Slide 1: 4Q19 and Full-Year 2019 Earnings Call Presentation
4Q19 and Full-Year 2019 Earnings Call Presentation F e b r u a r y 2 7 , 2 0 2 0
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: Call Participants and Agenda
Call Participants and Agenda Duke Austin • Introduction and Forward Looking President and Chief Executive Officer Statements Disclaimer • Fourth Quarter and Full-Year 2019 Review Derrick Jensen Chief Financial Officer • Operational, Strategic and Industry Commentary Kip Rupp • Financial Review and D
Slide 4: 2019 Highlights
2019 Highlights Adj. EBITDA(1) • 2019 was another record year for Quanta Operating Adj. Income EPS(1) • Four consecutive years of growth and record $942 MM results $3.33 $555 MM • Strategic position in the marketplace remains Total strong Revenue Backlog(1) • Believe we are well positioned for conti
Slide 5: Strong, Consistent Financial Improvement Driven by Key Objectives
Strong, Consistent Financial Improvement Driven by Key Objectives Revenue $bn $12.11 Grow Base $7.57 Business 2015 2019 Improve Adjusted EBITDA and Margin (1) $mm $941 Margins $526 7.8% 7% Expand Service 2015 2019 Offerings Adjusted EPS (1) $3.33 $1.11 Develop Craft Skilled Labor 2015 2019 Return on
Slide 6: Select Full-Year Accomplishments
Select Full-Year Accomplishments • Achieved a great deal in 2019, but remain focused on getting better Disciplined & Value Grow Base Improve Expand Service Develop Craft Creating Capital Business Margins Offerings Skilled Labor Deployment • Base business revenue • Pipeline and Industrial • Acquired
Slide 7: Transition to Advanced Utility Model Has Driven Spending
Transition to Advanced Utility Model Has Driven Spending Advanced Integrated Utility Model Transmission Distribution Generation Pipelines Top 25 Quanta Utility Customers in 2018(1) ($ in billions) $166 Gas Distribution Renewables Communications $99 • Heavy investment focus on transmission and distri
Slide 8: Utility Industry is Large, Attractive and Visible Addressable Market
Utility Industry is Large, Attractive and Visible Addressable Market “Our [utility] industry remains the most capital-intensive industry in America. For the eighth consecutive year, we expect another industry record, with total capital expenditures projected at $135.6 billion in 2019.” - Edison Elec
Slide 9: Continued Multi-Year Growth Opportunity
Continued Multi-Year Growth Opportunity • Utilities continue to shift capital investment towards electric transmission and distribution infrastructure, with increasing focus on gas distribution investment • Approximately 65% of Quanta’s revenue is tied to regulated electric and gas utility customers
Slide 10: Long-Term Drivers Provide Long-Term Growth Opportunity
Long-Term Drivers Provide Long-Term Growth Opportunity Top 25 Quanta Utility Customer Spend 2019E Utility Capex Quanta Core Solutions Aggregate Select Utility CAGR: 2000-2018 = $136 B = $61 B Multi-Year Avg. Annual ($ in billions) Capex Spend 8% CAPEX 87% $87 B 5% $37B OPEX 13% Quanta Core Quanta Es
Slide 11: Communications (within Electric Power Segment)
Communications (within Electric Power Segment) To Meet Future Broadband Needs, The U.S. Needs Est. $130-$150B of Fiber Infrastructure Investment(1) • Total communications services revenue increased +40% in 2019, led by our U.S. operations • Expect strong double digit revenue growth in 2020 with uppe
Slide 12: Pipeline and Industrial
Pipeline and Industrial • Revenue grew in 2019 despite meaningfully less larger pipeline project revenue as compared to 2018 Strategic Focus on Base Business Expansion • Double digit base business growth in 2019 Base Business Revenues Larger Project Revenues • Driven by strength in gas utility, pipe
Slide 13: 2020 Guidance Considerations
2020 Guidance Considerations • Reflects favorable end market trends, execution of strategic initiatives, strength of operations, ability to safely execute and strong competitive position • Expect improved profitability and continued growth in revenues, adjusted EBITDA and earnings per share. Opportu
Slide 14: Financial Goals for Growing Long-Term Shareholder Value
Financial Goals for Growing Long-Term Shareholder Value Return of Capital Strategic Acquisitions Double Digit ROIC Sustainable Cash Flow Generation EPS Growth > Improving Revenue Growth Adjusted EBITDA 5% to 10%+ Margins Revenue CAGR Actual Performance Through the Cycle, 2010 – 2019: • Revs. CAGR of
Slide 15: 4Q 2019 Segment Results versus 4Q 2018
4Q 2019 Segment Results versus 4Q 2018 ($MMs) Revenues Op Inc % Change (bps) Commentary + Base business driving revenue growth as utilities invest in infrastructure hardening and grid modernization; aggregate communications revenues, included in the electric segment, up 28% versus 4Q18 Electric Powe
Slide 16: Free Cash Flow & DSO
Free Cash Flow & DSO Free Cash Flow (1) ($MMs) Days Sales Outstanding (2) 4th Quarter Recap 4Q19 YTD 19 (3) Free Cash Flow driven by: $581 • Improved billings and collections with several customers that had negatively impacted DSO levels in prior quarters $298 • Collection of approximately $100MM of
Slide 17: Balance Sheet & Liquidity
Balance Sheet & Liquidity As of December 31, ($MMs) 2017 2018 2019 Cash 138 79 165 Liquidity Highlights Debt Term Loans - 593 1,241 • Amended our senior secured credit Credit Facility 668 479 105 agreement in 2019, adding term loan and Other 4 34 21 increasing borrowing capacity on the revolving cre
Slide 18: Electric Power Progression
(1) Electric Power Progression (excluding Latin America operations) GUIDANCE 2020 2017 D 2018 D 2019 D Range + Continued base electric growth + Continued base electric (1) + Increased larger growth + Fire hardening ramp in $7.6B Revenues projects + U.S. telecom growth California $5.5B + Telecom expa
Slide 19: Pipeline & Industrial Progression
Pipeline & Industrial Progression GUIDANCE 2020 2017 D 2018 D 2019 D Range + Partial year of Hallen + Full year of (acquired in September Stronghold (acquired + Full year of Hallen $4.6B Revenues 2019) in July 2017) + Continued base + Double digit base $3.9B + >20% base growth $4.8B growth excluding
Slide 20: 2020 Financial Guidance Summary
2020 Financial Guidance Summary ($MMs except per share data) LOW MID POINT HIGH Revenues $12,200 $12,400 $12,600 Adj. EBITDA (1) $1,029 $1,072 $1,115 Free Cash Flow (2) $400 $500 $600 Net Income $439 $469 $499 Diluted EPS (GAAP) $2.93 $3.13 $3.33 Adjusted Diluted EPS (3) $3.62 $3.82 $4.02 Net Income
Slide 21: Historical Net Working Capital as % of TTM Revenues
Historical Net Working Capital as % of TTM Revenues (1) N.W.C. Highlights • Net working capital as a percentage of trailing twelve month (TTM) revenues is subject to material changes throughout the year 13.5% 13.1% 13.0% • Over the last 20 quarters, net working 12.8% 12.8% capital has averaged 13.9%
Slide 22: Capital Allocation Priorities
Capital Allocation Priorities Capital Deployment – 2016 through 2019 ($MMs) Capital Allocation • Working capital and capex required to Working Capital & Capex (net of PP&E sales) Working Capital 889 Capex 900 support the organic growth of the business remain our first priority and Revenue increased
Slide 23: 2016 – 2020 Financial Performance
2016 – 2020 Financial Performance (1) Revenues ($MMs) EBITDA & Adjusted EBITDA (2) ($MMs) (1)(4) (1) $1,072 $12,112 $12,400 $1,004 $11,171 $902 $942 $837 $9,466 $790 $709 $7,651 $580 $598 P&I $521 EBITDA EP Adj EBITDA 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Diluted EPS (GAAP as reported) A
Slide 24: Appendix
Appendix • Definitions • Reconciliation Tables • Forward Looking Statement Disclaimers 24
Slide 25: Definitions
Definitions • Return on Invested Capital (“ROIC”) is calculated by dividing Adjusted EBITA, net of tax (a non-GAAP measure), by average invested capital. Average invested capital is determined by calculating the average of invested capital at the beginning and end of the year. Adjusted EBITA, net of
Slide 26: Definitions
Definitions • Adjusted Earnings per Share is defined as diluted earnings per share adjusted for certain other items as described below: • Non-cash stock-based compensation expense may vary due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates,
Slide 27: Reconciliation of EBITDA and Adjusted EBITDA
Reconciliation of EBITDA and Adjusted EBITDA ($000s) 2015 2016 2017 2018 2019 FY 2020 FY FY FY FY 4Q FY Low Mid High Net income attributable to common stock (GAAP as reported) $ 120,286 $ 198,725 $ 314,978 $ 293,346 $ 118,144 $ 402,044 $ 439,000 $ 469,000 $ 499,000 Interest expense 8,024 14,887 20,9
Slide 28: Reconciliation of Adjusted Diluted Earnings per Share
Reconciliation of Adjusted Diluted Earnings per Share ($000s, except per share information) 2016 2017 2018 2019 FY 2020 FY FY FY 4Q FY Low Mid High Reconciliation of adjusted net income attributable to common stock: Net income attributable to common stock (GAAP as reported) $ 198,725 $ 314,978 $ 293
Slide 29: Reconciliation of Return on Invested Capital (ROIC)
Reconciliation of Return on Invested Capital (ROIC) ($000s) 2015 2019 FY FY Adjusted EBITDA (a non-GAAP measure) $ 525,804 $ 941,805 Less: Depreciation expense (162,845) (218,107) Less: Stock-based compensation expense (36,939) (52,013) Adjusted EBITA 326,020 671,685 Less: Income taxes @ 30% Rate (9
Slide 30: Reconciliation of Backlog
Reconciliation of Backlog ($MMs) December 31, 2018 September 30, 2019 December 31, 2019 12 Month Total 12 Month Total 12 Month Total Electric Power Infrastructure Services Remaining performance obligations $ 2,093.5 $ 3,045.6 $ 2,124.6 $ 2,929.4 $ 2,483.1 $ 3,957.7 Estimated orders under MSAs and sh
Slide 31: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow ($000s) 2019 FY 2020 4Q FY Low Mid High Net cash provided by operating activities (GAAP as reported) $ 626,798 $ 526,551 $ 700,000 $ 800,000 $ 900,000 Less: Net capital expenditures: Capital expenditures (54,117) (261,762) (300,000) (300,000) (300,000) Proceeds from
Slide 32: Reconciliation of Electric Power Segment Excluding Latin America
Reconciliation of Electric Power Segment Excluding Latin America ($000s) 2017 2018 2019 FY 2020 FY FY FY Low High Revenues: Electric Power Infrastructure Services $ 5,599,836 $ 6,415,562 $ 7,121,837 $ 7,620,000 $ 7,840,000 Less: Latin America 100,427 96,126 63,226 20,000 40,000 Electric Power exclud
Slide 33: Reconciliation of Pipeline & Industrial Segment excluding Asset Impairments
(1) Reconciliation of Pipeline & Industrial Segment excluding Asset Impairments ($000s) 2017 2018 2019 FY 2020 FY FY FY Low High Revenues $ 3,866,642 $ 4,755,861 $ 4,990,316 $ 4,600,000 $ 4,800,000 Operating income $ 184,083 $ 204,178 $ 332,011 $ 313,000 $ 346,000 (1) Plus: Asset impairments 1,893 5
Slide 34: Historical Net Working Capital as % of TTM Revenues
Historical Net Working Capital as % of TTM Revenues ($MM) 2015 2016 2017 2018 2019 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Trailing Twelve Months (TTM) Revenues $ 7,873 $ 7,907 $ 7,701 $ 7,572 $ 7,425 $ 7,345 $ 7,448 $ 7,651 $ 8,116 $ 8,524 $ 9,091 $ 9,466 $ 9,706 $10,162 $10,538
Slide 35: Forward Looking Statements
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 1995. Forward-looking state
Slide 36: Forward Looking Statements
Forward Looking Statements • The time and costs required to exit Quanta’s Latin America operations and Quanta’s ability to effect related transactions on acceptable terms, as well as the business and political climate in Latin America; • Delays, reductions in scope or cancellations of anticipated, p
Slide 37: Forward Looking Statements
Forward Looking Statements • Quanta's ability to successfully complete remaining performance obligations or realize backlog; • Risks associated with operating in international markets, including instability of foreign governments, currency exchange fluctuations, and compliance with unfamiliar foreig
Slide 38: Connect With Quanta Services Investor Relations
Connect With Quanta Services Investor Relations @QuantaIR QuantaServicesIR Investor Contact Corporate Office Kip Rupp, CFA 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 38