10-KPeriod: FY2018

QUANTA SERVICES, INC. Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:PWR

Summary

Quanta Services, Inc. (PWR) reported strong revenue growth of 18.0% to $11.17 billion 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 billion, 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.

Financial Highlights

56 data points
Beta

Revenue

$11.17B

13.2% Gross Margin

Net Income

$296.01M

2.6% Net Margin

EPS (Diluted)

$1.90

Total Assets

$7.08B

Cash & Equivalents

$78.69M

Free Cash Flow

$65.19M

Financial Statements
Beta
Revenue$11.17B
Cost of Revenue$9.69B
Gross Profit$1.48B
SG&A Expenses$857.57M
Operating Income$540.27M
Interest Expense$36.95M
Net Income$296.01M
EPS (Basic)$1.92
EPS (Diluted)$1.90
Shares Outstanding (Basic)152.96M
Shares Outstanding (Diluted)154.23M

Key Highlights

  • 1Total revenues increased by 18.0% to $11.17 billion for the year ended December 31, 2018.
  • 2Operating income increased by 42.6% to $540.3 million, reflecting improved profitability.
  • 3Total backlog grew to $12.34 billion as of December 31, 2018, up from $11.18 billion in the prior year.
  • 4The Electric Power Infrastructure Services segment showed strong revenue growth and improved operating margin.
  • 5The company repurchased $451.3 million of common stock under its repurchase programs.
  • 6Quanta declared and paid its first cash dividend of $0.04 per share during the fourth quarter of 2018.
  • 7The company acquired several businesses in 2018, enhancing its service offerings in electrical and communications infrastructure.

Frequently Asked Questions

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.

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.

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.

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.