プリモリス（PRIM）2026年第3四半期決算説明会：過去最高の受注残高と2027年の利益率回復

主要ポイント

• プリモリス・サービシズ・コーポレーションの2026年第3四半期売上高は、再生可能エネルギー関連事業の低迷がエネルギー部門の重荷となり、前年同期比2億2,600万ドル（10.4%）減の20億ドル弱となった。
• 売上総利益は3,100万ドル減の2億470万ドルとなった。売上総利益率は10.5%となり、前四半期の10.8%から低下した。
• 受注残高（バックログ）は約141億ドルと過去最高に達し、前四半期比で約2億ドル増加した。マスターサービス契約（MSA）の受注残高は送配電およびガス事業が牽引し、3億ドル以上増加した。
• 経営陣は2026年の再生可能エネルギー事業の売上高見通しを、年央時点の20億ドルから約17億ドルへと下方修正した。見込んでいた売上高のうち約4億5,000万ドルが2026年以降に繰り延べられた。
• プリモリスは現在、2026年通期の調整後EPSを2.10〜2.25ドル、調整後EBITDAを2億9,000万〜3億1,000万ドルと予想している。報告ベースの希薄化後EPSガイダンスは1.20〜1.35ドルとしている。
• 経営陣は、課題を抱えていた最後の太陽光発電プロジェクトが数週間以内に機械的完成（メカニカルコンプリーション）に達すると見込んでおり、エネルギー部門の売上総利益率は2027年に通常の10%〜12%の範囲に戻ると予想している。

主要財務業績

事業および営業業績

再生可能エネルギー

再生可能エネルギー事業は依然として収益の主な逆風となった。大幅なコスト超過に見舞われた6件のプロジェクトのうち5件が完了しており、経営陣は最後の1件も数週間以内に機械的完成（メカニカルコンプリーション）に達すると見込んでいる。同プロジェクトの建設作業員数は、ピーク時の1,000人超から、試験、試運転（コミッショニング）、現場サポートを担当する約60〜100人に減少する見通しである。

規制を巡る混乱、許認可取得や系統連系の問題、顧客との電力購入契約（PPA）の再交渉により、プロジェクトの着工が遅延した。また、プリモリスは自社のリスク、人員配置、利益率の要件を満たさない案件の受注を見送った。経営陣は、問題のあった6件の契約以外のプロジェクトは、すでに過去の想定水準と同等以上の利益率で推移していると述べた。

同社は2026年第4四半期に約8億ドル以上の再生可能エネルギー関連の受注を見込んでいる。2027年第1四半期の受注額はその約2倍に達する可能性があるが、これらは依然として経営陣の予想にとどまる。第4四半期および第1四半期に受注したプロジェクトは、概ね2027年第2四半期または第3四半期から売上に貢献し始める見込みである。

ユーティリティ

ユーティリティ部門は、通信事業の低迷継続によって一部相殺されたものの、ガス事業と送配電事業の恩恵を受けた。送配電事業の売上総利益は、暴風雨災害の復旧工事がほとんどなかったにもかかわらず、生産性の向上、作業指示管理、有利な案件構成に支えられ、前年同期比で倍増した。

需要はテキサス州および南東部で引き続き最も堅調であった。経営陣は送配電およびガス事業の拡大が利益率の押し上げに寄与すると予想しているが、季節要因により通期のユーティリティ部門の売上総利益率は通常の10%〜12%の範囲内にとどまる見込みである。

通信事業は、ブロードバンド普及・展開（BEAD）プログラムの資金供給遅延、顧客企業の統合、FTTH（光ファイバー網の各戸引き込み）工事の減少に引き続き直面した。データセンター向け接続工事や長距離光ファイバー敷設は良好な利益率をもたらしたものの、全体の落ち込みを完全には相殺できなかった。経営陣は通信事業について、短期的には重要な成長牽引役とは見なしていない。

天然ガス発電、パイプライン、ペインクレスト

天然ガス発電関連の売上高は2026年に6億5,000万ドルを超え、2025年比で30%以上増加する見込みである。プリモリスは第4四半期に受注残高に計上される可能性のある約9億ドルの内定（口頭での内諾）を得ており、案件パイプラインは70億ドルを超えている。経営陣は、同市場からの売上高が2027年に10億ドルを突破する可能性があるとみている。

パイプライン事業のセールス・ファネルは四半期末時点で80億ドルを超えた。プリモリスは2027年後半または2028年初頭に着工予定の2億5,000万ドルのプロジェクトを確保したほか、間もなく準備・動員が開始される見込みの1億5,000万ドルの別案件も期待している。経営陣は、パイプライン事業におけるより大きな成長機会は2028年に到来すると見込んでいる。

ペインクレストの受注残高は、5月の買収完了時点の約2億6,000万ドルから6億ドル近くまで増加した。プリモリスは、買収後の最初の8カ月間で同事業が3億ドル以上の売上高を創出し、2027年には5億ドル以上を寄与する可能性があると予想している。労働力の確保が主な能力制約要因となっている。

経営陣による業績予想（ガイダンス）

この業績予想には、太陽光発電プロジェクトの着工遅延、ユーティリティ部門の季節的な減速、実効税率の上昇が織り込まれている。ユーティリティ部門における天候の好転や、天然ガス発電事業の立ち上がりの加速があれば、業績はレンジの上限に向かう可能性がある。

2027年について、経営陣はエネルギー部門の売上総利益率が10%〜12%に回復すると予想しており、プロジェクト遂行の習熟と事業構成の改善に伴い、下半期に改善が偏ると見込んでいる。また同社は、上振れの余地があるユーティリティ部門の1桁台後半の増収と、水準の低い2026年を起点とする再生可能エネルギー部門の緩やかな増収を見込んでいる。

リスクと注目点

• 再生可能エネルギー事業の売上高は、規制変更、許認可の遅延、系統連系の時期、顧客とのPPA再交渉などの影響を依然として受けやすい。
• エネルギー部門の回復は、課題を抱える最後の太陽光プロジェクトの完了と、目標とする利益率での新規案件の遂行にかかっている。
• 労働力の制約により、ペインクレストや送配電、その他需要の強い市場での成長が制限される可能性がある。
• 通信事業は、BEADプログラムの資金供給遅延、顧客企業の統合、FTTH支出の低迷により、引き続き圧力を受けている。
• 第1四半期は、特にユーティリティ部門において、プリモリスにとって季節的に最も低調な四半期となるのが通例である。
• レバレッジ比率は今後数四半期にわたり概ね横ばいで推移した後、2027年に低下する見通しである。

アナリスト質疑応答の要点

• 2027年の成長：経営陣は、天然ガス発電の売上高が2026年の6億5,000万ドル超から2027年には10億ドル超に達する可能性があることや、再生可能エネルギーの緩やかな成長、ペインクレストの継続的な拡大に支えられ、エネルギー部門の成長に自信を示した。
• 繰り延べられた再エネ案件：2026年以降に繰り延べられた約4億5,000万ドルの大半は2027年に移行する見込みである。なお、プリモリスはリスクプロファイルが許容できなかったため、1件のプロジェクトから撤退した。
• 契約リスク：エネルギー部門における固定価格契約の売上高減少は、再エネ事業の活動低下を一部反映したものである。成長傾向にある天然ガス発電プロジェクトは、通常オープンブック方式または実費精算方式で開始され、その後に固定価格契約へと移行する。
• ユーティリティ部門の利益率：経営陣は、第3四半期の利益率は季節的に典型的な水準であり、通期で持続可能なレンジは引き続き10%〜12%であると述べた。送配電事業における生産性向上は継続する見通しである。
• 資本配分：プリモリスは従来の1億5,000万ドルの自社株買い枠を使い切った。取締役会は新たに2億5,000万ドルの自社株買いプログラムを承認したが、経営陣は事業の自律的成長（オーガニック成長）と適切な企業買収が引き続き最優先事項であると述べた。
• ガス発電プロジェクト：経営陣は、現在のプロジェクトがモラトリアム（一時停止措置）によって遅延または中止されたことはないと述べた。案件の選定においては、許認可の取得状況、長納期機器の調達、遂行の確実性を考慮している。

決算説明会（アーニングスコール）文字起こし全文

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Hello, everyone. Thank you for joining us, and welcome to the Primoris Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Blake Holcomb, Senior Vice President of Investor Relations. Please go ahead.

Blake Holcomb

Good morning, and welcome to the Primoris Third Quarter 2026 Earnings Conference Call. Joining me today with prepared comments are Koti Vadlamudi, President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer.

Before we begin, I would like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and 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, November 4, 2026. 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 Investors section of our website and in our third quarter 2026 earnings press release, which was issued yesterday.

I would now like to turn the call over to Koti Vadlamudi.

Koti Vadlamudi

Thank you, Blake. Good morning, and thank you for joining us today to discuss our third quarter 2026 financial and operational results.

Primoris delivered a solid third quarter, generating sequential improvements in margins, earnings and cash flow, while ending the quarter with record backlog for the second consecutive quarter. Although our results year-to-date have been impacted by a small number of challenged renewable projects, the underlying fundamentals of the business remain strong, and we are seeing meaningful improvement in our operating trajectory.

As we disclosed in September, 5 of the 6 projects that experienced significant cost overruns have now been completed, and the final project is expected to be completed in the coming weeks. As these legacy challenges are resolved, we expect the strength of our backlog, combined with awarded and prospective opportunities to support improved operational and financial performance going forward.

In addition to the execution challenges, the renewables market experienced a volatile regulatory environment throughout the year, which contributed to lower-than-expected revenue from new project awards and starts. As a result, certain projects were delayed, while others were not awarded or intentionally not pursued because they did not meet our risk profile, project management availability schedule or targeted margin thresholds.

Collectively, these factors reduced our anticipated renewables revenue and gross profit contribution for 2026. The impact of these dynamics resulted in a steeper-than-expected decline in revenue from the prior year and approximately $450 million of revenue being deferred beyond 2026. As a result, we now expect full year 2026 renewables revenue to be approximately $1.7 billion, revised from our previous expectation of $2.0 billion at midyear.

Despite the challenges we faced in renewables during 2026, I remain very optimistic about the future of the business. The long-term fundamentals supporting utility-scale solar development remain firmly in place, and we are laying the foundation for a return to profitable growth in 2027. We have taken decisive actions to strengthen the organization, including adding experienced leadership that will enhance our culture, improve execution and further strengthen our customer relationships.

We have also invested in our project execution and support capabilities to ensure we continue delivering high-quality projects while maintaining disciplined risk management and margin expectations. As these initiatives progress and we capitalize on the strong booking opportunities ahead, we believe we are well positioned to return to our target margin profile in 2027.

Similar to other areas of our business where market demand remains exceptionally strong, we will continue to attract, train and develop the talent needed to support growth. Given the opportunities we see in front of us and the bookings we expect to secure over the coming quarters, we anticipate our available execution teams will be fully utilized during 2027. This gives us confidence in our ability to drive profitable growth next year, while maintaining the disciplined execution and customer focus that are critical to our success.

I'll now provide some commentary on the segment performance during the quarter. The Utilities segment delivered revenue and backlog growth during the quarter, driven by resilient demand in our gas operations business and accelerating activity in power delivery, which more than offset continued softness in the communications market.

In communications, market conditions remain challenging due primarily to delays in BEAD-related funding and customer consolidation, which have tempered spending across certain end markets. While opportunities in data center splicing and long-haul fiber continue to generate attractive margins, they have not yet fully offset the decline in fiber-to-the-home activity this year. Although we are encouraged by signs that market conditions could improve in 2027, we currently expect communications revenue to again be softer in the fourth quarter.

The gas operations business continues to benefit from increasing utility capital expenditures and growing demand for design build programs across the Midwest and Southern United States, supporting a strong pipeline of opportunities for the remainder of 2026 and into 2027. In addition, we are seeing improved operational performance in the West Coast region. Despite lower volumes of fixed price work compared to the prior year, the business is delivering solid margins, while continuing to drive revenue growth.

In power delivery, we continue to see rapid growth across several key markets, where we have established strong customer relationships, particularly in Texas and the Southeast. Activity on our MSA work continues to ramp, and we are seeing an expanding set of EPC and design-build opportunities for both substation and transmission projects.

I also want to recognize our power delivery teams for the outstanding work they have done to strengthen project execution and work order management. Those operational improvements, combined with a favorable mix of work, drove a doubling of gross profit compared to the prior year despite minimal storm restoration activity during the quarter.

Given the strength of customer demand, expanding opportunity set and continued focus on execution, we believe the power delivery business is well positioned for continued growth and strong financial performance moving forward.

In the Energy segment, aside from the previously discussed challenges in renewables, we delivered revenue growth across our end markets and achieved significant margin improvement in both our pipeline and industrial businesses. Our pipeline business delivered strong revenue growth and improved profitability compared to the third quarter of last year. During the quarter, we were awarded a $250 million project that is expected to begin construction in late 2027 or early 2028. We also anticipate securing an additional $150 million pipeline job in the fourth quarter that is expected to begin mobilization in the coming weeks, further supporting our growth outlook for 2027.

Just as importantly, our sales funnel reached a record level of more than $8 billion at quarter end, reflecting robust customer demand and increasing confidence that market activity over the coming years could approach historical peak levels.

PayneCrest also delivered an outstanding quarter, exceeding our revenue expectations and continued to build backlog, which now stands at nearly $600 million compared to approximately $260 million at the time of the acquisition in May. The PayneCrest team continues to capitalize on significant opportunities across industrial, power and data center markets throughout its core in Midwest geography.

Based on its strong performance year-to-date, we now expect PayneCrest to exceed $300 million of revenue during its first 8 months as part of Primoris, surpassing the high end of the range we anticipated when the acquisition was closed. Given its growing backlog, expanding opportunity pipeline and strong end market fundamentals, we are extremely excited about PayneCrest's growth potential in 2027 and beyond.

Turning to Industrial. The ramp-up of several natural gas generation projects drove strong revenue growth and margin improvement during the quarter. We now expect natural gas generation revenue to exceed $650 million in 2026, an increase of more than 30% compared to 2025.

Looking ahead, the market opportunity remains compelling. We currently have approximately $900 million of verbal awards that could book in the fourth quarter, and we are tracking an opportunity pipeline in excess of $7 billion. Based on the strength of customer demand and our competitive positioning, we believe natural gas generation revenue has the potential to reach $1 billion in 2027.

As encouraged as we are about the growth opportunity, we remain committed to disciplined execution. We are selective in the customers we serve, the geographies in which we operate and the contract structures we accept. Our focus is not simply on growth, but on profitable growth that delivers attractive returns, while maintaining an appropriate balance of risk and reward. By continuing to invest in our people, project controls and execution capabilities, we believe we are well positioned to capitalize on this opportunity, while continuing to deliver strong outcomes for both our customers and shareholders.

In summary, I am encouraged by our third quarter performance and the strength of our diversified portfolio. While the challenges we have faced in renewables this year have been a meaningful headwind, their impact continues to diminish as we move toward completing the remaining project and executing on the actions we have taken to strengthen the business.

We continue to see elevated demand across our end markets for the critical utility and energy infrastructure needed to support growing communities, expanding power requirements and the broader economy. That momentum we are seeing, combined with our record backlog and robust opportunity funnel, gives us confidence in our ability to drive profitable growth.

I'll now turn it over to Ken for more on our financial results.

Ken Dodgen

Thanks, Koti, and good morning, everyone. Our Q3 revenue was just under $2 billion, a decrease of $226 million or 10.4% from the prior year, driven by lower revenue in the Energy segment. The Energy segment was down $262 million or 17.6% from the prior year due to decreased renewables activity. This was partially offset by increased natural gas generation and pipeline activity and the acquisition of PayneCrest.

The Utilities segment was up $33 million or 4.5% from the prior year, driven by higher activity in gas operations and power delivery, partially offset by slightly lower communications revenue. Gross profit for the third quarter was $204.7 million, a decrease of $31 million compared to the prior year. This was driven by lower revenue and margins in the Energy segment, partially offset by higher revenue and margins in the Utilities segment. As a result, gross margin was 10.5% for the quarter compared to 10.8% in the prior quarter.

Looking further at our segment results. Utilities segment gross profit was $100.2 million, up $14.2 million compared to the prior year. This was driven by higher revenue in gas operations and higher revenue and margins in the power delivery business. The growth was partially offset by a decrease in revenue and margins in communications as the fiber-to-the-home market continues to see softness.

We continue to see strong performance in gas operations and power delivery that is supporting revenue growth and backlog growth. Gas operations are benefiting from accelerated CapEx spending in the Midwest and Southern U.S., while also delivering solid margins. Power delivery activity continues to be particularly strong in Texas and the Southeast. Additionally, a favorable mix of work and improved productivity led to a significant improvement in power delivery margins compared to the prior year.

In the Energy segment, gross profit was $104.5 million, down $45.2 million from the prior year due to lower revenue and margins in renewables. Gross margins were 8.5%, down from 10.1% in the prior year. The decrease in margin was driven by lower renewables revenue and the lingering impacts of cost overruns on certain solar projects. This was partially offset by the PayneCrest acquisition and improved revenue and margins in Industrial and pipeline.

We expect Energy segment margins to show improvement again in the fourth quarter as we complete the final challenged solar project. We anticipate modestly lower fourth quarter Energy segment revenue sequentially as the start of several renewable projects have shifted into early 2027. Despite the lower revenue outlook in 2026, we still expect gross margins in the Energy segment to be in the 6% to 8% range for the full year 2026 and return to our normal 10% to 12% range in 2027.

SG&A expenses in the third quarter were $109 million, an increase of $11.3 million compared to the prior year due to the addition of PayneCrest SG&A. As a percent of revenue, SG&A increased to 5.6% from 4.5% in the prior year due to lower revenue and increased intangibles amortization expense from PayneCrest. We expect SG&A will be a little over 6% of revenue for the full year 2026.

Net interest expense in the quarter was $14.3 million, up $7.3 million from the prior year due to higher average debt balances from the PayneCrest acquisition, partially offset by lower interest rates. Based on current debt levels and rates, we expect interest expense to be between $43 million and $47 million for the full year of 2026.

Our effective tax rate was elevated for the first 9 months of 2026, reflecting lower pretax profit. For the full year, we expect our effective tax rate to be approximately 33%.

Moving to cash flow. Cash provided by operations was $140.2 million in the third quarter, which improved sequentially, but was down from around $183 million in the prior year. The decrease in cash from operations was largely driven by lower net income.

Transitioning over to the balance sheet. We maintained strong liquidity of $944 million, which includes a little over $203 million of cash and approximately $741 million in available capacity on our revolver.

Our trailing 12-month net debt-to-EBITDA ratio increased slightly to 1.8x EBITDA at the end of Q3 due to PayneCrest debt and lower EBITDA in 2026. We expect our leverage ratio to remain steady for the next couple of quarters before trending lower in 2027.

Our strong balance sheet and liquidity continue to give us flexibility to allocate capital towards organic growth, pursue strategic acquisitions or opportunistically purchase shares under the new $250 million share repurchase program.

Total backlog at the end of Q3 was just under $14.1 billion, an increase of approximately $200 million sequentially from Q2 and another record for Primoris. Total fixed backlog was down slightly from Q2, primarily due to the timing of Energy segment bookings. We continue to anticipate a strong fourth quarter of bookings in the Energy segment, driven by renewables, natural gas generation and pipeline awards.

Total MSA backlog increased over $300 million from Q2, driven primarily by increased activity in power delivery and gas operations. We continue to see compelling opportunities across our businesses and expect meaningful backlog growth in the fourth quarter, which positions us for significant growth in revenue and earnings along with margin expansion in 2027.

Before turning it back over to Koti, I'll close with guidance. We are updating our guidance for 2026 to be EPS of $1.20 to $1.35 per fully diluted share, adjusted EPS of $2.10 to $2.25 per fully diluted share and adjusted EBITDA of $290 million to $310 million for the full year 2026.

Our updated guidance ranges anticipate lower revenue contribution in the fourth quarter from the previously referenced delay in certain solar project starts and expected seasonal slowdown in the Utilities segment and a higher effective tax rate. However, we could deliver in the upper end of these ranges in the Utilities segment with favorable weather conditions and in the Energy segment with the ramp-up of natural gas power generation work.

While we are still finalizing our 2027 financial plan, the underlying fundamentals of the business remain very strong with continued healthy demand across our end markets. As the headwind from the challenged renewables projects continues to fade, we are increasingly confident that our expanding backlog and improving mix of higher-margin work will drive a strong recovery in 2027 and support record revenue and earnings.

I'll now turn it back over to Koti.

Koti Vadlamudi

Thanks, Ken. Before opening the call for questions, I'd like to reiterate a few key points from the quarter. First, we are moving beyond the revenue and margin headwinds we experienced in renewables this year and have significantly greater visibility into restoring our path to profitable growth. We have an experienced leadership team and a talented organization committed to strengthening our position as a premier provider of utility-scale solar, battery storage and eBOS solutions.

While our financial performance in renewables has fallen short of expectations this year, we have continued to deliver high-quality projects that meet our customers' demands for safety, quality and performance. As we look ahead, we remain encouraged by our booking opportunities in renewables for the balance of 2026 and into 2027.

Beyond renewables, the opportunities across our portfolio have never been stronger. We continue to see robust demand for utility and energy infrastructure investment across the markets we serve, supported by increasing power demand, grid modernization and long-term energy security needs. With our skilled workforce, equipment fleet, technical expertise and long-standing customer relationships, we believe we are exceptionally well positioned to capitalize on these opportunities.

While the timing and location of specific infrastructure investments will continue to evolve, the need for reliable energy, power delivery, communications and utility infrastructure remains clear. Our diversified portfolio, disciplined approach to project selection and strong execution capabilities provide us with confidence in our ability to support our customers' objectives and the communities we service.

Although my first year with Primoris has included challenges that were not anticipated, my conviction in the company and its future has only strengthened. I am proud to be part of an organization with a culture that prioritizes the safe execution of the critical work we perform for our customers. That culture remains a key differentiator, helping us attract and retain top talent, build lasting customer relationships and deliver consistently strong operational performance.

I firmly believe we are positioned in the right markets, serving exceptional customers and supported by talented people who bring an entrepreneurial mindset and commitment to excellence every day. As we finalize our strategic plan for the next 3 years, I am energized by the opportunities ahead and confident in our ability to strengthen our position as a provider of choice for the infrastructure solutions that will be increasingly important to our communities and economy.

Our priorities remain clear: investing in the safety, development and well-being of our employees, delivering exceptional service and execution for our customers and allocating capital in a disciplined manner to create long-term value for our shareholders. While 2026 has presented challenges, it has also offered lessons learned and reinforced the strength of our organization, the resilience of our diversified portfolio and the significant opportunities ahead. I remain highly optimistic about the future of Primoris and confident in our ability to drive profitable growth and create value in the years ahead.

With that, we will open up the line for your questions.

Operator

[Operator Instructions] Your first question is from Steven Fisher with UBS.

質疑応答

Steven Fisher

Nice to see the improvements and turning the corner, hopefully here. Koti, it sounds like you think 2027 is going to be back to normalized energy margins. Just curious about the revenue growth. What do you think the potential is for double-digit growth in Energy next year? The consensus is looking like around 8% right now. I know you gave the $1 billion on gas, but not sure what the base there was. And then on renewables, I think we've been talking about growing modestly off a $2 billion base, but now that base is around $1.7 billion. So just kind of curious how you frame the revenue growth opportunity for Energy for next year.

Koti Vadlamudi

Yes. Thanks for the question, Steve. And what I'd say is the growth opportunity is strong for us. Going backwards on your question on renewables, as I said in prepared remarks, we're probably this year going to finish around $1.7 billion. We are looking at modest growth off of that, given the strength of our current backlog and opportunities in Q4 and Q1 for bookings.

Overall, very -- you asked the question about the base of business in Energy and gas power generation. We're probably finishing this year in that submarket around $650 million and probably looking very confidently in over $1 billion in top line for next year. So I think that gives confidence in that growth rate in the Energy segment. Though you didn't ask it, I'll just say it here, where consensus has us consolidated for the whole enterprise for next year 2027, given the trajectory, the positive trajectory and our backlog, we feel confident in meeting or exceeding those expectations.

Steven Fisher

Terrific. That's very helpful. And then maybe just on the topic of data centers. I'm just curious what you expect. Do you have any comments about the impact of the elections? Could this be a 2027 impact or more for 2028? What kind of things are you preparing for in 2027 in terms of data centers? And then just maybe any mix of the geographic work, how important Texas is to you?

Koti Vadlamudi

Yes. Obviously, it's a dynamic environment right now. We're staying close with our customers. With respect to 2027, backlog and opportunities, much of this work is contracted and in the field and execution and permitted. So we feel pretty good about that overall. But obviously, we'll stay -- we'll remain very close to our customers and their investment decisions and how potential changes in regulatory policy could inform CapEx going forward. But we remain confident given our intentional bias to end markets with strong durable secular tailwinds.

Operator

Your next question comes from the line of Sangita Jain with KeyBanc Capital Markets.

Sangita Jain

Can I first start with the narrowed guidance for 2026? You kept the midpoint. 3Q was above consensus. So can you help us understand how we should think about the bookends, as in what drives the low end of the guide and what drives the high end heading into the end of the year?

Ken Dodgen

Yes. Thanks, Sangita. The quick answer is it's just that those delayed starts in the renewables projects that Koti referenced in his prepared remarks, looks like we've got a few projects that are going to trip over and kind of start in Q1 of next year. And so as a result, a little bit lower revenue there. But again, the recovery is on track.

Sangita Jain

And then on the $450 million deferral from this year, does that all come in next year? And can you help us understand what may be the drivers behind those delayed starts?

Ken Dodgen

Yes. The drivers -- I'll go in reverse order. The drivers are a variety of things, but predominantly, it's just all the regulatory disruptions that happened this year. And because of that, it's driven some higher costs for some of our customers. They've had to go out and maybe renegotiate the PPA. There was 1 case -- 1 or 2 cases where the delay was related to permitting or interconnects. So it's all customer-driven. And so despite having very strong customers, large, well-capitalized customers in this space, they've experienced a few disruptions. But for the most part, all we're doing is just delaying the starts from '26 into '27.

Sangita Jain

And then on the deferral of the $450 million, how should we factor that in next year?

Ken Dodgen

With one exception of a project that we just chose to walk away from because of the risk posture on it, most of those projects -- sorry, with the exception of that one project, everything is just moving from a '26 start into a '27 start.

Operator

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

Lee Jagoda

Starting with PayneCrest. So the backlog of PayneCrest is up really nicely since you bought it. Can you kind of give us the drivers of that increase? And maybe what the opportunity pipeline looks like for them? And really, at this point, how much capacity do they have to add additional work?

Koti Vadlamudi

Yes. Thanks, Lee. I'll take that one. So yes, we're really pleased with the trend in backlog there, moving from $260 million when we acquired them to just under $600 million today. That movement is their exposure to industrial manufacturing, which includes data centers, and a very, very core hyperscale client that has an outlook for work that exceeds available capacity in terms of labor. So governor on them for growth will be availability of labor, but very, very strong backlog and very strong pipeline for them to continue to grow in the coming years.

Lee Jagoda

Okay. And then just looking at the Energy business, as we look out to next year, the mix of business looks like it might be shifting a little bit, I guess, with the exception of some of these energy delays, but certainly more power, more pipeline, and I guess now Energy may grow off of a lower base next year. If I look at the projected mix, how does that change your view, if at all, in terms of like the normalized margin range within Energy? Or does the mix potentially skew things to the lower or higher end of the prior historical margin ranges?

Koti Vadlamudi

Yes. I think for next year, we'll be restorative in terms of the margin range that we've seen in previous years like 2025, given the headwinds on some cost overruns in '26. I think portfolio mix will be very beneficial, particularly with the gas power generation portfolio will become a bigger driver of the overall portfolio in further years. But next year, probably normal restorative margins and then opportunity for -- to benefit from portfolio mix going forward.

Operator

Your next question comes from Philip Shen with ROTH Capital Partners.

Philip Shen

First one is on renewables and your bookings. Can you talk about how close ratios may have changed or not at all following the challenged 6 projects? In other words, trying to assess how has the business outlook changed from a booking standpoint? Or are you able to still close at the same ratios as you had previously when you guys were growing so much?

Koti Vadlamudi

Yes. Thanks for the question, Phil. No change with respect to that. Book-to-burn historically in this segment has been pretty close. Ken described some projects that have moved to the right. The customer relationships are very solid. In most cases, they're dealing with either a PPA or grid interconnect issue that's causing them to delay the start, but no cancellations and high aptitude to convert.

We were very back-half weighted. We're still back-half weighted, very strong opportunity funnel in Q4 and Q1. And just to put a little color on that, expecting Q4 bookings to maybe come in, in renewables around $800 million, potentially a little bit higher. Q1, even larger, maybe double that amount and potentially even a little bit higher than that. But strong, strong relationships with the customer. And in some cases, they've already signed letters of intent, but we have been pragmatic in not pushing that into backlog.

Philip Shen

Great. Okay. Very good color. And then sticking with renewables for my second question. Can you talk about the margins that you're seeing on the new work that you're winning versus the challenged projects of this past year? And then separately, but related, we've picked up on this potential for a new kind of Midwest labor agreement that could raise EPC costs because it might require EPCs to work with electricians to lay solar panels. And so I just was wondering, I think it's tied to like [NMA] agreements versus the [Tri-Net] -- I forget the second part of that word, but there's a labor agreement that may require the high-voltage electricians to get involved, and that could impact the states of Illinois, Missouri, Ohio and Indiana. So I just was wondering if you can give a little bit of color on that exposure. Tri-Trade is the name I was looking for.

Koti Vadlamudi

Yes, Phil, thanks for the question. Yes, we would have minimal exposure there. I confess, I don't know the details of that potential agreement or where it's evolving. But our footprint doesn't need to take us there. And so we'll watch out and school up on that in particular, but we would have no impact in our current portfolio or funnel. And then I apologize, can you repeat the first...

Philip Shen

Margins.

Koti Vadlamudi

Yes, margins. Margins will again be restorative to previous as-sold and as-executed margins historically. And again, the diminishing impact of the cost overrun projects will be helpful for us as we complete the remaining project. And I'll further say if we exclude the -- sorry, if we just exclude the 6, we're already at those margins.

Operator

Your next question comes from Dimple Gosai with Piper Sandler.

Dimple Gosai

And apologies in advance for this loaded question. But can you talk a little bit about just the gas and data center pipeline and how much has been awarded today? And then secondly, how durable the 13% gross margin is for Utilities? That was a standout. And how we should be thinking about that going forward? And then I warned it was going to be a loaded question. Taking all of this together, plus a recovery in your renewables, do you feel good about achieving double-digit growth in '27?

Koti Vadlamudi

Yes, I'll go work backwards, and I may ask you to repeat some of it, Dimple. But yes, very, very confident in the growth trajectory to the last part of the question. With respect to composition, gas power generation, current submarket for us, backlog sits at around [ 1 ] and opportunity to continue to grow. What I've described there, the demand environment is so high. We are very careful on the work we take on from a risk/reward posture, but strong opportunity to grow there.

And then the data center exposure specifically is through PayneCrest. They are not only data center, they do other industrial manufacturing as well, but they benefited from that CapEx and the growing relationship they have with a hyperscale client. And that total, not just data center, sits at about $600 million -- $593 million in backlog.

Dimple Gosai

Very good. And then just the durability on that 13% gross margin for Utilities, is that something we can continue to expect?

Koti Vadlamudi

Yes, on -- one thing I'm very, very happy with the team's performance in power delivery, specifically, they've worked over the past year to -- on the MSA work, drive further productivity and gained meaningful points in gross margin quality. So I think that's something we'll sustain over the year. We enjoyed good gas operations. And I think while that submarket may be more modest in growth, they've delivered good margins historically over the year. And next year, I think we'll see some -- probably modest growth in that market, hugging the margin quality they've delivered historically. So we feel good about that. And we don't plan for storm work, but that is when our customers have that need, we're critically able to support them when that arises. So we're optimistic.

Operator

Your next question comes from Julien Dumoulin-Smith with Jefferies.

Brian Russo

It's Brian Russo on for Julien. Just to follow up, did you mention power delivery margins could be sustainable at 13% or the overall Utilities segment, it can be sustainable at that level, which would be above the 10% to 12% you've been kind of guiding towards?

Ken Dodgen

Yes. Brian, those margins are typical for our Q3. But for the full year, because of seasonality, we still expect to be in the 10% to 12% range.

Brian Russo

Okay. Great. And we've seen -- sticking with the power delivery, we've seen a lot of your core Texas customers increase yet again their 5-year capital forecast. Does Primoris have the necessary capacity to support that type of growth? Or would that be a target of opportunistic M&A going forward?

Koti Vadlamudi

You're talking about power delivery, sorry, Brian? Yes, that...

Brian Russo

Correct.

Koti Vadlamudi

Is it power delivery? Is that your question?

Brian Russo

Yes.

Koti Vadlamudi

Yes. It'd be an opportunity for growth. I think the -- it is a labor-constrained market. We do have some really good MSA relationships with existing customers that give us visibility to the CapEx you're talking about. We also have opportunities to memorialize some contracts that are in discussion for new prospective customers that also see their availability in the supply chain with current peers kind of tapping out for crews. So it is meaningful growth for us, and we will look at opportunities, both organically and inorganically to drive that growth.

Brian Russo

Okay. Great. And then just on the pipeline awards. Can you just add a little bit more color there? $250 million, that's a nice size for Primoris given the size of that segment. Anything you could offer there in addition to just the timing that you mentioned?

Koti Vadlamudi

Yes. Historically, we've said before, the last few years, it's been sort of a slower market for us, but we've seen the opportunities. The $250 million one that we referenced is one that starts to burn at the end of next year and into '28. Importantly, I did mention in my prepared remarks, another opportunity, it's not inked yet, but $150 million. That one will contract, we expect, and will burn in '27. So we see more of that growth probably meaningfully in 2028, but starting to turn around in '27.

Operator

Your next question comes from Chris Tsung with Wolfe Research.

Chris Tsung

Just on renewables, with the revenue outlook now falling from like $3 billion to $1.7 billion this year, you cited higher carrying costs from lower volumes. Is there a need to resize the workforce and equipment base with this lower level of activity? Or are you maintaining this capacity in anticipation of a recovery? Like maybe just asking more broadly, what level of renewables revenues is needed to operate efficiently?

Ken Dodgen

Yes, Chris, I think I heard you. And the short answer is it's a little bit of both. With the revenue coming down so much, we've definitely maintained critical capacity where we needed to, but there are other parts of the business that are more back-office-focused and indirect-focused where we have rightsized the business.

Chris Tsung

Okay. And maybe just as a follow-up. I noticed the Energy fixed price revenue dropped a bit from like $951 million to $576 million year-over-year. And just -- and like the time and materials and cost plus increased $481 million to $376 million. Does this reflect a deliberate shift towards lower risk contracting or just simply just project mix?

Ken Dodgen

Well, yes, it's a little bit of both. It is project mix and some of it is lower risk. One of the main things is -- that's reflected there is the fact that we have lower renewables revenue, which is fixed price. And what's growing in its place, as we've talked about, is the nat gas generation, which starts out as open books or reimbursable until we convert it into a fixed price later on in the project.

Operator

Your next question comes from Jerry Revich with Wells Fargo.

Jerry Revich

Nice job on the projects this quarter. I want to ask when we're talking about the outlook for $1 billion plus for the gas power business into '27, could you just talk about what proportion of those jobs already have permits? Obviously, the downside of reporting right after elections is maybe there are more moving pieces than usual. Can you just comment on the status of permits on those projects or whatever they're supporting?

Koti Vadlamudi

Yes. Thanks for the question, Jerry. And I don't have this in specific as a percentage. But one of the things we do when we're evaluating the opportunity set given how fertile ground it is for numbers of opportunities, we do evaluate where they are in the client queue as far as procuring long-lead equipment such as the turbines. We also look at their aptitude for the project to go from a permitting perspective. So the ones that we're going after have strong aptitude or have the permits in place. So we feel very good about what we put into backlog and also for opportunity funnel. Those are sort of filters we use in terms of our go/no-go.

Jerry Revich

So they're not impacted by any of the moratoriums in place now?

Koti Vadlamudi

Nothing we have currently has been delayed or canceled due to any moratorium. All the projects are in the field and moving forward with their current schedules.

Jerry Revich

Okay. Super. And then can I just ask, the 2025 vintage projects that were booked in renewables, could you just talk about the status of those projects? Nice to see progress on the back half of '24 projects being closed out. How are the projects booked in '25 performing?

Koti Vadlamudi

Yes, everything is going -- everything is either performing as sold margins or a little bit better. We gave color on the 6 -- 5 of the 6 that we hit mechanical completion, the last one will hit this quarter. So good overall for the portfolio and lots of discipline in work we estimate going forward and making sure everything comports with our overall risk/reward balance.

Operator

Your next question comes from Manish Somaiya with Cantor Fitzgerald.

Manish Somaiya

Ken, my first question is on cash conversion. We're still trailing the target that we have laid out for the full year for operating cash flow, free cash flow. So maybe if you can help us kind of get us to that bridge as we are in 4Q. And then maybe, Koti, if you can help us kind of reconcile your comfort level with the consensus growth for 2027. I think you said that renewables, obviously, will grow from a base of $1.7 billion. Gas generation will exceed $1 billion. But then if you can just help us close the loop on how we should think about pipeline, PayneCrest and Utilities.

And then just lastly, on capital allocation. Obviously, it's great to see the $250 million of share buybacks. And if you could just help us prioritize in terms of share buybacks, organic, inorganic growth and deleveraging.

Ken Dodgen

Yes, Manish, I'll start off and then Koti can jump in. But on cash conversion, we are now expecting operating cash flow of about $100 million for the year and essentially breakeven free cash flow, and that's been a direct result of the lower EBITDA. But going into next year, we fully expect to bounce back to normalized levels as we enter 2027.

I'll also touch on capital allocation. Capital allocation, really no change there. We took advantage of the stock price and the share repurchase that our Board authorized in both Q2 and Q3. We exhausted all that $150 million. We have another $250 million that the Board just approved. Going forward, I expect we will continue to be opportunistic on the $250 million. But coming out of the renewables projects, I think we're going to be -- continue to be prioritizing supporting the organic growth and where we can find them good acquisitions.

And then, Koti, I don't know if you want to touch on the 2027 consensus.

Koti Vadlamudi

Yes, I'll jump in. In terms of revenue growth, and I said it in an answer to a previous question, we feel given the backlog strength and where we're positioned in -- at the end of 2026 and going into 2027, we feel very confident to exceed revenue expectations on top line for next year. And then you highlighted a couple of things that I already said, but gas going from $650 million to over $1 billion, very confident, again, based on backlog and opportunity set.

PayneCrest performing better than expectations for this time this year. Strength in backlog gives us confidence they're going to grow. They could contribute over $500 million for next year. Pipeline will probably be a little bit modestly up next year. And as I said before, it's more of a 2028 play for us for growth. And then renewables, given the funnel and what we expect to book in Q4 and in Q1, we see aptitude. We'll probably sit at the end of this year at over $2 billion in backlog and set us up for modest growth from '26 to '27.

And then Utilities as well, particularly around power delivery, we see growth there. And gas operations, while we would have expected to be maybe more tempering in growth, CapEx for customers and where they need our skill sets are showing the promise. So we see modest growth next year for that business as well.

Manish Somaiya

And Koti, if I can just squeeze one more in on the margin. I think on the Energy segment, you said 10% to 12% for next year. That's highly achievable. How we should -- how should we think about sort of the high end of that margin? And how do we see that progression over the course of 2027? Is it sort of back-half weighted? Or is it something that we'll probably see beginning pretty early in the New Year?

Koti Vadlamudi

It's probably more back-half weighted. Some of that is portfolio mix. Some of that is maturity of projects and execution that we'll see some -- with good execution and productivity opportunity to see expanded margin quality. But I'd look at it that way.

Operator

Your next question comes from Jean Veliz with Oppenheimer.

Jean Veliz

I apologize if you already mentioned some details. But with the 2027 $1 billion expectation in natural gas business, can you talk about what are your bookings and revenue burn cadence expectations through 2027?

Ken Dodgen

It's a good question. I mean revenue cadence is going to be relatively flat to my knowledge right now. I don't know specifically about bookings cadence by quarter for next year, though.

Jean Veliz

No problem. And just thinking about the renewables, can you just talk about -- a little bit about what some of the conversations are you having with your customers regarding 2027, 2028 opportunities and regarding the elections? Was some of that already baked in, in these conversations? Or do you expect to have a new set of conversations with your existing and potential new customers?

Koti Vadlamudi

Yes. What I'd say is the -- those customer conversations, the investment decisions they're making, I think, were based on current policies that are in place. And so we've -- and when we shape our portfolio, we look at it overall, risk/reward, aptitude to go, value proposition. We're a premier provider in this space, so we don't try to win on price. So all of those things sort of factor into how we pursue work.

Obviously, given the changes in the legislature, we'll keep tight with our customers on how policy could shape their investment decisions. But overall outlook for us is strong. The -- I've quoted numbers before about the total funnel. That funnel is still as large as it's ever been. So we're very focused on making sure we pursue the right work given the labor constraints that are out there.

Jean Veliz

And on -- one more for me. On the final project to be completed within the coming weeks, do you expect it to be actually done in that time line? Or are there additional like walk-throughs or things of that nature that we should expect from you guys?

Koti Vadlamudi

Yes. Construction will be complete in this quarter, and we'll be ramping down from the 1,000-plus peak to 60 to 100 staff. So from a construction progress, we'll be done. There will be still some people that have to remain to keep the site and as well do testing and commissioning, but that will spring into next year. But from a construction progress percentage complete and hitting mechanical completion, we're going to be finishing that off in the coming weeks.

Operator

[Operator Instructions] Your next question comes from Adam Thalhimer with Thompson, Davis.

Adam Thalhimer

Great quarter. Can you give some color on -- you gave some great color on renewables bookings potential for Q4. Can you give gas pipeline and communications?

Ken Dodgen

Yes, Adam. Sorry, I hit the wrong button here. On gas, gas will be strong in Q4, probably as much as $1 billion in bookings on gas. Pipeline, the main thing we're targeting for Q4 is about $150 million to $200 million in bookings related to a pipeline project that Koti talked about earlier. And then -- sorry, what was the other one you asked about?

Adam Thalhimer

Communications.

Ken Dodgen

Communications. Communications is almost all MSA work for us. It's very little project work. So it should be relatively flat going into the quarter as we continue to pivot that business and try to target more project work around data centers and middle-mile stuff.

Adam Thalhimer

Okay. And this might be asking too much because at least you said you're comfortable with the '27 consensus, but I don't know if you've looked at the quarters and how things might shake out. I just wanted to know how conservative we should be for Q1 of next year.

Ken Dodgen

I haven't looked at the quarters. In general, Q1 is one of our lowest quarters of the year just because of seasonality, in particular, in the Utilities business, but we also sometimes see a little bit of seasonality in the Energy side of the business as well. So I don't know that I completely answered your question, but it is natural to have Q1 be kind of a seasonally low quarter.

Operator

Your next question comes from [George Sheffey] with Mizuho.

Unknown Analyst

I'm just curious if you could give us some color on when we should expect the renewable projects that go into backlog next quarter and the gas projects that go into backlog next quarter. When we should expect to see those to burn to revenue?

Ken Dodgen

The -- so on the renewables projects that we booked in Q4 and Q1, revenue will begin burning in Q2 and Q3. I think there may be 1 project that won't start until Q4, but almost all of it should be booking -- excuse me, should start to burn relatively quickly. And then on the gas generation side, was that the other one you asked about, George?

Unknown Analyst

Yes, it was.

Ken Dodgen

Yes. As a general rule, those start burning very quickly as well. So whenever we book that into backlog, if it doesn't start within the quarter, it generally starts in the following quarter.

Operator

Your next question comes from Adam Bubes with Goldman Sachs.

Adam Bubes

Historically, I think in Utilities, gas is your highest margin business and then power delivery is relatively lower margin than the other business lines. Just wondering how much is that gap close given the strong margin performance in power. And then as that business becomes a larger part of the mix, should we expect mix dilution at the segment margin level? Or can improving margins in the power delivery segment offset that?

Ken Dodgen

Look, the margins are all in the 10% to 12% range. I'm trying to think through this real quick. Gas margins and power delivery margins like in Q3 were both at the upper end of the range and a little bit above the range. So going forward, as power delivery and gas continues to grow, that should be margin-accretive.

Adam Bubes

Okay. Got it. Understood. And then Utilities backlog, I think it's up strong double digits year-over-year and on a next 12-month basis as well. Does the current backlog here, you think support an acceleration in growth off of these levels? Can you just talk about maybe the growth in Utilities embedded in your expectation to execute well against consensus numbers next year?

Ken Dodgen

Yes. I mean we're excited about the growth that we're seeing in our Utilities business. I think we're still comfortably expecting kind of high single digits growth going into next year with the opportunity potentially to do a little bit better than that. I don't know that we are looking to see much immediate acceleration beyond that. I think we want to see how 2027 plays out from a booking standpoint, in particular, with certain of our customers who have larger projects that we're targeting in and around transmission and substation.

Operator

Your next question comes from Steven Fisher with UBS.

Steven Fisher

Just a follow-up on the communications business. Can you just give maybe a little bit more color on what you're seeing in the BEAD program? How is that progressing? Are there sort of higher confidence areas, lower confidence areas? And then anything -- any more color on sort of fiber-to-the-home activity beyond BEAD? I know it sounds like it's a little bit weaker, but sort of what are you seeing in the dynamics from the customers there?

Koti Vadlamudi

Yes. Thanks, Steve. I think, yes, I would characterize it just the way you said it. The fiber-to-the-home is probably a diminishing market for us overall. We are tracking some of the BEAD programs. They aren't in our backlog, but they are with customers we know. So expect to get some of that into backlog. But overall, for us, it's a smaller percentage of the -- over time, it's an overall smaller percentage of the total enterprise. We do have some initiatives and organic growth to look at some of the data center plays with like skill sets among the splicing technicians. But I'd say, for us, it's not a meaningful growth vector for us.

Operator

This concludes the Q&A session. I will now turn the call back to Koti Vadlamudi for closing remarks.

Koti Vadlamudi

Yes. I just want to close by thanking the employees at Primoris for doing the important, critical, purposeful work on behalf of our clients. I also want to thank you all for engaging with us today. We do believe our best days are in front of us, and we look forward to updating you as we go forward. Thank you.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.