This presentation (and oral statements regarding the subject matter of this presentation) includes forward-looking statements intended to qualifyunder the ldquosafe harborrdquo from liability established by the Private Securities Litigation Reform Act of 1995 These forward-looking statements includeany statements reflecting Quantas expectations intentions strategies assumptions or beliefs about future events or performance or that do notsolely relate to historical or current facts Forward-looking statements involve certain risks uncertainties and assumptions that are difficult topredict or beyond Quantas control and actual results may differ materially from those expected implied or forecasted by our forward-lookingstatements due to inaccurate assumptions and known and unknown risk and uncertainties For additional information concerning some of therisks uncertainties and assumptions that could affect our forward-looking statements please refer to Quantarsquos Annual Report on Form 10-K for theyear ended December 31 2017 and its other documents filed with the Securities and Exchange Commission as well as the risks uncertainties andassumptions identified in this presentation Investors and analysts should not place undue reliance on Quantarsquos forward-looking statements whichare current only as of the date of this presentation or as otherwise noted in this presentation Quanta does not undertake and expressly disclaimsany obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation orotherwise and Quanta expressly disclaims any written or oral statements made by any third party regarding the subject matter of this presentation
Forward Looking Statement Disclaimer
Page 2
Page 3
Key Takeaways
Quanta is the leading construction-led infrastructure solutions provider in the markets we serve with unmatched scope and scale
Quanta continues to see opportunities to increase shareholder value through growth in revenues EBITDA and EPS over a multi-year period
Quantarsquos corporate actions demonstrate confidence in our long-term growth prospects and a commitment to generating shareholder value
We will maintain a strong financial profile to support our strategic initiatives for near- and long-term profitable growth
Page 4
Leading Construction-Led Infrastructure Solutions Provider
Who is Quanta Services Committed to the health and safety of our employees customers and community
Recognized market leader in electric power and oil and gas pipeline construction in North America
Entrepreneurial business model and culture
Broad self-performing platform developed through organic growth and acquisitions
Strong scope and scale with deep customer relationships
Revenue as reported by type of work geography contract and project type based on revenues of $9466 million for the twelve months ended Dec 31 2017 Represents the midpoint of guidance range and is current as of November 1 2018
Estimated Revenue by Geography
United States74
LATAM amp Other2
Canada21
Australia3
Page 6
Overview ndash Diverse and High Quality Customer Base
Top 10
36
9 No single customer accounted formore than 9 of revenues in 2017
The ten largest customers accountedfor approximately 36 of revenues in2017
Strong relationships with the majorityof US investor owned utilities and Canadian utilities ndash many going backfor decades
Quantarsquos Low Customer Concentration Is Unique Versus Peers
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
This presentation (and oral statements regarding the subject matter of this presentation) includes forward-looking statements intended to qualifyunder the ldquosafe harborrdquo from liability established by the Private Securities Litigation Reform Act of 1995 These forward-looking statements includeany statements reflecting Quantas expectations intentions strategies assumptions or beliefs about future events or performance or that do notsolely relate to historical or current facts Forward-looking statements involve certain risks uncertainties and assumptions that are difficult topredict or beyond Quantas control and actual results may differ materially from those expected implied or forecasted by our forward-lookingstatements due to inaccurate assumptions and known and unknown risk and uncertainties For additional information concerning some of therisks uncertainties and assumptions that could affect our forward-looking statements please refer to Quantarsquos Annual Report on Form 10-K for theyear ended December 31 2017 and its other documents filed with the Securities and Exchange Commission as well as the risks uncertainties andassumptions identified in this presentation Investors and analysts should not place undue reliance on Quantarsquos forward-looking statements whichare current only as of the date of this presentation or as otherwise noted in this presentation Quanta does not undertake and expressly disclaimsany obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation orotherwise and Quanta expressly disclaims any written or oral statements made by any third party regarding the subject matter of this presentation
Forward Looking Statement Disclaimer
Page 2
Page 3
Key Takeaways
Quanta is the leading construction-led infrastructure solutions provider in the markets we serve with unmatched scope and scale
Quanta continues to see opportunities to increase shareholder value through growth in revenues EBITDA and EPS over a multi-year period
Quantarsquos corporate actions demonstrate confidence in our long-term growth prospects and a commitment to generating shareholder value
We will maintain a strong financial profile to support our strategic initiatives for near- and long-term profitable growth
Page 4
Leading Construction-Led Infrastructure Solutions Provider
Who is Quanta Services Committed to the health and safety of our employees customers and community
Recognized market leader in electric power and oil and gas pipeline construction in North America
Entrepreneurial business model and culture
Broad self-performing platform developed through organic growth and acquisitions
Strong scope and scale with deep customer relationships
Revenue as reported by type of work geography contract and project type based on revenues of $9466 million for the twelve months ended Dec 31 2017 Represents the midpoint of guidance range and is current as of November 1 2018
Estimated Revenue by Geography
United States74
LATAM amp Other2
Canada21
Australia3
Page 6
Overview ndash Diverse and High Quality Customer Base
Top 10
36
9 No single customer accounted formore than 9 of revenues in 2017
The ten largest customers accountedfor approximately 36 of revenues in2017
Strong relationships with the majorityof US investor owned utilities and Canadian utilities ndash many going backfor decades
Quantarsquos Low Customer Concentration Is Unique Versus Peers
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 3
Key Takeaways
Quanta is the leading construction-led infrastructure solutions provider in the markets we serve with unmatched scope and scale
Quanta continues to see opportunities to increase shareholder value through growth in revenues EBITDA and EPS over a multi-year period
Quantarsquos corporate actions demonstrate confidence in our long-term growth prospects and a commitment to generating shareholder value
We will maintain a strong financial profile to support our strategic initiatives for near- and long-term profitable growth
Page 4
Leading Construction-Led Infrastructure Solutions Provider
Who is Quanta Services Committed to the health and safety of our employees customers and community
Recognized market leader in electric power and oil and gas pipeline construction in North America
Entrepreneurial business model and culture
Broad self-performing platform developed through organic growth and acquisitions
Strong scope and scale with deep customer relationships
Revenue as reported by type of work geography contract and project type based on revenues of $9466 million for the twelve months ended Dec 31 2017 Represents the midpoint of guidance range and is current as of November 1 2018
Estimated Revenue by Geography
United States74
LATAM amp Other2
Canada21
Australia3
Page 6
Overview ndash Diverse and High Quality Customer Base
Top 10
36
9 No single customer accounted formore than 9 of revenues in 2017
The ten largest customers accountedfor approximately 36 of revenues in2017
Strong relationships with the majorityof US investor owned utilities and Canadian utilities ndash many going backfor decades
Quantarsquos Low Customer Concentration Is Unique Versus Peers
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 41
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 4
Leading Construction-Led Infrastructure Solutions Provider
Who is Quanta Services Committed to the health and safety of our employees customers and community
Recognized market leader in electric power and oil and gas pipeline construction in North America
Entrepreneurial business model and culture
Broad self-performing platform developed through organic growth and acquisitions
Strong scope and scale with deep customer relationships
Revenue as reported by type of work geography contract and project type based on revenues of $9466 million for the twelve months ended Dec 31 2017 Represents the midpoint of guidance range and is current as of November 1 2018
Estimated Revenue by Geography
United States74
LATAM amp Other2
Canada21
Australia3
Page 6
Overview ndash Diverse and High Quality Customer Base
Top 10
36
9 No single customer accounted formore than 9 of revenues in 2017
The ten largest customers accountedfor approximately 36 of revenues in2017
Strong relationships with the majorityof US investor owned utilities and Canadian utilities ndash many going backfor decades
Quantarsquos Low Customer Concentration Is Unique Versus Peers
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
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Slide Number 14
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Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
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Slide Number 30
Slide Number 31
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Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
Revenue as reported by type of work geography contract and project type based on revenues of $9466 million for the twelve months ended Dec 31 2017 Represents the midpoint of guidance range and is current as of November 1 2018
Estimated Revenue by Geography
United States74
LATAM amp Other2
Canada21
Australia3
Page 6
Overview ndash Diverse and High Quality Customer Base
Top 10
36
9 No single customer accounted formore than 9 of revenues in 2017
The ten largest customers accountedfor approximately 36 of revenues in2017
Strong relationships with the majorityof US investor owned utilities and Canadian utilities ndash many going backfor decades
Quantarsquos Low Customer Concentration Is Unique Versus Peers
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 6
Overview ndash Diverse and High Quality Customer Base
Top 10
36
9 No single customer accounted formore than 9 of revenues in 2017
The ten largest customers accountedfor approximately 36 of revenues in2017
Strong relationships with the majorityof US investor owned utilities and Canadian utilities ndash many going backfor decades
Quantarsquos Low Customer Concentration Is Unique Versus Peers
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 7
Leading Construction-Led Infrastructure Solutions Provider
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
bull Grow the ldquobase businessrdquo and compliment with larger scale projects
bull Organic growth and strategic acquisitions
bull Pricing discipline and risk management
bull Focus on safe executionbull Cost managementbull Maintain financial strength
Time
Reve
nues
Coupled with Successful Implementation of Other Strategic Imperatives hellip
Larger Projects
For illustrative purposes
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 10
Strategic Acquisitions ndash Criteria and Rationale
Acquisition Strategic Rationale
bull Seek well respected entrepreneurial leadership with extensive history of operational excellencebull Only interested in companies that bring strategic value to Quanta and provide opportunity for 1+1=3 growth
opportunity over time
bull Brings leadership position in new geographybull Enhances presence and capabilities in an existing
geographybull Brings or enhances customer relationshipsbull Brings leadership position in adjacent or new
marketbull Brings unique service or technology that Quanta
can leverage to further differentiate its turnkey solution offering
Typical Deal Terms
bull Target 4x-5x EBITDA multiplebull Meaningful stock component as part of
consideration for operational and stakeholder alignment (Target 40 of consideration)
bull Company leadership stays on to run the businessbull Non-compete agreementsbull Stock locked up for period of time
Acquisitions Have and Will Continue to Play A Strategic Role in Differentiating Quanta in the Marketplace and Positioning the Company for Profitable Long-Term Growth
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 11
Differentiated Competitive Position ndash In the Sweet Spot
bull Quanta is the leading and largest construction-led infrastructure solutions provider in North America
bull Unmatched scope providing broader solutions to customersbull Unmatched scale as the largest employer of skilled workforce
in the industry ndash more than 41000 employeesbull Track record of safe executionbull Projects are getting larger and more complex customers
increasingly seeking cost certainty and performancebull Quanta has consistently been working on numerous large
projects simultaneously for the past seven-plus yearsbull Significant revenues from strategic relationships recurring work
and an increasing amount of negotiated work
Quanta vs Specialty Contractors Quanta vs Traditional EampCs
bull Our customers believe skilled construction labor is a finite resource and critical to overall project success where engineering and procurement are more commoditized
bull Quanta is construction-led and self-performs its projects ndashcontrols quality and execution
bull EampCs typically provide project management oversight and have limited self-perform construction capabilities
bull Quanta derives significant revenues from strategic relationships recurring work and an increasing amount of negotiated work
bull Price is often the primary driver of who wins traditional EampC projects
Est Large Project Capability
Bubble Size = Avg Market Cap
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Bubble Size = Avg Market Cap
LargerSmallerLargerSmaller
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 12
Differentiated Competitive Position ndash In the Sweet Spotbull Quanta is construction-led and is uniquely
positioned to meet customer needs versus both specialty contractors and traditional engineering and construction companies
bull Customers understand that skilled labor is critical to project success
bull Projects and multi-year programs are getting larger and more complex and customers are increasingly seeking comprehensive solutions
bull Demand for specialty construction resources is high and increasing but supply is limited
bull Quanta has the largest infrastructure specialty workforce in North America +41000 employees globally
bull Quanta has strategically invested in engineering and program management to provide true complete engineering procurement and construction (EPC) solutions
0
20
40
60
80
100
Est
Self
Perf
orm
Cap
abili
ty
Est Large Project Capability
Bubble Size = Avg Market Cap
LargerSmaller
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 13
Electric Power Infrastructure Services Segment Overview
$5303$4937 $4850
$5600
107
75 8393
2014 2015 2016 2017
Revenue Op Margin
(2)
(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment charge in 2015 and a $57 million asset impairment charge in 2016 Includes the impact of $661 million in 2015 and $548 million in 2016 of project losses Refer to appendix for non-GAAP reconciliation(3) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$3395 $3308 $3369$4032
$6716 $6313 $6658$7359
2014 2015 2016 2017
12-Mth Backlog (3) Total Backlog (3)
(2)
(1)
Differentiatorsbull Largest TampD solutions provider in
North Americabull Reputation and Track Recordbull Unmatched Solutions Scope and
Scalebull Safety Recordbull Manpower and Equipment
Resourcesbull Northwest Lineman College (NLC)bull Lazy Q Training Facility amp other
industry leading training initiativesbull Energized Servicesbull EPC Capabilities Across All Offeringsbull Infrastructure Capital Solutions
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 37
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Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 14
Power Grid Investment Drivers ndash Transmission amp Distribution
Market Drivers
bull An aging grid that requires repair upgrade and maintenancebull Utility spending continues to shift from generation to
transmission and distributionbull Favorable transmission regulation Energy Policy Act of lsquo05
NERC Reliability Standards possibly FERC Order 1000 over the long-term
bull More stringent reliability standards will require repairing lines and adding redundant capacity
bull Regional grid infrastructure is too congested to get lowest-cost power to consumers
bull Coal and nuclear generation retirements and switching to natural gas and renewable generation strains the grid
bull Existing and new renewable generation needs interconnection to the grid
bull Renewed distribution focus on reliability versus costsbull System hardening initiatives particularly in areas hard hit by
severe weather
bull Challenged economic conditions in Canada
bull Environmental and other regulatory scrutiny right of way acquisition permitting etc
bull Tepid load growthbull Economybull Energy efficiency initiatives
bull State renewable portfolio standards being evaluated in some states
bull Transmission ROE challenges due to low interest rate environment
bull Distribution returns lower than FERC transmission returnsbull Regulatory and consumer pressures on utilities against rising
power bills
Restraining Factors
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
$0
$5
$10
$15
$20
$25
$30
$35
Avg 08-11
Avg 12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
$0$5
$10$15$20$25$30$35$40$45
Avg08-11
Avg12-15
16 17 18 19 20 21 22
2015 Est 2016 Est 2017 Est 2018 Est
Page 15
Power Grid Investment Drivers ndash Transmission amp Distributionbull Utility spending continues to shift from generation to
transmission and distribution
bull Transmission and distribution spending continues to reach all time highs and forecasts point towards sustained robust spending
bull Previously delayed larger transmission projects are expected to move forward over next several years
Source The C3 Group 2018
Est North American Transmission Spending
Billi
ons
Billi
ons
Est North American Distribution CapEx
bull Sub-transmission interconnection
bull Technology innovations will continue to grow A focus on upgrades to modernize the grid will overlap with spending needed to address aging infrastructure
bull Opportunity for industrial driven load growth and overall load growth asif economic growth increases
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
2017 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
17599783395
17375430450
17116821481
17473265629
19719353886
18593206538
21049378470
23210018195
24651006483
28003750000
29530700000
30481300000
30509750000
31231850000
31138000000
Co-ops
3679033739
3613552751
2806195753
3044502916
2639012201
3360515403
3050612075
2834000972
3277074511
3309845256
3342943708
3376373145
3410136877
3444238245
3478680628
MuniGovt Owned
2525145025
2693819865
2624788344
2608815562
2682098477
2938725525
3183015391
3330273309
3454862656
3664198000
3769427295
3778921940
3483677493
3817389338
3817389338
Canadian
3324942988
3202431553
3726264949
4213182949
4228837570
4323705834
4106960884
3465854177
3159852215
3254697600
3381315300
3453964800
3380277450
3406223700
3406223700
Total NA 2017 Market
27128905147
26885234619
26274070528
27339767056
29269302134
29216153300
31389966819
32840146653
34542795864
38232490856
40024386303
41090559885
40783841819
41899701283
41840293665
2018 Forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOU
$ 17601940318
$ 17378057372
$ 17118818686
$ 17473265629
$ 19702006413
$ 18596979761
$ 21051535393
$ 23214895165
$ 24693053372
$ 26546511219
$ 29925000000
$ 31173000000
$ 31920000000
$ 32301000000
$ 32791000000
Co-ops
$ 3576403094
$ 3484478898
$ 2969338874
$ 3019145649
$ 2842181898
$ 3006544482
$ 3156819383
$ 3028430234
$ 3335790674
$ 3436855395
$ 3635224716
$ 3686263271
$ 3738018408
$ 3790500186
$ 3843718809
MuniGovt Owned
$ 2338855743
$ 2901678730
$ 2565696289
$ 2612081989
$ 2666494880
$ 2954021381
$ 3096210072
$ 3083219885
$ 3536145766
$ 3631876811
$ 3679659274
$ 3682074494
$ 3772845835
$ 3747349792
$ 3923400815
Canadian
$ 3769527206
$ 3686062758
$ 4206960725
$ 4791721858
$ 4816905342
$ 4886150301
$ 4630720859
$ 4040685258
$ 3689938357
$ 3924850043
$ 3652102575
$ 4013475840
$ 4169666160
$ 4235362065
$ 4317663570
Total NA 2017 Market
$ 27286726360
$ 27450277758
$ 26860814573
$ 27896215125
$ 30027588534
$ 29443695925
$ 31935285707
$ 33367230543
$ 35254928169
$ 37540093468
$ 40891986565
$ 42554813605
$ 43600530402
$ 44074212043
$ 44875783194
From August 2015 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$175
$173
$171
$174
$197
$186
$210
$226
$244
$244
$247
$249
$250
US Co-ops
$27
$29
$27
$29
$35
$41
$34
$39
$40
$40
$41
$42
$42
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$32
$33
Total US
$226
$227
$224
$231
$260
$256
$273
$295
$314
$316
$320
$323
$325
Canada
$33
$33
$34
$39
$38
$39
$39
$38
$41
$41
$42
$43
$43
Total
$260
$261
$259
$269
$298
$294
$312
$333
$354
$357
$362
$365
$368
15 vs 16
$00
$01
$02
$04
($01)
($04)
$06
$04
$08
$21
$19
$28
$26
From August 2016 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$258
$270
$271
$281
$281
US Co-ops
$27
$29
$27
$29
$31
$33
$38
$39
$40
$41
$41
$42
$43
US Muni
$25
$26
$26
$28
$28
$29
$29
$30
$31
$31
$32
$33
$33
Total US
$228
$229
$224
$232
$256
$248
$277
$301
$329
$342
$344
$356
$357
Canada
$32
$32
$37
$41
$41
$42
$41
$36
$33
$36
$37
$37
$37
Total
$260
$261
$261
$273
$297
$290
$318
$337
$362
$378
$381
$393
$394
From September 2017 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$210
$232
$247
$280
$295
$305
$305
$312
$311
US Co-ops
$37
$36
$28
$30
$26
$34
$31
$28
$33
$33
$33
$34
$34
$34
$35
US Muni
$25
$27
$26
$26
$27
$29
$32
$33
$35
$37
$38
$38
$35
$38
$38
Total US
$238
$237
$225
$231
$250
$249
$273
$294
$314
$350
$366
$376
$374
$385
$384
Canada
$33
$32
$37
$42
$42
$43
$41
$35
$32
$33
$34
$35
$34
$34
$34
Total
$271
$269
$263
$273
$293
$292
$314
$328
$345
$382
$400
$411
$408
$419
$418
From September 2018 Report
North American Electric Distribution Spending
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US IOUs
$176
$174
$171
$175
$197
$186
$211
$232
$247
$265
$299
$312
$319
$323
$328
US Co-ops
$36
$35
$30
$30
$28
$30
$32
$30
$33
$34
$36
$37
$37
$38
$38
US Muni
$23
$29
$26
$26
$27
$30
$31
$31
$35
$36
$37
$37
$38
$37
$39
Total US
$235
$238
$227
$231
$252
$246
$273
$293
$316
$336
$372
$385
$394
$398
$406
Canada
$38
$37
$42
$48
$48
$49
$46
$40
$37
$39
$37
$40
$42
$42
$43
Total
$273
$275
$269
$279
$300
$294
$319
$334
$353
$375
$409
$426
$436
$441
$449
2015 vs 2016 vs 2017 vs 2018
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
$262
$264
$269
$274
Avg 12-15
$309
$311
$307
$312
16
$354
$362
$345
$353
17
$357
$378
$382
$375
18
$362
$381
$400
$409
19
$365
$393
$411
$426
20
$368
$394
$408
$436
21
$419
$441
22
$418
$449
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
08-11
12-15
16-20
US Avg Spend
129
218
221
Canada Avg Spend
41
72
57
North America Avg Spend
170
289
278
Avg 08-11
Avg 12-15
16
17
18
19
20
North America T Spend
262
309
354
357
362
365
368
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total FERC Reporting Companies
93
92
109
115
141
173
194
184
179
182
169
161
157
US Total Gov + Coops
14
15
18
22
22
30
32
37
37
39
39
32
30
Total US Non-Traditional Utilities
05
09
13
11
22
22
09
05
07
14
19
18
21
Total US
112
116
141
147
185
224
235
226
224
235
227
211
207
Total Canada
36
38
45
46
61
79
84
64
74
68
55
46
44
Total North American Market
148
154
185
193
246
303
319
290
298
303
282
256
252
2014 US Only Forecast
104
116
136
142
191
229
222
229
222
226
219
203
204
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total North America - 2015
1484
1545
1852
1929
2457
3033
3185
2900
2983
3028
2824
2561
2515
Total North America - 2016
1520
1580
1830
2100
2440
2940
3060
2980
3090
3300
3030
2950
2890
Total North America - 2017
1516
1601
1772
1888
2388
2865
3039
3019
3017
3290
3226
3162
3012
2822
2722
Total North America - 2018
1523
1607
1776
1904
2404
2943
3033
2996
3051
3070
3164
3089
2960
2974
2989
2015 Est
2016 Est
2017 Est
2018 Est
Avg 08-11
170
176
169
170
Avg 12-15
289
286
283
284
16
298
309
302
305
17
303
330
329
307
18
282
303
323
316
19
256
295
316
309
20
252
289
301
296
21
2822
2974
22
2722
2989
Estimated North American Transmission Spending
Page 16
Northwest Lineman College
bull Northwest Lineman College (NLC) is a for profit nationally accredited and industry leading training program providing safety and certification training to pre-apprentices apprentices journey level lineworkers crew leaders substation technicians and system operators NLC was founded in 1993 NLC has four campuses across the US (Idaho California Florida and Texas)
Overview
bull Tight labor market for lineman and other skilled employees Recruiting training and maintaining people is critical for us and for our customers
bull NLCrsquos world class program should elevate and expedite Quantarsquos training and development efforts which will benefit our customers the industry and Quanta
bull Curricula developed for communications and natural gas distribution services and ability to develop other curricula for services Quanta provides
bull Complements Quantarsquos other initiatives underway to address workforce needs
bull Lazy Q Training Facilitybull Veteran Recruiting and Developmentbull Quanta-Sam Houston State University Partnership
Strategic Rationale
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
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Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 17
Oil amp Gas Infrastructure Services Segment Overview
$2445 $2635 $2801
$3867
83
54 53 48
2014 2015 2016 2017Revenue Op Margin
(1) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(2) Includes $73 million of project losses Refer to appendix for non-GAAP reconciliation(3) Includes a $19 million charge to expense associated with a construction barge Refer to appendix for non-GAAP reconciliation(4) Refer to appendix for non-GAAP reconciliation
Financial SnapshotFor the years ended Dec 31 ($ in millions)
$1825 $1901$2484 $2414$2521
$3074 $3092
$3819
2014 2015 2016 2017
12-Mth Backlog (4) Total Backlog (4)
(2)
(1)
Differentiatorsbull Largest Pipeline Solutions Provider
in North Americabull Reputation amp Track Recordbull Safe Project Executionbull Turnkey Solutionsbull EPC Capabilitiesbull Critical Path Industrial Servicesbull In-House Mechanized Weldingbull In-House Pigging Technologybull Pipe Logistics Managementbull Infrastructure Capital Solutions
(3)
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
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Slide Number 11
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Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
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Slide Number 24
Slide Number 25
Slide Number 26
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Slide Number 36
Slide Number 37
Slide Number 38
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Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 18
Oil amp Gas Infrastructure Investment Drivers
bull Production of shale natural gas oil and natural gas liquids has grown dramatically and is expected to remain at high levels forthe foreseeable future
bull Much of these resources are in areas that have not been traditional hydrocarbon fuel sources and do not have adequate infrastructure in place to gather store process and transport product
bull Canadian oil production lacks adequate takeaway pipeline infrastructurebull Economics of pipeline transportation is increasingly attractive versus rail in a lower oil price environmentbull Pipeline construction capacity is more limited in Canada versus the US and construction capacity constraints could be significant
bull It will take many years and significant energy infrastructure investment to harvest these resources
Shale Gas amp Tight Oil Plays Drive US Natural Gas Production
2000-2050 (trillion cubic feet)
Source EIA Annual Energy Outlook 2018
Tight Oil Drives US Oil Production2000-2050 (millions of barrels per day)
Source EIA Annual Energy Outlook 2018
Canadian Oil Sands amp Conventional Oil Production(Millions of barrels per day)
Source Canadian Assoc of Petroleum Producers
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 17
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Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
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Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 19
Oil amp Gas Infrastructure Investment Drivers
bull Need for pipeline and related infrastructure driven by the significant increase in North American unconventional natural gas and oil production ndash not commodity prices
bull Takeaway pipelines have not been built fast enough to keep pace with hydrocarbon production ndash significant pipeline development needed
bull Large pipeline construction industry capacity is currently tight but could get significantly strained over the next several years
North American Pipeline ForecastProbability Weighted
bull Quanta is the largest pipeline construction company in North America
bull This positions Quanta to provide significant large diameter pipe construction capacity to the industry while remaining active in select shales
bull We are ready to assist our customers in meeting their development goals in what could be a resource challenged environment
In B
illio
ns
Quanta Is the Largest Pipeline Construction Company in North America
Stifel expects upward revisions to Tier 1 amp 2 projects in out years
x Tier 1 amp 2 x Tier 3
Existing Takeaway Capacity from Western Canadavs Supply Forecast
Source Canadian Assoc of Petroleum Producers
Mill
ion
barr
els
day
Capacity shown can be reduced by any extraordinary and temporary operating and physical constraints
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 3
Slide Number 4
Slide Number 5
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Slide Number 7
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Slide Number 14
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Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 20
Oil amp Gas Infrastructure Investment Drivers
Natural Gas Distribution amp Pipeline Integritybull US pipeline infrastructure is getting older and much of it was
installed before 1970bull Local Distribution Companies (LDCs) increasing spend on pipe
inspection and replacementbull Regulations push expanding inspection programs and
accelerating distribution pipeline replacement work bull Long timelines for some replacement plans (decades) will push
spend accelerationbull State regulators establishing cost recovery mechanisms to
accelerate replacement programs
Significant Inventory Remains for Replacement
Diversified and Expanding Solutions to Capture Midstream and Downstream Industry Spend
Downstream Industrial Services
Projected North American Downstream MaintenanceSpending 2017 ndash 2021 ~ $113 Billion
Refinery34
PetChem42
Gas Proc16
LNG8
Source Douglas-Westwood
bull Substantial installed base of industrial facilities operating in a highly corrosive environment
bull As plants age critical process unitsrsquo risk of failure increases significantly requiring consistent and recurring maintenance investment
bull Deferrals and other factors yield expectations for significant turnaround season over coming years ndash reversion to mean activity levels
bull Stronghold gives Quanta a significant presence in downstream services and a strong platform for growth
(1) PHMSA pipe inventory reports 2011 - 2015
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 21
Telecom Infrastructure Services Overview
To be an industry leading and true EPC contractor providing comprehensive communications infrastructure solutions to customers in the United States Canada and select markets in Latin America
Goal
Diverse Existing amp Target Customer BaseMarkets Served
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 22
Telecom Infrastructure Investment Drivers
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Connect America Fund - rural fiber build-out
bull Federal government funded FirstNet - national wireless network for first responders
United States
bull Backbone and last mile fiber (behind relative to the US)
bull Telco gigabit fiber to the home deployment programs
bull Cable MSOs deploying DOCSIS 31
bull Upcoming - 5G wireless and fiber backhaul
bull Ongoing 4G wireless network optimization
bull Federal government infrastructure initiatives generally positive
Canada
bull Significantly behind North America in both wireline and wireless connectivity
bull However demand for connectivity media and data intensive services is strong
bull Fiber and backhaul networks significantly behind North America
bull Primarily 3G wireless some 4G wireless (country dependent)
bull Various governments have infrastructure expansion initiatives
bull Concession and P3 opportunities
bull Connectivity for quality of life social and commercial reasons
Latin America
Geographic Diversity Provides Exposure to Multiple Market Drivers
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 23
Telecom Infrastructure Services Overview
Fiber Builds
Wireless Deployment
Make Ready Services
Civil Construction
Engineering Design
Material Management
EPC
Wireless Wireline
United States
Wireless Wireline
Canada
Wireless Wireline
Latin America
Quantarsquos Capabilities
= Current Service= In Development
Comprehensive Infrastructure Solutions Offered On A Turnkey Discrete Service or EPC Basis
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
bull Proven greenfield expansion model in Latin America ndash US should be less difficult
Leverage existing US field operations people equipment and property
bull Select strategic acquisitions may play a role but NOT a roll-up approach
Provide wireline and wireless services - heavier on wireline
bull Increasing convergence of wireless and wireline due fiber requirements of both
Project centric nimble approach versus MSA focused EPC services to differentiate
bull Less capital intensive with better margin opportunity
GOAL
STRATEGY
STRATEGY
STRATEGY
STRATEGY
To be the leading communications infrastructure solutions provider in the markets we serve
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 25
Engineer Procure Construct (EPC) Is A Differentiatorbull Quanta has a long history in the EPC business and is increasingly performing select projects on an EPC basisbull Customersrsquo capital programs are at historic levels and growing Projects are getting larger and more complexbull Evolution of regulatory demands competition and alternative pricing models
bull Many customers have limited internal resources and expertise to manage these dynamics and are turning to Quanta for solutions
bull Project cost certainty becoming increasingly important
bull We are enhancing initiatives to ensure we have a scalable comprehensive enterprise-wide capability for EPC projects that is consistently executed across all segments and geographies
bull EPC projects are a meaningful contributor to our current backlog and provide significant opportunity for future growth
Integrated Services
Construction amp Installation
Assessment Planning amp
Development
Engineering amp Design
Procurement Operation and Maintenance
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 26
What is Infrastructure Solutions
Infrastructure Solutions Represent Strategic Partnerships with Customers and Capital Partners
bull Public private partnerships (P3)bull Concessionsbull Build Own Operate or Transfer (BOOT)bull Build to Suit (BTS) arrangements
These solutions are a growth engine for each of our segments and geographies and a core component of our strategic imperative to deliver differentiated
solutions to our customers
Encompasses
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 27
Infrastructure Solutions Drivers
bull Provide transparency to a project shape design constructability risk allocation and overall project structure
bull Manages risk that yields more informed EPC project decisions
bull Improves success rate of both winning the engagement and successful execution
bull Where appropriate we invest alongside our partners
bull Significant capital needs to fund substantial infrastructure needs
bull Utilization of concessions public private partnerships (P3) and private infrastructure partnerships to fund and attract high-quality entities for complex projects
bull Changes in regulation (such as FERC Order 1000)
bull New entrants together with high interest and availability of investor infrastructure investment capital
Quanta Is A True Partner
bull Quanta increasingly sought as a partner for our execution capabilities the need for price certainty and our financial strength
bull Projects are larger more complex greater scope Typically under lump-sum turnkey arrangements which create greater opportunities and risks for Quanta
bull Successful Infrastructure Solutions and project execution track record
Quanta Sought for Executionamp Track Record
Market Structure amp Projects Getting More Complex
A Combination of Drivers are Occurring that Create Demand and Opportunity for Our Infrastructure Solutions
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 28
Fully Integrated Solutions Based Provider
Capitalbull Determine capital structurebull Source capitalbull Quanta minority direct
investmentbull First Infrastructure Capital
Advisors
PartnershipsPartner withbull Customersbull Equity Capital
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
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Slide Number 7
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
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Slide Number 7
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Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
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Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
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Slide Number 31
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
(2) Guidance as of Nov1 2018 and represents the midpoint of guidance range
(2)
$7747
(2) (2)
$9466
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
$7572
(3) Negatively impacted by project losses of $734 million ($473 million net of tax) or $021 per diluted share primarily related to an individual power plant project
$7651
(4) Negatively impacted by project losses of $548 million ($334 million net of tax) or $024 per diluted share related to an individual power plant project
Strong Revenue and Earnings Per Share Recovery
$11000
$585
$422
$521
$598
$826$778
$526$580
$707
$891
2014 2015 2016 2017 2018Est
EBITDA amp Adjusted EBITDA (1)
EBITDA Adjusted EBITDA
(2)
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
$2445$2635
$2801
$3867
83
54 5348
2014 2015 2016 2017 2018 EstRevenue Op Margin
(4)
(5)(4)
(5)(6)
Page 31
Recent Financial Performance amp 2018 ExpectationsFor the Years Ended December 31
($ in millions)Electric Power
$5303
$4937 $4850
$5600
107
7583
93
2014 2015 2016 2017 2018 Est
Revenue Op Margin(1) Operating margin excludes a $1025 million charge to cost of services for long-term contract receivable in 2014 Refer to appendix for non-GAAP reconciliation(2) Excludes a $66 million property and equipment impairment charge Includes the impact of $661 million of project losses Refer to appendix for non-GAAP reconciliation(3) Excludes a $57 million asset impairment charge Includes the impact of $548 million of project losses Refer to appendix for non-GAAP reconciliation
(1)
(2)(3)
f Est $635 - $640 Billion
Est operating incomemargins of approx 100
Guidance Commentary (7) ($ in millions)Oil amp Gas Infrastructure
(4) Excludes a $388 million expense associated with an arbitration decision Refer to appendix for non-GAAP reconciliation(5) Includes $73 million of project losses(6) Includes a $19 million charge to expense associated with a construction barge(7) Guidance commentary as of Nov 1 2018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
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Slide Number 16
Slide Number 17
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Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
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Slide Number 30
Slide Number 31
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Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
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Slide Number 14
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Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
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Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 33
Strong Balance Sheet to Support Growth Strategies
$191 $129 $112 $138 $114
$920 $1036 $1153$729
$407
123114 123115 123116 123117 93018
Cash Credit Facility (Unused)
($ in millions) 12312014 12312015 12312016 12312017 9302018
(1) Liquidity includes cash and cash equivalents and availability under Quantarsquos senior secured credit facility as described in our Form 10-Q for the third quarter of 2018
$521
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
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Slide Number 10
Slide Number 11
Slide Number 12
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Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
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Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 34
Historical Cash Flow Generation
$29
$445
$200$151
2014 2015 2016 2017
Cash Flow from Continuing Operations
$262
$629
$390 $372
2014 2015 2016 2017
(1) Defined as net cash provided by operating activities from continuing operations plus proceeds from sale of property and equipment less additions of property and equipment Refer to appendix for non-GAAP reconciliation
($ in millions)
For the Years Ending December 31
Working Capital Demand Influence OnCash Flow Generation
Free Cash Flow from Continuing Operations (1)
($ in millions)
For the Years Ending December 31
Revenue change from the prior year hellip
Results in working capital impacts of hellip
Results in cash flow impact of hellip
Scenario A Scenario B Scenario C
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
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Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
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Slide Number 30
Slide Number 31
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Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 35
Acquired Approx $21 Billion 38 of Quanta Common Stock
Completed - $500 Million Share Repurchase Authorization (2015)bull Acquired approximately 174 million shares for total cost of $500
completed in April 2016bull Acquired 351 million shares at $2136 per share
bull $500 million for opportunistic repurchases through Feb 28 2017bull Acquired $450 million 192 million shares retired
Completed - $300 Million Share Repurchase Authorization (2018)bull Acquired 86 million shares for total cost of $300 million
Announced (Sept lsquo18) ndash New $500 Million Share Repurchase Authorization through June lsquo21bull Acquired approximately 17 million shares for total cost of $539
million
$2197
$1542
0
25
50
75
100
125
150
175
200
225
$0000
$500000
$1000000
$1500000
$2000000
$2500000
$3000000
2014 2018E
Net Income Required to Generate $001 In EPS
Avg Dil Shs Out
Earnings Power Improvement
$ in
Tho
usan
ds
Shares in Millions
Reflects Confidence and Commitment to Generating Stockholder Value
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
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Slide Number 7
Slide Number 8
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Slide Number 11
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Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 36
Opportunistic amp Disciplined Capital Allocation
Capital Deployment Preference(Amounts in millions)
bull Working Capitalbull Capital Expendituresbull Acquisitionsbull Investmentsbull Return of Capital
bull Generally in sync with preference however hellip
bull Financial strength provides the ability to be opportunistic
bull Flexible and strategic capital allocation is a competitive advantage
Capital Deployment Posture
2014 ndash 2017 Sources amp Uses of Cash
Sources
Cash Flow fromOperations
DivestitureProceeds
Borrowings
$3172
$1653
$842
$677
Uses
StockRepurchase
CAPEX amp OtherNet
Acquisitions Net
Other
$1750
$828
$805
$140$3523
52
27
21
50
24
23
3
Amounts reflect the retrospective application of a recent accounting pronouncement related to the classification of tax withholding payments for share-based compensation
Financial Strength Allows for Flexible and Strategic Capital Allocation ndash A Competitive Advantage
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 37
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Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 37
Strong Foundation For Growth amp Improved Profitability
Multi-Year Growth Opportunities
Innovative Industry Leading Solutions
Scale amp Scope
Financial Strength
Safety amp Operational Excellence
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
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Slide Number 24
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Slide Number 31
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 38
QuantaServicesIR
QuantaIR
Connect With Quanta Services Investor Relations
Corporate Office2800 Post Oak Blvd Suite 2600Houston TX 77056713-629-7600wwwquantaservicescom
Investor ContactKip Rupp CFAVice President ndash Investor Relations713-341-7260investorsquantaservicescom
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 39
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Stock
2014 2015 2016 2017 2018 2018Reconciliation of adjusted net income from continuing operations attributable to common stockNet income from continuing operations attributable to common stock (GAAP as reported) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Adjustments
Asset impairment charges - 58451 7964 58057 3300 3300 Severance and restructuring charges - - 6352 - 1300 1300 Acquisition and integration costs 14754 7966 3053 10579 16300 16300 Impact of Tax Cut and Jobs Act - - - (70129) (5000) (5000) Tax benefits primarily related to entity restructuring and recapitalization efforts - - - (18224) 1800 1800 Impact of income tax contingency releases (8099) - (20488) (7223) (5900) (5900) Change in fair value of contingent consideration liabilities - - - (5171) (7700) (7700) Impact of tax benefit from realization of previously unrecognized deferred tax asset - (4228) - - Impact of Alberta tax law change - 4982 - - Provision for long-term contract receivable 102460 - - - Arbitration expense 38848 - -Impact of sale of equity ownership in Howard Energy - - -Income tax impact of adjustments 55935 (16186) (3982) (23522) (5900) (5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments 361252 171271 191624 259345 345800 361300
Non-cash stock based compensation 37449 36939 41134 46448 52400 52400 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Income tax impact of non-cash adjustments (26453) (25817) (26183) (28877) (25000) (25000)
Adjusted net income from continuing operations attributable to common stock 406505$ 217241$ 238260$ 309121$ 417000$ 432500$ Weighted average sharesWeighted average shares outstanding for diluted earnings per share 219690 195120 157288 157155 154200 154200 Weighted average shares outstanding for adjusted diluted earnings per share 219690 195120 157288 157155 154200 154200 Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stockDiluted earnings per share from continuing operations attributable to common stock 122$ 062$ 126$ 200$ 225$ 235$ Adjusted diluted earnings per share from continuing operations attributable to common stock 185$ 111$ 151$ 197$ 270$ 280$
Estimated Guidance Range
For the Years Ended December 31
(in thousands except per share information)(Unaudited)
As of Nov 1 2018
Recast of Adjusted Diluted
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
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Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Quanta Services Inc and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Diluted Earnings Per Share from Continuing Operations
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Estimated Guidance Range
2013
2014
2015
2016
2017
2018
2018
Reconciliation of adjusted net income from continuing operations attributable to common stock
Net income from continuing operations attributable to common stock (GAAP as reported)
$ 372057
$ 269224
$ 120286
$ 198725
$ 314978
$ 347600
$ 363100
Adjustments
Asset impairment charges
-
-
58451
7964
58057
3300
3300
Severance and restructuring charges
-
-
-
6352
- 0
1300
1300
Acquisition and integration costs
8145
14754
7966
3053
10579
16300
16300
Impact of Tax Cut and Jobs Act
- 0
- 0
- 0
(70129)
(5000)
(5000)
Tax benefits primarily related to entity restructuring and recapitalization efforts
- 0
- 0
- 0
(18224)
1800
1800
Impact of income tax contingency releases
(9935)
(8099)
- 0
(20488)
(7223)
(5900)
(5900)
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Impact of tax benefit from realization of previously unrecognized deferred tax asset
-
-
(4228)
-
- 0
Impact of Alberta tax law change
-
-
4982
-
- 0
Provision for long-term contract receivable
-
102460
-
-
- 0
Arbitration expense
-
38848
-
-
Impact of sale of equity ownership in Howard Energy
(112744)
-
-
-
Income tax impact of adjustments
39836
55935
(16186)
(3982)
(23522)
(5900)
(5900)
Adjusted net income from continuing operations attributable to common stock before certain non-cash adjustments
297359
361252
171271
191624
259345
345800
361300
Non-cash stock based compensation
34381
37449
36939
41134
46448
52400
52400
Amortization of intangible assets
25865
34257
34848
31685
32205
43800
43800
Income tax impact of non-cash adjustments
(22715)
(26453)
(25817)
(26183)
(28877)
(25000)
(25000)
Adjusted net income from continuing operations attributable to common stock
$ 334890
$ 406505
$ 217241
$ 238260
$ 309121
$ 417000
$ 432500
Weighted average shares
Weighted average shares outstanding for diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Weighted average shares outstanding for adjusted diluted earnings per share
214978
219690
195120
157288
157155
154200
154200
Diluted earnings per share from continuing operations attributable to common stock and adjusted diluted earnings per share from continuing operations attributable to common stock
Diluted earnings per share from continuing operations attributable to common stock
$ 173
$ 122
$ 062
$ 126
$ 200
$ 225
$ 235
Adjusted diluted earnings per share from continuing operations attributable to common stock
$ 156
$ 185
$ 111
$ 151
$ 197
$ 270
$ 280
Page 40
Reconciliation of EBITDA and Adjusted EBITDA
2014 2015 2016 2017 2018 2018
Net income attributable to common stock (as defined by GAAP) 269224$ 120286$ 198725$ 314978$ 347600$ 363100$ Interest expense 4765 8024 14887 20946 34300 34300 Interest income (3736) (1493) (2423) (832) (1300) (1300) Provision for income taxes 139007 97472 107246 35532 137300 145000 Amortization of intangible assets 34257 34848 31685 32205 43800 43800 Equity in (earnings) losses of unconsolidated affiliates 332 466 979 10945 48000 50000
For the Years Ended December 31(in thousands except per share information)
(Unaudited)
Estimated Guidance RangeAs of Nov 1 2018
Sheet1
Sheet2
Sheet3
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
For the Years Ended December 31
(in thousands except per share information)
(Unaudited)
As of Nov 1 2018
Three
Estimated Guidance Range
2014
2015
2016
2017
43190
2018
2018
Net income attributable to common stock (as defined by GAAP)
$ 269224
$ 120286
$ 198725
$ 314978
$ 37614
$ 347600
$ 363100
Interest expense
4765
8024
14887
20946
6778
34300
34300
Interest income
(3736)
(1493)
(2423)
(832)
(146)
(1300)
(1300)
Provision for income taxes
139007
97472
107246
35532
18003
137300
145000
Amortization of intangible assets
34257
34848
31685
32205
10405
43800
43800
Equity in (earnings) losses of unconsolidated affiliates
332
466
979
10945
13343
48000
50000
EBITA
$ 443849
$ 259603
$ 351099
$ 413774
$ 85997
$ 609700
$ 634900
Depreciation expense
141106
162845
170240
183808
48719
203300
203300
EBITDA
$ 584955
$ 422448
$ 521339
$ 597582
$ 134716
$ 813000
$ 838200
Non-cash stock-based compensation
37449
36939
41134
46448
14687
52400
52400
Acquisition and integration costs
14754
7966
3053
10579
7178
16300
16300
Asset impairment charges
- 0
58451
7964
58057
3300
3300
Change in fair value of contingent consideration liabilities
- 0
- 0
- 0
(5171)
(7700)
(7700)
Severance and restructuring charges
- 0
- 0
6352
- 0
1300
1300
Provision for long-term contract receivable
102460
- 0
- 0
- 0
- 0
- 0
- 0
Arbitration expense
38848
- 0
- 0
- 0
- 0
- 0
- 0
Adjusted EBITDA
$ 778466
$ 525804
$ 579842
$ 707495
$ 156581
$ 878600
$ 903800
Page 41
Reconciliation of Electric Power and Oil amp Gas Infrastructure Services Segments Operating Income As Adjusted
Amounts in millions except percentagesOil amp Gas
Infrastructure12312014 12312015 12312016 12312014
Revenues 53027$ 49373$ 48505$ 24446$
Operating Income (as reported) 4630 3623 3957 1628
Addback Provisions for long term contract receivable 1025 - - - Arbitration expense - - - 388 Asset impairment charge - 66 57 -
Operating Income (as adjusted) 5655$ 3689$ 4014$ 2016$
Operating income margin (as reported) 87 73 82 67Operating income margin (as adjusted) 107 75 83 83
Electric Power
(1) From continuing operations Refer to appendix for non-GAAP reconciliation
Sheet1
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Adjusted Operating Income Margin
$ in millions
Support for slide 23
Amounts in millions except percentages
Electric Power
Oil amp Gas Infrastructure
123114
123115
123116
123114
Revenues
$ 53027
$ 49373
$ 48505
$ 24446
Operating Income (as reported)
4630
3623
3957
1628
Addback
Provisions for long term contract receivable
1025
-0
-0
-0
Arbitration expense
-0
-0
-0
388
Asset impairment charge
-0
66
57
-0
Operating Income (as adjusted)
$ 5655
$ 3689
$ 4014
$ 2016
Operating income margin (as reported)
87
73
82
67
Operating income margin (as adjusted)
107
75
83
83
Page 42
Reconciliation of Backlog to Remaining Performance Obligations
12-Month TotalElectric Power Infrastructure Services
Remaining performance obligations 20991$ 30741$ Estimated orders under MSAs and short-term non-fixed price contracts 21290 48427 Backlog 42281 79168
Oil and Gas Infrastructure ServicesRemaining performance obligations 19932 22179 Estimated orders under MSAs and short-term non-fixed price contracts 12629 20802 Backlog 32561 42981
TotalRemaining performance obligations 40923 52920 Estimated orders under MSAs and short-term non-fixed price contracts 33919 69229 Backlog 74842$ 122149$
Sept 30 2018
Free Cash Flow from Cont Ops
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Slide Number 28
Slide Number 29
Slide Number 30
Slide Number 31
Slide Number 32
Slide Number 33
Slide Number 34
Slide Number 35
Slide Number 36
Slide Number 37
Slide Number 38
Slide Number 39
Slide Number 40
Slide Number 41
Slide Number 42
Slide Number 43
Slide Number 44
Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
2014
2015
2016
2017
Sept 30 2018
Source
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
12-Month
Total
(Support Cash Flow Statement)
Electric Power Infrastructure Services
(Support Cash Flow Statement)
Remaining performance obligations
$ 20991
$ 30741
(Support Cash Flow Statement)
Estimated orders under MSAs and short-term non-fixed price contracts
21290
48427
(Support Cash Flow Statement)
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
42281
79168
(Recalculation)
Oil and Gas Infrastructure Services
Remaining performance obligations
19932
22179
Estimated orders under MSAs and short-term non-fixed price contracts
12629
20802
Backlog
-0
-0
-0
-0
-0
-0
-0
-0
32561
42981
Total
Remaining performance obligations
40923
52920
Estimated orders under MSAs and short-term non-fixed price contracts
33919
69229
Backlog
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ -0
$ 74842
$ 122149
Page 43
Reconciliation of Free Cash Flow
2014 2015 2016 2017Net Cash Provided by Operating Activities of Continuing Operations 261439 627762 390749 371891 Less Net Capital ExpendituresAdditions of Property and Equipment (247216) (209968) (212555) (244651) Proceeds from Sale of Property and Equipment 14448 26178 21975 23348 Net Capital Expenditures (232768) (183790) (190580) (221303)
Free Cash Flow 28671 443972 200169 150588
Free Cash Flow from Cont Ops
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
Slide Number 1
Slide Number 2
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Slide Number 9
Slide Number 10
Slide Number 11
Slide Number 12
Slide Number 13
Slide Number 14
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Slide Number 16
Slide Number 17
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Slide Number 19
Slide Number 20
Slide Number 21
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
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Slide Number 37
Slide Number 38
Slide Number 39
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Slide Number 41
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Slide Number 45
Free Cash Flow From Continuing Operations
Source
2014
2015
2016
2017
(Support Cash Flow Statement)
Net Cash Provided by Operating Activities of Continuing Operations
261439
627762
390749
371891
(Support Cash Flow Statement)
Less Net Capital Expenditures
(Support Cash Flow Statement)
Additions of Property and Equipment
(247216)
(209968)
(212555)
(244651)
(Support Cash Flow Statement)
Proceeds from Sale of Property and Equipment
14448
26178
21975
23348
(Recalculation)
Net Capital Expenditures
(232768)
(183790)
(190580)
(221303)
(Recalculation)
Free Cash Flow
28671
443972
200169
150588
Page 44
Forward Looking Statement DisclaimerThis presentation (and oral statements regarding the subject matter of this presentation) includes ldquoforward-looking statementsrdquo intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 These statements reflect assumptions expectations projections intentions or beliefs about future events and use words such as anticipate estimate project forecast may will should could expect believe plan intend and other words of similar meaning You can identify these statements by the fact that they do not relate strictly to historical or current facts In particular these include but are not limited to statements relating to the following
bull Projected or estimated revenues net income earnings per share attributable to common stock EBITDA backlog margins capital expenditures weighted average shares outstanding tax rates or other financial or operating resultsbull Our business or financial outlook growth trends or opportunities in particular marketsbull The potential benefits from acquisitions and investmentsbull The expected financial and operational performance of acquired businessesbull The future demand for and availability of labor resources in the industries we servebull Future capital allocation initiatives including the amount timing and strategy with respect to any future stock repurchasesbull Our ability to deliver increased value and return capital to stockholders bull The strategic use of our balance sheetbull The expected value of contracts or intended contracts with customersbull The scope services term and results of any projects awarded or expected to be awarded for services to be provided by usbull The anticipated commencement and completion dates for any projects awardedbull The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil natural gas and natural gas liquids prices and their impact on our business or the demand for our services bull The impact of existing or potential legislation including the Tax Cuts and Jobs Act of 2017 bull Potential opportunities that may be indicated by bidding activity or discussions with customersbull The expected outcome of pending or threatened litigation bull Beliefs and assumptions about the collectability of receivablesbull The business plans or financial condition of our customersbull Our plans and strategies bull The current economic and regulatory conditions and trends in the industries we serve bull Possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties and bull Other statements reflecting expectations intentions assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts
Although our management believes that the expectations reflected in such forward-looking statements are reasonable it can give no assurance that such expectations will prove to be correct These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks uncertainties and assumptions that are difficult to predict or beyond our control These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made We caution you that actual outcomes and results may differ materially from what is expressed implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong Forward-looking statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties including the following
bull Market conditionsbull The effects of industry economic financial or political conditions outside our control including weakness in capital marketsbull Quarterly variations in our operating resultsbull Trends and growth opportunities in relevant marketsbull The cost of borrowing availability of credit and cash fluctuations in the price and volume of our common stock debt covenant compliance interest rate fluctuations and other factors affecting our financing and investing activitiesbull Delays reductions in scope or cancellations of anticipated pending or existing projects including as a result of weather regulatory or permitting issues environmental processes project performance issues claimed force majeure events protests or other
political activity legal challenges or our customers capital constraintsbull The successful negotiation execution performance and completion of anticipated pending and existing contracts including the ability to obtain future project awardsbull Our ability to retain key personnel and qualified employees
Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
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Page 45
Forward Looking Statement Disclaimerbull Our ability to attract or the potential shortage of skilled labor bull Our dependence on fixed price contracts and the potential to incur losses with respect to the contractsbull Estimates relating to our use of percentage-of-completion accountingbull Adverse weatherbull Our ability to generate internal growthbull Competition in our business including our ability to effectively compete for new projects and market sharebull The effect of natural gas natural gas liquids and oil prices on our operations and growth opportunities and on
our customersrsquo capital programs and demand for our servicesbull Fluctuations of prices of certain materials used in our business including any increase in prices as a result of
the imposition of tariffs on such materialsbull The future development of natural resourcesbull The failure of existing or potential legislative actions to result in demand for our servicesbull Unexpected costs or liabilities that may arise from pending or threatened litigation indemnity obligations or
other claims asserted against us including liabilities for claims that are not covered by third-party insurancebull The outcome of pending or threatened litigationbull Risks relating to the potential unavailability or cancellation of third party insurance the exclusion of coverage
for certain losses and potential increases in premiums for coverage deemed beneficial to usbull Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are
replaced on less favorable termsbull Loss of customers with whom we have long-standing or significant relationshipsbull The potential that participation in joint ventures or similar structures exposes us to liability andor harm to
our reputation for acts or omissions by our partnersbull Our inability or failure to comply with the terms of our contracts which may result in additional costs
unexcused delays warranty claims failure to meet performance guarantees damages or contract terminations
bull The inability or refusal of our customers to pay for services including the failure to collect outstanding receivables
bull The failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders
bull The failure of our customers to comply with regulatory requirements applicable to their projects which may result in project delays and cancellations
bull Budgetary or other constraints that reduce or eliminate tax incentives or government funding for projects which may result in project delays or cancellations
bull Estimates and assumptions in determining our financial results remaining performance obligations and backlog
bull Our ability to successfully complete our performance obligations or realize our backlogbull Risks associated with operating in international markets including instability of foreign governments
currency fluctuations tax and investment strategies as well as compliance with foreign legal systems and cultural practices the US Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws
bull Our ability to successfully identify complete integrate and realize synergies from acquisitionsbull The potential adverse impact resulting from uncertainty surrounding investments and acquisitions including
the ability to retain key personnel from acquired businesses the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets
bull The adverse impact of impairments of goodwill receivables property equipment and other intangible assets or investments
bull Our growth outpacing our decentralized management and infrastructurebull Requirements relating to governmental regulation and changes theretobull Inability to enforce our intellectual property rights or the obsolescence of such rightsbull Risks related to the implementation of new information technology solutionsbull The impact of our unionized workforce on our operations including labor stoppages or interruptions due to
strikes or lockoutsbull Potential liabilities and other adverse effects arising from occupational health and safety matters and
environmental mattersbull Our dependence on suppliers subcontractors equipment manufacturers and other third party contractorsbull Our ability to access sufficient funding to finance desired growth and operations or obtain necessary
performance bondsbull Our ability to continue to meet certain regulatory requirements applicable to us and our subsidiariesbull Rapid technological and other structural changes that could reduce the demand for our servicesbull New or changed tax laws treaties or regulationsbull Increased labor costs associated with regulatory changes including healthcare reform legislationbull Significant fluctuations in foreign currency exchange rates andbull The other risks and uncertainties described elsewhere herein and in our Annual Report on Form 10-K for the
year ended December 31 2017 filed with the SEC and as may be detailed from time to time in our other public filings with the SEC (available through our website at wwwquantaservicescom or the SECrdquos Electronic Data Gathering and Analysis Retrieval System (EDGAR) at wwwsecgov)
All of our forward-looking statements whether written or oral are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this presentation Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially from those expressed or implied in any forward-looking statements Investors are cautioned not to place undue reliance on these forward-looking statements which are current only as of this date We do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or otherwise and we expressly disclaim any written or oral statements made by any third party regarding the subject matter of this presentation
