10-QPeriod: Q3 FY2012

QUANTA SERVICES, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 7, 2012For Securities:PWR

Summary

Quanta Services, Inc. (PWR) reported strong revenue growth in the third quarter and first nine months of 2012, driven by increased capital spending from customers across its Electric Power, Natural Gas and Pipeline, and Telecommunications infrastructure services segments. The company saw significant year-over-year improvements in revenue and gross profit, with gross profit as a percentage of revenue increasing. This was supported by better operational performance and improved coverage of overhead costs due to higher revenue volumes. Selling, general, and administrative expenses also increased, largely due to higher compensation, professional fees, and costs associated with recent acquisitions. The company also reported a substantial increase in net income attributable to common stock. The effective tax rate decreased due to tax benefits related to uncertain tax positions and a higher proportion of income from international jurisdictions. Quanta continues to actively pursue acquisitions, with several completed in 2012 and 2011, which are contributing to revenue growth and the recognition of goodwill. The company's backlog remains robust, indicating continued demand for its services.

Financial Highlights

50 data points
Beta

Revenue

$1.53B

16.4% Gross Margin

Net Income

$96.40M

6.3% Net Margin

EPS (Diluted)

$0.45

Total Assets

$5.26B

Cash & Equivalents

$128.21M

Free Cash Flow

-$127.70M

Financial Statements
Beta
Revenue$1.53B
Gross Profit$252.00M
SG&A Expenses$114.58M
Operating Income$127.13M
Interest Expense$963K
Net Income$96.40M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)213.15M
Shares Outstanding (Diluted)213.24M

Key Highlights

  • 1Revenue for the three months ended September 30, 2012 increased by 34.7% to $1.69 billion compared to the same period in 2011.
  • 2Gross profit increased by 44.0% to $280.4 million for the three months ended September 30, 2012, with gross profit as a percentage of revenues improving to 16.6% from 15.6%.
  • 3Net income attributable to common stock for the three months ended September 30, 2012, was $96.4 million, an increase from $52.0 million in the prior year's period.
  • 4The company completed multiple acquisitions in 2012, including Service Electric Company, Phasor Engineering, Inc., Crux Subsurface, Inc., and Microline Technology Corporation, which contributed to revenue growth.
  • 5Operating income increased significantly across most segments, with the Natural Gas and Pipeline segment moving from a loss to a profit.
  • 6The company's backlog as of September 30, 2012, stood at $4.17 billion for the next 12 months and $7.27 billion in total.
  • 7Quanta Services maintained compliance with its credit facility covenants and had $395.7 million available for borrowings or issuing new letters of credit as of September 30, 2012.

Frequently Asked Questions

Quanta Services demonstrated strong financial performance with significant year-over-year increases in revenue and net income. Revenue grew substantially due to higher customer spending across its infrastructure service segments. Profitability also improved, with gross profit margin expanding, driven by increased revenues and operational efficiencies. The company actively pursued growth through acquisitions, which contributed to its top-line performance.

The primary drivers of revenue growth are increased capital spending by customers in the electric power, natural gas and pipeline, and telecommunications industries. Specifically, growth was fueled by electric power transmission and solar projects, expanded natural gas transmission and distribution projects linked to shale developments, and telecommunications projects supported by stimulus funding and fiber to cell site initiatives. Acquisitions also played a significant role in boosting revenue.

The company completed several acquisitions in 2012 and 2011, which contributed positively to revenue growth and expanded its service offerings and geographic reach. These acquisitions are integrated into the company's reportable segments and have led to the recognition of goodwill. While increasing revenues, these acquisitions also contributed to higher selling, general, and administrative expenses due to associated integration and operational costs.

Quanta Services maintained a strong liquidity position with $128.2 million in cash and cash equivalents and significant availability under its $700 million revolving credit facility. The company expects its cash flows from operations, existing cash, and borrowing capacity to fund its operating needs and planned capital expenditures. The outlook for growth across all served industries is positive, supported by ongoing infrastructure upgrades and investments.