Quanta Services(PWR) - 2023 Q4 - Annual Results

Financial Performance Overview Quanta Services achieved record financial results in 2023, demonstrating strong growth and robust cash flow Fourth Quarter & Full-Year 2023 Results Quanta Services achieved record Q4 and full-year 2023 results, marked by significant revenue and EPS growth, record cash flow, and robust backlog Q4 2023 Key Financial Results | Metric | Q4 2023 | Q4 2022 | % Change | | :--- | :--- | :--- | :--- | | Consolidated Revenues | $5.78 Billion | $4.42 Billion | +30.8% | | Net Income Attributable to Common Stock | $210.9 Million | $162.6 Million | +29.7% | | GAAP Diluted EPS | $1.42 | $1.10 | +29.1% | | Adjusted Diluted EPS | $2.04 | $1.68 | +21.4% | | Adjusted EBITDA | $550.2 Million | $449.9 Million | +22.3% | | Cash Flow From Operations | $1.00 Billion | $0.58 Billion | +72.4% | Full-Year 2023 Key Financial Results | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Consolidated Revenues | $20.88 Billion | $17.07 Billion | +22.3% | | Net Income Attributable to Common Stock | $744.7 Million | $491.2 Million | +51.6% | | GAAP Diluted EPS | $5.00 | $3.32 | +50.6% | | Adjusted Diluted EPS | $7.16 | $6.34 | +12.9% | | Adjusted EBITDA | $1.95 Billion | $1.68 Billion | +15.6% | | Cash Flow From Operations | $1.58 Billion | $1.13 Billion | +39.8% | - The company ended the year with record remaining performance obligations of $13.89 billion and a record total backlog of $30.11 billion[3] Management Commentary Management credits strong 2023 results to strategic execution, expecting continued growth from energy transition and infrastructure modernization demand - Management credits the strong 2023 performance, which delivered record revenues, profits, and cash flow, to the hard work of employees and the successful execution of strategic initiatives[4] - The company sees continued growth opportunities driven by strong demand for its solutions that support customers' energy-transition initiatives, reliability, safety, and modernization of infrastructure[5] - Quanta's portfolio approach is considered a strategic advantage, enabling risk management and resource allocation to the most economically attractive opportunities as the energy transition accelerates[5] Recent Highlights & Capital Deployment Quanta continued capital deployment in early 2024 through strategic acquisitions, significant stock repurchases, and an increased quarterly cash dividend - In January 2024, Quanta acquired two U.S. businesses for aggregate consideration of approximately $424.7 million, one providing specialty environmental solutions and the other specializing in safety equipment[7] - The company has authorization to repurchase an additional $499.7 million of its common stock under its existing program[7] - In December 2023, the Board of Directors declared a quarterly cash dividend of $0.09 per share, a 13% increase from the prior quarter[7] Full-Year 2024 Outlook Quanta provides a positive outlook for 2024, projecting continued growth in revenues, earnings, and strong free cash flow generation 2024 Financial Guidance Quanta projects continued solid growth for 2024, with guidance for revenues, adjusted diluted EPS, and strong free cash flow generation Full-Year 2024 Financial Guidance | Metric | Low Range | High Range | | :--- | :--- | :--- | | Revenues | $22.25 Billion | $22.75 Billion | | Net Income Attributable to Common Stock | $851 Million | $925 Million | | GAAP Diluted EPS | $5.71 | $6.21 | | Adjusted Diluted EPS | $8.00 | $8.50 | | Adjusted EBITDA | $2.14 Billion | $2.25 Billion | | Net Cash from Operating Activities | $1.75 Billion | $2.15 Billion | | Free Cash Flow | $1.30 Billion | $1.70 Billion | - Management acknowledges potential risks to its outlook, including weather, regulatory issues, supply chain challenges, inflation, and interest rates, but the guidance reflects an effort to align these uncertainties with its current backlog and expected opportunities[9] Consolidated Financial Statements This section presents the company's consolidated financial statements, including statements of operations and balance sheets, reflecting its financial position and performance Statements of Operations The consolidated statement of operations reflects significant year-over-year revenue growth for 2023, driving a substantial increase in net income Condensed Consolidated Statements of Operations (Year-End) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $20,882,206 | $17,073,903 | | Gross profit | $2,937,086 | $2,529,155 | | Operating income | $1,127,976 | $872,058 | | Net income attributable to common stock | $744,689 | $491,189 | | Diluted EPS | $5.00 | $3.32 | Balance Sheets The company's balance sheet expanded significantly as of December 31, 2023, reflecting growth in total assets, equity, and liabilities Condensed Consolidated Balance Sheets (Year-End) | (In thousands) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $1,290,248 | $428,505 | | Total current assets | $7,676,897 | $5,536,070 | | Total assets | $16,237,225 | $13,464,337 | | LIABILITIES & EQUITY | | | | Total current liabilities | $5,213,116 | $3,406,194 | | Total liabilities | $9,953,870 | $8,065,518 | | Total equity | $6,283,355 | $5,398,819 | Segment Performance and Backlog This section details the performance of Quanta's operating segments and the significant growth in its total backlog and remaining performance obligations Segment Results All segments reported revenue growth for full-year 2023, with Renewable Energy Infrastructure Solutions showing the most significant increase Full-Year 2023 Segment Revenues (In thousands) | Segment | FY 2023 Revenue | FY 2022 Revenue | % Change | | :--- | :--- | :--- | :--- | | Electric Power Infrastructure Solutions | $9,696,897 | $8,940,276 | +8.5% | | Renewable Energy Infrastructure Solutions | $6,170,301 | $3,778,560 | +63.3% | | Underground Utility and Infrastructure Solutions | $5,015,008 | $4,355,067 | +15.2% | Full-Year 2023 Segment Operating Income (In thousands) | Segment | FY 2023 Op. Income | FY 2022 Op. Income | % Change | | :--- | :--- | :--- | :--- | | Electric Power Infrastructure Solutions | $1,013,350 | $958,798 | +5.7% | | Renewable Energy Infrastructure Solutions | $477,208 | $304,308 | +56.8% | | Underground Utility and Infrastructure Solutions | $377,977 | $317,543 | +19.0% | Remaining Performance Obligations and Backlog Quanta's total backlog and remaining performance obligations reached record levels at year-end 2023, driven by strong growth across key segments Total Backlog by Segment (In thousands) | Segment | Dec 31, 2023 | Dec 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Electric Power Infrastructure Solutions | $15,501,028 | $13,082,907 | +18.5% | | Renewable Energy Infrastructure Solutions | $8,125,002 | $4,722,209 | +72.1% | | Underground Utility and Infrastructure Solutions | $6,482,389 | $6,288,651 | +3.1% | | Total | $30,108,419 | $24,093,767 | +25.0% | - Total Remaining Performance Obligations (RPOs) increased significantly to $13.89 billion as of December 31, 2023, compared to $8.80 billion at the end of 2022[37] Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures for both historical results and future guidance Reconciliation for Q4 & Full-Year 2023 Results This section details reconciliations of GAAP to non-GAAP financial measures for Q4 and full-year 2023, adjusting for non-cash and non-recurring items to reflect core performance Adjusted Net Income and EPS Full-year 2023 GAAP net income of $744.7 million was adjusted to $1.06 billion, resulting in an adjusted diluted EPS of $7.16 Full-Year 2023 Reconciliation of Net Income and Diluted EPS | (In thousands, except per share) | Amount | Per Share | | :--- | :--- | :--- | | Net income attributable to common stock (GAAP) | $744,689 | $5.00 | | Non-cash stock-based compensation | $126,762 | $0.85 | | Amortization of intangible assets | $289,014 | $1.94 | | Acquisition and integration costs | $42,837 | $0.29 | | Other adjustments & tax impacts | ($138,379) | ($0.92) | | Adjusted net income attributable to common stock | $1,064,923 | $7.16 | EBITDA and Adjusted EBITDA Full-year 2023 GAAP net income of $744.7 million was reconciled to an adjusted EBITDA of $1.95 billion through various adjustments Full-Year 2023 Reconciliation of EBITDA and Adjusted EBITDA | (In thousands) | Amount | | :--- | :--- | | Net income attributable to common stock (GAAP) | $744,689 | | Interest, Taxes, Depreciation & Amortization | $1,029,086 | | EBITDA | $1,773,775 | | Non-cash stock-based compensation | $126,762 | | Acquisition and integration costs | $42,837 | | Other adjustments | $3,809 | | Adjusted EBITDA | $1,947,183 | Free Cash Flow The company generated strong free cash flow of $1.21 billion for full-year 2023, derived from operating activities less capital expenditures Full-Year 2023 Reconciliation of Free Cash Flow | (In thousands) | Amount | | :--- | :--- | | Net cash provided by operating activities | $1,575,952 | | Less: Net capital expenditures | ($365,456) | | Free Cash Flow | $1,210,496 | Reconciliation for Full-Year 2024 Guidance This section provides forward-looking reconciliations for the company's 2024 guidance, bridging projected GAAP figures to non-GAAP metrics for the upcoming fiscal year Estimated Adjusted Net Income and EPS Quanta's 2024 guidance reconciles estimated GAAP net income to an adjusted range of $1.19 billion to $1.27 billion, resulting in an adjusted diluted EPS of $8.00 to $8.50 Full-Year 2024 Guidance Reconciliation of Diluted EPS | | Low Range | High Range | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $5.71 | $6.21 | | Non-cash stock-based compensation | $0.93 | $0.93 | | Amortization of intangible assets | $2.10 | $2.10 | | Other adjustments & tax impacts | ($0.74) | ($0.74) | | Adjusted Diluted EPS | $8.00 | $8.50 | Estimated EBITDA and Adjusted EBITDA The 2024 guidance reconciles GAAP net income to an estimated adjusted EBITDA range of $2.14 billion to $2.25 billion, incorporating various adjustments Full-Year 2024 Guidance Reconciliation of Adjusted EBITDA | (In thousands) | Low Range | High Range | | :--- | :--- | :--- | | Net income attributable to common stock (GAAP) | $850,800 | $925,300 | | Interest, Taxes, Depreciation & Amortization | $1,142,500 | $1,183,300 | | EBITDA | $1,993,300 | $2,108,600 | | Non-cash stock-based compensation | $138,600 | $138,600 | | Acquisition and integration costs | $6,400 | $6,400 | | Adjusted EBITDA | $2,138,300 | $2,253,600 | Estimated Free Cash Flow Quanta projects strong cash generation for 2024, with estimated free cash flow in the range of $1.30 billion to $1.70 billion Full-Year 2024 Guidance Reconciliation of Free Cash Flow | (In thousands) | Low Range | High Range | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,750,000 | $2,150,000 | | Less: Net capital expenditures | ($450,000) | ($450,000) | | Free Cash Flow | $1,300,000 | $1,700,000 |