Quanta Services, Inc. · NYSE:PWR
Quanta Services — Investor Presentation (November 2020)
47 slides from Quanta Services's investor presentation, Nov 5, 2020
Slide 1: Investor Presentation
Investor Presentation November 5, 2020
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 services company and the leading specialty infrastructure 1 solutions provider for the utility, energy and communications industries We self-perform more than 85% of our work, which we believe mitigates 2 project risks and ensures efficiency, safety and cost-certainty for o
Slide 4: Leading Specialty Infrastructure Solutions Provider
W H O I S Q U A N TA S E R V I C E S ? Leading Specialty Infrastructure Solutions Provider Largest and preferred employer of craft skilled labor in the industry. We Industry leading self-perform +85% of safety and our work – mitigates risk training results Strong financial Recognized market leader i
Slide 5: Focused on Long-Term Corporate Responsibility and Sustainability
C O R P O R AT E R E S P O N S I B I L I T Y & S U S TA I N A B I L I T Y 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
Slide 6: Key Strategies for Sustainable Success
K E Y S T R AT E G I E S Key Strategies for Sustainable Success Improve Expand Service Develop Craft Disciplined & Value Grow Base Creating Capital Business Margins Offerings Skilled Labor Deployment • +$4 billion estimated • Opportunity for further • Largely organic • +$100 million of • Working cap
Slide 7: Resilient Business Model, Strong Financial Profile and Proactive Management
C O V I D - 1 9 R E S P O N S E & I M PA C T Resilient Business Model, Strong Financial Profile and Proactive Management Proactive Expense & Quanta Strengths Employees & Customers Capex Management Operational Impacts • Solid YTD 2020 results • Remain focused on health and • Proactively implemented c
Slide 8: Strong, Consistent Financial Improvement Driven by Key Objectives
K E Y S T R AT E G I E S Strong, Consistent Financial Improvement Driven by Key Objectives Revenue (1) $bn $11.20 Grow Base $7.57 Business 2015 2020E Improve Adjusted EBITDA (2) (1) Margins $998 $mm $526 Expand Service 2015 2020E Offerings Adjusted EBITDA Margin (2) (1) 8.9% 6.9% Develop Craft Skill
Slide 9: How We Are Driving Long-Term, Sustainable Value Creation
S U S TA I N A B L E VA L U E C R E AT I O N How We Are Driving Long-Term, Sustainable Value Creation Key Strategies Disciplined & Value Grow Base Improve Expand Service Develop Craft Creating Capital Business Margins Offerings Skilled Labor Deployment Portfolio Approach ◄ 5% to 10%+ Revenue CAGR ◄
Slide 10: High-Quality & Diverse Customer Base with Critical Assets
STRONG END-MARKETS High-Quality & Diverse Customer Base with Critical Assets Select Industry End Markets Data Points Select Customers Electric Power +$70B Annual T&D Spend Through 2022 Pipeline & Industrial +$22B Est. U.S. Utility Gas Related Capex in 2019 +$140B Communications Est. Fiber Investment
Slide 11: Focused On Meeting Customer Needs
CUSTOMER FOCUSED 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 environm
Slide 12: Industry-Leading Training Is A Competitive Differentiator
S T R AT E G I C T R A I N I N G I N I T I AT I V E S Industry-Leading Training Is A Competitive Differentiator Dedicated Training Facilities Northwest Lineman College (NLC) – has provided world class training curriculum for 28 years. Added communications and gas distribution curriculum Quanta Train
Slide 13: Construction-Led Infrastructure Solutions Through Portfolio Approach
LIFE CYCLE SOLUTIONS Construction-Led Infrastructure Solutions Through Portfolio Approach Electric Pipeline & 59% Power 41% Industrial Revenues - Revenues - 2019 2019 Downstream Gas Distribution Pipeline Integrity Transmission Distribution Engineering Services Substation Industrial Services Renewabl
Slide 14: Strategically Focused, Operationally Diverse
REVENUE BREAKDOWN Strategically Focused, Operationally Diverse 82% of 2019 Revenues Estimated to Come From Utilities, Industrial and Communications Customers, Which Provide Visible and Growing Capital Programs 2019 Consolidated Revenue = $12.1 Billion* 2019 Revenue By Segment Est. 2019 Revenue By Cu
Slide 15: Large Portion of Revenues Visible and Consistent
BASE BUSINESS ACTIVITY Large Portion of Revenues Visible and Consistent 2016 ~78% of our revenues from base business activity(1) 2020E Expect ~90% of our revenues to come from base business activity Base Business Tends to Follow Industry Drivers and Customer Investment Trends, Which are Longer Term
Slide 16: Portfolio Approach & Diversity of Revenues Mitigates Risk
SUPERIOR RISK PROFILE Portfolio Approach & Diversity of Revenues Mitigates Risk Estimated Revenue by Geography(1) Estimated Revenue by Project Type(1) Estimated Revenue by Contract Type(1) Large Cost Plus Project Unit Price New 36% & Other Repair, Replace Construction 24% United States Canada & Upgr
Slide 17: Transition to Advanced Utility Model Has Driven Spending
E V O LV I N G W I T H C U S T O M E R S Transition to Advanced Utility Model Has Driven Spending Advanced Integrated Utility Model Transmission Distribution Generation Pipelines Top 25 Quanta Utility Customers in 2018(1) ($ in billions) $166 Gas Distribution Renewables Communications $99 • Heavy in
Slide 18: Consistency of Spend from Top Customers
R E P E ATA B L E & G R O W I N G S P E N D Consistency of Spend from Top Customers Driving Repeatable, Consistent Revenue Through Deep and Collaborative Customer Relationships Top 20 Customers Based on 2019 Top 20 Utility Customers Based on 2019 Revenues Excluding Larger Projects Revenues Excluding
Slide 19: Electric & Gas Utility Infrastructure Investment Large & Growing
UTILITY FOCUSED Electric & Gas Utility Infrastructure Investment Large & Growing 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 modernization • Regula
Slide 20: Utility Industry is Large, Attractive and Visible Addressable Market
UTILITY FOCUSED 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
Slide 21: Significant Opportunity With Our Clients
SELECT CUSTOMER PROOF POINTS Significant Opportunity With Our Clients Multi-Year, Medium-Term Modernization Initiatives Will Likely Last More Than a Decade $58B $35B 2020-2024 $11.6B-$12.4B $11.8B-$14.5B $37B-$40B 2020-2024 $65B-75B 2020-2023 2019-2022 2020-2024 2025-2029 • 73% allocated to • 2020-2
Slide 22: Aging Utility Workforce Contributes to Outsourcing Trend
POSITIVE OUTSOURCING TREND Aging Utility Workforce Contributes to Outsourcing Trend Outsourcing expected to increase across electric and gas distribution over the next five years • Tight labor market for lineman and other skilled employees • The average energy industry employee is estimated to be ov
Slide 23: Puerto Rico Electric T&D System Operation & Maintenance Agreement
T R A N S F O R M AT I V E O P P O R T U N I T Y Puerto Rico Electric T&D System Operation & Maintenance Agreement • 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 e
Slide 24: Key Contract Terms and Timeline
T R A N S F O R M AT I V E O P P O R T U N I T Y Key Contract Terms and Timeline Front-End O&M Services Period Transition Period (2021 – 2035) (2020 – 2021) • Preparatory work to • LUMA assumes responsibility for all in-scope operational matters enable full transition of operations to LUMA in • Fixe
Slide 25: Compelling and Complimentary Growth Opportunity
C O M M U N I C AT I O N S I N F R A S T R U C T U R E S E R V I C E S Compelling and Complimentary Growth Opportunity Goals Growth Strategies To be a leading communications infrastructure • Primarily organic growth and greenfield expansion solutions provider in the markets we serve • Select strateg
Slide 26: Uniquely Positioned for 5G – Overlap of Telecom & Electric Power Infrastructure
C O M M U N I C AT I O N S I N F R A S T R U C T U R E S E R V I C E S Uniquely Positioned for 5G – Overlap of Telecom & Electric Power Infrastructure Today’s 4G Network Future 5G Network We believe the density requirements of small cells for 5G deployment is likely to require wireless carriers to u
Slide 27: The Electrification & Connectivity of Everything
AT T R A C T I V E L O N G - T E R M T H E M E The Electrification & Connectivity of Everything 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 e
Slide 28: Pipeline and Industrial Infrastructure Services
S T R AT E G I C F O C U S O N B A S E B U S I N E S S Pipeline and Industrial Infrastructure Services Strategy Focus Services Steps Taken Results 2020E Pipeline & Industrial Gas Utility • Create a more sustainable • Organic expansion of gas Segment Revenues and consistent operation utility services
Slide 29: Pipeline and Industrial Infrastructure Services
S T R AT E G I C F O C U S O N B A S E B U S I N E S S Pipeline and Industrial Infrastructure Services Gas Utility Services Pipeline Integrity Services • As of 2019, the U.S. natural gas distribution system consisted of • There are 544,000 miles of hazardous liquids, gas transmission more than 2.2 m
Slide 30: Industrial Services Overview
C R I T I C A L PAT H & S P E C I A LT Y S O L U T I O N S Industrial Services Overview Representative Customers Projected North American Downstream Maintenance Spending 2018 – 2022: ~ $105 Billion Estimates as of August 2017 Gas Proc. 36% 14% Refinery 10% LNG 40% PetChem Source: Douglas-Westwood Do
Slide 31: Pipeline Infrastructure Investment & Ancillary Services Drivers
ENERGY DELIVERY Pipeline Infrastructure Investment & Ancillary Services Drivers Shale Gas & Tight Oil Plays Drive Tight Oil Drives U.S. Oil Production U.S. Natural Gas Production 2000-2050 (millions of barrels per day) • Need for pipeline and related infrastructure is primarily driven by the 2000-20
Slide 32: Balance Sheet Strength Provides Flexibility
S T R O N G F I N A N C I A L F O U N D AT I O N Balance Sheet Strength Provides Flexibility ($ in millions) 12/31/2016 12/31/2017 12/31/2018 12/31/2019 9/30/2020 Cash and Equivalents $ 112 $ 138 $ 79 $ 165 $ 217 Other Debt 10 4 34 21 17 2.9% Senior Notes due 10/1/30 -- -- -- -- 1,000 Term Debt -- -
Slide 33: Cash Flow Is Counter Cyclical
CASH FLOW IS COUNTER CYCLICAL Influences on Cash Flow Generation and Conversion • Quanta’s cash flow generation is counter to revenue growth primarily due to Change in Revenue vs Free Cash Flow(1)/Adjusted EBITDA(2) working capital demands and to a lesser extent, capex investment For the Years Endin
Slide 34: Flexible & Strategic Capital Allocation – A Competitive Advantage
OPPORTUNISTIC & DISCIPLINED APPROACH Flexible & Strategic Capital Allocation – A Competitive Advantage Capital Deployment Preference 2015 – 2019 Sources & Uses of Cash (Amounts in millions) • Working Capital • Capital Expenditures $4,411 $4,349 • Acquisitions 1% $44 Investments • Investments • Retur
Slide 35: Financial Goals for Growing Long-Term Shareholder Value
M U LT I - Y E A R P R O F I TA B L E G R O W T H 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 Performan
Slide 36: Corporate Sustainability and Responsibility
Corporate Sustainability and Responsibility 2019 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 37: People
C O R P O R AT E S U S TA I N A B I L I T Y & R E S P O N S I B I L I T Y People 3 7
Slide 38: Planet
C O R P O R AT E S U S TA I N A B I L I T Y & R E S P O N S I B I L I T Y Planet 3 8
Slide 39: 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 3 9
Slide 40: Appendix: Reconciliation Tables & Forward-Looking Statement Disclaimers
Appendix Reconciliation Tables & Forward-Looking Statement Disclaimers
Slide 41: Reconciliation of Adjusted Net Income from Continuing Operations
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock For the Years Ended December 31, (in thousands, except per share information) (Unaudited) As of Oct. 29, 2020 Estimated Guidance Range 2010 2015 2016 2017 2018 2019 2020 2020 Reconciliation of adjusted net
Slide 42: Reconciliation of EBITDA and Adjusted EBITDA
Reconciliation of EBITDA and Adjusted EBITDA For the Years Ended December 31, (in thousands, except per share information) (Unaudited) As of Oct. 29, 2020 Estimated Guidance Range 2010 2013 2014 2015 2016 2017 2018 2019 2020 2020 Net income from continuing operations attributable to common stock (as
Slide 43: 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 44: Reconciliation of Free Cash Flow Conversion Scenario
Reconciliation of Free Cash Flow Conversion Scenario Revenue Growth impact on Free Cash Flow $MMs 2013 2019 Change Revenue, reported $6,412 $12,112 $5,701 NWC $750 $1,478 $728 Revenue @ 3% growth per year $6,412 $7,656 $1,244 Implied NWC $750 $934 $185 Excess NWC to support Revenue Growth $544 Cumul
Slide 45: 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 46: Cautionary Statement About Forward-Looking Statements
Cautionary Statement About Forward-Looking Statements Although Quanta’s management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements can be affected by inaccurate assu
Slide 47: Cautionary Statement About Forward-Looking Statements
Cautionary Statement About Forward-Looking Statements • The failure of existing or potential legislative actions and initiatives to result in increased demand for our services; • The future development of natural resources; • Fluctuations of prices of certain materials used in Quanta’s or its custom
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