UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                    to                      .

Commission file number 001-34145

Primoris Services Corporation

(Exact name of registrant as specified in its charter)

Delaware	20-4743916
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
2300 N. Field Street, Suite 1900
Dallas, Texas	75201
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (214) 740-5600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	PRIM	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ⌧  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer  ⌧	Accelerated filer  ☐
Non-accelerated filer  ☐	Smaller reporting company   ☐
	Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No ⌧

At November 5, 2021, 53,820,801 shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.

PRIMORIS SERVICES CORPORATION

INDEX

	Page No.
Part I. Financial Information
Item 1. Financial Statements:
—Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020 (Unaudited)	3
—Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	4
—Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	5
—Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	6
—Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)	8
—Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
Part II. Other Information
Item 1. Legal Proceedings	42
Item 6. Exhibits	43
Signatures	44

2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

		September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	199,025	$	326,744
Accounts receivable, net		554,501		432,455
Contract assets		411,262		325,849
Prepaid expenses and other current assets		52,444		30,218
Total current assets		1,217,232		1,115,266
Property and equipment, net		434,307		356,194
Operating lease assets		173,198		207,320
Deferred tax assets		1,919		1,909
Intangible assets, net		172,165		61,012
Goodwill		584,681		215,103
Other long-term assets		14,491		12,776
Total assets	$	2,597,993	$	1,969,580
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	315,276	$	245,906
Contract liabilities		202,116		267,227
Accrued liabilities		234,004		200,673
Dividends payable		3,228		2,887
Current portion of long-term debt		68,028		47,722
Total current liabilities		822,652		764,415
Long-term debt, net of current portion		610,556		268,835
Noncurrent operating lease liabilities, net of current portion		110,819		137,913
Deferred tax liabilities		8,870		13,548
Other long-term liabilities		67,708		70,077
Total liabilities		1,620,605		1,254,788
Commitments and contingencies (See Note 15)
Stockholders’ equity
Common stock—$.0001 par value; 90,000,000 shares authorized; 53,800,811 and 48,110,442 issued and outstanding at September 30, 2021 and December 31, 2020, respectively		6		5
Additional paid-in capital		275,155		89,098
Retained earnings		701,210		624,694
Accumulated other comprehensive income		974		958
Noncontrolling interest		43		37
Total stockholders’ equity		977,388		714,792
Total liabilities and stockholders’ equity	$	2,597,993	$	1,969,580

See Accompanying Notes to Condensed Consolidated Financial Statements

3

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue	$	913,245	$	942,700	$	2,613,184	$	2,594,159
Cost of revenue		785,809		819,019		2,292,541		2,321,701
Gross profit		127,436		123,681		320,643		272,458
Selling, general and administrative expenses		61,706		56,980		172,885		152,753
Transaction and related costs		447		117		14,823		154
Operating income		65,283		66,584		132,935		119,551
Other income (expense):
Foreign exchange loss, net		—		(77)		(443)		(141)
Other income, net		181		98		555		816
Interest expense, net		(4,698)		(4,715)		(14,154)		(17,172)
Income before provision for income taxes		60,766		61,890		118,893		103,054
Provision for income taxes		(16,710)		(17,947)		(32,694)		(29,883)
Net income		44,056		43,943		86,199		73,171
Net income attributable to noncontrolling interests		(3)		(2)		(6)		(8)
Net income attributable to Primoris	$	44,053	$	43,941	$	86,193	$	73,163
Dividends per common share	$	0.06	$	0.06	$	0.18	$	0.18
Earnings per share:
Basic	$	0.82	$	0.91	$	1.65	$	1.51
Diluted	$	0.81	$	0.90	$	1.63	$	1.50
Weighted average common shares outstanding:
Basic		53,769		48,253		52,354		48,370
Diluted		54,367		48,574		52,887		48,712

See Accompanying Notes to Condensed Consolidated Financial Statements

4

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income	$	44,056	$	43,943	$	86,199	$	73,171
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,077)		458		16		(727)
Comprehensive income		42,979		44,401		86,215		72,444
Net income attributable to noncontrolling interests		(3)		(2)		(6)		(8)
Comprehensive income attributable to Primoris	$	42,976	$	44,399	$	86,209	$	72,436

See Accompanying Notes to Condensed Consolidated Financial Statements

5

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

									Accumulated
				Additional					Other		Non		Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling		Stockholders’
	Shares	Amount		Capital		Earnings		0	Income		Interest		Equity
Balance, June 30, 2021	53,731,206	$	6	$	274,008	$	660,385		$	2,051	$	40	$	936,490
Net income	—		—		—		44,053			—		3		44,056
Foreign currency translation adjustments, net of tax	—		—		—		—			(1,077)		—		(1,077)
Issuance of shares, net of issuance costs	7,328		—		212		—			—		—		212
Conversion of Restricted Stock Units, net of shares withheld for taxes	62,277		—		(726)		—			—		—		(726)
Stock-based compensation	—		—		1,661		—			—		—		1,661
Dividend equivalent Units accrued - Restricted Stock Units	—		—		—		—			—		—		—
Dividends declared ($0.06 per share)	—		—		—		(3,228)			—		—		(3,228)
Balance, September 30, 2021	53,800,811	$	6	$	275,155	$	701,210		$	974	$	43	$	977,388

									Accumulated
				Additional					Other		Non		Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling		Stockholders’
	Shares	Amount		Capital		Earnings		0	Income		Interest		Equity
Balance, December 31, 2020	48,110,442	$	5	$	89,098	$	624,694		$	958	$	37	$	714,792
Net income	—		—		—		86,193			—		6		86,199
Foreign currency translation adjustments, net of tax	—		—		—		—			16		—		16
Issuance of shares, net of issuance costs	5,588,328		1		178,234		—			—		—		178,235
Conversion of Restricted Stock Units, net of shares withheld for taxes	102,041		—		(1,325)		—			—		—		(1,325)
Stock-based compensation	—		—		9,146		—			—		—		9,146
Dividend equivalent Units accrued - Restricted Stock Units	—		—		2		(2)			—		—		—
Dividends declared ($0.18 per share)	—		—		—		(9,675)			—		—		(9,675)
Balance, September 30, 2021	53,800,811	$	6	$	275,155	$	701,210		$	974	$	43	$	977,388

6

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

									Accumulated
				Additional					Other		Non			Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling			Stockholders’
	Shares	Amount		Capital		Earnings		0	Loss		Interest		0	Equity
Balance, June 30, 2020	48,220,811	$	5	$	91,257	$	554,717		$	(1,109)	$	34		$	644,904
Net income	—		—		—		43,941			—		2			43,943
Foreign currency translation adjustments, net of tax	—		—		—		—			458		—			458
Issuance of shares, net of issuance costs	9,086		—		157		—			—		—			157
Conversion of Restricted Stock Units, net of shares withheld for taxes	41,119		—		(471)		—			—		—			(471)
Stock-based compensation	—		—		528		—			—		—			528
Dividend equivalent Units accrued - Restricted Stock Units	—		—		2		(2)			—		—			—
Repurchase of stock	(174,698)		—		(3,110)		—			—		—			(3,110)
Dividends declared ($0.06 per share)	—		—		—		(2,887)			—		—			(2,887)
Balance, September 30, 2020	48,096,318	$	5	$	88,363	$	595,769		$	(651)	$	36		$	683,522

									Accumulated
				Additional					Other		Non			Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling			Stockholders’
	Shares	Amount		Capital		Earnings		0	Loss		Interest		0	Equity
Balance, December 31, 2019	48,665,138	$	5	$	97,130	$	531,291		$	76	$	1,028		$	629,530
Net income	—		—		—		73,163			—		8			73,171
Foreign currency translation adjustments, net of tax	—		—		—		—			(727)		—			(727)
Issuance of shares, net of issuance costs	70,805		—		1,494		—			—		—			1,494
Conversion of Restricted Stock Units, net of shares withheld for taxes	54,635		—		(548)		—			—		—			(548)
Stock-based compensation	—		—		1,730		—			—		—			1,730
Dividend equivalent Units accrued - Restricted Stock Units	—		—		10		(10)			—		—			—
Repurchase of stock	(694,260)		—		(11,453)		—			—		—			(11,453)
Distribution of noncontrolling entities							—					(1,000)			(1,000)
Dividends declared ($0.18 per share)	—		—		—		(8,675)			—		—			(8,675)
Balance, September 30, 2020	48,096,318	$	5	$	88,363	$	595,769		$	(651)	$	36		$	683,522

7

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	86,199	$	73,171
Adjustments to reconcile net income to net cash provided by operating activities (net of effect of acquisitions):
Depreciation and amortization		78,865		62,558
Stock-based compensation expense		9,146		1,730
Gain on sale of property and equipment		(13,075)		(6,198)
Unrealized (gain) loss on interest rate swap		(3,183)		3,856
Other non-cash items		823		295
Changes in assets and liabilities:
Accounts receivable		(69,659)		(91,741)
Contract assets		(54,262)		(16,783)
Other current assets		(21,795)		9,707
Other long-term assets		477		1,073
Accounts payable		57,698		16,533
Contract liabilities		(67,821)		63,682
Operating lease assets and liabilities, net		(1,388)		3,250
Accrued liabilities		21,327		36,394
Other long-term liabilities		(8,457)		33,952
Net cash provided by operating activities		14,895		191,479
Cash flows from investing activities:
Purchase of property and equipment		(102,133)		(54,404)
Proceeds from sale of assets		43,488		17,710
Cash paid for acquisitions, net of cash acquired		(606,974)		—
Net cash used in investing activities		(665,619)		(36,694)
Cash flows from financing activities:
Borrowings under revolving line of credit		100,000		—
Payments on revolving line of credit		(100,000)		—
Proceeds from issuance of long-term debt		461,719		33,873
Repayment of long-term debt		(96,473)		(56,321)
Proceeds from issuance of common stock		178,707		578
Cash distribution to noncontrolling interest holders		—		(1,000)
Debt issuance costs		(4,876)		—
Repurchase of common stock		—		(10,959)
Dividends paid		(9,334)		(8,707)
Other		(7,038)		(3,436)
Net cash provided by (used in) financing activities		522,705		(45,972)
Effect of exchange rate changes on cash and cash equivalents		300		(553)
Net change in cash and cash equivalents		(127,719)		108,260
Cash and cash equivalents at beginning of the period		326,744		120,286
Cash and cash equivalents at end of the period	$	199,025	$	228,546

See Accompanying Notes to Condensed Consolidated Financial Statements

8

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands)

(Unaudited)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Nine Months Ended September 30,
	2021		2020
Cash paid for interest	$	16,555	$	13,433
Cash paid for income taxes, net of refunds received		31,194		5,288
Leased assets obtained in exchange for new operating leases		15,500		51,664

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

	Nine Months Ended September 30,
	2021		2020
Dividends declared and not yet paid	$	3,228	$	2,887

See Accompanying Notes to Condensed Consolidated Financial Statements

9

PRIMORIS SERVICES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Share and Per Share Amounts)

(Unaudited)

Note 1—Nature of Business

Organization and operations — Primoris Services Corporation is one of the leading providers of specialty contracting services operating mainly in the United States and Canada. We provide a wide range of specialty construction services, fabrication, maintenance, replacement, and engineering services to a diversified base of customers through our three segments.

We have customer relationships with major utility, telecommunications, refining, petrochemical, power, midstream, and engineering companies, and state departments of transportation. We provide our services to a diversified base of customers, under a range of contracting options. A substantial portion of our services are provided under Master Service Agreements (“MSA”), which are generally multi-year agreements. The remainder of our services are generated from contracts for specific construction or installation projects.

We are incorporated in the State of Delaware, and our corporate headquarters are located at 2300 N. Field Street, Suite 1900, Dallas, Texas 75201. Unless specifically noted otherwise, as used throughout these consolidated financial statements, “Primoris”, “the Company”, “we”, “our”, “us” or “its” refers to the business, operations and financial results of the Company and its wholly-owned subsidiaries.

Reportable Segments — Through the end of 2020, we segregated our business into five reportable segments: the Power, Industrial and Engineering segment, the Pipeline and Underground segment, the Utilities and Distribution segment, the Transmission and Distribution segment, and the Civil segment. In the first quarter 2021, we changed our reportable segments in connection with a realignment of our internal organization and management structure. The segment changes reflect the focus of our chief operating decision maker (“CODM”) on the range of services we provide to our end user markets. Our CODM regularly reviews our operating and financial performance based on these segments.

The current reportable segments include the Utilities segment, the Energy/Renewables segment and the Pipeline Services (“Pipeline”) segment. See Note 16 – “Reportable Segments” for a brief description of the reportable segments and their operations.

The classification of revenue and gross profit for segment reporting purposes can at times require judgment on the part of management. Our segments may perform services across industries or perform joint services for customers in multiple industries. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses, were made.

Note 2—Basis of Presentation

Interim condensed consolidated financial statements — The interim condensed consolidated financial statements for the three and nine months ended September 30, 2021 and 2020 have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, certain disclosures, which would substantially duplicate the disclosures contained in our Annual Report on Form 10-K, filed on February 23, 2021, which contains our audited consolidated financial statements for the year ended December 31, 2020, have been omitted.

This Form 10-Q should be read in conjunction with our most recent Annual Report on Form 10-K. The interim financial information is unaudited.  In the opinion of management, the interim information includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim financial information. 

Reclassification — Certain previously reported amounts have been reclassified to conform to the current period presentation.

Customer concentration — We operate in multiple industry segments encompassing the construction of commercial, industrial and public works infrastructure assets primarily throughout the United States. Typically, the top ten

10

customers in any one calendar year generate revenue that is approximately 50% of total revenue; however, the companies that comprise the top ten vary from year to year.

For the three and nine months ended September 30, 2021, approximately 45.6% and 43.3%, respectively, of total revenue was generated from our top ten customers and no one customer accounted for more than ten percent of our total revenue.

For the three and nine months ended September 30, 2020, approximately 49.2% and 49.3%, respectively, of total revenue was generated from our top ten customers. For the three months ended September 30, 2020 no one customer accounted for more than 10% of total revenue and for the nine months ended September 30, 2020, one pipeline customer represented approximately 10.5% of total revenue.

Note 3—Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. We adopted the new standard on January 1, 2021, on a prospective basis and it did not have a material impact on our consolidated financial position, results of operations or cash flows.

Note 4—Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. ASC Topic 820 addresses fair value GAAP for financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period and for non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis.

In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, our financial assets and liabilities that are required to be measured at fair value at September 30, 2021 and December 31, 2020 (in thousands):

	Fair Value Measurements at Reporting Date
			Significant
	Quoted Prices		Other		Significant
	in Active Markets		Observable		Unobservable
	for Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets as of September 30, 2021:
Cash and cash equivalents	$	199,025	$	—	$	—
Liabilities as of September 30, 2021:
Interest rate swap	$	—	$	6,022	$	—
Assets as of December 31, 2020: