Quanta Services(PWR) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2024, show overall financial health with increased revenues and operating cash flow, despite minor shifts in asset and liability balances Condensed Consolidated Balance Sheets As of June 30, 2024, the balance sheet shows a slight decrease in total assets and liabilities, with a corresponding increase in total equity Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $6,887,553 | $7,676,897 | | Total assets | $15,929,150 | $16,237,225 | | Total current liabilities | $5,315,993 | $5,213,116 | | Total liabilities | $9,348,076 | $9,953,870 | | Total equity | $6,581,074 | $6,283,355 | Condensed Consolidated Statements of Operations For both the three and six months ended June 30, 2024, the statements of operations show strong year-over-year growth in revenues, net income, and diluted earnings per share Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $5,594,387 | $5,048,610 | $10,626,206 | $9,477,436 | | Gross profit | $811,331 | $724,099 | $1,434,825 | $1,297,294 | | Operating income | $307,230 | $279,273 | $462,584 | $405,133 | | Net income attributable to common stock | $188,159 | $165,899 | $306,519 | $260,945 | | Diluted EPS | $1.26 | $1.12 | $2.05 | $1.75 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, operating cash flow significantly increased, while investing activities primarily focused on acquisitions and capital expenditures, and financing activities reflected debt repayments Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $629,267 | $165,822 | | Net cash used in investing activities | ($589,260) | ($567,367) | | Net cash (used in) provided by financing activities | ($806,298) | $336,294 | | Net decrease in cash, cash equivalents and restricted cash | ($773,294) | ($64,902) | Notes to Condensed Consolidated Financial Statements The notes provide detailed insights into accounting policies, segment performance, recent acquisitions, and legal contingencies, highlighting a shift towards fixed-price contracts and strong renewable energy growth - Fixed-price contracts constituted 54.3% of revenues for the first six months of 2024, up from 44.7% in the prior-year period, indicating a shift in contract mix[33] - The Renewable Energy segment's revenue grew by 50.9% to $3.62 billion for the first six months of 2024, driving the company's overall revenue growth[57] - Subsequent to the quarter end, on July 17, 2024, Quanta completed the acquisition of Cupertino Electric, Inc. for approximately $1.5 billion in cash and stock, plus potential contingent consideration[61] - The company is involved in a significant legal dispute regarding a terminated telecommunications project in Peru, with an arbitration tribunal awarding its subsidiary approximately $177 million, though collection remains uncertain[112][114] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights strong Q2 2024 results driven by increased demand in renewable energy, robust liquidity, and strategic acquisitions, contributing to a growing backlog Results of Operations Consolidated results for Q2 and the first six months of 2024 show significant revenue and operating income growth, primarily driven by the Renewable Energy segment, offsetting declines in Underground and Infrastructure Consolidated Results - Three Months Ended June 30 (in thousands) | Metric | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $5,594,387 | $5,048,610 | $545,777 | 10.8% | | Gross Profit | $811,331 | $724,099 | $87,232 | 12.0% | | Operating Income | $307,230 | $279,273 | $27,957 | 10.0% | Consolidated Results - Six Months Ended June 30 (in thousands) | Metric | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $10,626,206 | $9,477,436 | $1,148,770 | 12.1% | | Gross Profit | $1,434,825 | $1,297,294 | $137,531 | 10.6% | | Operating Income | $462,584 | $405,133 | $57,451 | 14.2% | Segment Results Q2 2024 segment results show the Renewable Energy segment as the primary growth driver, while Electric Power experienced modest growth, and Underground and Infrastructure revenues declined Segment Revenues - Three Months Ended June 30 (in thousands) | Segment | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Electric Power | $2,452,488 | $2,415,254 | $37,234 | 1.5% | | Renewable Energy | $2,034,392 | $1,389,368 | $645,024 | 46.4% | | Underground and Infrastructure | $1,107,507 | $1,243,988 | ($136,481) | (11.0)% | Segment Operating Income - Three Months Ended June 30 (in thousands) | Segment | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Electric Power | $263,860 | $244,017 | $19,843 | 8.1% | | Renewable Energy | $162,721 | $110,487 | $52,234 | 47.3% | | Underground and Infrastructure | $81,593 | $107,207 | ($25,614) | (23.9)% | Non-GAAP Financial Measures Non-GAAP measures for the six months ended June 30, 2024, indicate increased Adjusted EBITDA and a growing total backlog, primarily driven by the Electric Power segment Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net income attributable to common stock | $306,519 | $260,945 | | EBITDA | $817,122 | $723,777 | | Adjusted EBITDA | $910,484 | $804,426 | Backlog by Segment (in thousands) | Segment | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Electric Power | $17,168,750 | $15,501,028 | | Renewable Energy | $7,835,587 | $8,125,002 | | Underground and Infrastructure | $6,306,461 | $6,482,389 | | Total Backlog | $31,310,798 | $30,108,419 | Liquidity and Capital Resources As of June 30, 2024, the company maintains strong liquidity with significant operating cash flow and improved Days Sales Outstanding, further bolstered by recent financing for the Cupertino acquisition - Total available liquidity as of June 30, 2024, was $2.77 billion, consisting of $2.25 billion in available commitments under the senior credit facility and $518.1 million in cash and cash equivalents[192] - Net cash from operating activities for the first six months of 2024 was $629.3 million, a 279% increase from the $165.8 million generated in the same period of 2023[142][197] - Days Sales Outstanding (DSO) improved to 68 days as of June 30, 2024, compared to 78 days as of June 30, 2023, reflecting better working capital management[200] - In July 2024, the company financed the Cupertino acquisition using a new $400 million term loan, $1.2 billion in commercial paper, and cash. The senior credit facility was also amended, increasing revolving commitments to $2.80 billion and extending the maturity to July 2029[193][194] Quantitative and Qualitative Disclosures About Market Risk No material changes were reported regarding market risk disclosures for the first six months of 2024, with primary exposures remaining in interest rate and foreign currency fluctuations - There were no material changes to market risk disclosures for the six months ended June 30, 2024. Key risks continue to be interest rate and currency exchange rate fluctuations[206] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with ongoing integration of five acquired businesses into internal control over financial reporting - Based on an evaluation as of June 30, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[210] - The company is in the process of integrating five businesses acquired in the first six months of 2024 into its overall internal control over financial reporting[211] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings typical for its industry, with significant matters detailed in Note 14 of the financial statements, including a dispute in Peru - The company is involved in various lawsuits and claims typical for its industry. For detailed information on significant legal matters, refer to Note 14 of the financial statements[214] Risk Factors No material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K were reported - As of the filing date, there have been no material changes to the risk factors described in the 2023 Annual Report[216] Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company issued unregistered shares for acquisitions and did not repurchase stock under its program, with significant authorization remaining - In Q2 2024, Quanta issued 35,886 unregistered shares of common stock valued at $9.1 million for acquisitions. An additional 882,926 shares were issued for an acquisition on July 17, 2024[218] - No shares were repurchased under the company's stock repurchase program during Q2 2024. The remaining authorization under the program is $499.7 million[221] Other Information A Rule 10b5-1 trading arrangement for an Executive Vice President terminated on June 3, 2024, upon completion of all planned transactions - A Rule 10b5-1 trading plan for Executive Vice President Derrick A. Jensen terminated on June 3, 2024, after all planned sales were executed[223]