01—Abstract
Summary
Summary of the 10-K filed February 28, 2020. Cited figures are marked; the original filing is the authoritative source.
Quanta Services, Inc. (PWR) reported strong revenue growth in its 2019 fiscal year, reaching $12.11 billiona, an increase of 8.4% over the prior year.
This growth was primarily driven by increased customer spending in the Electric Power Infrastructure Services segment, particularly in grid modernization and fire hardening programs, as well as expansion in communications services. The Pipeline and Industrial Infrastructure Services segment also saw growth, fueled by utility infrastructure replacement initiatives and improved execution in industrial services. Despite revenue growth, operating income saw a modest increase of 2.7%b, impacted by factors such as a significant project termination charge in Peru and increased SG&A expenses.
The company's backlog and remaining performance obligations also grew, signaling continued demand for its services heading into 2020. Financially, Quanta ended 2019 with a robust balance sheet, including substantial available commitments under its senior secured credit facility and healthy cash reserves.
The company continued its strategic growth through acquisitions, integrating seven businesses during the year. Management expressed confidence in its positioning to capitalize on future infrastructure spending, driven by trends in electric grid modernization, renewable energy development, and communication technology advancements, while also navigating risks associated with project execution, market cyclicality, and labor availability.
02—Key points
Key Highlights
- Consolidated revenues increased by 8.4% to $12.11 billion in 2019, driven by growth in both major segments.
- Electric Power Infrastructure Services segment saw increased customer spending on transmission, distribution, grid modernization, and fire hardening programs.
- Pipeline and Industrial Infrastructure Services benefited from utility infrastructure replacement, pipeline integrity work, and improved operational execution.
- Backlog and remaining performance obligations increased significantly, indicating robust future demand for Quanta's services.
- The company completed seven acquisitions in 2019, strategically expanding its service offerings and geographic reach.
- Despite revenue growth, operating income saw a modest increase of 2.7% due to project termination charges and higher operating expenses.
- Quanta ended the year with a strong liquidity position, supported by available credit facilities and cash reserves.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Quanta Services kept $0.03.
- Revenue$12.11B100.0%
- Cost of revenue−$10.51B86.8%
- Gross profit$1.60B13.2%
- Operating costs−$1.05B8.6%
- Operating income$554.9M4.6%
- Interest, other & tax−$148.1M1.2%
- Net income$406.8M3.4%
Where FY2019 revenue went
$12.11B- Cost of revenue: $10.51B, 87% of revenue
- Net income: $406.8M, 3.4% of revenue
- SG&A: $956.0M, 7.9% of revenue
- Other operating costs: $89.4M, 0.7% of revenue
- Interest, other & tax: $148.1M, 1.2% of revenue
Kept 3.4% as net incomeNet income $406.8M · 3.4%Other operating costs $89.4M · 0.7%Interest, other & tax $148.1M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 28, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $12.11B$11.17B | +8.4% |
| Cost of Revenue | $10.51B$9.69B | +8.5% |
| Gross Profit | $1.60B$1.48B | +8.1% |
| SG&A Expenses | $955.99M$857.57M | +11.5% |
| Operating Income | $554.87M$540.27M | +2.7% |
| Interest Expense | $66.89M$36.95M | +81.1% |
| Net Income | $406.81M$296.01M | +37.4% |
| EPS (Basic) | $2.76$1.92 | +43.7% |
| EPS (Diluted) | $2.73$1.90 | +43.7% |
| Shares Outstanding (Basic) | 145.71M152.96M | −4.7% |
| Shares Outstanding (Diluted) | 147.53M154.23M | −4.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of Quanta Services' revenue growth in 2019?
Revenue growth was primarily driven by increased customer spending in the Electric Power Infrastructure Services segment, notably on grid modernization and fire hardening initiatives in the western United States, as well as expansion in communications services. The Pipeline and Industrial Infrastructure Services segment also contributed to growth through utility infrastructure replacement and modernization projects.
What impacted Quanta's operating income in 2019?
While revenues grew, operating income saw a more modest increase due to several factors. These included a $79.2 million charge related to the termination of a telecommunications project in Peru, increased selling, general, and administrative expenses (such as compensation and integration costs from acquisitions), and other project-related costs. A $28.3 million project loss was also recognized in the Pipeline and Industrial Infrastructure Services segment.
How is Quanta positioned for future growth based on this filing?
Quanta appears well-positioned for future growth. The company reported a significant increase in backlog and remaining performance obligations, signaling strong demand for its infrastructure services. Key growth opportunities are identified in electric power grid modernization, renewable energy infrastructure, and telecommunications (5G deployment). The company's strategy of selective acquisitions also aims to further broaden its capabilities and customer base.
Did Quanta experience any significant customer-specific risks or impacts?
Yes, Quanta disclosed that PG&E Corporation, one of its largest customers, filed for bankruptcy protection in January 2019. This impacted approximately $165 million of pre-petition receivables, though a significant portion was paid post-bankruptcy. No single customer represented 10% or more of consolidated revenues in 2019, indicating a diversified customer base overall, but the PG&E situation highlights the potential impact of customer financial distress.
06—Continue