Q2 2019 Earnings Call
Welcome to Primoris Services Corporation, 2019 second quarter financial results Conference call.
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A question and answer session will follow the presentation.
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Please note this conference is being recorded.
I will now turn the conference over to your host Kate Tholking Director of Investor Relations you may begin.
Thank you David Good morning, everyone. Thank you for joining us today, our speakers for today will be David King Executive Chairman and Chief Executive Officer, Tom Mccormick, President and Ken Dodson Executive Vice President and Chief Financial Officer. In addition to this mornings press release, we have also posted slides on our website that highlight key points. We plan to discuss on this call you can access them by going to our corporate website www dot from dot com and selecting investors.
Once on the Investor site, you'll find the slides in the events and presentations section next to the webcast link for today's call before we begin I'd like to remind everyone that statements made during today's call may contain certain 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 as discussed in this mornings 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 30, Onest 2018, and other filings with the Securities 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 I'd now like to turn the call over to our CEO , David King Thanks, Kate.
Good morning, everyone.
Thank you for joining us today to review our 2019 second quarter results were extremely pleased that we delivered another quarter of positive earnings 35 cents per share and we ended the quarter with a backlog of over $3 billion, reaching another record in from overseas history.
This quarter marks the 44th consecutive quarter Primoris has posted profitable results.
Our record second quarter revenue of $790 million was 22% higher than last year's second quarter revenue.
I want to discuss the risk profile associated with our revenue growth because I'm aware of others in the construction industry faced recent challenges and it's important to recognize that primoris is risk profile is different from many of our peers.
Our MSA revenue continues to grow accounting for 44% of the second quarter revenue.
This focus on growing our MSA revenue is one side of our risk management strategy as our utility based revenues are stable deliver good margins and provide several years of visibility.
The remainder of our revenue is fairly evenly split.
Between our other operating segments and we are not reliant on any one cyclical end markets are any one single project.
Well that is true we have a handful of larger projects, we placed a strong emphasis on contract terms and most of our larger projects are either unit price our cost reimbursable.
Fixed price jobs account for less than 25% of our revenue this year.
We have historically been very successful in large projects like power projects in major pipelines, but they are not primoris is bread and butter.
Our average contract value is less than $10 million, we strongly believe our focus on growing MSA revenue diverse end markets and a conservative mix of project size and a disciplined approach to contract terms are critical elements that helped us deliver our 11 years of consistently profitable quarters and we plan to continue following this strategy as we grow the company.
Our second quarter saw us add to our backlog with some very notable MSC and project awards, our addressable market has expanded to over $22 billion of identified opportunities, but just looking to the next 12 months, we're tracking over $2.6 billion of awards that look favorable.
The diversity that leaves a pinch potential awards range across all sectors, including MSA for both gas and electric utilities assisting them in upgrading fire hardening and strengthening of their systems to industrial and civil projects for solar Biofuels renewable diesel and large diameter pipeline projects.
Some of these continue to provide for Boris with multi year revenue agreements very visible revenues and solid earnings growth for many years to come.
As I start my individual segment remarks, I'm very proud that primoris ranks as one of the top specialty contractors in the United States and Canada.
I also wanted to give all of these groups of speckle, Rick special recognition for helping to move Primoris up several spots in NR as top contractors list. We're also notified recently that were solar power worlds number seven APC contractor and the number one solar APC contractor for Texas.
He had ourselves and are also ranked the top three California projects recently and I'm proud to say that two of those projects were done by Primoris.
With that said I'll dive into the individual segment results starting with the civil segment.
We're extremely gotta gratified by the improvement in the profitability in this segment.
Notable awards. This quarter include LNG related Civil War and highway projects, both for Louisiana, and Texas Department of Transportation.
The heavy civil Belton jobs are tracking well on execution and safety as a wrap up at the same time. We've now had a couple of years to establish a track record with our new management team led by Mark Buchanan and I'm pleased to say that our newer heavy civil work is meeting our margin expectations.
All right Im team is working closely with other primoris business units on projects as varied as Appalachian expansion projects ethane crackers and the renewable energy projects. We expect margins for this segment to continue to improve in the second half and we anticipate that by next year, we'll be back in our target gross margin range.
Our power industrial engineering segment.
Currently led by Tim Healy and Kevin Smith had a strong second quarter Primoris designing construction secured their first full MPC awards in the second quarter and isomerization unit for a major refinery customer and they continue to work with our industrial units to cross sell their services.
We expect to see good backlog growth for them in the second half of the year and revenue continuing to ramp up next year.
Onquest was recently awarded their first project, and then or renewable natural gas market, capturing bio gas from dairy farms and they are currently pursuing several other opportunities in this market. This was one of the initiatives came out of our strategic planning sessions and I'm pleased to see the progress they've already made.
They continue to pursue work in their traditional fired heaters and micro LNG markets as well and we expect to be making some positive announcements soon.
Our Canadian operations has been growing revenue, thanks to increasing MSA work in the oil sands and leaner overhead costs have led to improved margins for them.
Our local management team is highly focused on our growing strength in that market. Our industrial work in the Gulf Coast led by Primoris Industrial Constructors has seen a slower revenue margin due to some client delays in permitting challenges. We're now in the second wave of the LNG export installations and the associated petrochemical facilities and we are closely tracking multiple opportunities in this space.
Hi, Harvey Industrial was recently awarded a compressor station a great win for the team and they're tracking several other potential compressor station awards. This is helping to offset some of the headwinds they face in the combined cycle power market in California.
We have also begun seeing trends and other west coast markets, such as Oregon, and Washington State that will fit well for the abbey.
Maybe industrial team.
They are working closely with our teams also in the renewable energy markets. The large solar projects, we announced earlier this year is going very well and we are benefiting from value added lessons learned on last year's major solar project here in Texas.
This new solar facility is just down the road in West, Texas from last year's project.
We are now more familiar with that region and we're seeing it in our margins the us utility solar forecast for 2019 through 2024 has grown by 5.1 Gigawatts just since last quarter driven by the low price environment for utility PV and we're tracking several sizable opportunities throughout the southwest.
We've just passed the one year anniversary in June for our interest into the electrical TMB market led by Jeff premium and its going strong, notably MSA Awards this quarter in our TNT each group was for our major utility.
For us to handle construction services for their overhead line distribution.
The group has over 600 worksite ranging from one man crews to 40 person crews were continue to transition them to a company owned fleet as this is a resource driven market.
Through the indirect cost associated with their gross.
Though the indirect cost associated with our growth placed a damper on second quarter margins as we continue to grow this group.
We are seeing a substantial shift in our class capital spending from generation plants to distribution as environmental concerns and regulation place increased emphasis on grid reliability.
We are seeing a lot of electric fire hardening work in Northern Canada, California, with our ERP group also.
While weather was another headwind for the quarter, we remain very encouraged by the long term trends in the electric utility market.
Our gas utility and distribution segment led by Mike Christie continued their solid execution, although the wet weather throughout the Midwest slightly delayed the start of our traditional second quarter ramp up.
Q3 c experienced some shift in the revenue mix wrapping up some distribution integrity work in Colorado, which had a slight impact on margins in the quarter, we expect to see some margin headwinds as we continue to grow into new territories, but we believe the opportunities for replacement work in these markets are very robust.
The long term outlook for natural gas utility work continues to increase and we are excited to expand our reach in this market.
Our open shop utility work also continues to grow and we're working to right size. The equipment fleet that came with the latest acquisition to get margins closer to our union utility work.
Our overall view of the natural gas utility market remains very positive.
As we are experiencing a multi decade investment cycle with many estimating that it could take another 30 years to replace the current antiquated distribution systems.
Now onto our pipeline an underground segment led by Scott Summers. It had a second a great second quarter, which might surprise some on wall Street to seem to predict Doom every quarter for pipeline groups and I have to say all this was achieved while the Atlantic Coast pipeline project remains somewhat dormant for us at this time.
Notable awards this quarter included pipeline projects in West, Texas, Pennsylvania, and along the Gulf Coast and various pumping stations.
Primoris pipeline continues to see strong demand with work in the Permian starting to shift more to natural gas from crude oil and natural gas liquids.
It was certainly a wet quarter for them as one of their projects in West Texas received the equivalent of two thirds of their annual rainfall ingest April and may that impacted their margins, but not their outlook, we see opportunity stretching out several years and we're already talking with clients about 2021 work.
Our Primoris field services team had an outstanding quarter and they're on track to see their full year revenue quadruple from what it was just a couple of years ago.
Most of their work is in the Gulf Coast region, laying new pipelines and performing maintenance and repair work inside refining areas pump stations and tank farms. They are also experiencing growth in the Permian where their work consist of gathering stations pump stations compressor stations and meter Sachin and last but certainly not least Rockford had another great quarter. They both two jobs in the quarter and started burning revenue right away and we continue to be paid some stand by while we wait for the Atlantic Coast pipeline project to resume we are optimistic this project will start in first quarter of next year.
We've also continued our company wide focus on a more formalized standards skills training, that's replicate across all business lines.
We've created a curriculum that covers topics such as communication with Platts planning procurement and commercial management for all of our project managers and superintendents.
Before I think turn things over to Ken for a deeper dive in the numbers I'd like to mention some recent improve improvements we've made to our governance and sustainability practices.
We recently published our code of conduct and our corporate corporate governance guidelines, we've taken a deep look at our corporate governance practice practices and implemented some changes such as declassification of our board, creating a mandatory retirement age for directors and reaffirming our prohibition on directors hedging with Primoris stock will also be publishing our first sustainability, Gad, which will outline these improvements as well as our initiatives and environmental and social matters I'd also like to welcome our newest board member Tom Mccormick here with me today. He was elected to the board at our meeting last week. Tom are company President has served us very well since coming to the company and this election to the board is well deserved with that I will now turn it over to Ken.
Thanks, David and good morning, everyone I'm going to review, our second quarter operating results, our balance sheet and cash flows and our 2019 guidance before we move on to your questions.
Our second quarter revenue was $790 million compared to $649 million in the second quarter of 2018, an increase of over $140 million or 22%.
The transmission segment accounted for almost $93 million of the increase as we have three full months of revenue in 2019 compared to only one month in 2018. Our pipeline segment also contributed over $46 million to the to the revenue increase per market, primarily driven by strong growth in our field services business, along with increases in both Rockford and Primoris pipeline.
Our largest three customers in the second quarter and year to date, where utility customers, where we work under long term MSC agreements in the second quarter. These top three customers accounted for a combined 21.6% of our revenue and year to date those same top three customers accounted for a combined 20.7% of our revenue.
Under these MSA agreements, we invoice our customers for thousands of work orders each month.
With many averaging only a few thousand dollars. This is just further evidence that we don't rely on large fixed price jobs to achieve our results.
Gross profit in the second quarter was just under $81 million compared to $71 million in the second quarter of 2018, an increase of 13%.
The increase in gross profit was primarily driven by the revenue growth in the transmission and pipeline segments mentioned earlier.
Gross profit as a percentage of percent of revenue was 10.2% in the second quarter compared to 11% in the second quarter 2018.
This decline was largely due to the impact of challenging weather conditions in the utilities transmission and pipeline segments.
As gene a expenses in the second quarter were just under $49 million compared to only compared to $43.5 million in the prior year second quarter.
The increase is due to having the legacy Willbros business units for a full three months this quarter compared to only one month in 2018.
However, as gene a expenses were only 6.2% of revenue this quarter.
Compared to 6.7% of revenue in the prior year, we're very pleased with our continued control of SG expenses as we grow revenues and we expect to maintain SGN a expense in the low six percents rent, 6% range as a percent of revenue going forward.
Interest expense in the second quarter was 6.7 million a $3.5 million increase from the prior year second quarter.
Increases due to a $2.7 million noncash charge for the unrealized loss on the change in fair value of our interest rate swap as well as higher debt balances during the quarter.
Our effective tax rate on income attributable to Primoris was 29% for the quarter, which is where we expect the rate to be for the full year.
As David mentioned net income attributable to Primoris in the second quarter was $17.8 million or 35 cents per share compared to $11.7 million or 23 cents per share in the second quarter 2018.
Excluding the relatively small amount of cash held by our Carlsbad joint venture. We ended the quarter with 52 million of cash on the balance sheet, our cash flow from operations. During the second quarter was a $24 million or use of cash. This is primarily related to our normal seasonal ramp up in revenue during the quarter and the working capital required to support this seasonal trend.
Included in our accounts receivable is roughly 66 million tied to a utility customer going through a chapter 11 reorganization.
Of this $57 million is pre petition and past due and the majority of the $57 million is secured by liens. We continue to work with the customer and the bankruptcy committed to resolve the delay and get paid and the customers current on all post petition work.
Our debt at June Thirtyth, 2019 was $412 million, an increase of $38 million during the quarter. This increase was due to borrowed funds under our revolving credit facility offset by $17 million of normal scheduled debt payments on our term loan equipment loans and mortgage loans, we anticipate paying down the revolver later in the year when our normal seasonal operating cash flows transition from cash outflows to cash inflows.
During the second quarter, we spent just under 43 million on capital expenditures, which included 29 million for construction equipment and the balance on facilities, we expect to spend between 15 and 20 million on Capex in the second half of the year.
Our total backlog as of June Thirtyth was $3.2 billion a record level for Primoris as David mentioned.
Fixed backlog was 1.8 billion, an increase of $260 million during the quarter driven by New awards in the pipeline and civil segment's MSA backlog held steady during the quarter and $1.4 billion or 43% of total backlog.
And now for our guidance for screening of fiscal year 2019, it remains unchanged at $1.60 to $1.80 per share the assumptions underlying our guidance has not changed during the quarter. Despite stronger than expected results in the first two quarters, we still expect our normal back end loaded seasonality in 2019 across most of our operating segments. Much of this driven by the seasonality of our MSC work for utility customers as well as the timing of certain larger projects.
And for those of you would like to ask about the Atlantic Coast pipeline, we anticipate little to no work on HCP in Q4 this year.
With that we can down turn to your questions.
David.
Thank you.
At this time, we will conduct a question and answer session.
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Our first question is from Lee Jagoda with CJS Securities.
Hi, Good morning, it's Pete Lucas for Lee.
Just assuming normalized margins in the transmission segment should be in the low double digits, you mentioned, a large impact from weather, but can you break out how much was weather versus mix and when you would expect that mix to normalize.
Yeah, Pete Thanks for asking the question the.
When we when we bought the TNT group, we mentioned I'll come specific to your question in a moment, we mentioned that it was going to take US a couple of years to get those margins up to the level that we were expecting them to be mainly because they had some pretty onerous leases and having to work off those leases both on a from a real estate as well as many equipment perspective, and we're still anticipating that those those margins will come up over the next three to four quarters to close to what we were expecting to be which is a pretty close into those those ranges you mentioned less route around are you in D. group.
I will also mention that you've seen the numbers from that group that we've reported over the last 12 months. They are very much in line with what our EBITDA in fact last actually above what our EBITDA expectations were.
In that particular unit.
When we did the acquisition and the ability to somewhat.
Somewhat.
Flatten out or smooth that I guess I would say some of the dips that we've had in our earnings in the past in first quarter and second quarter.
Their MSR backlog is certainly help do that.
When it when you actually look at the weather versus the cost that we did moving into some of the areas in some of the leases I would probably tell you that the most of that margin.
Shortfall was due to us getting out of leases and moving into the equipment side of that not the weather side. All the weather had some effect it was more from the equipment lease side.
Helpful. Thanks, and just one follow up for me turning to civil can you quantify the major refining project that started this year in civil and also are the lower volumes from Texas Deo T. expected to continue or was that mainly a a weather impact.
Yes the.
I don't want to identify because we typically don't identify our major customers list it wasn't refining customer down in the Louisiana area.
That that actually our PDC group that we've started a few years ago was able to secure that contract and allow our ITM group to get in there and start doing some site work on it.
Your second question I'm, sorry, yes.
Sorry, It was just regarding the lower volumes from Texas Deo Ti do you expect the lower volumes to continue or is that mainly a onetime weather impact.
That's probably a onetime weather impact now we have as you noted in previous calls we intentionally until we got that group turned around as we used to say turned the battle ship back in the right direction and Martin Buchanan has certainly got that headed that way, we intentionally kept the revenues fairly flat.
As well as relative to the the amount of work, we would take with text dot.
I believe you will start seeing that now begin to open back up since we began to see some very positive results out of that group.
Very helpful. Thanks, guys.
Thank you appreciate the questions.
Our next question is from Tahira Afzal with Keybanc capital markets.
Hi, Dave This is Sean on for Tahira.
First question for me is.
This was alluded to in the prepared remarks, but I'm, hoping to get some some updates on some added color on the LNG and petrochemical prospects and how you'd characterize the likelihood we might see some larger bookings there for that.
Segment.
And maybe just broadly how backlogs expected to trend in the next few quarters for that particular segment.
So this is Tom Mccormick and I'll answer that question and David can add to it if he wants.
With respect to petrochemical and LNG prospects, we have enough of them that were still tracking we're working with some large major.
SCS on those projects, they've just pushed a little bit out we still expect those to go do come to fruition so to speak but it's going to be later in the year, which means we probably won't burn a whole lot of revenue on those jobs Theyre awarded later this year that will go into 2020.
Yes, but the only thing I'd add Tom as you know were.
On the larger LNG projects, we are a subcontractor to most of those major E. Pcs that that secure those and you've certainly heard a few of them begin to make announcements here recently of those awards and so some of those will be able to pick up some work as Tom mentioned in.
Latam this third to fourth quarter, which will really begin to start first first to second quarter of next year. So one thing to think about as those jobs or awarded that they've got to go through a certain device design phase a lot of have done some front end work, where they've got to go through a design phase and started issuing drawings for construction before you will see contractors mobilized to the sites.
And on the on the pet Chem side that was LNG sat on the pet Chem side. You've also seen again, we are sub to some of the majors on some of their pet Chem work and you've at least heard of a couple level mentioned some methanol related awards and were in line to get some of that work as a dedicated sub on some of those projects. So it's a little bit of mix of the LNG work, a little bit of mix of anything to do with methanol whether its a.
No methanol facility and then some of the ethane type of work ethane cracking work that we mentioned in our prepared remarks, and I think with respect to the pick him, it's going to be tied to the clients getting there the necessary permits they need to mobilize the size.
Great very helpful and next question for me is.
Just hoping to get an idea of how you guys are positioned around HCP at this point it sounds like the prospect pipeline is really strong.
As we await.
Central restart.
How you guys might be able to offset potential further delays.
On that particular project.
Well as you know there are there are good customer for us and we're certainly don't abandon any customer in fact, we have a contract with them and so.
We're hoping they get that approved the latter part of this year, but there is a very robust demand and so for large diameter pipelines.
In fact.
What we had to do when we were asked to be kind of put on hold on HCP.
As I mentioned, we immediately released those resources and secured two awards very quickly. So those were the ones that I mentioned in Pennsylvania and in.
West, Texas, and burning revenue quite well through our Rockford group.
What we're also seeing with our Rockford group is.
We can't announce some yet obviously, but some verbal pre awards on some fairly large projects that will be starting up in that 20, 2021 and onward timeframe.
So we are very encouraged that.
I Hope HCP goes through gets approved I think it's a great project.
But in any event it doesn't we will be able to quickly marshal those resources to on these other projects that were verbally talking with now.
That's great and last one from me and the TV segment. I believe you guys were expecting to secure a pretty major Miss a renewal on a legacy WG contract.
In the very near term so I'm, hoping.
For an update there to the extent you can comment and maybe just tie in how those discussions with.
With those dnbi customers are going around.
Renewals and pricing discussion.
This is Tom Mccormick and I'll answer that question is the discussions are going extremely well, we're very close I would expect it sometime in the third quarter early fourth quarter. We would we would have an agreement in place and be able to execute that contract.
So it's it is actually going extremely well.
Yes, Thanks, Ed I'll add one more bit a flavor.
The.
The revenue levels that we've typically seen from that when we acquired that group.
It will be at that level or maybe even slightly above when this renewal gets done so.
Looks like its headed in a very positive direction.
Really helpful responses. Thanks, so much for the time.
Yes, our Sean thanks for the questions.
Our next question is how to tell however, with Thompson Davis.
Hey, good morning, guys congrats on a good quarter.
Thanks, Adam Good morning, Good morning, Adam.
Can can you give us some kind of sense for free cash flow for the full year.
Yes, so free cash flow for the full year I don't have the numbers in front of me right now, but they're they're probably going to be slightly ahead of last year, just on higher revenue levels.
And so I would guess probably 10% to 15% above last year's levels.
Perfect.
Okay and then.
You mentioned fire hardening work.
In Northern California would you say that work is steady or is it accelerating.
And then how does a or b.
And what are they doing for that.
Well. This again is that in the star performer, So in California, a lot of what we're doing is replacing a lot of power lines.
In certain areas in northern California for our clients out there.
With coated cyst lines that have protection Oliver some in some instances we're going on the ground. We also have clients in the southeast and up to the Atlantic Coast.
That are just not fire hardening, but its certainly hardening their systems for storm and whether it be hurricanes or ice storms. So we're we have a number of clients. There that have programs in place are starting programs in the coming years and is probably growing more it's probably right now it's flat a little bit flat in California, but it is expected to pick up in the coming.
Orders in the East coast in Atlanta Coast, Thats going to grow for a number of years is going to be multiyear programs to do that storm hardening.
And in fact, Adam I'll add a little bit more.
Unfortunately, when all those fires took place in in California.
Obviously, we were one of the major contractors out there that was was working to.
To clean up all the fire situation.
We had taken a strategic look a couple of years ago.
At the request of one of our clients in Northern California.
Because previously a RMB underground had been more of a gas distribution not an electrical contractor out there, but about two years ago, we really went into the electrical electrical side of the business out there under the R.A.R. B underground umbrella if I can call it that.
At the request of the client at the request of the clients out there. So weve steadily seen that electrical work for us and our ERP underground segment continue to go up and with what's going on out there with the hardening of all of that system, we do expect to see that ramp up.
For both the northern color, California, as well as a southern California.
Customers over these next few years if not longer.
Okay perfect.
And then pipeline margins how are you thinking about pipeline margins for the back half of the year.
Well the margins.
The margins on the first half of the year was really hurt more because of the weather situation. So really I think that as we go into the back half of the year typically.
Typically we don't see the weather situation. So we should be running at one of our typical margins and our Primoris pipeline group.
In our Rockford group.
Again right now the demand is pretty heavy in the larger diameter gas lands and indeed, our Primoris pipeline group is getting larger diameter gas lines also so I'm anticipating although I.
Im cautious when I say this but I am anticipating that the margin improvement is going to come up in the last half relative to those larger diameter pipelines.
Okay, and then lastly on the.
Civil segment.
You said return to normal.
In 20, I forget what normal list.
No.
Yes, you know, we've always said that when that units running properly that's in a 4% to 7% three to seven I think is actually what Kate puts on our slides and things like that and now.
With the mix in with the performance that we are beginning to get from it.
I think we're going to see that come up into that mid range of that 3% to 7% range, maybe even a little higher but.
That's kind of what we're looking to get now again part of that part of the pull down in that group is we are literally finishing off the temple project on the F 35 corridor and so we've still got a little bit of revenue burn at zero margin that continues to pull that group down some.
Okay perfect. Thank you.
Thank you.
Once again, if you have a question. Please press star one our next question is from Brent Thielman with da Davidson.
Hey, Thanks, good morning.
Good morning, Brett.
David maybe just on the civil side any update on.
Some of the claims you guys haven't been after that.
Oh sure.
You know, there's five projects in that I 35 corridor.
Two of them. We have went ahead and submitted our paperwork to what's called the contractor claims committee the CCC.
And I have got notified at least by Texstar management that though CCC claims will be hailed about six to nine months from now.
You know at least what what we're seeing is I feel comfortable with that claim I feel comfortable where we've got it represented at.
So that one is those two are progressing on through.
There are three of those remaining five projects that.
We've received indication that rather than go through the CCC process that it might be best just to sit down and show and what we're talking about and and then not have to go through what's called a contractor claims committee.
And we're in the process of going through that.
I really cant handicap that for you because.
When you're working with tax dot.
It just depends on on the people you align up across the table, sometimes and and whether or not they want to admit their mistakes those admit their mistakes. They settled pretty quick those that don't admit that mistakes they won't the system to to to to admit their mistakes forum. So it takes the burden off of them.
So I'm expecting that.
Those resolutions not to be done for at least another optimistically, we might be talking six months pessimistically it might take us at least another nine to 12 months to get those resolved.
Okay.
Okay. That's helpful and then.
I guess on the power segment you guys.
Obviously made a big kind of strategic shift in focus toward more of the renewables area I guess them.
Curious David.
I mean, you guys optimistic about any potential Nat gas sort of project awards in the next 12 to 18 months.
We are we havent and.
And Brian I. Appreciate your question because it gives me an opportunity to really.
We really didnt do a shift if you if you remember the the first battery storage facility in the state of California, we built.
The solar projects out in the state of California, we built but at the same time, we were building Nat gas facilities also but the headwinds to and we've had verbal awards of an additional Nat gas facility in California, but we haven't announced it because the headwinds to get that project approved in the California is steel steel gives us a feeling that it may or may not go.
So what we began to look at was the rest of the Nat gas facilities, and where our best opportunities were and we still got some that we're nurturing along and our opportunities that are Nat gas based facilities across the United States.
As you remember we did one in Virginia I guess it was we finished it about a year and a half ago very highly successful project for us.
But at the same point in time, we began to look at the really demand and the push on the renewable side and I'm. One of these people that kind of currently believe that wind farms.
They may be getting close to their maturity level or begin to flatten, but solar is not sold are still on a very.
Upward mobility and what we found was a void in that marketplace for what we thought was some very really good contractors out there that could Marshall the resources to do these two and 3000 acre Sachs lack primoris can and so I wouldn't say, it's really a market shift away from Nat gas renewables were definitely still chasing the Nat gas is it's just it while the headwinds are against Nat gas. These renewables are out there and it seemed a perfect opportunity to slip our groups and and we've been highly successful so far and in fact, I think you will see us announce some others in the not too dear future not not too distant future because we're tracking several good opportunities for us for additional solar work in that southwest region.
Okay. That's really helpful color I guess and on the.
The pipeline side it sounds like you had some thing.
In a few years out that you're talking about with customers I guess I'd be curious.
Yes.
Are you seeing the types of projects out there like a CP that.
I think the concern on the street.
Booking new work that may run into some of the issues that atps experience. So.
You just talked about the kind of the composition of projects out there that you're bidding and quoting and talking with the customers.
Hello.
Yes, you know any of the projects. Unfortunately that that that are the big projects and it doesn't make any sense was mountain valley or HCP or.
All these they get such high visibility and things and yet we have an opportunity on on those types of projects. But then you also see on these larger diameter ones that are in more more regional friendly states.
In the southwest and the Gulf Coast.
Where these LNG facilities have got to have natural gas brought to home. So you've got to appreciate that the people only the intake supplier for the LNG facilities are out there talking to the pipeline operators about putting in major pipelines to supply the gas and indeed, that's what we're beginning to see is some of those commitments that are already made on the LNG side, we're beginning to see the award of those projects to bring natural gas out at Permian region.
So, yes, we're still seeing tremendous amounts of opportunity and what I would call more regional friendly areas for the large diameter pipeline.
And then Brent this is Tom Mccormick and the other thing we're seeing is you're seeing smaller projects that don't have the visibility of these large multibillion dollar projects and so they kind of stay below the radar and so theres a lot of those in these in these areas.
We operate that clients are going forward with that you just don't really hear about.
But Brian I want to add one more quick thing because I just thought of it I said it in my comments, but I don't want it to go unnoticed by a lot of people.
One of our strategy a few years ago was to really get more in the field services side of the business and in fact, we had a field services group, albeit small in Texas that we acquired when we did our sprint acquisition, but a few years ago, we bought a company called coastal field services brought on a gentleman by the name of Jeff bridges and in my comments I think I've mentioned, we have quadrupled the size of the services and these are field services that go along with those pipelines that have to be performed.
A lot of it on an annualized basis, you know year after year after year, but then also pumping stations compressor stations things of that nature, and so that side of our business.
As really began to blossom and I think thats, an area, you're going to see us moving more into in the future not only in the Texas and Louisiana region, but across some of the other regions that have these large diameter pipelines.
Got it Okay, and I guess the last one for me I mean, the balance sheet.
Good good shape leverage pretty manageable I guess.
Curious how much of your time, you're you're focused on kind of new business prospects via M&A.
We kind of hit it on the head the reason I promoted time up to president and things was.
And then what about Jon Marino and as Chief operating Officer was to let me begin to look more at some of the M&A activities and we finished our.
Strategic planning process earlier, this year and came up with some very good opportunities both organic to grow organic but then also through through acquisitions and indeed have already started looking at a couple level and for us the timing needs to be just ride on them and some of them are going to be.
Entries entryways into what I call very very markets that are just now beginning to take off.
So things that will benefit the company longer term 3457 years from now so yeah, youre going to see may spend a lot more time on the M&A side.
Okay. Thanks for all the color.
Thanks, Thank you very much for your question Brent.
Thank you we have reached the end of the question and answer session.
I will now turn the call back to David King for closing remarks.
Well, thanks, everyone for joining us today.
You want to make sure we gave a special thanks to our over 12000 employees, who worked for for more safely each day, providing quality projects to our customers.
I also appreciate all your questions you ask us today, and we look forward to seeing many of you at our planned investor conferences I. Appreciate your questions have a good day.
Thank you.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.