Thank you for standing by. My name is Cheryl and I will be your conference Operator today. At this time, I would like to welcome everyone to the Primoris Services Corporation First Quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise.

After the speaker’s remarks, there will be a question-and-answer session. Thank you. Brook Wootton, Vice President, you may begin your conference..

Good morning and welcome to Primoris, first-quarter 2022 earnings conference call. Joining me today are Tom McCormick, President and Chief Executive Officer, and Kenneth Dodgen, our Chief Financial Officer. Before we begin, I would like to make everyone aware of certain language contained in our safe harbor statements.

The company cautions that certain statements made during this call, are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and our expectations. These risks and uncertainties are discussed in our reports filed with the SEC.

Our forward-looking statements represent our outlook only as of today. We disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures.

A reconciliation of these non-GAAP financial measures are available on the Investor Relations section of our website. I would now like to turn the call over to Tom McCormick..

Thank you, Brook. Good morning and thank you for joining us today to discuss our 2022 first-quarter results and our financial outlook for the rest of the year. For the first quarter, we generated $784.4 million of revenue. Compared to last year's record first quarter, this period was much more in line with our historic first quarter results.

This is typically our slowest quarter of the year and the most likely to be impacted by increment weather and extended winter conditions.

That was our experience this year as positive performance in our growth markets, utilities, and energy renewables was largely offset by a loss that we recognized on a pipeline projects in the mid-Atlantic and lower overall revenue in our pipeline segment.

Approximately 92% of our first-quarter revenue was driven by our utilities and energy renewables businesses. As we lean more heavily into markets with more secular growth, we continue to build our backlog primarily in these two segments, increasing total backlog for the third consecutive quarter.

Reflecting the underlying strength of our business, our total backlog is 30% above the same period last year. Now let's look at our operations segment-by-segment. Our utilities segment revenue came in at $358.7 million. That is 7% increase compared to the same period last year.

Remember, this segment encompasses our specialty services in a Gas distribution, power delivery, and communications industries. The increase reflects higher levels of activity with our Gas utility and communications customers in our East and West regions.

Most of our issues such as material shortages, delays in engineering and permitting, are now mostly behind us. As way in our clients continue to adapt to the ever-changing market conditions. We brought in over $375 million in new business during the quarter. In the Western U.S., most of the new businesses with large existing customers.

While in the East Coast, we continue to expand our publications footprint with new customers and new geographic markets. One new client is building fiber networks across the country. We signed contracts for two projects with them. One in Virginia and another in Oklahoma.

We are focusing on building a long term relationship with this client that we believe will bring additional projects, which is always our goal. Another growing relationship has been our power delivery space with the multi-state client. We just added crews to take on our third electric distribution projects for them.

After the end of the quarter, we signed a multi-year multi-million-dollar contract, expanding our power delivery services into a market in the Northeast. This demonstrates the effectiveness of our focused expansion efforts. This customer has expressed an interest in discussing additional services that we're prepared to provide.

Overall, we are things sustainable growth in our power delivery and communications businesses. Our Energy/Renewable segment revenue came in at $359 million. Renewed solar projects are just kicking off, one of the end of the first quarter and two more of this quarter.

So we will start to show meaningful revenue from all these projects in near future The utility-scale solar market remains robust and we value our strong relationships with our customers in this area.

As we had previously discussed, diversifying into small scale or distributed generation solar brings additional scale and opportunity to our renewables business. To best serve this market opportunity, we have successfully transitioned some of our pipeline field management to develop our new DG Solar team.

This transition is going well and we now have a significant funnel of DG Solar project opportunities. We will start executing this work in the third quarter. Other projects of our renewables business are also moving forward. Hydrogen has proven to be an exciting area right now.

As I've stated before, hydrogen is the third leg of the renewable energy stool. Hydrogen can solve many of the difficult challenges of energy storage as it can be produced and used at its point utilization. Recently, we extended our evolving, developing sustainable green hydrogen for residential and commercial use in North America.

We're participating in a hydrogen pilot home project as part of a proof-of-concept demonstration with a large utility in Southern California. This hydrogen project features a micro grid that supplies electricity to a 2000 square foot home.

The grid is composed of solar panels, a battery storage system, an electrolyzer to convert solar energy to hydrogen and a fuel cell. This hydrogen project was named a world changing idea by Fast Company magazine.

As this market develops, we expect to work further with this utility as well as with other utilities and developers on both hydrogen and other renewable related projects. Looking at future opportunities, our Energy/Renewables segment has signed more than $325 million in new projects for the segment during the first quarter alone.

These include an earthworks project located in the South, as well as the mechanical scope for a hydrogen-producing Steam Methane Reformer plant in Texas this facility will be the largest such plant, our customer will operate in the Gulf Coast region.

We began work on both projects in the first quarter of 2022, with completion expected in the first quarter of 2023. We were also awarded a $48 million contract from the Texas Department of Transportation to expand an existing roadway and bridge to four lines. This project will run from Q2 2022 to the end of 2024.

We have also been contracted to construct a new pump station and modify the existing infrastructure at original wastewater treatment facility located in Florida. This major project is also scheduled to start this quarter and will run into early 2025. Our safety and execution performance in solar projects continues to drive business.

This performance has led to the continuation of repeat business across multiple customers. After the end of the quarter, we were awarded two new solar projects totaling more than $250 million. One is for the engineering, procurement, and construction of a utility-scale solar facility located in the Southwest.

Mobilization and construction will begin in the second quarter of this year with completion of the project expected in the first quarter of 2023. Second project is located in the south. Construction is scheduled to begin at the fourth quarter of this year with completion expected in the third quarter of 2023.

This project is another example of our segments working together to provide a complete solution for our clients. Our Energy/Renewables segment will build a solar facility while Power Delivery group of our Utility segment completes the high-voltage work associated with this project.

We expect to see continued and increased collaboration between our Energy Renewables, and Utilities segments on this front. Before I move onto the Pipeline Services segment, I want to talk about how we're addressing a supply chain issue around the cost of materials and delivery certainty in our Energy/Renewables segment.

There has been a lot of industry speculation around e-commerce's investigation on solar panel modules imported from certain countries and the potential impact of project costs and schedules if anti-dumping, countervailing duty tariffs are imposed. We don't see this as having a significant revenue impact on projects for the following regions.

As of the first quarter of 2022, our project backlog for utility-scale solar is more than a billion dollars. We have intentionally diversified our portfolio of projects to those clients and projects that have more modules certainty around them.

More is does not purchased solar margins for our projects, nor do we have risks associated with not receiving those modules for projects. If a customer experiences and module delay, we serve our customers best by planning and executing in a manner that brings in flexibility to progress the project such that our primary work is not impacted.

The modules, the last component installed, which gives us the ability to build out the project in adapt to our customer’s needs. We can always return to the project than later in bay and install the modules. And when this does occur, our clients have compensated us from the extra costs. We also work with our customers on design-build basis.

So we have a high degree of transparency into the materials they purchase. We currently know that more than 50% of our 2022 projects are using solar modules that are not subject to the ADCBD tares. Our disciplined and planning and best practices in our solar business is paying off and reduced risk for both our business continuity and our bottom line.

Now on the Pipeline Services. Our Pipeline Services segment revenue came in at $67 million that is a 49% decrease compared to the same period last year. This segment, which includes conventional oil and gas pipelines, as well as water and wastewater pipelines is now increasingly focused on master service agreements for Pipeline Services.

The year-to-year comparison is somewhat skewed by the fact that in first quarter last year, we achieved substantial placing on three pipeline projects, accounted for more than $71 million in revenue.

As we previously stated, we're pursuing fewer pipeline projects and focusing on Field Service Pipeline integrity type work, so some of that income declines in align with our strategy. D1 2022 pipeline companies, just over 8% of our total revenue which is down for where it has traditionally been. Once again, a lot of that is by design.

It is a much smaller part of our business and will continue to be for some time. We did complete one small wastewater project during the quarter with high level of customer satisfaction, zero recordable incidents, and good profit margin.

On the flip side, one pipeline projects in the mid-Atlantic region got bogged down literally with extreme weather conditions delayed progress down the right-of-way. We've added the net 30 labor to mitigate the delays associated with the ground conditions and complete the projects.

However, the project is currently forecasted to lose money, which has adversely affected the segment's results for the quarter. We continue to evaluate what costs over recoverable and are currently in discussions will the client on this matters.

While the project impacts our Pipeline revenue and bottom line, fortunately, it's a small item of the big picture of our overall business. We brought in approximately $43 million in new awards during the quarter for the pickup and bidding activity that bodes well for the last half of the year as well as 2023.

On average, 18% of our Pipeline Services revenue comes from the ongoing MSAs compared to new bid projects. And with that, let me hand off to Kenneth for more detailed review of the numbers..

Good morning, everyone. Let me begin with our key operating metrics for the first quarter, and then I'll discuss our balance sheet, cash flows, and backlog.

As Tom mentioned, our first-quarter revenue was $784.4 million, a decrease of $33.9 million compared to the prior year, mainly due to the $63.8 million reduction in pipeline work, which was in line with our expectations.

This decline was partially offset by continued strength in our Utility segment, which grew by $23.7 million, and our Energy/Renewable segment, which grew by $6.2 million. Gross profit for the first quarter was $56.5 million, a decrease of $23.7 million, primarily due to poor performance in our pipeline segment.

Positively impacting the period, all three segments benefited from the change in useful lives as certain equipment, which reduced our depreciation expense by $5.8 million in Q1. We expect a full-year benefit of this change to be approximately $21 million.

Gross margins was 7.2% for the quarter, which is typically our lowest quarter as a result of the seasonality in our utilities segments. Now let's look at each of the three segments. Despite the seasonality in our utilities segment, gross profit was $22.4 million.

A slight increase over the prior year due to higher revenue, partially offset by lower gross margins. Gross margins declined slightly to 6.2% compared to 6.5% in the prior year..

Underlying factors included. The delayed start at some projects for the second quarter, as well as increased fuel and labor costs, partially offset by better equipment utilization as we continue rightsizing our fleet and selling underutilized equipment.

For the rest of the year, we continue to see strong demand from our customers and expect to see our normal seasonal increases into Q2 and Q3. Energy and Renewables. Gross profit was $39.9 million for the quarter, a $2.7 million decrease from the prior year, primarily due to lower margins, partially offset by higher solar revenues..

Gross margins came in at 11.1% down modestly from last year, but well within our normal range. In 2021, we benefited from the favorable resolution of the claim on an industrial project.

Looking forward, we expect gross profit to gradually increase each quarter as we continue to grow our solar business and execute on the significant work in our backlog. Pipeline segment gross profit decreased by $21.6 million from the prior year.

Given the sharp decline in volume due to general market conditions and higher costs associated with the pipeline project in the mid-Atlantic, we've reported negative gross margins of 8.7% this quarter. The mid-Atlantic project experienced very unfavorable weather conditions in the period.

The reduced activity levels also led to higher carrying costs for equipment and personnel. This project will continue to impact margins in Q2 as we complete the project. Now shifting to SG&A.

Expenses in the first quarter were $55.5 million, an increase of $2 million over the prior year as we continue to invest in our technology and human resources initiatives. As a percent of revenue, SG&A increased to 7.1% primarily due to lower revenue and is normally higher in the first quarter of the year.

We expect our SG&A for the full year to be back down in our normal low to mid-6% range. Net interest expense in the first quarter was $2.9 million compared to $4.6 million in the prior year. The decrease of $1.7 million was primarily due to the $2.9 million benefit from our interest rate swap this quarter compared to a $1.3 million benefit last year.

Our effective tax rate was 27% for the quarter. And we expect the same rate for the balance of the year. But this may vary depending on the mix of states in which we work. Net loss was $7 million for the quarter and diluted EPS was a loss of $0.03. Adjusted EPS was $0.01 per share for the quarter and adjusted EBITDA for the quarter was $22.6 million.

Operating cash flows in the first quarter was $6.6 million, relatively consistent with the prior year. But it's important to note that during the quarter, we invested in other $35 million in prepaid materials for our solar projects in order to ensure timely delivery uncertainty at price.

In the first quarter, we invested $33.2 million in CapEx of which $13.4 million was for equipment. We still expect capital extending for the remaining year to be $90 to $110 million, which includes $55 million to $75 million for equipment. We ended the quarter with a $173.5 million of cash.

Borrowing capacity under our revolver was a $160.6 million providing total available liquidity of $334.1 million at quarter end. Total debt was $655.3 million and net debt was $491.8 million. Total backlog at the end of the quarter was a little over $4 billion compared to $3.1 billion in the prior year. This was another record backlog for us.

Fixed backlog was almost $2.5 billion, an increase of over $800 million or 50.2% primarily due to solar projects. MSA backlog was up 9% or $127.9 million to a little over $1.6 billion.

Turning to our full-year earnings guidance, we're increasing our full-year guidance by $0.10 per share to reflect the benefit of our revised depreciation expense and the challenges in the pipeline segment. The updated earnings guidance is $2.20 to $2.40 per share. And our adjusted EPS guidance, a non-GAAP measure is $2.49 to $2.69 per share.

We feel very good about balance of the year and are starting to see the typical ramp up of utilities work in the second quarter. And very strong prospects for additional renewables awards to build on our record backlog. And with that, I'll turn it back over to Tom..

Looking forward, it is clear to see that we're more and more focused on the utilities and energy renewables markets, and less focused on pipeline construction. As I noted upfront, our pipeline services segment represented just a little over 8% of our total revenue this quarter.

It only represents 10% of our total year business plan with the other 90% being fairly evenly split between the utilities and energy renewables segments. We continue to gain momentum in our growth markets as evidenced by the total dollars of new business we brought in during the quarter for those two segments, more than $750 million.

For the full year, we expect the following. Our energy renewables segment to grow approximately 20% compared to last year. Our utilities segment to increase in the range of 8% to 10%. And our pipeline segment to finish the year below last year as I previously noted and per our 2022 plan.

Our year-end mix will be even more heavily weighted towards utilities and energy renewables and away from pipeline for 2022. And if you add up the new business that we bought in after the end of the quarter, you'll see that the three contracts signed in April accounts for more than $325 million of additional backlog in just the last month.

So the momentum is there. The business is there.

As I've said previously, but it does bear repeating, the business that we are pursuing and capturing strategically align with secular market things, including next-generation broadband infrastructure, power delivery, and a push for renewable energy, all of which will link to the overall goal of bridging a net zero future.

We continue to closely watch the infrastructure and investment job rank and are seeing it states and industry players spoil for how to tap into that funding, which we think will translate into shovel-ready projects for rural broadband and urban 5G deployments adding opportunities for our Utility teams.

We also see the energy transition driving business with higher energy prices are loosening the purse strings of traditional energy companies wanted to retool to lower-carbon opportunities. That includes hydrogen, as I mentioned earlier, as well as carbon capture.

We're seeing the emergence of new players, such as developers who are rapidly advancing utility-scale solar power generation. Our strength in this market is allowing us to choose the partners we want to work with and continue to build solid long-term relationships with them.

Both traditional energy companies and new players create a bright outlet for our Energy/Renewables business. So what I would say is we have everything we need to capitalize on the momentum in the secular trends we're seeing and deliver results going forward. Thank you once again for joining us today..

The first question is from Lee Jagoda of CJS Securities. Please go ahead. Your line is open..

Yes. Hi. Good morning. It's Peter Lukas for Lee. In looking at your guidance for the renewable segment of 20% growth for the full-year, that implies 25% to 30% growth over the next three quarters.

Can you help us in terms of how you see this ramping from Q1 through the balance of the year?.

Yeah Pete. We have been laying out all the projects that we've been winning over the course of the past two to three quarters. And literally, it's just going to be a continuous steady growth quarter-over-quarter as we complete smaller projects and roll into bigger, larger projects.

So I expect Q2 to be up sequentially from Q1, Q3 will probably fairly flat compared to Q2, and then Q4 will probably up significantly as we really start ramping up on some of those larger jobs that we announced in Q4 of last year..

Great. Next I want to confirm, in terms of the Pipeline gross margin guidance of 9% to 11% for the full-year.

Does that include the minus 9% margin in Q1? And should we expect any outsized margins in any of the next several quarters driven by project true-ups, or should the balance be in that 12% to 15% range to get to the full-year numbers?.

Yes, so the 9% to 11% is our long-term target for the year given what's happened in Q1 and the completion of the Appalachian project that we talked about that gave us problems. We're expecting this year's gross margins to be 6% to 8% range for the full-year..

Helpful, thanks. And last one for me, can you give us some more detail around the change in the depreciation schedule on equipment, the impact it had in Q1 results, and also the impact you expected to have on the full year in terms of which segment margins would be affected most by the change..

As we stated, $5.8 million impact in Q1. Full-year impact is probably going to be about $21 million. It was just an ordinary course analysis of our equipment in conjunction with an outside third-party that led us to do that. You rarely ever do these. And when you do, it's only when do you have compelling evidence that it's the right thing to do.

And then with respect to the benefit, probably about, by my estimation, 50% to 60% of the benefit will accrue to the utility segment. And the remaining will be split fairly evenly between the energy renewable segment and the pipeline segment..

Your next question is from Steven Fisher of UBS. Please go ahead. Your line is open..

Great. Thanks. So just to follow-up on that, appreciation benefits seems like about maybe a $0.25 to $0.30 benefit.

Can you just talk about what the offsetting headwinds are, then? Is that just the Pipeline segment being a bit weaker than expected, whether there are other things relative to original expectations?.

Steve, it's just the Pipeline segment and what's going on. They're in particular with the first quarter and -- and the lingering drag that will probably experience in the second quarter..

Okay. That's helpful. And just a follow-up on that.

Within your pipeline outlook, I mean, are you assuming that you have any growth year-over-year in any quarter before the year is over?.

I mean, for the year -- yeah, for the Pipeline segment, we're definitely expecting the segment to be down year-over-year. I don't have any quarterly numbers in front of me right now, but we normally don't give quarterly guidance anyway on that, but it will definitely be down probably 10% to 20%. I wouldn't expect it.

It'd be flat quarter-on-quarter from the balance sheet. The year should pick up as we're seeing more bid opportunities but it's not going to be dramatic..

I'm going to guess that higher level there was, are you seeing anything come together? We are hearing a bit more about the midstream activity bovine traditional and then non-traditional and just wondering if that was maybe flowing through any of your timing expectations but it sounds maybe still more of a 2023 opportunity..

Exactly. I think all that will be the late 2022, more than likely all of it will be 2023 and going forward..

Okay. And then I guess the last question would be, the revenue guidance numbers are helpful.

Can you give us a sense of how those have changed maybe since your initial thoughts on the year?.

Really, Steve, there's been no change with respect to Energy Renewables, and Utilities and Pipeline as I just mentioned, is down slightly from where we originally thought it's going to be at the beginning of the year.

I think the only thing is it we'll see as we got a little bit of slow start in Gas distribution in the Midwest, because continue to be a little bit long. Yes. I would expect that spend to pick up a little bit in Q2 and Q3. And the readout in Q4 again, as it traditionally is. So maybe there's some makeup there, but again, not dramatic..

Got it. Thanks a lot..

Your next question is from Sean Eastman of KeyBanc. Please go ahead. Your line is open..

Hi team. Thanks for taking my questions. I wanted to come back to the carbon capture opportunity relative to how you guys are framing the growth focus in the pipeline segment, more focused on the field services.

I mean, how should we think about that in the context of some of these big carbon capture projects that seem to be coming pretty near term? Do those fit into the growth strategy criteria for Primoris?.

They do. But again, its 2023 and beyond. We don't see anything with carbon capture other than engineering and maybe some procurement that's going to take place in 2022. And even with one that we're working on right now, we expect to go to the field for that if it moves forward to be in 2023. And that's really what we're seeing in the market..

And it sounded like you guys are a little more affirmative on the hydrogen opportunity side.

Is there anything in particular backing up your comments specifically on hydrogen? Have some things firmed up, even in just the past couple of months since we heard from you guys last?.

It's really just you saw the award that we had for just the construction of the facility in the Gulf Coast and the study that we're doing or the - what would we call that on the green hydrogen projects that we're doing that Visa feasibility study we're also having other studies that are going on.

So we're seeing a lot of activity in the very front-end start-up, scoping and estimating on those types of projects that we've seen before and typically that tells you that within the next 12 months you're going to see some of that come to fruition..

Okay got it, and then a lot of people are starting to get excited about the role the U.S. can play in reorienting energy supply chains, post this conflicts in Europe. And I just wondered, have you guys started to see a pick-up in that Gulf Coast industrial activity over the past couple of months.

And maybe if you could just frame what types of opportunities do you think you guys could get involved with their..

So we're seeing our bid activity pick up. So we're seeing a lot of activity there. Like the energy independence. Again, a lot of it's still long-term, it's more out in light 2022 and 2023, but we're seeing our bid activity pick up quite a bit. That's what gives us confidence in our, some of the conference we have in our Energy and Renewable segment..

Okay, got it. Thanks. I'll turn it over there.

Your next question is from Julio Romero of Sidoti. Please go ahead. Your line is open..

Hey, good morning. Thanks for taking my questions. So you guys mentioned you expect Pipeline gross margins to come in below your targeted ranges for the year.

How about on utilities and Energy Renewables, is the guidance given on the press release your guidance for 2022 or is that rather your longer-term targets?.

In that case, both. Or both of those cases, yes, that's correct. It's both current year guidance as well as long term guidance. Everything's looking very nice for both segments, they're performing well.

Utilities, as Tom mentioned, is seeing it's normal Q1, Q2, ramp up and we expect that to continue into Q3 like normal and as I mentioned previously, energy and renewable will be growing fairly steadily sequentially through the next three quarters..

Okay, got it. That's very helpful and then for my follow-up on the solar business, you talked about in your prepared remarks about building in contingencies for customers and potential module delays.

But I think you did mention there is some timing risk as to when -- as to the solar business so can you talk about maybe how you're managing your labor efficiencies given that timing risk and does the contingencies you have with their customers compensate you for any labor inefficiencies?.

Well, what we did, Steve, really early on was, I guess in the last six months of the last six to 12 months probably started with our clients. And we've been very selective about picking our clients based on a number of different factors. One, just the clients we want to work for a long term, how owner of their contract terms.

What is the surety of delivery of the modules and where they buying them from? We saw a pause and that's what delight some of our awards, but I can tell you that we have a lot of confidence and our clients, have a lot of confidence from the surety to deliver the modules for the projects that we have, at least for the balance of this year and going into next year.

Beyond that, it's just really hard to see. It's going be dependent on the outcome of this investigation. But for right now, we have complete confidence and our projects are moving forward. We're moving in the field as why we're starting to see a ramp up. You'll see the revenue ramp up quite a bit in the fourth quarter on these solar projects..

Okay. Thanks very much..

.

Hey, this is Adam on for Jerry today. I was wondering if there is any way to quantify the negative impact from the higher costs on the pipeline project in the mid-Atlantic this quarter.

And to what extent is that headwind continue in Q2?.

The impact is basically this difference between the margins we experienced and our normal 9% margins. And then with respect to Q2, we should still see -- as we finish up that project in Q2, we should still see margin drag that jobs in loss position to the remaining revenue, about 10 to 15 million in most will be burning at zero gross margin..

And in solar, can you update us on the current level of prospective projects? And how are you thinking about how big this business can get until you start to be labor constrained?.

Well, first with respect to labor, we don't take on any more projects than we have project teams for. So we're building new teams even now as we speak, as I said earlier in the call, we have now started going in to distribute generation. And we were building teams for that as well, takes smaller teams to execute those projects.

So we're being very careful about scheduling and working with the clients and laying out schedules based on what the needs are for every respective project and what teams that they occupy their time. But if you look at perspective projects, we have over $500 million in projects that are currently in LNTP.

We have another $525 million of dollars of projects of which were sole sourced. We have not been awarded and then yet, we have not been awarded in LNTP, but we've been estimating in doing studies and estimates on those jobs and we're still been totaled were sole sourced. We have another $200 million of projects that were shortlisted.

And there's another close to $600 million of projects that we're bidding. So look for 2022, we're probably booked for half, if not more of 2023. And we have the teams to execute those projects all the way through the end of 2023.

And we're going to grow that business and continue to grow that business 20% to 30% through the course of this year and into next. So we'll see what we can do. You're right. I guess the more teams you build a harder it gets to build teams, but we're doing it at a very disciplined pace..

Great, thanks so much..

Your next question is from Adam Thalhimer of Thompson Davis. Please go ahead. Your line is open..

Hey, good morning, guys.

I guess at a high level, I was just trying to think through inflation and supply chain issues and how did that impact the business in Q1 and how do you see those issues trending throughout this year?.

I mean inflation, we're seeing it in two main areas. One is fuel just like everybody else. And the other area is in labor, we're not seeing it across the board when we see in certain markets, in particular, non-union markets, more than anything. But so far, it has been fairly regionalized.

I think we're going to continue to see those pressures at least for the next three to three quarters, depending on how the overall inflation picture works out. And we're monitoring it very closely..

What about supply chain?.

If you recall, Adam, we had supply chain issues last year. Those have mostly abated themselves as of today. I think a better word to say that is we've learned and our clients have learned how to deal with them. So it's already of longer weighing times yet to order earlier schedules go they're out a little bit longer.

The more you planned for now, more so than anything else..

Okay. And I think we've seen particularly on the heavy civil side where some customers are at the high prices that are coming back from contractors.

Is that an issue at all yet?.

For heavy civil for us, no. TxDOT in Louisiana, they award the lowest bidder. I haven't seen them push anything back. And that's one of the businesses that we probably see higher impacts from the fuel pricing because we use a lot of equipment. But no, I haven't seen or heard of any pushback..

And then just kind of a model question.

What do you expect for interest expense for the rest of the year?.

Interest expense we're still expecting, bear with me as I check. Well we're forecasting $5to $6 million per quarter for the balance of the year..

Perfect. Thanks, guys..

Thanks Adam..

Thanks Adam..

Next question is from Brent Thielman of D.A. Davidson. Please go ahead. Your line is open..

Great. Thanks.

what's the expectation for the Telecom business this year?.

Telecom business this year? Well sorry, Brent, I'm going to actually a clarifying question.

Are you asking about future or are you asking about the Telecom portion of future?.

The Telecom portion..

Telecom portion of future. We're probably up 10% to 12% this year..

Okay.

And on solar is 20% to 30% growth still the expectation for this year, it's embedded in that 20% energy growth outlook?.

Yes, it is..

And then on Pipeline, I mean, with activity starting to come around again, when could we start to see the backlog ramp back up just based on the conversations you're having, are we sort of bottoming out here?.

I think we are, I think you're going to see to backlog start ramping up as we get into the last half of the year and into 2023. I'd say that kind of backlog will be from projects that are going to be executed in 2023..

Okay. Thank you..

. There are no further questions at this time. I will now turn the call over to Tom McCormick for closing remarks..

Thank you. We appreciate your questions and your investment in Primoris. I'll just close by recapping what I see as the three key takeaways from this quarter. We continue our transition to increase focus on utilities and Energy/Renewables and less on Pipeline.

Our backlog represents the strength of our business going forward and that backlog continues to grow. The strategy we're following puts us at the heart of important trends, not just in our markets, but in the broader direction of our society and that inspires us to keep getting better every day. Thank you and have a good day..

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