01—Abstract
Summary
Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.
Quanta Services, Inc. (PWR) reported strong revenue growth of 18.0% to $11.17 billiona for the year ended December 31, 2018, driven by both its Electric Power Infrastructure Services and Pipeline and Industrial Infrastructure Services segments.
The company demonstrated improved operating income, up 42.6% year-over-year, reflecting effective management of increased revenues and slight improvements in gross margin. A significant highlight was the increase in backlog, reaching $12.34 billionb, indicating robust future demand for its services. Despite a challenging industry landscape, Quanta's strategic focus on expanding its service offerings and geographic reach, coupled with disciplined operational execution, positions it well for continued growth.
The company also continued its share repurchase program and initiated its first cash dividend, signaling a commitment to returning value to shareholders. Investors should note potential risks related to project execution, labor availability, and economic conditions in the energy sector, though the company's diversified business model and strong customer relationships provide a degree of resilience.
02—Key points
Key Highlights
- Total revenues increased by 18.0% to $11.17 billion for the year ended December 31, 2018.
- Operating income increased by 42.6% to $540.3 million, reflecting improved profitability.
- Total backlog grew to $12.34 billion as of December 31, 2018, up from $11.18 billion in the prior year.
- The Electric Power Infrastructure Services segment showed strong revenue growth and improved operating margin.
- The company repurchased $451.3 million of common stock under its repurchase programs.
- Quanta declared and paid its first cash dividend of $0.04 per share during the fourth quarter of 2018.
- The company acquired several businesses in 2018, enhancing its service offerings in electrical and communications infrastructure.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Quanta Services kept $0.03.
- Revenue$11.17B100.0%
- Cost of revenue−$9.69B86.8%
- Gross profit$1.48B13.2%
- Operating costs−$939.7M8.4%
- Operating income$540.3M4.8%
- Interest, other & tax−$244.3M2.2%
- Net income$296.0M2.6%
Where FY2018 revenue went
$11.17B- Cost of revenue: $9.69B, 87% of revenue
- Net income: $296.0M, 2.6% of revenue
- SG&A: $857.6M, 7.7% of revenue
- Other operating costs: $82.1M, 0.7% of revenue
- Interest, other & tax: $244.3M, 2.2% of revenue
Kept 2.6% as net incomeNet income $296.0M · 2.6%Other operating costs $82.1M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $11.17B$9.47B | +18.0% |
| Cost of Revenue | $9.69B$8.22B | +17.8% |
| Gross Profit | $1.48B$1.24B | +19.2% |
| SG&A Expenses | $857.57M$777.92M | +10.2% |
| Operating Income | $540.27M$378.85M | +42.6% |
| Interest Expense | $36.95M$20.95M | +76.4% |
| Net Income | $296.01M$318.23M | −7.0% |
| EPS (Basic) | $1.92$2.02 | −5.0% |
| EPS (Diluted) | $1.90$2.00 | −5.0% |
| Shares Outstanding (Basic) | 152.96M156.12M | −2.0% |
| Shares Outstanding (Diluted) | 154.23M157.16M | −1.9% |
05—Questions
Frequently Asked Questions
What were Quanta Services' primary segments and their performance in 2018?
Quanta Services operates under two primary segments: Electric Power Infrastructure Services and Pipeline and Industrial Infrastructure Services. In 2018, both segments contributed to the company's strong revenue growth. The Electric Power Infrastructure Services segment saw revenues increase by 14.6% and an improvement in operating margin to 9.8%. The Pipeline and Industrial Infrastructure Services segment experienced a revenue increase of 23.0%, although its operating margin slightly decreased to 4.3% due to asset impairment charges and project losses.
How did Quanta Services manage its debt and capital structure in 2018?
In 2018, Quanta Services increased its borrowings under its senior secured credit facility, primarily to fund acquisitions and stock repurchases. The company had $1.07 billion in outstanding borrowings as of December 31, 2018. Quanta remained in compliance with its debt covenants and maintained a Consolidated Leverage Ratio below the stipulated 3.0 to 1.0 limit, demonstrating prudent financial management.
What are the key risks and challenges Quanta Services highlighted in its filing?
Quanta Services identified several risks and challenges, including the cyclical nature of its business, potential project delays or cancellations due to weather, regulatory issues, or customer constraints. The company also noted the risk of labor shortages for skilled personnel, competition, fluctuations in commodity prices impacting customer spending, and potential liabilities arising from operational hazards and legal proceedings. The bankruptcy filing of a major customer, PG&E, was also highlighted as a significant risk impacting receivables.
What is Quanta Services' outlook for its business segments?
Quanta Services expressed optimism about the long-term outlook for both its segments, believing they are in a multi-year up-cycle. The company anticipates continued demand for electric power infrastructure upgrades and modernization, driven by grid reliability needs and the transition to renewable energy. For the Pipeline and Industrial Infrastructure Services segment, growth opportunities are seen in natural gas distribution, pipeline integrity, and downstream industrial services. The company is focused on leveraging its comprehensive service offerings and broad geographic reach to capitalize on these trends.
06—Continue