Quanta Services, Inc. · NYSE:PWR
Quanta Services — Investor Presentation (November 2022)
55 slides from Quanta Services's investor presentation, Nov 14, 2022
Slide 1: Investor Presentation
Repeatable. Sustainable. RESILIENT Investor Presentation November 14, 2022 A Leading Energy Transition Infrastructure Solutions Provider
Slide 2: Notice to Investors
NOTICE TO INVESTORS This presentation (and oral statements regarding the subject matter of this presentation) includes forward-looking statements intended to qualify under the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking stat
Slide 3: Key Takeaways
KEY TAKEAWAYS Quanta is a leading specialty infrastructure solutions provider for the utility, 1 renewable energy, communications and energy industries Our acquisition of Blattner provides a leading infrastructure solutions 2 platform to collaborate with customers to shape North America’s energy tra
Slide 4: Who Is Quanta Services?
WHO IS QUANTA SERVICES? Leading Specialty Infrastructure Solutions Provider Largest and preferred employer of craft skilled Growing Total Industry leading Addressable Market labor in the industry. We typically self-perform safety and (TAM) driven Recognized market leader in by megatrends with +80% o
Slide 5: People, Planet, Principles
QUANTA IS FOCUSED ON LONG-TERM CORPORATE RESPONSIBILITY AND SUSTAINABILITY PEOPLE PLANET PRINCIPLES • Safety drives everything we • Facilitating efficient and • Board-level oversight of do – our employees are safe delivery of clean ESG-related matters our #1 asset energy and the migration towards a
Slide 6: Key Strategies for Sustainable Success
KEY STRATEGIES FOR SUSTAINABLE SUCCESS Disciplined & Value Grow Base Improve Expand Service Develop Craft Creating Capital Business Margins Offerings Skilled Labor Deployment ~$9B Consolidated Acquired leadership position +$150M incremental Working capital to support Adjusted in renewable generation
Slide 7: Strong, Consistent Financial Improvement Driven by Key Objectives
STRONG, CONSISTENT FINANCIAL IMPROVEMENT DRIVEN BY KEY OBJECTIVES Revenue $16.90 (1) $bn Grow Base $7.57 Business 2015 2022E Improve Adjusted EBITDA (2) (1) Margins $mm $1,670 $526 Expand Service 2015 2022E Offerings Adjusted EBITDA Margin (2) (1) 9.9% 6.9% Develop Craft Skilled Labor 2015 2022E Adj
Slide 8: How We Are Driving Long-Term, Sustainable Value Creation
HOW WE ARE DRIVING LONG-TERM, SUSTAINABLE VALUE CREATION Key Strategies Develop Craft Disciplined & Value Grow Base Improve Expand Service Skilled Labor Creating Capital Business Margins Offerings Deployment Portfolio Approach ◄ 5% to 8% Organic Revenue CAGR ◄ Double Digit Adjusted EBITDA Margins ◄
Slide 9: High-Quality and Diverse Customer Base with Critical Assets
HIGH-QUALITY AND DIVERSE CUSTOMER BASE WITH CRITICAL ASSETS SELECT CUSTOMERS – Many of Our Customer Relationships Span Decades LOW CUSTOMER Electric Power CONCENTRATION Largest Top 10 customer customers Renewable Generation accounted for accounted for ~ 7% ~ 38% Communications of 2021 revenues of 20
Slide 10: Collaborative and Comprehensive Solutions
COLLABORATIVE AND COMPREHENSIVE SOLUTIONS RANGE OF OUTCOMES INTERMEDIARY/ • Higher total cost to • Greater risk for sub-optimal Customer EXTERNAL COMPANY customer (margin on a project outcome – change TRADITIONAL identifies need for Customer would often choose margin) order disputes and remedial APP
Slide 11: Consistent and Growing Spend from Top Customers
CONSISTENT AND GROWING SPEND FROM TOP CUSTOMERS Driving Repeatable, Consistent Revenue Through Deep and Collaborative Customer Relationships Top 20 Customers Based on 2021 Top 20 Utility Customers Based on 2021 Base Business Revenues(1) Base Business Revenues $7 $7 $6 $6 20% 19% $5 CAGR $5 CAGR $ Bi
Slide 12: Massive and Growing Energy Transition TAM Driven by Megatrends
MASSIVE AND GROWING ENERGY TRANSITION TAM DRIVEN BY MEGATRENDS Carbon Capture Utilization & Storage $90BN NET ZERO Low Emission Fuels $132BN $3.0TN • From Fossil • From Biofuels • Biogas (RNG) • Liquid Biofuels Fuels • CO2 • Hydrogen w/ • Hydrogen • Direct Air Transportation CCUS Electrolysis Captur
Slide 13: Levered to Megatrends That Provide Multiple Paths for Growth
LEVERED TO MEGATRENDS THAT PROVIDE MULTIPLE PATHS FOR GROWTH Leveraging our Solutions Portfolio, the Continued Successful Execution of our Strategic Initiatives and Megatrend Drivers Provide Multiple Paths for Near- and Long-Term Profitable Growth System Modernization UNDERGROUND UTILITY Grid Redund
Slide 14: Aging Utility Workforce Contributes to Outsourcing Trend
AGING UTILITY WORKFORCE CONTRIBUTES TO OUTSOURCING TREND Additive Long-Term Tailwind Outsourcing is expected to increase across electric • Tight labor market for lineman and other skilled employees and gas utilities over the next five years • Quanta is focused on recruiting, training and developing
Slide 15: Industry-Leading Training Is a Competitive Differentiator
INDUSTRY-LEADING TRAINING IS A COMPETITIVE DIFFERENTIATOR Dedicated Training Facilities Northwest Lineman College (NLC) – Postsecondary education institution that has provided world-class electric training curriculum for 28 years. Added communications and gas distribution curriculum Quanta Advanced
Slide 16: Construction-Led Infrastructure Solutions Through Portfolio Approach
CONSTRUCTION-LED INFRASTRUCTURE SOLUTIONS THROUGH PORTFOLIO APPROACH Revenues - 2022E(1) Electric Power Renewable Energy Underground 52% Infrastructure Solutions 23% Infrastructure Solutions 25% Utility & Infrastructure Solutions Engineering Program Gas Pipeline Downstream Transmission Distribution
Slide 17: Revenue Mix – Strategically Focused, Operationally Diverse
REVENUE MIX – STRATEGICALLY FOCUSED, OPERATIONALLY DIVERSE ~90% of 2021 Revenues Came From Utilities, Renewable Developers, Communications and Industrial Customers, Which Provide Visible and Growing Multi-Year Capital Programs 2021 Consolidated Revenue = $13.0 Billion 2021 Revenue By Segment Est. 20
Slide 18: Base Business Activity
BASE BUSINESS ACTIVITY Large Portion of Revenues are Visible and Consistent Base Business Tends to Follow Industry Drivers and Customer Investment Trends, Which are Longer Term in Nature Est. ’22-’26 Consolidated Organic BASE BUSINESS: Revenue CAGR = 5%-8% • Repeatable, sustainable revenues • Primar
Slide 19: Portfolio Approach and Diversity of Revenue Helps Mitigate Risk
PORTFOLIO APPROACH AND DIVERSITY OF REVENUE HELPS MITIGATE RISK Superior Risk Profile Fiscal Year 2021(1) Estimated Revenue by Geography Estimated Revenue by Project Type Estimated Revenue by Contract Type Large Unit Price Cost Plus Project New 39% & Other Repair, Replace Construction 24% & Upgrade
Slide 20: Electric Power & Communications
ELECTRIC POWER & COMMUNICATIONS Page 20
Slide 21: Transition to Advanced Utility Model Has Driven Spending
TRANSITION TO ADVANCED UTILITY MODEL HAS DRIVEN SPENDING Advanced Integrated Utility Model Transmission Distribution Generation Pipelines Top 20 Quanta Investor-Owned Utility Customers in 2021(1) ($ in billions) $179 Gas Distribution Renewables Communications $111 • Heavy investment focus on electri
Slide 22: Utility Industry Is a Large, Attractive and Visible Addressable Market
UTILITY INDUSTRY IS A LARGE, ATTRACTIVE AND VISIBLE ADDRESSABLE MARKET U.S. Investor-Owned Electric Company CapEx $143 B(1) +$100 B(1) $29 5% 5% Quanta Core Quanta Core $46 Addressable Solutions Annual Market 65% +$75 B +$100B $22 $3 $9 Quanta Focused $34 On Renewables 25% 2021E 2021E Capex Est. Cor
Slide 23: Significant Grid Modernization and Hardening
SIGNIFICANT GRID MODERNIZATION AND HARDENING Widespread Need for Grid Modernization and Hardening – Maintenance, Upgrade, Repair and Replacement Projected Transmission Circuit Miles Replaced/Upgraded and Total Projected Investment ($ in millions) (1) Age • From 2022 - 2042, industry sources estimate
Slide 24: Electrification and Electric Vehicles
ELECTRIFICATION AND ELECTRIC VEHICLES Movement Towards A Reduced-Carbon Economy Will Require Significant Power Grid Investment • Over the coming decades, developed economies are Electrification Adoption Rates(1) expected to increasingly utilize electricity to meet carbon reduction/neutrality goals •
Slide 25: Puerto Rico Electric T&D System Operation & Maintenance
PUERTO RICO ELECTRIC T&D SYSTEM OPERATION & MAINTENANCE Transformative Opportunity • LUMA Energy, LLC (LUMA), 50% owned by Quanta and 50% owned by ATCO, was selected in June 2020 for this historic opportunity – the transformation and modernization of the Puerto Rico electric transmission and distrib
Slide 26: Puerto Rico Electric T&D System O&M Agreement
PUERTO RICO ELECTRIC T&D SYSTEM OPERATION & MAINTENANCE AGREEMENT Key Contract Terms and Timeline Front-End Transition Period O&M Services Period (completed) • Preparatory work to • In June 2021, LUMA commenced operation and maintenance of the T&D system under an interim-period agreement in exchange
Slide 27: Communications Infrastructure Services
COMMUNICATIONS INFRASTRUCTURE SERVICES Compelling and Complementary Growth Opportunity Goals Multi-Year Drivers / Opportunities 1 To be a leading communications infrastructure solutions provider in the markets we serve 2 Opportunity for +$1 billion annual revenues in the medium-term • Ongoing core f
Slide 28: Enabling Technology: Connectivity of Everything
ENABLING TECHNOLOGY Quanta is Uniquely Positioned For advanced technologies to work, it requires infrastructure. Technology is advancing Connectivity faster than required infrastructure. Quanta is uniquely positioned to provide critical of Everything infrastructure services that enable the technolog
Slide 29: Renewable Energy Infrastructure Solutions
RENEWABLE ENERGY INFRASTRUCTURE SOLUTIONS Page 29
Slide 30: Renewable Energy Infrastructure Solutions
RENEWABLE ENERGY INFRASTRUCTURE SOLUTIONS Significant Upgrading of Transmission and Grid Infrastructure Required to Support Renewable Energy Growth U.S. Renewable Electricity Generation Est. $14T in Global Grid Investment Required by Est. Incremental Transmission Requirements Annual Energy Outlook 2
Slide 31: Acquisition of Blattner - Strategic Rationale
ACQUISITION OF BLATTNER - STRATEGIC RATIONALE Premium Solutions Provider to the Renewable Energy Industry With A Market Leading Position & Attractive Financial Profile 1 Enhanced alignment with energy transition trends and access to the attractive wind, solar and energy storage markets, which are po
Slide 32: Blattner - Market Leader & Premier Partner
BLATTNER - MARKET LEADER & PREMIER PARTNER Extensive Track Record of Successful Project Execution Across Renewable Technologies Blattner has enhanced Quanta’s capabilities and geographic reach Blattner has installed +50 gigawatts of the total 200 gigawatts of utility-scale renewable capacity install
Slide 33: Deep Relationships with Leading Renewables Developers
DEEP RELATIONSHIPS WITH LEADING RENEWABLES DEVELOPERS Blattner Has Strong & Longstanding Relationships That Have Driven Repeat Business Select Customers Revenues from Repeat Customers 94% 100% 100% 100% Wind 80% 60% Solar 40% 20% 0% 2019A 2020A 2021A Storage Repeat Customer Revenue Blattner typicall
Slide 34: Underground Utility & Infrastructure Solutions
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Page 34
Slide 35: Underground Utility & Infrastructure Solutions: Strategic Focus on Base Business
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Strategic Focus on Base Business Strategy Focus Services Steps Taken Expectations 2022E Underground Utility & Gas LDC(1) Infrastructure Solutions • Create a more sustainable • Organic expansion of gas Segment Revenues and consistent operation utility se
Slide 36: Underground Utility: Gas LDC and Pipeline Integrity Services
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Strategic Focus on Base Business Gas LDC Services Pipeline Integrity Services • As of 2019, the U.S. natural gas distribution system consisted of more • There are ~544,000 miles of hazardous liquids, gas transmission and than 2.2 million miles of pipeli
Slide 37: Underground Utility: Downstream Industrial Services
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Strategic Focus on Base Business Decline primarily due to impact of U.S. Refiner Capital Spending COVID-19 ($ in MM) Downstream Industrial Services Drivers pandemic. Opportunity for $12,000 • Plant spending and upgrades have similar drivers to electric
Slide 38: Energy Delivery and Ancillary Services Drivers
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Energy Delivery and Ancillary Services Drivers Production • Need for pipeline and related infrastructure is being driven by the Grows significant increase in hydrocarbon availability from North American unconventional natural gas and oil production from
Slide 39: Pursuing Energy Industry Carbon-Reduction Opportunities
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Well Positioned and Actively Pursuing Energy Industry Carbon-Reduction Opportunities System Modernization Methane Emission Reduction GAS Gas Utilities and the Traditional Energy UTILITIES Industry are in the Early Stages of Hydrogen Blending Adoption of
Slide 40: Balance Sheet, Cash Flow and Capital Deployment
BALANCE SHEET, CASH FLOW AND CAPITAL DEPLOYMENT Page 40
Slide 41: Balance Sheet Strength Provides Flexibility
BALANCE SHEET STRENGTH PROVIDES FLEXIBILITY Strong Financial Foundation ($ in millions) 12/31/2018 12/31/2019 12/31/2020 12/31/2021 9/30/2022 (Sept. 30, 2022) Cash and Equivalents $ 79 $ 165 $ 185 $229 $215 Other Debt 34 21 40 54 67 Net Debt / 0.95% Sr. Notes due Oct. 2024 -- -- -- Adj. EBITDA(2) 50
Slide 42: Cash Flow Is Counter Cyclical
CASH FLOW IS COUNTER CYCLICAL Change in Revenue vs Free Cash Flow(1)/Adjusted EBITDA(1) For the Years Ending December 31, • Quanta’s cash flow generation is typically counter to revenue Guidance growth, primarily due to working capital demands and to a lesser 35% Midpoint(2) 90% extent, capex invest
Slide 43: Debt Maturities and Capital Structure
DEBT MATURITIES AND CAPITAL STRUCTURE Investment Grade With Opportunity to De-Lever Debt Maturities(1) Amounts shown in millions • Well positioned balance sheet with 2.90% Senior long-term capital structure at Notes attractive interest rates $1,000 Term Loan • Cash flow should provide the 0.95% 2.35
Slide 44: Flexible and Strategic Capital Allocation
FLEXIBLE AND STRATEGIC CAPITAL ALLOCATION Opportunistic and Disciplined Approach 2017 – 2021 Sources & Uses of Cash (Amounts in millions) Capital Deployment Preference $6,246 $6,127 • Working Capital 2% $134 Investments Organic Growth • Capital Expenditures 1% $86 Dividends 14% $827 Stock • Acquisit
Slide 45: Financial Goals for Growing Long-Term Shareholder Value
FINANCIAL GOALS FOR GROWING LONG-TERM SHAREHOLDER VALUE Multi-Year Profitable Growth Return of Capital Strategic Acquisitions Double Digit ROIC Sustainable Cash Flow Generation EPS Growth > Revenue Growth Improving Adjusted EBITDA Margins 5% to 10%+ Revenue CAGR Actual Performance Through the Cycle,
Slide 46: ESG Highlights
ESG HIGHLIGHTS <x 9 AL @Q Page 46 QUANTA
Slide 47: 2021 Sustainability Report
2021 Sustainability Report https://sustainability.quantaservices.com/ Quanta's 2021 Sustainability Report discusses the company's accomplishments in 2021 and marks a key milestone, as the company published its first consolidated set of sustainability metrics, including Scope 1 and 2 emissions. Title
Slide 48: Connect With Quanta Services Investor Relations
Connect With Quanta Services Investor Relations @QuantaIR QuantaServicesIR Investor Contact Corporate Office Kip Rupp, CFA, IRC 2727 North Loop West Vice President – Investor Relations Houston, TX 77008 713-341-7260 713-629-7600 investors@quantaservices.com www.quantaservices.com Page 48
Slide 49: Reconciliation Tables and Cautionary Statement
APPENDIX RECONCILIATION TABLES AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
Slide 50: Reconciliation of Adjusted Net Income and Adjusted Diluted EPS
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS For the Years Ended December 31, (in thousands, except per share information) (Unaudited) As of November 3, 2022 Estimated Guidance Range 2022E 2010 2015 2016 2017 2018 2019 2020 2021 Low Midpoint High Reconciliation of adjusted net inco
Slide 51: Reconciliation of EBITDA and Adjusted EBITDA
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA For the Years Ended December 31, (in thousands) (Unaudited) As of November 3, 2022 Estimated Guidance Range 2022E 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Low Midpoint High Net income from continuing operations attributable to common st
Slide 52: Reconciliation of Free Cash Flow
RECONCILIATION OF FREE CASH FLOW Free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures. Net capital expenditures is defined as capital expenditures less proceeds from sale of property and equipment and from insurance settlements related to pro
Slide 53: Cautionary Statement About Forward-Looking Statements and Information
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS AND INFORMATION This presentation (and oral statements regarding the subject matter of this presentation) contains forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigatio
Slide 54: Cautionary Statement About Forward-Looking Statements and Information
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS AND INFORMATION • Further effects of the COVID-19 pandemic, including the impact of the pandemic and of business and governmental responses thereto on Quanta's operations, personnel and supply chains and on commercial activity and demand across Q
Slide 55: Cautionary Statement About Forward-Looking Statements and Information
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS AND INFORMATION • The potential that Quanta's participation in joint ventures or similar structures exposes Quanta to liability and/or harm to its reputation as a result of acts or omissions by partners; • Quanta’s inability or failure to comply
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