01—Abstract
Summary
Summary of the 10-K filed March 1, 2017. Cited figures are marked; the original filing is the authoritative source.
Quanta Services, Inc. reported revenues of $7.65 billiona for the fiscal year ended December 31, 2016.
The company operates in two primary segments: Electric Power Infrastructure Services (63%b of revenue) and Oil and Gas Infrastructure Services (37% of revenue). The Electric Power segment saw a slight revenue decrease year-over-year, impacted by regulatory and permitting delays on large transmission projects. Conversely, the Oil and Gas segment experienced revenue growth, driven by increased customer capital spending on larger projects and natural gas distribution services.
Profitability improved, with gross profit increasing by 9.8%c and gross margin expanding to 13.3% from 12.2% in the prior year. This improvement was attributed to better resource utilization, particularly in the second half of 2016, and improved project performance.
However, both segments faced project losses, notably on an Alaska power plant construction project for the Electric Power segment. The company also managed an increase in selling, general, and administrative expenses, partly due to acquisition integration costs and employee-related expenses.
02—Key points
Key Highlights
- Total revenues for 2016 were $7.65 billion, a slight increase from $7.57 billion in 2015.
- The Electric Power Infrastructure Services segment accounted for 63% of total revenue, while the Oil and Gas Infrastructure Services segment accounted for 37%.
- Gross profit margin improved to 13.3% in 2016 from 12.2% in 2015, driven by better resource utilization and project performance.
- Operating income saw a significant increase of 35.1% to $320.8 million in 2016 from $237.5 million in 2015.
- The company completed five acquisitions in 2016 to enhance its service offerings in Australia, Canada, and the United States.
- Significant asset impairment charges of $58.5 million were recorded in 2015, primarily related to goodwill and intangible assets in the Oil and Gas segment due to the low commodity price environment.
- Backlog at the end of 2016 was $5.85 billion for Electric Power and $2.48 billion for Oil and Gas.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Quanta Services kept $0.03.
- Revenue$7.65B100.0%
- Cost of revenue−$6.64B86.7%
- Gross profit$1.01B13.3%
- Operating costs−$693.0M9.1%
- Operating income$320.8M4.2%
- Interest, other & tax−$122.4M1.6%
- Net income$198.4M2.6%
Where FY2016 revenue went
$7.65B- Cost of revenue: $6.64B, 87% of revenue
- Net income: $198.4M, 2.6% of revenue
- SG&A: $653.3M, 8.5% of revenue
- Other operating costs: $39.6M, 0.5% of revenue
- Interest, other & tax: $122.4M, 1.6% of revenue
Kept 2.6% as net incomeNet income $198.4M · 2.6%Other operating costs $39.6M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 1, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $7.65B$7.57B | +1.0% |
| Cost of Revenue | $6.64B— | — |
| Gross Profit | $1.01B$923.66M | +9.8% |
| SG&A Expenses | $653.34M$592.86M | +10.2% |
| Operating Income | $320.81M$237.50M | +35.1% |
| Interest Expense | $14.89M$8.02M | +85.5% |
| Net Income | $198.38M$310.91M | −36.2% |
| EPS (Basic) | $1.26$1.59 | −20.8% |
| EPS (Diluted) | $1.26$1.59 | −20.8% |
| Shares Outstanding (Basic) | 157.29M195.11M | −19.4% |
| Shares Outstanding (Diluted) | 157.29M195.12M | −19.4% |
05—Questions
Frequently Asked Questions
What were Quanta Services' primary revenue drivers in 2016?
Quanta Services generated the majority of its revenue from its two main segments: Electric Power Infrastructure Services (63%) and Oil and Gas Infrastructure Services (37%). Revenue in the Electric Power segment was influenced by utility spending on transmission projects, while the Oil and Gas segment benefited from increased capital expenditures in larger projects and natural gas distribution services.
How did the company's profitability perform in 2016 compared to 2015?
Profitability showed improvement in 2016. Gross profit increased by 9.8% to $1.01 billion, and the gross profit margin expanded from 12.2% to 13.3%. This was primarily due to better utilization of resources on larger projects and improved productivity in key segments, despite some project-specific losses.
What significant risks or challenges did Quanta Services highlight in its 2016 10-K filing?
Key risks and challenges highlighted include the cyclical nature of its business, potential adverse impacts from negative economic and market conditions (especially in the oil and gas sector), regulatory and environmental requirements affecting demand, labor shortages, competition, and the inherent operational hazards of its services. The company also noted the potential for project delays and cost overruns.
What was the company's strategy regarding acquisitions and capital allocation in 2016?
In 2016, Quanta completed five acquisitions to strengthen its service offerings in its core markets. The company also continued its stock repurchase program, having repurchased approximately $1.20 billion of its common stock under a $1.25 billion authorization. Management indicated a commitment to organic growth and strategic acquisitions.
06—Continue