UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022.~~2023.


or
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
						For the transition period from to .


Commission File Number:			001-13831

Quanta Services, Inc.

(Exact name of registrant as specified in its charter)


Delaware			74-2851603
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

~~2800 Post Oak Boulevard, Suite 2600~~2727 North Loop West

Houston, Texas ~~77056~~77008

(Address of principal executive offices, including zip code)

(713) 629-7600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

PWR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~August 2, 2022,~~July 28, 2023, the number of outstanding shares of Common Stock of the registrant was ~~143,022,957.~~145,198,975.

QUANTA SERVICES, INC. AND SUBSIDIARIES

~~INDEX~~TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	65
	Condensed Consolidated Statements of Operations	76
	Condensed Consolidated Statements of Comprehensive Income (Loss)	87
	Condensed Consolidated Statements of Cash Flows	98
	Condensed Consolidated Statements of Equity	109
	Notes to Condensed Consolidated Financial Statements	1211
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4135
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	6148
ITEM 4.	Controls and Procedures	6148

	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	6350
ITEM 1A.	Risk Factors	6350
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6451
ITEM 3.	Defaults Upon Senior Securities	6451
ITEM 4.	Mine Safety Disclosures	6451
ITEM 5.	Other Information	6451
ITEM 6.	Exhibits	6553
Signature		6654

Cautionary Statement About Forward-Looking Statements and Information

This Quarterly Report on Form 10-Q (Quarterly Report) of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) includes forward-looking statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “project,” “forecast,” “may,” “will,” “should,” “could,” “expect,” “believe,” “plan,” “intend” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

•Projected revenues, net income, earnings per share, margins, cash flows, liquidity, weighted average shares outstanding, capital expenditures, interest rates and tax rates, as well as other projections of operating results and GAAP (as defined ~~below)~~herein) and non-GAAP financial results, including EBITDA (as defined herein), adjusted EBITDA (as defined herein) and backlog;

•Expectations regarding our business or financial outlook;

•Expectations regarding opportunities, technological developments, competitive positioning, future economic and regulatory conditions and other trends in particular markets or industries, including with respect to our increased operations in the renewable energy market ~~after our acquisition of Blattner (as defined below)~~ and the transition to a ~~carbon-neutral~~reduced-carbon economy;

•Expectations regarding the pandemic associated with the novel coronavirus disease that began in 2019 (COVID-19), including the continued and potential impact of the COVID-19 pandemic and of governmental and customer responses to the pandemic on our business, operations, supply chain, personnel, financial condition, results of operations, cash flows and liquidity;

•Expectations regarding our plans and strategies;

•The business plans or financial condition of our customers, including with respect to the ~~COVID-19 pandemic and the~~ transition to a ~~carbon-neutral~~reduced-carbon economy;

•~~The potential impact of commodity prices and production volumes on our business, financial condition, results of operations, cash flows and demand for our services;~~

•The potential benefits from, and future financial and operational performance of, acquired businesses and our ~~investments, including Blattner and our equity interests in LUMA and Starry (each as defined below);~~investments;

•Beliefs and assumptions about the collectability of receivables;

•The expected value of contracts or intended contracts with customers, as well as the expected timing, scope, services, term or results of any awarded or expected projects;

•Possible recovery of pending or contemplated insurance claims, change orders and claims asserted against customers or third parties;

•The development of and opportunities with respect to future projects, including renewable energy projects and other projects designed to support transition to a ~~carbon-neutral~~reduced-carbon economy, electrical grid modernization, upgrade and hardening projects and larger transmission and pipeline projects;

•Expectations regarding the future availability and price of materials and equipment necessary for the performance of our business;

•The expected impact of ~~inflation;~~global and domestic economic conditions on our business, financial condition, results of operations, cash flows, liquidity and demand for our services, including inflation, interest rates, recessionary economic conditions and commodity prices and production volumes;

•The expected impact of changes and potential changes in ~~climate;~~climate and the physical and transition risks associated with climate change and the transition to a reduced-carbon economy;

•Future capital allocation initiatives, including the amount and timing of, and strategies with respect to, any future acquisitions, investments, cash dividends, repurchases of our equity or debt securities or repayments of other outstanding debt;

•The expected impact of existing or potential legislation or regulation;

•Potential opportunities that may be indicated by bidding activity or similar discussions with customers;

•The future demand for, availability of and costs related to labor resources in the industries we serve;

•The expected recognition and realization of our remaining performance obligations or backlog;

•~~The expected~~Expectations regarding the outcome of pending or threatened legal proceedings, as well as the collection of amounts awarded in legal proceedings; and

•Expectations with respect to our ability to reduce our debt and maintain our current credit ~~ratings; and~~

•~~Possible recovery of pending or contemplated insurance claims, change orders and claims asserted against customers or third parties.~~ratings.

These forward-looking statements are not guarantees of future performance; rather they involve or rely on a number of risks, uncertainties, and assumptions that are difficult to predict or are beyond our control and reflect management’s beliefs and assumptions based on information available at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements and that any or

all of our forward-looking statements may turn out to be inaccurate or incorrect. These statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties, including the following:

•Market, industry, economic, financial or political conditions that are outside of our control, including economic, energy, infrastructure and environmental policies and plans that are adopted or proposed by the U.S. federal and

state governments or other governments in territories or countries in which we operate, inflation, interest rates, recessionary economic conditions, deterioration of global or specific trade relationships, and geopolitical conflicts and political ~~unrest, and inflation;~~unrest;

•Quarterly variations in our operating and financial results, liquidity, financial condition, cash flows, capital requirements, and reinvestment ~~opportunities, including the ongoing and potential impact to our business operations, workforce and supply chains resulting from the COVID-19 pandemic and governmental responses thereto;~~

•The overall severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of business and governmental responses thereto on our operations, personnel and supply chains, and on commercial activity and demand across our business and our customers’ businesses, as well as our inability to predict the extent to which the COVID-19 pandemic will adversely impact our business, financial performance, results of operations, financial position, liquidity, cash flows, the price of our securities and the achievement of our strategic objectives;opportunities;

•Trends and growth opportunities in relevant markets, including our ability to obtain future project awards;

•Delays, deferrals, reductions in scope or cancellations of anticipated, pending or existing projects as a result of, among other things, ~~the COVID-19 pandemic,~~ supply chain disruptions and other logistical challenges, weather, regulatory or permitting issues, environmental processes, project performance issues, claimed force majeure events, protests or other political activity, legal challenges, inflationary pressure, reductions or eliminations in governmental funding or customer capital constraints;

•The effect of commodity prices and commodity production volumes, which have been and may continue to be affected by inflationary pressure, on our operations and growth opportunities and on our customers’ capital programs and demand for our services;

•The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts;

•Events arising from operational hazards, including, among others, wildfires and explosions, that can arise due to the nature of the services we provide and the conditions in which we operate and can be due to failure of infrastructure on which we have performed services and result in significant liabilities that may be exacerbated in certain geographies and locations;

•Unexpected costs, liabilities, fines or penalties that may arise from legal proceedings, indemnity obligations, reimbursement obligations associated with letters of credit or bonds, multiemployer pension plans ~~(e.g., underfunding of liabilities, termination or withdrawal liability)~~ or other claims or actions asserted against us, including amounts that are not covered by, or are in excess of the coverage under, our third-party insurance;

•Potential unavailability or cancellation of third-party insurance coverage, as well as the exclusion of coverage for certain losses, potential increases in premiums for coverage deemed beneficial to us, or the unavailability of coverage deemed beneficial to us at reasonable and competitive rates (e.g., coverage for wildfire events);

•Damage to our brands or reputation, as well as potential costs, liabilities, fines or penalties, arising as a result of cyber-security breaches, environmental and occupational health and safety matters, corporate scandal, failure to successfully perform or negative publicity regarding a high-profile project, involvement in a catastrophic event (e.g., fire, explosion) or other negative incidents;

•Disruptions in, or failure to adequately protect, our information technology systems;

•Our dependence on suppliers, subcontractors, equipment manufacturers and other third parties and the impact of, among other things, inflationary ~~pressure;~~pressure and regulatory, supply chain and logistical ~~challenges; and the COVID-19 pandemic~~challenges on these third parties;

•Estimates and assumptions related to our financial results, remaining performance obligations and backlog;

•Our inability to attract, the potential shortage of, and increased costs with respect to skilled employees, as well as our ability to retain and attract key personnel and qualified employees;

•Our dependence on fixed price contracts and the potential that we incur losses with respect to these contracts;

•Cancellation provisions within our contracts ~~including as a~~and the risk that contracts expire and are not renewed or are replaced on less favorable terms;

•Our inability or failure to comply with the terms of our contracts, which may result ~~of inaccurate estimates of project~~in additional costs, ~~or inability~~unexcused delays, warranty claims, failure to meet ~~project schedule requirements~~performance guarantees, damages or ~~achieve guaranteed performance or quality standards for a project;~~contract terminations;

•Adverse weather conditions, natural disasters and other emergencies, including wildfires, pandemics, ~~(including the ongoing COVID-19 pandemic),~~ hurricanes, tropical storms, floods, debris flows, earthquakes and other geological- and weather-related hazards, as well as the impact of climate change;

•Our ability to generate internal growth;

•Competition in our business, including our ability to effectively compete for new projects and market ~~share;~~

•~~The future development of natural resources;~~share, as well as technological advancements and market developments that could reduce demand for our services;

•The failure of existing or potential legislative actions and initiatives to result in increased demand for our ~~services;~~services or budgetary or other constraints that may reduce or eliminate tax incentives or government funding for projects, including renewable energy projects, which may result in project delays or cancellations;

•The unavailability of, or increased prices for, materials, equipment and ~~fuel~~consumables (such as fuel) used in our and our customers’ businesses, including as a result of inflation, supply chain disruptions, governmental regulations on sourcing, the imposition of tariffs, duties, taxes or other assessments, and other changes in U.S. trade relationships with foreign countries;

•
~~Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are replaced on less favorable terms;~~

•Loss of customers with whom we have long-standing or significant relationships;

•The potential that our participation in joint ventures or similar structures exposes us to liability or harm to our reputation as a result of acts or omissions by our partners;

•Our inability or failure to comply with the terms of our contracts, which may result in additional costs, unexcused delays, warranty claims, failure to meet performance guarantees, damages or contract terminations;

•The inability or refusal of our customers or third-party contractors to pay for services, which could result in our inability to collect our outstanding receivables, failure to recover amounts billed to, or avoidance of certain payments received from, customers in bankruptcy or failure to recover on change orders or contract claims;

•~~Budgetary or other constraints that may reduce or eliminate tax incentives or government funding for projects, including renewable energy projects, which may result in project delays or cancellations;~~

•~~Our inability to successfully complete our remaining performance obligations or realize our backlog;~~

•~~Technological advancements and market developments that could reduce demand for our services;~~

•Risks associated with operating in international markets and U.S. territories, including instability of governments, significant currency exchange fluctuations, and compliance with unfamiliar legal and labor systems and cultural practices, the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws, and complex U.S. and foreign tax regulations and international treaties;

•Our inability to successfully identify, complete, integrate and realize synergies from acquisitions, including the inability to retain key personnel from acquired businesses;

•The potential adverse impact of acquisitions and investments, including the potential increase in risks already existing in our operations, poor performance or decline in value of acquired businesses or investments and unexpected costs or liabilities that may arise from acquisitions or investments;

•The adverse impact of impairments of goodwill, other intangible assets, receivables, long-lived assets or investments;

•Difficulties arising from our decentralized management structure;

•The impact of the unionized portion of our workforce on our ~~operations, including labor stoppages or interruptions due to strikes or lockouts;~~operations;

•An inability to access sufficient funding to finance desired growth and operations, including our ability to access capital markets on favorable terms, as well as fluctuations in the price and trading volume of our common stock, debt covenant compliance, interest rate fluctuations, a downgrade in our credit ratings and other factors affecting our financing and investing activities;

•Our ability to obtain bonds, letters of credit and other project security;

•Risks related to the implementation of new information technology systems;

•New or changed tax laws, treaties or ~~regulations;~~

•~~Inability~~regulations or the inability to realize deferred tax assets;

•~~Significant fluctuations in foreign currency exchange rates;~~ and

•The other risks and uncertainties described elsewhere herein, including in Item 1A. Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2021 (2021~~2022 (2022 Annual Report), and as may be detailed from time to time in our other public filings with the U.S. Securities and Exchange Commission (SEC).

All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this report. Although forward-looking statements reflect our good faith beliefs at the time they are made, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. In addition, we do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	150,653	$	229,097	Cash and cash equivalents	$	361,966	$	428,505
Accounts receivable, net of allowances of $49,707 and $49,749		3,518,576		3,400,318
Accounts receivable, net						Accounts receivable, net	4,075,206		3,674,525
Contract assets	Contract assets	1,001,733		803,453		Contract assets	1,357,233		1,080,206
Inventories	Inventories	96,306		84,659		Inventories	156,505		103,265
Prepaid expenses and other current assets	Prepaid expenses and other current assets	253,592		215,050		Prepaid expenses and other current assets	371,482		249,569

Total current assets	Total current assets	5,020,860		4,732,577		Total current assets	6,322,392		5,536,070
Property and equipment, net of accumulated depreciation of $1,599,037 and $1,503,498		2,024,238		1,919,697
Property and equipment, net						Property and equipment, net	2,233,610		2,030,464
Operating lease right-of-use assets	Operating lease right-of-use assets	226,494		240,605		Operating lease right-of-use assets	241,814		229,691
Other assets, net	Other assets, net	615,119		632,244		Other assets, net	633,569		622,736
Other intangible assets, net of accumulated amortization of $902,028 and $682,498		1,575,714		1,801,180
Other intangible assets, net						Other intangible assets, net	1,424,366		1,458,631
Goodwill	Goodwill	3,587,220		3,528,886		Goodwill	3,885,099		3,586,745

Total assets	Total assets	$	13,049,645	$	12,855,189	Total assets	$	14,740,850	$	13,464,337
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Current maturities of long-term debt and short-term debt		$	27,162	$	29,166
Current maturities of long-term debt						Current maturities of long-term debt	$	41,249	$	37,495
Current portion of operating lease liabilities	Current portion of operating lease liabilities	74,728		78,251		Current portion of operating lease liabilities	76,648		74,052
Accounts payable and accrued expenses	Accounts payable and accrued expenses	2,366,337		2,254,671		Accounts payable and accrued expenses	2,516,908		2,153,129
Contract liabilities	Contract liabilities	751,326		802,872		Contract liabilities	1,128,864		1,141,518

Total current liabilities	Total current liabilities	3,219,553		3,164,960		Total current liabilities	3,763,669		3,406,194
Long-term debt, net of current maturities	Long-term debt, net of current maturities	3,871,294		3,724,474		Long-term debt, net of current maturities	4,216,522		3,692,432
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	163,693		170,427		Operating lease liabilities, net of current portion	181,705		171,512
Deferred income taxes	Deferred income taxes	193,172		191,098		Deferred income taxes	254,953		227,861
Insurance and other non-current liabilities	Insurance and other non-current liabilities	462,158		487,309		Insurance and other non-current liabilities	595,022		567,519

Total liabilities	Total liabilities	7,909,870		7,738,268		Total liabilities	9,011,871		8,065,518
Commitments and Contingencies	Commitments and Contingencies	0		0		Commitments and Contingencies
Equity:	Equity:					Equity:
Common stock, $0.00001 par value, 600,000,000 shares authorized, 170,495,056 and 168,546,513 shares issued, and 143,080,328 and 142,633,934 shares outstanding		2		2
Common stock, $0.00001 par value, 600,000,000 shares authorized, 173,586,323 and 170,638,525 shares issued, and 145,196,458 and 142,930,598 shares outstanding						Common stock, $0.00001 par value, 600,000,000 shares authorized, 173,586,323 and 170,638,525 shares issued, and 145,196,458 and 142,930,598 shares outstanding	2		2
Additional paid-in capital	Additional paid-in capital	2,665,286		2,615,410		Additional paid-in capital	2,903,628		2,718,988
Retained earnings	Retained earnings	3,866,762		3,714,843		Retained earnings	4,400,164		4,163,212
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(255,309)		(237,689)		Accumulated other comprehensive loss	(285,660)		(310,677)
Treasury stock, 27,414,728 and 25,912,579 common shares		(1,149,722)		(980,265)
Treasury stock, 28,389,865 and 27,707,927 common shares						Treasury stock, 28,389,865 and 27,707,927 common shares	(1,297,201)		(1,188,061)
Total stockholders’ equity	Total stockholders’ equity	5,127,019		5,112,301		Total stockholders’ equity	5,720,933		5,383,464
Non-controlling interests	Non-controlling interests	12,756		4,620		Non-controlling interests	8,046		15,355
Total equity	Total equity	5,139,775		5,116,921		Total equity	5,728,979		5,398,819
Total liabilities and equity	Total liabilities and equity	$	13,049,645	$	12,855,189	Total liabilities and equity	$	14,740,850	$	13,464,337

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues	$	4,232,003	$	2,999,816	$	8,197,528	$	5,703,397	Revenues	$	5,048,610	$	4,232,003	$	9,477,436	$	8,197,528
Cost of services (including depreciation)		3,607,413		2,552,105		7,024,767		4,882,796
Cost of services										Cost of services	4,324,511		3,607,413		8,180,142		7,024,767
Gross profit	Gross profit	624,590		447,711		1,172,761		820,601		Gross profit	724,099		624,590		1,297,294		1,172,761
Equity in earnings of integral unconsolidated affiliates	Equity in earnings of integral unconsolidated affiliates	18,565		7,450		33,717		12,633		Equity in earnings of integral unconsolidated affiliates	9,370		18,565		18,990		33,717
Selling, general and administrative expenses	Selling, general and administrative expenses	(323,245)		(270,110)		(648,132)		(513,462)		Selling, general and administrative expenses	(384,171)		(323,245)		(768,723)		(648,132)
Amortization of intangible assets	Amortization of intangible assets	(107,945)		(21,291)		(223,696)		(42,646)		Amortization of intangible assets	(70,025)		(107,945)		(142,428)		(223,696)
Asset impairment charges	Asset impairment charges	(2,800)		(2,319)		(2,800)		(2,319)		Asset impairment charges	—		(2,800)		—		(2,800)
Change in fair value of contingent consideration liabilities	Change in fair value of contingent consideration liabilities	(809)		210		(5,978)		573		Change in fair value of contingent consideration liabilities	—		(809)		—		(5,978)
Operating income	Operating income	208,356		161,651		325,872		275,380		Operating income	279,273		208,356		405,133		325,872
Interest and other financing expenses	Interest and other financing expenses	(28,639)		(13,109)		(53,367)		(25,584)		Interest and other financing expenses	(48,189)		(28,639)		(89,882)		(53,367)
Interest income	Interest income	222		2,909		291		3,026		Interest income	1,448		222		2,964		291
Other income (expense), net	Other income (expense), net	(42,527)		8,471		(43,800)		12,143		Other income (expense), net	3,419		(42,527)		11,285		(43,800)
Income before income taxes	Income before income taxes	137,412		159,922		228,996		264,965		Income before income taxes	235,951		137,412		329,500		228,996
Provision for income taxes	Provision for income taxes	41,252		40,951		47,808		54,675		Provision for income taxes	69,367		41,252		65,946		47,808

Net income	Net income	96,160		118,971		181,188		210,290		Net income	166,584		96,160		263,554		181,188
Less: Net income attributable to non-controlling interests	Less: Net income attributable to non-controlling interests	8,140		1,938		8,527		3,496		Less: Net income attributable to non-controlling interests	685		8,140		2,609		8,527
Net income attributable to common stock	Net income attributable to common stock	$	88,020	$	117,033	$	172,661	$	206,794	Net income attributable to common stock	$	165,899	$	88,020	$	260,945	$	172,661

Earnings per share attributable to common stock:	Earnings per share attributable to common stock:									Earnings per share attributable to common stock:
Basic	Basic	$	0.61	$	0.83	$	1.20	$	1.48	Basic	$	1.14	$	0.61	$	1.80	$	1.20
Diluted	Diluted	$	0.59	$	0.81	$	1.16	$	1.43	Diluted	$	1.12	$	0.59	$	1.75	$	1.16

Shares used in computing earnings per share:	Shares used in computing earnings per share:									Shares used in computing earnings per share:
Weighted average basic shares outstanding	Weighted average basic shares outstanding	143,851		140,276		143,697		140,199		Weighted average basic shares outstanding	145,422		143,851		144,947		143,697
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding	148,211		144,607		148,327		144,523		Weighted average diluted shares outstanding	148,773		148,211		148,717		148,327

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income	Net income	$	96,160	$	118,971	$	181,188	$	210,290	Net income	$	166,584	$	96,160	$	263,554	$	181,188
Other comprehensive income (loss), net of taxes:	Other comprehensive income (loss), net of taxes:									Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of tax of $0, $0, $0, and $0		(31,087)		7,888		(17,559)		16,420
Other income (loss), net of tax of $35, $1, $(12), and $3		192		7		(61)		14
Foreign currency translation adjustment gain (loss)										Foreign currency translation adjustment gain (loss)	23,917		(31,087)		24,226		(17,559)
Other income (loss)										Other income (loss)	—		192		791		(61)
Other comprehensive income (loss), net of taxes	Other comprehensive income (loss), net of taxes	(30,895)		7,895		(17,620)		16,434		Other comprehensive income (loss), net of taxes	23,917		(30,895)		25,017		(17,620)
Comprehensive income	Comprehensive income	65,265		126,866		163,568		226,724		Comprehensive income	190,501		65,265		288,571		163,568
Less: Comprehensive income attributable to non-controlling interests	Less: Comprehensive income attributable to non-controlling interests	8,140		1,938		8,527		3,496		Less: Comprehensive income attributable to non-controlling interests	685		8,140		2,609		8,527
Total comprehensive income attributable to common stock		$	57,125	$	124,928	$	155,041	$	223,228
Comprehensive income attributable to common stock										Comprehensive income attributable to common stock	$	189,816	$	57,125	$	285,962	$	155,041

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended
	June 30,
		2023		2022
Cash Flows from Operating Activities:
Net income		$	263,554	$	181,188
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation		158,258		144,913
Amortization of intangible assets		142,428		223,696

Equity in earnings of unconsolidated affiliates, net of distributions		22,830		(15,783)
Unrealized loss from mark-to-market adjustment on investment		—		50,047
Gain on sale of property and equipment		(11,900)		(3,456)
Non-cash stock-based compensation		62,058		51,082
Other non-cash adjustments, net		9,334		7,797
Changes in assets and liabilities, net of non-cash transactions:
Accounts and notes receivable		(363,481)		(163,942)
Contract assets		(262,921)		(208,260)
Prepaid expenses and other current assets		(135,849)		(55,869)
Accounts payable and accrued expenses and other non-current liabilities		300,652		57,901
Contract liabilities		(13,625)		(50,404)
Other assets and liabilities, net		(5,516)		(15,089)
Net cash provided by operating activities		165,822		203,821
Cash Flows from Investing Activities:
Capital expenditures		(185,597)		(231,511)
Proceeds from sale of and insurance settlements related to property and equipment		34,963		25,386
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired		(452,252)		(4,809)

Investments in unconsolidated affiliates and other		(5,626)		(16,653)
Proceeds from the sale or settlement of certain investments		42,277		16,905
Other, net		(1,132)		(336)
Net cash used in investing activities		(567,367)		(211,018)
Cash Flows from Financing Activities:
Borrowings under credit facility and commercial paper program		9,885,534		2,889,372
Payments under credit facility and commercial paper program		(9,393,812)		(2,747,249)


Payments related to tax withholding for share-based compensation		(110,764)		(76,215)
Payments of dividends		(24,499)		(20,930)
Repurchase of common stock		—		(94,364)
Other, net		(20,165)		(21,530)
Net cash provided by (used in) financing activities		336,294		(70,916)






Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		349		(408)

Net decrease in cash, cash equivalents and restricted cash		(64,902)		(78,521)
Cash, cash equivalents and restricted cash, beginning of period		433,214		231,887
Cash, cash equivalents and restricted cash, end of period		$	368,312	$	153,366

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~EQUITY

(In ~~thousands)~~thousands, except share data)

(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Cash Flows from Operating Activities:
Net income $ 96,160 $ 118,971 $ 181,188 $ 210,290
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation 73,959 62,757 144,913 124,864
Amortization of intangible assets 107,945 21,291 223,696 42,646
Asset impairment charges 2,800 2,319 2,800 2,319
Change in fair value of contingent consideration liabilities 809 (210) 5,978 (573)
Equity in (earnings) losses of unconsolidated affiliates, net of distributions 4,707 (8,108) (15,783) (13,976)
Amortization of deferred financing costs 1,460 844 2,918 1,690
Gain on sale of property and equipment (1,263) (4,872) (3,456) (9,854)
Gain on sale of investments — — (6,696) —
Unrealized loss from mark-to-market adjustment on investment 41,654 — 50,047 —
Increase (decrease) in provision for credit losses (428) 23,877 (295) 23,920
Deferred income tax expense (benefit) 8,493 14,253 395 16,747
Non-cash stock-based compensation 28,090 23,923 51,082 42,610
Foreign currency (gain) loss 1,179 (1,054) 2,760 (1,630)
Payments for contingent consideration liabilities — — (63) —
Changes in operating assets and liabilities, net of non-cash transactions (246,834) (65,043) (435,663) (124,492)
Net cash provided by operating activities 118,731 188,948 203,821 314,561
Cash Flows from Investing Activities:
Capital expenditures (121,574) (74,898) (231,511) (158,384)
Proceeds from sale of property and equipment 15,594 11,447 24,404 18,670
Proceeds from insurance settlements related to property and equipment 791 273 982 280
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired (4,809) (35,334) (4,809) (68,112)
Investments in unconsolidated affiliates and other (8,334) (342) (16,653) (114,324)
Cash received from investments 445 2,807 16,905 3,017
Cash paid for intangible assets (62) (324) (336) (324)
Net cash used in investing activities (117,949) (96,371) (211,018) (319,177)
Cash Flows from Financing Activities:
Borrowings under credit facility 1,520,221 1,055,583 2,889,372 1,884,079
Payments under credit facility (1,446,103) (1,058,022) (2,747,249) (1,714,840)
Payments on other long-term debt (1,902) (757) (3,981) (1,614)
Net borrowings (repayments) of short-term debt 107 — (15,596) (4,247)
Deferred financing costs — — (48) —
Payments for contingent consideration liabilities — — (1,514) (263)
Contributions received from (distributions to) non-controlling interests, net 147 (4,121) (391) (5,250)
Payments related to tax withholding for share-based compensation (64,963) (36,572) (76,215) (60,493)
Payments of dividends (10,088) (8,415) (20,930) (17,213)
Repurchase of common stock (84,885) (29,449) (94,364) (48,923)
Net cash provided by (used in) financing activities (87,466) (81,753) (70,916) 31,236
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (786) 1,276 (408) 1,287
Net increase (decrease) in cash, cash equivalents and restricted cash (87,470) 12,100 (78,521) 27,907
Cash, cash equivalents and restricted cash, beginning of period 240,836 202,615 231,887 186,808
Cash, cash equivalents and restricted cash, end of period $ 153,366 $ 214,715 $ 153,366 $ 214,715

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~


								Accumulated
				Additional				Other				Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total
	Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity
Balance, December 31, 2022	142,930,598	$	2	$	2,718,988	$	4,163,212	$	(310,677)	$	(1,188,061)	$	5,383,464	$	15,355	$	5,398,819
Other comprehensive income	—	—		—		—		1,100		—		1,100		—		1,100
Acquisitions	1,018,946			123,503						—		123,503		—		123,503
Stock-based compensation activity	1,210,615	—		26,650		—		—		(104,247)		(77,597)		—		(77,597)

Dividends declared ($0.08 per share)	—	—		—		(12,100)		—		—		(12,100)		—		(12,100)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(8,741)		(8,741)

Net income	—	—		—		95,046		—		—		95,046		1,924		96,970
Balance, March 31, 2023	145,160,159	$	2	$	2,869,141	$	4,246,158	$	(309,577)	$	(1,292,308)	$	5,513,416	$	8,538	$	5,521,954
Other comprehensive income	—	—		—		—		23,917		—		23,917		—		23,917
Stock-based compensation activity	36,299	—		34,487		—		—		(4,893)		29,594		—		29,594

Dividends declared ($0.08 per share)	—	—		—		(11,893)		—		—		(11,893)		—		(11,893)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(1,177)		(1,177)

Net income	—	—		—		165,899		—		—		165,899		685		166,584
Balance, June 30, 2023	145,196,458	$	2	$	2,903,628	$	4,400,164	$	(285,660)	$	(1,297,201)	$	5,720,933	$	8,046	$	5,728,979

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)

Accumulated
Additional Other Total Non-
Common Stock Paid-In Retained Comprehensive Treasury Stockholders’ Controlling Total
Shares Amount Capital Earnings Income (Loss) Stock Equity Interests Equity
Balance, December 31, 2021 142,633,934 $ 2 $ 2,615,410 $ 3,714,843 $ (237,689) $ (980,265) $ 5,112,301 $ 4,620 $ 5,116,921
Other comprehensive income, net of taxes — — — — 13,275 — 13,275 — 13,275
Stock-based compensation activity 1,216,468 — 21,830 — — (73,643) (51,813) — (51,813)
Common stock repurchases (84,798) — — — — (10,426) (10,426) — (10,426)
Dividends declared ($0.07 per share) — — — (10,459) — — (10,459) — (10,459)
Distributions to non-controlling interests — — — — — — — (538) (538)
Net income — — — 84,641 — — 84,641 387 85,028
Balance, March 31, 2022 143,765,604 $ 2 $ 2,637,240 $ 3,789,025 $ (224,414) $ (1,064,334) $ 5,137,519 $ 4,469 $ 5,141,988
Other comprehensive loss, net of taxes — — — — (30,895) — (30,895) — (30,895)
Stock-based compensation activity 46,105 — 28,046 — — (504) 27,542 — 27,542
Common stock repurchases (731,381) — — — — (84,884) (84,884) — (84,884)
Dividends declared ($0.07 per share) — — — (10,283) — — (10,283) — (10,283)
Distributions to non-controlling interests — — — — — — — (80) (80)
Contribution from non-controlling interest — — — — — — — 227 227
Net income — — — 88,020 — — 88,020 8,140 96,160
Balance, June 30, 2022 143,080,328 $ 2 $ 2,665,286 $ 3,866,762 $ (255,309) $ (1,149,722) $ 5,127,019 $ 12,756 $ 5,139,775

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(In thousands, except share data)~~

~~(Unaudited)~~


									Accumulated																		Accumulated
					Additional				Other				Total		Non-								Additional				Other				Total		Non-
		Common Stock			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total			Common Stock			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total
		Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity			Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity
Balance, December 31, 2020		138,300,191	$	2	$	2,170,026	$	3,264,967	$	(232,997)	$	(857,817)	$	4,344,181	$	4,791	$	4,348,972
Other comprehensive income, net of taxes		—	—		—		—		8,539		—		8,539		—		8,539
Balance, December 31, 2021																			Balance, December 31, 2021	142,633,934	$	2	$	2,615,410	$	3,714,843	$	(237,689)	$	(980,265)	$	5,112,301	$	4,620	$	5,116,921
Other comprehensive income																			Other comprehensive income	—	—		—		—		13,275		—		13,275		—		13,275
Stock-based compensation activity	Stock-based compensation activity	1,368,739	—		13,702		—		—		(55,101)		(41,399)		—		(41,399)		Stock-based compensation activity	1,216,468	—		21,830		—		—		(73,643)		(51,813)		—		(51,813)
Common stock repurchases	Common stock repurchases	(222,081)	—		—		—				(17,710)		(17,710)		—		(17,710)		Common stock repurchases	(84,798)	—		—		—		—		(10,426)		(10,426)		—		(10,426)
Dividends declared ($0.06 per share)		—	—		—		(8,429)		—		—		(8,429)		—		(8,429)
Dividends declared ($0.07 per share)																			Dividends declared ($0.07 per share)	—	—		—		(10,459)		—		—		(10,459)		—		(10,459)
Distributions to non-controlling interests	Distributions to non-controlling interests	—	—		—		—		—		—		—		(1,129)		(1,129)		Distributions to non-controlling interests	—	—		—		—		—		—		—		(538)		(538)
Net income	Net income	—	—		—		89,761		—		—		89,761		1,558		91,319		Net income	—	—		—		84,641		—		—		84,641		387		85,028
Balance, March 31, 2021		139,446,849	$	2	$	2,183,728	$	3,346,299	$	(224,458)	$	(930,628)	$	4,374,943	$	5,220	$	4,380,163
Other comprehensive income, net of taxes		—	—		—		—		7,895		—		7,895		—		7,895
Balance, March 31, 2022																			Balance, March 31, 2022	143,765,604	$	2	$	2,637,240	$	3,789,025	$	(224,414)	$	(1,064,334)	$	5,137,519	$	4,469	$	5,141,988
Other comprehensive loss																			Other comprehensive loss	—	—		—		—		(30,895)		—		(30,895)		—		(30,895)
Stock-based compensation activity	Stock-based compensation activity	64,600	—		25,177		—		—		(216)		24,961		—		24,961		Stock-based compensation activity	46,105	—		28,046		—		—		(504)		27,542		—		27,542
Common stock repurchases	Common stock repurchases	(313,725)	—		—		—		—		(29,450)		(29,450)		—		(29,450)		Common stock repurchases	(731,381)	—		—		—		—		(84,884)		(84,884)		—		(84,884)
Dividends declared ($0.06 per share)		—	—		—		(8,650)		—		—		(8,650)		—		(8,650)
Dividends declared ($0.07 per share)																			Dividends declared ($0.07 per share)	—	—		—		(10,283)		—		—		(10,283)		—		(10,283)
Distributions to non-controlling interests	Distributions to non-controlling interests	—	—		—		—		—		—		—		(4,121)		(4,121)		Distributions to non-controlling interests	—	—		—		—		—		—		—		(80)		(80)
Other	Other	—	—		—		—		—		—		—		25		25		Other	—	—		—		—		—		—		—		227		227
Net income	Net income	—	—		—		117,033		—		—		117,033		1,938		118,971		Net income	—	—		—		88,020		—		—		88,020		8,140		96,160
Balance, June 30, 2021		139,197,724	$	2	$	2,208,905	$	3,454,682	$	(216,563)	$	(960,294)	$	4,486,732	$	3,062	$	4,489,794
Balance, June 30, 2022																			Balance, June 30, 2022	143,080,328	$	2	$	2,665,286	$	3,866,762	$	(255,309)	$	(1,149,722)	$	5,127,019	$	12,756	$	5,139,775

The accompanying notes are an integral part of these condensed consolidated financial statements.

1110

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

TABLE OF CONTENTS

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

1. BUSINESS AND ~~ORGANIZATION:~~ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES:

Quanta Services, Inc. (together with its subsidiaries, Quanta) is a leading provider of ~~specialty contracting services, delivering~~ comprehensive infrastructure solutions for the electric and gas utility, renewable energy, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. Quanta reports its results under 3 reportable segments: (1) Electric Power Infrastructure Solutions, (2) Renewable Energy Infrastructure Solutions and (3) Underground Utility and Infrastructure Solutions.

~~Electric Power Infrastructure Solutions Segment~~

The Electric Power Infrastructure Solutions segment provides comprehensive network solutions to customers involved in the electric power industry. Services include design, procurement, new construction, upgrade and repair and maintenance for electric power transmission and distribution infrastructure, both overhead and underground, and substation facilities, along with other engineering and technical services. This includes solutions that support the implementation of upgrades by utilities to modernize and harden the electric power grid in order to ensure its safety and enhance reliability. In addition, this segment provides emergency restoration services, including the repair of infrastructure damaged by fire and inclement weather; the energized installation, maintenance and upgrade of electric power infrastructure utilizing bare hand and hot stick methods and Quanta’s robotic arm techniques; and the installation of “smart grid” technologies on electric power networks. This segment also provides comprehensive design and construction solutions to wireline and wireless communications companies, cable multi-system operators and other customers within the communications industry, including services in connection with 5G wireless deployment; and the design, installation, maintenance and repair services related to commercial and industrial wiring. Additionally, this segment provides aviation services primarily for the utility industry, including the transportation of line workers, the setting of poles and towers and the stringing of wires. The majority of the financial results of Quanta’s postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and specialized utility task training for electric workers, as well as training for the gas distribution and communications industries, are also included in the segment.

~~Renewable Energy Infrastructure Solutions Segment~~

The Renewable Energy Infrastructure Solutions segment provides comprehensive infrastructure solutions to customers involved in the renewable energy industry. Services include engineering, procurement, new construction, repowering and repair and maintenance for renewable generation facilities, such as utility-scale wind, solar, and hydropower generation facilities and battery storage facilities, as well as engineering and construction services for substations and switchyards, transmission and other electrical infrastructure needed to interconnect and transmit renewable energy generation and battery storage facilities.

~~Underground Utility and Infrastructure Solutions Segment~~

The Underground Utility and Infrastructure Solutions segment provides comprehensive infrastructure solutions for customers involved in the development, transportation, distribution, storage and processing of natural gas, oil and other products. Services include design, engineering, procurement, new construction, upgrade and repair and maintenance for natural gas systems for gas utility customers, as well as pipeline protection, integrity testing, rehabilitation and replacement services. Quanta also provides catalyst replacement services, high-pressure and critical-path turnaround services, instrumentation and electrical services, piping, fabrication and storage tank services for the midstream and downstream industrial energy markets. This segment also provides engineering and construction services for pipeline systems, storage systems and compressor and pump stations and the fabrication of pipeline support systems and related structures and facilities, as well as trenching, directional boring and mechanized welding services related to the services described above and in connection with Quanta’s electric power infrastructure services. This segment also provides engineering, construction and maintenance services for energy transition and carbon-reduction related projects, such as alternative fuel facilities, carbon capture systems and hydrogen facilities.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES:~~

~~Interim Condensed Consolidated Financial Information~~

These unaudited condensed consolidated financial statements have been prepared ~~pursuant~~in accordance with the instructions to ~~the rules~~Form 10-Q and Rule 10-01 of ~~the U.S. Securities and Exchange Commission (SEC).~~Regulation S-X for interim financial information. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP), have been condensed or omitted pursuant to those rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta’s Annual Report on Form 10-K for the year ended December 31, 2022. Quanta believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations, comprehensive income and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations and comprehensive income for the interim periods are not necessarily indicative of the results for the entire fiscal year. The results of Quanta have historically been subject to significant seasonal fluctuations.

Quanta recommends that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta and its consolidated subsidiaries. Certain of Quanta’s accounting policies are included in Note 2 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report~~

3.2. NEW ACCOUNTING PRONOUNCEMENTS:

~~New Accounting Pronouncement Not Yet~~Recently Adopted Guidance

In October 2021, the Financial Accounting Standards Board (FASB) issued an update that requires ~~an entity to recognize~~recognition and ~~measure~~measurement of contract assets and contract liabilities acquired in a business combination in accordance with FASB ASC 606 (Revenue from Contracts with Customers). At the acquisition date, an acquirer should account for the related contract revenue in accordance with FASB ASC 606. This update is effective for interim and annual periods beginning after December 15, 2022, with amendments generally applied prospectively. Quanta adopted this update effective January 1, 2023, and it did not have a material impact on Quanta’s consolidated financial statements.

New Accounting Pronouncement Not Yet Adopted

In June 2022, the FASB issued an update that clarifies the guidance in FASB ASC 820 (Fair Value Measurement) for equity securities subject to contractual sale restrictions. The update prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. This update is effective for interim and annual periods after December 15, 2023. Early adoption is permitted. This guidance will increase the fair market value of the consideration paid in equity securities in a business combination, and therefore it may increase the amount allocated to goodwill. Quanta will adopt this update by January 1, ~~2023,~~2024, and it is not expected to have a material impact on Quanta’s consolidated financial ~~statements at the date of adoption.~~statements.

4.3. REVENUE RECOGNITION AND RELATED BALANCE SHEET ACCOUNTS:

Contracts

Certain of Quanta’s services ~~may be~~are generally provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price construction contracts. These contracts are classified into three categories: unit-price contracts, cost-plus contracts and fixed price contracts.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following tables present Quanta’s revenue disaggregated by contract type and by geographic location, as determined by the job location (in thousands):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021					2023				2022				2023				2022
By contract type:	By contract type:																	By contract type:
Fixed price contracts																		Fixed price contracts	$	2,296,888	45.5	%	$	1,805,156	42.7	%	4,231,776		44.7	%	$	3,494,791	42.6	%
Unit-price contracts	Unit-price contracts	$	1,451,905	34.3	%	$	1,217,724	40.6	%	2,809,507		34.3	%	$	2,194,286	38.5	%	Unit-price contracts	1,697,629		33.6		1,451,905		34.3		3,195,023		33.7		$	2,809,507	34.3
Cost-plus contracts	Cost-plus contracts	974,942		23.0	%	759,485		25.3	%	1,893,230		23.1	%	1,422,257		24.9	%	Cost-plus contracts	1,054,093		20.9		974,942		23.0		2,050,637		21.6		1,893,230		23.1
Fixed price contracts		1,805,156		42.7	%	1,022,607		34.1	%	3,494,791		42.6	%	2,086,854		36.6	%
Total revenues	Total revenues	$	4,232,003	100.0	%	$	2,999,816	100.0	%	$	8,197,528	100.0	%	$	5,703,397	100.0	%	Total revenues	$	5,048,610	100.0	%	$	4,232,003	100.0	%	$	9,477,436	100.0	%	$	8,197,528	100.0	%

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021					2023				2022				2023				2022
By primary geographic location:	By primary geographic location:																	By primary geographic location:
United States	United States	$	3,667,337	86.7	%	$	2,570,798	85.7	%	$	6,991,306	85.2	%	$	4,776,914	83.7	%	United States	$	4,282,902	84.8	%	$	3,667,337	86.7	%	$	7,949,267	83.9	%	$	6,991,306	85.2	%
Canada	Canada	439,466		10.4	%	327,159		10.9	%	990,371		12.1	%	741,005		13.0	%	Canada	523,258		10.4		439,466		10.4		1,065,618		11.2		990,371		12.1
Australia	Australia	89,369		2.1	%	62,808		2.1	%	144,570		1.8	%	117,915		2.1	%	Australia	156,725		3.1		89,369		2.1		311,402		3.3		144,570		1.8
Others	Others	35,831		0.8	%	39,051		1.3	%	71,281		0.9	%	67,563		1.2	%	Others	85,725		1.7		35,831		0.8		151,149		1.6		71,281		0.9
Total revenues	Total revenues	$	4,232,003	100.0	%	$	2,999,816	100.0	%	$	8,197,528	100.0	%	$	5,703,397	100.0	%	Total revenues	$	5,048,610	100.0	%	$	4,232,003	100.0	%	$	9,477,436	100.0	%	$	8,197,528	100.0	%

Under fixed-price contracts, as well as unit-price contracts with more than an insignificant amount of partially completed units, revenue is recognized as performance obligations are satisfied over time, with the percentage of completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately ~~51.7%~~54.0% and ~~43.9%~~51.7% of Quanta’s revenues recognized during the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 were associated with this revenue recognition method, and ~~51.5%~~52.4% and ~~43.9%~~51.5% of Quanta’s revenues recognized during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were associated with this revenue recognition method.

Performance Obligations

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was approximately ~~$6.92~~$12.48 billion and ~~$5.90~~$8.80 billion, with ~~79.1%~~70.7% and ~~81.8%~~72.1% expected to be recognized in the subsequent twelve months. These amounts represent management’s estimates of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work had not yet begun as of such dates. For purposes of calculating remaining performance obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and variable interest entities, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized, and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under MSAs and non-fixed price contracts expected to be completed within one year.

Contract Estimates and Changes in Estimates

Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in Quanta’s cost estimates or covered by its contracts. Some of the factors that can result in positive changes in estimates on projects include successful execution through project risks, reduction of estimated project costs or increases of estimated revenues. Some of the factors that can result in negative changes in estimates include concealed or unknown site conditions; changes to or disputes with customers regarding the scope of services; changes in estimates related to the length of time to complete a performance obligation; changes or delays with respect to permitting and regulatory requirements and materials; changes in the cost of equipment, commodities, materials or skilled labor; unanticipated costs or claims due to delays or failure to perform by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs; project modifications; adverse weather conditions, natural disasters, and other ~~emergencies (including the COVID-19 pandemic);~~emergencies; and performance and quality issues causing delay (including payment of liquidated damages) or requiring rework or replacement. Any changes in estimates could result in changes to profitability or losses associated with the related performance obligations.

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Additionally, changes in cost estimates on certain contracts may result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. Quanta recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reasonably estimated.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Quanta had recognized revenues of ~~$497.1~~$745.1 million and ~~$367.8~~$549.3 million related to change orders and claims included as contract price adjustments ~~that~~primarily in “Contract assets” in the accompanying consolidated balance sheets. These change orders and claims were in the process of being negotiated in the normal course of ~~business.~~ business and represent management’s estimates of additional contract revenues that have been earned and are probable of collection.

The largest component of the revenues recognized ~~is associated with 2 transmission projects in Canada for which~~related to change orders and claims ~~were primarily attributable to the negative impact~~as of June 30, 2023 and of the ~~COVID-19 pandemic which resulted~~increase relative to December 31, 2022 is associated with a large renewable transmission project in Canada. During 2021 and 2022, decreased productivity and additional costs ~~arising~~arose from delays, administrative requirements and labor issues due to the COVID-19 pandemic, including ~~additional COVID-19~~incremental governmental requirements and worksite restrictions. Additionally, both of the projects were negatively impacted by unrelated wildfires in the region, and the electric transmission project was also negatively impacted by acceleration of the project timeline. This electric infrastructure project was substantially complete as of March 31, 2022. For this project, during the three months ended June 30, 2022, the majority of the

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~change orders and claims were approved and billed to the customer. The large renewable transmission project was also substantially impacted by the COVID-19 pandemic during~~During the six months ended June 30, ~~2022, which was exacerbated by the remote location of the project impacting its~~2023, additional costs arose from residual impacts associated with such delays, administrative requirements and labor force and project efficiency. These continued impacts required the need for a revised timeline and plan for the project completion, which in collaboration with the customer, will require an additional winter season of work through the spring of 2024, collectively resulting in a substantial increaseissues due to the ~~change order~~COVID-19 pandemic, including work resequencing and ~~claim balance as~~acceleration, access delays, and logistical challenges along with other issues outside of June 30, 2022. Quanta believes that the contracts for these projects entitle it to recover certain amounts associated with these delays, which are the subject of certain change orders and claims described above.Quanta’s control.

Changes ~~in estimated revenues, costs and profit are recognized on a cumulative catch-up basis and recorded in the period they are determined to be probable and can be reasonably estimated. Such changes~~ in estimates can result in the recognition of revenue in a current period for performance obligations that were satisfied or partially satisfied in prior periods or the reversal of previously recognized revenue if the currently estimated revenue is less than the previous estimate. The impact of a change in contract estimate is measured as the difference between the revenue or gross profit recognized in the prior period as compared to the revenue or gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period. Changes in estimates can also result in contract losses, which are recognized in full when they are determined to be probable and can be reasonably estimated.

Revenues were positively impacted by ~~$62.1 million~~0.7% and ~~$63.5 million~~1.5% during the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to March 31, ~~2022~~2023 and ~~2021.~~2022. Revenues were positively impacted by ~~$80.8 million~~0.3% and ~~$105.0 million~~1.0% during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, ~~2021~~2022 and ~~2020.~~2021.

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(Unaudited)

Operating results for the three months ended June 30, 2023 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of March 31, 2023. There were no material changes in estimates on any individual project.

Operating results for the six months ended June 30, 2023 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of December 31, 2022. However, Quanta’s large renewable transmission project in Canada was negatively impacted by $20.7 million due to changes to estimated project costs during this period, as mentioned above.

Operating results for the three months ended June 30, 2022 were favorably impacted by $62.3 million, or 10.0%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of March 31, 2022. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion. Partially offsetting the aggregate net favorable impact to gross profit was a negative change in estimate of $13.0 million for the three months ended June 30, 2022, associated with the large renewable transmission project in Canada, described ~~further~~ above.

Operating results for the six months ended June 30, 2022 were favorably impacted by $72.7 million, or 6.2%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress ~~as of~~at December 31, 2021. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion. Partially offsetting the aggregate net favorable impact to gross profit was a negative change in estimate of $23.7 million for the six months ended June 30, 2022, associated with the large renewable transmission project in Canada, described ~~further~~ above.

Operating results for the three months ended June 30, 2021 were favorably impacted by $57.5 million, or 12.8% of gross profit, as a result of aggregate changes in contract estimates related to projects that were in progress at March 31, 2021. The net favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion.

Operating results for the six months ended June 30, 2021 were favorably impacted by $88.5 million, or 10.8% of gross profit, as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2020. The net favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion. Partially offsetting the net favorable impact to gross profit for the six months ended June 30, 2021 was a negative change in estimate of $14.8 million in the three months ended March 31, 2021 associated with a communications project in the United States, which arose from challenges with subcontractor performance and site conditions. This project had a total contract value of $77.2 million and was 100% complete as of June 30, 2022.

Contract Assets and Liabilities

Contract assets and liabilities consisted of the following (in thousands):

June 30, 2022 December 31, 2021
Contract assets $ 1,001,733 $ 803,453
Contract liabilities $ 751,326 $ 802,872

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


	June 30, 2023		December 31, 2022
Contract assets	$	1,357,233	$	1,080,206
Contract liabilities	$	1,128,864	$	1,141,518

Contract assets and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects in progress at period end; variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, or deferred billings; and unapproved change orders and contract claims recognized as revenues. The increase in contract assets from December 31, ~~2021~~2022 to June 30, ~~2022~~2023 was primarily due to ~~increased working capital requirements, including the timing of billings and~~additional unapproved change orders and claims related to the large renewable transmission project in Canada described ~~above.~~above, as well as progress on other projects on which the timing of billings lagged behind the completion of work.

During the six months ended June 30, ~~2022,~~2023, Quanta recognized revenue of approximately ~~$629.6~~$897.8 million related to contract liabilities outstanding as of ~~December 31, 2021.~~the end of the prior year.

Accounts Receivable, Allowance for Credit Losses and Concentrations of Credit Risk

Quanta determines its allowance for credit losses based on an estimate of expected credit losses for financial instruments, primarily accounts receivable and contract assets. The assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Expected credit losses are estimated by evaluating trends in historical write-off experience and applying historical loss ratios to pools of financial assets with similar risk characteristics.

Quanta’s historical loss ratio and its determination of its risk ~~pool,~~pools, which are used to calculate expected credit losses, may be adjusted for changes in customer credit concentrations within its portfolio of financial assets, its customers’ ability to pay, and other considerations, such as economic and market changes, changes to regulatory or technological environments affecting customers and the consistency between current and forecasted economic conditions and historical economic conditions used to derive historical loss ratios. At the end of each quarter, management reassesses these and other relevant factors, including the impact of uncertainty and challenges in the overall economy and in Quanta’s industries and markets, which currently include inflationary pressure, ~~ongoing~~ supply chain and other logistical challenges and ~~potential continued uncertainty~~increased interest rates.

Additional allowance for credit losses is established for financial asset balances with specific customers where collectability has been determined to be improbable based on customer specific facts and ~~challenges~~circumstances. Quanta considers

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accounts receivable delinquent after 30 days but, absent certain specific considerations, generally does not consider such amounts delinquent in its credit loss analysis unless the ~~energy~~accounts receivable are at least 120 days outstanding. In addition, management monitors the credit quality of its receivables by, among other things, obtaining credit ratings for significant customers, assessing economic and market conditions and ~~overall economy caused by~~evaluating material changes to a customer’s business, cash flows and financial condition. Should anticipated recoveries relating to receivables fail to materialize, including anticipated recoveries relating to bankruptcies or other workout situations, Quanta could experience reduced cash flows and losses in excess of current allowances provided.

Accounts receivable are written-off against the ~~COVID-19 pandemic.~~allowance for credit losses if they are deemed uncollectible.

Activity in Quanta’s allowance for credit losses consisted of the following (in thousands):


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	49,916	$	16,449	$	49,749	$	16,546	Balance at beginning of period	$	16,530	$	49,916	$	15,644	$	49,749
Increase (decrease) in provision for credit losses		(428)		23,877		(295)		23,920
Recoveries of amounts previously written off (write-offs charged against the allowance), net		219		(613)		253		(753)
Increase in provision for credit losses										Increase in provision for credit losses	2,889		(428)		5,247		(295)
Write-offs charged against the allowance net of recoveries of amounts previously written off										Write-offs charged against the allowance net of recoveries of amounts previously written off	(5,511)		219		(6,983)		253
Balance at end of period	Balance at end of period	$	49,707	$	39,713	$	49,707	$	39,713	Balance at end of period	$	13,908	$	49,707	$	13,908	$	49,707

Provision for credit losses is included in “Selling, general and administrative expenses” in the consolidated statements of operations. During the three months ended June 30, 2021, Quanta recorded a provision for credit loss of $23.6 million related to Limetree Bay Refining, LLC (Limetree Refining), a customer within Quanta’s Underground Utility and Infrastructure Solutions segment, that filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in July 2021 after experiencing operational and financial difficulties and shutting down operations at its refinery. As of June 30, 2022, Quanta had $31.3 million of receivables for services performed and other costs related to Limetree Refining and $0.4 million of receivables outstanding from an affiliate, which had been fully reserved as of December 31, 2021.

Quanta is subject to concentrations of credit risk related primarily to its ~~net~~ receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and contract assets ~~net of advanced billings with the same customer.~~for services Quanta has performed for customers. Quanta grants credit under normal payment terms, generally without collateral, to its customers, which primarily include utilities, renewable energy developers, communications providers, industrial companies and energy delivery companies located primarily in the United States, Canada and Australia.collateral. One customer within the Renewable Energy Infrastructure Solutions segment associated with the large renewable transmission project in Canada described above represented ~~12%~~15% and ~~11%~~13% of Quanta’s consolidated ~~net~~ receivable position as of June 30, ~~2022~~2023 and December 31, 2021. Another customer, when combined with the net receivable position of a joint venture in which such customer owns a 50% interest, also represented 11% of Quanta’s consolidated net receivable position as of December 31, 2021. Quanta’s projects with this customer are primarily within the Electric Power Infrastructure Solutions and Renewable Energy Infrastructure Solutions segments.2022. No customer represented 10% or more of Quanta’s consolidated revenues for the three ~~and~~or six months ended June 30, ~~2022~~2023 or ~~2021.~~2022.

Certain contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts are generally due upon completion of the contract and acceptance of the project by the customer. Based on Quanta’s experience in recent years, the majority of these retainage balances are expected to be collected within ~~approximately~~ one year. Retainage balances with expected settlement dates within one year of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$342.1~~$483.9 million and ~~$406.7~~$397.6 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond one year were ~~$128.4~~$147.8 million and ~~$93.9~~$136.2 million as of June 30, 2023 and December 31, 2022 and are included in “Other assets, net.”

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date or when amounts arise from routine lags in ~~billing (for example, work completed during one month but not billed until the next month).~~billing. These balances do not include revenues recognized for work performed under fixed-price contracts and unit-price contracts with more than an insignificant amount of partially completed units, as these amounts are recorded as “Contract assets.” As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, unbilled receivables included in “Accounts receivable” were ~~$897.5~~$929.4 million and ~~$679.0~~$823.9 million. The increase in unbilled receivables was primarily due to ~~the ramp up of~~significant increases in work and certain delays in billing related to certain large customers. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were ~~$48.2~~$61.6 million and ~~$51.8~~$59.6 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

5.4. SEGMENT INFORMATION:

~~Beginning with the three months ended December 31, 2021,~~ Quanta reports its results under 3three reportable ~~segments: (1)~~ segments described below:

•Electric Power Infrastructure Solutions ~~(2)~~ (Electric Power). Quanta’s Electric Power segment provides comprehensive services for the electric power and communications markets.

•Renewable Energy Infrastructure Solutions ~~and (3) Underground Utility and Infrastructure Solutions. The~~(Renewable Energy). Quanta’s Renewable Energy ~~Infrastructure Solutions~~ segment ~~was added primarily due~~provides comprehensive infrastructure solutions to customers that are involved in the acquisition of Blattner Holding Company and its operating subsidiaries (collectively, Blattner) on October 13, 2021. For additional information regarding this acquisition, see Note 6. In conjunction with this change, certain prior period amounts have been recast to conform to this new segment reporting structure. This structure is generally based on the broad end-user markets for Quanta’s services. See Note 1 for additional information regarding Quanta’s reportable segments.

Quanta’s segment results are derived from the types of services provided across its operating companies in each of its end user markets. Quanta’s entrepreneurial business model allows multiple operating companies to serve the same or similar customers and to provide a range of services across end user markets. Reportable segment information, including revenues and operating income by type of work, is gathered from each operating company for the purpose of evaluating segment performance in support of Quanta’s market strategies. Classification of operating company revenues by type of work for segment reporting purposes can require judgment on the part of management. Quanta’s operating companies may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, Quanta performs joint trenching projects to install distribution lines for electric power and natural gas customers.

In addition, integrated operations and common administrative support for Quanta’s operating companies require that certain allocations be made to determine segment profitability, including allocations of corporate shared and indirect operating costs as well as general and administrative costs. Certain corporate costs are not allocated, including facility costs, acquisition and integration costs, non-cash stock-based compensation, amortization related to intangible assets, asset impairment related to goodwill and intangible assets and change in fair value of contingent consideration liabilities.renewable energy industry.

1716

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(Unaudited)

•Underground Utility and Infrastructure Solutions (Underground and Infrastructure). Quanta’s Underground and Infrastructure segment provides comprehensive infrastructure solutions to customers involved in the transportation, distribution, storage, development and processing of natural gas, oil and other products.

Corporate and Non-allocated Costs include corporate facility costs; non-allocated corporate salaries, benefits and incentive compensation; acquisition and integration costs; non-cash stock-based compensation; amortization related to intangible assets; asset impairment related to goodwill and intangible assets; and change in fair value of contingent consideration liabilities.

The following table sets forth segment revenues and segment operating income (loss) and operating margins for the three and six months ended June ~~31, 2022~~30, 2023 and ~~2021.~~2022. Operating ~~margins are~~margin is calculated by dividing operating income (loss) by revenues. The following table shows dollars in thousands:


		Three Months Ended								Six Months Ended
		June 30,								June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021					2023				2022				2023				2022
Revenues:	Revenues:																	Revenues:
Electric Power Infrastructure Solutions	Electric Power Infrastructure Solutions	$	2,199,430	52.0	%	$	1,815,762	60.5	%	$	4,338,127	52.9	%	$	3,491,808	61.2	%	Electric Power Infrastructure Solutions	$	2,415,254	47.9	%	$	2,199,430	52.0	%	$	4,751,291	50.1	%	$	4,338,127	52.9	%
Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions	924,236		21.8		332,013		11.1		1,799,868		22.0		716,087		12.6		Renewable Energy Infrastructure Solutions	1,389,368		27.5		924,236		21.8		2,397,668		25.3		1,799,868		22.0
Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions	1,108,337		26.2		852,041		28.4		2,059,533		25.1		1,495,502		26.2		Underground Utility and Infrastructure Solutions	1,243,988		24.6		1,108,337		26.2		2,328,477		24.6		2,059,533		25.1
Consolidated revenues	Consolidated revenues	$	4,232,003	100.0	%	$	2,999,816	100.0	%	$	8,197,528	100.0	%	$	5,703,397	100.0	%	Consolidated revenues	$	5,048,610	100.0	%	$	4,232,003	100.0	%	$	9,477,436	100.0	%	$	8,197,528	100.0	%
Operating income (loss):	Operating income (loss):																	Operating income (loss):
Electric Power Infrastructure Solutions (1)	Electric Power Infrastructure Solutions (1)	$	232,150	10.6	%	$	206,967	11.4	%	$	435,569	10.0	%	$	360,706	10.3	%	Electric Power Infrastructure Solutions (1)	$	244,017	10.1	%	$	232,150	10.6	%	$	459,166	9.7	%	$	435,569	10.0	%
Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions	81,687		8.8	%	29,932		9.0	%	151,629		8.4	%	75,228		10.5	%	Renewable Energy Infrastructure Solutions	110,487		8.0	%	81,687		8.8	%	146,143		6.1	%	151,629		8.4	%
Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions	89,943		8.1	%	23,937		2.8	%	138,118		6.7	%	32,750		2.2	%	Underground Utility and Infrastructure Solutions	107,207		8.6	%	89,943		8.1	%	168,780		7.2	%	138,118		6.7	%
Corporate and Non-Allocated Costs (2)	Corporate and Non-Allocated Costs (2)	(195,424)		(4.6)	%	(99,185)		(3.3)	%	(399,444)		(4.9)	%	(193,304)		(3.4)	%	Corporate and Non-Allocated Costs (2)	(182,438)		(3.6)	%	(195,424)		(4.6)	%	(368,956)		(3.9)	%	(399,444)		(4.9)	%
Consolidated operating income	Consolidated operating income	$	208,356	4.9	%	$	161,651	5.4	%	$	325,872	4.0	%	$	275,380	4.8	%	Consolidated operating income	$	279,273	5.5	%	$	208,356	4.9	%	$	405,133	4.3	%	$	325,872	4.0	%

(1) ~~Operating income for the Electric Power Infrastructure Solutions segment includes~~Includes equity in earnings of integral unconsolidated affiliates ~~that are operationally integral to the operations~~ of ~~Quanta, which primarily consists of equity in earnings related to Quanta’s equity interest in LUMA.~~

~~(2)~~ ~~Corporate~~$9.4 million and ~~Non-Allocated Costs~~$18.6 million for the three months ended June 30, 2023 and 2022 and ~~2021 included amortization expense of $107.9~~$19.0 million and ~~$21.3~~$33.7 million ~~and non-cash stock-based compensation of $28.1 million and $23.9 million. Corporate and Non-Allocated Costs~~ for the six months ended June 30, 2023 and 2022, ~~and 2021 included~~primarily related to Quanta’s equity interest in LUMA Energy, LLC (LUMA).

(2) Includes amortization expense of ~~$223.7~~$70.0 million and ~~$42.6~~$107.9 million and non-cash stock-based compensation of $34.6 million and $28.1 million for the three months ended June 30, 2023 and 2022. Includes amortization expense of $142.4 million and $223.7 million and non-cash stock-based compensation of $62.1 million and $51.1 million for the six months ended June 30, 2023 and ~~$42.6 million.~~2022.

Depreciation Expense Allocation

Separate measures of Quanta’s assets and cash flows by reportable segment, including capital expenditures, are not produced or utilized by management to evaluate segment performance. Quanta’s fixed assets ~~which are held at the operating company level, include operating machinery, equipment and vehicles, office equipment, buildings and leasehold improvements, and certain fixed assets and~~ are generally used on an interchangeable basis across its reportable segments. As such, for reporting purposes, total depreciation expense is allocated

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

each quarter among Quanta’s reportable segments based on the ratio of each reportable segment’s revenue contribution to consolidated revenues. The following table shows dollars in thousands:

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Depreciation:
Electric Power Infrastructure Solutions $ 36,781 $ 34,790 $ 73,560 $ 69,194
Renewable Energy Infrastructure Solutions 10,178 2,294 18,411 4,535
Underground Utility and Infrastructure Solutions 20,667 21,138 41,605 42,225
Corporate and Non-Allocated Costs 6,333 4,535 11,337 8,910
Consolidated depreciation $ 73,959 $ 62,757 $ 144,913 $ 124,864

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~Foreign Operations~~

During the three months ended June 30, 2022 and 2021, Quanta derived $564.7 million and $429.0 million of its revenues from foreign operations. During the six months ended June 30, 2022 and 2021, Quanta derived $1.21 billion and $926.5 million of its revenues from foreign operations. Of Quanta’s foreign revenues, 78% and 76% were earned in Canada during the three months ended June 30, 2022 and 2021 and 82% and 80% were earned in Canada during the six months ended June 30, 2022 and 2021. In addition, Quanta held property and equipment of $324.6 million and $338.1 million in foreign countries, primarily Canada, as of June 30, 2022 and December 31, 2021.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Depreciation:
Electric Power Infrastructure Solutions	$	41,357	$	36,781	$	83,442	$	73,560
Renewable Energy Infrastructure Solutions	10,681		10,178		21,539		18,411
Underground Utility and Infrastructure Solutions	19,135		20,667		39,635		41,605
Corporate and Non-Allocated Costs	8,703		6,333		13,642		11,337
Consolidated depreciation	$	79,876	$	73,959	$	158,258	$	144,913

6.5. ACQUISITIONS:

The results of operations of acquired businesses have been included in Quanta’s consolidated financial statements since ~~the~~their respective acquisition dates.

In January 2023, Quanta ~~did not acquire any~~acquired three businesses ~~during the six months ended June 30, 2022.~~

~~On October 13, 2021, Quanta completed the acquisition of Blattner, a large and leading utility-scale renewable energy infrastructure solutions provider that is~~ located in the United States including: a business that provides services related to high-voltage transmission lines, overhead and ~~primarily operates in North America. Blattner provides comprehensive solutions to customers~~underground distribution, emergency restoration and industrial and commercial wiring and lighting (primarily included in the ~~renewable energy industry, which generally include front-end engineering, procurement, project management~~Electric Power segment); a business that procures parts, assembles kits for sale, manages logistics and installs solar tracking equipment for utility and development customers (primarily included in the Renewable Energy segment); and a business that provides concrete construction services (primarily included in the Electric Power and Renewable Energy segments). The consideration for ~~wind, solar and energy storage projects. Consideration for this acquisition included $2.43 billion~~these transactions consisted of approximately $463.5 million paid or payable in cash ~~which includes the final post-closing adjustments,~~(subject to certain adjustments) and ~~3,326,955~~1,018,946 shares of Quanta common stock, which had a fair value of ~~$345.4~~$123.5 million as of the ~~date~~dates of the ~~acquisition.~~acquisitions.

In July 2022, Quanta acquired a business located in the United States that provides construction contracting services to utilities, specializing in trenching and underground pipeline and electrical conduit installation, primarily included in the Electric Power segment. The consideration for this transaction included $22.3 million paid or payable in cash (subject to certain adjustments). Additionally, the former owners of ~~Blattner~~this business are eligible to receive a potential payment of ~~up to $300.0 million of~~ contingent consideration ~~payable~~ to the extent the acquired business achieves certain financial performance targets ~~each fiscal year~~ over a three-year period that began in January 2022. Based on the estimated fair value of the contingent consideration, Quanta recorded a $125.6 million liability as of the date of the acquisition. As of June 30, 2022, the fair value of the contingent consideration liability was $140.3 million, including accretion of $2.8 million and $7.0 million recorded in the three and six months ended June 30, 2022. The contingent consideration is earned based on performance during each year of the three-year performance period ending on December 31, 2024, and amounts earned are payable in cash after the end of the applicable performance year. Quanta may defer payment of earned contingent consideration amounts, at its sole discretion, until after the end of the entire three-year performance period; however, any deferred amounts will accrue interest at 5 percent per annum until paid. Blattner’s results have been included in Quanta’s consolidated financial statements in the Renewable Energy Infrastructure Solutions segment since the acquisition date.

During the year ended December 31, 2021, Quanta also acquired the following businesses: 3 businesses located in the United States that provide electric power construction and related services; a communications services business located in the United States that performs data center connection services; a business located in the United States that designs, develops and holds a certification for the manufacture of personal protective breathing equipment and related monitoring devices primarily used in the refining and petrochemical industries, including in connection with catalyst services; a business that provides turnaround and catalyst change-out services to the refining and petrochemical industries primarily in the United States and Canada; a business located in Canada that provides front-end land services for infrastructure development projects in Canada and the United States; a business located in the United States that primarily provides horizontal directional drilling services; and a communications services business located in the United States. The aggregate consideration for these acquisitions was $328.0 million paid or payable in cash (subject to certain adjustments) and 187,093 shares of Quanta common stock, which had an aggregate fair value of $16.9 million as of the applicable acquisition dates. The results of the manufacturing business and the turnaround and catalyst change-out business are generally included in the Underground Utility and Infrastructure Solutions segment and the results of the remaining businesses are generally included in the Electric Power Infrastructure Solutions segment.five-year post-acquisition period.

Purchase Price Allocation

Quanta is finalizing its ~~fair value assessments for the acquired assets and assumed liabilities~~purchase price allocations related to businesses acquired ~~subsequent to June 30, 2021,~~in 2023, and further adjustments to the purchase price allocations may ~~occur. As of June 30, 2022, the estimated fair values of the net assets acquired were preliminary,~~occur, with possible updates primarily related to tax estimates and the finalization of closing working capital adjustments. The aggregate consideration paid or payable for businesses acquired between June 30, ~~2021~~2022 and June 30, ~~2022~~2023 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of ~~$243.2~~$184.8 million to net tangible assets, ~~$1.52 billion~~$120.5 million to identifiable intangible assets and ~~$1.46 billion~~$306.6 million to goodwill.

~~Goodwill represents~~

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table summarizes the ~~amount by which the purchase price for an acquired business exceeds the net~~ fair value of total consideration transferred or estimated to be transferred and the fair value of assets acquired and liabilities ~~assumed. Goodwill included~~assumed as of their respective acquisition dates as of June 30, 2023 for acquisitions completed in ~~the Renewable Energy Infrastructure Solutions Segment increased by $64.9 million during~~ the six months ended June 30, ~~2022~~2023 (in thousands):


	Six Months Ended
	June 30, 2023
Consideration:
Cash paid or payable	$	463,482
Value of Quanta common stock issued	123,503

Fair value of total consideration transferred or estimated to be transferred	$	586,985

Cash and cash equivalents	$	14,832
Accounts receivable	46,389
Contract assets	195
Inventories	56,960
Prepaid expenses and other current assets	4,392
Property and equipment	144,217
Operating lease assets	14,189
Other assets	4,553
Identifiable intangible assets	107,430

Accounts payable and accrued liabilities	(61,739)
Contract liabilities	(3,071)
Operating lease liabilities, current	(2,552)
Deferred tax liabilities, net	(20,556)
Operating lease liabilities, non-current	(12,242)


Total identifiable net assets	292,997
Goodwill	293,988
Fair value of net assets acquired	$	586,985

As of June 30, 2023, approximately $238.2 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the six months ended June 30, 2023.

The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in the six months ended June 30, 2023 as ~~a result~~ of ~~certain post-closing consideration adjustments~~the acquisition dates and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).


	Six Months Ended
	June 30, 2023
	Estimated Fair Value		Weighted Average Amortization Period in Years
Customer relationships	$	79,240	4.6
Backlog	11,095		0.9
Trade names	12,615		15.0
Non-compete agreements	4,480		5.0

Total intangible assets subject to amortization	$	107,430	5.5

The significant estimates used by management in determining the fair values of customer relationship intangible assets include future revenues, discount rates and customer attrition rates. The following table includes the discount rates and

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~associated with Quanta’s acquisition~~customer attrition rates used to determine the fair value of ~~Blattner. The acquisitions completed in~~customer relationship intangible assets for businesses acquired during the ~~year~~six months ended December 31, 2021 strategically expanded Quanta’s domestic renewable energy infrastructure solutions, domestic and international electric power infrastructure solutions, domestic communications service offerings, and domestic and international underground utility and infrastructure solutions, which Quanta believes contributes to the recognitionJune 30, 2023 as of the ~~goodwill. Approximately $1.49 billion of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the year ended December 31, 2021.~~respective acquisition dates:

Six Months Ended

June 30, 2023

Range

Weighted Average

Discount rates

15% to 19%

17%

Customer attrition rates

10% to 20%

18%

Contingent Consideration

As described above, certain business acquisitions have contingent consideration liabilities associated with the transactions. The aggregate fair value of these outstanding contingent consideration liabilities and their classification in the accompanying consolidated balance sheets is as follows (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	4,949	$	2,591	Accounts payable and accrued expenses	$	—	$	5,000
Insurance and other non-current liabilities	Insurance and other non-current liabilities	142,524		140,482		Insurance and other non-current liabilities	143,517		143,517
Total contingent consideration liabilities	Total contingent consideration liabilities	$	147,473	$	143,073	Total contingent consideration liabilities	$	143,517	$	148,517

~~Quanta’s aggregate~~The fair value determinations of contingent consideration liabilities ~~can change due to additional business acquisitions, settlement of outstanding liabilities, accretion in present value and changes~~incorporate significant inputs not observable in the ~~estimated~~market. Accordingly, the level of inputs used for these fair value measurements is Level 3. The following table includes the volatility factors, weighted average costs of ~~amounts owed based on~~capital and discount rates used to determine the ~~performance of acquired businesses in post-acquisition periods. These changes are reflected in “Change in~~ fair value of contingent consideration ~~liabilities” in~~liabilities during the ~~accompanying consolidated statements of operations. The majority~~six months ended June 30, 2023:

Six Months Ended

June 30, 2023

Range

Weighted Average

Volatility factors

35.0% to 43.0%

35.2%

Weighted average cost of capital

14.0% to 15.50%

14.0%

Discount rates

4.06% to 6.90%

6.5%

Quanta’s outstanding contingent consideration liabilities are subject to a maximum payment amount, and the aggregate maximum payment amount of these liabilities totaled ~~$312.0~~$321.8 million as of June 30, ~~2022.~~2023. During the six months ended June 30, 2023 and 2022, Quanta settled certain contingent consideration liabilities with cash payments of $5.0 million and $1.6 million.

Pro Forma Results of Operations

The following unaudited supplemental pro forma results of operations for Quanta, which incorporate the acquisitions completed in ~~2021,~~the six months ended June 30, 2023 and the year ended December 31, 2022, have been provided for illustrative purposes only and domay not ~~purport to~~ be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the ~~future. Future results may vary significantly from the results reflected in the following pro forma financial information because of~~ future ~~events and transactions, as well as other factors~~ (in ~~thousands, except per share amounts)~~thousands).

Three Months Ended Six Months Ended
June 30, June 30,
2021 2021
Revenues $ 3,862,768 $ 7,180,383
Gross profit $ 606,039 $ 1,105,600
Selling, general and administrative expenses $ (334,034) $ (639,909)
Amortization of intangible assets $ (66,931) $ (134,506)
Net income $ 145,806 $ 240,999
Net income attributable to common stock $ 143,868 $ 237,503
Earnings per share attributable to common stock:
Basic $ 1.00 $ 1.65
Diluted $ 0.97 $ 1.60


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenues	$	5,048,610	$	4,358,240	$	9,477,436	$	8,450,003




Net income attributable to common stock	$	165,899	$	88,671	$	260,945	$	173,129

The pro forma combined results of operations for the three and six months ended June 30, ~~2021~~2023 and 2022 were prepared by adjusting the historical results of Quanta to include the historical results of the ~~acquisitions completed~~businesses acquired in ~~2021~~2023 as if ~~they~~such acquisitions had occurred January 1, ~~2020.~~2022. The pro forma combined results of operations for the three and six months ended June 30, 2022 were prepared by adjusting the historical results of Quanta to include the historical results of the business acquired in 2022 as if such acquisition had occurred January 1, 2021. These pro forma combined historical results were adjusted for the following: a reduction of interest and other financing expenses as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest and other financing expenses as a result of the cash consideration paid and debt incurred by Quanta for the purpose of financing the acquisition of Blattner; an increase in amortization expense due to the intangible assets recorded; elimination of inter-company sales; changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies; an increase in the number of outstanding shares of Quanta common stock; reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies; and elimination of certain transaction costs incurred by Blattner and directly related to the acquisition of the business by Quanta. The pro forma

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

consideration paid; an increase in amortization expense due to the intangible assets recorded; elimination of inter-company sales; and changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs incurred by Quanta or any cost savings or other synergies that resulted or may result from the acquisitions. ~~As noted above, the pro forma results~~

Results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.Operations

Revenues of ~~$1.2~~$143.1 million and income before income taxes of ~~$0.3~~$12.9 million, which ~~included $0.2~~includes $6.4 million of amortization expense and no acquisition-related costs, related to the acquisitions completed in ~~2021~~2023 are included in Quanta’s condensed consolidated results of operations for the three months ended June 30, ~~2021.~~2023. Revenues of ~~$1.2~~$236.6 million and ~~income~~a loss before income taxes of ~~$0.1~~$3.2 million, which ~~included $0.4~~includes $15.0 million of amortization expense and $17.8 million of acquisition-related costs, related to the acquisitions completed in ~~2021~~2023 are included in Quanta’s condensed consolidated results of operations for the six months ended June 30, ~~2021.~~

In July 2022, Quanta acquired a business located in the United States that provides construction contracting services and specializes in trenching and underground pipe and electrical conduit installation. Beginning on the acquisition date, the results of the acquired business will generally be included in the Electrical Power Infrastructure Solutions segment.2023.

~~7. GOODWILL AND OTHER INTANGIBLE ASSETS:~~

~~Goodwill~~

Goodwill, net of accumulated impairment losses, represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses and is stated at cost.

Quanta’s reporting units for the purpose of assessing goodwill impairment align with its 3 reportable segments. Goodwill is not amortized but is tested for impairment annually in the fourth quarter of the fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions; declining financial performance; deterioration in the operational environment; an expectation of selling or disposing of a portion of a reporting unit; a significant change in market, management, business strategy or business climate; a loss of a significant customer; increased competition; a sustained decrease in share price; or a decrease in Quanta’s market capitalization below book value. Quanta did not identify any triggering events in and did not recognize any goodwill impairments for the three and six months ended June 30, 2022.

~~Intangible Assets~~

Quanta’s intangible assets include customer relationships; backlog; trade names; non-compete agreements; patented rights, developed technology, and process certifications; and curriculum, all of which are subject to amortization; as well as an engineering license, which is not subject to amortization. Quanta did not identify any triggering events in and did not recognize any intangible asset impairments for the three and six months ended June 30, 2022.

In connection with its annual goodwill assessment in 2021, Quanta also considered the sensitivity of its fair value estimates to changes in certain valuation assumptions, including with respect to reporting units within Quanta’s Underground Utility and Infrastructure Solutions segment that were negatively impacted by energy market challenges. In particular, 2 Canadian pipeline-related businesses were identified in the annual goodwill assessment to have an increased risk of goodwill impairment in the near and medium term. After taking into account a 10% decrease in fair value, these reporting units would have had fair values below their carrying amounts as of December 31, 2021. The aggregate goodwill and intangible asset balances for these 2 businesses totaled $75.2 million and $10.5 million as of June 30, 2022. Quanta will continue to monitor the goodwill associated with these reporting units, and should they suffer additional declines in actual or forecasted financial results, the risk of goodwill impairment would increase.

8.6. INVESTMENTS IN AFFILIATES AND OTHER ENTITIES:

Equity Investments

The following table presents Quanta’s equity investments by type (in thousands):


	June 30, 2023		December 31, 2022
Equity method investments - integral unconsolidated affiliates	$	95,550	$	101,251
Equity method investments - non-integral unconsolidated affiliates	28,588		55,833
Marketable equity securities	—		—
Non-marketable equity securities	53,624		54,134
Total equity investments	$	177,762	$	211,218

Equity Method Investments

~~The carrying values for Quanta’s unconsolidated~~During the three months ended December 31, 2022, Quanta entered into an agreement to sell one of its non-integral equity method ~~investments~~investments. The transaction was subject to certain customary closing conditions that were ~~$120.6~~satisfied in early 2023. As a result, a $25.9 million ~~and $101.2~~gain was recognized in the fourth quarter of 2022, $10.4 million asof which was attributable to non-controlling interests. During the six months ended June 30, 2023, Quanta received cash of $58.5 million related to the sale of this investment, $9.8 million of which was distributed to non-controlling interests.

As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022, Quanta had receivables of $87.5 million and ~~are~~$96.9 million from its integral affiliates and payables of $11.6 million and $9.3 million to its integral affiliates. Quanta recognizes revenues from services provided to its integral affiliates, primarily for services provided to LUMA at cost. Quanta recognized revenues from such services to its integral affiliates of $50.2 million and $26.4 million during the three months ended June 30, 2023 and 2022 and $98.5 million and $51.5 million during the six months ended June 30, 2023 and 2022. In addition, during the three months ended June 30, 2023 and 2022, Quanta recognized costs of sales of $21.2 million and $21.9 million for services provided by other integral affiliates. During the six months ended June 30, 2023 and 2022, Quanta recognized costs of sales of $33.2 million and $72.3 million for services provided by other integral affiliates.

Total equity in earnings from integral unconsolidated affiliates was $9.4 million and $18.6 million for the three months ended June 30, 2023 and 2022, and $19.0 million and $33.7 million for the six months ended June 30, 2023 and 2022. Total equity in earnings from non-integral unconsolidated affiliates was earnings of $0.5 million and earnings of $9.6 million for the three months ended June 30, 2023 and 2022 and earnings of $2.1 million and $14.9 million for the six months ended June 30, 2023 and 2022 and was included in “Other ~~assets,~~income (expense), net” in the accompanying condensed consolidated ~~balance sheets. Included in the carrying value as~~statements of income. As of June 30, ~~2022 was $70.5~~2023, retained earnings included $16.6 million related to ~~integral~~the undistributed earnings of unconsolidated ~~affiliates~~affiliates.

Marketable Equity Securities

As of June 30, 2023 and ~~$50.1 million~~December 31, 2022, the fair value of Quanta’s investment in equity securities of Starry Group Holdings, Inc. (Starry), which is accounted for as a marketable security, was zero, which included an unrealized loss related to ~~non-integral unconsolidated affiliates, and included in the carrying value as~~these securities of ~~December 31, 2021 was $67.8 million related to integral unconsolidated affiliates and $33.4 million related to non-integral unconsolidated affiliates.~~$91.5 million.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Quanta’s share of net income or losses of these investments is included within operating income in the accompanying condensed consolidated statements of operations when the investee is operationally integral to the operations of Quanta and is reported as “Equity in earnings (losses) of integral unconsolidated affiliates.” Quanta’s share of net income or losses for investments considered non-integral to the operations of Quanta is reported as “Other income (expense), net.”

Quanta’s integral equity method investment balance includes Quanta’s 50% interest in LUMA Energy, LLC (LUMA), which had a carrying investment value of $31.1 million and $30.6 million as of June 30, 2022 and December 31, 2021. During 2020, the LUMA joint venture was selected for a 15-year operation and maintenance agreement to operate, maintain and modernize the approximately 18,000-mile electric transmission and distribution system in Puerto Rico, and in June 2021 LUMA completed the steps necessary to transition operation and maintenance of the system from the owner to LUMA and entered into an interim services agreement. During the interim services period covered by this agreement, LUMA receives a fixed annual management fee, payable in monthly installments, and is reimbursed for costs and expenses. The 15-year operation and maintenance period is scheduled to begin once the owner emerges from its Title III debt restructuring process, and during this period LUMA will continue to be reimbursed for costs and expenses and receive a fixed annual management fee, with the opportunity to receive additional annual performance-based incentive fees. LUMA has not assumed and will not assume ownership of the electric transmission and distribution system assets and is not responsible for operation of the power generation assets. Quanta’s ownership interest and participation in LUMA is accounted for as an equity method investment due to Quanta’s and its joint venture partner’s equal ownership of LUMA.

Also included within the integral equity method investment balances described above is Quanta’s 44% interest in an entity that provides right-of-way solutions, including site preparation and clearing, materials delivery and installation and management of permitting requirements and traffic control. Quanta acquired this interest in October 2021, and the carrying value of the investment was $26.8 million and $28.5 million as of June 30, 2022 and December 31, 2021.

As of June 30, 2022, Quanta had receivables of $59.3 million and payables of $12.9 million from its integral unconsolidated affiliates. As of December 31, 2021, Quanta had receivables of $49.0 million and payables of $56.3 million from its integral unconsolidated affiliates. During the three and six months ended June 30, 2022, Quanta recognized revenues of $26.4 million and $51.5 million and costs of sales of $21.9 million and $72.3 million related to transactions with its integral unconsolidated affiliates.

~~Equity Securities~~

As of June 30, 2022, the carrying value for an investment accounted for using the accounting guidance for equity securities with a readily determinable fair value was $41.5 million, which is described further below; and the carrying value for investments accounted for using the accounting guidance for equity securities without a readily determinable fair value was $28.6 million. This is compared to the carrying value of investments as of December 31, 2021 of $130.2 million for equity securities without readily determinable fair values. These amounts are included in “Other assets, net” in the accompanying condensed consolidated balance sheets.

During the three months ended March 31, 2021, Quanta acquired a preferred non-controlling interest in a broadband technology provider for $90.0 million. In March 2022, pursuant to the terms of an agreement and plan of merger with a special purpose acquisition company, the broadband technology provider became Starry Group Holdings, Inc. (Starry), a publicly traded company, and Quanta’s preferred equity interest converted to a common equity interest, without preferential liquidation rights, in the publicly traded company. Additionally, in March 2022, Quanta acquired an additional common equity interest in Starry for $1.5 million. Quanta remeasured the fair value of this investment based on the market price of Starry’s common stock as of June 30, 2022, which resulted in $41.7 million and $50.0 million decreases in value for the three and six months ended June 30, 2022. As of June 30, 2022, the fair value of the investment balance was $41.5 million. The change in fair value was recorded within “Other income (expense), net” on Quanta’s condensed consolidated statements of operations for the three and six months ended June 30, 2022. Additionally, substantially all of the shares of common equity held by Quanta in Starry remain subject to a lock-up period that restricts the transfer of such shares for 180 days after March 29, 2022.

During the three months ended March 31, 2022, Quanta sold its non-controlling ownership interest in a technology company and recognized a gain of $6.7 million ($5.0 million, net of tax expense). The gain was recorded in “Other income (expense), net.”

~~Investment in Real Property~~

During the three months ended March 31, 2021, Quanta also purchased, through its wholly-owned captive insurance company, certain real property, including associated buildings and facilities, that is being developed for its future corporate headquarters. A portion of this property is currently leased to third-party lessees and is expected to continue to be leased to

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

third-party lessees for the foreseeable future. As a result, an investment in real estate in the amount of $23.5 million was recognized at cost for the third-party leased portion of the property during the three months ended March 31, 2021, and the carrying amount of $24.3 million is included in “Other assets, net” in the accompanying condensed consolidated balance sheet as of June 30, 2022.

9.7. PER SHARE INFORMATION:

The amounts used to compute basic and diluted earnings per share attributable to common stock consisted of the following (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Amounts attributable to common stock:
Net income attributable to common stock $ 88,020 $ 117,033 $ 172,661 $ 206,794
Weighted average shares:
Weighted average shares outstanding for basic earnings per share attributable to common stock 143,851 140,276 143,697 140,199
Effect of dilutive unvested non-participating stock-based awards 4,360 4,331 4,630 4,324
Weighted average shares outstanding for diluted earnings per share attributable to common stock 148,211 144,607 148,327 144,523

Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Additionally, unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock included 0.1 million and 0.6 million weighted average participating securities for the three months ended June 30, 2022 and 2021 and 0.2 million and 0.8 million weighted average participating securities for the six months ended June 30, 2022 and 2021.

For purposes of calculating diluted earnings per share attributable to common stock, there were no adjustments required to derive Quanta’s net income attributable to common stock. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Amounts attributable to common stock:
Net income attributable to common stock	$	165,899	$	88,020	$	260,945	$	172,661

Weighted average shares:
Weighted average shares outstanding for basic earnings per share attributable to common stock	145,422		143,851		144,947		143,697
Effect of dilutive unvested non-participating stock-based awards	3,351		4,360		3,770		4,630
Weighted average shares outstanding for diluted earnings per share attributable to common stock	148,773		148,211		148,717		148,327

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~10.~~8. DEBT OBLIGATIONS:

Quanta’s long-term debt obligations consisted of the following (in thousands):

June 30, 2022 December 31, 2021
0.950% Senior Notes due October 2024 $ 500,000 $ 500,000
2.900% Senior Notes due October 2030 1,000,000 1,000,000
2.350% Senior Notes due January 2032 500,000 500,000
3.050% Senior Notes due October 2041 500,000 500,000
Borrowings under senior credit facility 1,333,185 1,199,841
Other long-term debt 89,272 64,800
Finance leases 3,431 2,546
Unamortized discount and debt issuance costs related to senior notes and term loan (27,432) (29,295)
Total long-term debt obligations 3,898,456 3,737,892
Less — Current maturities of long-term debt 27,162 13,418
Total long-term debt obligations, net of current maturities $ 3,871,294 $ 3,724,474

~~Quanta’s current maturities of long-term debt and short-term debt consisted of the following (in thousands):~~

June 30, 2022 December 31, 2021
Short-term debt $ — $ 15,748
Current maturities of long-term debt 27,162 13,418
Current maturities of long-term debt and short-term debt $ 27,162 $ 29,166


	June 30, 2023		December 31, 2022
0.950% Senior Notes due October 2024	$	500,000	$	500,000
2.900% Senior Notes due October 2030	1,000,000		1,000,000
2.350% Senior Notes due January 2032	500,000		500,000
3.050% Senior Notes due October 2041	500,000		500,000
Borrowings under senior credit facility (including Term Loan)	958,065		786,910
Borrowings under commercial paper program	699,200		373,000
Other long-term debt	97,117		92,907
Finance leases	28,367		3,542
Unamortized discount and financing costs	(24,978)		(26,432)
Total long-term debt obligations	4,257,771		3,729,927
Less — Current maturities of long-term debt	41,249		37,495
Total long-term debt obligations, net of current maturities	$	4,216,522	$	3,692,432

Senior Notes

The interest amounts due on Quanta’s senior notes on each payment date are set forth below (dollars in thousands).:

Title of the Notes

Interest Amount

Payment Dates

Commencement Date

0.950% Senior Notes due October 2024

2,375

April 1 and October 1

April 1, 2022

2.900% Senior Notes due October 2030

14,500

April 1 and October 1

April 1, 2021

2.350% Senior Notes due January 2032

5,875

January 15 and July 15

July 15, 2022

3.050% Senior Notes due October 2041

7,625

April 1 and October 1

April 1, 2022

The fair value of Quanta’s senior notes was $2.06 billion as of June 30, 2023, compared to a carrying value of $2.48 billion net of unamortized bond discount, underwriting discounts and deferred financing costs of $22.1 million. The fair value of the senior notes is based on the quoted market prices for the same issue, and the senior notes are categorized as Level 1 liabilities.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Senior Credit Facility

The credit agreement for Quanta’s senior credit facility ~~(the~~(as amended, the credit agreement) provides for a $750.0 million term loan facility and aggregate revolving commitments of $2.64 billion, with a maturity date of October 8, 2026. Borrowings under the senior credit facility and the applicable interest rates were as follows (dollars in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Maximum amount outstanding under the senior credit facility during the period $ 1,597,744 $ 576,993 $ 1,597,744 $ 576,993
Average daily amount outstanding under the senior credit facility $ 1,466,146 $ 449,132 $ 1,361,728 $ 332,409
Weighted-average interest rate of the senior credit facility 2.32 % 1.90 % 2.04 % 1.99 %


	Six Months Ended
	June 30,
		2023			2022
Maximum amount outstanding		$	987,348		$	1,597,744
Average daily amount outstanding		$	909,662		$	1,361,728
Weighted-average interest rate		6.22		%	2.04		%

The credit agreement contains certain covenants, including, as of the end of any fiscal quarter of Quanta, (i) a maximum Consolidated Leverage Ratio (as defined in the credit agreement) of 3.5 to 1.0 (except that in connection with certain permitted acquisitions in excess of $200.0 million, such ratio is 4.0 to 1.0 for the fiscal quarter in which the acquisition is completed and the 4 subsequent fiscal quarters) and (ii) a minimum Consolidated Interest Coverage Ratio (as defined in the credit

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~agreement) of 3.0 to 1.0.~~ As of June 30, ~~2022,~~2023, Quanta was in compliance with all of the financial covenants under the credit agreement.

Term Loan. As of June 30, ~~2022,~~2023, Quanta had ~~$750.0~~$740.6 million outstanding under its term loan facility. The carrying amount of the term loan facility requires quarterly principal payments on the first business day of each January, April, July and October, beginning in January 2023, in the amount of $4.7 million per quarter in 2023 and 2024, $9.4 million per quarter in 2025 and $18.8 million per quarter in 2026. The aggregate remaining principal amount outstanding must be paid by the maturity date of theunder Quanta’s senior credit ~~facility.~~facility approximates fair value due to its variable interest rate.

Revolving Loans. As of June 30, ~~2022,~~2023, Quanta had ~~$583.2~~$217.4 million of outstanding revolving loans under the senior credit ~~facility. Of the total outstanding borrowings, $225.0 million were denominated in U.S. dollars, $334.0 million~~facility, all of which were denominated in Canadian ~~dollars and $24.2 million were denominated in Australian~~ dollars. The carrying amounts of the revolving borrowings under Quanta’s senior credit facility approximate fair value, as all revolving borrowings have a variable interest rate.

As of June 30, ~~2022,~~2023, Quanta also had ~~$430.5~~$312.7 million of letters of credit issued under the senior credit facility, of which ~~$335.0~~$223.2 million were denominated in U.S. dollars and ~~$95.5~~$89.5 million were denominated in currencies other than the U.S. dollar, primarily Australian and Canadian dollars. ~~As of June 30, 2022, subject to the applicable sublimits and other terms and conditions, the remaining $1.63 billion of~~Additionally, available commitments for revolving loans under the senior credit facility ~~was~~must be maintained in order to provide credit support for notes issued under Quanta’s commercial paper program, and therefore such notes effectively reduce the available borrowing capacity under the senior credit facility.

As of June 30, 2023, $1.41 billion remained available under the senior credit facility for new revolving loans, or letters of credit ~~in U.S. dollars~~ and ~~certain alternative currencies.~~support of the commercial paper program.

Deferred Financing Costs. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, capitalized deferred financing costs, net of accumulated amortization, related to Quanta’s revolving loans under its senior credit facility and commercial paper program were ~~$9.0~~$7.2 million and ~~$10.1~~$8.3 million and are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. Amortization of deferred financing costs for all debt instruments is included in interest and other financing expenses and was $1.5 million and $1.5 million for the three months ended June 30, 2023 and 2022, and $3.0 million and $2.9 million for the six months ended June 30, 2023 and 2022.

Commercial Paper Program

Quanta had $699.2 million of outstanding notes under its unsecured commercial paper program as of June 30, 2023, with a weighted average interest rate of 5.95% and a weighted average maturity of 21 days as of such date. The carrying amounts of the notes issued under Quanta’s commercial paper program approximate fair value, as all notes currently have a short maturity.

Borrowings under the commercial paper program and the applicable interest rates were as follows (dollars in thousands):


	Six Months Ended
	June 30, 2023
Maximum amount outstanding		$	841,400
Average daily amount outstanding		$	622,756
Weighted-average interest rate		5.64		%

Additional Letters of Credit

As of June 30, 2023 Quanta had $212.8 million of surety-backed letters of credit issued outside of its senior credit facility, which were denominated in U.S. dollars.

~~11.~~

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

9. LEASES:

Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):


			Three Months Ended				Six Months Ended						Three Months Ended				Six Months Ended
			June 30,				June 30,						June 30,				June 30,
Lease cost	Lease cost	Classification	2022		2021		2022		2021		Lease cost	Classification	2023		2022		2023		2022
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of lease assets	Amortization of lease assets	Depreciation (1)	$	436	$	230	$	876	$	474	Amortization of lease assets	Depreciation (1)	$	1,102	$	436	$	2,013	$	876
Interest on lease liabilities	Interest on lease liabilities	Interest and other financing expenses	28		23		55		50		Interest on lease liabilities	Interest and other financing expenses	299		28		507		55
Operating lease cost	Operating lease cost	Cost of services and Selling, general and administrative expenses	24,248		26,947		49,125		54,723		Operating lease cost	Cost of services and Selling, general and administrative expenses	23,140		24,248		46,363		49,125
Short-term and variable lease cost (2)	Short-term and variable lease cost (2)	Cost of services and Selling, general and administrative expenses	224,088		160,342		443,387		318,241		Short-term and variable lease cost (2)	Cost of services and Selling, general and administrative expenses	249,868		224,088		487,946		443,387
Total lease cost	Total lease cost		$	248,800	$	187,542	$	493,443	$	373,488	Total lease cost		$	274,409	$	248,800	$	536,829	$	493,443

(1) Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.

(2) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant.

During the three months ended June 30, 2022, Quanta recognized a $2.8 million asset impairment charge primarily related to the expected discontinued use of the right-of-use asset associated with its existing corporate headquarters in connection with a planned move to a new headquarters by the end of 2022. This amount is reported as “Asset impairment charges” in the accompanying condensed consolidated statements of operations.

Quanta has entered into arrangements with certain related parties to lease certain real property and facilities. Typically, the parties are employees of Quanta who are also the former owners of businesses acquired by Quanta, and the real properties and facilities continue to be utilized by Quanta subsequent to the acquisitions. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to 10 years, subject to renewal options. Related party lease expense was ~~$3.8~~$3.9 million and ~~$3.2~~$3.8 million for the three months ended June 30, 2023 and 2022 and ~~2021~~$7.8 million and $7.4 ~~million and $8.0~~ million for the six months ended June 30, ~~2022~~2023 and ~~2021.~~

Certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. When these purchase options are exercised and a substantive benefit is deemed to be

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

transferred to a third-party lessor, the transaction is deemed to be a financing transaction for accounting purposes, which results in the recognition of an asset equal to the purchase price in “Property, plant and equipment, net of accumulated depreciation,” and a corresponding liability in “Current maturities of long-term debt and short-term debt” and “Long-term debt, net of current maturities.” As of June 30, 2022 and December 31, 2021, the assets recorded related to these financing transactions, net of accumulated depreciation, totaled $78.6 million and $53.9 million.2022.

Future minimum lease payments for operating ~~and~~leases, finance leases and lease financing transactions were as follows (in thousands):


		As of June 30, 2022							As of June 30, 2023
		Operating Leases		Finance Leases		Total			Operating Leases		Finance Leases		Lease Financing Transactions		Total
Remainder of 2022		$	43,232	$	740	$	43,972
2023		72,121		1,267		73,388
Remainder of 2023								Remainder of 2023	$	45,285	$	1,488	$	8,361	$	55,134
2024	2024	50,936		745		51,681		2024	75,927		6,504		15,573		98,004
2025	2025	36,345		396		36,741		2025	59,264		6,477		13,831		79,572
2026	2026	25,139		263		25,402		2026	43,129		6,219		14,369		63,717
2027								2027	27,812		5,691		11,756		45,259
Thereafter	Thereafter	29,051		22		29,073		Thereafter	29,696		3,452		25,161		58,309
Total future minimum operating and finance lease payments		256,824		3,433		260,257
Total future minimum payments related to operating leases, finance leases and lease financing transactions								Total future minimum payments related to operating leases, finance leases and lease financing transactions	281,113		29,831		89,051		399,995
Less imputed interest	Less imputed interest	(18,403)		(2)		(18,405)		Less imputed interest	(22,760)		(1,464)		—		(24,224)
Total lease liabilities		$	238,421	$	3,431	$	241,852
Total operating lease, finance lease and lease financing transaction liabilities								Total operating lease, finance lease and lease financing transaction liabilities	$	258,353	$	28,367	$	89,051	$	375,771

Future minimum lease payments for short-term leases ~~which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election,~~ were ~~$14.6~~$19.6 million as of June 30, 2022. Rental expense associated primarily with certain month-to-month equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future amounts associated with such rentals.2023.

The weighted average remaining lease terms and discount rates were as follows:

As of June 30, ~~2022~~2023

Weighted average remaining lease term (in years):

Operating leases

~~4.21~~4.26

Finance leases

~~2.94~~5.60

Weighted average discount rate:

Operating leases

~~3.6~~3.9

Finance leases

~~3.2~~6.1

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Quanta has also guaranteed the residual value under certain of its equipment operating leases and real estate finance leases, agreeing to pay any difference between the residual value and the fair market value of the underlying asset at the date of lease termination. ~~As of June 30, 2022,~~Historically, the ~~maximum guaranteed residual~~fair value of ~~this equipment was $945.8 million. While Quanta believes that no significant payments will be made as a result~~the assets at the time of ~~these~~lease termination generally has approximated or exceeded the residual value guarantees, ~~there can be no assurance that~~and therefore such guarantees are not expected to result in significant ~~payments will not be required in the future.~~

During the three months ended March 31, 2022, Quanta entered into a real estate lease that has not yet commenced. The lease agreement also contains a purchase option in the amount of $53.7 million that can be exercised during 2022.payments.

~~12.~~10. INCOME TAXES:

Quanta’s effective tax rates for the three months ended June 30, 2023 and 2022 were 29.4% and ~~2021 were~~ 30.0% ~~and 25.6%~~. Quanta’s effective tax rate for the three months ended June 30, 2022 was unfavorably impacted by losses on marketable securities for which a valuation allowance was recorded, which is further described below. The tax rate for the three months ended June 30, 2021 was favorably impacted by $4.2 million of tax benefits associated with deferred compensation plan investments. Quanta’s effective tax rates for the six months ended June 30, 2023 and 2022 were 20.0% and ~~2021 were~~ 20.9% ~~and 20.6%~~. The tax ~~rate~~rates for the six months ended June 30, 2023 and 2022 ~~was also~~were favorably impacted by the recognition of a$32.4 million and $21.2 million ~~tax benefit~~of benefits that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair ~~market value, as compared to~~value. The effective tax rates for the ~~recognition of $18.4 million associated with this tax benefit for the~~three and six months ended June 30, ~~2021.~~

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

2022 were unfavorably impacted by the valuation allowance on the losses on Starry, which is further described below.

Quanta regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs from these estimates, Quanta may not realize deferred tax assets to the extent estimated. During the three and six months ended June 30, 2022, Quanta recognized $41.7 million and $50.0 million of unrealized losses on its investment in ~~Starry. These losses created~~Starry and recorded a ~~deferred tax asset; however, since Quanta currently has no readily available means to utilize the capital loss, a full~~ valuation allowance onagainst such unrealized losses. During the ~~deferred~~three months ended March 31, 2023, Starry filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, as amended. Upon resolution of the bankruptcy proceedings, a portion of Quanta’s unrealized losses may become deductible for income tax ~~asset has been included in its annual estimated effective tax rate.~~purposes.

As of June 30, ~~2022,~~2023, the total amount of unrecognized tax benefits relating to uncertain tax positions was ~~$42.3~~$46.3 million, ana net increase of ~~$4.6~~$4.7 million from December 31, ~~2021,~~2022, which isprimarily resulted from a $4.7 million increase related to positions expected to be ~~recognized~~taken in ~~2022. Quanta’s consolidated federal income tax return for tax year 2019 is currently under examination by the Internal Revenue Services (IRS), and~~2023. Quanta’s consolidated federal income tax returns for tax years 2017 ~~2018, 2020 and~~through 2021 remain open to examination by the IRS, as the applicable statute of limitations periods have not yet expired. Additionally, various state and foreign tax returns filed by Quanta and certain subsidiaries for multiple periods remain under examination by various U.S. state and foreign tax authorities. Quanta does not consider any state in which it does business to be a major tax jurisdiction. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to ~~$8.1~~$11.9 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.

~~13.~~11. EQUITY:

Stock ~~repurchases~~Repurchases

On May 23, 2023, Quanta’s Board of Directors approved a new stock repurchase program that authorizes Quanta to purchase, from time to time through June 30, 2026, up to $500 million of its outstanding common stock. The new stock repurchase program became effective on July 1, 2023, upon expiration of Quanta’s existing stock repurchase program.

Quanta repurchased the following shares of common stock in the open market under its stock repurchase ~~programs~~program (in thousands):

Quarter ended: Shares Amount
June 30, 2022 731 $ 84,884
March 31, 2022 85 $ 10,426
December 31, 2021 — $ —
September 30, 2021 185 $ 16,828
June 30, 2021 314 $ 29,450
March 31, 2021 222 $ 17,710


Quarter ended:	Shares	Amount
June 30, 2023	—	$	—
March 31, 2023	—	—
December 31, 2022	87	$	11,403
September 30, 2022	158	$	21,033
June 30, 2022	731	$	84,884
March 31, 2022	85	$	10,426

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Quanta’s policy is to record a stock repurchase as of the trade date of the transaction; however, the payment of cash related to the repurchase is made on the settlement date of the transaction. During the three and six month ended June 30, 2023, Quanta did not make any cash payments related to stock repurchases. During the three and six months ended June 30, 2022, ~~and 2021,~~ cash payments related to stock repurchases were $84.9 million and ~~$29.4 million and during the six months ended June 30, 2022 and 2021, cash payments related to stock repurchases were~~ $94.4 ~~million and $48.9~~ million. Repurchases may be implemented through open market repurchases or privately negotiated transactions, at management’s discretion, based on market and business conditions, applicable contractual and legal requirements, including restrictions under Quanta’s senior credit facility, and other factors. Quanta is not obligated to acquire any specific amount of common stock, and the repurchase program may be modified or terminated by Quanta’s Board of Directors at any time at its sole discretion and without notice.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Dividends

Quanta declared and paid the following cash dividends and cash dividend equivalents during ~~2021~~2022 and the first six months of ~~2022~~2023 (in thousands, except per share amounts):


Declaration	Declaration	Record	Payment	Dividend		Dividends		Declaration	Record	Payment	Dividend		Dividends
Date	Date	Date	Date	Per Share		Declared		Date	Date	Date	Per Share		Declared

May 23, 2023								May 23, 2023	July 3, 2023	July 14, 2023	$	0.08	$	11,893
March 29, 2023								March 29, 2023	April 10, 2023	April 18, 2023	$	0.08	$	12,100
December 13, 2022								December 13, 2022	January 3, 2023	January 13, 2023	$	0.08	$	11,756
August 31, 2022								August 31, 2022	October 3, 2022	October 14, 2022	$	0.07	$	10,322
May 27, 2022	May 27, 2022	July 1, 2022	July 15, 2022	$	0.07	$	10,283	May 27, 2022	July 1, 2022	July 15, 2022	$	0.07	$	10,283
March 30, 2022	March 30, 2022	April 11, 2022	April 18, 2022	$	0.07	$	10,459	March 30, 2022	April 11, 2022	April 18, 2022	$	0.07	$	10,459
December 1, 2021		January 4, 2022	January 14, 2022	$	0.07	$	10,363
August 27, 2021		October 1, 2021	October 15, 2021	$	0.06	$	8,638
May 27, 2021		July 1, 2021	July 15, 2021	$	0.06	$	8,650
March 25, 2021		April 6, 2021	April 15, 2021	$	0.06	$	8,429

~~14.~~12. STOCK-BASED COMPENSATION:

Quanta has stock-based compensation awards outstanding under 2 equity incentive plans, the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan and the Quanta Services, Inc. 2019 Omnibus Equity Incentive Plan. For descriptions and further information regarding these plans, refer to Note 14 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report.~~

Restricted Stock Units (RSUs) to be Settled in Common Stock

A summary of the activity for RSUs to be settled in common stock for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows (RSUs in thousands):


		2022		2021			2023		2022
		RSUs	Weighted Average Grant Date Fair Value (Per Unit)	RSUs	Weighted Average Grant Date Fair Value (Per Unit)		RSUs	Weighted Average Grant Date Fair Value (Per Unit)	RSUs	Weighted Average Grant Date Fair Value (Per Unit)
Unvested at January 1	Unvested at January 1	3,880	$61.64	3,869	$37.57	Unvested at January 1	3,263	$78.74	3,880	$61.64
Granted	Granted	801	$110.73	929	$82.57	Granted	635	$158.93	801	$110.73
Vested	Vested	(1,200)	$48.96	(1,375)	$36.85	Vested	(1,159)	$67.23	(1,200)	$48.96
Forfeited	Forfeited	(98)	$77.41	(85)	$44.60	Forfeited	(101)	$111.48	(98)	$77.41
Unvested at June 30	Unvested at June 30	3,383	$77.47	3,338	$50.26	Unvested at June 30	2,638	$102.44	3,383	$77.47

~~The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant.~~ The approximate fair value of RSUs that vested during the six months ended June 30, 2023 and 2022 ~~and 2021~~ was ~~$135.7~~$182.8 million and ~~$115.1~~$135.7 million.

During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, Quanta recognized ~~$40.5~~$47.1 million and ~~$31.6~~$40.5 million of non-cash stock compensation expense related to RSUs to be settled in common stock. ~~Such expense is recorded in “Selling, general and administrative expenses.”~~ As of June 30, ~~2022,~~2023, there was ~~$177.1~~$182.9 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of ~~3.95~~3.41 years.

2826

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Performance Stock Units (PSUs) to be Settled in Common Stock

A summary of the activity for PSUs to be settled in common stock for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows (PSUs in thousands):


		2022		2021			2023		2022
		PSUs	Weighted Average Grant Date Fair Value (Per Unit)	PSUs	Weighted Average Grant Date Fair Value (Per Unit)		PSUs	Weighted Average Grant Date Fair Value (Per Unit)	PSUs	Weighted Average Grant Date Fair Value (Per Unit)
Unvested at January 1	Unvested at January 1	931	$47.27	1,047	$37.65	Unvested at January 1	733	$65.39	931	$47.27
Granted	Granted	148	$119.04	174	$90.44	Granted	177	$174.50	148	$119.04
Vested	Vested	(334)	$40.15	(268)	$38.28	Vested	(413)	$35.12	(334)	$40.15
Forfeited	Forfeited	(17)	$58.79	(11)	$36.90	Forfeited	(3)	$90.36	(17)	$58.79
Unvested at June 30	Unvested at June 30	728	$64.83	942	$47.27	Unvested at June 30	494	$129.66	728	$64.83

The grant date fair value for PSUs is determined as follows: (i) for the portion of the awards based on company financial and operational performance metrics, by utilizing the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. The Monte Carlo simulation valuation methodology applied the following key inputs:


		2022		2021			2023		2022
Valuation date price based on March 2, 2022 and March 25, 2021 closing stock prices of Quanta common stock		$110.24		$83.48
Expected volatility		39	%	36	%
Valuation date price based on March 9, 2023 and March 2, 2022 closing stock prices of Quanta common stock						Valuation date price based on March 9, 2023 and March 2, 2022 closing stock prices of Quanta common stock	$160.55		$110.24
Historical volatility						Historical volatility	35	%	39	%
Risk-free interest rate	Risk-free interest rate	1.64	%	0.26	%	Risk-free interest rate	4.62	%	1.64	%
Term in years	Term in years	2.83		2.77		Term in years	2.81		2.83

During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, Quanta recognized ~~$10.6~~$15.0 million and ~~$11.0~~$10.6 million of non-cash stock compensation expense related to PSUs to be settled in common stock. ~~Such expense is recorded in “Selling, general and administrative expenses.”~~ As of June 30, ~~2022,~~2023, there was an estimated ~~$29.0~~$43.4 million of total unrecognized compensation expense related to unearned and unvested ~~PSUs, which~~PSUs. This amount is based on ~~the~~ forecasted attainment of performance metrics ~~associated with unearned~~ and ~~unvested PSUs and includes~~ estimated forfeitures of unearned and unvested PSUs. The compensation expense related to outstanding PSUs can vary from period to period based on changes in forecasted achievement of established performance goals and the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such PSUs. This cost is expected to be recognized over a weighted average period of ~~1.96~~1.97 years.

During each of the six months ended June 30, 2023 and 2022, ~~and 2021,~~ 0.7 ~~million and 0.5~~ million shares of common stock were earned and either issued or deferred for future issuance under Quanta’s deferred compensation plans in connection with PSUs. The approximate fair values of PSUs earned during the six months ended June 30, 2023 and 2022 ~~and 2021~~ were ~~$72.4~~$115.5 million and ~~$45.2~~$72.4 million.

RSUs to be Settled in Cash

During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, compensation expense related to RSUs to be settled in cash was ~~$6.7~~$8.6 million and ~~$8.4~~$6.7 million. ~~Such expense is recorded in “Selling, general and administrative expenses.”~~ RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is calculated at the end of each reporting period based on the market value of Quanta’s common stock and is classified as a liability. Quanta paid ~~$8.7~~$9.7 million and ~~$7.9~~$8.7 million to settle liabilities related to cash-settled RSUs in the six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were ~~$8.3~~$10.3 million and ~~$11.1~~$11.0 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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~~15.~~13. EMPLOYEE BENEFIT PLANS:

~~Collective Bargaining Agreements and Multiemployer Pension Plans~~

Certain of Quanta’s operating companies are parties to collective bargaining agreements with unions that represent certain of their employees. Quanta contributes to a number of multiemployer defined benefit pension plans pursuant to the terms of these collective bargaining agreements. For descriptions and further information regarding these plans and Quanta’s contributions, refer to Note 15 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report.~~

~~Quanta 401(k) Plan~~

Quanta maintains a 401(k) plan pursuant to which employees who are not provided retirement benefits through a collective bargaining agreement may make contributions through payroll deductions. For descriptions and further information regarding this plan and Quanta’s contributions, refer to Note 15 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report.~~

Deferred Compensation Plans

Quanta maintains non-qualified deferred compensation plans under which eligible directors and key employees may defer their receipt of certain cash compensation and/or the settlement of certain stock-based awards. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the liability related to deferred cash compensation ~~liability~~ under ~~Quanta’s deferred compensation~~these plans, including amounts contributed by Quanta, was ~~$64.7~~$81.4 million and ~~$74.2~~$67.4 million, the majority of which was included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. Additionally, as of June 30, 2023 and December 31, 2022, the settlement and issuance of 207,512 and 252,026 shares of common stock underlying certain stock-based awards had been deferred under these plans, and such issuances are scheduled to occur in future periods.

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To provide for future obligations related to ~~these~~ deferred cash compensation under these plans, Quanta has invested in corporate-owned life insurance (COLI) policies covering certain participants in the deferred compensation plans, the underlying investments of which are intended to be aligned with the investment alternatives elected by plan participants. The COLI assets are recorded at their cash surrender value, which is considered their fair market value, and as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair market values were ~~$62.2~~$76.6 million and ~~$73.8~~$64.0 million and were included in “Other assets, net” in the accompanying condensed consolidated balance sheets. The level of inputs for these fair value measurements is Level 2.

Changes in the fair market value of Quanta’s COLI assets and deferred compensation liabilities largely offset and are recorded in the accompanying statements of operations is as follows (in thousands):


			Three Months Ended				Six Months Ended						Three Months Ended				Six Months Ended
			June 30,				June 30,						June 30,				June 30,
Classification	Classification	Change in fair market value of	2022		2021		2022		2021		Classification	Change in fair market value of	2023		2022		2023		2022
Gain (loss) included in Selling, general and administrative expenses		Deferred compensation liabilities	$	10,110	$	(3,639)	$	14,037	$	(5,989)
(Loss) gain included in Selling, general and administrative expenses											(Loss) gain included in Selling, general and administrative expenses	Deferred compensation liabilities	$	(4,103)	$	10,110	$	(8,310)	$	14,037
Other income (expense), net	Other income (expense), net	COLI assets	$	(10,164)	$	3,881	$	(14,304)	$	5,469	Other income (expense), net	COLI assets	$	3,266	$	(10,164)	$	6,412	$	(14,304)

~~16.~~14. COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

Quanta is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible.

The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success and taking into account, among other things, negotiations with claimants, discovery, settlements and payments, judicial rulings, arbitration and mediation decisions, advice of internal and external legal counsel, and other information and events pertaining to a particular matter. Costs incurred for litigation are expensed as incurred. Except as otherwise stated below, none of these proceedings are expected to have a material

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~~(Unaudited)~~

adverse effect on Quanta’s consolidated financial position, results of operations or cash flows. However, management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.

Peru Project Dispute

In 2015, Redes Andinas de Comunicaciones S.R.L. (Redes), a majority-owned subsidiary of Quanta, entered into two separate contracts with an agency of the Peruvian Ministry of Transportation and Communications (MTC), currently Programa Nacional de Telecomunicaciones (PRONATEL), as successor to Fondo de Inversion en Telecomunicaciones (FITEL), pursuant to which Redes would design, construct and operate certain telecommunication networks in rural regions of Peru. The aggregate consideration provided for in the contracts was approximately $248 million, consisting of approximately $151 million to be paid during the construction period and approximately $97 million to be paid during a 10-year post-construction operation and maintenance period. At the beginning of the project, FITEL made advance payments totaling approximately $87 million to Redes, which were secured by two on-demand advance payment bonds posted by Redes to guarantee proper use of the payments in the execution of the project. Redes also provided two on-demand performance bonds in the aggregate amount of $25 million to secure performance of its obligations under the contracts.

During the construction phase, the project experienced numerous challenges and delays, primarily related to issues which Quanta believes were outside of the control of and not attributable to Redes, including, among others, weather-related issues, local opposition to the project, permitting delays, the inability to acquire clear title to certain required parcels of land and other delays which Quanta believes were attributable to FITEL/PRONATEL. In response to various of these challenges and delays, Redes requested and received multiple extensions to certain contractual deadlines and relief from related liquidated damages.

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However, in April 2019, PRONATEL provided notice to Redes claiming that Redes was in default under the contracts due to the delays and that PRONATEL would terminate the contracts if the alleged defaults were not cured. Redes responded by claiming that it was not in default, as the delays were due to events not attributable to Redes, and therefore PRONATEL was not entitled to terminate the contracts. PRONATEL subsequently terminated the contracts for alleged cause prior to completion of Redes’ scope of work, exercised the on-demand performance bonds and advance payment bonds against Redes, and indicated its intention to claim damages, including ~~a verbal allegation of approximately $45 million of~~ liquidated damages under the contracts. In August 2020, Redes received a formal claim from PRONATEL for liquidated damages in the amount of approximately $41 million, which represents the U.S. dollar equivalent of the amount asserted based on the June 30, 2022 exchange rate.

In May 2019, Redes filed for arbitration before the Court of International Arbitration of the International Chamber of Commerce (ICC) against PRONATEL and the MTC. In the arbitration, Redes claims that PRONATEL: breached and wrongfully terminated the contracts; wrongfully executed the advance payment bonds and the performance bonds; and is not entitled to the alleged amount of liquidated damages. In addition, Redes is seeking compensation for all damages arising from PRONATEL’s actions, including but not limited to (i) repayment of the amounts collected by PRONATEL under the advance payment bonds and the performance bonds; (ii) payment of amounts owed for work completed by Redes under the contracts; (iii) lost income in connection with Redes’ future operation and maintenance of the networks; and (iv) other related costs and damages to Redes as a result of the breach and improper termination of the contracts (including construction costs caused by the delays and costs related to the transfer of the networks). The amount claimed by Redes in this arbitration is approximately $190 million. In May 2021, PRONATEL and the MTC filed their counter memorial and counterclaims in the ICC arbitration, requesting: (i) that Redes’ claims for breach of contract be rejected; (ii) a declaration that the execution of the advance payment bonds and the performance bonds was valid, and that the funds may be applied towards any debt owed by Redes; (iii) a declaration that the liquidated damages asserted by PRONATEL apply; (iv) that Redes’ claim for payment of amounts owed for work completed as a result of contractual reconciliation of balances be rejected and that any reconciliation of balances approved by the arbitration panel exclude the funds from the performance bonds; (v) that Redes’ claims for damages be rejected; (vi) a declaration that the contract terminations by PRONATEL were valid; and (vii) that Redes reimburse all funds it received from PRONATEL. In addition, PRONATEL alleges that Redes did not satisfy the contractual requirements for the transfer of the networks, which Redes disputes. In July 2021, Redes filed its statement of defense in reply to the counter memorial and counterclaims of PRONATEL and the MTC, in which it disputes all claims made by PRONATEL and the MTC and maintains the positions on its claims against PRONATEL and the MTC in the arbitration. In August 2021, PRONATEL and the MTC filed a rejoinder statement with their position on the merits and damages, which did not present any new claims, and in October 2021, Redes filed a rejoinder with respect to the counterclaims of PRONATEL and the MTC. The arbitration hearing on the merits occurred in the fourth quarter of 2021 and a decision is expected during 2022.

As of the date of the contract terminations, Redes had incurred costs of approximately $157 million related to the design and construction of the project and had received approximately $100 million of payments (inclusive of the approximately $87 million advance payments). ~~Furthermore, upon completion~~

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~~contract terminations) to PRONATEL, which was required upon termination~~ terms of the ~~contracts~~arbitration decision, interest will accrue on the amount owed up to the date of payment.

The decision of the arbitration tribunal is final, with limited grounds on which PRONATEL and ~~was completed~~the MTC may seek to annul the decision in ~~2020,~~Peruvian courts. In December 2022, Redes filed an enforcement proceeding with respect to each project contract to secure recovery of the arbitration award, and PRONATEL and the MTC filed an annulment proceeding with respect to each project contract. The enforcement and annulment proceedings are pending within different commercial courts in Lima, Peru. In April 2023 and August 2023, Redes received favorable rulings in each of the annulment proceedings rejecting the grounds for annulment; however, PRONATEL and the MTC are ~~able~~pursuing, and are expected to ~~possess~~continue to pursue, certain remaining legal challenges to such rulings. Decisions with respect to the ~~networks,~~enforcement proceedings are expected later in 2023. Additionally, in December 2022, following the favorable arbitration ruling, Quanta received $100.5 million pursuant to coverage under an insurance policy for which PRONATEL has paid approximately $100 million while also collecting approximately $112 million of bond proceeds. Quanta believes that PRONATEL’s actions represent an abuse of power and unfair and inequitable treatment and thatthe improper collection by PRONATEL and the MTC have been unjustly enriched. Specifically, under the terms of the contracts, the advance payment bonds were to be exercised only if it is determined that Redes did not use the advance payments for their intended purpose, in which case Redes would be obligated to return the portion of the advance payments not properly used. In connection with PRONATEL exercising the bonds, Redes was not afforded the opportunity to provide evidence of its proper use of the advance payments for project expenditures. Redes has incurred substantially more than the advance payment amounts in the execution of the project, and Quanta believes Redes has used the advance payment amounts for their intended purpose.

Quanta believes Redes is entitled to all amounts described in its claims above. However, as a result of the contract terminations and the inherent uncertainty involved in arbitration proceedings and recovery of amounts owed, there can be no assurance that Redes will prevail on those claims or in defense of liquidated damages claims or any other claims asserted by PRONATEL. As a result, during the three months ended June 30, 2019, Quanta recorded a charge to earnings of $79.2 million, which included a reduction of previously recognized earnings on the project, a reserve against a portion of the project costs incurred through the project termination date, an accrual for a portion of the alleged liquidated damages, and the estimated costs to complete the project turnover and close out the project. The reduction of previously recognized earnings on the project included $14.5 million related to the correction of prior period errors associated with the determination of total estimated project costs and the resulting revenue recognized. Quanta assessed the materiality of the prior period errors and determined that the errors were immaterial individually and in the aggregate to its previously issued financial statements.

As of June 30, 2022, after taking into account the above charge, Quanta had a contract receivable of approximately $120 million related to the project which includes the approximately $87 million PRONATEL collected through exercise of the advance payment ~~bonds. The contract receivable~~and performance bonds, and in January 2023 Quanta received $6.7 million pursuant to coverage under an insurance policy for nonpayment by PRONATEL and the MTC of amounts owed for work completed by Redes. Quanta is continuing to pursue collection of the ICC arbitration award and any amount collected would result in repayment of an equal amount to the insurers up to the amount received from ~~PRONATEL is included in “Other assets, net” in~~ the ~~accompanying condensed consolidated balance sheet as of June 30, 2022.~~insurers.

Quanta also reserves the right to seek full compensation for the loss of its investment under applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with PRONATEL or the MTC. In connection with these rights, in May 2020 Quanta’s Dutch subsidiary delivered to the Peruvian government an official notice of dispute arising from the termination of the contracts and related acts by PRONATEL (which are attributable to Peru) under the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Peru (Investment Treaty). The Investment Treaty protects Quanta’s subsidiary’s indirect ownership stake in Redes and the project, and provides for rights and remedies distinct from the ICC arbitration. In December 2020, Quanta’s Dutch subsidiary filed a request for the institution of an arbitration proceeding against Peru with the International Centre for Settlement of Investment Disputes (ICSID) related to Peru’s breach of the Investment Treaty, which was registered by ICSID in January 2021. In the ICSID arbitration, Quanta’s Dutch subsidiary claims, without limitation, that Peru: (i) treated the subsidiary’s investment in Redes and the project unfairly and inequitably; and (ii) effectively expropriated the subsidiary’s investment in Redes and the project. In addition, Quanta’s Dutch subsidiary is seeking full compensation for all damages arising from Peru’s actions, including but not limited to (i) the fair market value of the investment and/or lost profits; (ii) attorneys’ fees and arbitration costs; (iii) other related costs and damages and (iv) pre- and post-award interest. The ICSID arbitration hearing on the merits occurred in the second quarter of 2023 and a decision is currently expected in the first half of 2024.

IfQuanta believes Redes is entitled to all amounts awarded by the ICC arbitration tribunal, and that its Dutch subsidiary is entitled to other amounts associated with the pending ICSID arbitration proceeding. Quanta and Redes intend to vigorously pursue recovery of the amounts awarded by the ICC arbitration tribunal and take additional legal actions deemed necessary to enforce the ICC arbitration decision. However, due to the inherent uncertainty involved with, among other things, the

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annulment, enforcement and related proceedings, the ultimate timing and conclusion with respect to collection of the amount of the ICC arbitration award remains unknown.

As a result of the contract terminations and the inherent uncertainty involved in arbitration proceedings and recovery of amounts owed, during the three months ended June 30, 2019, Quanta recorded a charge to earnings of $79.2 million, which included a reduction of previously recognized earnings on the project, a reserve against a portion of the project costs incurred through the project termination date, an accrual for a portion of the alleged liquidated damages, and the estimated costs to complete the project turnover and close out the project. Quanta also initially recorded a contract receivable of approximately $120 million related to the project during the three months ended June 30, 2019, which includes the amounts collected by PRONATEL through exercise of the advance payment bonds and performance bonds. As of June 30, 2023, the total amount of the receivable was not changed and is included in “Other assets, net” in the accompanying condensed consolidated balance sheet. Additionally, with respect to the amounts received pursuant to coverage under the insurance policies described above, $107.2 million is included in “Insurance and other non-current liabilities” in the accompanying consolidated balance sheet as of June 30, 2023.

After considering, as discussed above, that the ultimate timing and conclusion with respect to collection of the full amount associated with the ICC arbitration award remains unknown, Quanta has not recognized a gain in the current period. To the extent amounts in excess of the current receivable are determined to be realizable, a gain would be recorded in the period such determination is made. However, if Quanta is ultimately not successful with respect to collection of the ICC arbitration award, through annulment or otherwise, or with respect to its claims in the pending ~~arbitration proceedings, including the ICC~~ICSID arbitration proceeding, ~~held in the fourth quarter of 2021,~~ this matter could result in an additional significant loss that could have a material adverse effect on Quanta’s consolidated results of operations and cash flows. However, based on the information currently available and the status of the pending arbitration proceedings, Quanta is not able to determine a range of reasonably possible additional loss, if any, with respect to this matter.

~~Maurepas Project Dispute~~

During the third quarter of 2017, Maurepas Pipeline, LLC (Maurepas) notified QPS Engineering, LLC (QPS), a subsidiary of Quanta, of its claim for liquidated damages allegedly arising from delay in mechanical completion of a project in Louisiana. Quanta disputes the claim and believes that QPS is not responsible for liquidated damages under the contract terms, and in June 2019 QPS filed suit against SemGroup Corporation (now Energy Transfer LP), the parent company of Maurepas, under the parent guarantee issued to secure payment from Maurepas on the project. QPS is seeking to recover $22 million that it believes has been wrongfully withheld, which represents the maximum liability for liquidated damages pursuant to the contract terms. In July and August 2018, QPS also received notice from Maurepas claiming certain warranty defects on the project. In July 2019, Maurepas filed suit against QPS and Quanta, pursuant to a parent guarantee, for damages related to the alleged

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warranty defects and for a declaratory judgment related to the liquidated damages claim, claiming approximately $59 million in damages related to a portion of the alleged warranty defects. During the second quarter of 2022, Maurepas revised the amount of claimed damages to approximately $48 million. The lawsuits relating to these claims have been consolidated and are pending in the Tulsa County District Court in Oklahoma. Quanta is continuing to evaluate the claimed warranty defects and, if they exist, the appropriate remedy. At this time, Quanta disputes the extent of the alleged defects or has not been able to substantiate them.

As of June 30, 2022, Quanta had recorded an accrual with respect to this matter, which represents its current estimated amount of probable loss. Based on the information currently available, including documentation received in the discovery process, Quanta estimates the range of additional reasonably possible loss in connection with this matter is between no additional loss and the amount claimed by Maurepas with respect to the alleged warranty defects and liquidated damages, less the currently accrued amount. Upon final resolution of this matter, any liquidated damages or warranty defect damages in excess of Quanta’s current loss accrual would be recorded as additional costs on the project.

Lorenzo Benton v. Telecom Network Specialists, Inc., et al.

In June 2006, plaintiff Lorenzo Benton filed a class action complaint in the Superior Court of California, County of Los Angeles, alleging various wage and hour violations against Telecom Network Specialists (TNS), a former subsidiary of Quanta. Quanta retained liability associated with this matter pursuant to the terms of Quanta’s sale of TNS in December 2012. Benton represents a class of workers that includes all persons who worked on certain TNS projects, including individuals that TNS retained through numerous staffing agencies. The plaintiff class in this matter is seeking damages for unpaid wages, penalties associated with the failure to provide meal and rest periods and overtime wages, interest and attorneys’ fees. In January 2017, the trial court granted a summary judgment motion filed by the plaintiff class and found that TNS was a joint employer of the class members and that it failed to provide adequate meal and rest breaks and failed to pay overtime wages. During 2019 and 2020, the parties filed additional summary judgment and other motions, and a bench trial on liability and damages was held. Liability and damages have been determined by the trial court, with the amount of liability for TNS, including interest through the date of the trial court’s orders, determined to be approximately $9.5 ~~million, which does not include~~million. Separately, in 2022, the court issued a final ruling awarding attorneys’ fees ~~or costs.~~and costs to plaintiffs in the amount of approximately $17.3 million. Quanta ~~believes the court’s decisions on liability and damages are not supported by controlling law and~~ continues to contest its liability and the damages ~~calculation~~calculations asserted by the plaintiff class in this ~~matter.~~matter and believes the court’s decisions on these matters are not supported by controlling law and that attorneys’ fees would only be recoverable by the plaintiff class in the event Quanta’s appeal of the trial court’s rulings on liability and damages is unsuccessful.

Additionally, in November 2007, TNS filed cross complaints for indemnity and breach of contract against the staffing agencies, which employed many of the individuals in question. In December 2012, the trial court heard cross-motions for summary judgment filed by TNS and the staffing agencies pertaining to TNS’s demand for indemnity. The court denied TNS’s motion and granted the motions filed by the staffing agencies; however, the California Appellate Court reversed the trial court’s decision in part and instructed the trial court to reconsider its ruling. In February 2017, the court denied a new motion for summary judgment filed by the staffing companies and has since stated that the staffing companies would be liable to TNS for any damages owed to the class members that the staffing companies employed. However, Quanta currently believes that, due to solvency issues, any contribution from the staffing companies may not be substantial.

The final amount of liability and attorneys’ fees, if any, payable in connection with this matter remains the subject of pending litigation and will ultimately depend on various factors, including the outcome of ~~Quanta’s appeal~~the parties’ appeals of the trial court’s rulings on liability, ~~and~~ damages, ~~a final determination with respect to the amount of any~~and attorneys’ fees ~~or additional~~and costs, ~~or damages owed by Quanta,~~ and the solvency of the staffing agencies. Based on review and analysis of the trial court’s rulings on liability, Quanta does not believe, at this time, that it is probable this matter will result in a material loss. However, if Quanta is unsuccessful in this litigation and the staffing agencies are unable to fund damages owed to class members, based on rulings issued by the trial court, Quanta believes the range of reasonably possible loss to Quanta upon final resolution of this matter could be up to approximately ~~$9.5~~$26.8 million, plus ~~the final amount of~~ any additional attorneys’ fees, interest, and expenses awarded to the plaintiff class. Based on rulings issued by the trial court, Quanta believes the maximum recoverable amount of attorneys’ fees and costs is approximately $17.3 million, and that such maximum amount would only be recoverable in the event Quanta’s appeal of the trial court’s rulings with respect to liability and damages is unsuccessful.

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Hallen Acquisition Assumed Liability

In August 2019, in connection with the acquisition of The Hallen Construction Co., Inc. (Hallen), Quanta assumed certain contingent liabilities associated with a March 2014 natural gas-fed explosion and fire in the Manhattan borough of New York City, New York. The incident resulted in, among other things, loss of life, personal injury and the destruction of 2two buildings and other property damage. After investigation, the National Transportation Safety Board determined that the probable cause of the incident was the failure of certain natural gas infrastructure installed by Consolidated Edison, Inc. (Con Ed) and the failure of certain sewer infrastructure maintained by the City of New York. Pursuant to a contract with Con Ed, Hallen had performed

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certain work related to such natural gas infrastructure and agreed to indemnify Con Ed for certain claims, liabilities and costs associated with its work. Numerous lawsuits are pending in New York state courts related to the incident, which generally name Con Ed, the City of New York and Hallen as defendants. These lawsuits are at various ~~preliminary~~ stages and generally seek unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption.

~~As of June 30, 2022, Quanta had not recorded an accrual related to this matter.~~ Hallen’s liabilities associated with this matter are expected to be covered under applicable insurance policies or contractual remedies negotiated by Quanta with the former owners of Hallen. IfWhen a loss becomes probable and estimable, ~~with respect to this matter,~~ Quanta expects to ~~accrue its~~record an accrual of the estimated liability, ~~and~~offset by a receivable in the same ~~amount. However,~~amount related to such insurance coverage and contractual remedies. As of June 30, 2023, Quanta had not recorded an accrual related to this matter, as the ultimate amount of liability in connection with this matter remains subject to uncertainties associated with pending litigation, including, among other things, the ~~apportionment of liability among the defendants and other responsible parties and the~~ likelihood and potential amount of ~~potential~~ damages ~~claims. As a result,~~that could be asserted or awarded. While Quanta believes the liabilities associated with this matter will not exceed the amount of available insurance coverage and contractual remedies, this matter could result in a loss that is in excess of, or not covered by, such ~~insurance or contractual~~ remedies, which could have a material adverse effect on Quanta’s consolidated financial condition, results of operations and cash flows.

Silverado Wildfire Matter

During 2022 and 2023, two of Quanta’s subsidiaries ~~have~~ received tenders of defense and demands for preservation of evidence from Southern California Edison Company (SCE) related to lawsuits filed infrom April 2021 ~~November 2021 and February 2022~~through July 2023 against SCE and T-Mobile USA, Inc. (T-Mobile) in the Superior Court of California, County of Orange. The lawsuits generally assert property damage and related claims on behalf of certain individuals and subrogation claims on behalf of insurers relating to damages caused by a wildfire that began in October 2020 in Orange County, California (the Silverado Fire) and that is purported to have damaged approximately 13,000 acres. The lawsuits allege the Silverado Fire originated from utility poles in the area, generally claiming that each defendant failed to adequately maintain, inspect, repair or replace its overhead facilities, equipment and utility poles and remove vegetation in the vicinity; that the utility poles were overloaded with equipment from shared usage; and that SCE failed to de-energize its facilities during red flag warnings for a Santa Ana wind event. The lawsuits allege the Silverado Fire started when SCE and T-Mobile equipment contacted each other and note the Orange County Fire Department is investigating whether a T-Mobile lashing wire contacted an SCE overhead primary conductor in high winds. T-Mobile has filed cross-complaints against SCE alleging, among other things, that the ignition site of the Silverado Fire encompassed two utility poles replaced by SCE or a third party engaged by SCE, and that certain equipment, including T-Mobile’s lashing wire, was not sufficiently re-secured after the utility pole replacements. One of Quanta’s subsidiaries performed planning and other services related to the two utility poles, and another Quanta subsidiary replaced the utility poles and reattached the electrical and telecommunication equipment to the new utility poles in March 2019, approximately 19 months before the Silverado Fire. Pursuant to the general terms of a master services agreement and a master consulting services agreement between the Quanta subsidiaries and SCE, the subsidiaries agreed to defend and indemnify SCE against certain claims arising with respect to performance or nonperformance under the agreements. The SCE tender letters seek contractual indemnification and defense from Quanta’s subsidiaries for the claims asserted against SCE in the lawsuits and the T-Mobile cross-complaints.

Quanta’s subsidiaries intend to vigorously defend against the lawsuits, the T-Mobile cross-complaints and any other claims asserted in connection with the Silverado Fire. Quanta will continue to review additional information in connection with this matter as litigation and resolution efforts progress, and any such information may potentially allow Quanta to determine an estimate of potential loss, if any. As of June 30, ~~2022,~~2023, Quanta had not recorded an accrual with respect to this matter, and Quanta is currently unable to reasonably estimate a range of reasonably possible loss, if any, because there are a number of unknown facts and legal considerations that may impact the amount of any potential liability. Quanta also believes that to the extent its subsidiaries are determined to be liable for any damages resulting from this matter, its insurance would be applied to any such liabilities over its deductible amount and its insurance coverage would be adequate to cover such potential liabilities. However, the ultimate amount of any potential liability and insurance coverage in connection with this matter remains subject to uncertainties associated with pending and potential future litigation.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Insurance

Quanta is insured for, among other things, employer’s liability, workers’ compensation, auto liability, aviation and general liability claims. Quanta manages and maintains a portion of its casualty risk indirectly through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs, as well as with respect to certain other amounts.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health claims totaled ~~$323.6~~$322.9 million and ~~$318.2~~$319.6 million, ~~with $214.3~~of which $210.7 million and

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~$238.0~~ $209.8 million ~~considered to be long-term and~~are included in “Insurance and other non-current ~~liabilities.~~liabilities,” and the remainder is included in “Accounts payables and accrued expenses.” Related insurance recoveries/receivables as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$13.0~~$5.3 million and ~~$28.6~~$5.8 million, of which $0.3 million and ~~$0.4~~$0.3 million are included in “Prepaid expenses and other current assets” and ~~$12.7~~$5.0 million and ~~$28.2~~$5.5 million are included in “Other assets, net.”

~~Letters of Credit~~

Certain of Quanta’s vendors require letters of credit to ensure reimbursement for amounts they are disbursing on Quanta’s behalf, such as to beneficiaries under its insurance programs. In addition, from time to time, certain customers require Quanta to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. As of June 30, 2022, Quanta had $430.5 million in outstanding letters of credit under its senior credit facility securing its casualty insurance program and various contractual commitments. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout 2022 and 2023. Quanta expects to renew the majority of the letters of credit related to the casualty insurance program for subsequent one-year periods upon their maturity. Quanta is not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the aggregate.

Bonds and Parent Guarantees

Many customers, particularly in connection with new construction, require Quanta to post performance and payment bonds. These bonds provide a guarantee that Quanta will perform under the terms of a contract and pay its subcontractors and vendors. In certain circumstances, the customer may demand that the surety make payments or provide services under the bond, and Quanta must reimburse the surety for any expenses or outlays it incurs. Quanta may also be required to post letters of credit in favor of the sureties, which would reduce the borrowing availability under its senior credit facility. Quanta has not been required to make any material reimbursements to its sureties for bond-related costs, except the exercise of approximately $112 million advance payment and performance bonds in 2019 related to the terminated telecommunications project in Peru, which is described further in ~~Legal Proceedings – Peru Project Dispute~~ above. However, to the extent further reimbursements are required, the amounts could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows. As of June 30, ~~2022, Quanta is not aware of any outstanding material obligations for payments related to bond obligations, and~~2023, the ~~estimated~~ total amount of the outstanding performance bonds was estimated to be approximately ~~$4.5~~$6.3 billion. Quanta’s estimated maximum exposure related to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately ~~$1.6~~$2.4 billion as of June 30, ~~2022.~~2023.

~~Additionally, from time to time,~~Capital Commitments and Other Committed Expenditures

As of June 30, 2023, Quanta ~~guarantees certain obligations~~had $59.9 million of production orders with expected delivery dates during the remainder of 2023 and ~~liabilities~~$36.5 million of ~~its subsidiaries that may arise~~production orders with expected delivery dates in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. Quanta is not aware of any claims under any guarantees that are material, except as described in ~~Legal Proceedings – Maurepas Project Dispute~~ ~~above.~~

~~Collective Bargaining Agreements and Multiemployer Pension Plans~~

Certain of Quanta’s operating companies are parties to collective bargaining agreements with unions that represent certain of their employees, and from time to time, Quanta is a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements. In addition, Quanta may also be subject to liabilities as a result of its participation in, or withdrawal from, multiemployer defined benefit pension plans. Additional information regarding the agreements and plans associated with these potential obligations is included in Note 15 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report.~~

~~Contingent Consideration Liabilities~~

The terms of certain of Quanta’s acquisition transactions have included the potential payment of contingent consideration. Additional information regarding the liabilities associated with these potential obligations is included in Note 6.

~~Indemnities~~

~~Quanta generally indemnifies its customers~~2024 for the services it provides under its contracts and other specified liabilities, which may subject Quanta to indemnity claims and liabilities and related litigation. Quanta is not aware of any indemnity claims in connection with these obligations that are material, except as described in ~~Legal Proceedings – Silverado Wildfire Matter~~ ~~above.~~

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~Additionally, in the normal course of Quanta’s acquisition transactions, Quanta has granted indemnification rights to various parties against certain potential liabilities~~capital commitments primarily related to the ~~transaction or the acquired business and obtained rights~~expansion of its equipment fleet. The majority of this amount relates to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities, and obligations arising from business operations prior to the date of acquisition. For example, Quanta has obtained certain indemnification rights from the former owners of Hallen with respect to contingent liabilities that were assumed in connection with the acquisition, as described in ~~Legal Proceedings — Hallen Acquisition Assumed Liability~~ ~~above.~~

~~Investments in Affiliates and Other Entities~~

As described in Note 8, Quanta holds investments in various entities, including joint venture entities that provide infrastructure-related services under specific customer contracts and partially owned entities that own, operate and/or maintain certain infrastructure assets. Quanta is not aware of circumstances that would lead to future claims against it for material amounts in connection with joint and several liabilities associated with its joint venture structures.

~~Committed Expenditures~~

~~Quanta has capital commitments for~~ the expansion of ~~its~~Quanta’s equipment fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of June 30, 2022, Quanta had $72.8 million of production orders with expected delivery dates during the remainder of 2022 and $86.5 million of production orders with expected delivery dates in 2023. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available under certain master equipment lease agreements, thereby releasing Quanta from its capital commitments.

~~Residual Value Guarantees~~

As described in Note 11, Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of June 30, 2022, the maximum guaranteed residual value of this equipment was $945.8 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

~~Deferral of Employer Payroll Taxes~~

During 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which provided for various tax relief and tax incentive measures. These measures did not have a material impact on Quanta’s results of operations. However, pursuant to the CARES Act, Quanta deferred the payment of $108.9 million of employer payroll taxes during the year ended December 31, 2020, 50% of which were paid in the year ended December 31, 2021 and the remainder of which is due by December 31, 2022.

~~Employment Agreements~~

Quanta has various employment agreements with certain executives and other employees, which provide for compensation, other benefits and, under certain circumstances, severance payments and post-termination stock-based compensation benefits. Certain employment agreements also contain clauses that require the potential payment of specified amounts to such employees upon the occurrence of a defined change in control event.

~~17. FAIR VALUE MEASUREMENTS:~~

For disclosure purposes, qualifying assets and liabilities are categorized into three broad levels based on the priority of the inputs used to determine their fair values. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Certain assumptions and other information as they relate to these qualifying assets and liabilities are described below.

~~Goodwill and Other Intangible Assets~~

As discussed in Note 6, Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The ~~Goodwill~~ ~~and~~ ~~Other Intangible Assets~~ sections in Notes 2 and 7 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2021 Annual Report provide information regarding valuation methods and assumptions used to determine the fair value of these assets. Quanta periodically engages the

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

services of an independent valuation firm when a new business is acquired to assist management with the valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3).

~~Investments~~

Quanta has various equity investments, which are further described in Note 8. Equity investments with readily determinable fair values are measured and recorded at fair value on a recurring basis, with changes in fair value, whether realized or unrealized, recognized in net income. In cases where those readily determinable values are quoted market prices, the level of input used for these fair value measurements is the highest level (Level 1).

Equity investments without readily determinable fair values and equity method investments are measured on a nonrecurring basis. Equity investments without readily determinable fair values are measured and recorded at cost minus impairment, if any, plus or minus changes from qualifying observable price changes. Equity method investments are measured at cost minus impairment, if any, plus or minus Quanta’s share of equity method investee income or loss. Quanta utilizes the fair value premise as the basis for its impairment valuation and recognizes impairment if there are sufficient indicators that the fair value of the investment is less than its carrying value, and, in the case of equity method investments, if that decline is other-than-temporary. These types of fair market value assessments are similar to other nonrecurring fair value measures used by Quanta, which include the use of significant judgments and available relevant market data. The level of inputs used for these fair value measurements is the lowest level (Level 3).

During the three months ended March 31, 2022, Quanta’s investment in Starry became a common equity interest in a publicly traded company, as further described in Note 8. As a result, the fair value of this investment is remeasured based on the market price of Starry’s common stock at the end of each quarter, which is considered to be its fair value. The level of input used for this fair value measurement is Level 1. Quanta also has COLI policies related to its deferred compensation plan as further described in Note 15. ~~These policies are carried at their cash surrender value, which is considered their fair value. The level of input used for these fair value measurements is Level 2.~~

~~Financial Instruments~~

The carrying amounts of cash equivalents, accounts receivable, contract assets, accounts payable, accrued expenses and contract liabilities approximate fair value due to the short-term nature of these instruments. All of Quanta’s cash equivalents were categorized as Level 1 assets as of June 30, 2022 and December 31, 2021, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access.

~~Contingent Consideration Liabilities~~

Financial instruments required to be measured at fair value on a recurring basis consist primarily of Quanta’s liabilities related to contingent consideration associated with certain acquisitions, payable in the event certain performance objectives are achieved by the acquired businesses during designated post-acquisition periods.

The fair values of these liabilities described in Note 6 were primarily determined using a Monte Carlo simulation valuation methodology based on probability-weighted performance projections and other inputs, including a discount rate and an expected volatility factor for each acquisition. The expected volatility factor was 50.0% based on historical asset volatility of selected guideline public companies. Depending on contingent consideration payment terms, the present values of the estimated payments are discounted based on a risk-free rate and/or Quanta’s cost of debt and ranged from 0.04% to 3.9% and had a weighted average of 2.4% based on the fair value at the dates of the respective acquisitions. The fair value determinations incorporate significant inputs not observable in the market. Accordingly, the level of inputs used for these fair value measurements is the lowest level (Level 3). Significant changes in any of these assumptions could result in a significantly higher or lower potential liability.

~~Long-Term Debt~~

The carrying amount of variable rate debt, which includes borrowings under Quanta’s senior credit facility, approximates fair value. Quanta’s fixed rate debt primarily includes its senior notes. The fair value of Quanta’s senior notes, which are described further in Note 10, was $2.03 billion as of June 30, 2022, compared to a carrying value of $2.47 billion net of unamortized bond discount, underwriting discounts and deferred financing costs of $25.4 million. The fair value of the senior notes is based on the quoted market prices for the same issue, and the senior notes are categorized as Level 1 liabilities. See Note 10 for additional information regarding Quanta’s senior credit facility and senior notes.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~18.~~ DETAIL OF CERTAIN ACCOUNTS:

Cash and Cash Equivalents

~~Amounts related to Quanta’s cash and cash equivalents based on geographic location of the bank accounts were as follows (in thousands):~~

June 30, 2022 December 31, 2021
Cash and cash equivalents held in domestic bank accounts $ 110,203 $ 205,781
Cash and cash equivalents held in foreign bank accounts 40,450 23,316
Total cash and cash equivalents $ 150,653 $ 229,097

~~Quanta considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents, which are carried at fair value.~~ As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, cash equivalents were ~~$66.2~~$197.1 million and ~~$140.0~~$260.1 million and consisted primarily of money market investments and money market mutual ~~funds~~funds. Quanta’s cash equivalents are categorized as Level 1 assets, as all values are based on unadjusted quoted prices for identical assets in an active market. Cash and cash equivalents in foreign bank accounts are ~~discussed further~~primarily held in ~~Note 17.~~Canada and Australia.

Cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to cash and cash equivalents held by a joint venture other than participating in distributions, to the extent made, and in the event of dissolution. Cash and cash equivalents held by Quanta’s wholly-owned captive insurance company are generally not available for use in support of its other operations. Amounts related to cash and cash equivalents held by consolidated or proportionately consolidated joint ventures and the captive insurance company, which are included in Quanta’s total cash and cash equivalents balances, were as follows (in thousands):

June 30, 2022 December 31, 2021
Cash and cash equivalents held by domestic joint ventures $ 20,461 $ 21,828
Cash and cash equivalents held by foreign joint ventures 3,146 3,461
Total cash and cash equivalents held by joint ventures 23,607 25,289
Cash and cash equivalents held by captive insurance company 47,896 133,302
Cash and cash equivalents not held by joint ventures or captive insurance company 79,150 70,506
Total cash and cash equivalents $ 150,653 $ 229,097

~~Accounts Payable and Accrued Expenses~~

~~Accounts payable and accrued expenses consisted of the following (in thousands):~~

June 30, 2022 December 31, 2021
Accounts payable, trade $ 1,337,812 $ 1,251,118
Accrued compensation and related expenses 488,824 547,161
Other accrued expenses 539,701 456,392
Accounts payable and accrued expenses $ 2,366,337 $ 2,254,671


	June 30, 2023		December 31, 2022
Cash and cash equivalents held by domestic joint ventures	$	27,836	$	14,291
Cash and cash equivalents held by foreign joint ventures	4,854		6,277
Total cash and cash equivalents held by joint ventures	32,690		20,568
Cash and cash equivalents held by captive insurance company	33,663		35,085
Cash and cash equivalents not held by joint ventures or captive insurance company	295,613		372,852
Total cash and cash equivalents	$	361,966	$	428,505

3832

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~19.~~Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):


	June 30, 2023		December 31, 2022
Accounts payable, trade	$	1,672,778	$	1,302,086
Accrued compensation and related expenses	469,661		469,048
Other accrued expenses	374,469		381,995
Accounts payable and accrued expenses	$	2,516,908	$	2,153,129

Other accrued expenses primarily include accrued insurance liabilities, income and franchise taxes payable and deferred revenues.

Property and Equipment

Accumulated depreciation related to property and equipment was $1.74 billion and $1.65 billion as of June 30, 2023 and December 31, 2022. In addition, Quanta held property and equipment, net of $278.6 million and $298.0 million in foreign countries, primarily Canada, as of June 30, 2023 and December 31, 2022.

Other Intangible Assets

Accumulated amortization related to other intangible assets was $1.17 billion and $1.02 billion as of June 30, 2023 and December 31, 2022.

16. SUPPLEMENTAL CASH FLOW INFORMATION:

~~The net effects of changes in operating assets and liabilities, net of non-cash transactions, on cash flows from operating activities are as follows (in thousands):~~

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Accounts and notes receivable $ (189,124) $ 76,512 $ (163,942) $ 112,033
Contract assets (42,711) (150,148) (208,260) (212,426)
Inventories (2,376) (5,709) (11,864) (6,144)
Prepaid expenses and other current assets (76,963) (52,297) (55,869) (42,349)
Accounts payable and accrued expenses and other non-current liabilities 115,804 63,982 57,901 59,202
Contract liabilities (47,607) 3,595 (50,404) (25,630)
Other, net (3,857) (978) (3,225) (9,178)
Net change in operating assets and liabilities, net of non-cash transactions $ (246,834) $ (65,043) $ (435,663) $ (124,492)

Reconciliations of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows are as follows (in thousands):


		June 30,					June 30,
		2022		2021			2023		2022
Cash and cash equivalents ~~(1)~~	Cash and cash equivalents ~~(1)~~	$	150,653	$	212,473	Cash and cash equivalents ~~(1)~~	$	361,966	$	150,653
Restricted cash included in “Prepaid expenses and other current assets” ~~(2)~~(1)	Restricted cash included in “Prepaid expenses and other current assets” ~~(2)~~(1)	1,763		1,460		Restricted cash included in “Prepaid expenses and other current assets” ~~(2)~~(1)	5,205		1,763
Restricted cash included in “Other assets, net” ~~(2)~~(1)	Restricted cash included in “Other assets, net” ~~(2)~~(1)	950		782		Restricted cash included in “Other assets, net” ~~(2)~~(1)	1,141		950
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	153,366	$	214,715	Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	368,312	$	153,366

March 31,
2022 2021
Cash and cash equivalents (1)
$ 238,258 $ 200,218
Restricted cash included in “Prepaid expenses and other current assets” (2)
1,628 1,518
Restricted cash included in “Other assets, net” (2)
950 879
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows $ 240,836 $ 202,615


		December 31,					December 31,
		2021		2020			2022		2021
Cash and cash equivalents ~~(1)~~	Cash and cash equivalents ~~(1)~~	$	229,097	$	184,620	Cash and cash equivalents ~~(1)~~	$	428,505	$	229,097
Restricted cash included in “Prepaid expenses and other current assets” ~~(2)~~(1)	Restricted cash included in “Prepaid expenses and other current assets” ~~(2)~~(1)	1,836		1,275		Restricted cash included in “Prepaid expenses and other current assets” ~~(2)~~(1)	3,759		1,836
Restricted cash included in “Other assets, net” ~~(2)~~(1)	Restricted cash included in “Other assets, net” ~~(2)~~(1)	954		913		Restricted cash included in “Other assets, net” ~~(2)~~(1)	950		954
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	231,887	$	186,808	Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	433,214	$	231,887

(1) Cash and cash equivalents as of June 30, 2022 and 2021 includes $47.9 million and $132.0 million held by Quanta’s wholly-owned captive insurance company. Cash and cash equivalents as of March 31, 2022 and 2021 includes $134.8 million and $131.8 million held by Quanta’s wholly-owned captive insurance company. Cash and cash equivalents as of December 31, 2021 and 2020 includes $133.3 million and $85.0 million held by Quanta’s wholly-owned captive insurance company. Such amounts are generally not available for use in support of Quanta’s other operations.

~~(2)~~ Restricted cash includes any cash that is legally restricted as to withdrawal or usage.

3933

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Supplemental cash flow information related to leases ~~and rental purchase options~~ is as follows (in thousands):


		Three Months Ended				Six Months Ended					Six Months Ended
		June 30,				June 30,					June 30,
		2022		2021		2022		2021				2023		2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:									Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	(24,211)	$	(26,789)	$	(49,268)	$	(54,399)
Operating cash flows from finance leases		$	(27)	$	(23)	$	(54)	$	(50)
Financing cash flows from finance leases		$	(362)	$	(271)	$	(727)	$	(520)
Operating cash flows used by operating leases										Operating cash flows used by operating leases		$	(47,470)	$	(49,268)
Operating cash flows used by finance leases										Operating cash flows used by finance leases		$	(507)	$	(54)
Financing cash flows used by finance leases										Financing cash flows used by finance leases		$	(992)	$	(727)
Lease assets obtained in exchange for lease liabilities:	Lease assets obtained in exchange for lease liabilities:									Lease assets obtained in exchange for lease liabilities:
Operating leases	Operating leases	$	15,617	$	6,678	$	24,723	$	24,605	Operating leases		$	52,494	$	24,723
Finance leases	Finance leases	$	116	$	118	$	1,250	$	286	Finance leases		$	25,373	$	1,250
Rental purchase option assets obtained in exchange for rental purchase option liabilities		$	3,920	$	5,577	$	27,153	$	5,880
Lease financing transaction assets obtained in exchange for lease financing transaction liabilities										Lease financing transaction assets obtained in exchange for lease financing transaction liabilities		$	7,136	$	27,153

Additional supplemental cash flow information is as follows (in thousands):


		Three Months Ended				Six Months Ended					Six Months Ended
		June 30,				June 30,					June 30,
		2022		2021		2022		2021				2023		2022
Cash (paid) received during the period for —
Cash (paid) received during the period for:										Cash (paid) received during the period for:
Interest paid	Interest paid	$	(35,489)	$	(18,894)	$	(42,959)	$	(22,933)	Interest paid		$	(78,773)	$	(42,959)
Income taxes paid	Income taxes paid	$	(53,531)	$	(62,883)	$	(58,363)	$	(67,485)	Income taxes paid		$	(128,925)	$	(58,363)
Income tax refunds	Income tax refunds	$	2,513	$	655	$	5,470	$	6,792	Income tax refunds		$	4,037	$	5,470

Accrued capital expenditures were $31.2 million and $27.7 million as of June 30, 2023 and 2022. The impact of these items has been excluded from Quanta’s capital expenditures in the accompanying condensed consolidated statements of cash flows due to their non-cash nature.

4034

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

General

The following discussion and analysis of the financial condition and results of operations of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our ~~2021~~2022 Annual Report, which was filed with the SEC on February ~~25, 2022~~23, 2023 and is available on the SEC’s website at www.sec.gov and on our website at www.quantaservices.com. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in Cautionary Statement About Forward-Looking Statements and Information above, in Item 1A. Risk Factors of Part II of this Quarterly Report and in Item 1A. Risk Factors of Part I of our ~~2021~~2022 Annual Report.

Overview

~~We are a leading provider of specialty contracting~~Our second quarter 2023 results reflect increased demand for our services, ~~delivering comprehensive infrastructure solutions for the utility, renewable energy, communications, pipeline and energy industries~~as revenue increased in ~~the United States, Canada, Australia and select other international markets. The performance~~all of our ~~business generally depends on~~segments as compared to the second quarter of 2022.

With respect to our ability to obtain contracts with customers and to effectively deliver the services provided under those contracts. The services we provide include design, engineering, procurement, new construction, upgrade and repair and maintenance services for infrastructure within each of the industries we serve, such as electric power transmission and distribution networks; substation facilities; wind and solar energy generation and transmission and battery storage facilities; communications and cable multi-system operator networks; gas utility systems; pipeline transmission systems facilities; and downstream industrial facilities. Our customers include many of the leading companies in the industries we serve, and we endeavor to develop and maintain strategic alliances and preferred service provider status with our customers. Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price new construction contracts.

~~Beginning with the three months ended December 31, 2021, we report our results under three reportable segments: (1)~~ Electric Power Infrastructure Solutions (2) Renewable Energy Infrastructure Solutions and (3) Underground Utility and Infrastructure Solutions. In conjunction with this change, certain prior period amounts have been recast to conform to this new(Electric Power) segment, reporting structure. This structure is generally focused on broad end-user markets for our services. Included within the Electric Power Infrastructure Solutions segment are the results related to our communications infrastructure services.

~~Current Quarter Financial Results and Significant Operational Trends and Events~~

~~Key consolidated financial results for the three months ended June 30, 2022 included:~~

•~~Revenues increased 41.1%, or $1.2 billion, to $4.23 billion as compared to consolidated revenues of $3.0 billion for the three months ended June 30, 2021;~~

•~~Operating income increased 28.9%, or $46.7 million, to $208.4 million as compared to $161.7 million for the three months ended June 30, 2021;~~

•Net income attributable to common stock decreased 24.8%, or $29.0 million, to $88.0 million as compared to $117.0 million for the three months ended June 30, 2021, and was substantially impacted by a $41.7 million ($34.7 million net of tax) unrealized loss related to the change in fair value of our investment in a publicly traded company. Additionally, incremental earnings from recently acquired businesses were substantially offset by an $86.7 million increase in amortization expense attributable to recent acquisitions, primarily Blattner;

•~~Diluted earnings per share decreased 27.2%, or $0.22, to $0.59 as compared to $0.81 for the three months ended June 30, 2021;~~

•EBITDA (a non-GAAP financial measure) increased 35.3%, or $89.8 million, to $344.2 million, as compared to $254.4 million for the three months ended June 30, 2021, and adjusted EBITDA (a non-GAAP financial measure) increased 50.0%, or $140.8 million, to $422.1 million, as compared to $281.3 million for the three months ended June 30, 2021;

•Net cash provided by operating activities decreased by 37%, or $70.2 million to $118.7 million, as compared to net cash provided by operating activities of $188.9 million for the three months ended June 30, 2021;

•~~Remaining performance obligations increased 17.4%, or $1.02 billion, to $6.92 billion as of June 30, 2022 as compared to $5.90 billion as of December 31, 2021; and~~

•~~Total backlog (a non-GAAP financial measure) increased 3.0%, or $576.0 million, to $19.85 billion as of June 30, 2022, as compared to $19.27 billion as of December 31, 2021.~~

For a reconciliation of EBITDA and adjusted EBITDA to net income attributable to common stock, the most comparable GAAP financial measure, and a reconciliation of backlog to remaining performance obligations, the most comparable GAAP financial measure, see ~~Non-GAAP Financial Measures~~ ~~below.~~

As described below, during the three months ended June 30, 2022, our results reflected certain significant operational trends and events as compared to the three months ended June 30, 2021, with certain of our segment results of operations recast to conform to our current segment reporting structure.

~~Electric Power Infrastructure Solutions Segment~~

•~~Revenues increased by 21.1% to $2.20 billion, as compared to $1.82 billion.~~

•~~Operating income increased by 12.2% to $232.2 million, as compared to $207.0 million, and operating margin decreased to 10.6%, as compared to 11.4%.~~

•Revenues increased primarily due to increased spending by our utility customers on grid modernization and hardening, as well as approximately $80 million in revenues attributable to acquired businesses.

•~~The increase in operating income was primarily due to the increase in revenues.~~

•The decrease in operating margin was primarily due to the normal variability associated with the overall timing of projects and project mix, as well as inefficiencies attributable to supply chain disruptions impacting certain operations and elevated consumables costs.

~~Renewable Energy Infrastructure Solutions Segment~~

•~~Revenues increased by 178.4% to $924.2 million, as compared to $332.0 million.~~

•~~Operating income increased by 172.9% to $81.7 million, as compared to $29.9 million, and operating margin decreased to 8.8%, as compared to 9.0%.~~

•~~Revenues increased primarily due to approximately $490 million in revenues attributable to acquired businesses, mainly Blattner, which was acquired in October 2021.~~

•~~The increase in operating income was primarily due to the increase in revenues.~~

•The decrease in operating margin was attributable to significant additional costs arising from delays on a large transmission project in Canada that were due to the continued negative impact of the COVID-19 pandemic from the first quarter.

~~Underground Utility and Infrastructure Solutions Segment~~

•~~Revenues increased by 30.1% to $1.11 billion, as compared to $852.0 million.~~

•~~Operating income increased by 275.7% to $89.9 million, as compared to $23.9 million, and operating margin increased to 8.1%, as compared to 2.8%.~~

•Revenues increased primarily due to higher demand from our gas utility and industrial customers, which was largely due to increased demand in connection with previously deferred maintenance and capital spending which had been negatively impacted by the COVID-19 pandemic, as well as an increase in revenues associated with execution on certain large pipeline projects in Canada.

•Operating income and operating margin increased in the three months ended June 30, 2022 due to the increase in revenues and improved performance across the segment, particularly with respect to our industrial services operations. The three months ended June 30, 2021 also included the recognition of a $23.6 million provision for credit loss related to receivables from a customer that declared bankruptcy in July 2021 and its affiliate.

~~See~~ ~~Business Environment, Results of Operations~~ ~~and~~ ~~Liquidity and Capital Resources~~ ~~below for additional information and discussion related to consolidated and segment results.~~

~~Business Environment~~

~~We believe there are long-term growth opportunities across our industries, and we continue to have a positive long-term outlook. Although not without risks and challenges, including those discussed in~~ ~~Cautionary Statement About Forward-Looking Statements and Information,~~ ~~Item 1A.~~ ~~Risk Factors~~ ~~of Part II of this Quarterly Report and Item 1A.~~ ~~Risk Factors~~ ~~of Part I of our~~

2021 Annual Report, we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries.

~~Electric Power Infrastructure Solutions. Utilities~~utilities are continuing to invest significant capital in their electric power delivery systems ~~particularly transmission, substation and distribution infrastructure,~~ through multi-year ~~multi-billion dollar~~ grid modernization and reliability programs, which have provided, and are expected to continue to provide, demand for our services. While the COVID-19 pandemic resulted in a short-term overall decline in electricity usage in 2020, primarily related to commercial and industrial users, demand recovered and continued to increase in 2021, and we expect demand for electricity in North America to grow over the long term and believe that certain segments of the North American electric power grid are not adequate to efficiently serve the power needs of the future. Furthermore, to the extent that electrification trends increase, including through, among other things, electric vehicle (EV) adoption, demand for electricity could be greater than currently anticipated. To accommodate this growth, we expect continued demand for new or expanded transmission, substation and distribution infrastructure to reliably transport power to meet demand driven by electrification and the modification and reengineering of existing infrastructure as existing coal and nuclear generation facilities are retired or shut down. In order to reliably and efficiently deliver power, including in response to federal reliability standards and in preparation for emerging technologies, suchwell as ~~EVs, utilities are also integrating smart grid technologies into distribution systems to improve grid management and create efficiencies.~~

~~A number of utilities also continue to implement~~ system upgrades and hardening programs in response to recurring severe weather ~~events, such as hurricanes~~events. We have also experienced high demand for new and wildfires. For example, utilities along the Eastern and Gulf Coasts of the United States are executing storm hardening programs to make their systems more resilient to hurricanes and other severe weather events, which we expect to continue for the foreseeable future. Additionally, there are significant system resiliency initiatives underway in California and other regions in the western United States that are designed to prevent and manage the impact of wildfires. While these resiliency initiatives provide additional opportunities for our services, they also increase our potential exposure to significant liabilities, as these events can be started by the failure of electric power and other infrastructure on which we have performed services. Utilities are also executing significant initiatives to underground critical infrastructure, including additional undergroundexpanded transmission, substation and distribution initiatives by utilities in California, underground transmission projects in the northeast United States, underground distribution circuits along the U.S. coastlines and underground transmission lines for offshore wind generation projects.infrastructure needed to reliably transport power.

With respect to our communications service offerings, which are focused on the North American market, consumer and commercial demand for communication and data-intensive, high-bandwidth wireline and wireless services and applications is driving significant investment in infrastructure and the deployment of new technologies. In particular, communications providers are in the early stages of developing new fifth generation wireless services (5G), which are intended to facilitate bandwidth-intensive services at high speeds for consumers and commercial applications. Additionally, recent legislative and regulatory initiatives, including the Rural Digital Opportunity Fund and the Infrastructure Investment and Jobs Act, have dedicated billions of dollars of funding to support broadband service to underserved markets. As a result of these industry trends, we believe there will be meaningful demand for our engineering and construction services.

Renewable Energy Infrastructure ~~Solutions.~~ We believe the transition to a carbon-neutral economy, which is being driven by consumer and investor preferences, increasing electrification trends, supportive public policy actions and declining levelized costs of renewable energy, will require sizeable long-term investment in renewable generation and related infrastructure, including meaningful repowering and modernization of existing assets. To that end, renewable energy developers are expected to continue to increase investments in wind and solar projects, as well as energy storage projects. Utilities have increased the percentage of renewable electricity bought through power purchase agreements (PPAs) with renewable energy developers, and we believe are in the early stages of investing directly in renewable generation facilities, which could expand significantly over time as they pursue clean energy strategies and emissions-reduction initiatives. Also, a growing number of corporate enterprises, particularly technology companies, are entering into PPAs with renewable energy developers to source renewable electricity to power their facilities and achieve their own carbon-reduction initiatives. We believe increased battery storage can support increased renewable energy development by providing shorter-term storage of electricity from renewable energy generation, particularly from solar facilities, which helps to manage the amount and timing of intermittent power placed on the grid from renewable generation. Though current battery storage capacity is much smaller than the amount of wind and solar capacity installed in North America, utility-scale battery storage capacity is expected to grow significantly and at higher rates over the longer term.

We believe these dynamics will generate significant demand for our renewable energy infrastructure services, including our generation construction services and engineering expertise in utility-scale solar, wind and battery storage projects, as well as our services related to the development and construction of related infrastructure, including high-voltage electric transmission and substation infrastructure, that is necessary to interconnect and transmit electricity from new renewable energy generation facilities into the existing electric power grid and enhance grid reliability. While in the short term and in any given period the demand for certain renewable energy services could fluctuate due to, among other things, supply chain and other logistical

difficulties that could delay projects, the availability of production tax credits, permitting delays, or sourcing restrictions, tariffs, duties, taxes and other assessments on materials and components necessary for certain projects (e.g., solar panels), we believe we are well positioned, through our acquisition of Blattner and our existing renewable energy and transmission services offerings, to capitalize on these growth trends over the long term.

~~Underground Utility and Infrastructure Solutions.~~ ~~Within this~~Solutions (Renewable Energy) segment, we have focused on specialty services and industries that we believe are driven by regulated utility spending; regulation, replacement and rehabilitation of aging infrastructure; and safety and environmental initiatives. These services include gas utility services, pipeline integrity and transmission services and downstream industrial services. We believe demand for our gas utility distribution services will increase as a result of customer desire to upgrade and replace aging infrastructure and increasing regulatory requirements. In particular, natural gas utilities have implemented multi-decade modernization programs to replace aging cast iron, bare steel and plastic system infrastructure with modern materials for safety, reliability and environmental purposes. We believe there are also growth opportunities for our pipeline integrity, rehabilitation and replacement services, as regulatory measures have increased the frequency and stringency of pipeline integrity testing requirements that require our customers to test, inspect, repair, maintain and replace pipeline infrastructure to ensure that it operates in a safe, reliable and environmentally conscious manner. Further, permitting challenges associated with construction of new pipelines can make existing pipeline infrastructure more valuable, motivating owners to extend the useful life of existing pipeline assets through integrity initiatives. Additionally, we believe there are significant long-term opportunities for our downstream industrial services, including our high-pressure and critical-path turnaround services, as well as our capabilities with respect to instrumentation and electrical services, piping, fabrication and storage tanks services, and other industrial services, and that processing facilities located along the U.S. Gulf Coast region should have certain long-term strategic advantages due to their proximity to competitively priced and abundant hydrocarbon resources.

During 2020 and 2021, certain services in this segment, including our midstream and industrial services operations, were negatively impacted by the COVID-19 pandemic and broader economic challenges and uncertainties in the energy market, which resulted in decreased demand for refined products and reduced and deferred customer spending on regularly scheduled maintenance and capital projects. Demand for these services has improved in the first half of 2022 as customers are moving forward with their deferred maintenance and capital spending, and to the extent energy market conditions remain accommodating and shutdowns and other dislocations caused by the COVID-19 pandemic continue to subside, we believe the outlook for these services will continue to improve throughout 2022. Additionally, in any given period, downstream processing facilities can be negatively impacted due to severe weather events, such as hurricanes, tropical storms and floods. Furthermore, the broader oil and gas industry is cyclical and subject to price and production volume volatility, which can impact demand for certain of our ancillary and pipeline services, particularly in markets where the price of oil is influential, such as Australia, the Canadian Oil Sands and certain oil-driven U.S. shale formations. Revenues related to larger U.S. pipeline projects have declined significantly over the last few years as the pipeline and related infrastructure development necessary to support U.S. shale formations has largely been completed. Additionally, the development of new larger pipeline projects continues to be negatively impacted in the United States by a more challenging permitting and regulatory environment, as well as challenging economic and market conditions caused by the COVID-19 pandemic and uncertainty around the energy policy needed to facilitate the transition to a reduced-carbon economy ~~while maintaining energy reliability~~is continuing to drive demand for renewable generation and ~~availability. However, there has been an increase in activity~~related infrastructure (e.g., high-voltage electric transmission and substation infrastructure), as well as interconnection services necessary to connect and transmit renewable-generated electricity to existing electric power delivery systems. Our acquisition of Blattner Holding Company and its operating subsidiaries (collectively, Blattner) in the ~~Canadian large pipeline market~~fourth quarter of 2021, has had a significant incremental impact on our ability to perform these services. Despite these positive longer-term trends, certain of our customers experienced supply chain challenges during 2022 ~~which is currently active with a number of major projects underway,~~ and we continue to pursue larger pipeline project opportunities to the extent they satisfy our margin and risk profiles and support the needs of our customers. We believe our strategic decision to increase our focus on specialty services and industries that are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives should provide a greater level of business sustainability and predictability and help to offset the cyclicality of our larger pipeline project business.

Lastly, we believe there are additional longer-term opportunities that may arise in this segment. For example, we believe natural gas, due to its expected abundant supply and attractive price over the long term, will remain a fuel of choice for both primary power generation and backup power generation for renewable power plants in North America. We believe the favorable characteristics of natural gas could also position North America as a leading competitor in the global LNG export market, which could provide additional opportunities for our pipeline infrastructure services. We also believe that customers in this segment are implementing strategies to reduce carbon emissions produced from their operations, which are providing incremental opportunities for our services, including developing infrastructure for blending hydrogen into ~~natural gas flow and for customers’ carbon capture projects, which could include building or repurposing pipeline infrastructure.~~

~~COVID-19 Pandemic and Impact.~~ The effects of the COVID-19 pandemic continue to significantly impact certain aspects and geographies of the global economy due to, among other things, workforce and travel restrictions and supply chain, production and other logistical disruptions. While we have continued to operate substantially all of our activities, shut-down orders and limitations on work site practices implemented by the Canadian and Australian governments continued to impact our business in 2021 and during the first half of ~~2022. Additionally, we continue to monitor governmental and customer vaccination~~

and testing standards or requirements related to COVID-19, as well as certain standards and guidance as to preventing the spread of COVID-19. While the overall impact of the COVID-19 pandemic has lessened significantly during 2022, certain of our Canadian projects have been significantly impacted. The broader and longer-term implications of the pandemic remain uncertain and variable. The future impact2023 that the pandemic, or any resulting market disruption and volatility, will have on our business, cash flows, liquidity, financial condition and results of operations will depend on future developments, including, among others, the duration and severity of the pandemic; actions taken by governmental authorities, customers, suppliers and other third parties in response to the pandemic and the consequences of those actions; our workforce availability; and the timing and extent to which normal economic and operating conditions resume and continue.

~~Regulatory Challenges and Opportunities~~. The regulatory environment creates both challenges and opportunities for our business, and in recent years our margins have been impacted by regulatory and permitting delays, as well as private legal challenges related to regulatory requirements, particularly with respect to large transmission and large pipeline projects. As a result, regulatory and environmental permitting processes continue to create uncertainty for projects and negatively impact customer spending. However, we believe that there are also several existing, pending or proposed legislative or regulatory actions that may alleviate certain regulatory and permitting issues and positively impact long-term demand, particularly in connection with electric power infrastructure and renewable energy spending. For example, regulatory changes affecting siting and right-of-way processes could potentially accelerate construction for transmission projects, and state and federal reliability standards are creating incentives for both electrical and pipeline system investment and maintenance. Additionally, as described above, we consider renewable energy, including solar and wind generation and battery storage facilities, to be an ongoing opportunity; however, demand for our services can be influenced by policy and economic incentives designed to support and encourage such projects, and any tariffs, duties, taxes, assessments, or other limitations on the availability or sourcing of materials or components for such projects can increase costs for customers and create variability of project timing. For example, during the first part of 2022, the U.S. Department of Commerce’s investigation into an antidumping and countervailing duties circumvention claim on solar cells and panels supplied from Malaysia, Vietnam, Thailand and Cambodia caused some disruption in the solar panel supply chain and created uncertainty regarding the timing of development and/or financing of certain renewable energy projects. During the second quarter of 2022, the Biden Administration issued an executive order that exempted imported solar panels from these countries for 24 months to mitigate the uncertainty and impact caused in the near term. While we expect this order will provide time to allow U.S. solar project developers to adjust their solar panel supply chain, we are continuing to monitor the supply chain for these materials.

~~Labor Resource Availability and Cost~~. We continue to address the longer-term need for additional labor resources in our markets, as our customers continue to seek additional specialized labor resources to offset an aging utility workforce and longer-term labor availability issues, increasing pressure to reduce costs and improve reliability, and increasing duration and complexity of their capital programs. We believe these trends will continue, possibly to such a degree that demand for labor resources will outpace supply. Furthermore, the increased demand for our services based on the dynamics described above can create shortages of qualified labor in our markets. Our ability to capitalize on available opportunities is limited by our ability to employ, train and retain the necessary skilled personnel, and therefore we are taking proactive steps to develop our workforce, including through strategic relationships with universities, the military and unions and the expansion and development of our training facilities and postsecondary educational institution. Although we believe these initiatives will help address workforce needs, meeting our customers’ demand for labor resources could prove challenging.

Additionally, we monitor our labor markets and expect labor costs to continue to increase based on increased demand for our services. Our labor costs are passed through in certain of our contracts, and the portion of our workforce that is represented by labor unions typically operate under multi-year collective bargaining agreements, which provide some visibility into future labor costs. While we do not currently believe this environment will materially impact our profitability and we would expect to be able to adjust contract pricing with certain customers to the extent wages and other labor costs increase, whether due to renegotiation of collective bargaining agreements or market conditions, meaningful increases in our labor costs could have a material adverse effect on our business, financial condition, results of operations or cash flows to the extent we cannot do so. Furthermore, increased labor costs could impact our customers' decision-making with respect to the viability or timing of certain projects.

~~Materials and Equipment Procurement.~~ We continue to monitor supply chain and other logistical challenges, global trade relationships (e.g., tariffs, duties, taxes, sourcing restrictions) and other general market and political conditions (e.g., inflation) with respect to availability and costs of certain materials and equipment necessary for the performance of our business and for materials necessary for our customers’ projects, including, among other things, steel, copper, aluminum, and components for renewable energy projects. Increased costs and delays can impact project construction schedules and the performance of our services. For example, we believe some participants in the renewable energy market are experiencing supply chain challenges, resultingresulted in delays and shortages of, and increased costs for, materials necessary for ~~the construction of~~ certain ~~renewable energy~~ projects, ~~in the near term, including as a result of~~particularly sourcing restrictions related to solar panels ~~manufactured in China and~~necessary for the ~~Department~~utility scale solar industry. Based on indications within this market during the second quarter of ~~Commerce investigation described above. While~~2023, we ~~believe many of our renewable energy customers are~~

~~generally better equipped to manage near-term~~expect the supply chain ~~disruptions than their smaller competitors, these~~ challenges ~~could delay~~and sourcing restrictions related to solar panels to improve throughout the remainder of the year.

With respect to our ~~customers’ ongoing projects or impact their future project schedules, which~~Underground Utility and Infrastructure Solutions (Underground and Infrastructure) segment, in ~~turn could impact~~2022 and through the ~~timing~~second quarter of or2023 we experienced strong demand for our ~~renewable energy services. While~~services focused on utility spending, in particular our gas distribution services to natural gas utilities that are implementing modernization programs, and our downstream industrial services, as these ~~delays are not anticipated~~customers continued to ~~result~~move forward with certain maintenance and capital spending that was deferred during the course of the COVID-19 pandemic. Additionally, during the first half of 2023 we generated increased revenues associated with large pipeline projects in ~~exposure to liquidated damages or commodity risks, such delays could cause customers to cancel projects~~Canada.

During the six months ended June 30, 2023, increased revenues resulted in $165.8 million of net cash provided by operating activities. Available commitments under our senior credit facility and cash and cash equivalents as ~~higher than expected costs impact project profitability projections.~~of June 30, 2023 were $1.77 billion.

~~Additionally, based on, among other things,~~We expect the ~~significant worldwide shortage of semiconductors, vehicle manufacturers are experiencing production delays with respect to new vehicles~~strong demand for our ~~fleet (both on-road~~services will continue. Our remaining performance obligations and ~~specialty vehicles)~~backlog were $12.48 billion and ~~vehicle parts (e.g.~~$27.20 billion as of June 30, 2023, representing increases of 41.8%, ~~tires), all~~and 12.9% relative to December 31, 2022. For a reconciliation of ~~which we utilize~~backlog to remaining performance obligations, the most comparable financial measure prepared in our operations, and certain of our vehicle delivery orders scheduled for delivery in 2022 have been delayed or cancelled. While we believe we have taken steps to secure delivery of a sufficient amount of vehiclesconformity with generally accepted accounting principles in the near term and do not anticipate any significant disruptions with respect to our fleet, to the extent the production issues become worse than expected or become longer-term in nature, our operations could be negatively impacted. In addition, as a result of the recent inflationary pressure, the cost of consumables and equipment for us and our customers has increased, and our results of operations could be impacted to the extent we are not able to manage or pass such costs through to our customers.

~~Acquisitions and Investments.~~United States (GAAP), see We believe potential acquisition and investment opportunities exist in our industries and adjacent industries, primarily due to the highly fragmented and evolving nature of those industries and inability of many companies to expand due to capital or liquidity constraints. While the desirability of certain of these opportunities could be impacted by the recent inflationary pressure in the short term, we continue to evaluate opportunities that are expected to, among other things, broaden our customer base, expand our geographic area of operations and grow and diversify our portfolio of services.Non-GAAP Financial Measures below.

Significant Factors Impacting Results

Our revenues, profit, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Item 1. Business ~~Environment~~ ~~above~~ and Item 1A. Risk Factors of Part I of our ~~2021~~2022 Annual Report, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.

Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. Generally, revenues during the fourth quarter are lower than the third quarter but higher than the second quarter, as many projects are completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs. These seasonal impacts are typical for our U.S. operations, but seasonality for our international operations may differ. For example, revenues for certain projects in Canada are typically higher in the first quarter because projects are often accelerated in order to complete work while the ground is frozen and prior to the break up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during warmer months.

Weather, natural disasters and emergencies. The results of our business in a given period can be impacted by adverse weather conditions, severe weather events, natural disasters or other emergencies, which include, among other things, heavy or prolonged snowfall or rainfall, hurricanes, tropical storms, tornadoes, floods, blizzards, extreme temperatures, wildfires, post-wildfire floods and debris flows, pandemics ~~(including~~and earthquakes. Climate change has the ~~ongoing COVID-19 pandemic, as described above)~~potential to increase the frequency and ~~earthquakes.~~extremity of severe weather events. These conditions and events can negatively impact our financial results due to, among other things, the termination, deferral or delay of projects, reduced productivity and exposure to significant ~~liabilities.~~liabilities due to failure of electrical power or other infrastructure on which we have performed services. However, severe weather events can also increase our emergency restoration services, which typically yield higher margins due in part to higher equipment utilization and absorption of fixed ~~costs, and in 2020 and 2021 we had record levels of emergency restoration services.~~costs.

Demand for services. We perform the majority of our services under existing contracts, including ~~master service agreements (MSAs)~~MSAs and similar agreements pursuant to which our customers are not committed to specific volumes of our services. Therefore our volume of business can be positively or negatively affected by fluctuations in the amount of work our customers assign us in a given period, which may vary by geographic region. For example, to the extent our customers accelerate grid modernization or hardening programs or face deadlines to meet regulatory requirements for rehabilitation, reliability or efficiency, our volume of work could increase under existing agreements. Also, as described above in ~~Business Environment,~~ ~~we have experienced reductions in demand for certain services as a result of uncertainties and challenges in the~~

~~energy market and overall economy caused by the COVID-19 pandemic.~~ Examples of ~~other~~ items that may cause demand for our services to fluctuate materially from quarter to quarter include: the financial condition of our customers, their capital spending and their access to capital; acceleration of any projects or programs by customers (e.g., modernization or hardening programs); economic and political conditions on a regional, national or global scale, including availability of renewable energy tax credits; interest rates; governmental regulations affecting the sourcing and costs of materials and equipment; other changes in U.S. and global trade relationships; and project deferrals and cancellations.

Revenue mix and impact on margins. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Our larger or more complex projects typically include, among others, transmission projects with higher voltage capacities; pipeline projects with larger-diameter throughput capacities; large-scale renewable generation projects; and projects with increased engineering, design or construction complexities, more difficult terrain or geographical requirements, or longer distance requirements. These projects typically yield opportunities for higher margins than our recurring services under MSAs described above, as we assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. However, larger projects are subject to additional risk of regulatory delay and cyclicality. For example, our revenues with respect to large pipeline projects have declined significantly in recent years, and a significant number of larger projects have been delayed or cancelled during that same period. Project schedules also fluctuate, particularly in connection with larger, more complex or longer-term projects, which can affect the amount of work performed in a given period. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a greater number of smaller projects versus continuous production on fewer larger projects. As a result, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

Project variability and performance. Margins for a single project may fluctuate period to period due to changes in the volume or type of work performed, the pricing structure under the project contract or job productivity. Additionally, our productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties or site conditions (including in connection with difficult geographic characteristics); project location, including locations with challenging operating conditions; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; protests, other political activity or legal challenges related to a project; and the performance of third ~~parties; and the impact of the COVID-19 pandemic.~~parties. Moreover, we currently generate a significant portion of our revenues under fixed price contracts, and fixed price contracts are more common in connection with our larger and more complex projects that typically involve greater performance risk. Under these contracts, we assume risks related to project estimates and execution, and project revenues can vary, sometimes substantially, from our original projections due to a variety of factors,

including the additional complexity, timing uncertainty or extended bidding, regulatory and permitting processes associated with these projects. These variations can result in a reduction in expected profit, or the incurrence of losses on a project or the issuance of change orders and/or assertion of contract claims against customers. See Revenue Recognition - Contract Estimates and Changes in Estimates in Note 43 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further information regarding changes in estimated contract revenues and/or project costs, including any significant project gains or losses in connection with fixed price contracts that have impacted our results, and determinations with respect to the recognition of change orders and claims as contract price adjustments.Report.

Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease operating margins. In recent years, we have subcontracted approximately 20% of our work to other service providers. Our customers are usually responsible for supplying the materials for their projects. However, under some contracts ~~including contracts for projects where we provide engineering, procurement and construction (EPC) services,~~ we agree to procure all or part of the required materials. Margins may be lower on projects where we furnish a significant amount of materials, as our markup on materials is generally lower than our markup on labor costs, and in a given period an increase in the percentage of work with greater materials procurement requirements may decrease our overall ~~margins.~~margins, including in some cases our assuming price risk. Furthermore, ~~as discussed further in~~ ~~Business Environment,~~ fluctuations in the price or availability of materials, equipment and consumables that we or our customers utilize could impact costs to complete projects.

~~Foreign currency risk.~~ Our financial performance is reported on a U.S. dollar-denominated basis but is partially subject to fluctuations in foreign currency exchange rates. Fluctuations in exchange rates relative to the U.S. dollar, primarily Canadian dollars and Australian dollars, can materially impact our results of operations and impact comparability between periods.

Results of Operations

~~A discussion of the changes in our consolidated and segment results of operations between~~Consolidated Results

Three months ended June 30, 2023 compared to the three months ended June 30, 2022 ~~and 2021 is included below, with certain of our segment results~~

The following table sets forth selected statements of operations ~~recast to conform to our current segment reporting structure.~~data, such data as a percentage of revenues for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands). The results of acquired businesses have been included in the following results of operations since their respective acquisition dates.


	Three Months Ended June 30,								Change
	2023				2022				$		%
Revenues	$	5,048,610	100.0	%	$	4,232,003	100.0	%	$	816,607	19.3	%
Cost of services	4,324,511		85.7		3,607,413		85.2		717,098		19.9	%
Gross profit	724,099		14.3		624,590		14.8		99,509		15.9	%
Equity in earnings of integral unconsolidated affiliates	9,370		0.2		18,565		0.4		(9,195)		(49.5)	%
Selling, general and administrative expenses	(384,171)		(7.6)		(323,245)		(7.6)		(60,926)		18.8	%
Amortization of intangible assets	(70,025)		(1.4)		(107,945)		(2.6)		37,920		(35.1)	%
Asset impairment charges	—		—		(2,800)		(0.1)		2,800		(100.0)	%
Change in fair value of contingent consideration liabilities	—		—		(809)		—		809		(100.0)	%
Operating income	279,273		5.5		208,356		4.9		70,917		34.0	%
Interest and other financing expenses	(48,189)		(1.0)		(28,639)		(0.7)		(19,550)		68.3	%
Interest income	1,448		—		222		—		1,226		552.3	%
Other income (expense), net	3,419		0.2		(42,527)		(1.0)		45,946		*
Income before income taxes	235,951		4.7		137,412		3.2		98,539		71.7	%
Provision for income taxes	69,367		1.4		41,252		0.9		28,115		68.2	%


Net income	166,584		3.3		96,160		2.3		70,424		73.2	%
Less: Net income attributable to non-controlling interests	685		—		8,140		(0.2)		(7,455)		(91.6)	%
Net income attributable to common stock	$	165,899	3.3	%	$	88,020	2.1	%	$	77,879	88.5	%

* The percentage change is not meaningful.

Revenues. Revenues increased due to a $465.1 million increase in revenues from our Renewable Energy segment, a $215.8 million increase in revenues from our Electric Power segment and a $135.7 million increase in revenues from our Underground and Infrastructure segment. See Segment Results below for additional information and discussion related to segment revenues.

Cost of services. Costs of services primarily includes wages, benefits, subcontractor costs, materials, equipment, and other direct and indirect costs, including related depreciation. The increase in cost of services generally correlates to the increase in revenues.

Equity in earnings of integral unconsolidated affiliates. The decrease in equity in earnings was primarily driven by the timing of completion of projects associated with certain of our integral affiliates, as well as the reimbursement of certain large costs to LUMA by the owner of the transmission and distribution system during the three months ended June 30, 2022.

Selling, general and administrative expenses. The increase was partially attributable to an aggregate $28.7 million increase in the following items to support business growth: compensation expense, largely associated with increased salaries due primarily to headcount growth; and travel and related expenses. Also contributing to the increase was a $14.2 million increase in deferred compensation liabilities primarily driven by fair market value increases and an $11.9 million increase in legal and other consulting services. The fair market value changes in deferred compensation liabilities were largely offset by changes in the fair value of corporate-owned life insurance (COLI) assets associated with the deferred compensation plan, which are included in “Other (expense) income, net” as discussed below.

Amortization of intangible assets. The decrease was primarily related to a $40.7 million reduction of amortization of intangible assets associated with backlog for Blattner, which was fully amortized by the third quarter of 2022.

Operating income. Operating income was positively impacted by a $13.0 million decrease in corporate and non-allocated costs, which includes amortization expense, as well as a $11.9 million increase in operating income for our Electric Power segment, a $28.8 million increase in operating income for our Renewable Energy segment and a $17.3 million increase in operating income for our Underground and Infrastructure segment. Results for each of our business segments and corporate and non-allocated costs are discussed in the Segment Results section below.

Interest and other financing expenses. The increase primarily resulted from the impact of higher interest rates on our outstanding variable rate debt during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Other income (expense), net. The net other expense for the three months ended June 30, 2022 included a $41.7 million unrealized loss that resulted from the remeasurement of the fair value of our investment in Starry Group Holdings, Inc. (Starry). The increase in other income, net for three months ended June 30, 2023 compared to the three months ended June 30, 2022 also resulted from a $13.4 million favorable mark-to-market valuation of the COLI assets associated with our deferred compensation plans, partially offset by $9.1 million lower equity in earnings of non-integral affiliates.

Provision for income taxes. The effective tax rates for the three months ended June 30, 2023 and 2022 were 29.4% and 30.0%.

Comprehensive income. See Statements of Comprehensive Income in Item 1. Financial Statements of Part I of this Quarterly Report. Comprehensive income increased by $125.2 million in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily due to a $70.4 million increase in net income and a $55.0 million increase in foreign currency translation gains. The predominant functional currencies for our operations outside the U.S. are Canadian and Australian dollars. The increase in foreign currency translation gains primarily resulted from strengthening of the Canadian dollar against the U.S. dollar for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

EBITDA and adjusted EBITDA. See Non-GAAP Financial Measures below for a reconciliation of EBITDA and adjusted EBITDA to net income attributable to common stock, the most comparable GAAP financial measure. EBITDA increased 26.8%, or $92.1 million, to $436.3 million as compared to $344.2 million for the three months ended June 30, 2022, and adjusted EBITDA increased 11.8%, or $50.0 million, to $472.1 million as compared to $422.1 million for the three months ended June 30, 2022.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

The following table sets forth selected statements of operations data, such data as a percentage of revenues for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands):

~~Consolidated Results~~

~~Three months ended June 30, 2022 compared to the three months ended June 30, 2021~~


		Three Months Ended June 30,								Change				Six Months Ended June 30,			Change
		2022				2021				$		%				2023		2022	$		%
Revenues	Revenues	$	4,232,003	100.0	%	$	2,999,816	100.0	%	$	1,232,187	41.1	%		Revenues				$	9,477,436	100.0	%	$	8,197,528	100.0	%	$	1,279,908	15.6	%
Cost of services (including depreciation)		3,607,413		85.2		2,552,105		85.1		1,055,308		41.4	%
Cost of services (including related depreciation)															Cost of services (including related depreciation)				8,180,142		86.3		7,024,767		85.7		1,155,375		16.4	%
Gross profit	Gross profit	624,590		14.8		447,711		14.9		176,879		39.5	%		Gross profit				1,297,294		13.7		1,172,761		14.3		124,533		10.6	%
Equity in earnings of integral unconsolidated affiliates	Equity in earnings of integral unconsolidated affiliates	18,565		0.4		7,450		0.2		11,115		149.2	%		Equity in earnings of integral unconsolidated affiliates				18,990		0.2		33,717		0.4		(14,727)		(43.7)	%
Selling, general and administrative expenses	Selling, general and administrative expenses	(323,245)		(7.6)		(270,110)		(9.0)		(53,135)		19.7	%		Selling, general and administrative expenses				(768,723)		(8.1)		(648,132)		(7.9)		(120,591)		18.6	%
Amortization of intangible assets	Amortization of intangible assets	(107,945)		(2.6)		(21,291)		(0.6)		(86,654)		407.0	%		Amortization of intangible assets				(142,428)		(1.5)		(223,696)		(2.7)		81,268		(36.3)	%
Asset impairment charges	Asset impairment charges	(2,800)		(0.1)		(2,319)		(0.1)		(481)		20.7	%		Asset impairment charges				—		—		(2,800)		—		2,800		(100.0)	%
Change in fair value of contingent consideration liabilities	Change in fair value of contingent consideration liabilities	(809)		—		210		—		(1,019)		*			Change in fair value of contingent consideration liabilities				—		—		(5,978)		(0.1)		5,978		(100.0)	%
Operating income	Operating income	208,356		4.9		161,651		5.4		46,705		28.9	%		Operating income				405,133		4.3		325,872		4.0		79,261		24.3	%
Interest and other financing expenses	Interest and other financing expenses	(28,639)		(0.7)		(13,109)		(0.4)		(15,530)		118.5	%		Interest and other financing expenses				(89,882)		(0.9)		(53,367)		(0.7)		(36,515)		68.4	%
Interest income	Interest income	222		—		2,909		0.1		(2,687)		(92.4)	%		Interest income				2,964		—		291		—		2,673		918.6	%
Other income (expense), net	Other income (expense), net	(42,527)		(1.0)		8,471		0.2		(50,998)		*			Other income (expense), net				11,285		0.1		(43,800)		(0.5)		55,085		*
Income before income taxes	Income before income taxes	137,412		3.2		159,922		5.3		(22,510)		(14.1)	%		Income before income taxes				329,500		3.5		228,996		2.8		100,504		43.9	%
Provision for income taxes	Provision for income taxes	41,252		0.9		40,951		1.3		301		0.7	%		Provision for income taxes				65,946		0.7		47,808		0.6		18,138		37.9	%

Net income	Net income	96,160		2.3		118,971		4.0		(22,811)		(19.2)	%		Net income				263,554		2.8		181,188		2.2		82,366		45.5	%
Less: Net income attributable to non-controlling interests	Less: Net income attributable to non-controlling interests	8,140		0.2		1,938		0.1		6,202		320.0	%		Less: Net income attributable to non-controlling interests				2,609		—		8,527		0.1		(5,918)		(69.4)	%
Net income attributable to common stock	Net income attributable to common stock	$	88,020	2.1	%	$	117,033	3.9	%	$	(29,013)	(24.8)	%		Net income attributable to common stock				$	260,945	2.8	%	$	172,661	2.1	%	$	88,284	51.1	%

* The percentage change is not meaningful.

Revenues. Revenues increased due to a ~~$592.2~~$597.8 million increase in revenues from our Renewable Energy ~~Infrastructure Solutions~~ segment, a ~~$383.7~~$413.2 million increase in revenues from our Electric Power ~~Infrastructure Solutions~~ segment and a ~~$256.3~~$268.9 million increase in revenues from our Underground ~~Utility~~ and Infrastructure ~~Solutions~~ segment. See Segment Results below for additional information and discussion related to segment revenues.

~~Gross profit.~~ Cost of services.~~Gross profit increased due~~ Costs of services primarily includes wages, benefits, subcontractor costs, materials, equipment, and other direct and indirect costs, including related depreciation. The increase in cost of services generally correlates to the increase in revenues in all segments and improved utilization and fixed cost absorption in both our Electric Power Infrastructure Solutions segment and Underground Utility and Infrastructure Solutions segment. See ~~Segment Results~~ ~~below for additional information and discussion related to segment operating income (loss).~~revenues.

Equity in earnings of integral unconsolidated affiliates. The ~~amounts include~~decrease in equity in earnings was primarily driven by the timing of completion of projects associated with certain of our ~~portion~~integral affiliates, as well as the reimbursement of ~~amounts earned~~certain large costs to LUMA by ~~integral unconsolidated affiliates and primarily relate to our portion of amounts earned by LUMA, which accounts for~~ the ~~majority~~owner of the ~~increase compared to~~transmission and distribution system during the ~~three~~six months ended June 30, 2021. Additionally, the amount for the three months ended June 30, 2022 includes our portion of amounts earned by an entity that we acquired a 44% interest in during the fourth quarter of 2021 and that provides right-of-way solutions, including site preparation and clearing, materials delivery and installation and management of permitting requirements and traffic control. For additional information regarding these investments, see Note 8 of the Notes to Condensed Consolidated Financial Statements in Item 1. ~~Financial Statements~~ ~~of Part I of this Quarterly Report.~~

2022.

Selling, general and administrative expenses.The increase was ~~primarily~~partially attributable to ~~a $56.1~~an aggregate $50.9 million increase in ~~expenses associated with acquired businesses, as well as an increase of $14.4 million in~~the following items to support business growth: compensation expense, largely associated with increased salaries ~~incentive compensation and non-cash stock compensation expense~~ due primarily to ~~increased operational~~

~~performance~~headcount growth; and ~~an increase in employees to support the growth of the business, and a $6.0 million increase in~~ travel and related expenses. ~~Partially offsetting these increases~~Also contributing to the increase was a ~~$24.3~~$22.3 million decrease in provision for credit loss, which was primarily attributable to the recognition of a $23.6 million provision for credit loss related to receivables owed by a customer that declared bankruptcy in July 2021 and its affiliate during the three months ended June 30, 2021, and a $13.7 million decreaseincrease in expense related to deferred compensation liabilities. The fair market value changes in deferred compensation liabilities were largely offset by changes in the fair value of COLI assets associated with the deferred compensation plan, which are included in “Other (expense) income, ~~(expense),~~ net” as discussed below. Additional items contributing to the increase were an $11.5 million increase in legal and other consulting services; a $7.8 million increase in expenses associated with acquired businesses; a $5.6 million increase in depreciation expense primarily related to our new corporate headquarters and a $5.5 million increase in provision for credit allowance.

Amortization of intangible assets. The ~~increase~~decrease was primarily due to a $88.8 million reduction of amortization of intangible assets associated with ~~recently acquired businesses, driven~~backlog for Blattner, which was fully amortized by the ~~acquisition~~third quarter of ~~Blattner,~~2022.

Operating income. Operating income was positively impacted by a $30.5 million decrease in corporate and ~~was partially offset by reduced~~non-allocated costs, which includes amortization expense, ~~associated with older acquired intangible assets,~~ as ~~certain~~well as a $30.7 million increase in operating income for our Underground and Infrastructure segment and a $23.6 million increase in operating income for our Electric Power segment. Partially offsetting the

positive impact of these ~~assets became fully amortized.~~

~~Asset impairment charges.~~ ~~During the three months ended June 30, 2022, we recognized~~items was a ~~$2.8~~$5.5 million ~~asset impairment charge primarily related to the expected discontinued use~~decrease in operating income for our Renewable Energy segment. Results for each of ~~the right-of-use asset associated with~~ our ~~existing~~business segments and corporate headquarters in connection with our planned move to a new headquarters by the end of 2022. During the three months ended June 30, 2021, we recognized a $2.3 million asset impairment charge related to certain equipment that was not utilized in our core operations and ~~was subsequently sold.~~

~~Change in fair value of contingent consideration liabilities.~~ ~~Contingent consideration liabilities~~non-allocated costs are ~~payable~~discussed in the event certain performance objectives are achieved by acquired businesses during designated post-acquisition periods. The change in fair value associated with these liabilities was primarily due to the effect of present value accretion on fair value calculations and to a lesser extent, changes in performance in post-acquisition measurement periods by certain acquired businesses. Further changes in fair value are expected to be recorded periodically until the contingent consideration liabilities are settled. For additional information regarding these liabilities, see Notes 6 and 17 of the Notes to Condensed Consolidated Financial Statements in Item 1. ~~Financial Statements~~ ~~of Part I of this Quarterly Report.~~Segment Results section below.

Interest and other financing expenses. ~~Interest and other financing expenses increased for~~The increase primarily resulted from the ~~three months ended June 30, 2022 primarily due to higher levels~~impact of ~~debt and, to a lesser extent,~~ higher interest ~~rates. Our long-term debt increased significantly at the end of 2021 in connection with our acquisition of Blattner.~~

~~Interest income.~~ ~~Interest income decreased in the three months ended June 30, 2022 primarily due to interest received in the three months ended June 30, 2021 related to a settlement with a customer.~~

~~Other income (expense), net.~~ The net other expense for the three months ended June 30, 2022 included an unrealized loss of $41.7 million resulting from the remeasurement of the fair value of our investment in a publicly traded broadband technology provider, Starry Group Holdings, Inc. (Starry), based on the market price of Starry’s common stock as of June 30, 2022. Also included in other income (expense), net for the three months ended June 30, 2022 was $10.2 million of expense associated with our deferred compensation plan, as compared to $3.9 million of income during the three months ended June 30, 2021. The amounts associated with the deferred compensation plan were largely offset by corresponding changes in the fair market value of the liabilities associated with our deferred compensation plan, which are recorded in selling, general, and administrative expenses, as discussed above. During the three months ended June 30, 2021, we also recognized a $2.5 million benefit from a COLI policy held in connection with our deferred compensation plan. Additionally, equity in earnings of non-integral affiliates for three months ended June 30, 2022 was $9.6 million as compared to $0.7 million for the three months ended June 30, 2021.

~~Provision for income taxes. The effective tax~~ rates ~~for the three months ended June 30, 2022 and 2021 were 30.0% and 25.6%. The effective tax rate for the three months ended June 30, 2022 was unfavorably impacted by the unrealized loss~~ on our ~~investment in Starry described above, for which a valuation allowance was recorded. The lower~~outstanding variable rate ~~for the three months ended June 30, 2021 was impacted by the recognition of a $4.2 million benefit associated with deferred compensation plan investments.~~

~~Other comprehensive income (loss), net of taxes.~~ ~~See Statements of Comprehensive Income (Loss) in Item 1.~~ ~~Financial Statements~~ of Part I of this Quarterly Report. Other comprehensive income (loss) results from translation of the balance sheets of our foreign operating companies, which are primarily located in Canada and Australia and have functional currencies other than the U.S. dollar, and therefore are affected by the strengthening or weakening of the U.S. dollar against such currencies. The loss in the three months ended June 30, 2022 was impacted primarily by the strengthening of the U.S. dollar against both the Canadian and Australian dollars as of June 30, 2022 when compared to March 31, 2022. The gain in the three months ended June 30, 2021 was impacted primarily by the weakening of the U.S. dollar against the Canadian dollar as of June 30, 2021 when compared to March 31, 2021.

~~Six months ended June 30, 2022 compared to~~debt during the six months ended June 30, ~~2021~~

Six Months Ended June 30, Change
2022 2021 $ %
Revenues $ 8,197,528 100.0 % $ 5,703,397 100.0 % $ 2,494,131 43.7 %
Cost of services (including depreciation) 7,024,767 85.7 4,882,796 85.6 2,141,971 43.9 %
Gross profit 1,172,761 14.3 820,601 14.4 352,160 42.9 %
Equity in earnings of integral unconsolidated affiliates 33,717 0.4 12,633 0.2 21,084 166.9 %
Selling, general and administrative expenses (648,132) (7.9) (513,462) (9.0) (134,670) 26.2 %
Amortization of intangible assets (223,696) (2.7) (42,646) (0.8) (181,050) 424.5 %
Asset impairment charges (2,800) — (2,319) — (481) 20.7 %
Change in fair value of contingent consideration liabilities (5,978) (0.1) 573 — (6,551) *
Operating income 325,872 4.0 275,380 4.8 50,492 18.3 %
Interest and other financing expenses (53,367) (0.7) (25,584) (0.4) (27,783) 108.6 %
Interest income 291 — 3,026 0.1 (2,735) (90.4) %
Other income (expense), net (43,800) (0.5) 12,143 0.1 (55,943) *
Income before income taxes 228,996 2.8 264,965 4.6 (35,969) (13.6) %
Provision for income taxes 47,808 0.6 54,675 0.9 (6,867) (12.6) %
Net income 181,188 2.2 210,290 3.7 (29,102) (13.8) %
Less: Net income attributable to non-controlling interests 8,527 0.1 3,496 0.1 5,031 143.9 %
Net income attributable to common stock $ 172,661 2.1 % $ 206,794 3.6 % $ (34,133) (16.5) %
* The percentage change is not meaningful.

~~Revenues.~~ Revenues increased due to a $1.08 billion increase in revenues from our Renewable Energy Infrastructure Solutions segment, a $846.3 million increase in revenues from our Electric Power Infrastructure Solutions segment and a $564.0 million increase in revenues from our Underground Utility and Infrastructure Solutions segment. See ~~Segment Results~~ ~~below for additional information and discussion related to segment revenues.~~

~~Gross profit.~~ Gross profit increased primarily due to the increase in revenues in all segments and improved utilization and fixed cost absorption in both our Electric Power Infrastructure Solutions segment and Underground Utility and Infrastructure Solutions segment See ~~Segment Results~~ ~~below for additional information and discussion related to segment operating income (loss).~~

~~Equity in earnings of integral unconsolidated affiliates. The amounts include our portion of amounts earned by integral unconsolidated affiliates and primarily relate to our portion of amounts earned by LUMA, which accounts for the majority of the increase~~2023 as compared to the six months ended June 30, 2021. Additionally, the amount for the six months ended June 30, 2022 includes our portion of amounts earned by an entity that we acquired a 44% interest in during the fourth quarter of 2021 and that provides right-of-way solutions, including site preparation and clearing, materials delivery and installation and management of permitting requirements and traffic control. For additional information regarding these investments, see Note 8 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report.

~~Selling, general and administrative expenses.~~ The increase was primarily attributable to a $116.4 million increase in expenses associated with acquired businesses, as well as a $24.0 million increase in compensation expense, associated with increased salaries, incentive compensation and non-cash stock compensation expense due primarily to increased operational performance and an increase in employees to support the growth of the business, and a $11.8 million increase in travel and related expenses. Partially offsetting these increases was a $24.2 million decrease in provision for credit loss, which was primarily attributable to the recognition of a $23.6 million provision for credit loss related to receivables owed by a customer that declared bankruptcy in July 2021 and its affiliate during the six months ended June 30, 2021, and a $20.0 million decrease in expense related to deferred compensation liabilities. The fair market value changes in deferred compensation liabilities were offset by changes in the fair value of COLI assets associated with the deferred compensation plan, which are included in “Other income (expense), net” as discussed below.

~~Amortization of intangible assets.~~ The increase was primarily due to amortization of intangible assets associated with recently acquired businesses, driven by the acquisition of Blattner, partially offset by reduced amortization expense associated with older acquired intangible assets, as certain of these assets became fully amortized.

~~Asset impairment charges.~~ During the six months ended June 30, 2022, we recognized a $2.8 million asset impairment charge primarily related to the expected discontinued use of the right-of-use asset associated with our existing corporate headquarters in connection with our planned move to a new headquarters by the end of 2022. ~~During the six months ended June 30, 2021, we recognized a $2.3 million asset impairment charge related to certain equipment that was not utilized in our core operations and was subsequently sold.~~

~~Change in fair value of contingent consideration liabilities.~~ Contingent consideration liabilities are payable in the event certain performance objectives are achieved by acquired businesses during designated post-acquisition periods. The change in fair value associated with these liabilities was primarily due to the effect of present value accretion on fair value calculations and to a lesser extent, changes in performance in post-acquisition measurement periods by certain acquired businesses. Further changes in fair value are expected to be recorded periodically until the contingent consideration liabilities are settled. For additional information regarding these liabilities, see Notes 6 and 17 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report.

~~Interest and other financing expenses.~~ Interest and other financing expenses increased for the six months ended June 30, 2022 primarily due to higher levels of debt and, to a lesser extent, higher interest rates. Our long-term debt increased significantly at the end of 2021 in connection with our acquisition of Blattner.

~~Interest income.~~ ~~Interest income decreased in the six months ended June 30, 2022 primarily due to interest received in the six months ended June 30, 2021 related to a settlement with a customer.~~

Other income (expense), net. The net other expense for the six months ended June 30, 2022 ~~included~~was primarily due to an unrealized loss of $50.0 million ~~resulting~~that resulted from the remeasurement of the fair value of our investment in ~~a publicly traded broadband technology provider, Starry, based on the market price of Starry’s common stock as of June 30, 2022. Also included~~Starry. The increase in other income (expense), net was $14.3 million of expense associated with our deferred compensation plan, as compared to $5.5 million of income during the six months ended June 30, 2021. The amounts associated with the deferred compensation plan were largely offset by corresponding changes in the fair market value of the liabilities associated with our deferred compensation plan, which are recorded in selling, general, and administrative expenses, as discussed above. The net other income for the six months ended June 30, 2021 was also favorably impacted by a $2.5 million benefit recognized from a COLI policy held in connection with our deferred compensation plan. Partially offsetting these expenses was a gain of $6.7 million as a result of our sale of a non-controlling ownership interest in a technology company. Additionally equity in earnings of non-integral affiliates for2023 compared to the six months ended June 30, 2022 ~~was $14.9~~resulted from a $20.7 million ~~as compared to $1.3~~favorable mark-to-market valuation of the COLI assets associated with our deferred compensation plan, partially offset by a $12.9 million ~~for the six months ended June 30, 2021.~~decrease in equity in earnings of non-integral affiliates.

Provision for income taxes. The effective tax rates for the six months ended June 30, 2023 and 2022 were 20.0% and ~~2021 were~~ 20.9% ~~and 20.6%~~. The tax rate for the six months ended June 30, ~~2022~~2023 was favorably impacted by the recognition of a ~~$21.2~~$32.4 million ~~tax~~ benefit that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair market value, as compared to the recognition of ~~$18.4~~$21.2 million associated with this tax benefit for the six months ended June 30, ~~2021.~~2022.

~~Other comprehensive income (loss), net of taxes.~~Comprehensive income. See Statements of Comprehensive Income ~~(Loss)~~ in Item 1. Financial Statements of Part I of this Quarterly Report. ~~Other comprehensive~~Comprehensive income (loss) results from translation of the balance sheets of our foreign operating units, which are primarily located in Canada and Australia and have functional currencies other than the U.S. dollar, and therefore are affectedincreased by ~~the strengthening or weakening of the U.S. dollar against such currencies. The loss~~$125.0 million in the six months ended June 30, ~~2022 was impacted primarily by the strengthening of the U.S. dollar against both the Canadian and Australian dollars~~2023 as ~~of June 30, 2022 when~~ compared to ~~December 31, 2021. The gain in~~ the six months ended June 30, ~~2021 was impacted by~~2022, primarily due to a $82.4 million increase in net income and a $41.8 million increase in foreign currency translation gains. The predominant functional currencies for our operations outside the ~~weakening~~U.S. are Canadian and Australian dollars. The increase in foreign currency translation gains primarily resulted from strengthening of the Canadian dollar against the U.S. dollar ~~against~~for the ~~Canadian dollar as of~~six months ended June 30, ~~2021 when~~2023 as compared to ~~December 31, 2020.~~the six months ended June 30, 2022.

EBITDA and adjusted EBITDA. See Non-GAAP Financial Measures below for a reconciliation of EBITDA and adjusted EBITDA to net income attributable to common stock, the most comparable GAAP financial measure. EBITDA increased 11.4%, or $73.8 million, to $723.8 million as compared to $650.0 million for the six months ended June 30, 2022, and adjusted EBITDA increased 5%, or $36.8 million, to $804.4 million as compared to $767.6 million for the six months ended June 30, 2022.

Segment Results

We report our results under three reportable segments: Electric Power, Renewable Energy and Underground and Infrastructure. Reportable segment information, including revenues and operating income by type of work, is gathered from each of our operating ~~companies for the purpose of evaluating segment performance.~~companies. Classification of our operating company revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Our operating companies may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, we perform joint trenching projects to install distribution lines for electric power and natural gas customers. Integrated operations and common administrative support for operating companies require that certain allocations be made to determine segment profitability, including allocations of corporate shared and indirect operating costs as well as general and administrative costs. Certain corporate costs are not

allocated, including corporate facility ~~costs,~~costs; non-allocated corporate salaries, benefits and incentive compensation; acquisition and integration ~~costs,~~costs; non-cash stock-based ~~compensation,~~compensation; amortization related to intangible ~~assets,~~assets; asset ~~impairment~~impairments related to goodwill and intangible ~~assets~~assets; and change in fair value of contingent consideration liabilities.

Three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021~~2022

The following table sets forth segment revenues, segment operating income (loss) and operating margins for the periods ~~indicated, as well as~~indicated. Operating margin is calculated by dividing operating income (loss) by revenues. The following table also includes the dollar and percentage change from the prior period. Operating margins are calculated by dividing operating income by revenues. Management utilizes operating margins as a measure of profitability, which can be helpful for monitoring how effectively we are performing under our contracts. Management also believes operating margins are a useful metric for investors to utilizeperiod (dollars in evaluating our performance. Beginning with the three months ended December 31, 2021, we report our results under three reportable segments: (1) Electric Power Infrastructure Solutions, (2) Renewable Energy Infrastructure Solutions and (3) Underground Utility and Infrastructure Solutions. In conjunction with this change, certain prior period amounts have been recast to conform to this new segment reporting structure. The following table shows dollars in thousands.thousands):


		Three Months Ended June 30,								Change					Three Months Ended June 30,								Change
		2022				2021				$		%			2023				2022				$		%
Revenues:	Revenues:													Revenues:

Electric Power Infrastructure Solutions	Electric Power Infrastructure Solutions	$	2,199,430	52.0	%	$	1,815,762	60.5	%	$	383,668	21.1	%	Electric Power Infrastructure Solutions	$	2,415,254	47.9	%	$	2,199,430	52.0	%	$	215,824	9.8	%
Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions	924,236		21.8		332,013		11.1		592,223		178.4	%	Renewable Energy Infrastructure Solutions	1,389,368		27.5		924,236		21.8		465,132		50.3	%
Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions	1,108,337		26.2		852,041		28.4		256,296		30.1	%	Underground Utility and Infrastructure Solutions	1,243,988		24.6		1,108,337		26.2		135,651		12.2	%
Consolidated revenues	Consolidated revenues	$	4,232,003	100.0	%	$	2,999,816	100.0	%	$	1,232,187	41.1	%	Consolidated revenues	$	5,048,610	100.0	%	$	4,232,003	100.0	%	$	816,607	19.3	%
Operating income (loss):	Operating income (loss):													Operating income (loss):

Electric Power Infrastructure Solutions	Electric Power Infrastructure Solutions	$	232,150	10.6	%	$	206,967	11.4	%	$	25,183	12.2	%	Electric Power Infrastructure Solutions	$	244,017	10.1	%	$	232,150	10.6	%	$	11,867	5.1	%
Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions	81,687		8.8	%	29,932		9.0	%	51,755		172.9	%	Renewable Energy Infrastructure Solutions	110,487		8.0	%	81,687		8.8	%	28,800		35.3	%
Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions	89,943		8.1	%	23,937		2.8	%	66,006		275.7	%	Underground Utility and Infrastructure Solutions	107,207		8.6	%	89,943		8.1	%	17,264		19.2	%
Corporate and Non-Allocated costs		(195,424)		(4.6)	%	(99,185)		(3.3)	%	(96,239)		97.0	%
Corporate and Non-Allocated Costs														Corporate and Non-Allocated Costs	(182,438)		(3.6)	%	(195,424)		(4.6)	%	12,986		(6.6)	%
Consolidated operating income	Consolidated operating income	$	208,356	4.9	%	$	161,651	5.4	%	$	46,705	28.9	%	Consolidated operating income	$	279,273	5.5	%	$	208,356	4.9	%	$	70,917	34.0	%

Electric Power Infrastructure Solutions Segment Results

Revenues. The increase in revenues for the three months ended June 30, ~~2022~~2023 was primarily due to increased spending by our utility customers on grid modernization and hardening ~~resulting in increased demand for our electric power services, as well as~~and approximately $80 million in revenues attributable to acquired businesses.

Operating Income. Operating income increased for the three months ended June 30, ~~2022~~2023 primarily due to ~~increased revenues explained above.~~the increase in revenues. Operating margin decreased during the three months ended June 30, ~~2022 primarily~~2023 partially due to ~~the normal variability associated with the overall timing~~$9.2 million of ~~projects and project mix,~~lower equity in earnings from our integral unconsolidated affiliates as discussed above, as well as ~~inefficiencies attributable~~lower than expected utilization of resources in Canada, which is expected to ~~supply chain disruptions impacting certain operations and elevated consumables costs.~~continue throughout the rest of the year. The ~~decrease in~~negative impact of these items on operating margin was partially offset by improved performance on various communication projects and an $11.1 million increase in equity in earnings from LUMA and other integral unconsolidated affiliates as compared to the three months ended June 30, 2021.operating margin associated with telecommunications projects.

Renewable Energy Infrastructure Solutions Segment Results

Revenues. The increase in revenues for the three months ended June 30, ~~2022~~2023 was primarily due to increased demand and improved supply chain dynamics, as well as approximately ~~$490~~$75 million in revenues attributable to acquired ~~businesses, primarily Blattner, which was acquired in October 2021.~~businesses.

Operating Income. The ~~remaining~~ increase in ~~revenues~~operating income was primarily due to ~~increased customer demand for renewable transmission and interconnection construction services.~~

~~The~~the increase in revenues during the three months ended June 30, 2023. The decrease in operating ~~income~~margin during the three months ended June 30, 2023 was primarily attributable to increased unabsorbed costs related to higher levels of fixed costs for resources required to support the expected increase in project activity in the second half of 2023 and into 2024. Additionally, operating margin during the three months ended June 30, 2022 ~~was primarily due to the increase in revenues. The decrease in operating margin was attributable to significant additional costs arising~~benefited from delays on a large transmission project in Canada that were due to the continued negative impact of the COVID-19 pandemic from the first quarter, which was exacerbated by the remote locations of the project, as well as less favorable results associated with the normal variability of overall project timing and project mix. The decrease in operating margin was partially offset by the favorable acceleration of a transmission project by the customer.

Underground Utility and Infrastructure Solutions Segment Results

Revenues. The increase in revenues for the three months ended June 30, ~~2022~~2023 was ~~primarily~~ due to ~~increased revenues associated with~~ higher demand from our gas utility services customers, and ~~industrial customers, which began~~ to ~~move forward~~a lesser extent, increased revenues associated with ~~certain deferred~~large pipeline projects in Canada. These increases were partially offset by approximately $20 million as a result of unfavorable foreign currency exchange rates.

~~maintenance~~Operating Income. The increase in operating income and ~~capital spending during~~operating margin for the three months ended June 30, ~~2022, as well as an increase in revenues associated with certain large pipeline projects in Canada and approximately $20 million in revenues attributable to acquired businesses.~~

~~The increases in operating income and operating margin during the three months ended June 30, 2022 were~~2023 was primarily due to the increase in revenues, which contributed to higher levels of fixed cost absorption. Also contributing to the increases were improved performance across the segment, particularly with respect to our industrial services operations, and more favorable results associated with the normal variability of overall project timing and project mix. Additionally, our performance in this segment was impacted less by the COVID-19 pandemic and challenges in the overall energy market during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The three months ended June 30, 2021 also included the recognition of a $23.6 million provision for credit loss related to receivables from a customer that declared bankruptcy in July 2021 and its affiliate, as well as a $2.3 million asset impairment charge related to the planned sale of certain equipment that was not utilized in our core operations and was subsequently sold.

Corporate and Non-Allocated Costs

The ~~increase~~decrease in corporate and non-allocated costs during the three months ended June 30, ~~2022~~2023 was primarily ~~related~~due to ~~an $86.7~~a $37.9 million ~~increase~~decrease in intangible asset amortization, largely associated with the acquisition of Blattner, ~~a $12.6~~which was fully amortized by the third quarter of 2022; and an $11.9 million ~~increase~~decrease in acquisition and integration costs related to recent acquisitions and a $6.9 million increase in salaries, incentive compensation and non-cash stock compensation expense. Included in acquisition and integration costs during the three months ended June 30, 2022 was $11.5 million of expenses associated with change of control payments as a result of the acquisition of Blattner.acquisitions. These ~~increases~~decreases were partially offset by ~~a $13.7~~an aggregate increase of $36.8 million ~~decrease in expense~~primarily related to deferred compensation liabilities due to market ~~fluctuations.~~fluctuations; compensation expense, primarily related to salaries due partially to growth in business; and consulting fees.

Six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021~~2022

The following table sets forth segment revenues, segment operating income (loss) and operating margins for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands):


		Six Months Ended June 30,				Change								Six Months Ended June 30,					Change
			2022	2021				$		%								2023	2022	$		%
Revenues:	Revenues:																Revenues:

Electric Power Infrastructure Solutions	Electric Power Infrastructure Solutions			$	4,338,127	52.9	%	$	3,491,808	61.2	%	$	846,319		24.2	%	Electric Power Infrastructure Solutions			$	4,751,291	50.1	%	$	4,338,127	52.9	%	$	413,164	9.5	%
Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions			1,799,868		22.0		716,087		12.6		1,083,781			151.3	%	Renewable Energy Infrastructure Solutions			2,397,668		25.3		1,799,868		22.0		597,800		33.2	%
Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions			2,059,533		25.1		1,495,502		26.2		564,031			37.7	%	Underground Utility and Infrastructure Solutions			2,328,477		24.6		2,059,533		25.1		268,944		13.1	%
Consolidated revenues	Consolidated revenues			$	8,197,528	100.0	%	$	5,703,397	100.0	%	$	2,494,131		43.7	%	Consolidated revenues			$	9,477,436	100.0	%	$	8,197,528	100.0	%	$	1,279,908	15.6	%
Operating income (loss):	Operating income (loss):																Operating income (loss):

Electric Power Infrastructure Solutions	Electric Power Infrastructure Solutions			435,569		10.0	%	360,706		10.3	%	74,863			20.8	%	Electric Power Infrastructure Solutions			459,166		9.7	%	435,569		10.0	%	23,597		5.4	%
Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions			151,629		8.4	%	75,228		10.5	%	76,401			101.6	%	Renewable Energy Infrastructure Solutions			146,143		6.1	%	151,629		8.4	%	(5,486)		(3.6)	%
Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions			138,118		6.7	%	32,750		2.2	%	105,368			321.7	%	Underground Utility and Infrastructure Solutions			168,780		7.2	%	138,118		6.7	%	30,662		22.2	%
Corporate and Non-Allocated Costs	Corporate and Non-Allocated Costs			(399,444)		(4.9)	%	(193,304)		(3.4)	%	(206,140)			106.6	%	Corporate and Non-Allocated Costs			(368,956)		(3.9)	%	(399,444)		(4.9)	%	30,488		(7.6)	%
Consolidated operating income	Consolidated operating income			$	325,872	4.0	%	$	275,380	4.8	%	$	50,492		18.3	%	Consolidated operating income			$	405,133	4.3	%	$	325,872	4.0	%	$	79,261	24.3	%

Electric Power Infrastructure Solutions Segment Results

Revenues. The increase in revenues for the six months ended June 30, ~~2022~~2023 was primarily due to increased spending by our utility customers on grid modernization and hardening ~~resulting in increased demand for our electric power services, as well as~~and approximately ~~$155~~$145 million in revenues attributable to acquired businesses.

Operating Income. Operating income increased for the six months ended June 30, ~~2022~~2023 primarily due to the increase in ~~revenues explained above.~~revenues. Operating margin decreased during the six months ended June 30, ~~2022~~2023 partially due to $14.7 million of lower equity in earnings from our integral unconsolidated affiliates as ~~a result~~discussed above, as well as lower than expected utilization of ~~normal variability~~resources in Canada, which is expected to continue throughout the rest of the ~~overall timing~~year. The negative impact of ~~projects and project mix, inefficiencies attributable to supply chain disruptions impacting certain operations, elevated consumables costs, and lower margins~~these items on ~~a large transmission project in Canada that experienced substantial productivity impacts from the COVID-19 pandemic during the first quarter of 2022. The decrease in~~ operating margin was partially offset by improved performance on various communication projects and a $21.1 million increase in equity in earnings from LUMA and other integral unconsolidated affiliates as compared to the six months ended June 30, 2021.

operating margin associated with telecommunications projects.

Renewable Energy Infrastructure Solutions Segment Results

Revenues. The increase in revenues for the six months ended June 30, ~~2022~~2023 was primarily due to increased demand and improved supply chain dynamics, as well as approximately ~~$960~~$110 million in revenues attributable to acquired ~~businesses, primarily Blattner, which was acquired~~businesses. These increases were partially offset by approximately $29 million as a result of unfavorable foreign currency exchange rates.

Operating Income. Operating income and operating margin during the six months ended June 30, 2023 were negatively impacted by normal variability in ~~October 2021. The remaining~~overall project timing and increased unabsorbed costs related to higher levels of fixed costs for resources required to support the expected increase in ~~revenues~~project activity in the second half of 2023 and into 2024. Additionally, the six months ended June 30, 2022 was ~~primarily due to increased customer demand for renewable transmission and interconnection construction services.~~

~~The increase in operating income was primarily due to the increase in revenues associated with the acquisition of Blattner. The decrease in operating margin was attributable to extensive schedule~~negatively impacted by significant additional costs arising from delays on athe large renewable transmission project in Canada that were due to the ~~effect~~continued negative impact of the COVID-19 pandemic, which was exacerbated by the remote locations of the project, as well as less favorable results associated with the normal variability of overall project timing and project mix. Additionally, there were more favorable close-outs of certain projects during the six months ended June 30, 2021 as compared to the six months ended June 30, 2022.project.

Underground Utility and Infrastructure Solutions Segment Results

Revenues. The increase in revenues for the six months ended June 30, ~~2022~~2023 was primarily due to higher demand from our gas utility services customers, and to a lesser extent, due to increased revenues associated with higher demand from our gas utility and industrial customers, which began to move forward with certain deferred maintenance and capital spending during the six months ended June 30, 2022, as well as an increase in revenues associated with certain large pipeline projects in ~~Canada and~~Canada. These increases were partially offset by approximately ~~$25~~$42 million ~~in revenues attributable to acquired businesses.~~as a result of unfavorable foreign currency exchange rates.

Operating Income. The increase in operating income and operating margin for the six months ended June 30, 2023 was primarily due to the increase in revenues, which contributed to higher levels of fixed cost absorption. Also contributing to the increases were improved performance across the segment, particularly with respect to our industrial services operations, and more favorable results associated with the normal variability of overall project timing and project mix. Additionally, our performance in this segment was impacted less by the COVID-19 pandemic and challenges in the overall energy market during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. Also, the six months ended June 30, 2021 included the recognition of a $23.6 million provision for credit loss related to receivables from a customer that declared bankruptcy in July 2021 and its affiliate, as well as a $2.3 million asset impairment charge related to the planned sale of certain equipment that was not utilized in our core operations and was subsequently sold.

Corporate and Non-Allocated Costs

The ~~increase~~decrease in corporate and non-allocated costs during the six months ended June 30, ~~2022~~2023 was primarily due to a ~~$181.1~~$81.3 million ~~increase~~decrease in intangible asset amortization, largely associated with the acquisition of Blattner, which was fully amortized by the third quarter of 2022; and a ~~$26.0~~$7.2 million ~~increase~~decrease in acquisition and integration costs. These decreases were

partially offset by an aggregate increase of $58.0 million in costs primarily related to ~~recent acquisitions and a $13.2 million increase in salaries, incentive~~market fluctuations of deferred compensation ~~and~~liabilities; compensation expense, primarily related to non-cash stock compensation ~~expense. Included~~expense and salaries due partially to growth in ~~acquisition~~business; travel and integration costs during the six months ended June 30, 2022 was $23.0 million of expenses associated with change of control payments as a result of the acquisition of Blattner. These increases were partially offset by a $20.0 million decrease in expense related to deferred compensation liabilities due to market fluctuations.entertainment; and consulting fees.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA, financial measures not recognized under GAAP, when used in connection with net income attributable to common stock, are intended to provide useful information to investors and analysts as they evaluate our performance. EBITDA is defined as earnings before interest and other financing expenses, taxes, depreciation and amortization, and adjusted EBITDA is defined as EBITDA adjusted for certain other items as described below. These measures should not be considered as an alternative to net income attributable to common stock or other financial measures of performance that are derived in accordance with GAAP. Management believes that the exclusion of these items from net income attributable to common stock enables itus and our investors to more effectively evaluate our operations period over period and to identify operating trends that might not be apparent when including the excluded items.

As to certain of the items below, (i) non-cash stock-based compensation expense varies from period to period due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition and integration costs vary from period to period depending on the level of our acquisition activity; (iii) equity in (earnings) losses of non-integral unconsolidated affiliates varies from period to period depending on the activity and financial performance of ~~non-integral unconsolidated~~such affiliates, the operations of which are not operationally integral to ~~Quanta;~~us; (iv) unrealized mark-to-market adjustments on ~~our investment in a publicly traded company~~investments vary from period to period based on fluctuations in the market price of such company’s common stock; (v) gains and losses on the sale of investments vary from period to period depending on activity; (vi) asset impairment charges ~~can~~ vary from period to period

depending on economic and other factors; and (vii) change in fair value of contingent consideration liabilities varies from period to period depending on the performance in post-acquisition periods of certain acquired businesses, and the effect of present value accretion on fair value calculations. Because EBITDA and adjusted EBITDA, as defined, exclude some, but not all, items that affect net income attributable to common stock, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income

attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. The following table shows dollars in ~~thousands.~~thousands:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income attributable to common stock (GAAP as reported)	Net income attributable to common stock (GAAP as reported)	$	88,020	$	117,033	$	172,661	$	206,794	Net income attributable to common stock (GAAP as reported)	$	165,899	$	88,020	$	260,945	$	172,661
Interest and other financing expenses	Interest and other financing expenses	28,639		13,109		53,367		25,584		Interest and other financing expenses	48,189		28,639		89,882		53,367
Interest income	Interest income	(222)		(2,909)		(291)		(3,026)		Interest income	(1,448)		(222)		(2,964)		(291)
Provision for income taxes	Provision for income taxes	41,252		40,951		47,808		54,675		Provision for income taxes	69,367		41,252		65,946		47,808
Depreciation expense	Depreciation expense	73,959		62,757		144,913		124,864		Depreciation expense	79,876		73,959		158,258		144,913
Amortization of intangible assets	Amortization of intangible assets	107,945		21,291		223,696		42,646		Amortization of intangible assets	70,025		107,945		142,428		223,696
Interest, income taxes and depreciation included in equity in earnings of integral unconsolidated affiliates		4,579		2,150		7,840		3,651
Interest, income taxes, depreciation and amortization included in equity in earnings of integral unconsolidated affiliates										Interest, income taxes, depreciation and amortization included in equity in earnings of integral unconsolidated affiliates	4,412		4,579		9,282		7,840
EBITDA	EBITDA	344,172		254,382		649,994		455,188		EBITDA	436,320		344,172		723,777		649,994
Non-cash stock-based compensation	Non-cash stock-based compensation	28,090		23,923		51,082		42,610		Non-cash stock-based compensation	34,607		28,090		62,058		51,082
Acquisition and integration costs (1)	Acquisition and integration costs (1)	14,191		1,567		29,322		3,328		Acquisition and integration costs (1)	2,284		14,191		22,172		29,322
Equity in earnings of non-integral unconsolidated affiliates		(9,611)		(658)		(14,949)		(1,343)
Equity in losses (earnings) of non-integral unconsolidated affiliates										Equity in losses (earnings) of non-integral unconsolidated affiliates	(468)		(9,611)		(2,085)		(14,949)
Unrealized loss from mark-to-market adjustment on investment (2)	Unrealized loss from mark-to-market adjustment on investment (2)	41,654		—		50,047		—		Unrealized loss from mark-to-market adjustment on investment (2)	—		41,654		—		50,047
Gain on sale of investment (3)		—		—		(6,696)		—
Gains on sales of investments (3)										Gains on sales of investments (3)	(674)		—		(1,496)		(6,696)
Asset impairment charges ~~(4)~~	Asset impairment charges ~~(4)~~	2,800		2,319		2,800		2,319		Asset impairment charges ~~(4)~~	—		2,800		—		2,800
Change in fair value of contingent consideration liabilities	Change in fair value of contingent consideration liabilities	809		(210)		5,978		(573)		Change in fair value of contingent consideration liabilities	—		809		—		5,978
Adjusted EBITDA	Adjusted EBITDA	$	422,105	$	281,323	$	767,578	$	501,529	Adjusted EBITDA	$	472,069	$	422,105	$	804,426	$	767,578

(1) The amounts for the three and six months ended June 30, 2022 include ~~among other things,~~ $11.5 million and $23.0 million of expenses that are associated with change of control payments as a result of the acquisition of Blattner.

(2) The amounts for the three and six months ended June 30, 2022 ~~represent~~are unrealized losses from decreases in ~~the~~ fair value of our investment ~~based on the market price of our stock investment~~ in ~~Starry, a publicly traded company.~~Starry.

(3) The amount for the six months ended June 30, 2022 ~~represents~~is a gain as a result of the sale of ~~our non-controlling ownership~~a non-marketable equity security interest equity in a technology company.

~~(4)~~ The amount for the three and six months ended June 30, 2022 represents a $2.8 million asset impairment charge primarily related to the expected discontinued use of the right-of-use asset associated with our existing corporate headquarters in connection with our planned move to a new headquarters by the end of 2022. The amount for the three and six months ended June 30, 2021 represents an asset impairment charge related to certain equipment that was not utilized in our core operations and was subsequently sold.

Remaining Performance Obligations and Backlog

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Our remaining performance obligations represent management’s estimate of consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work has not yet begun, which includes estimated revenues attributable to consolidated joint ventures and variable interest entities, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized, and revenues from change orders and claims to the extent management believes they will be earned and are probable of collection.

We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under GAAP. We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent. We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors. Our remaining performance obligations are a component of

backlog, which also includes estimated orders under MSAs, including estimated renewals, and non-fixed price contracts expected to be completed within one year. Our methodology for determining backlog may not be comparable to the methodologies used by other companies.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, MSAs accounted for ~~55%~~46% and ~~55%~~52% of our estimated 12-month backlog and ~~66%~~57% and ~~67%~~65% of our total backlog. Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts can be terminated on short notice even if we are not in default. We determine the estimated backlog for these MSAs using recurring historical trends, factoring in seasonal demand and projected customer needs based upon ongoing communications. In addition, many of our MSAs are subject to renewal, and these potential renewals are considered in determining estimated backlog. As a result, estimates for remaining performance obligations and backlog are subject to change based on, among other things, project accelerations; project cancellations or delays, including but not limited

to those caused by commercial issues, regulatory requirements, natural disasters, emergencies ~~(including the ongoing COVID-19 pandemic)~~ and adverse weather conditions; and final acceptance of change orders by customers. These factors can cause revenues to be realized in periods and at levels that are different than originally projected.

The following table reconciles total remaining performance obligations to our backlog (a non-GAAP financial measure) by reportable segment along with estimates of amounts expected to be realized within 12 months (in thousands):


		June 30, 2022				December 31, 2021				June 30, 2023				December 31, 2022
		12 Month		Total		12 Month		Total				12 Month		Total		12 Month		Total
Electric Power Infrastructure Solutions	Electric Power Infrastructure Solutions										Electric Power Infrastructure Solutions
Remaining performance obligations	Remaining performance obligations	$	2,149,469	$	2,779,227	$	2,002,862	$	2,769,106		Remaining performance obligations	$	2,584,140	$	4,128,988	$	2,124,820	$	3,033,472
Estimated orders under MSAs and short-term, non-fixed price contracts	Estimated orders under MSAs and short-term, non-fixed price contracts	4,230,888		8,945,444		4,492,038		9,447,765			Estimated orders under MSAs and short-term, non-fixed price contracts	4,948,080		9,454,858		5,415,427		10,049,435
Backlog	Backlog	$	6,380,357	$	11,724,671	$	6,494,900	$	12,216,871		Backlog	$	7,532,220	$	13,583,846	$	7,540,247	$	13,082,907

Renewable Energy Infrastructure Solutions	Renewable Energy Infrastructure Solutions										Renewable Energy Infrastructure Solutions
Remaining performance obligations	Remaining performance obligations	$	2,299,898	$	2,911,835	$	2,178,846	$	2,428,408		Remaining performance obligations	$	5,048,636	$	6,801,436	$	3,183,568	$	4,638,115
Estimated orders under MSAs and short-term, non-fixed price contracts	Estimated orders under MSAs and short-term, non-fixed price contracts	52,345		90,553		65,618		120,237			Estimated orders under MSAs and short-term, non-fixed price contracts	118,333		206,102		57,555		84,094
Backlog	Backlog	$	2,352,243	$	3,002,388	$	2,244,464	$	2,548,645		Backlog	$	5,166,969	$	7,007,538	$	3,241,123	$	4,722,209

Underground Utility and Infrastructure Solutions	Underground Utility and Infrastructure Solutions										Underground Utility and Infrastructure Solutions
Remaining performance obligations	Remaining performance obligations	$	1,023,556	$	1,229,157	$	637,843	$	697,881		Remaining performance obligations	$	1,184,061	$	1,546,395	$	1,038,543	$	1,129,837
Estimated orders under MSAs and short-term, non-fixed price contracts	Estimated orders under MSAs and short-term, non-fixed price contracts	1,820,560		3,894,014		1,934,826		3,810,829			Estimated orders under MSAs and short-term, non-fixed price contracts	1,755,797		5,057,435		1,973,982		5,158,814
Backlog	Backlog	$	2,844,116	$	5,123,171	$	2,572,669	$	4,508,710		Backlog	$	2,939,858	$	6,603,830	$	3,012,525	$	6,288,651

Total	Total										Total
Remaining performance obligations	Remaining performance obligations	$	5,472,923	$	6,920,219	$	4,819,551	$	5,895,395		Remaining performance obligations	$	8,816,837	$	12,476,819	$	6,346,931	$	8,801,424
Estimated orders under MSAs and short-term, non-fixed price contracts	Estimated orders under MSAs and short-term, non-fixed price contracts	6,103,793		12,930,011		6,492,482		13,378,831			Estimated orders under MSAs and short-term, non-fixed price contracts	6,822,210		14,718,395		7,446,964		15,292,343
Backlog	Backlog	$	11,576,716	$	19,850,230	$	11,312,033	$	19,274,226		Backlog	$	15,639,047	$	27,195,214	$	13,793,895	$	24,093,767

The increases in remaining performance obligations and backlog from December 31, 2022 to June 30, 2023 were primarily attributable to multiple new project awards.

Liquidity and Capital Resources

Overview

We plan to fund our working capital, capital expenditures, debt service, dividends and other cash requirements with our current available liquidity and cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Management monitors financial markets and national and global economic conditions for factors that may affect our liquidity and capital resources. As set forth below, we have various short-term and long-term cash requirements and capital allocation priorities, and we intend to fund these requirements primarily with cash flow from operating activities and debt financing.

~~Cash Requirements and Capital Allocation~~

~~Cash Requirements.~~ The following table summarizes, as of June 30, 2022, our cash requirements from contractual obligations that are due within the twelve months subsequent to June 30, 2022 and thereafter, excluding certain amounts discussed below (in thousands):

Due by
June 30, 2023 Due Thereafter Total
Long-term debt, including current portion - principal $ 25,838 $ 3,878,519 $ 3,904,357
Long-term debt - cash interest (1)
64,295 624,132 688,427
Operating lease obligations (2)
81,677 175,147 256,824
Operating lease obligations that have not yet commenced (3)
1,070 17,994 19,064
Finance lease obligations (2)
1,422 2,011 3,433
Short-term lease obligations (4)
14,619 — 14,619
Deferral of employer portion of payroll tax payments 54,435 — 54,435
Equipment purchase commitments (5)
159,312 — 159,312
Capital commitment related to investments in unconsolidated affiliates (6)
733 11,163 11,896
Total cash requirements from contractual obligations $ 403,401 $ 4,708,966 $ 5,112,367

~~(1)~~ Amounts represents cash interest and other financing expenses associated with our fixed-rate, long-term debt, which primarily includes our senior notes and financing transactions arising from the exercise of our equipment rental purchase options. Our $750.0 million term loan and $583.2 million of outstanding revolving loans under our senior credit facility bear interest at variable market rates and such amount is not included due to its variability. Assuming the principal amount outstanding and interest rate in effect as of June 30, 2022 with respect to this variable rate debt remained the same, the annual cash interest expense would be approximately $40.3 million, payable until October 8, 2026, the maturity date of our senior credit facility. The recent increase in the federal funds interest rate, as well as expected additional increases to such rate during the remainder of 2022, is expected to increase the variable interest rate on amounts borrowed under our senior credit facility in future periods. Additionally, as discussed further in ~~Significant Sources of Cash~~ below, our cash interest and other financing expenses may also be impacted in future periods due to the transition in financial markets away from London Interbank Offered Rate (LIBOR), which is expected to be complete by mid-2023.

~~(2)~~ Amounts represent undiscounted operating and finance lease obligations as of June 30, 2022. The corresponding amounts recorded on our June 30, 2022 condensed consolidated balance sheet represent the present value of these amounts.

~~(3)~~ Amounts represent undiscounted operating lease obligations that have not commenced as of June 30, 2022. The operating lease obligations will be recorded on our condensed consolidated balance sheet beginning on the commencement date of each lease.

~~(4)~~ Amount represents short-term lease obligations that are not recorded on our June 30, 2022 condensed consolidated balance sheet due to our accounting policy election. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because we are unable to accurately predict future rental amounts.

~~(5)~~ Amount represents capital committed for the expansion of our vehicle fleet. Although we have committed to the purchase of these vehicles/equipment at the time of their delivery, we expect that these orders will be assigned to third-party leasing companies and made available to us under certain of our master equipment lease agreements.

~~(6)~~ ~~Amounts represent outstanding capital commitments associated with investments in unconsolidated affiliates.~~

~~Contingent Obligations~~. We have various contingent obligations that could require the use of cash or impact the collection of cash in future periods; however, we are unable to accurately predict the timing and estimate the amount of such contingent obligations as of June 30, 2022. These contingent obligations generally include, among other things:

•contingent consideration liabilities and changes to consideration related to acquisitions and purchase price allocations, including liabilities assumed related to change of control provisions, which are described further in Note 6 of the Notes to Condensed Consolidated Financial Statements in Item 1. ~~Financial Statements~~ ~~of Part I of this Quarterly Report;~~

•~~undistributed earnings of foreign subsidiaries and unrecognized tax benefits, which are described further in Note 12 of the Notes to Condensed Consolidated Financial Statements in Item 1.~~ ~~Financial Statements~~ ~~of Part I of this~~

~~Quarterly Report and Note 12 of the Notes to Consolidated Financial Statements in Item 8.~~ ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report;~~

•collective bargaining agreements and multiemployer pension plan liabilities, as well as liabilities related to our deferred compensation and other employee benefit plans, which are described further in Notes 15 and 16 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report; and~~

•obligations relating to our investments in affiliates and other entities, lawsuits and other legal proceedings, uncollectible accounts receivable, insurance liabilities, obligations relating to letters of credit, bonds and parent guarantees, obligations relating to employment agreements, indemnities and assumed liabilities, and residual value guarantees, which are described further in Note 16 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report and Note 16 of the Notes to Consolidated Financial Statements in Item 8. ~~Financial Statements and Supplementary Data~~ ~~in Part II of the 2021 Annual Report.~~

~~Capital Allocation~~. Our capital deployment priorities that require the use of cash include: (i) working capital to fund ongoing operating needs, (ii) capital expenditures to meet anticipated demand for our services, (iii) acquisitions and investments to facilitate the long-term growth and sustainability of our business, and (iv) return of capital to stockholders, including through the payment of dividends and repurchases of our outstanding common ~~stock and/~~stock. We intend to fund these requirements primarily with cash flow from operating activities, as well as debt financing as needed.

Cash Requirements and Capital Allocation

During the six months ended June 30, 2023, there were no material changes outside the ordinary course of business in the specified contractual obligations or ~~debt securities. Our industry is~~changes to our capital intensive, and we expect substantial capital expenditures and commitments for equipment purchases and equipment lease and rental arrangements to be needed into the foreseeable future in order to meet anticipated demand for our services. We expect capital expenditures for property and equipment purchases for the year ended December 31, 2022 to be approximately $400 million. In line with our past practices, which areallocation priorities as set forth in ~~further detail below, we also expect to continue to allocate significant capital to strategic acquisitions~~Item 7. Management’s Discussion and ~~investments, as well as to pay dividends and to repurchase our outstanding common stock and/or debt securities.~~

~~Significant Sources~~Analysis of ~~Cash~~

Financial Condition and Results of Operations in Part II of the 2022 Annual Report. We anticipate that our future cash flows from operating activities, cash and cash equivalents on hand, existing borrowing capacity under our senior

credit facility and commercial paper program and ability to access capital markets for additional capital will provide sufficient funds to enable us to meet our cash requirements ~~described above~~ for the next twelve months and over the longer term.

Significant Sources of Cash

Cash flow from operating activities is primarily influenced by demand for our services and operating margins but is also influenced by the timing of working capital needs associated with the various types of services that we provide. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs are required to be paid before the associated receivables are billed and collected. Additionally, operating cash flows may be negatively impacted as a result of unpaid and delayed change orders and claims. Changes in project timing due to delays or accelerations and other economic, regulatory, market and political factors that may affect customer spending ~~including the potential continued impact of the COVID-19 pandemic,~~ could also impact cash flow from operating activities. Further information with respect to our cash flow from operating activities is set forth below and in Note 1916 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report.

Our available commitments under our senior credit facility and cash and cash equivalents as of June 30, ~~2022~~2023 were as follows (in thousands):


	June 30, ~~2022~~2023
Total capacity available for revolving loans, credit support for commercial paper program and letters of credit	$	2,640,000
Less:
Borrowings of revolving loans	~~583,185~~217,440
Commercial paper program notes outstanding(1)	699,200
Letters of credit outstanding	~~430,493~~312,700
Available commitments for ~~issuing~~ revolving loans, ~~or new~~credit support for commercial paper program and letters of credit	~~1,626,322~~1,410,660
Plus:
Cash and cash equivalents(2)	~~150,653~~361,966
Total available commitments under senior credit facility and cash and cash equivalents	$	~~1,776,975~~1,772,626

(1) Represents unsecured notes issued under our commercial paper program, which allows for the issuance of notes up to a maximum aggregate face amount of $1.0 billion outstanding at any time. Available commitments for revolving loans under our senior credit facility must be maintained to provide credit support for notes issued under our commercial paper program, and therefore such notes effectively reduce the available borrowing capacity under our senior credit facility.

(2) Further information with respect to our cash and cash equivalents is set forth below and in Note 15 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report. This amount includes $93.5 million in jurisdictions outside of the U.S., principally in Canada and Australia. There are currently no legal or economic restrictions that would materially impede our ability to repatriate cash.

We consider our investment policies related to cash and cash equivalents to be conservative, as we maintain a diverse portfolio of what we believe to be high-quality cash and cash equivalent investments with short-term maturities. ~~Further information with respect to our cash and cash equivalents is set forth in Note 18 of the Notes to Condensed Consolidated Financial Statements in Item 1.~~ ~~Financial Statements~~ ~~of Part I of this Quarterly Report~~.Additionally, subject to the conditions

specified in the credit agreement for our senior credit facility, we have the option to increase the capacity of our senior credit facility, in the form of an increase in the revolving commitments, term loans or a combination thereof, from time to time, upon receipt of additional commitments from new or existing lenders by up to an additional (i) $400.0 million plus (ii) additional amounts so long as the Incremental Leverage Ratio Requirement (as defined in the credit agreement) is satisfied at the time of such increase. The Incremental Leverage Ratio Requirement requires, among other things, after giving pro forma effect to such increase and the use of proceeds therefrom, compliance with the credit agreement’s financial covenants as of the most recent fiscal quarter end for which financial statements were required to be delivered. Further information with respect to our debt obligations is set forth in Note 108 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report.

We may also seek to access the capital markets from time to time to raise additional capital, increase liquidity as necessary, refinance or extend the term of our existing indebtedness, fund acquisitions or otherwise fund our capital needs. While our financial strategy and consistent performance have allowed us to maintain investment grade ratings, subsequent to recent financing transactions, including the senior notes issuance and increase in the capacity of our senior credit facility in connection with our acquisition of Blattner during the fourth quarter of 2021, our ability to access capital markets in the future depends on a number of factors, including our financial performance and financial position, our credit ratings, industry conditions, general economic conditions, our backlog, capital expenditure commitments, market conditions and market perceptions of us and our industry.

Furthermore, our interest expense may be impacted in future periods due to the transition in financial markets away from LIBOR, which is expected to be complete by mid-2023. The credit agreement for our senior credit facility includes LIBOR benchmark replacement provisions, including, among others, the Secured Overnight Financing Rate, and we anticipate selecting an alternative benchmark rate prior to the transition away from LIBOR. While we do not expect our interest rate to be materially affected in future periods by this transition, the ultimate impact remains unknown and is subject to numerous factors, including the final determination and behavior of a replacement benchmark rate.

Sources and Uses of Cash, ~~and~~ Cash Equivalents and Restricted Cash During the ~~Three and~~ Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

In summary, our cash flows for each period were as follows (in thousands):


		Three Months Ended				Six Months Ended					Six Months Ended
		June 30,				June 30,					June 30,
		2022		2021		2022		2021				2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	118,731	$	188,948	$	203,821	$	314,561	Net cash provided by operating activities		$	165,822	$	203,821
Net cash used in investing activities	Net cash used in investing activities	$	(117,949)	$	(96,371)	$	(211,018)	$	(319,177)	Net cash used in investing activities		$	(567,367)	$	(211,018)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	$	(87,466)	$	(81,753)	$	(70,916)	$	31,236	Net cash provided by (used in) financing activities		$	336,294	$	(70,916)

Operating Activities

Net cash provided by operating activities of $165.8 million and $203.8 million in the six months ended June 30, 2023 and 2022 primarily reflected earnings adjusted for non-cash items and cash used by the main components of working capital: “Accounts and notes receivable,” “Contract assets,” “Prepaid expenses and other current assets,” “Accounts payable and accrued expenses,” and “Contract liabilities.” The net cash provided by operating activities during the six months ended June 30, 2023 and 2022 was negatively impacted by incremental working capital requirements related to the large renewable transmission project in Canada and the timing of the associated billings.

As discussed above, cash flow ~~from~~provided by operating activities is primarily influenced by demand for our services and operating margins but is also influenced by working capital needs. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs, primarily labor, equipment and subcontractors, are required to be paid before the associated receivables are billed and collected and when we incur costs for work that is the subject of unpaid change orders and claims. Accordingly, changes within working capital in accounts receivable, contract assets and contract liabilities are normally related and are typically affected on a collective basis by changes in revenue due to the timing and volume of work performed and variability in the timing of customer billings and ~~payments.~~payments, as well as change orders and claims. Additionally, working capital needs are generally higher during the summer and fall due to increased demand for our services when favorable weather conditions exist in many of our operating regions. Conversely, working capital assets are typically converted to cash during the winter. These seasonal trends can be offset by changes in project timing due to delays or accelerations and other economic factors that may affect customer spending, including market conditions or the impact of certain unforeseen events (e.g., ~~COVID-19 pandemic).~~

~~Net cash provided by operating activities during~~regulatory and other actions that impact the three and six months ended June 30, 2022 was negatively impacted by increased working capital requirements, associated with higher levels of revenues as well as increases associated with two large transmission projects in Canada. For additional information about the change orders and claims associated with these projects, see ~~Contract Estimates~~ ~~and~~ ~~Changes in Estimates~~ ~~in Note 4 of the Notes to Condensed Consolidated Financial Statements in Item 1.~~ ~~Financial Statements~~ ~~of Part I of this Quarterly Report. These increases in working capital needs were partially offset by an increase in net income adjusted~~supply chain for ~~non-cash items compared to the three and six months ended June 30, 2021.~~

Net cash provided by operating activities during the three and six months ended June 30, 2021 was negatively impacted by high working capital requirements, including the ramp up of the two large transmission projects in Canada described above.certain materials).

Days sales outstanding (DSO) represents the average number of days it takes revenues to be converted into cash, which management believes is an important metric for assessing liquidity. A decrease in DSO has a favorable impact on cash flow from operating activities, while an increase in DSO has a negative impact on cash flow from operating activities. DSO is calculated by using the sum of current accounts receivable, net of allowance (which includes retainage and unbilled balances), plus contract assets, less contract liabilities, and divided by average revenues per day during the quarter. DSO as of June 30, ~~2022~~2023 was 8178 days, which was lower than DSO of 8381 days as of June 30, ~~2021~~2022 and lower than our five-year historical average DSO of 82 days. This decrease in DSO as compared to June 30, ~~2021~~2022 was ~~primarily~~partially due to ~~the~~an increase in contract liabilities related to favorable billing terms on certain large projects, as well as increased revenues. The favorable impact ofon operating cash flow related to the ~~acquisition of Blattner, which has historically had a lower~~decrease in DSO ~~than certain of our other larger operating companies. This decrease~~ was partially offset by our prepayment of amounts to suppliers for certain project materials that require a long lead time and increased working capital requirements primarily related to increased unapproved change orders included in contract assets from the ~~two~~aforementioned large renewable transmission ~~projects~~project in ~~Canada and the timing of the associated billings on such projects.~~Canada.

Investing Activities

Net cash used in investing activities in the ~~three~~six months ended June 30, ~~2022~~2023 included ~~$121.6~~$452.3 million related to acquisitions and $185.6 million of capital ~~expenditures, partially offset by $15.6~~expenditures. Partially offsetting these items were $42.3 million of proceeds from the sale of non-integral equity investments and $35.0 million of proceeds from the sale of, and insurance settlements related to, property and equipment.

Net cash used in investing activities in the six months ended June 30, 2022 included $231.5 million of capital expenditures and $16.7 million of cash used for investments, partially offset by ~~$24.4~~$25.4 million of proceeds from the sale of, and insurance settlements related to, property and equipment and $16.9 million of cash received from investments, which primarily related to proceeds received from the sale of a non-controlling ownership interest in a technology company.

Net cash used in investing activities in the three months ended June 30, 2021 included $74.9 million of capital expenditures and $35.3 million used for acquisitions, some of which relates to acquisitions that closed in prior periods. Partially

offsetting these items was $11.4 million of proceeds from the sale of property and equipment. Net cash used in investing activities in the six months ended June 30, 2021 included $158.4 million of capital expenditures; $114.3 million of cash paid for equity and other investments, which primarily related to the acquisition of a minority interest in the broadband technology provider, Starry; and $68.1 million used for acquisitions, the majority of which related to acquisitions that closed in prior periods. These items were partially offset by $18.7 million of proceeds from the sale of property and equipment.

Our industry is capital intensive, and we expect substantial capital expenditures and commitments for equipment purchases and equipment lease and rental arrangements to be needed ~~into~~for the foreseeable future in order to meet anticipated demand for our services. ~~We also have various other capital commitments that are detailed in~~ ~~Cash Requirements and Capital Allocation~~ ~~above.~~ In addition, we expect to continue to pursue strategic acquisitions and investments, although we cannot predict the timing or amount of the cash needed for these initiatives.

Financing Activities

Net cash ~~used in~~provided by financing activities in the ~~three~~six months ended June 30, ~~2022~~2023 included $84.9 million of cash payments for common stock repurchases, $65.0 million of cash payments related to tax withholding for non-cash stock-based compensation and $10.1 million of cash payments for dividends and dividend equivalents. These items were partially offset by $74.1$491.7 million of net borrowings under our senior credit ~~facility.~~ facility and commercial paper program, partially offset by $110.8 million of cash payments to satisfy tax withholding obligations associated with stock-based compensation and $24.5 million of cash payments for dividends.

Net cash used in financing activities in the six months ended June 30, 2022 included $94.4 million of cash payments for common stock repurchases, $76.2 million of cash payments to satisfy tax withholding obligations associated with stock-based compensation and $20.9 million of cash payments for ~~dividends and cash dividend equivalents and $15.6 million of net repayments of short-term debt.~~dividends. These items were partially offset by $142.1 million of net borrowings under our senior credit facility.

Net cash used in financing activities in the three months ended June 30, 2021 included $36.6 million of payments to satisfy tax withholding obligations associated with stock-based compensation, $29.4 million of cash payments for common stock repurchases and $8.4 million of cash payments for dividends and cash dividend equivalents. Net cash provided by financing activities in the six months ended June 30, 2021 included $169.2 million of net borrowings under our senior credit facility, partially offset by $60.5 million of cash payments to satisfy tax withholding obligations associated with stock-based compensation, $48.9 million of cash payments for common stock repurchases and $17.2 million of cash payments for dividends and cash dividend equivalents.

We expect to continue to utilize cash for similar financing activities in the future, including repayments under our senior credit facility and commercial paper program, payment of cash dividends and repurchases of our common stock and/or debt securities.

Critical Accounting Estimates ~~and Policies Update~~

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to those rules and regulations. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the condensed consolidated financial statements are published and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our condensed consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. Management has reviewed its development and selection of critical accounting estimates with the audit committee of our Board of Directors. Our accounting policies are primarily described in ~~Notes~~Note 2 ~~and 4~~ of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the ~~2021~~2022 Annual Report and should be read in conjunction with the accounting policies identified that we believe affect our ~~critical accounting~~more significant judgments and estimates detailed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Part II of our ~~2021~~2022 Annual Report.

Item 3.Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes to our quantitative and qualitative disclosures about market risk during the six months ended June 30, ~~2022.~~2023. Our primary exposure to market risk relates to unfavorable changes in interest rates and currency exchange rates. Refer to the information on financial market risk related to changes in interest rates and foreign currency exchange rates in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of Part II of our ~~2021~~2022 Annual Report. ~~Our primary exposure to market risk relates to unfavorable changes in concentration of credit risk, interest rates and currency exchange rates.~~

Item 4.Controls and Procedures.

Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of Quanta’s Chief Executive Officer and Chief Financial Officer that are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the Exchange Act). This ~~item~~Item 4. section includes information concerning the controls and controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Evaluation of Disclosure Controls and Procedures

Our management has established and maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. The disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) ~~of the Exchange Act,~~, as such disclosure controls and procedures are defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, these officers have concluded that, as of June 30, ~~2022,~~2023, our disclosure controls and procedures were effective to provide reasonable assurance of achieving their objectives.

Evaluation of Internal Control over Financial Reporting

~~As described in Item 9A.~~ ~~Controls and Procedures~~ ~~of Part II of our 2021 Annual Report, we~~We acquired ~~Blattner and nine other businesses in 2021.~~three business during the six months ended June 30, 2023. We are in the process of integrating ~~each~~these acquired business into our overall internal control over financial reporting process.

Except as noted above, there has been no change in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Design and Operation of Control Systems

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and breakdowns can occur because of simple errors or mistakes. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

6249

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, negligence or gross negligence and/or property damage, environmental liabilities, wage and hour claims and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief, as well as interest and attorneys’ fees associated with such claims. With respect to all such lawsuits, claims and proceedings, we record a reserve when we believe it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. See Note 1614 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report, which is incorporated by reference in this Item 1, for additional information regarding litigation, claims and other legal proceedings.

Item 1A. Risk Factors.

Our business is subject to a variety of risks and uncertainties that are difficult to predict and many of which are outside of our control. For a detailed discussion of the risks that affect our business, refer to Item 1A. Risk Factors of Part I of our ~~2021~~2022 Annual Report. As of the date of this filing, there have been no material changes to the risk factors previously described in our ~~2021~~2022 Annual Report. The matters specifically identified are not the only risks and uncertainties facing our company, and ~~additional~~ risks and uncertainties not known to us or not specifically identified also may ~~also~~ impair our ~~business.~~business operations. If any of these risks and uncertainties occur, our business, financial condition, results of operations and cash flows could be negatively ~~impacted,~~affected, which could negatively impact the value of an investment in our company.

6350

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities During the Second Quarter of ~~2022~~2023

The following table contains information about our purchases of equity securities during the three months ended June 30, ~~2022.~~2023.


Period	Period	Total Number of Shares Purchased (1)(2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs (1)		Period	Total Number of Shares Purchased (1)(2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs (1)
April 1 - 30, 2022
April 1 - 30, 2023								April 1 - 30, 2023
Open Market Stock Repurchases (1)	Open Market Stock Repurchases (1)	73,606	$	128.78	73,606	$	452,914,538	Open Market Stock Repurchases (1)	—	$	—	—	$	345,073,142
Tax Withholding Obligations (2)	Tax Withholding Obligations (2)	7,324	$	126.36	—			Tax Withholding Obligations (2)	9,050	$	162.01	—
May 1 - 31, 2022
May 1 - 31, 2023								May 1 - 31, 2023
Open Market Stock Repurchases (1)	Open Market Stock Repurchases (1)	394,941	$	112.22	394,941	$	408,592,862	Open Market Stock Repurchases (1)	—	$	—	—	$	345,073,142
Tax Withholding Obligations (2)	Tax Withholding Obligations (2)	824	$	104.50	—			Tax Withholding Obligations (2)	2,189	$	171.36	—
June 1 - 30, 2022
June 1 - 30, 2023								June 1 - 30, 2023
Open Market Stock Repurchases (1)	Open Market Stock Repurchases (1)	262,834	$	118.26	262,834	$	377,509,077	Open Market Stock Repurchases (1)	—	$	—	—	$	345,073,142
Tax Withholding Obligations (2)	Tax Withholding Obligations (2)	2,811	$	122.06	—			Tax Withholding Obligations (2)	1,230	$	190.51	—
Total	Total	742,340			731,381	$	377,509,077	Total	12,469			—

(1)~~Includes shares repurchased as of the trade date of such repurchases.~~ On ~~August 6, 2020,~~May 24, 2023, we issued a press release announcing that our Board of Directors approved a stock repurchase program that authorizes us to purchase, from time to time through June 30, 2026, up to $500 million of our outstanding common stock (the 2023 Program). The 2023 Program became effective on July 1, 2023, upon expiration of our stock repurchase program that was announced on August 6, 2020 that authorized us to purchase, from time to time through June 30, 2023, up to $500 million of our outstanding common ~~stock.~~stock (the 2020 Program). Through June 30, 2023, we had acquired approximately 1.4 million shares of our outstanding common stock in the open market for a total cost of approximately $154.9 million under the 2020 Program. Repurchases under ~~this program~~the 2023 Program can be made in open market and privately negotiated transactions, at our discretion, based on market and business conditions, applicable contractual and legal requirements and other factors. The ~~program~~2023 Program does not obligate us to acquire any specific amount of common stock and may be modified or terminated by our Board of Directors at any time at its sole discretion and without notice.

(2)Includes shares purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock unit and performance stock unit awards or the settlement of previously vested but deferred restricted stock unit and performance stock unit awards.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~Insider Trading Arrangements

On May 15, 2023, Donald C. Wayne, Executive Vice President and General Counsel of Quanta, adopted a Rule 10b5-1 trading arrangement (as such term is defined in Item 408 of Regulation S-K). Mr. Wayne’s plan provides for the potential sale of up to 17,750 shares of Quanta’s common stock through April 30, 2024.

This Rule 10b5-1 trading arrangement is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended, and Quanta’s policies regarding transactions in our securities.

Item 6.Exhibits.

Exhibit
No.

Description

3.1

Restated Certificate of Incorporation of Quanta Services, Inc. (previously filed as Exhibit 3.1 to Quanta's Form 8-K filed March 26, 2019 and incorporated herein by reference)

3.2

Bylaws of Quanta Services, Inc., as amended and restated ~~December 6, 2018~~January 13, 2023 (previously filed as Exhibit 3.1 to Quanta’s Form 8-K filed ~~December 11, 2018~~January 19, 2023 and incorporated ~~herein by reference)~~

~~10.1~~

~~Amendment No. 1 to the~~ ~~Quanta Services, Inc.~~ ~~2019 Omnibus Equity~~ ~~Incentive Plan~~ ~~(previously filed as Exhibit~~ ~~10.2~~ to ~~the Company's~~ ~~Form 8-K filed~~ ~~on May 31,~~ ~~2022 and~~ ~~incorporated~~ herein by reference)

31.1

Certification by Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2

Certification by Chief Financial Officer pursuant to Rule 13a -14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1

Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101

The following financial statements from Quanta’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022,~~2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Equity and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and with detailed tags

104

The cover page from Quanta’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022,~~2023, formatted in Inline XBRL (included as Exhibit 101)


*			Filed or furnished herewith
^			Management contracts or compensatory plans or arrangements

6553

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Quanta Services, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

QUANTA SERVICES, INC.


By:			/s/ PAUL M. NOBEL
			Paul M. Nobel Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)

Dated: August ~~4, 2022~~3, 2023

6654


		Page
1.	Business and Organization, Basis of Presentation and Accounting Policies	12
2.	New Accounting Pronouncements	12
3.	Revenue Recognition and Related Balance Sheet Accounts	12
4.	Segment Information	16
5.	Acquisitions	18
6.	Investments in Affiliates and Other Entities	21
7.	Per Share Information	22
8.	Debt Obligations	22
9.	Leases	24
10.	Income Taxes	25
11.	Equity	25
12.	Stock-Based Compensation	26
13.	Employee Benefit Plans	27
14.	Commitments and Contingencies	28
15.	Detail of Certain Accounts	32
16.	Supplemental Cash Flow Information	33


	June 30, 2022		December 31, 2021
Short-term debt	$	—	$	15,748
Current maturities of long-term debt	27,162		13,418
Current maturities of long-term debt and short-term debt	$	27,162	$	29,166


	June 30, 2022		December 31, 2021
Cash and cash equivalents held in domestic bank accounts	$	110,203	$	205,781
Cash and cash equivalents held in foreign bank accounts	40,450		23,316
Total cash and cash equivalents	$	150,653	$	229,097


	March 31,
	2022		2021
Cash and cash equivalents (1)	$	238,258	$	200,218
Restricted cash included in “Prepaid expenses and other current assets” (2)	1,628		1,518
Restricted cash included in “Other assets, net” (2)	950		879
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	240,836	$	202,615


	Due by June 30, 2023		Due Thereafter		Total
Long-term debt, including current portion - principal	$	25,838	$	3,878,519	$	3,904,357
Long-term debt - cash interest (1)	64,295		624,132		688,427

Operating lease obligations (2)	81,677		175,147		256,824
Operating lease obligations that have not yet commenced (3)	1,070		17,994		19,064
Finance lease obligations (2)	1,422		2,011		3,433

Short-term lease obligations (4)	14,619		—		14,619

Deferral of employer portion of payroll tax payments	54,435		—		54,435
Equipment purchase commitments (5)	159,312		—		159,312
Capital commitment related to investments in unconsolidated affiliates (6)	733		11,163		11,896
Total cash requirements from contractual obligations	$	403,401	$	4,708,966	$	5,112,367