10-QPeriod: Q3 FY2010

QUANTA SERVICES, INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 9, 2010For Securities:PWR

Summary

Quanta Services, Inc. (PWR) reported strong revenue growth for the nine months ended September 30, 2010, driven primarily by the acquisition of Price Gregory Services, Inc. and a significant increase in its Natural Gas and Pipeline Infrastructure Services segment. While overall revenues increased by 21.1% to $2.82 billion, the Electric Power Infrastructure Services segment experienced a slight revenue decline. The company also saw a decrease in its overall gross margin to 16.8% from 17.3% in the prior year period, largely due to a higher proportion of revenue coming from the lower-margin Natural Gas segment. Despite margin pressure, Quanta Services' operating income increased by 18.9% to $201.7 million for the nine-month period. The company demonstrated solid liquidity with $441.2 million in cash and cash equivalents as of September 30, 2010, and a robust $1.1 billion in working capital. Management anticipates sufficient cash flow and borrowing capacity to meet future operating needs, debt obligations, and planned capital expenditures, including strategic acquisitions like the recent purchase of Valard Construction LP. The company is navigating a challenging economic environment but expresses optimism for long-term growth opportunities in 2011 and beyond, particularly in electric transmission, gas transmission, and telecommunications infrastructure.

Financial Highlights

50 data points
Beta

Revenue

$1.21B

15.8% Gross Margin

Net Income

$62.78M

5.2% Net Margin

EPS (Diluted)

$0.30

Total Assets

$4.13B

Cash & Equivalents

$441.25M

Free Cash Flow

-$86.38M

Financial Statements
Beta
Revenue$1.21B
Gross Profit$189.99M
SG&A Expenses$82.04M
Operating Income$94.56M
Interest Expense$269K
Net Income$62.78M
EPS (Basic)$0.30
EPS (Diluted)$0.30
Shares Outstanding (Basic)209.43M
Shares Outstanding (Diluted)211.10M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2010, increased by 21.1% to $2.82 billion, primarily driven by the acquisition of Price Gregory.
  • 2The Natural Gas and Pipeline Infrastructure Services segment saw a substantial revenue increase of 131.7%, becoming a larger contributor to overall revenue.
  • 3Gross margin decreased to 16.8% from 17.3% year-over-year, impacted by a shift in revenue mix towards the lower-margin Natural Gas segment.
  • 4Operating income grew by 18.9% to $201.7 million for the nine-month period, indicating operational efficiency despite margin compression.
  • 5The company maintains a strong liquidity position with $441.2 million in cash and cash equivalents and $1.1 billion in working capital as of September 30, 2010.
  • 6Quanta Services completed the acquisition of Valard Construction LP in October 2010, further expanding its Electric Power Infrastructure Services segment.
  • 7The company forecasts improved demand and growth opportunities in 2011 across key segments, despite current economic challenges and regulatory hurdles.

Frequently Asked Questions

The primary driver for the revenue increase was the acquisition of Price Gregory Services, Inc. in October 2009, which significantly boosted the Natural Gas and Pipeline Infrastructure Services segment. This segment experienced a 131.7% revenue increase, contributing substantially to the consolidated revenue growth of 21.1%.

The decrease in gross margin, from 17.3% to 16.8%, was primarily due to a shift in the revenue mix. The Natural Gas and Pipeline Infrastructure Services segment, which has historically lower margins than the company's overall average, now represents a larger portion of total revenue following the Price Gregory acquisition.

Quanta Services maintains a strong financial position with $441.2 million in cash and cash equivalents and $1.1 billion in working capital as of September 30, 2010. While acknowledging the current challenging economic environment and regulatory complexities, management is optimistic about long-term growth opportunities in 2011, particularly in electric transmission, gas transmission, and telecommunications infrastructure projects.

The acquisition of Price Gregory, completed in October 2009, significantly expanded Quanta's natural gas and pipeline operations. Its financial results have been consolidated since October 2009, and it has been integrated into the Natural Gas and Pipeline Infrastructure Services segment. This acquisition contributed significantly to revenue growth but also impacted the overall gross margin due to its specific margin profile.