PWR - Earnings call transcript Q3 2018

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Operator

Greetings and welcome to the Quanta Services Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kip Rupp, Vice President, Investor Relations.

Kip A. Rupp

Great. everyone Quanta welcome earnings third and call. conference you, to Services the quarter Thank issued release commentary Investors a quarter we our quantaservices.com morning, This press summary a will can of website of found discuss along section morning. with results, outlook announcing be in we Media the and & XXXX our at that which third our this information November advised on the call speaks of time-sensitive today, information that of you're therefore reported replay this no accurate X, remember be and Please as XXXX, any longer as may any only of call. this include statements of Private will Securities call qualify This the from Act Reform forward-looking XXXX. under Harbor the Safe Litigation by to established liability intended or performance, that solely all or facts. to not statements current or historical Quanta's relate include assumptions, reflecting events or intentions, do These future expectations, beliefs about

risks, from predict to results Forward-looking and statements or may expressed and involve those differ or control beyond certain are assumptions actual that difficult materially uncertainties, Quanta's implied.

some uncertainties, SEC's, Annual filed Report today's Securities XX-K, of with Commission, the XXXX press company's For in available Exchange additional its Quanta's, are other the on and these which release, included and please information and refer on the the language risks, with concerning along cautionary to or documents assumptions, Form website.

place their comparable financial of certain subject in adjusted diluted EPS, undertake release. or not oral Reconciliations also included the measures of made EBITDA. non-GAAP our measures Please including most reliance any should statements GAAP we call, backlog, note statements financial regarding undue and directly that are earnings will disclaims call. not to statements in matter measures written any present and today's these You any obligation on such Quanta does forward-looking and to update this by third-party

of other if please section for you'd Investors sign-up alerts information, and publishes notified releases & like through Media Quanta quantaservices.com. the Lastly, e-mail when news be to

the media the Quanta IR and Austin, investors President company We Mr. channels like website. With to our call Quanta turn on also and encourage our Services follow listed that, Duke would social over Duke? others and on now to CEO. I in interested Quanta's to

Earl C. Austin, Jr.

morning, Quanta Services conference welcome Good third call. Kip. quarter earnings everyone Thanks, XXXX to and

On will provide and over strategic our detailed Jensen, third review our it Officer, Derrick to before I Financial commentary turning the Chief provide a quarter operational call, who'll of results.

with man-hours who year employees XX the maintenance and record man-hours. indicative our year your of and record first first for and pace the programs. Following Quanta's We adjusted third and revenues, of achieved we to certainty we than EBITDA At XX,XXX Derrick's record ended on $XX.X finish of share report worked the strong well nine adjusted per and in is demand capital and provide comments with This execution had Quanta of welcome total the of and earnings pleased I'm months Quanta operating billion end $X.X quarter, year. more customers' backlog record questions. of world-class cost levels income, the are XX-month markets that the activity and during end nearly billion. for to quarter solutions, the which million nine quarter months our for the

favorable We our services. have demonstrate in strong guidance competitive believe year full and our our marketplace year the executed record year-to-date well results this and position demand and multi-year for

managing of We diversity portfolio risk. our operational and benefits the reflect our also to results believe approach

outlook growth projects, and solidifies expectations our our which of adjusted midpoint the in our in earnings per We and share expectations, we for end, To XXXX. Perhaps, year strengthening business revenue for for continue be importantly, our expectations, more of are our for adjusted we EBITDA that a demand diluted Quanta. expect experiencing record earnings are increasing that the larger increasing midpoint will base to maintaining XXXX. XXXX

we Michael, restore to line top power hard who and to operations hours from to base personnel, The line workers several margin third support storm their and customers. worked In Florence operations across for Power safely Electric Power perspective. a for transmission days quarter worked Electric was deployed response business and projects. thousand Hurricanes and and and alongside from have them both They and thank to execution I by strong perform our safety driven Our continue solid in activity to the to performance response well many want work. tirelessly long our dedication larger

and for in growth. generation weather systems programs changing and capital a grid deploy aging fuel extreme for infrastructure, events renewables, to to continue support address multi-year transmission accommodate towards gas resiliency modernization and distribution against customers economic Our strengthening mix electric natural long-term

than years contract Furthermore, press million. And example, recently announced more allocated expenditure $XX Power's Energy's for forecast transmission capital Southern more our to morning, to period grid it for of and in with River XXXX we plan its five-year is this allocates plan Electric $XX.X to $XXX than up as distribution, billion. in Lower Approximately than modernization. their release a signed planned a more increased alliance agreement capital billion XX% is to and American spending allocated Colorado XX% transmission higher by Edison's the and XX% XX% Eversource up of For to September, with plan transmission, distribution solar. four-year Fortis capital and distribution. and California transmission, Authority XX% gas of XXXX, electric value spent capital five-year a with five to than in electric

and agreement CenterPoint on electric system. services Additionally, master we multi-year provide a renewed with to services Energy their gas distribution recently

customers. examples we programs at trends earnings is supporting deploying, with together brings strong and We their are relationships competitive efforts growing have grow value fabric growth these in agreements just the have to a industry American visibility to industry primary and dividends designed them multi-year our business. North investors. investment important and Quanta of are we embedded an the with execute multi-decade resource of an our rate in that industry, of capital North American we consumer. drivers and are customers' positioning, and multi-year for bring Due customers the as payer utility few excellent the these These utility Quanta our these to favorable opportunities is benefit the which to our value programs expect to the reflect partner

We believe see continue up them be and coming several to of picking larger awarded projects transmission would for opportunities over the quarters.

project win is believe for consists projects, approximately We engineering, procurement We continue are recently was and Bridger morning circuit contract for Jim to construction well-positioned that connect the Aeolus America. these XXX compete electric pursue Project, larger end, transmission billion value that $X announced high-voltage in This transmission by XXXX in PacifiCorp PacifiCorp's any plan. Energy segment not solutions provide we Quanta in larger the part these project a all XXX XXX-kilovolt other to projects than this new circuit but transmission of line West in expect or aggregate that substations projects. This of To to line tender single more various of electric Gateway single approximately North Transmission Line stages Line. Vision we several of we will selected do to of to Wyoming. and five kilovolt of of Transmission which miles miles transmission is of

to engineering and We will for XXXX. by quarter begin backlog the XXXX project begin include to our construction of this procurement in expect year-end. this and activities in plan spring fourth project The

project Power complete our by U.S. our this the to We performing well, operations communications third segment, operations, were late are our in XXXX. profitable Electric quarter. Within which led in expect

We have profitability and improved quarter-by-quarter. month-by-month

move as for projects, we are which We towards XXXX. us gives of in many confidence the construction our phase

Also, third $XX profile with us We new believe relationships in a the $XXX quarter, continue to we prospects. with the two efforts management successful nearly our believe strong scale awarded contractors XX% one representing increase. in they teams, we resources. ended these excellent companies growth double-digit during profitably subsequent work million companies to operations. acquired the a more Quanta's of to the growth communications more than infrastructure and serve opportunity our one of We in sequential expansion two margin allow and third backlog will Further, Both have are to operate customers. we expedite our markets Georgia customer the as been and additional of Texas. have from with quarter, business the quarter we We third million, end to with continue communications than

$XXX We strong continued expect of revenue opportunity than improved to million in and full growth year profitability. more achieve XXXX with the

underlying well the our as pipeline adversely and expected, gas significantly to income Turning strength grew as and projects larger business driven pipeline services, margins industrial two on by base Oil Gas as strongly, our higher segment. Though activity concealed impacted experienced segment. operations increased profitability integrity we challenges that distribution operating of segment activity. project and the Revenues natural in

we resulted in to drill that on project and that an facility additional on and are on conservative result of impact our full our is believe year we scale experiencing strong portfolio liquidated mitigated which position a chose project expected delays operations end these processing are of what damages expectations. insurance claim. markets horizontal difficult we in of a We are to take The cost challenges diversity for pursuing the and a

made off. operations Our began organic to as last gas expanding integrity year their and distribution pay investments margins are

finish expected peak year. project which employees industrial XXXX. late in to services this project towards Our to the could a continues December Further, up largest on recently require we at a record history, and in group path start This company secured turnaround is XXX activity.

are we be operations, to record customers' on materialize. services a XXXX our continue our with to profitably as midstream We for year industrial track synergies for grow group our while base

into and performed up significantly moved several Our projects the as larger ramped challenges. construction third well full we quarter, pipeline despite in external

a of Pipeline a Valley push our Coast Pipeline next of Mountain As into on will year. work projects portion result meaningful challenges, and Atlantic these

expect in strengthen project this Canada view $X pipeline project and year. in ongoing than next shifts pipeline billion with work in for backlog However, end our elsewhere, these actually backlog. to larger and we more larger With the year timing positive Appalachia,

billion us infrastructure an pursuing our profitably and projects. XXXX construction-led diversifying geographic, our larger actively result, permitting, set apart believe throughout pipeline we additional focused operations business, expect pipeline We position a and geographies its both many opportunities cycles project, scale, of execution, are are half deliberate and solutions very services we This companies, in service activity us is first of is a to investment. we Further, believe geographic diversity unique our operationally grow diversity, customer, weather time. mitigate including of risk Quanta's to provider over risks. and and other capabilities and and execution a of scope Quanta aspects Quanta strategically see various XXXX to additional across as space America and through portfolio on for designed XXXX. numerous in and than of in be has the XXXX As help greater approach pipeline half approximately lines manner. $X meaningfully first the North and

in how of and the utility CapEx customers our We integral estimate agreements multi-year multi-year modernize achieve generated an OpEx such maintenance and the revenues electric for multi-decade majority several follow medium growth to those how years Quanta have in customers work, plans. role to in will revenues master of talked their as plans and that of that business year their work. gas small cases, services We I've our helping customers. our some activity about and from types base projects, are tend XX% system this and, and which come approximately plays discussed our plans of our upgrade from and have

regulated provide result, good Quanta have a and dynamics market These we that to end multi-year visibility is economic resilient growth large uncertainty. very a As with growing a into is opportunities.

customers to infrastructure. favor continue investment of assets in their in generation moderate and transmission in capital utility investment electric distribution Our growing

gas is utility of significantly much note, for account investing which important XX% is tied to modernize are regulated business to utilities directly Quanta's more our It and of revenue. distribution gas multi-decade to than infrastructure programs. Additionally, electric core customers, with

market labor environment, markets. seen time American market best that career I in to have when prolific a in North there my is at shortage expect in are happening of our and We the we continue. craft-skilled a This is certainly

for Quanta. As trainer of the this a markets, good is serving and environment labor largest craft-skilled our employer

us Our and field customers' quarterly to execute ability preferred a differentiator to And the the serve. the Quanta. well returns our has employees our of industries number we In to employer dedication we made and for enhance executed by in projects skilled delivered a records. is deploying efficiently summary, safely our resources

our plan We against to year and are and strategic expect momentum. well performing the this finish operationally with year

we the and up-cycle, Our a end we're markets opportunity believe with and strong are in the visibility for continue coming record continued backlog to quarters. multi-year in

at more We have over that increased grown three we rate last time. profits during have considerably years, revenues a the but faster importantly,

and long-term commentary a formal our markets the and XXXX are February, in provide expectations we growth multi-year we we'll on confident strategy earnings our While quarter next cycle in the are call in fourth serve.

award base see year profitability. will high-voltage to electric business increasing the and the larger our over alliance project believe and services and expect to opportunity with to We market near- We grow. our communications the We continued infrastructure projects of for grow expect programs large pipeline remain continue multi-year transmission robust operation next diameter medium-term.

Given favorable trends, visible been common and the and we this expectations for a and over growth year, valuation of our period, end-market stock. for financial stock, our multi-year our have expectations future multi-year actively repurchasing our

far the approximately those four We shares repurchased at XX% of Quanta million for our more billion have and our our this we these would of we of commitment believe note the year, repurchased $X.X common that to in of stock, have repurchases. stockholders. over confidence $XXX So also our start retirement I than of which to generating equates stock. common the past value the demonstrate actions outstanding years,

focused business and are leadership. the best-in-class long-term and field safe the We through continue distinguish operating ourselves execution for on to will

mindset industry believe Quanta's us I leadership will foundation core call entrepreneurial value quarter With will for stakeholders. position innovative in the long-term our unique third operating our to for We Derrick the Derrick? our generate will allow We all business to now that, opportunities of solutions the and review results. our Jensen, his over turn to diversity, CFO, enhance to to continue model pursue that customers. provide Quanta's and and is

Derrick A. Jensen

third measure, diluted to as compared and morning, good increase $X.XX we per of of quarter a items earnings in million These was on Electric the per on for million adjustments earnings for everyone. customer record transmission third share, common XQ our share Discussing net stock of for common was Adjusted Certain per Duke, base stock spending, billion. revenues the compared a announced Quanta's to quarterly XX.X% attributable increase Net segment XXXX. higher calculation. primarily business, double-digit quarter attributable was adjusted and of quarter the diluted have as to including to or the $X.XX revenues to of income in impacted $X.XX quarter non-GAAP due record today's share. of when disclosed $X.XX per Today, quarter $XXX.X share to large third $XX.X were billion Canada. per $X.XX the was in compared the $X.XX XXXX, associated Thanks, progress GAAP share to reflected earnings favorable the quarter third results, increased compared diluted third or of third $X.XX Power XXXX items XXXX. a favorable XXXX, XXXX. release, both been growth resulting earnings which to transmission diluted project This with impact in diluted a in Quanta's larger projects continued and X.X% XXXX

million a $XX last of million restoration Additional emergency Harvey quarter restoration significant increases approximately offset partially and businesses. Irma. by were revenues increase reduction services in related revenues service an in to infrastructure as communications contributors in $XX.X and third acquired million $XX.X These of included were year's Hurricanes efforts from

improved profit. large U.S. which Power previously breakeven during to overall generating a XXXX. we $XX the Lastly, segment in lower quarter the Electric of currently revenues to operations, favorably. exchange foreign Communications quarter in higher within This increased rates. XX% by infrastructure primarily segment with the were compared Electric Operating was as favorable in our perform Power operations revenues, quarter slight the due continue to to to included the million to are less mentioned which third including margin due XX.X% currency transmission services in approximately project segment, increase

the these continued quarter. margin improvement during expect incremental We for operations fourth

was backlog quarter remaining quarter. were segment from revenues to non-GAAP increases as XX% an compared when Total for increased his September XX continued but year. of of of third segments third to the performance by construction X% the Approximately months Gas pipeline slight quarter quarter activities overall and be so the We third estimated $X.X projects to XXXX. reflect increase billion, XX, As in of when believe these to our last pipeline Duke segment XXXX. and segment diameter the to billion. approximately third significantly related the quarter increase last for XXXX, backlog the a September the expected performed they the $X.X the increase Many year the the is recognized decrease a to a from the be XX-month XXXX. Increased XX% markets end record of contribute Also our opportunities, which XX obligations significant to revenue of contributor of when not larger was were our Electric year subsequent in second Oil billion. last which was billion, strength XXXX, half of to both compared quarter in Power of compared an XX to September XQ of larger $X.XX of XXXX XX.X% on did in customers comments. the referenced our front projects to year, $X.XX

X.X% For quarters. fourth were a third Also continue larger the of pipeline a the This comparability began and quarter XXXX, of from the contributing from in will of was or Harvey. increased to distribution-related higher due a margin and XQ majority X% substantial primarily in of impact into level projects projects the has revenues in attributable increased increase negatively segment was Oil as result the This XQ deferred increased on quarter. XXXX. acquired in revenues revenues and which diameter the services projects Stronghold, suspended Gas an part impacted temporarily Operating were in transmission XQ higher issues several XXXX were the being by operating The to as work, of activity for that margins quarter. in quarter projects as Hurricane from margin Oil during estimated to this and revenues due $XX were July the Stronghold. incremental late to by with pipeline from Increased yields improvements partially offset diameter Gas well XXXX million associated two in typically month XXXX. which and also larger

and the As approximately which unexpected of during project quarter a million quarter Duke $XX a our million, resulted This XX% loss recording at to spoke project the approximately project performance on forecasted facility in delays for complete an about, of contributed end. the production $XX project original on quarter. processing the from variance engineering was

of horizontal transmission drill believe a directional joint In We on a specific addition, collapse is claim. are partial incident a experienced customer's by and borehole the job on we insurance a working collaboratively gas project. the covered

insurance a for As all recorded portion receivable a incurred not the end. but quarter impacts result, an significant we've through of

recovered Although is believe change, issue we current may additional may the that process be future cost positioned estimates such our have and periods. amounts for this conservatively potential plan in mitigation we recovery our in still

total third XQ was of year's Total more diameter As segment $X.X at XXXX, compared was of quarter an end XX-month which to by last $X.X to year. when increase last robust increase Oil the of last compared when and XX-month an XXXX second is segment this and year the versus Gas year's backlog of was in larger XQ being of and remains backlog levels. timing an the this near quarter XQ quarter increase the record which XX% September to Again, backlog XX, at compared X% record and and of for end. driven XX% increase backlog non-GAAP a is for billion, third billion, work XQ pipeline

Quanta, can continue costs levels additional a opportunity backlog million non-allocated contingent $XXX costs, expect in the the strong. or liabilities consideration we in billion of increased the income million backlog and million or and higher million value costs increased increased by partially While million and during XX%, Corporate aggregate as incentive a compared XXXX. to million of remain see to in increases represents to measure, compared $XX $X.X XQ for total the awards to as third of and impact to or with increased million. These to $XX.X and offset in primarily support compensation-related annual $X.X a EBITDA, as quarter record increased fair for due $X.X XXXX of million $XX.X quarter business acquisition consolidated of increases integration compensation XXXX, third associated in higher $X.X well $XXX personnel our intangible XQ and when aggregate, increase operating grew $XX In favorable were XX.X% XX.X% amortization. growth, consolidated revenues non-GAAP XXXX, a million adjusted decrease

records. quarterly represent metrics these of All

quarter Directors outstanding the project free third payments days the negative larger XXXX. from to third third XX flow timing million, In last Board capital program us operating DSOs and as flows through XX, for cash end to of higher cash XX at were of million million provided million in on projects. activity $XXX were cash $XX activities repurchase time-to-time XXXX, amounts of free year's days $XXX.X that For This cash XXXX higher of June to decrease resulting compared capital stock advance XXXX was $XX of approved of year-end and of million flow. our $XX to XX, net well a due up primarily requirements our expenditures compares flow and days XXXX, a to stock. quarter. This common purchase of XX of third were by at quarter levels quarter in the working as to related September the of free at authorizes the

common X million. XX, through stock our prior to of total market in XXXX, million date $XXX have this a $XXX.X earnings This in us of the million During program leaves $XXX of our $XXX.X our liquidity outstanding shares our for outstanding, call, million of new acquired availability repurchase under and open had September and we cost with completed September of stock million in letters total cash. us in of credit under and repurchase leaving million million guarantees $XXX million borrowings credit facility, program. had bank we At $XXX in $XXX as We XXXX, XXXX. XX,

other and of on borrowings amendment which, provide agreement liquidity to raise, which loan the loan as $X.XXX repay term financial can among However, things, our credit to capital $XXX commitment amount a XXXX, revolving as $XXX we flexibility any and the the under on billion this was pursue We revolving total entered the XX, credit determined our amounts proceeds full increased the without cost-effective million provided and million. borrowed the time term penalty. credit to term the facility loan other same used by of facility into and of loan improved approach for strategic amount new the agreement, We outstanding with means significant an date. October the opportunistic term under under flexibility the facility This we was most most provided an initiatives. be commitments prepaid at

with Securities with details our filed these see October transactions, more For Exchange Commission XX, X-K on as XXXX. and associated the

the the quarter our Turning quarter to expect XXXX. of consolidated $X.X full Electric expect Within $XX.XX and billion revenues this between fourth contemplates has revenues to comparable third guidance, to and of XX%. Duke revenues we we segment, view to to year fourth $X.XX QX increased our as billion and XX% billion range between commented, This margins billion. for strengthened with Power now be $XX.XX segment the range operating quarter

Gas XX% dilutive now segment segment & to Oil billion year XXXX. Power to to $X.XX segment slightly our We with margins be billion We operating Electric the to $X.X continuing revenues operations ranging expect communications see from for full XXXX be around overall margins. for

third comparable to remain QX moderately expect or We quarter. to decline revenues

revenues the that the This to XXXX. the X.X%. continued $X.X now net be expectation approximately year larger X.X%, distribution We charges the anticipate impacts increased and negative XXXX that to the the margin activities be Oil and quarter in for the diameter from X.X% margins for interest of and previously million of gas year our expected strengthen be million. aided expect by third between reflects fourth business. & experienced of and Gas to impact recorded will in pipeline projects expense and quarter operating quarter anticipate segment during segment between improvement during margin second $XX We the mentioned base X.X% We in construction the in

investments. the expense a item have primarily we our other $XX the $XX due As projects million expense certain we portion better-than-expected construction million the line for of year, discussed, the line profit item the have between projects. previously of other those of to on which includes now expect activity from and in range production to on deferral We

$XX investments, As be other half a likely other to result, of to expense the million, in XXXX all first for the could occur approximately absent reduced year.

GAAP diluted to per to the around estimate now our XXX.X to of tax the assuming stock for of be projecting and to year. weighted share earnings million million earnings per now our attributable to shares anticipate stock $X.XX. outstanding XXX.X year the repurchase year. million to ranges share attributable net XX.X% we effective are for diluted of between between $X.XX non-GAAP and rate year average XXXX. common and be $XXX We and for EBITDA support fourth adjusted for $X.XX our shares million outstanding $XXX for our range adjusted the and Due common XXXX share expectation and attributable These $XXX activity, approximately for of quarter the operating to income million and $XXX million stock between are for full year-to-date between weighted We $X.XX average be common

line concludes our forecasted flexibility. and to measures initiatives. release. estimated reflect on maintaining for our This Our We the to formal website for we of and our results to operationally non-GAAP the in are expected on a balance adjusted our share We and financial feel are to in positioned details. summary and expectation open the sheet to per additional our our commitment strong for continue for and similar opportunities Please presentation continue presented execute now year strategic we'll focus believe our review basis financially well growth calculations Q&A. outlook diluted the historical on Operator? ability our earnings

Operator

a session. conducting time, this question-and-answer we'll At be

with question Stifel. comes question. from Our your Please first Noelle proceed Dilts,

Noelle Christine Dilts

Hi. Duke Good and morning, Derrick.

Earl C. Austin, Jr.

Good morning.

Derrick A. Jensen

Morning.

Noelle Christine Dilts

projects on while positive on larger some sounded XXXX incrementally time, know for been and bit positive pipeline into more you a outlook you've your So, XXXX. in the maybe I markets for I thought

the also, mix initial oil so, as any thoughts if what's XXXX? think underpinning about So as how is base have the And work to any do we to look Is of gas out out thoughts characterization? fair amount that of then, diameter well. and bid? And you and on margins it And initial large would work be this a appreciated for optimism? on

Earl C. Austin, Jr.

Yeah, Noelle.

when some on We what of looked of into nicely pipe in out year marketplace, this some think I larger we we the XXXX see with the big really see we projects. Canada. backfilled the at push

see takeaway to starting we're the capacity. more So on market prolific Canadian markets in our

seeing there our XXXX as don't think some is and on commentary. cyclical some are had even Basin do strength I our business I we some that. into markets, always think changed it's It we But see have takeaway. we've LNG on looks The big But we So really a you at that we've commentary all XXXX. into nice. pipe. Permian move outlook an when

when big it, we on pipe see look takeaway. So, at there long-term some opportunities out we

nice As business. our base it industrial probably a revenue-type We've far business, business in as in is the built underlying continues. base. business of XX% gas It's the recurring

strong pipe, underlying continuing to beyond. XXXX a talked perform business. and We're market. about Again, Our lot long-term going big excited business we LDC extremely well. the underlying markets is but extremely are It's about a into the

Noelle Christine Dilts

which Okay. second think, Thanks. and top a providers investors. about bit, both of you labor constraints, service question, for And are I talked mind

rate comment you are of most on the advantage actions think or an you and have that could And lot of And those you think guess, price? now wage feel markets the accepting inflation? where you're input maybe higher taking? given through training. accepting customers through around you you work But difficult been some have costs that we I all I I question most tight how right the of the that do appreciate the biggest are guys is that the seeing a

Earl C. Austin, Jr.

Yeah. you think Noelle, if X,XXX from quarter-over-quarter, I employees look to XX,XXX added quarter-over-quarter. over XX,XXX we

So labor still and to the deploy productive. able field we're in remain

the field us not projects about, in think on in separates talked problem college, the investment us from Even I many we issues issue. where in – the the it's not with that's training, labor having field. the We're the a investment others. with labor

We've train on that and day continue field. they're they believe sure worked it and people when the the hit And to we're we'll so productive on and we're really world-class productive field, make craft-skilled in labor one.

retaining the we've in well. done as far market, very people As

our across countries. operators world-class have We regions,

about as move we're differentiator and will forward. to that be a believe we So excited we it continue

Noelle Christine Dilts

Thank you

Operator

comes question your with Citi. Alan proceed Please from question. next Our Fleming,

Alan Fleming

morning. Good

Earl C. Austin, Jr.

Good morning.

Alan Fleming

to into is both half. contribute might more Momentum seeing the your in possible of to we're XXXX have should Atlantic you headed Mountain your Duke, weather the gate? visibility out guide that conservatively to base And than for XXXX, in you potential historically look especially projects the close as keep tended out Fort mentioned even improving. seems contingencies in McMurray first in delays you to segment projects at given and as you you busy usual you than large visibility year, Do guys XXXX? core such Valley, issues. large actually guide have new year start conservative But a businesses telecom less used and that a and in be it to Coast, for potential

Earl C. Austin, Jr.

business would see as We've in out of We've we base there. XX% XXXX our I say, opportunities about being talked early. about revenue. the talked are that general,

pipe, have visibility first projects, that, We good into large going half know The of larger billion we agree. positive there. very $X into the I so have it's we

see on projects as to as backfilling We need we first well. second large of execution with the well watch half do early. the It's the very have our four the months can We through three, year. opportunity to what do

guide. how So have we'll prudent in we a to continue nature

Alan Fleming

Okay.

really execution and and shouldn't as Fort any average, I Electric margin segment had this performance margin. closer just expect becoming the that reason in And on bigger in business the improve is boosted since continue base telecom back maybe highest good that with go know there less to anything follow was dilutive projects telecom was we up Or to you is XX.X%, and think, Power margin quarter? Let is mean, presumably overall probably less XXXX? But becoming to to in dilutive. XXXX we segment such me on there McMurray? the I to

Earl C. Austin, Jr.

We've margins around the being talked a lot about XX%. Electric

some times. get XX.X%, you X.X%, it many, get XX%. it many general, business double-digits. will some over some today. I'll We've get In in say operate You said you time the

base the guys productivity, a proud our great projects and we from the very, safety quarter. we're had on doing From storm business, broad to of I'm really large in executed We a I work to doing bit way base to very we're a the little of a think well. we're operating standpoint And field. well. very

So, I nice have in general, we think, in project some We nice projects. a had Canada.

future, E&P the Electric I in to base sustainable business, in yeah, mean, double-digits think our in operate can division. operate we – so continue well We for I

Alan Fleming

Okay. luck. guys. Thank you, Good

Earl C. Austin, Jr.

Sure.

Operator

Afzal, comes question KeyBanc. Tahira your with proceed from question. next Please Our

Tahira Afzal

Duke. Hi,

I So, to Gateway that other won if for wondering up awards project a is can this that if there size large West what string could going be come? project you've you of a means and and was very

Earl C. Austin, Jr.

missed I last the part. The sorry, single... I'm

Tahira Afzal

wondering I if it's get if way? if opportunities the sense same up other won would if portions that West, And a you've love your you won Gateway to a for dollar portion, can a so that project, the could come Basically far. size there multi-billion are project

Earl C. Austin, Jr.

so a plan capital they're of company. segments PacifiCorp has, but don't MidAmerican, rest to a segment Hathaway that many. forward how choosing they're go customer, the Long-time project. know it's It's one nice with of the Berkshire it's I

West Coast So we're project, it'll it. we're larger operations. It's It's help – about excited our excited. a

Tahira Afzal

mentioned of in visibility earlier Got Fort it, you Duke. middle as And Mac maybe segment year. on, T&D was provides the

really now? business, have these right offset As your even and load they in or see set (XX:XX) sufficient of to look wait we opportunities to you at are base

Earl C. Austin, Jr.

No.

I smaller million but out I say to what $XXX what projects not seeing we're million we're to think get communicate transmission. there. the When fixated projects is on smaller, the $XXX we larger trying that underlying are those and

the we the move to billion projects, base million Tie million, projects. the utility there's we've about we're million. that OpEx on above opportunity what there's about have The looking between As East-West but on so and forward, – across Canada. announced we in We coastlines there's a house projects it, many the kind plenty even multitude $X Midwest be in that multitude at, business, the supporting of many, talked in base right $XXX of the is There's a see future. below that see talked are our projects both that successful that. $XXX now CapEx, $XXX we We customers, as even into what base of of billion business and we the of $X the

Tahira Afzal

Awesome. Thanks, Duke.

Earl C. Austin, Jr.

Sure.

Operator

proceed Our Suisse. question. - (USA) morning. Cook next question Hi, Credit from LLC Jamie Please Credit comes good with L. Jamie Suisse your Securities Cook,

it $XX in I or a what variance you said you process first, million guess, I was guiding. the versus or that So, third quarter for charge something the think thought

good. which So and third it in if we implies have been pretty Gas about do X.X%, calculation, that the Oil margins is for quarter would

– So, So my shouldn't your shouldn't question QX like based guided in QX be but X%. are dissimilar? below your margins implied versus revenues why for that is like

So, then of Duke, second billion big you why, I I think, pipe in half first of mentioned, my the in guess, XXXX. is question my $X And question. visibility

what seeing Given of XXXX that the that (XX:XX), first in and can know we to, margins what half assume visibility, can be you comparable mean XXXX? back of we're Thanks. Oil half Gas I for

Earl C. Austin, Jr.

to about to the caution general winter prudent when fourth the guide. it's We how you seasonality the take there we and especially execute Yeah, look guide we'll be Jamie, the I in through into at winter in lower-XX. in the that, always need quarter, we'll months think

are freeze it here spreads bit going, a or there. need Canadian Our to we

continuing we So, lots our guides. – and account some weather risk in into to in there take are always see that

So, that's the fourth quarter.

diameter We're the XXXX. in some in do with going of visibility have backlog as far comfortable we into big that. pipe, As that

the division business, taking (USA) that which said underpin in in L. both the we're growth $XXX segment, acquisition, actions - the margin upper $XXX the segment, growth I range, Jamie to Credit that believe in will enhance end into million Cook LDC the Securities trend million, Stronghold continue margins to we will LLC and underlying Our to be Okay. whole Suisse XXXX. gas that on the of

So be, want – mean the half, or to in the in net-net – no so we or first X-ish yet? I mean or sort so there range I net go can margins don't of

Earl C. Austin, Jr.

like, back Securities We – you been business? about start let's Credit Thanks. in in sort to shift guidance I'll communications, the XX don't maybe point. if that Jamie Well Electric L. think Okay. this about Cook we about LLC on talk at to just a want margins headwind talk ask should just know can Power. expectations I (USA) but XXXX Suisse the next a to of XXXX, not question months? – How that that for you had - to on can And then XX

Earl C. Austin, Jr.

Yes. Sure.

most organically grew the telecommunications it the business, part. we for On

You've small seen some us make acquisitions.

move getting of a to get those now We and well our make but incrementally our thing think it quarter, I XX, sure within of XX customers. Many do the start customers now. to we're number customers profitable. was the we're bit, field. incremental, we've are the Its how slowed growth expedite up that will the have a picked to We make to a in executing right was we we're field are sure we for that We're for. engineering. I extremely it been think just for us working get we smart did how projects started through the about to field later

deploying are Electric telecom. some also customers Our

vibrant year. to field. and next smartly. good robust prudently getting We $XXX we're We stated the million around in bidding did So get the that one it's training, guys those into them of a We're field. Every environment.

So got today. we to the think the next robust as I we'll field. I to but with We've think feel that's do and million, when we the it, very $XXX said number upside but that, sit field, get get well we year. the to there's we is look got at to guys the good market to We've

Operator

with Bank. Please Our Chad next question from question. proceed your Deutsche comes Dillard,

Unknown Speaker

to I your Gas spread you business. and of Chad. the for see on activity seeing of to that started sides midstream (XX:XX) Permian if is could long-haul This Oil activity you're ask of and the you wanted level beyond the out and discuss Have Hi. Permian? your

Earl C. Austin, Jr.

Yeah.

bids lot same Also of we midstream up Canada, up business When part in There's there. electrification Permian, coming taking a see Canada at the Shale in of thing. of is going a out Montney There's there. the the look with union, side It's a the something very, our in very customers as on on in things Our that both non-union vibrant we well. that area the of we're part world. the area. in activity lot

bit. back that So basins we're starting are seeing some to shale come a

to midstream If come see of capacity the lot we do business back it takeaway areas, has a the you'll think of shale. those with I takeaway. can in get out

So we for Bakken in board activity across the on seeing even the are midstream. that matter

Unknown Speaker

Great. Thank helpful. you. That's

Operator

question. comes Steven next question Our UBS. your Please proceed with from Fisher,

Steven Fisher

half morning. know in of Gas mentioned the what for wondering, half? be I'm diameter for the overall at mix you on XXXX Thanks, XXXX? Oil backlog margin What, $X XXXX. good so large is today, then diameter billion in and the will the And first your in second you work than based of moment, large the better

Earl C. Austin, Jr.

grow. the second we're fourth think in on I when mix But the Yeah, sure say guidance giving in not we half general good in diameter at quarter. backlog the in I would half. what's that It'll in general, continue we I'm look of to it, have second large a

do the have like $X so We a back to We're of opportunities of billion. in off, starting with half year. we said, lot next

opportunities at customers I as it we the you have the to look think we when see in going or the into did and as good with this much do opportunity look you half, year again, more. So, second XXXX at

Steven Fisher

first challenges, how of you of reconcile to could Okay. more like going of kind investors these some be And maybe And the of of execution mix frequency are about outside of work? bit with business recurring profile execution comfortable what a doing the base trying should forward? project type a That's just helpful. get of the services with the I'm sort little seems then, guess, I more higher message

Earl C. Austin, Jr.

No.

job One the or to We resolve to we the front-end client a it's We're that with but the things, we're in I billion long a projects damages to It's $X the quarter, a did billion very about to general these. some jobs. $X lost company's liquidated – for is going working in not same issue. We're executing in very, close general, with there we working a of think, lot time. our it, have talked say thousands about client. on issue. we're due whole

we're for project some on claim. talking about to in insurance we're an it drill prudent challenges. well for decisions collaborating horizontal quarter, those was adjusting that other working a directional with sitting made very in Due as The well we where the client, as

Steven Fisher

a Thanks Okay. lot.

Operator

Andrew your comes Robert question next with from Baird Our Company. & question. proceed Wittmann, W. Please

Andrew John Wittmann

time, But Maybe little just you Derrick, kind Gas understand pieces. resumed more. during project was, then a in obviously, that Could in and thanks. down of the while you you your guys affected us help idle. guys with and bit Great, were Can bit probably understand how costs to revenue the your a margins little – ACP the quarter of stood contribution for your protected quarter? margins that a were some in the while the the magnitude of

Derrick A. Jensen

overall, we from to of we ultimately as saw well, quarter, of broadly, a lot strong business, was replaced as base we've then went But Yeah. margin original work. to I is mean, of the from it we the two third We fourth executed few contributed as items quarter level quarter. that well the as some third that from tell don't that, with contributions a industrial contributions. And about nicely. those base that is, work perspective, we despite a the of that business with I'll part you make that But project-specific had problem in What our jobs. that into saw guidance spoken commentaries. type push

the with the of from any quite deferral. in project, irrespective executed been $XX already But of base discussed a execution the has actually associated call well. a of business, As we the here, lot that broad shortfall million absent one on that the comes

Andrew John Wittmann

but wanted income level you'll Are little understand accounting some presumably pieces statement project, a that which also I how sheet? moving you that at key a think drilling it. you quantified And what also but a level here approved said like segment the insurance this an maybe was – in, reimbursed balance missed you took you I – the that the the you yet, maybe that where those charge, put on works Got you be of think at much, receivable think or directional But I that been it it's you that. just in Okay. it, then hasn't to on that, think then don't bit more. sounds and

Derrick A. Jensen

Yeah.

you be with we than For recovery. still stage, we comfortable we've rather have look would insurance you're working is be this something impact, overall effectively the in are our recorded a probable to upside comes that, that up mean recovering profit that project, at the yet insurance be very basis. the the looking is, and a of the an itself, what claiming yes. situation, amount generally and I at conclusion this the on we'll can we on booking but the cost of break-even. we've we'll customer at looking directional include the portion with today, project now, But amounts which into project would of profit here of through standpoint a at future dates. only as no When receivable larger it are in our in mean, gone some feel I recorded you basis more level associated at assessment. cost the of drill done we've profits, stage, at the basically that cost from are future the that The of an stand

Andrew John Wittmann

Thanks. right. All

Operator

Thompson Adam with from question. proceed your comes question Please next Our Thalhimer, Davis.

Adam Robert Thalhimer

morning, Hey. guys. Good Nice quarter.

Earl C. Austin, Jr.

Thanks. Hey.

Adam Robert Thalhimer

you, of into really, I the And am quarters? is, I've mean, is a question the how more the years. transmission this heard little seem part large in translate award the does a of coming You first of I you activity the than part question. mean, positive I second reading correctly, in number on

Earl C. Austin, Jr.

Yeah.

comment just the me company. on Let

it's have We we've portfolio base a a nice geographies. across that broad service portfolio building, of we're built, that that really and lines a

for And growing nothing – we basically utility our CapEx so, and been a when OpEx business, which customers have, and the of we growing, longer. haven't yearly is you it of that business, the see that XX% it's couple it's of years the at can we look saying these is

and there go underlying the strengthening that, And so, business some but yes, forward. we as bigger is are there in projects

positive. incrementally we're So

guidance says that giving incrementally customers We're Our positive. that. are

and follow follow we that business continue we as to our strengthen. we well, as just industrial So,

Adam Robert Thalhimer

was give hoping then, you And bit can QX. maybe expectations flow cash color Derrick, just what little Okay. us of in I a your for are

Derrick A. Jensen

little as potentially flow the you uncommon free free often flow, a bit from as not cash negative making this Yeah. a to see in and flow. year. lower be to quarter It's even And time typically, overall cash a much stronger times seasonal perspective, break-even quarter, fourth the for cash the for in being free revenues entire the flow up cash fourth point

it's As that that possible we lot stand a quarter we'll million effects of, today, are it, here are call from that, $XXX there free let's $XXX to dynamics less But cash million of range. fourth we're have $XXX maybe a around the more seeing there flow up seasonal that pushing such still be definitely we're annual upon would based fourth strength to the million, for modeling a flow that million I be down the $XXX the on the free But then that's in looking seeing and for bit quarter. cash of something maybe year. lines perspective, along

Adam Robert Thalhimer

Perfect. Great. you. Thank

Operator

comes A. your Our next D. Please question. Davidson. Thielman, proceed with from question Brent

Brent Edward Thielman

Gas for is of that questions, Great. How or end. XX% the of regular at Thank for looks big Derrick, more and Harvey guess, has strong, really than I business? just much growth something pipe comps the I of outlook Stronghold, versus related because expectations fourth way couple in you. kind Oil quarter easier near-term A Duke and of some low last the your which to think year

Earl C. Austin, Jr.

I'll last comment coming the that We're Canada what quarter But, the finish X well. comp. the fourth is We think I'll of let this and in in you're is as little and seeing Line a about back our very half. Derrick seeing bit awards Stronghold year up. a into come general, Montney doing quarter. I in strength North of talked

that it's segment. We the grow couldn't for what continue to be that prouder plus. of We business, acquisition double-digits and done

Canada. business has But Our I as of North in in Montney let the do But Line majority the LDC Derrick Gas quarter Oil to think with the growth and on X comment. strong I'll coming well. and fourth is

Derrick A. Jensen

is mean, in fourth little everything year's Yeah. The had correct. said large I to we Duke incremental quarter. pipe only piece is be would little last diameter activity have I add. that

then the So, is headwinds broadly, last the to very of And majority as has of said, contributions expansion over Stronghold year. double-digit last growth as pipe exactly a year. in you nice large work it compared diameter considering

Brent Edward Thielman

particular the you're is Great. days, then billion-plus pursuing, it you in broad-based? any hear for that about Permian that the is but Thanks there or that $X really Okay. concentrated a in across pipeline out lot this is the color. And And opportunity basins, board? pretty work these

Earl C. Austin, Jr.

Yeah.

some it's it, when think broad-based. our we tank we to We across our midstream Others side the your Also there It's really like quite in nicely. at us tanks, for business. like really I that at in matter. it grow our Stronghold. board for when grow markets. our all see to with really and we tank There's business on look there issues the with look are starting we having synergies opportunities markets ability

it's broad-based. So

Brent Edward Thielman

Thank you. great. Okay,

Operator

with from comes question Rygiel. proceed question. Alex your next Our Please

Alex Rygiel

quarter, Nice you. Thank gentlemen.

Earl C. Austin, Jr.

Alex. Thanks,

Alex Rygiel

are pipeline out portion? the those of jobs think to billion $X projects, $X large bid transmission relates it XXXX? of many billion As of What going for in and how you

Earl C. Austin, Jr.

out are for of those bid think I today. most

Alex Rygiel

therefore... And

Earl C. Austin, Jr.

it. A majority of

Alex Rygiel

...then XXXX? to get for in awarded start construction

Earl C. Austin, Jr.

Yeah, I would say the majority would, yes.

Alex Rygiel

communications are going projects discrete like unprofitable it as kind Are telco, then relates And looks And was there? MSAs? would what anything to specifics to U.S. U.S.? little work a business or cable? the in there it then wireline, they business Is it be great. Is on as the quarter. Why wireless, that? the international relates segment, bit it particular winning guess, in you More in the I of Excellent. was

Earl C. Austin, Jr.

Sure.

areas slowdowns in had and that. some to we and some operations, weather LATAM Our due this

market prudent and So LATAM sure have we're robust that, real a make markets growth in North our taken we've our really obviously, we a tempering there. lower-XX America approach to

It's us weather look in we're in fiber there. the of when XG primarily in centers. data So, as from for back wireline. supporting deployment board, America, really pulling backhaul slowdown a really well some as that part that's general, we standpoint lower-XX the just fiber deployment across just general, In and North bandwidth

Alex Rygiel

you. Thank

Operator

would the Ladies remarks. the have like and of management call to to I end for turn gentlemen we question-and-answer back reached closing session. the And

Earl C. Austin, Jr.

work the Yeah. the on. affected to as point. our lights were that doing. in work our storms well with the it, hard thank this regards. And and hours I people I want field we'll believe have hopefully at for The we get long them all send employees the they're on we

I that you. and call. all general for third quarter concludes questions appreciate thank in thank and of you for ongoing in participating our working safely. I Quanta Also people Thank to Services. doing This XXXX our So conference want interest We our in your call.

Operator

concludes This today's conference.

lines You this may you your for disconnect Thank your at time. participation.

Kip A. Rupp	Quanta Services, Inc.
Earl C. Austin, Jr.	Quanta Services, Inc.
Derrick A. Jensen	Quanta Services, Inc.
Noelle Christine Dilts	Stifel, Nicolaus & Co., Inc.
Alan Fleming	Citigroup Global Markets, Inc.
Tahira Afzal	KeyBanc Capital Markets, Inc.
Jamie L. Cook	Credit Suisse Securities (NYSE:USA) LLC
Steven Fisher	UBS Securities LLC
Andrew John Wittmann	Robert W. Baird & Co., Inc.
Adam Robert Thalhimer	Thompson Davis & Co., Inc.
Brent Edward Thielman	D. A. Davidson & Co.
Alex Rygiel	B. Riley FBR, Inc.

Quanta Services (PWR) 1 Nov 182018 Q3 Earnings call transcript