Quanta Services, Inc. · NYSE:PWR
Quanta Services — Investor Presentation (December 2021)
56 slides from Quanta Services's investor presentation, Dec 7, 2021
Slide 1: Investor Presentation
Investor Presentation December 7, 2021 Repeatable. Sustainable. RESILIENT
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 Blattner gives Quanta a leading infrastructure solutions platform to 2 collaborate with customers to shape North America’s energy transition towards
Slide 4: Who Is Quanta Services?
WHO IS QUANTA SERVICES? Leading Specialty Infrastructure Solutions Provider Largest and preferred employer of craft skilled labor in the industry. We Industry leading typically self-perform safety and +80% of our work – training results Strong financial Recognized market leader in mitigates risk and
Slide 5: Corporate Responsibility & Sustainability
CORPORATE RESPONSIBILITY & SUSTAINABILITY Quanta is Focused on Long-Term Corporate Responsibility and Sustainability Quanta’s sustainability mission centers on collaborating with our customers to meet their needs and creating value for stakeholders, while focusing on employee safety and conducting o
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 • ~$5 billion estimated • Opportunity for further • Acquisition of Blattner in • +$100 million of • Working capital to increa
Slide 7: Strong, Consistent Financial Improvement Driven by Key Objectives
STRONG, CONSISTENT FINANCIAL IMPROVEMENT DRIVEN BY KEY OBJECTIVES Revenue (1) $bn $12.70 Grow Base $7.57 Business 2015 2021E Improve Adjusted EBITDA (2) (1) Margins $mm $1,236 $526 Expand Service 2015 2021E Offerings Adjusted EBITDA Margin (2) 9.7% (1) 6.9% Develop Craft Skilled Labor 2015 2021E 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 10%+ Revenue CAGR ◄ Improving Adjusted EBITDA Margins ◄ EPS Growt
Slide 9: Focused on Meeting Customer Needs
FOCUSED ON MEETING CUSTOMER NEEDS Grow Base What Customers Business Want Why Customers Care Quanta Delivers • Safety is a core value to our industry • Safety is a core value • Better employee relations, lower turnover and improved productivity to Quanta Safety • Unsafe work environment can result in
Slide 10: High-Quality and Diverse Customer Base with Critical Assets
HIGH-QUALITY AND DIVERSE CUSTOMER BASE WITH CRITICAL ASSETS Select Industry End Markets Data Points Select Customers $143B Electric Power Est. U.S. Investor-Owned Utility capex in 2021 Renewable +160 GWs Est. U.S. renewable Generation generation nameplate capacity installations, ’21-’25 $275B Commun
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 2020 Top 20 Utility Customers Based on 2020 Base Business Revenues(1) Base Business Revenues $6 $5 $5 18% $4 CAGR 19% CAGR $4 $ Billi
Slide 12: Levered to Favorable Long-Term Trends
LEVERED TO FAVORABLE LONG-TERM TRENDS Quanta’s Solutions for Modern Infrastructure Facilitate Movement Towards A Carbon-Neutral Economy and New Technologies • Utility Grid Modernization – The majority of the North American electric power and natural gas utility system is approaching or beyond its us
Slide 13: Electric and Gas Utility Infrastructure Investment Is Large and Growing
ELECTRIC AND GAS UTILITY INFRASTRUCTURE INVESTMENT IS LARGE AND GROWING Quanta is Utility Focused North American Utility Three-Year Forward Capex Budgets Relative to • Utilities are investing significantly in their regulated Preceding Three-Year Capex Budgets delivery systems driven by: • Grid moder
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 and gas utilities over the next five years • Tight labor market for lineman and other skilled employees • The average energy industry employee is estimated to be o
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 Training
Slide 16: Construction-Led Infrastructure Solutions Through Portfolio Approach
CONSTRUCTION-LED INFRASTRUCTURE SOLUTIONS THROUGH PORTFOLIO APPROACH Revenues - 2020 Revenues - 2020 Electric Underground Power Utility & 69% Infrastructure 31% Infrastructure Solutions Solutions Downstream Gas Distribution Pipeline Integrity Transmission Distribution Substation Engineering Services
Slide 17: Revenue Mix – Strategically Focused, Operationally Diverse
REVENUE MIX – STRATEGICALLY FOCUSED, OPERATIONALLY DIVERSE ~90% of 2020 Revenues Estimated to Come From Utilities, Communications and Industrial Customers, Which Provide Visible and Growing Multi-Year Capital Programs 2020 Consolidated Revenue = $11.2 Billion* 2020 Revenue By Segment Est. 2020 Reven
Slide 18: Base Business Activity
BASE BUSINESS ACTIVITY Large Portion of Revenues are Visible and Consistent 2016 ~79% of our revenues from base business activity(1) 2021E Expect ~90% of our revenues to come from base business activity Base Business Tends to Follow Industry Drivers and Customer Investment Trends, Which are Longer T
Slide 19: Portfolio Approach and Diversity of Revenue Helps Mitigate Risk
PORTFOLIO APPROACH AND DIVERSITY OF REVENUE HELPS MITIGATE RISK Superior Risk Profile Fiscal Year 2020 Estimated Revenue by Geography(1) Estimated Revenue by Project Type(1) Estimated Revenue by Contract Type(1) Large Cost Plus Project Unit Price 37% & Other New Repair, Replace 24% Construction Unit
Slide 20: Electric Power & Communications
ELECTRIC POWER & COMMUNICATIONS Page 20
Slide 21: Transition to Advanced Utility Model Has Driven Spending
TRANSITION TO ADVANCED UTILITY MODEL HAS DRIVEN SPENDING Advanced Integrated Utility Model Transmission Distribution Generation Pipelines Top 25 Quanta Investor-Owned Utility Customers in 2020(1) ($ in billions) $187 Gas Distribution Renewables Communications $117 • Heavy investment focus on electri
Slide 22: Utility Industry Is a Large, Attractive and Visible Addressable Market
UTILITY INDUSTRY IS A LARGE, ATTRACTIVE AND VISIBLE ADDRESSABLE MARKET “Our [utility] industry remains the most capital-intensive industry in America.” … “Our goal is to give our customers an energy future that is cleaner, smarter and stronger than any they have known before.” - Edison Electric Inst
Slide 23: Significant Grid Modernization and Hardening
SIGNIFICANT GRID MODERNIZATION AND HARDENING Widespread Need for Grid Modernization and Hardening – Maintenance, Upgrade, Repair and Replacement Projected Circuit Miles Replaced/Upgraded and Total Projected Investment ($ in millions) (1) Age (1) Source: Americans for a Clean Energy Grid, “Planning f
Slide 24: Renewable Generation Integration
RENEWABLE GENERATION INTEGRATION 100% Clean Energy Commitments & Renewable Portfolio Standard (RPS) Requirements (1) (as % of 2018 retail electricity sales) Requires Incremental Investment in Transmission and 100% State Substation Infrastructure Commitments 15.4% • States and provinces in North Amer
Slide 25: Electrification and Electric Vehicles
ELECTRIFICATION AND ELECTRIC VEHICLES Movement Towards A Carbon-Neutral 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 26: Puerto Rico Electric T&D System Operation & Maintenance Agreement
PUERTO RICO ELECTRIC T&D SYSTEM OPERATION & MAINTENANCE AGREEMENT 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 a
Slide 27: Puerto Rico Electric T&D System Operation & Maintenance Agreement
PUERTO RICO ELECTRIC T&D SYSTEM OPERATION & MAINTENANCE AGREEMENT Key Contract Terms and Timeline Front-End O&M Services Period Transition Period (2021 – 2035+) (completed) • Preparatory work to • In June 2021, LUMA commenced operation and maintenance of the T&D system enable full transition of • LU
Slide 28: 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 29: Communications Infrastructure Services
COMMUNICATIONS INFRASTRUCTURE SERVICES Uniquely Positioned for 5G – Overlap of Telecom and Electric Power Infrastructure We believe the density requirements of small cells for For 5G, American wireless companies 5G deployment is likely to require wireless carriers to are expected to invest … Looking
Slide 30: The Electrification and Connectivity of Everything
THE ELECTRIFICATION AND CONNECTIVITY OF EVERYTHING Quanta is Uniquely Positioned For advanced technologies to work, it requires infrastructure. Technology is advancing faster than required infrastructure. Quanta is uniquely positioned to provide critical infrastructure services that enable the techn
Slide 31: Blattner Holding Company
BLATTNER HOLDING COMPANY For additional information regarding Quanta’s acquisition of Blattner, see Quanta’s Investor Relations website https://investors.quantaservices.com/company-information/presentations Page 31
Slide 32: Strategic Rationale
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 poised for significant decad
Slide 33: Blattner - Market Leader & Premier Partner
BLATTNER - MARKET LEADER & PREMIER PARTNER Key Operating Segments Overview Blattner typically performs work on a portfolio of 30-40 projects per year Wind(2) Solar Storage(3) # of Projects(1) +90 17 +300 2020 Total Revenue = $2.4 Billion (all time) 100% from Repeat Customers MWs Installed(1) +12,200
Slide 34: Deep Relationships with Leading Renewables Developers
DEEP RELATIONSHIPS WITH LEADING RENEWABLES DEVELOPERS Blattner Has Strong & Longstanding Relationships That Have Driven Repeat Business Select Customers Revenues from Repeat Customers 94% 100% 96% 100% Wind 80% 60% Solar 40% 20% 0% 2019A 2020A 2021E Storage Repeat Customer Revenue Page 34
Slide 35: Multi-Year Expectations
MULTI-YEAR EXPECTATIONS Significant Growth and Financial Contribution Opportunity • Quanta and Blattner believe there is significant opportunity for growth over the near and longer-term, which could provide meaningful incremental financial contributions to Quanta • Quanta has made prudent assumption
Slide 36: Underground Utility & Infrastructure Solutions
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Page 36
Slide 37: Underground Utility & Infrastructure Solutions
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Strategic Focus on Base Business Strategy Focus Services Steps Taken Expectations 2021E Underground Utility & Gas LDC* Infrastructure Solutions • Create a more sustainable • Organic expansion of gas Segment Revenues and consistent operation utility serv
Slide 38: Underground Utility & Infrastructure Solutions
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Strategic Focus on Base Business Gas LDC Services Pipeline Integrity Services • As of 2019, the U.S. natural gas distribution system consisted of more • There are ~544,000 miles of hazardous liquids, gas transmission and than 2.2 million miles of pipeli
Slide 39: Underground Utility & Infrastructure Solutions
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Strategic Focus on Base Business U.S. Refiner Capital Spending ($ in MM) Decline due Downstream Industrial Services Drivers to COVID- • Near-term downstream maintenance and capital investment meaningfully 19 effects. impacted by the COVID-19 pandemic, w
Slide 40: Underground Utility & Infrastructure Solutions
UNDERGROUND UTILITY & INFRASTRUCTURE SOLUTIONS Energy Delivery and Ancillary Services Drivers • Need for pipeline and related infrastructure is being driven by the significant increase in North American unconventional natural gas and oil Change in U.S. Natural Gas Production from 2019 Change in U.S.
Slide 41: Balance Sheet, Cash Flow and Capital Deployment
BALANCE SHEET, CASH FLOW AND CAPITAL DEPLOYMENT Page 41
Slide 42: Balance Sheet Strength Provides Flexibility
BALANCE SHEET STRENGTH PROVIDES FLEXIBILITY Strong Financial Foundation ($ in millions) 12/31/2017 12/31/2018 12/31/2019 12/31/2020 9/30/2021 (Sept. 30, 2021) Cash and Equivalents $ 138 $ 79 $ 165 $ 185 $ 1,696 Net Debt / Other Debt 4 34 21 40 39 Adj. EBITDA(2) 0.95% Sr. Notes due Oct. 2024 -- -- --
Slide 43: 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 30% 90% growth, primarily due to working capital demands and to a lesser 25% 80% extent, capex investment • This d
Slide 44: 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 45: Flexible and Strategic Capital Allocation 2016 – 2020
FLEXIBLE AND STRATEGIC CAPITAL ALLOCATION Opportunistic and Disciplined Approach 2016 – 2020 Sources & Uses of Cash (Amounts in millions) Capital Deployment Preference $3,354 • Working Capital $3,413 Organic Growth 1% $30 Investments • Capital Expenditures 1% $52 Dividends • Acquisitions Borrowings
Slide 46: 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 47: ESG Highlights
ESG HIGHLIGHTS <x 9 AL @Q Page 47 QUANTA
Slide 48: Corporate Sustainability and Responsibility
CORPORATE SUSTAINABILITY AND RESPONSIBILITY 2020 Corporate Responsibility Report https://esg.quantaservices.com/ This report includes financial and nonfinancial information from Quanta Services, Inc. about activities, metrics, awards and accolades related to our People, Planet, Principles sustainabi
Slide 49: Connect With Quanta Services Investor Relations
Connect With Quanta Services Investor Relations @QuantaIR QuantaServicesIR Investor Contact Corporate Office Kip Rupp, CFA, IRC 2800 Post Oak Blvd., Suite 2600 Vice President – Investor Relations Houston, TX 77056 713-341-7260 713-629-7600 investors@quantaservices.com www.quantaservices.com Page 49
Slide 50: Reconciliation Tables and Cautionary Statement Regarding Forward-Looking Statements
APPENDIX RECONCILIATION TABLES AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Slide 51: Reconciliation of Adjusted Net Income and Adjusted Diluted EPS
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS Page 51
Slide 52: Reconciliation of EBITDA and Adjusted EBITDA
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA Page 52
Slide 53: 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 54: Cautionary Statement About Forward-Looking Statements
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS 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 Litigation Reform Act of
Slide 55: Cautionary Statement About Forward-Looking Statements
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS • The severity, magnitude and duration of the COVID-19 pandemic, including impacts 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
Slide 56: Cautionary Statement About Forward-Looking Statements
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS • 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 with the terms o
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