10-QPeriod: Q1 FY2016

QUANTA SERVICES, INC. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 10, 2016For Securities:PWR

Summary

Quanta Services, Inc. (PWR) reported financial results for the first quarter ended March 31, 2016. The company experienced a revenue decrease of 7.9% year-over-year, primarily attributed to lower demand in the Oil and Gas Infrastructure Services segment due to project timing and reduced customer spending amid lower oil prices, as well as decreased revenues in Electric Power Infrastructure Services. This was partially offset by contributions from recent acquisitions. Despite the revenue decline, the company highlighted strategic acquisitions in both its key segments, aimed at enhancing service offerings. The company maintained a strong backlog, indicating future revenue potential. However, profitability was impacted by a shift in revenue mix towards lower-margin projects and increased costs associated with a specific power plant construction project in Alaska. Management is focused on managing costs and maintaining pricing discipline amidst competitive pressures.

Financial Highlights

50 data points
Beta

Revenue

$1.71B

11.9% Gross Margin

Net Income

$20.50M

1.2% Net Margin

EPS (Diluted)

$0.13

Total Assets

$5.30B

Cash & Equivalents

$155.31M

Free Cash Flow

$158.12M

Financial Statements
Beta
Revenue$1.71B
Gross Profit$203.31M
SG&A Expenses$158.52M
Operating Income$37.29M
Interest Expense$3.59M
Net Income$20.50M
EPS (Basic)$0.13
Shares Outstanding (Basic)162.80M
Shares Outstanding (Diluted)162.81M

Key Highlights

  • 1Revenue decreased by 7.9% to $1.71 billion compared to the prior year's first quarter, impacted by lower demand in Oil & Gas and Electric Power segments.
  • 2Gross profit margin declined to 11.9% from 12.8% due to a shift to lower-margin projects and increased costs on a specific Alaska project.
  • 3Selling, general, and administrative expenses increased by 9.0% to $158.5 million, driven by severance costs and expenses related to acquired companies.
  • 4The company completed three acquisitions in Q1 2016, two in Electric Power Infrastructure Services and one in Oil and Gas Infrastructure Services, to expand its offerings.
  • 5Backlog remained strong, totaling $10.08 billion at the end of Q1 2016, with $5.75 billion expected within 12 months.
  • 6Operating income from continuing operations decreased significantly to $37.3 million from $84.2 million in the prior year period.
  • 7Cash flow from operating activities of continuing operations improved to $199.7 million from $179.6 million, driven by lower working capital requirements.

Frequently Asked Questions

The revenue decline was primarily driven by reduced demand in the Oil and Gas Infrastructure Services segment due to project timing and lower customer spending amid lower oil prices. Additionally, the Electric Power Infrastructure Services segment saw decreased revenues from large electric transmission projects due to heightened regulatory and environmental requirements impacting project timing and customer spending.

The company completed three acquisitions in Q1 2016. These acquisitions contributed approximately $30 million in revenues, partially offsetting the overall revenue decrease. Acquired companies also contributed to an increase in selling, general, and administrative expenses.

The company maintained a strong backlog, with a total of $10.08 billion as of March 31, 2016, of which $5.75 billion was expected to be realized within 12 months. This indicates a solid pipeline of future work, particularly in the Electric Power Infrastructure Services segment.

The gross profit margin decreased due to a shift in revenue mix towards lower-margin projects, particularly smaller electric transmission projects, and increased costs associated with a power plant construction project in Alaska that resulted in project losses of $21.3 million during the quarter. Increased inefficiencies from transitioning between projects also contributed.