The facility has a generation capacity of 498 megawatts DC.
Which will prevent the emission of over 800000 tons of C O two per year.
Primoris is receiving recognition as an industry, leading EPC contractor for solar projects and we expect this market to continue to provide opportunity for growth across multiple business units in the coming years.
The pipeline and underground segment had another strong quarter. Once again led by the great performance or non union pipeline projects and field services work.
The big storms largely missed these projects, allowing us to continue our outstanding project execution.
As expected the larger diameter market faces some headwinds from energy prices and environmental challenges, but we are following through on our strategy of replacing lost revenue with multiple smaller projects and repurchasing this business increase or menu of services include filled serve including field services type work, which is very similar to the strategy. We followed during the last entered.
The downturn.
Our krasner Experis with this type of work and we have already had some success picking up work from new and existing clients. While we have taken the HCP project out of backlog. We do have made his crew still on site and are in discussions and discussions are ongoing as to any potential work to close out the project.
Segments still needs to win work to make their 2021 plan, but that's typical for this type of work is the norm for this market is for projects to be awarded and then moved quickly to the field.
The utilities and distribution segment saw revenue continued to grow as the third quarter is traditionally our busiest quarter, but.
The mix of work in the California market had a slight negative impact on overall margins.
As did cost associated with the tooling and outfitting of new gas distribution crews starting in late September we have had crews working full time to help with wildfires in California, which has disrupted some of the normal release of work in the region.
Our Midwest work benefited from good weather and the close out of a larger lump sum project and in the southeast we continue to benefit from higher margin work better contract terms and reduced equipment levels.
That region is going to see double digit margins. This year, which is a dramatic improvement over last year and one we believe to be sustainable.
We picked up several new gas utility customers across the country during the third quarter as we expanded our national presence. We're also finding opportunities for additional work or partnering with our renewables teams as we can provide services to their projects that were previously subcontracted.
This is another example of the benefit of Primoris is diverse capabilities and our ability to have multiple touch points on a project.
Our transmission and distribution segment.
Had another strong quarter building on the momentum from Q2.
We are very pleased to now be delivering margins consistently within our target range.
We had some startup costs a large transmission projects in the quarter, but that was mostly offset by the margin benefit this benefit of storm work.
And while we appreciate their incremental margins that storm work can provide we are more appreciative of the positive support and feedback we receive from the impact of communities as our crews worked long hours and challenging conditions to restore power to regions that have been devastated by these stores.
Well this quarter strong results. We are now confident that we have right sized the business and fully executed on our integration plan.
As we move forward, we have brought the management of the utilities and distribution segment and the transmission and distribution segment under one senior executive and have established integrated electric and gas business processes to improve the overall performance. These.
These are I must say based businesses and our focus moving forward is to maximize synergies and scale continue to improve productivity and increase our market share.
We ended the fourth quarter in a position of strength understanding of the challenges of 2020 have not gone away, but we have learned how to successfully manage them and continue to operate safely.
While we have slightly increased our guidance range to account for our third quarter results. The timing of the winter cold season is always unpredictable and can impact our fourth quarter gas utility work.
That said, we are confident that 2020 will close out as the best year for Morse is history, and we see the strength in our utility and renewables business is gaining momentum at 2021.
With that I will turn it over to Ken for a deeper dive into the numbers.
Thanks, Tom and good morning, everyone I'll review, our third quarter operating results and then move onto our cash flow balance sheet and backlog.
Our third quarter 2020 revenue was $942.7 million, an increase of $77.6 million or 9% compared to the third quarter of 2019.
This growth was primarily driven by an $80.8 million increase in our pipeline segment revenue related to project in Texas that began earlier this year are.
Our utility segment revenue improved by $17.4 million work increased in California, and renewables continue to drive our power segment as revenue increased $11.9 million related to solar and bio fuels projects.
These increases were partially offset by modest revenue decreases in the transmission in civil segments as we continue to right size contracts.
Our largest customers in the quarter were two gas utility customers that collectively accounted for 15% of revenue and the midstream pipeline company that accounted for 6.3% of revenue.
Gross profit in the third quarter was $123.7 million compared to $108.4 million in the prior year, primarily due to the increased revenue but.
But in addition, gross margins increased to 13.1% in Q3 compared to 12.5% in the prior year.
Our transmission segment recorded significantly higher gross margins in the third quarter coming in at 12% compared to 3.8% in the prior year our strategy to focus on higher margin work cost management and strong safety performance drove the improved profit and we also had the benefit of some storm work across the southeast during the quarter.
Our utility segment continued to perform well with 18.2% gross margins for the quarter, primarily due to higher margins on projects in the southeast and good weather.
Our power segment experienced a slight decrease in gross margin during the quarter, mostly due to higher costs associated with an LNG project in the northeast.
Our pipeline segment reported strong gross profit driven primarily by higher revenues, but gross margins were down slightly due to the favorable close out of multiple projects in 2019 and higher costs on the Texas pipeline project in 2020.
Our civil segment had a 2 million dollar benefit from the final resolution of the two remaining belt belt and claims, but even without this benefit the segment had strong gross margins driven by good project execution and a few project closeouts.
SGT expense in the quarter was 57.1 million an increase of $7.3 million from last year due to increased incentive compensation expense driven by our strong Q3 quarter results and expenses as we upgrade some of our infrastructure that Tom referred to earlier.
We still expect our SG expenses will be in the high 5% to low 6% range for the full year.
Interest expense in the third quarter decreased to $4.7 million compared to the prior year due to lower average debt balances and the decline in interest rates.
We also had the benefit from the $1.1 million unrealized gain on the change in fair value of our interest rate swap compared to a $600000 unrealized lost last year.
The effective tax rate on income attributable Primoris remained in that remain unchanged at 25, 29% in the third quarter and it is our expectation that we will remain at the school right at this rate for the full year, but.
The third quarter net income attributable protuberance was record setting $43.9 million or 90 cents per fully diluted share. These.
These results show, we've been able to successfully deliver on our strategy and achieve record results. Despite these unprecedented times this.
This provides us great momentum as we move towards year end and into 2021.
Cash flow from operations was $130.8 million during the third quarter, an increase of 74.4 million over the third quarter 2019. This.
This increase was due to good working capital management, along with the $30 million settlement of the belt and claims during the quarter. This generation cash resulted in a $228.5 million cash balance at the end of the quarter.
We had no borrowings on our revolver at the end of the quarter and $150 million of available borrowing capacity.
We reduced debt by almost 24 million to end the quarter with total debt of $329.1 billion and our net debt was 100.5 million at the end of the quarter strong.
Strong cash flows higher cash balances and lower debt balances ensure our balance sheet is ready to support our continued organic growth as well as acquisitions.
During the third quarter, we spent $32.7 million on capital expenditures, bringing our year to date capital expenditures to $54.4 million as usual most of our capex spend is on construction equipment, including $19.5 million for the buyout of some old unfavorable leases, we expect our capital expenditures to be $5 million to $10 million for the remaining three months of 22.
Okay.
During the third quarter, we repurchased approximately 175000 per more shares for $3.1 million at an average price of $17.90 per share.
We spent a total of 11.5 million on share repurchases year to date and approximately 13.5 million remains under the current repurchase authorizations, which will expire at the end of this year.
Fixed backlog at the end of the third quarter was 1.8 billion a decline of 500 million from Q2 solely due to the removal of HCP from our backlog.
RMS say backlog remained steady at 1.2 billion and total backlog was $3 billion at the end of the quarter, which is impressive given the record amount of revenue we burn during the quarter.
Now turning to our outlook, we are increasing our full year earnings guidance to a range of $1.80 to $2 per fully diluted share.
Our guidance balances the ongoing uncertainty surrounding the pandemic with our expected operational performance all in all we had a very strong quarter with that we can turn it over for questions Doug.
Doug are you there.
Yes, sorry, I was on mute.
Ladies and gentlemen at this time, we'll be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
A confirmation total indicate your line was there any question queue. You May press star two if you'd like to remove your question from the Q4 participants using speaker equipment. It maybe that's starting to pick up your handset before pressing the star key.
Our first question comes from the line of Sean Eastman with Keybanc capital markets. Please proceed with your question.
Hi team, many compliments great third quarter.
Thanks, Sean.
So I guess, the one thing I'm kind of struggling with is the.
Moving parts in the power segment so.
Clearly some strong underlying.
Drivers for the renewable piece, but it sounds like Western Canada, and chemicals refining a little trickier to put your finger on so so I'm just curious if you could just talk through the moving parts there.
As we try to think about the revenue trajectory for that segment going into 2021.
So John this is Tom let me I'll try to answer your question or not.
Sure if I am not if I don't answer you can you can clarify a little bit but.
I think that.
From the standpoint of our our industrial groups.
What you're seeing and what we're seeing is a lot of movement away from refining and petrochem more to Biofuels and renewables.
Yes, we're have refining clients that are model modifying their facilities more for me, whether it be green diesel or biofuels.
That as part of their offerings to their to the market and we've gotten ahead of that we've been able to get ahead of that we are doing a lot of front end design work that for those some a number of those projects Weve actually won a biomass project in California last year would you you know what we spoke of it on in this call.
And there is other opportunities that we're seeing that that's kind of what we were able to fortunate to get in front of that have good relationships with these clients that were.
We're not silver line, although it's still refining its renewable.
And we've we've got some projects both out in the west end and in the Gulf Coast that we need to finish up that have been a little bit problematic the ones in the west are still very profitable projects that we've just had to work through some issues yet and.
And then the one in the northeast and that once we think we've got a contained we think we know what the costs are on it we had those in our in our forecast and that project should complete by this in the second quarter of next year next year. So.
The met we have made some changes to management team I think we spoke about last quarter.
And in our non Union.
And we are seeing a lot of positive results for the performance of them and their respective management teams and leadership groups.
Getting positive feedback from clients, which is actually leading to more work.
Yes, we're trying to build on what their strengths are and.
Its working quite we have clients now, while but albeit smaller projects, which which we've always said and always believed going into 2021 of the larger projects you're going go away and we have to be able to do the smaller projects, which is what we've done in our history anyway.
Yes, and then you have solar which is a huge growth market for us.
We actually have to temper that a little bit because there's there's so many opportunities out there you get out over your skis, if you're not careful but that group is is performed well on every project they've done they actually exceeded expectations on every project they've done they've got a great partner and relationship with their clients and there is a lot of then there's also pull through with our other businesses from the.
There there are projects, we do site work, where you clarity we do grading we do the transmission lines. We can do the sub stations, we haven't done those on any of those on projects that we've executed yet but that is work that we can provide we can actually be a one stop shop for clients. When it comes to solar facilities, which I don't think there are any other contractors that can do that.
So how it looks like for 2021 I could answer that right now, but there is work out there where we know we're in the process of doing our developing our 2021 business plans right now.
And.
That will be later on in the year or early next.
Gotcha, Alright, Thats, all really helpful color.
I guess, maybe just to maybe put maybe I'm pushing my luck here, but as.
As you sit today does that segment look like it's going to grow revenue and be back in that targeted gross margin range in 2021 on a preliminary yet.
Yes, I think we are going to be in our in our target margin range. I think we are going to see I think youre see growth in that segment, but it's not going to be in the areas. It's traditionally been where we typically has been out west and in the industrial markets. We've seen growth. They may be flat. This year, but there is opportunities with an old renewables that we when some of the projects that were after.
They'll see some growth I think it's primarily within free the renewables, we're going to see you will see significant growth in that.
Got you, Okay, great and.
On the pipeline and an underground segment when you pull HCP.
Yes, it really high underlying burn this year in that backlog I think that segments clearly done a lot better than anybody would have thought this year.
But just curious how much visibility you guys have there.
What you are seeing around.
Sort of this spring selling season going into next year in that segment, just kind of curious what scenario your.
Your planning around at this point.
Well again, we're in the middle that planning process, but we'll tell you what we are seeing and I spoke about this last quarter also I think what we're going to be able to replace quite a bit of the HCP revenue the lost revenue from HCP.
On smaller projects and different off the service offerings, which we are we're actually talking to some clients about the service offerings now is more field services type work in Union markets.
We're not going to be able to replace all of it because I think HCP was a significant burn you're right.
But.
Enough to.
They are probably that group may be a little bit flat don't know yet till I see their final numbers, maybe a little bit smaller, but certainly will be profitable. It's just going to be it's just going to be the back of smaller projects.
Gotcha, Okay, great I appreciate it guys and again nice work.
Thanks, Sean.
Our next question comes from the line of Lee Jagoda with CJS Securities. Please proceed with your question.
Hi, good morning.
Hey, Larry.
So.
Congrats on the quarter congrats on having revenue as good as you did and while maintaining backlog at flat. So that's that's awesome.
Looking at the bidding environment and sort of the the consequences of the election.
Did you see any either halt in bidding or halt in lettings temporarily as we kind of wait for whatever the.
The outcome here is and would you expect to see some additional lettings coming pretty quickly between now and year end once the election is decided.
And what market specifically link.
I would love to hear about all of them.
I don't know that we probably have seen we've seen some certainly in pipeline and field services any any business tied to the.
The price of oil or oil demand energy demand.
Clients are waiting for but what we saw those in the second quarter also so they are not new to the third quarter.
Our expectation is that we'll see we'll see some change I think most of our clients expectations are that regardless of who wins the election, you're not going to really see any immediate impacts from that but they are they are waiting because it does affect some longer term plans maybe on some larger projects that may have in the works.
But we've been we've we've known this an expected this for a while so we've kind of worked around it and industrial it's just it's a function of these some of these larger projects being have reached the point of financing.
And weve actually changed our directional little bit not much because weve always chase smaller projects, but we concentrate on our core projects are 5 million to 25 million, maybe 30 million those projects you've seen in California, with Tim Healy's group than the Union Industrial group, where.
A lot of them, there's no big power plants going on Tim's group used to build probably a new power plant about every three years, two and a half years well now he's he's building and go.
Getting revenue, but on smaller projects smaller capital projects maintenance projects maintenance services and he has been able to replay biofuels now on this large $200 billion project, we're executing for for one of our clients out there. So we've been able to replace a lot of it.
But what I guess, our expectation is the bid slate is going to be tight you're going to see more we'll see more bidders, which means we are our estimates have to be better and they have to be tighter may put some pressure on margins renewables I'll tell you right now there's there's so many opportunities out there that's the opposite of everything else, we see and then.
Really in some of the utilities Theres, our clients are still spending money.
So you know our gas utilities and electric utilities, we're moving out of some areas because some of the work and replacement work that was being done in some of those gas utility markets is finished and we are chasing other work in other regions, but thats, just helping us expand our reach and then add TMB our clients that they're actually their budgets have grown and we're actually trying to get more color.
Yes, and develop relationships and MSA contracts with more clients. So we haven't seen a lot of drop off my fact haven't seen any drop off in those markets.
That's great one more from me and I'll hop back into the queue here.
Just on the on the transmission side I know when you do emergency work it doesn't really impact revenue as favorably as it might impact margin is there any way for you to quantify the positive weather impact to margin in Q3, and I know you had mentioned you're sort of gotten things cleaned up got the integration done so going forward, we should expect sort of a more normal March.
Second range, but if we could break out sort of the emergency one timeish type stuff in the quarter that we just help model going forward.
Yes, Lee I think for the quarter, it probably gave us about a 2% bump on margins.
Two percentage points, yes.
That's perfect thanks very much.
You're welcome.
Thanks Lee.
Our next question comes from the line of Adam Thalhimer with Thompson Davis. Please proceed with your question.
Hey, good morning, guys great quarter. Thanks, Adam how are you doing.
Doing great.
I wanted to take another shot at the pipe.
I have no idea what to model for pipeline revenue next year.
Oh.
I think you were at five 600, and then yeah. This year with over 800, yes.
Yeah, We had we had a couple of projects that did did really well in it a lot quite a bit of growth autumn that really help drive those numbers this year.
And again, we were very fortunate because in that certainly in the non union side to smaller diameter shorter runs not cross country, but more interstate.
Performance was exceptional in the weather was exceptional they all the hurricanes that came up through the Gulf coast. It never affected these projects where is the industrial the union side got impacted a little bit it impact a couple of their projects for those projects were primarily in the south south of Houston, So they're right there on the coast and I got bombed.
Next year I.
I would expect if I look at this in three different ways because.
Three different business units in that segment, primarily the field services will probably be up a little bit.
I would expect the non union.
Pipeline, which is a smaller diameter shorter runs.
We'll be up either flat or a little.
A little what little lower but not significantly lower than they were this year, just because of how well.
What and how much how fortunate they were to win some of the work. They got this year and then the union side I would expect to be flat.
Flat or probably a little bit below and you know maybe as much as 30 or 40 million below and again, we're just in the planning stages over 2021 plant. So I'm just speculating but.
But you are closer to that 800 range than 500 range clearly, yes, okay. So and then the second question would be same question for utilities and distribution.
Yeah, what do you stand from customers in their Capex budgets I think you had some projects in the south east that are maybe kind of onetime ish for 2020.
So do you grow revenue there next year or just kind of flattish no I think it will grow I think those are our expectation is our our utilities will grow it's not going to be double digits, but believe it will be in the mid single digits.
Maybe a little bit higher.
Our again our clients.
The mix of work Mitek may change the type work might change, but most of their budgets have actually remained the same or gone up.
Okay.
And then lastly power I think you said little bit margin pressure first half and then that kind of releases margin to get better in the second half but.
But like at what levels, let me if the cabin caveat that with if its renewables I don't see margin pressure going on just.
Talking total segment total segment.
Actually out active.
I'm struggling to answer that question right now you get a feel for it by major so yes. So you are asking about margins. This year into next year is that what you're saying I thought you guys had said there was some projects it might have been the LNG yeah that continue to hurt you in the first half of next year, but then when those things finish up the margins kind of revert to normal now I'm not sure what normal is.
Our segment right northeast probably high single digits.
Once you get through once we get through the first.
The first two quarters okay.
All right great great quarter, great outlet, thanks, guys I appreciate it Adam.
Our next question comes from the line of Julio Romero with Sidoti and company. Please proceed with your question.
Hey, good morning, Congrats to Kate and broke very exciting news.
Thanks, Julio Thank you.
So I guess on.
On that utility segment, I mean, like you typically have that seasonal slowdown.
You expect in the in the first and fourth quarters I mean.
Would you expect margin improvement year over year and utilities in the fourth quarter and if so would it be by a comparable margin amount that you saw in the third quarter year over year.
No I think the the little bump that we got in the third quarter. This year was related to those projects in the southeast and some closeouts.
And just kind of perfect weather. So as we look into Q4 of this year I expect margins to kind of emulate our normal margins with the one caveat is that we always talked about which is.
Whether and when winter is going to start that's going to shut us down.
For the step up in the upper Midwest and one of the benefits that we had also in the third quarter. This year was that we had some work to push.
Our clients pushed it firms because of the pandemic and because getting engineering out of the materials out like push from second quarter to third quarter was work we would tip traditionally have done in the second quarter, we pushed into the third right, but our first course, you know again certainly in the Midwest and North it's.
It's going to be slow right are just very traditional for us.
Got it so traditional like 12 percentage that you got last.
Fourth quarter, So, yes, yes, yes, okay.
And.
Leave you mentioned the profit in the prepared remarks, bringing utilities and TNT under one senior executive can you just.
Maybe dig into that a little bit more the opportunities you see on synergies market share and.
Maybe some of the organic growth opportunities you see in gas and electric.
Well one thing is they bought the two industries they share a lot of common clients.
Well, we have a lot. So they have very similar client so theres theres a benefit of pulling the land under single not only a single executive a single management team Cushing benefits and cost savings of doing that or the efficiency of managing.
Now by region, rather than trying to manage by business unit by region.
And yes.
There is just an advantage with relationships with the clients, where we can do we can pull another another create another revenue source for what we are doing some work with whether it be on the electrical side or gas side for our clients and we have the right now we have the other offerings.
Doing the other work, let's just say, it's a TMB client we're doing electrical work form we can put gaslight if they have gas work to be done. We can also do that gas work. It's another it creates another revenue stream for US. It also allows us to cross train the employees you can't cross train everybody to be everything, but we cross train a number of those employees working both of those businesses or.
Well the workloads down in one.
You have opportunities because of the diversity to be able to pick up work in the other move those resources and continue to work.
Got it and last one from me is I'm, just trying to wrap my head around.
Your expected kind of go forward Capex in maybe 21 and beyond I mean.
You mentioned the internal upgrade like T systems upgrade, but I would think you probably have less construction equipment spend.
Then relative to maybe 2019, so and.
And your cash is very strong your cash balance at the end of this quarter. So what do you think capex maybe ends up at 21 yet.
For 21, I expect it to be very similar to what it is this year, we've talked about 2019 being high because of our investment in.
New offices, new facilities other things like that which we have not had this year. So we're still thinking next year will be somewhere in the $40 million to $50 million range, and maybe maybe a little bit more but not much right. Because we do have one facility, we're going to probably stores more gone right.
This year next year, but.
But it would be very similar to this year.
Yes.
Really helpful. Thanks very much.
It's really a thanks Julio.
Just as a reminder, ladies and gentlemen, it is star one to ask your question.
Our next question comes from the line of Zane Correct Me with D.A. Davidson. Please proceed with your question.
Hey, good morning, and congratulations on the quarter.
Thanks, Dan.
So first off I wanted to touch on the stronger cash flow this quarter does that reflect.
Any fees or payments to HCP and when those continue.
As long as a little bit more detail around the strength on the quarter, yes, So theres no theres no big cash fees or anything like that necessarily that came in from HCP during the quarter.
There was a fairly sizable as I mentioned in my comments payment that we got with respect to that text dot settlement.
That was about $30 million.
And that was basically just.
Turning.
Turning working capital into cash is what that was the rest of it frankly was just good working capital management, we had some very good contract terms with some customers.
Scheduled values and we also had just a really good quarter guys. The.
The teams billing timely and getting paid timely so.
Great working capital management on our part of all five segments.
You can look in the statement of cash flows and see it was just normal course chain.
Change in contract assets and liabilities and they are the drove the vast majority of it.
Okay Gotcha, and then I think to follow up on an earlier question around the.
The power margins on the quarter.
I know there are a little bit below the target range right now, but how much of a headwind to gross profit was let's think of the northeast LNG plant.
And I couldn't quite hear you, but anything you can get back to over 10%. After twoq two next year.
Yes, so that project probably hit us for a couple of basis points during the quarter.
To margin and so what our expectation is is as we work through the rest of that project over the course of the next couple of quarters by the time, we get to Q2 of next year, we should be up in that higher single digits, nine and a half 10% range right around there.
Which should be normal course for that segment.
Okay.
The last one real quick.
What does the renewables business now represent for print comparisons like revenue and where do you think that goes through 21.
Yes, we don't normally breakout revenue within a segment.
But it's it's.
It's a meaningful portion of the power segment and it's definitely the fastest growing portion of that segment is that you're going to see significant growth in 2021 in that segment due to rooms.
Okay.
Appreciate the color gentlemen.
Thanks, Jamie.
There are no further questions in the queue I'd like to hand, the call back to Tom Mccormick for closing remarks.
Well. Thank you. We appreciate you taking the time to be with US on this call and for your support for Morse Oh.
I hope that all of you and your families are healthy and safe.
Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.