Greetings and welcome to Primoris’ 2020 Second Quarter Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded.

At this time, I will turn the conference over to Kate Tholking, Vice President of Investor Relations. Please go ahead, Kate..

Thank you, Rob. Good morning, everyone, and thank you for joining us today. Our speakers for the day will be Tom McCormick, Primoris’ President and Chief Executive Officer and Ken Dodgen, our Executive Vice President and Chief Financial Officer.

In addition to this morning’s 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.prim.com, then selecting Investors.

Once on the Investors site, you will 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 company’s future performance.

Words such as estimates, believes, expects, projects, may and future or similar expressions are intended to identify forward-looking statements.

Forward-looking statements inherently involve risks and uncertainties, including, without limitation, those discussed in this morning’s press release, and those detailed in the Risk Factors section and other portions in our annual report on Form 10-K for the period ending December 31, 2019, and other filings with the Securities and Exchange Commission.

Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. I’d now like to turn the call over to our CEO, Tom McCormick..

Thanks, Kate. Good morning, everyone and thank you for joining us today to discuss our second quarter results. This was an outstanding quarter for Primoris.

And due to the commitment and hard work of our employees, we were able to successfully execute on projects while simultaneously implementing new protocols to keep our employees, customers and communities safe.

While there are some impacts from COVID-19 such as several clients being slow to release work and learning how to comply with the various state, county and/or municipality health orders, it’s difficult to put a precise dollar figure on these costs or forecast how long they will continue.

Despite the impacts imposed by the pandemic, Primoris experienced its best second quarter in our history, both top line and bottom line.

The fact that we delivered these results while working over 13.2 million work hours year-to-date and maintaining an excellent safety record is a testament to the commitment of all of our employees to keep themselves, their coworkers and their communities safe.

We focused on project execution and improving cash flow, and our employees, subcontractors and suppliers continue to operate safely and efficiently during the quarter. Our SG&A continues to decline as a percent of revenue, and our operating cash flow in the quarter was one of the best in the company’s history.

With our robust balance sheet, we are in a position of strength as we evaluate new opportunities for growth either through internal investment or by acquisition. As you saw from our numerous press releases, we had near record bookings in the quarter. And even with the record revenue burn, our backlog remains strong.

It should be noted that our backlog does still include the ACP project. We were disappointed that our client has announced their plan to cancel the project. However, we have not yet received a formal notice of termination nor any direction as to what work should be completed prior to our demobilization from the project.

Once that is received and we are able to evaluate the revenue associated with the remaining work, including demobilization, reinstatement, et cetera, we expect to adjust our backlog accordingly. Now looking at the second quarter results, let’s start with our Civil segment.

We have made great progress in the turnaround of our heavy civil operations and are now seeing consistent positive results from the segment, which are the result of our dedicated employees and a qualified and professional management team that took ownership of the issues within the business unit and implemented the control and performance initiatives necessary to turn it around.

The heavy civil market looks stable for the remainder of the year and into next. At this time, we are not seeing any large impacts to state budgets from lower gas tax revenue or the pandemic.

Our industrial team in this segment is performing well in their current book of business, though we are seeing some softness in their markets as new projects are pushed into either late this year or into 2021.

The headwinds to global demand created by the pandemic and low energy prices could lead to some revenue softness in the second half of this year, but we are being disciplined in our bidding approach and still expect the segment to finish the year at the high end of our target margin range.

Moving on to the Power, Industrial & Engineering segment, given the broad range of end markets this segment covers, our results are varied significantly based on the end market. To the positive, our performance in the renewables market was outstanding, both with record bookings and record execution on existing projects.

During the second quarter, we announced over $260 million of new solar awards. Constructing a large scale solar facilities is a different process than our other industrial work.

It’s much more like manufacturing as you are repeating a process potentially hundreds of thousands of times as you install all the components and equipment associated with the solar facility. We have a very experienced management team that has been designing and constructing solar facilities for most of their careers.

This team is very adapted using their experience and taking the lessons learned from previous solar projects and applying them to new projects. The impact on project margins has been significant.

While the solar market has seen some slight impact from COVID-19, the tailwinds such as state renewable energy mandates and the push for clean energy continued to drive growth, and we are continuing to execute our strategy to find great partners that have large portfolios of projects that need to be constructed over the next several years.

Capital spending and turnaround budgets in the California refinery market have decreased, but we are seeing growing opportunities in the bio-fuel market, which has similar drivers to the solar market.

We announced a $200 million California Bio-fuel award in the quarter and are focused on small-cap and critical maintenance projects that help our clients ensure business continuity and keep our people working.

We are also continuing to pursue recurring work and recently negotiated a 3-year contract extension on one of our existing MSAs for oilfield maintenance work. The volatility in the energy markets continued to impact our operations in Western Canada as key oil sands customers basically froze capital spending and deferred maintenance.

But we are seeing projects delayed rather than outright canceled, indicating a somewhat favorable industry outlook for 2021. Our team is focused on cost reduction measures while maintaining our market share, and we were able to offset some of the second quarter revenue decline with strong margins.

Our nonunion industrial team was challenged this quarter as costs associated with the project in the Northeast impacted the business. Problems on the project were largely due to quantity and forecast changes associated with subcontractor pricing rather than execution issues.

We are working to mitigate some of the cost increases through improved project execution and control, as well as resolving some outstanding issues with our client. We’ve made management changes at multiple levels within the group and are seeing positive results.

They have some legacy projects remaining to complete, but we expect improved margins out of this business unit in the future. The Gulf industrial market is going to be tight as we head into 2021, but we’re not chasing the mega projects and are confident that we can win our fair share of the small-cap and mid-sized projects.

The Pipeline & Underground segment had an outstanding quarter contrary to the negative sentiment over heard on the street. We booked over $200 million in new awards in the quarter, setting the segment up for a solid second half of 2020. Our large diameter pipeline division did more revenue in the second quarter of 2020 than they did in all of 2019.

We expect to see some slowdown in the second half of the year for them as they complete their current projects. But based off the strength of the first half, we still expect to outperform our full year expectations.

Activity picked up in the second quarter for smaller diameter interstate pipeline work, and we saw significant improvement in both revenue and margins.

And though our field services team has been impacted from lower energy prices, with some projects being pushed into next year, they offset the revenue decline with good execution on projects, leading to an overall increase in gross profit.

As we look ahead to 2021 for this segment, we expect most, if not all, of ACP to replace – excuse me, most, if not all of ACP with multiple smaller projects. The Utilities & Distribution segment experienced our typical seasonal ramp-up in the second quarter.

Across the Midwest, favorable weather and project mix allowed us to realize better margins rebounding from a challenging Q1. In California, we were able to outperform our expectations despite a major reduction in work from one customer.

The Southern California market remains strong, and we have received multiple awards on a major pipeline replacement project with a large utility. Our operations in the Southeast improved in the quarter, not just driven by weather and project mix, but in execution as well.

Over the past several quarters, we have taken a hard look at our contracts in that region and renegotiated or exited less favorable contracts, while at the same time, adjusting our equipment levels needed for the work as well as upgrading our management teams. We’re extremely pleased with the hard work of our team and the results they delivered.

In a similar vein, the Transmission & Distribution segment is also seeing significant improvement, thanks to our cost reduction initiatives and execution improvements. We made some changes at various management levels, placed people in rolls for which they are better suited and brought in more talent at the management levels.

We expect full year results will be solid within our targeted margin range. As you can see, it was a great quarter for Primoris, and we are optimistic for the remainder of the year.

As I said last quarter, the withdrawal of guidance was not because of underlying concerns with the long-term strength of our end markets and opportunities, but due to the near-term uncertainty related to the pandemic and the price of oil. We have learned a lot since then. And we know how to operate successfully and safely under these new conditions.

So it is with confidence that we reinstate guidance for the year in the range of $1.60 to $1.80. With that, I’ll turn it over to Ken for a deeper dive into the numbers..

Pipeline, Utilities, Transmission and Civil. Our typical seasonal ramp-up, helped by good weather conditions, project mix and strong new awards, all contributed to the increase in margins.

We are pleased with the margin increase in the transmission segment, where we are now seeing the positive impact from the improvements we implemented over the past several quarters.

Civil margins exceeded expectations due to improved productivity on an LNG project, and our gas utility margins exceeded expectations due to better execution and some project closeouts during the quarter. Power segment margins declined in the second quarter, mainly due to the project in the Northeast that Tom previously mentioned.

We expect the margins for this segment to improve in the second half of the year, aided by stronger performance on solar and bio-fuel projects. SG&A expense in the quarter was $51.4 million, up slightly from $48.7 million last year. But as a percent of revenue, SG&A was 5.7%, an improvement over last year at 6.2% of revenue.

We believe we can continue to operate in the high 5% to low 6% range and potentially be below 6% for the full year 2020. Interest expense in the second quarter was $3.7 million compared to $6.7 million in the second quarter of 2019. We had minimal impact this quarter from our interest rate swap compared to a $2.7 million unrealized loss last year.

The effective tax rate on income attributable for Primoris remain unchanged to 29% in the second quarter and it is our expectation, we will remain at this effective tax rate for the full year. And second quarter net income attributable for Primoris was a record-setting $33 million or $0.68 per fully diluted share.

This is the best second quarter result in the company’s history, and it’s not far off the record $0.70 that we set in the third quarter of 2019.

Our strong earnings translated into great cash flow for the second quarter, with cash flow from operations generating $66.1 million, a $90.5 million improved swing compared to last year’s $24.4 million use of cash.

Managing our working capital continues to be a focus for us, and we saw the results in this quarter despite normal seasonal increases in accounts receivable and contract assets. Turning to capital expenditures, year-to-date, we spent $21.7 million, most of which was on construction equipment.

This is significantly less than the $56.9 million we spent last year in keeping with our previously announced plans to lower CapEx spending this year to the $40 million to $50 million range. We sold $12.1 million of older or underutilized equipment year-to-date, resulting in net CapEx of $9.6 million compared to $35.7 million last year.

Early in the second quarter, we paused our share repurchase program as we work to understand how COVID-19 might impact our cash flow. By June, we felt comfortable reinstating the program, and we purchased 57,731 shares for approximately $950,000 at an average price of $16.46 per share.

Year-to-date, we spent a total of $8.3 million on share repurchases and approximately $16.7 million remains under the current repurchase authorization. Strong earnings and operating cash flows resulted in $155.7 million of cash on the balance sheet at the end of the quarter and an additional $142.8 million of borrowing capacity on our revolver.

Total debt of $352.8 million was basically flat compared to year-end 2019, but down $59.2 million compared to Q2 of 2019. And our net debt was only $197.1 million at the end of the quarter. Our weighted average interest rate is down to 3.7% compared to 4.2% at the end of Q2 2019.

As Tom mentioned, fixed backlog grew 19% in the second quarter to $2.3 billion, thanks primarily to strong new bookings in our power segment. The fixed backlog for the pipeline segment does still include roughly $500 million tied to the ACP project. When we have more clarity on our remaining scope of work, we expect to adjust our backlog accordingly.

MSA backlog saw a minimal decline in the second quarter, coming in at $1.2 billion. The majority of the decrease came from the utility segment as we lowered expectations for spending by a major California customer.

Total backlog grew to $3.5 billion, and it’s important to note that even excluding the ACP project, our total backlog would have been above $3 billion. With that in mind, our full year earnings guidance is $1.60 to $1.80 per share.

Our guidance assumes very little work on ACP for the rest of the year, some recovery of margins in the power segment and typical margins in the remaining four segments. With that, we can turn it over to your questions.

Rob?.

Thank you. [Operator Instructions] Our first question is coming from the line of Adam Thalhimer with Thompson Davis..

Hey, good morning, guys. Congrats. Great results across a lot of segments..

Thanks, Adam..

Thanks, Adam..

Curious, in the Utilities & Distribution space, what’s the customer – I mean, what would you say their mood is like and kind of customer spending levels?.

Cautious, I think they are – they all have been talking about the fact that their client demand or demand for their products, where their services are down, they don’t know when it’s going to end. So there’s some uncertainty a little bit going forward in discussions about slowing down their capital or spending a little bit.

If they cannot see an end, but that talk is – that rhetoric has been going on for a while, and we haven’t seen a lot of it. I think that’s what started the year slow, certainly it impacted our first quarter. A little bit slow to the start of the second quarter, too, but it’s ramped up since then.

And the several of those same clients are wanting to catch up now on their spend in the third quarter, weather permitting. So it’s a little bit mixed, but it’s – I think most – for the most part, it’s cautious..

Okay. So kind of embedded within your guidance, maybe that segments for the full year kind of ends up kind of flattish..

At revenue, that could be right. I think that’s about right..

Okay. And then in Pipeline & Underground, I mean, a lot of the backlog is ACP, you talked about replacing ACP.

What are you seeing in the bidding environment right now?.

There’s still a lot of opportunity in gas pipelines. Certainly, interstate, smaller diameter, there’s a number of packages that we have opportunities to bid on. There’s a number that we are bidding. Liquid’s a little bit slower. They’re starting to see some of those coming back, but it will be in 2021, but it’s still not at the volume.

So I think it’s going to be a little more competitive. We have to be selective and sharpen our pencils a little bit..

Okay.

And then just lastly, in the transmission space, really good margins Q2 and that segment has bounced around a little bit, but do you think you can kind of build on Q2 going forward?.

I think we can. I think there’s a lot of opportunity in that work. We are actually trying to expand our client base in the transmission and substation portion of that business, which I think we are having some success in it. A lot of it is just in discipline and how they manage their equipment.

It was – and you heard me say earlier, getting the right people in the right places in the right positions. And we have got a management team in place now that is really driving performance. I think you heard us said last year when we signed a large contract with a major client, there was some opportunity in our rates to perform better.

If we were to perform better, there was opportunity for us to make a little bit higher margins, and we are seeing that now. So I think a lot of it is just being disciplined, getting rid of equipment that we are not utilizing and utilizing the equipment we have and making sure it’s making its way onto the invoices to the clients.

And then our execution performance has improved..

Okay, great. Okay, I will turn it over. Thanks a lot..

Thank you..

Thanks, Adam..

The next question comes from the line of Lee Jagoda with CJS Securities..

Hey, good morning..

Hi, Lee..

So, just going at that last question around transmission margins a little differently, I think you made the comment, you expect the full year results to be solidly within your target margin range for transmission.

Given the issues you have had, what is the target margin range that you think you will get to?.

I think those – we have always said it’s kind of 8% to 12% and so we had a good quarter this quarter at 12%. I think the balance of the year is probably going to be in that 10% to 12% range..

Okay. And I guess looking ahead, all of this, I would assume, or most of this is from just the renegotiation and then the – all the negatives or some of the negatives dropping off.

Is that a fair way to think about it?.

Yes, I think that’s right. We have – and we still have some contracts to renegotiate. We have walked away from some unprofitable contracts. And as Tom mentioned, streamlining the equipment, getting out of those legacy old leases from when we bought them, that just took longer than we thought, some legacy facility leases as well.

There has just been a number of things that just took a little bit longer than we thought. The good news is it’s performing as we expected it to..

Getting out of some markets that we weren’t going to make money at, it’s a great point, yes. So it just wasn’t possible for us to make money at the rights we had in the contracts. So, we just stepped out of those markets which has helped..

Okay. And then looking at the power segment, I think you made the comment that you see some recovery in the power margins. I mean given where we came from and where we were in Q2, some recovery doesn’t necessarily install a whole lot of confidence.

Is there a way to kind of give us some more confidence around margins and maybe go into the breadth of the LNG project that’s causing you some issues and where it is from a profitability perspective?.

There is so many different components of that power and industrial segment that if I looked at the union industrial part of it, their margins are going to be pretty normal. Their execution on projects is going well. They had a couple of issues on some projects, but they got some claims in front of the clients.

And they have had some impacts, but they have already absorbed those and moved on. And those aren’t lost projects. These projects are performing well. Now it’s just – they took a bite earlier in the year or late last year.

If you talk about renewables, they are performing extremely well, and their margins are right where we expected it will be, if not higher.

You look at – the engineering is going to suffer a little bit just because one of our engineering groups is – the PD&C part of that is primarily dependent upon price of oil and they work primarily in refining, their revenues are down, their margins are still reasonable as a percentage of their revenues. But the revenues are going to be down.

It’s not a big part of our business, that business, that segment anyway. It was a nonunion part, industrial component of our business that took – that is responsible for the Eversource job. I think most of that’s behind us, Lee, on Eversource, although you always still have some risk as that project won’t complete until 2021.

But as far as getting the right people in place to build out the project, we have that as far as the management team, we actually have seen some turnaround on some projects at this management team took over, there were legacy projects, the decline is now giving that group more work because their performance is good and is being recognized.

So I think they can finish out these legacy projects, finish out the LNG project in the Northeast. And for the balance of it, we are seeing good margins on the balance of their work. So I think the upside is down the road..

Got it.

One more for me on the power side, the $800 million of fixed backlog within the Power segment, can you break out how much of that is solar and renewables versus the other work? And given that most of that is going to burn within the next four quarters, how much capacity do you have to add more work in the short-term in that segment for renewables and solar?.

That’s a good question. I don’t have the breakout in front of me right now, Lee, but I would expect the renewables is at least right now at $250 million to maybe as much as $300 million of it, and then the rest is just spread across the rest of them. And that’s predominantly because we announced $260 million of new awards during Q2..

Now as far as capacity goes, we are continuing to recruit and hire people and train people in that renewables group. Different teams were actually selling the services of our project teams to clients that we have partnerships with and those teams, a number of those teams are committed to future work with these clients.

It does mean contracts are signed, it means they’re committed to future work with these clients, which means they’re working on either the scope and estimate development and the execution development of those projects, where they are working on a current project, and they’ll move to those projects when they’re done.

So there’s a lot of opportunity in that renewables work for growth..

You are not including – are you not including the bio-fuels piece in that renewables number, are you? So that would be – is that incremental?.

That’s incremental..

That’s incremental..

Got it.

So between bio-fuels and solar, it’s more like, I don’t know, $550 million plus of the $800 million?.

$500 million to $550 million, best guess, yes..

Okay, that’s all I have. Thank you..

Thank you..

Our next question is from the line of Brent Thielman with D.A. Davidson..

Hey thanks guys. Good morning. Congrats..

Hey Brent..

Well, hopefully, it was the last time we bring up Atlantic Coast, but a lot has been on that one..

Come on. It’s the gift that keeps on giving..

Maybe just what are the – obviously, you [indiscernible] in the backlog, I understand the reasons around it. Maybe just talk about the potential scenarios that can play out here.

And just wondering if there’s a breakup or cancellation fee you’re able to discuss publicly?.

We – well, I can’t discuss that because we got – we need to meet with the client. We need to understand the terms of the cancellation but I would expect, obviously, there is demobilization costs. There will be part of that.

There’s a lot of reinstatement that will have to take place along the right-of-way in the lay down yards in the equipment yards that will need to be returned back to their original conditions. Now we don’t know whether the client is going to have the consortium members do that, or higher third parties to do that.

And that’s really what we’re waiting on. I think they’re in the process of developing a plan. We have some meetings scheduled with them. They have moved those meetings a couple of times.

We expect they will probably move them at least one more time so they can finalize their plans before they come and meet with the consortium members, us and our partners and talk about, okay, what they want us to do with respect to moving off-site in completing the project to whatever extent they need it.

That’s why we left to be – quite frank, that’s what we left in backlog because I know how much I have in backlog. I have no idea what I am going to spend going forward, when our revenue will be going forward until I hear from them..

Yes, understood, understood. And then, Tom or Ken, on pipeline, it actually sounds like pretty good visibility into the second half overall. I guess I’m just kind of wondering how you guys are thinking and preparing for the next couple of years.

I mean, in your in your sort of models are you preparing for a hard landing or is that being too pessimistic based on what you all see today?.

Well, I would say it’s being a little bit too pessimistic. I don’t think we are going to see a we’re not going to replace ACP with another large project. But I think most of the revenue over the course of the next two years can be replaced with smaller projects. We just – we got to get competitive.

We have got to chase the right projects with the right clients. But I think it’s possible to replace that revenue with smaller projects, maybe it’s $50 million less in revenue a year, maybe not. But we showed this year even between both groups that they can go out and competitively bid work and win work.

It’s just – now it’s the timing of those projects and when they bid and how fast they move. So we’ll see..

Okay. And Ken, I mean, really strong cash flow this quarter.

Just wondering if there is particular business units driving that or any pull forward?.

No, it was really across all the businesses this quarter. Strong margins helped and then just working capital management, we have got all ores in the water rowing in the same direction. So it was a good quarter..

Okay. Well thanks guys. Congrats again..

Thanks, Brent..

Thanks, Brent..

Thank you. The next question is from the line of Julio Romero with Sidoti & Company..

Hey good morning. Hope you are all well..

We are..

Hey Julio.

How are you?.

I am good. Thanks. So I wanted to touch again on the power segment.

Any clarity as to when demand comes back for Western Canada? And is that margin recovery you expect in the second half kind of dependent on a recovery in Western Canada?.

It is not dependent on a recovery in Western Canada. And I wish I knew – I could tell you when the oil prices and the demand is going to start going back up, but I actually don’t. It’s something we’re going to take a hard look at as we develop our plans for 2021.

What I will say is that our Western Canadian operation management team did an extremely good job of rightsizing that business unit for the lower revenue and they’ve been able to maintain their margins at a reasonable percentage based on that. So I don’t know how long they are going to have to hold that. They have the ability to do that.

So we’ll just have to see..

Understood.

And I appreciate you reinstating guidance, I mean, it sounds like your visibility has improved, I guess, partly because of your mix shift over the years to smaller projects, but also because you probably learned in real-time how resilient your businesses are, right? I mean, is that a fair takeaway here? And do you feel a little more confident in the resiliency of your – of the portfolio?.

Yes. I feel much more confident in the resilience of the portfolio. It’s good to be diverse, but it’s also to be in the type of businesses that we’re in. We’re very fortunate that all of our businesses were being essential. So we were able to continue working.

Then it was just making the adjustment so that we could work safely, meet our client requirements, meet the municipality or the government requirements in health orders. And our employees really responded well with change, which was fantastic..

Yes. Just to add to that, I think one of the big things that we were waiting to see the last time we spoke to you guys right after Q1 was just how our clients were going to respond to that and how resilient and how they were going to be able to adjust.

And I think once they figured out that they could adjust and keep lettings going, even though there was a slight pause in that, that slowed down a little bit. Once they got through that and figured it out, then it was easy for us to respond. So it was kind of a joint effort. But we still have clients that all their staff are still working at home.

They’ve just figured out how to issue work orders and release work and review invoices and do that all remotely. So they themselves have done a fantastic job of adjusting to these changes..

Okay, I will hop back into the queue. Thank you..

Thank you..

Thanks..

Thank you. [Operator Instructions] The next question is from the line of Sean Eastman with KeyBanc..

Hi, Sean..

Nice work this quarter. Thanks for taking my questions. I just wanted to go back to the pipeline segment.

Just in light of the ACP cancellation and you guys trending towards some pretty healthy growth in that segment in 2020, just trying to think about this pivot to smaller projects, what that means for sort of the sustainability of this revenue run rate we’re at in 2020? And what sort of their prospective, less large mainline pipeline activity going into 2021 means for margins?.

So with respect to the revenue, it’s going to be – I would expect – and like I said, we are just now making preparations to start our planning for 2021 for our business plan. But I would expect to probably see either flat to a slight decrease in revenue. I don’t expect to see that segment really grow.

It does, it’s going to be through the field services component of it, which will also come with the increase in oil demand and the price of oil. There will be some opportunity for that business unit to grow because it has grown over the past few years. From a pipeline standpoint, I would be actually satisfied if it were to stay flat.

From a margin standpoint, I don’t really expect much change from the range that we have in our numbers. Just a lot of that is dependent upon the type of contracts, how much risk the client takes. And of course, if there is more competition for projects, you will see a little bit of pressure on the percentage of profit across the board.

But I think that range is still pretty reasonable..

Yes. I think just to add to what Tom said, I think it’s important to remember that these small to medium projects are not new for us. This is part of our ongoing business model that we’ve been doing for years and years. So, just because we don’t have Atlantic Coast pipeline, doesn’t mean we’re truly changing our business model.

We’re just going to be doing more work in that segment around the small and mid-size pipe and probably more maintenance work as well..

And it’s just like – before ACP, even we were pursuing projects like the two we executed in Florida, it wasn’t – we’re not chasing these megaprojects. We chase all sizes. And the union portion of our pipeline group has proven the competitive in that business. So we’ll just see they’re out pursuing work now.

They have been told they are short-listed on a number of projects. One or two projects even now, whether those projects go forward or when the client decides to make a decision to move forward, we’ll see..

Got it. That’s helpful. And then on the PI&E segment, it’s just been asked a few times.

But could you just tell us what the gross margin in that segment would have been, if not for the execution challenges on the LNG project in the Northeast? And should we be assuming clean execution margins well within your targeted range in 2021 just based on the execution left on that project? I mean, just trying to get comfortable around that, given we’ve got a couple of quarters here now with different issues popping up in that segment..

Yes. I think without the impact of that one job, we would be right in our target range of kind of 10% to 12% for those guys. And going forward, that’s what we expect as well. As Tom said, we think we’ve got all those issues behind us.

We’ve taken the hit in this quarter, but we still have to finish the job and won’t be done until sometime in the first half of 2021. So once we get past that, then we had better clear..

Yes. I’m not sure how much revenue in that job goes into 2021. There’ll be a slight dilutive effect, but not enough to get us out of that range..

Right..

Okay, also very helpful. And then just this MSA backlog dynamic dipped sequentially a little bit. You mentioned one particular customer where you had to trim some assumptions there.

Does that MSA backlog start to trend back up in the second half? I mean, I am trying to think about what this sort of dip down means for growth in the MSA-driven segments in the out year?.

Well, we had a couple of clients that pushed. We were actually supposed to renegotiate terms on a couple of MSAs in the first quarter, early second quarter, those got pushed to third quarter because of the pandemic in everything that was going on at the time. So we expect that those will come back.

So I do expect the MSAs as a percentage of our total revenue – or the total backlog will come up.

The other thing that had an impact on that is we had, what $260 million of renewable awards, a couple of hundred million dollars, which was lump sum, then a couple of hundred million dollars in the bio-fuel and then another – well, a couple of hundred million dollars in pipeline awards which are lump sum.

So you had a large volume or a large amount of fixed price work that was awarded in the quarter that kind of drove that – diluted that percentage down also. So the answer your question – short answer is, yes, I expect them to come up..

Okay, great. Really appreciate it. I will turn it over..

Thanks, Sean..

Thank you. Our next question is a follow-up from Adam Thalhimer with Thompson Davis..

Thanks. What are your early thoughts on total company ‘21, like down, flat, up? My – I’ve been modeling most contractors down next year, but I’ll tell you where your backlog is at the end of Q2.

I just don’t know if that makes any sense?.

Yes, I think we are going to be flat at some of our segments, but I’ll tell you, Adam, our other segments, I expect them to be up. I mean, if you look at – even if you look at power, a lot of that is going to be flat. But if you look at the renewables part of that, there’s significant opportunities for us, and we’re growing that business.

So I expect that will be up. I expect our utilities will be up. And I expect both T&D and U&D..

Okay. That’s all I currently have. Appreciate it..

Alright. Thanks Adam..

Thanks, Adam..

Thank you. At this time, we have reached the end of our question-and-answer session. And I’ll hand the call back to Tom McCormick for closing remarks..

Alright. Well, thank you, everyone, for joining us. We appreciate you taking the time to be with us on this call and for your support of Primoris. I hope that all of you and your families are healthy and safe. Goodbye..

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation..