Q4 2020 Primoris Services Corp Earnings Call

Good morning, My name is Amy and I will be your conference operator today.

At this time and I would like to welcome everyone to the pre March 'twenty and 'twenty fourth quarter and year end earnings conference call.

All lines have been placed on mute to prevent any background noise.

And speakers remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question you May press the pound key.

It is now my pleasure to introduce your host.

Your host Brook, Wootton, Vice President of Investor Relations.

Please go ahead.

Amy Good morning, and welcome to Prime Wars. This conference call. Joining me today are Tom Mccormick, Chief Executive Officer, and Ken Dodgen, Chief Financial Officer.

And again I would like to make everyone aware of certain.

Language contained in our Safe Harbor statement.

The company cautions that certain statements made during this call are forward looking and are subject to various risks and uncertainties.

<unk> results may differ materially from our projections and expectations. These risks and uncertainties are discussed and a report filed with the SEC are forward looking statements represent our outlook only as of today, we disclaim any obligation to update these statements except as.

And maybe required by law.

I would now like to turn the call over to our CEO Tom Mccormick.

Thank you Brooks.

Good morning, and thank you for joining us today to discuss our 2024th quarter and full year results.

We had an incredible year, despite social unrest and pandemic are significant reduction on the price of oil as well as the presidential election.

Good weather and the fourth quarter allowed some of our business units that typically shut down after Thanksgiving to work all the way through to the end of the year. This was a nice boost and a great way to close out 2020.

The numbers paint a clear picture of the success of our strategy, even in a difficult market and as we announced record revenue of $3 5 billion for the full year up 12% compared to last year our earnings per share for 2020 came in at $2.16 per diluted.

Fully diluted share another record for the company.

Reflecting on our strong overall performance and the cooperative weather in December our fourth quarter revenue was up 13, 6% over the prior year and $897 $3 million.

Our pipeline power utilities, and transmission segments generated, especially strong revenues and the fourth quarter.

I want to send a special thank you to all of our employees, whose hard work and commitment to work safely enable the company to have the success that we all experienced this year now lets look at our segments.

Our pipeline and underground segment had exceptional topline growth for the full year 2020, coming in and almost $900 million.

Up 77, 6% compared to full year 2019. This was mostly due to pipeline projects in Texas. The began on the first quarter of 2020, partially offset by the cancellation of a pipeline project and the mid Atlantic and the substantial completion of a pipeline project and 2019, our field services, we're able to produce strong results for the year to <unk>.

Might the challenges encountered with the drop and the price of oil as well as the pandemic and hurricanes that struck the Gulf coast last year.

Turning to our power industrial and engineering segment revenue increased by nine 1% from $729 3.002 million 19 to 795 4.002 million 20. This growth was driven by solar energy projects and progress on and industrial project for a customer and California.

The renewable solar market continues to growth we began work on a new 380 megawatts solar project and the late in the fourth quarter and Nevada also during the quarter. We were selected as the EPC contractor for two large solar projects and taxes totaling 885 megawatts that will begin this quarter.

During Q4 2020, we completed phase for engineering services on a green diesel project located on the Gulf Coast and we continue to make progress on the previously mentioned renewable projects in California.

We experienced higher costs associated with an LNG project in the northeast and 2020 that has impacted our margins. We expect the project will complete by late Q2 and commissioned and are in early Q3 and this will then this issue will then be behind us its worth noting that all of the projects being and executed within this segment are performing to plan or better.

And our utilities and distribution segment increased productivity and activity with our customers resulted in revenue growing from $886 $5 million and 2019 to 900 and <unk>.

6.002 million 20.

This segment operated at full capacity the weather was good our crews work safely and productively and our major customers spent their budgets with few interruptions. We also completed mobilization on a new MSA contract and the Western region of the U S. And believe this will be a long standing relationship with new numerous growth opportunities.

Our transmission and distribution segment recorded revenue of $459 million and 2020 compared to $497 3 million the previous year.

We have been more selective on the type of work we perform and we also benefited from an increase and storm work during the during the year. We completed a restructuring of this segment in Q1 of 2020, which has resulted in improved performance better contract pricing and <unk>.

Management reorganization and reduction of indirect costs, we expect this momentum to carry us forward into 'twenty and 'twenty, one and beyond storm remediation work performed by our crews provided positive margins during the fourth quarter. As we responded to storms that occurred in the Midwest Gulf and mid Atlantic regions margins also benefited from improved project performance on our transmission.

Projects.

Our civil segments revenue for 2020 was $433 5 million down 11, 2% from $488 million and 2019. The decline was primarily due to lower txdot work volumes and the substantial completion of a project with a major refining customer and and ethylene project in 2019.

Despite the modest decline our management team remains focused on project execution and the results are showing we continue to be very selective and the civil work that we bid and as a result of segment performed within our target margin range.

Our civil projects, and Louisiana performed well too although the same active storm season, and they brought storm work to our T&D group negatively impacted the Louisiana projects to some degree, especially Hurricanes Delta and zero.

As I look across all of our segments I'm extremely proud of not only their financial results, but also their safety results I want to thank our management teams and employees for their focus on workplace safety during the year. Our teams worked over 27 million work hours and our total recordable incident rate for 2020 was one of the best and the company's history and 0.53.

And well below the industry average during.

During the year, we received numerous safety awards.

<unk> was named the overall winner of the California, Plumbing and mechanical Contractors Association Safety Star Award and winner of the Safety Star Award AAR.

Underground was awarded the Arthur T ever Ham Safety award by the distribution contractors Association, and the $2 million and overwork our category.

<unk> and the division one greater Baton Rouge, Industrial Alliance Award and from Morris, Canada, One on Excellence award during the 2020, Canada's safest safest employer award ceremony.

As happy as I am to put 2020, and a rearview mirror I'm excited to talk about where we're headed in 2021.

To take advantage of the opportunities, we see and create a stronger platform for our growth. We review the organizational structure of our operations and in January and announced that we are streamlining it to function more efficiently as well as to facilitate collaboration and cross selling.

With that we have reduced our number of segments from five to three.

The new utility segment combines our gas utilities and distribution segment and the electrical transmission and distribution segment as well as the telecom services acquired through the acquisition of future infrastructure the.

And the new energy segment consolidates, the power industrial engineering segment and the civil segment.

The pipeline services segment and will be the new name for the pipeline and underground segment, which obtains its current structure.

Simplifying our structure makes so much sales and the different between business units and each side with share a lot of the same clients or excuse me the different business units. These seven sure a lot of the same clients. So if you can get all of them working together, we can self perform a larger portion of the work that we have create multiple revenue streams, which ultimately drives our margins and take advantage of the synergies throughout the various business units.

Sure.

So what do we see for 2021.

And I want to touch briefly on some segment highlights and then address two areas with wider implications from our prospects going forward. The recent addition to future infrastructure to our family of companies and the new presidential administration.

For our utility segment, which once again includes our gas and electrical transmission and distribution businesses and our new telecom business. We are well positioned for continued improvement and overall business growth by building off the momentum momentum created and at 2020 as well as expanding our geographic reach and client base.

Last week's utility crisis, and Texas is just one more indications on the nature of infrastructure work.

Gas electric and telecom are all MSA based markets and are focusing moving forward and our focus moving forward is to maximize synergies and scale continue to improve productivity increase and increase our market share.

The telecom market continues to be strong we have secured msas with two telecom companies and the western region and should start performing work and the first quarter of this year.

For the energy segment, which again incorporates the power industrial and engineering business and the civil business. There's a lot to say about renewable and energy under the new administration and I'll come back to that and detail.

And while we are watching how state spending levels, especially in Texas may affect our civil projects text sought historically spends $8 billion to $9 billion a year and this could slightly decreased due to declines in oil and tax gas revenues.

Oil and gas tax revenue excuse me from the pipeline services segment, given the headwinds and the industry, we expect to see fewer new pipeline projects. The good news is our pipeline segment already has over 40% of their 'twenty 'twenty, one plan and backlog and they continue to pursue other projects over.

Over half of the operating pipelines and the United States or pass our design life with some being more than 50 to 60 years old and addition to the age of these pipelines and some have other potential challenges such as missing or poor coding anomalies or perhaps due to their age being built without modern manufacturing or construction techniques.

The government just issued a new mega rule and expanding the requirements for verifying monitoring and improving pipeline integrity.

This new rule requires all pipelines to verify and verify their maximum allowable operating pressure in order to be able to remain and service. It's minimal pressure has not met the pipeline will have to be upgraded repaired replaced repurposed were decommissioned.

We are repositioning our pipeline segment to take advantage of our field services capabilities in order to help our customers and respond to these rules and all their pipeline integrity and maintenance and construction needs.

Looking more broadly, let me talk about our acquisition and future infrastructure last month.

This is an exceptional fit with Morris and that checks all the right boxes from the criteria. We laid out when we started looking for our next our next major acquisition several years ago.

At catapult us into telecom markets Telecom services is a high growth market that will continue to grow well into the future writing the <unk> of our increasingly digital world. It further strengthens our existing utility capabilities, giving us a larger footprint within which we can leverage the value of our <unk> brand, our strong customer base and our expertise.

And it moves us further away from pure engineering and construction into a business with higher margin growth potential and recurring revenue via Msas, which is exactly the direction. We want to continue to move our portfolio. This is an extraordinary fit in and a defining moment for <unk>.

I am happy to report that the integration is going extremely well. We're slightly ahead of plan. The leadership of EFI is extremely energized to be part from Morris they've all committed to staying with the company and have even signed employment agreements. They are excited about being part of the <unk> family of companies and we are beginning to enter new geographical areas to expand our telecom presence.

We have already started to realize the synergies we identified and we expect we will save at least $10 million of that.

And we should be able to recognize $5 million this year and the five and the remaining $5 million and any additional upside within the following 12 to 18 months.

Finally, I'd like to discuss our prospects under the new presidential administration and.

And we all say that the domestic energy industry has been under pressure for the past several years, although our pipeline segment had a record year. This will affect our pipeline construction opportunities going forward and drilling restrictions may continue to suppress new construction, even as the economy recovers and demand rises and.

The other concern would be the possible increase and corporate taxes.

But there are also areas, where we see that the new administration's priorities create significant opportunities for from worse.

First president of Bot and has stated that he wants to make infrastructure rebuilding a priority.

As I noted earlier, the nation's gas pipeline infrastructure is aging and and needed a attention.

On a broader scale, replacing other aging infrastructure, such as roads and bridges also creates opportunity from Morris and our industrial engineering and heavy civil businesses.

Second the bond administration is ready to pursue renewable and energy on a large scale.

And this dovetails with our increasing activity and in the renewable energy markets and 2018 from Morris earned $45 million and revenue from renewable energy projects, which equates to less than 2% of total company revenues.

And 2019, we announced approximately $170 million and solar projects to be constructed in 2000, 22000, and 'twenty and 2021.

And in 2020, we announced approximately $470 million and solar projects to be construction in 2021 and 2022.

We have over $430 million and backlog for 2021 and renewable projects, we have and artificially awarded $570 million of other projects that will likely turn to backlog in 2021 and 2022.

This means that during the course of 2021, we could have as much as $1 billion of backlog that will be executed just and solar projects and 2021 and 2022 alone.

We are very careful as to how we select the projects we've taken the clients we work with.

Solar projects also creates cross selling opportunities.

Solar project requires transmission lines and substations to support it which creates opportunities for our new utility segment.

On a typical solar project, we have had as many as four from Morris business unit is doing some level of work on that project include and I am to do the site preparation and heavy civil to build the access roads.

Solar is and are only renewable market. We're also evaluating whether to expanded wind, but only for specific scopes and we're not going to make a huge investment to buy large cranes and allows us to set turbines and fan blades.

However, we will perform site clearing and grading construct roads complete underground installations, including the foundation work and Duck banks, we can also pull or terminate cables constructed transmission lines of the facility as well as design and build the substations and Theres a lot of opportunity there.

We are currently working on Green diesel Biofuels projects for clients and the Gulf Coast and out West we are retrofitting a refinery for Biofuels on the West Coast that has a 200 plus million dollar project.

We have another $50 million project for another client on the Gulf Coast, where theyre modify a refinery to make green diesel.

We have seen the political landscape and clients leaning more and more towards renewables.

We've been actively looking at different ways, we can help our clients and we're not done yet.

We want to be smart about which clients we work with what projects, we execute how we estimate these projects and how we staff the projects were awarded.

We're going to continue to grow our renewables group organically, although we might look at on the acquisition of the target if the right target would come up but we would have to be the right fit with the right culture.

Another area, that's going to impact our business as a rural broadband initiatives, both on a national and state levels depend.

The pandemic has exposed that existing network infrastructure has a significant shortage of bandwidth.

Not only in the metropolitan areas, but also on smaller towns and cities and.

Texas Governor Abbott recently signed a rural broadband initiative for our state and I believe other states will follow.

We've been told on the demand for broadband is doubling approximately every six months.

And while the pandemic has driven the urgent demand now the longer term picture is also promising over the next 10 to 15 years and with that I'll now turn it over to Kim.

Thanks, Tom and good morning, everyone I'll begin with our key financial metrics for the quarter and for the full year and then I'll cover our balance sheet cash flows and backlog and then I'll wrap up with our 2021 guidance before moving on to your questions. Our fourth quarter 2020 revenue was 897 $3 million and increase of $107 6 million or 13 six.

<unk> percent compared to the fourth quarter prior year and.

The increase was largely due to higher pipeline segment revenue since we had a number of pipeline jobs and processed during the quarter. We also had higher revenue and our power and transmission segments, but this was slightly offset by lower revenue and our civil and utility segments, mostly due to the timing of jobs.

Gross profit and the fourth quarter of 2020 was $97 8 million compared to $89 $89 5 million and the prior year. The increase in gross profit was largely due to higher pipeline segment revenue and improved margins and the transmission segment. This was partially offset by lower margins and the civil and power segments for the full year 2020 gross profit increased by almost.

40 million to $370 2 million compared to 2019 due to increases increased revenue.

Looking at each segment transmit power transmission segment gross profit increased $22 3 million to a record $44 $9 million, primarily due to higher gross margins on slightly lower revenue gross margins were nine 8% and 2020 compared to four and 5% and the prior year due to higher costs and the prior year higher margin work.

And the current year and a little more storm work and this year.

Our utility segment continued to perform well with gross profit increasing by $16 3 million to $133 million due to slightly higher revenues and higher gross margins gross margins were 14, 7% compared to 13, 2% and the prior year, primarily due to better weather conditions, and 2020 and better margins on projects and the southeastern part of the U S.

Our power segment experienced a $22 6 million deep.

Decrease in gross profit is slightly higher revenues were offset by lower gross margins. During the year. This was mostly due to the higher costs associated with the LNG project and the northeast that Tom mentioned.

The pipeline segment increased gross profit by almost 36 million, primarily due to higher revenue, partially offset by slightly lower margins in 2020.

At 10, 9% they were down from 12, 2% and the prior year, primarily due to higher costs on pipeline projects, and Virginia and Texas This year.

The civil segment gross profit was down $12 $6 million this year, primarily due to low revenue.

Due to timing of projects as well as slightly lower gross margins.

And 19 gross margins benefited from the resolution of a large portion of our belt and claims with Txdot and in 2020, we resolve the remaining two belt and claims with Txdot, but they only had a small impact on gross margins, but even without the claims benefit in 2020. The segment had solid gross margins driven by good project execution and a few project closeouts.

SG&A expense and the fourth quarter was $50 2 million up from $48 6 million and the prior year. The slight increase was primarily due to incentive compensation and <unk> expenses as we continue to upgrade some of our it infrastructure, partially offset by lower travel expenses as a result of the pandemic on.

Our 2020, SG&A expenses were $202 8 million compared to $190 1 million and the prior year, primarily from the same reasons as our Q4 increase.

For the full year SG&A expense was five 8% of revenue compared to six 1% and 2019, we expect our SG&A expenses will be and the low five excuse me high five to low 6% range for 2021 as well.

We also incurred $3 4 million of transaction cost and Q4 2020, primarily related to our acquisition of future infrastructure.

Interest expense and the fourth quarter, which was $2 8 million compared to $2 6 million and the prior year, which was in line with expectations and for the full year interest expense was $20 3 million essentially flat with 2019.

With the additional debt raised to fund the acquisition of future infrastructure, I expect 2021, and interest expense to be approximately $7 million per quarter.

The effective tax rate on income attributable to <unk> was approximately 28% for the year slightly lower than we anticipated due to higher pre tax profit and lower state income tax.

We expect that our effective tax rate to be approximately 29% for 2021, but that rate may vary slightly depending on the mix of states. We work in this year.

Fourth quarter net income attributable from Morris was $31 8 million or <unk> 60, <unk> 66 per fully diluted share compared with $26 9 million or <unk> 53 per fully diluted share and the prior year for the full year, we recorded a record $2 16.

And which surpasses the $1 61 per share, we did and set and 19 2019.

Operating cash flows and the fourth quarter were $120 4 million and for the full year, our operating activities generated almost $312 million of cash flows compared to almost $118 million and 2019.

And this considerable increase in operating cash flows was due to higher net income and a continued focus on working capital and negotiating good contract terms and.

And the fourth quarter, we invested approximately 10 million and property and equipment and for the full year, we invested $64 4 million of which about $42 million, which was for construction equipment. We.

We expect our 2021 capital spending to be and the $60 million to $80 million range with almost all of that is spent on construction equipment. This year.

Our balance sheet at year end was strong as we ended the year with $326 7 million of cash flow.

And capacity under our revolvers.

Under our revolver was $148 5 million, providing a total available liquidity of $475 2 million at year end.

That was down to $316 million and a weighted average interest rate was down to three 7% compared to 4% and the prior year.

With the acquisition of future last month, we borrowed 100 million and to our revolving credit facility and increased our term loan by $400 million over the next 12 months, we expect to use our cash flow to support the continued organic growth of our company and reduce debt and we continue to look for acquisitions that complement our growth strategy.

Fixed backlog at the end of the year was $1 64 billion and our MSA backlog was $1. One 4 billion for a total backlog of $2 708 billion. While this is down compared to 2019, when you exclude the impact of the ACP project, our backlog is essentially flat compared to the prior year.

And that's something we're proud of given the amount of revenue we burn this year.

Compared to the end of 2019, our MSA backlog is down $280 million.

This is due to us terminating some unprofitable contracts during the year reduced spending by a couple of our utility customers and reduced spend by some of our industrial and pipeline customers. We expect our MSA backlog will increase and 2021 as we add new utility customers and layer in the acquisition of the futures backlog.

And concluding with our 2021 earnings guidance, we expect net earnings per fully diluted share will be and the $2 40 to $2 60 range. This includes the operating results and future infrastructure, partially offset by about $6 million to $8 million of incremental intangible amortization expense and approximately $12 million to $13 million of incremental interest expense.

Our early estimate is that future should contribute between 30 to 40 and EPS in 2021.

And with that we can turn it over to your questions Amy.

At this time I would like to remind everyone and quarter to ask a question press star.

And then one on your telephone keypad.

Well pause for just a moment to compile the Q&A roster.

Your first question today comes from the line of Lee as you go day with CJS Securities. Please proceed with your question Hi.

Hi, good morning, and congrats on the results.

Thanks Lee.

So just starting with the current.

I will say unfortunate situation and Texas can we speak to sort of how your company can be part of the solution. Both in terms of the immediate term solution and then longer term.

On your grid hardening and.

Further improvements to the <unk>.

Infrastructure down there.

I think you actually answered it but.

Short term, we have crews out now and working with our clients and help and reestablish power and energy I think is as recent as yesterday were close to 300, fulltime equivalent and still out working with restoring power to clients as the lawsuit pair and damage from the storm.

Long term.

Exactly as you said, it's helping our clients.

And build additional capacity, whether that's transmission capacity or is power generation.

Also in and grid hardening and so.

And next time something like this happens they are prepared and they can withstand it they have more capacity to help with standard.

We are available to our clients, we have the crews and the capabilities to be able to do that so and.

And extremely close to them here and some of them and here in Dallas.

We're there with what Theyre nowhere, there David and we're even working on some of this now.

Got it and then if I think about Q1 historically before future Q1 has typically been sort of a breakeven to making a little bit of money quarter, just because your utility customers are snowed in et cetera, I guess the first part of it is the work that's needed and Texas, a positive or a negative for Q1 specifics.

<unk> and then layering on and things like future and then you know the the.

And the work on the solar stuff within the power segment.

It would appear that Q1 versus historical might be abnormally profitable is there any way you can speak to that.

Well I don't know if we're there yet that we could say that and one thing I would caution you is that we.

We've literally here in Texas lost a week of revenue.

And just from last week. So we had some people working last week very few.

So now we'll get some of that back and the work that we're doing on this recovery, but typically the storm recovery work just replaces revenue you jet you would generate or you would burn anyway. So.

I think renewables I kind of look and see how fast those projects are progressing and what the revenue burn is but that should help offset it and future will too but future typically they star. There is clients are again be and utility clients. They start off a little slow and the year as well coming back from holidays, and the design work done and and issuing work order. So I don't know if I could say, yes that is.

Going to offset it.

By Q on a profitable quarter with a little bit higher upside than we've seen in the past or not we will know that in the coming weeks.

Okay, and then one more for Ken and I will hop back in queue. Just on the SG&A side. It looks like you guys are doing a great job keeping cost on are there any specific actions you can talk to that you've done already on the SG&A side to keep these down permanently and are there any other things you are looking at in terms of projects that could further reduce your SG&A levels, both absolute and.

And as a percentage of sales.

Yes, I mean, most of the projects that we implemented to reduce G&A are done now and fully baked in and so we don't have really much and the way of incremental projects.

We're going to continue to monitor it though it's something that's kind of ongoing well.

And we will definitely get the.

The dilution from continued revenue growth, but then what we're also have now is.

The additional G&A from the future acquisition, and we're going to have to look at that a little bit further and see how it lines up with our historical G&A percentages, we may need to do a little streamlining their long term.

And I think they're all sounds great and do that.

I will hop back in queue. Thanks.

Thanks Lee.

Your next question comes from the line of Sean Eastman with Keybanc capital markets. Please proceed with your question.

And Dan Congrats on closing out the year strong thanks, Sean and Sean.

My pleasure I, just wanted to just to be clear on the future contribution. So the guidance includes the.

Incremental amortization and any transaction fees those are not adjusted out of the guidance. That's correct. That's correct that's correct.

And those things should roll off into the out years, and so that contribution should step up around that right.

Yes.

Yes.

Okay, Okay terrific and.

And just wanted to ask on the pipeline and underground and segment. I mean, you guys are sort of appropriately measured and your outlook commentary there.

But it sounds like you've got a lot of the 'twenty and 'twenty one plan and backlog can you give us an idea of what's reflected in the guidance from pipeline and underground.

Revenue and is that over 40% of the plan and backlog as of today kind of normal at this point and the year or is it above normal I'm curious about that.

It really depends on the year and the timing of projects. So there's years when we'll go into and we will go into the year and we've got hardly anything baked and the backlog and other years, where we've got quite a bit baked. It all just depends on the timing of the projects being awarded and when Theyre going to start.

And we normally don't give and then with respect to 2021 and general we normally don't give revenue guidance, but.

We had a.

Go back to 2018, and 2019 I consider those kind of be normal years for pipeline for US we had a really good year and 2020 as you can see.

I'm not saying, we're going to go back to 2018, and 2019, but it's going to be down in 2021.

Okay got you and last one from me I'm, just curious with some optimism around.

You know the business cycle around around the reopening of the economy et cetera, whether youre seeing any firming and the.

Prospect activity and the Gulf Coast industrial markets, whether it be refining or chemicals or is there any kind of signs of life.

And sort of an inflection there.

I would say a little bit not anything to.

Get you too excited right now there's activity and we're <unk>.

Seeing primarily smaller projects I haven't seen anything.

Step change yet.

Not yet.

Okay helpful. Again, nice work guys. Thanks for the time, Thanks, Sean and thanks, Sean.

Your next question comes from the line of Adam Campbell Thompson Davis. Please proceed with your question.

Hey, good morning, guys, Hey, Adam Adam.

Hey, can we talk a little bit about high level the outlook for.

California.

Curious both on the pipeline and the industrial side.

Well the industrial side again.

And they've got that one large biofuels project and there'll be burning revenue on that project I think through this year and probably into early next.

And.

They've been able in the past I mean, it's definitely that group used to do a lot of power plants. They do a power plant about every year and a half day every two years, that's seen a lot of that but they've been able to replace a lot of that lost revenue with smaller projects smaller capital projects and the mid and successful doing that.

And then renewables of course so.

The pipeline.

Youre, probably talking about more of the underground or gas utility portion of that that group because that's really what they do and they do some electrical transmission work for the utilities out in California.

We haven't seen a drop off from some of our companies, but we have seen.

The drop off from a major client that just.

Came out of.

Bankruptcy, just now has a new CEO and so we expect that some of that will pick back up because they've got a lot of grid hardening and that theyre going to do but we've got to give them. Some time to to get her organization and business structure in place and then determine what their path forward is so we're down a little bit out there and we were down last year on.

There, but what we're expecting this is not going to pick up a whole lot. This year, but I don't think its not going away by any stretch of imagination.

Okay.

And then Tom can you.

On the solar side can you run us through.

And just kind of quick I couldnt quite catch and thank you said something about $1 billion.

Would be kind of what was flowing in and out of backup.

Backlog or you might hit $1 billion and solar backlog at some point over the next two years, what what was that comment yes, what I said was we have about.

We have 490 415 and hang on let me get let me get to that part and here.

Wed like $470 million of projects renewable projects and backlog.

And that we've been typically what happens and that businesses that were.

You go through a and estimating process with your clients.

And you then you are granted.

The project is yours, given and you get them.

And typically we get a limited notice to proceed but we will start engineering will do some engineering and so we don't ever put that into our backlog. We may put the value of the limited notice to proceed which is nine or 10 or $11 million and our backlog and we don't put the whole project and tobacco backlog and we've been told that there's another 500, so we sit and here was about $430 million and backlog.

And renewable projects, we've been total unofficial but.

There is another $570 million of projects that.

And they go forward once they get financial backing and the final.

Total support which is that they.

They've already got most of that is just approval start from their respective companies that will finalize our contracts with those clients and then that work will go into backlog.

And that those projects that $570 million of projects are also projects that are slated to be built designed and built in 2021 and 2022. So if that happens we'll have over $1 billion of renewable work and backlog.

From a project that we built in 2021 and 2022 and.

Backlog or in process or backlog on processes.

But the $5 70, those are incremental projects its not exist it's not.

The next phase of projects that are already started they're just they're incremental projects and there are different stages of progress right. So.

And client handles and I'm, a little bit different so some of them. They go through get and estimate to get and agreement on what the prices have agreement on what the scope is go back to.

Their senior management and get the project brewed and funded and then they move forward others. They go out and they sell the project to a developer or whoever they are all different depending on who and wireless and then just last one from me and I'll turn it over that.

And your experience so far with the margins and solar.

They've been on that.

Low double digit.

2014 and 15%.

It's a pretty good actually they are nice margins, yes, okay, yes, Adam when you think about it.

And the work is very different but they tend to ironically enough kind of resemble how pipeline projects work generally fixed price projects.

Generally our bid at kind of low double digit margins and if we do a good job and manage our costs and our efficient we can get some margin accretion as we push our way through and close them out and they are real.

Theyre not theyre, not a typical or atypical construction type projects like mobile manufacturing more than it is construction work is very different and a pipeline project right, but in terms of how they financially we end up working out that could be similar to a pipeline, Brian well that's great. It helps offset the decline and pipeline okay.

Very good I'll turn it over thanks, guys. Thanks I appreciate it.

Your next question comes from the line of Julio Romero with Sidoti and company. Please proceed with your question.

Hey, good morning.

Hey, Julio.

I wanted to ask about the streamline segments and what your market.

And the range it looks like for the three new segments.

I'm, sorry, you broke up a little bit can you repeat that.

Sure I wanted to ask about the new segment structure split normally targeted margin like from maybe energy and utility segment.

Oh.

For the energy segment, it's going to be kind of 11% to 13% and <unk>.

<unk> segment will probably be a little bit broader but we've normally said thats generally kind of 12% to 14%.

Got it.

And.

This question was asked earlier, but on electric grid modernization.

Just thinking longer term and.

And your experience through the storm well you probably haven't experienced so on like this but.

Has passed forms and Texas kind of increased like a sustained appetite for increased capex into grid reliability or does that sort of <unk>.

Paper off as People's memories kind of.

Yeah, Pat overtime, well I mean, theres always a storm.

Grid hardening work that comes that follows hurricane dry.

The problem with the grid hardening is certainly.

I guess, that's a little bit different type of work, but when youre talking about doing grid hartinger going underground with utilities.

The numbers I've heard is anywhere from 7% to 10% more expensive to put power utilities underground and it has to build overhead.

And you tell them out and the result of what might happen as a result of this storm that hit Texas. This last week, it's more creating more capacity, whether it be transmission capacity and energy generation capacity.

And to make sure that you have that you can provide the serve what services that people need.

And when storms like this occur.

There's a little bit different.

To me it would be more power generation, and we're bringing more power generation online and.

And obviously, perhaps doing some <unk> on the wind farms that apparently didn't occur and they lost that power generation capability, and then having the transmission capabilities, because youre going to lose and when you have storms like this youre going to lose some transmission capabilities, because youre going to have some failures.

The nature of the base get sub zero temperatures ice storms volume.

Freeze power lines come down it just happens.

Got it and just thinking about your backlog and the mix of MSA base too.

On to non MSA based if I.

If I pro forma the future infrastructure backlog.

And to your and your backlog I mean does that.

Does that mix low closer to.

Closer to 50%.

MSA to non MSA.

Hold on and Jim up yes Sandy.

Our hope.

Backlog and we had thought about as you said $350 million I think of.

Of estimated at backlog for future infrastructure, right and if I assume Paul.

And east I get kind of closer to 48, 49 and range, Yes, no thats right zone.

And Thats exactly right.

Okay, and I guess just last one from me is on the Capex guidance.

I think you mentioned $60 million to $80 million based on buying new equipment.

Is that.

Is that extra $25 million and so I think.

And that step up I guess related to what.

You were talking about on the path for this year is that related to the new future infrastructure business and buying equipment for that business. So there's only a small portion of that thats in there for future actually there's I mean, there's a percentage of it based on their revenue its probably 252% to two 5% of the revenue.

And just last year, we held.

Capex down just because of the pandemic and want to make sure we preserve cash and it's pretty if you go back and past years, historically spent anywhere between $60 million to $90 million or $70 million to $90 million and capex. So just getting back more to the traditional numbers that's been consistent with how we've operated in the past.

Thanks for taking the questions.

Thanks for that.

Sure.

Your next question comes from the line of Brian.

Good day.

Davidson.

Please proceed with your question.

Hey, Thanks, Good morning, Hey, Brent Brent.

Hey.

And.

And then it's going to get re segmented, but the utilities and distribution group.

And it seemed the same growth and 19 and 20 EBIT gotten used to you and preceding years and there's some of that and there is some seasonal factors things outside of you and your customers control.

So backlog isn't always a perfect leading indicator of the business and I'm, just wondering how you're thinking about that.

And 2021.

Yes, I mean, we.

Had been down but part of the reason we've been down a little bit is because we we chose to.

Trade.

Revenue from for profit, we went through and did a full review of all of our contracts and say, which ones are we making money on and which ones, we not and so and we've talked about this in previous quarters about how we walked away from some contracts or terminated some.

They were just not profitable, where we couldnt negotiate good profitable.

Renegotiate profitable rates with some of our customers.

Other customers.

We were very successful negotiating good right. So the reason for the slower revenue growth and decline is because we've been kind of cleaning up some of that in order to produce better margins overall and be more disciplined in that respect.

Our continued growth is going to be driven by a number of different things geographic expansion, Tom talked about and his comments about expanding out in the west we've got new customer and the state of Utah.

But we are going to have some ebb and flow depending on our customer spend where they are and the rebuild process and.

And our geographic expansion and that will be further complement and now by the acquisition of the future because I think as we mentioned before futures, mostly telecom, but there was a nice chunk of.

Our gas utility work that they did as well down on the south eastern part of the United States and the other.

Part of it is when you go on to do.

The utility, especially the gas utilities work.

And if it's going in and replacing OLED old age systems and urban environments Rural environments. When you cash that build out there and youre doing new installs and things like the pandemic occur that stopped new construction.

And then that type of work drops off.

And that will still do work for those clients and those regions under current msas or existing Msas, but then it drives us to go out and find other msas and other areas to work too and it takes a little bit of time to get those classes.

Why are you to come into an area demonstrates that you can work that we'll do that typically with why you would bring on a few crews and it just takes time to build a relationship to the if you can take over some of that work. It's just a process.

Okay.

And we will be addition of.

Some of the telecom capabilities do you think that will actually help you get from new customers on the utilities.

Utility and just literally sat them down.

And I'm counting on it we're counting on it and I think will help the telecom side get new customers. So we have we're and.

Geographic areas and the future doesn't operate right now we're already seeing them be pulled by customers that we have relationships with into those regions. So.

It's working both ways.

Great and then.

And.

You guys and a massive <unk>.

Backlog here and that our business and it sounds like a good chunk of that and solar and related.

Can you just talk about.

I guess, the non solar related stuff and bookings.

Bookings activity.

And what what youre seeing outside of that within that business unit.

And how you see that playing over the next 12 months in terms of growth opportunities.

Yes, we've got we do a number of things that are non solar.

You heard me talk about looking at getting into wind is one of them that we're going to start looking at it but a lot of it is renewable fuels.

Biodiesel Green.

Green diesels were actually doing studies for clients right now some of those projects will turn into construction projects force, we're actually doing a large construction project that you heard me reference for Biofuels project GAAP, California, that's about $200 million plus and have another $50 million project that we're going to do some construction on here.

And the Gulf Coast.

And.

Some of the projects, we're dealing with clients some of the projects you deal with developers and so theres a number of opportunities out there developer projects have a tendency to take longer to.

Become a real project they have to go out.

Prove the process and they have sought after on engineering to support that and I have to go out and get the financing in place and then get funding.

Move forward with the project just takes a little wall.

So we started years several years ago and looking at those opportunities even with methane recovery.

And you know quite as treatment facilities are and landfills. So we've got our fingers and the fire at a lot of different areas working with developers and clients on those projects. It's just it takes a while I don't know what we have and our plan for those.

Outside of solar and our business plan and right now and I couldnt speak to that at this moment, yes she'll call Brent.

And that segment has a number of different business unit includes our Canadian operations and includes our industrial operations on the West Coast on industrial operations on the along the Gulf Coast. So it's a broad mix of work in and around industrial facilities refining and pet Chem.

Canadian oil sands, Canadian midstream et cetera.

Okay.

And Ken I imagined final question does the guidance reflect some normalization and civil margins maybe back to the mid mid to high single digits is that fair. That's correct. That's correct yeah yeah.

Yes.

Okay, great. Thank you.

Thanks, Brent Thanks, Brent.

Your next question comes from the line of Lee Jagoda with CJS Securities. Please proceed with your question.

Hi, just one quick follow up on an earlier comment. So I think earlier, you mentioned that the energy segment target margins were and that 11% to 13% range I assume you're speaking to the new energy segment is that correct that is correctly.

And I guess the follow up is.

Don't think you've gotten to the low end of that range. Since 2015, if I look at the segment together.

So has something changed structurally that you should achieve that range going forward and when do you actually expect to be within that range.

Okay.

I guess I was thinking about it more from that.

That's a good question I'm glad you clarified that I was thinking about more from the old <unk>.

Power and industrial if when you layer in heavy civil and <unk>. That's a good point it probably will not be 11% to 13% when you layer and our civil segment. It will probably be kind of nine to 12.

Yes.

Yeah, and because that will set that will dollar average heavy sales traditionally just a lower margin business.

Right.

That makes sense I just was surprised that it was as high as it was on that.

Great question I appreciate you asking about day when.

And we finished the job and the northeast and Youll see margin start trickle up in that segment right now they've got some revenue they got a burn and that has no margin at all so.

And we get past that project, but but renewables pick those numbers up pretty pretty nicely.

Right.

Perfect.

And again, if he would like to ask a question. Please go ahead and press star and the number one on your telephone keypad.

And there are no further questions at this time I would like to turn the call back over to Mr. Tom Mccormick, Chief Executive Officer for from Lauren.

Thank you Amy I'll, just conclude by saying 'twenty and 'twenty was a very successful year from Morris family of companies as well as for our shareholders and our customers. We're off to a strong start in 2021 and are looking forward to seeing what challenges and opportunities. The year brings thank you all for joining us today.

This concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

David.

[music].

Yes.

[music].