10-KPeriod: FY2016

QUANTA SERVICES, INC. Annual Report, Year Ended Dec 31, 2016

Filed March 1, 2017For Securities:PWR

Summary

Quanta Services, Inc. reported revenues of $7.65 billion for the fiscal year ended December 31, 2016. The company operates in two primary segments: Electric Power Infrastructure Services (63% 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% 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.

Financial Highlights

54 data points
Beta

Revenue

$7.65B

13.3% Gross Margin

Net Income

$198.38M

2.6% Net Margin

EPS (Diluted)

$1.26

Total Assets

$5.35B

Cash & Equivalents

$112.18M

Free Cash Flow

$178.19M

Financial Statements
Beta
Revenue$7.65B
Cost of Revenue$6.64B
Gross Profit$1.01B
SG&A Expenses$653.34M
Operating Income$320.81M
Interest Expense$14.89M
Net Income$198.38M
EPS (Basic)$1.26
EPS (Diluted)$1.26
Shares Outstanding (Basic)157.29M
Shares Outstanding (Diluted)157.29M

Key Highlights

  • 1Total revenues for 2016 were $7.65 billion, a slight increase from $7.57 billion in 2015.
  • 2The Electric Power Infrastructure Services segment accounted for 63% of total revenue, while the Oil and Gas Infrastructure Services segment accounted for 37%.
  • 3Gross profit margin improved to 13.3% in 2016 from 12.2% in 2015, driven by better resource utilization and project performance.
  • 4Operating income saw a significant increase of 35.1% to $320.8 million in 2016 from $237.5 million in 2015.
  • 5The company completed five acquisitions in 2016 to enhance its service offerings in Australia, Canada, and the United States.
  • 6Significant 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.
  • 7Backlog at the end of 2016 was $5.85 billion for Electric Power and $2.48 billion for Oil and Gas.

Frequently Asked Questions

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.

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.

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.

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.