10-QPeriod: Q3 FY2021

QUANTA SERVICES, INC. Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 4, 2021For Securities:PWR

Summary

Quanta Services, Inc. reported a strong performance in the third quarter of 2021, with consolidated revenues increasing by 11.0% year-over-year to $3.35 billion. This growth was driven by both segments: Electric Power Infrastructure Solutions saw a 10.5% revenue increase, while Underground Utility and Infrastructure Solutions experienced a 12.3% rise. Net income attributable to common stock grew by 7.0% to $174.4 million, resulting in diluted earnings per share of $1.21. The company also significantly bolstered its financial position, issuing $1.5 billion in senior notes and amending its credit facility to include a new $750 million term loan, primarily to finance the substantial acquisition of Blattner Holding Company. This acquisition is expected to enhance Quanta's position in the renewable energy infrastructure sector. Despite these positive financial trends, the company is navigating ongoing challenges, including supply chain disruptions and the potential impact of rising labor costs and the COVID-19 pandemic. Looking forward, Quanta Services remains optimistic about long-term growth opportunities across its key markets, particularly in electric power infrastructure modernization and renewable energy development. The company's robust backlog of $17.02 billion as of September 30, 2021, provides a solid foundation for future revenue generation. While the Underground Utility and Infrastructure Solutions segment faced some headwinds due to cyclicality in larger pipeline projects and the challenging energy market, the strategic focus on specialty services and regulated utility spending aims to provide more sustainable and predictable revenue streams.

Financial Highlights

55 data points
Beta

Revenue

$3.35B

15.9% Gross Margin

Net Income

$175.40M

5.2% Net Margin

EPS (Diluted)

$1.21

Total Assets

$10.68B

Cash & Equivalents

$1.70B

Free Cash Flow

-$56.74M

Financial Statements
Beta
Revenue$3.35B
Cost of Revenue$2.82B
Gross Profit$534.68M
SG&A Expenses$274.85M
Operating Income$248.08M
Interest Expense$17.26M
Net Income$175.40M
EPS (Basic)$1.25
EPS (Diluted)$1.21
Shares Outstanding (Basic)140.01M
Shares Outstanding (Diluted)144.30M

Key Highlights

  • 1Consolidated revenues increased 11.0% to $3.35 billion in Q3 2021 compared to Q3 2020.
  • 2Net income attributable to common stock increased 7.0% to $174.4 million, with diluted EPS rising to $1.21.
  • 3The company completed the significant acquisition of Blattner Holding Company for approximately $2.635 billion (cash and stock).
  • 4Total backlog increased to $17.02 billion, up 12.5% from the end of 2020, indicating strong future demand.
  • 5The Electric Power Infrastructure Solutions segment showed strong performance with increased revenues and operating income.
  • 6The Underground Utility and Infrastructure Solutions segment saw revenue growth but a decline in operating income, partly due to project timing and prior-period favorable adjustments.
  • 7The company raised substantial capital through new senior notes issuance ($1.5 billion) and amendments to its credit facility.

Frequently Asked Questions

Revenue growth was driven by both segments. The Electric Power Infrastructure Solutions segment benefited from strong demand in the utility market and increased renewable energy project activity, while the Underground Utility and Infrastructure Solutions segment saw growth from increased demand in gas distribution and industrial services. The acquisition of new businesses also contributed to revenue growth across segments.

The acquisition of Blattner, completed on October 13, 2021, was a major event. It was financed through approximately $2.29 billion in cash and $345.4 million in stock. While Blattner's results are included starting from the acquisition date, the financing activities (issuance of senior notes and credit facility amendments) occurred during the quarter. This acquisition is expected to significantly enhance Quanta's presence in the renewable energy sector.

Key challenges include supply chain disruptions, particularly for renewable energy projects, the potential impact of rising labor costs and inflation, and ongoing uncertainties related to the COVID-19 pandemic and its effect on operations and workforce. The company also faces risks related to customer creditworthiness and potential project-specific issues, as highlighted by the provision for credit loss related to Limetree Bay Refining.

Quanta Services actively manages its debt and liquidity. During the quarter, it issued $1.5 billion in senior notes and amended its credit facility to secure additional financing for the Blattner acquisition. As of September 30, 2021, the company had substantial available commitments under its senior credit facility and cash on hand, indicating a strong liquidity position. Management expects these resources to be sufficient for future operating needs, capital expenditures, and strategic investments.