Q4 2019 Earnings Call

February 27, 2020

Greetings and welcome to Quanta Services' fourth quarter and full year 2019 earnings conference call.

Duke Austin: Greetings and welcome to Quanta Services' Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Kip Rupp, Vice President, Investor Relations. Thank you. You may begin.

Operator: Greetings and welcome to Quanta Services' Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Kip Rupp, Vice President, Investor Relations. Thank you. You may begin.

This time, all participants are in listen only mode.

Question and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star as you're on your telephone keypad.

Please note this conference is being recorded.

Now I'd like to turn the conference over to your host Kip Rupp.

Vice President Investor Relations. Thank you you may begin.

Great. Thank you and welcome everyone to the Quanta Services' fourth quarter and full year 2019 earnings Conference call. This morning, we issued a press release announcing our fourth quarter and full year results, which can be found in the Investor Relations section of our web site at Quanta services Dot com, along with a summary of our 20.

Kip Rupp: Great. Thank you and welcome, everyone, to the Quanta Services' Fourth Quarter and Full Year 2019 Earnings Conference Call. This morning, we issued a press release announcing our fourth quarter and full year results, which can be found in the Investor Relations section of our website at quantaservices.com, along with a summary of our 2020 outlook and commentary that we will discuss this morning. Additionally, we will use a slide presentation this morning to accompany our prepared remarks, which is viewable through the call's webcast and is also available in the Investor Relations section of the Quanta Services' website. Please remember that information reported on this call speaks only as of today, 27 February 2020, and therefore you are advised that any time-sensitive information may no longer be accurate as of any replay of this call.

20 outlook and commentary that we will discuss this morning.

Additionally, we will use a slide presentation. This morning to accompany our prepared remarks, which is feel more through the calls webcast and is also available on the Investor Relations section of the Quanta services Web site. Please.

Please remember that information reported on this call speaks only as of today February 27th of 2020, and therefore, you're advised at any time sensitive information may no longer be accurate adds of any replay of this call.

Kip Rupp: This call will include forward-looking statements intended to qualify under the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These include all statements reflecting Quanta's expectations, intentions, assumptions, or beliefs about future events or performance that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict or beyond Quanta's control, and actual results may differ materially from those expressed or implied. For additional information concerning some of these risks, uncertainties, and assumptions, please refer to the cautionary language included in today's press release, along with the company's periodic reports and other documents filed with the Securities and Exchange Commission, which are available on Quanta's or the SEC's website.

This call will include forward looking statements intended to qualify under the safe Harbor from liability established by the private Securities Litigation Reform Act 1995.

These include all statements, reflecting quantities expectations intentions assumptions or beliefs about future events or performance that you're not solely relate to historical or current facts.

Forward looking statements involve certain risks uncertainties assumptions that are difficult to predict or beyond quantus control and actual results may differ materially from those expressed or implied for additional information concerning some of these risks uncertainties assumptions. Please refer to the cautionary language included in todays press release.

Along with the company's periodic reports and other documents filed with Securities and Exchange Commission, which are available on quantus or the Fccs website.

Kip Rupp: You should not place undue reliance on forward-looking statements, and Quanta does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third party regarding the subject matter of this call. Please also note that we will present certain historical and forecasted non-GAAP financial measures in today's call, including adjusted diluted EPS, backlog, EBITDA, and free cash flow. Reconciliations of these measures to their most directly comparable GAAP financial measures are included in our earnings release. Lastly, if you would like to be notified when Quanta publishes news releases and other information, please sign up for email alerts through the Investor Relations section of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and Quanta Services on the social media channels listed on our website.

You should not place undue reliance on forward looking statements and quiet does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third party regarding the subject matter on this call. Please also note that we will present certain historical and forecasted non-GAAP financial measures in today's call, including adjusted.

Diluted D. P S backlog EBITDA and free cash flow reconciliations of these measures to their most directly comparable GAAP financial measures are included in our earnings release.

Lastly, if you would likely be notified when quanta publishes news releases and other information. Please sign up for email alerts through the Investor Relations section of Quanta services Dotcom, we also encourage investors and others interested at our company to follow Quanta, IR and Quanta services on the social media channels listed on our website.

Kip Rupp: With that, I would like to now turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

With that I would like to now turn the call over to Mr., Duke Austin, Quantus, President and CEO did.

Thanks, Ken Good morning, everyone and welcome to the Quanta Services' fourth quarter and full year 2019 earnings conference call on the call today, I will provide operational and strategic commentary before turning it over to Derrick Jensen want US Chief Financial Officer, who will provide a review of the fourth quarter and full year results and.

Derek Jensen: Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services' fourth quarter and full year 2019 earnings conference call. On the call today, I will provide operational and strategic commentary before turning it over to Derek Jensen, Quanta's Chief Financial Officer, who will provide a review of the fourth quarter and full year results and 2020 guidance. Following Derek's comments, we welcome your questions. 2019 was solid and another record year, built off a platform that has resulted in four consecutive years of growth and record results across most of our key metrics. In 2019, we achieved record revenues, operating income, Adjusted EBITDA, and adjusted earnings per share. Of note, we had record cash flow generation in the fourth quarter, which resulted in 2019 free cash flow exceeding our expectations. We also ended the year with record total and 12-month backlog and more than 40,000 employees.

Duke Austin: Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services' fourth quarter and full year 2019 earnings conference call. On the call today, I will provide operational and strategic commentary before turning it over to Derek Jensen, Quanta's Chief Financial Officer, who will provide a review of the fourth quarter and full year results and 2020 guidance. Following Derek's comments, we welcome your questions. 2019 was solid and another record year, built off a platform that has resulted in four consecutive years of growth and record results across most of our key metrics. In 2019, we achieved record revenues, operating income, Adjusted EBITDA, and adjusted earnings per share. Of note, we had record cash flow generation in the fourth quarter, which resulted in 2019 free cash flow exceeding our expectations. We also ended the year with record total and 12-month backlog and more than 40,000 employees.

2020 guidance.

Following doug's comments, we welcome your questions.

Well the nine team was solid and another record year built off a platform that has resulted in four consecutive years of growth and record results across most of our key metrics and 2019, we achieved record revenues operating income adjusted EBITDA and aren't and adjusted.

Earnings per share.

No we had record cash flow generation in the fourth quarter, which resulted in 29 team free cash flow exceeding our expectations.

We also ended the year with record total and 12 month backlog and more than 40000 employees.

Derek Jensen: Importantly, we believe our strategic position in the marketplace remains strong, and we are well positioned for continued profitable growth over the next several years. Our improving results over the last several years and our expectations for continued profitable growth going forward are driven by the successful execution of our five key objectives. These objectives are, first, focus and grow our base business. Second, improve margins. Third, create growth platforms through service line expansions in the utility, industrial, and communications industries, and adjacent industries where craft skill labor is critical to providing cost-certain solutions. Fourth, be the industry leader in safety and training by investing in craft skill labor. And finally, deploy capital in a disciplined and value-creating manner. We have grown revenues at a double-digit CAGR over the last four years.

Duke Austin: Importantly, we believe our strategic position in the marketplace remains strong, and we are well positioned for continued profitable growth over the next several years. Our improving results over the last several years and our expectations for continued profitable growth going forward are driven by the successful execution of our five key objectives. These objectives are, first, focus and grow our base business. Second, improve margins. Third, create growth platforms through service line expansions in the utility, industrial, and communications industries, and adjacent industries where craft skill labor is critical to providing cost-certain solutions. Fourth, be the industry leader in safety and training by investing in craft skill labor. And finally, deploy capital in a disciplined and value-creating manner. We have grown revenues at a double-digit CAGR over the last four years.

Importantly, we believe our strategic position in the marketplace remains strong and we.

Well positioned for continued profitable growth over the next several years.

Our improving results over the last several years and our expectations for continued profitable growth going forward are driven by the successful execution of our five key Jeff objectives.

These objectives, our first focus and grow our base business.

Second improve margins third grade growth platforms through service line expansions in the utility industrial and communications industries, and adjacent industries, where cross skill labor is critical to providing cost certain solutions.

Fourth be the industry leader and safety in training by investing in cross skill labor and finally deploy capital in a disciplined and value creating manner.

We have grown revenues at a double digit CAGR over the last four years.

Derek Jensen: More importantly, we have increased profits faster than revenues during that time and have improved our return on invested capital. We accomplished a great deal in 2019 through successful implementation of these key objectives, and our past success positions us well for the future. However, we remain focused on getting better to ensure that Quanta continues to evolve to effectively collaborate with our customers and business partners in helping them achieve their goals and to capitalize on opportunities ahead of us. Here are some of the accomplishments in 2019. We achieved record revenues through the continued focus of positioning our base business for long-term and consistent profitable growth. Base business revenue increased approximately 19% in 2019 and accounted for approximately 87% of total revenue. We accomplished this through new program agreements, increased MSA share, and service line expansions, and grew our small and medium-sized project work with many existing customers.

Duke Austin: More importantly, we have increased profits faster than revenues during that time and have improved our return on invested capital. We accomplished a great deal in 2019 through successful implementation of these key objectives, and our past success positions us well for the future. However, we remain focused on getting better to ensure that Quanta continues to evolve to effectively collaborate with our customers and business partners in helping them achieve their goals and to capitalize on opportunities ahead of us. Here are some of the accomplishments in 2019. We achieved record revenues through the continued focus of positioning our base business for long-term and consistent profitable growth. Base business revenue increased approximately 19% in 2019 and accounted for approximately 87% of total revenue. We accomplished this through new program agreements, increased MSA share, and service line expansions, and grew our small and medium-sized project work with many existing customers.

More importantly, we have increased profits faster than revenues during that time and have improved our return on invested capital.

We accomplished a great deal in 2019 through successful implementation of these key objectives, and our past success positions us well for the future.

However, we remain focused on getting better to ensure that quanta continues to a ball to effectively collaborate with our customers and base and business partners and helping them achieve their goals and to capitalize on opportunities ahead of us.

There are some of the accomplishments and 29 team.

We achieved record revenues through the continued focus up positioning our base business for long term and consistent profitable growth.

Business revenue increased approximately 19% in 2019 and accounted for approximately 87% of total revenue.

We accomplished this through new program agreements increase demo say share and service line expansions and grew our small and medium sized project work with many existing customers.

Derek Jensen: We continue to implement our margin enhancement initiatives for the pipeline and industrial segment, which resulted in a full year operating margin of 6.7%. This is the highest annual margin for the segment in five years. More importantly, we see opportunity for additional margin expansion in 2020 for both the electric power and pipeline and industrial segments. We meaningfully expanded and enhanced our gas utility service operations through organic growth and the acquisition of the Hallen Construction Company, which gives Quanta a leading presence in the Northeast United States. We grew our communications services revenues by more than 40% and ended the year with a total backlog of approximately $770 million. Our US backlog grew 25% from the end of 2018 and accounts for nearly all of the communications backlog. Importantly, we expect our communications operations to grow both top and bottom line results in 2020.

Duke Austin: We continue to implement our margin enhancement initiatives for the pipeline and industrial segment, which resulted in a full year operating margin of 6.7%. This is the highest annual margin for the segment in five years. More importantly, we see opportunity for additional margin expansion in 2020 for both the electric power and pipeline and industrial segments. We meaningfully expanded and enhanced our gas utility service operations through organic growth and the acquisition of the Hallen Construction Company, which gives Quanta a leading presence in the Northeast United States. We grew our communications services revenues by more than 40% and ended the year with a total backlog of approximately $770 million. Our US backlog grew 25% from the end of 2018 and accounts for nearly all of the communications backlog. Importantly, we expect our communications operations to grow both top and bottom line results in 2020.

We continue to implement our margin enhancement initiatives for the pipeline industrial segment, which resulted in a full year operating margin of 6.7%. This is the highest annual margin for the segment in five years more importantly, we see opportunity for additional margin expansion in 2020 for both the electric power and pipes.

Line and industrial segments.

We meaningfully expanded and enhanced our gas utility service operations through organic growth and the acquisition of the housing construction company, which gives quantify a leading presence in the northeast United States.

We grew our communication services revenues by more than 40% and ended the year with a total backlog of approximately $770 million are U.S. backlog grew 25% from the end up 28 team and accounts for nearly all of the communications backlog.

Importantly, we expect our communications operations to grow both top and bottom line result, and 2020.

We continue to lead the industry and safety, which we believe starts with train we continue to incrementally invest in our training efforts through our northwest Mom and college.

Derek Jensen: We continue to lead the industry in safety, which we believe starts with training. We continue to incrementally invest in our training efforts through our Northwest Lineman College. We further advanced our new communications infrastructure and natural gas distribution services curriculum during the year, which is allowing us to get employees out to the field faster and for them to be more productive when they get there. Additionally, we expanded the training programs offered at our Quanta Advanced Training Center in La Grange, Texas. In 2019, Quanta staff trained nearly 10,000 employees through various programs and began training initiatives with our customers. We believe our industry-leading training and recruiting initiatives will improve productivity in the field and ensure that we have the very best craft skill labor.

Duke Austin: We continue to lead the industry in safety, which we believe starts with training. We continue to incrementally invest in our training efforts through our Northwest Lineman College. We further advanced our new communications infrastructure and natural gas distribution services curriculum during the year, which is allowing us to get employees out to the field faster and for them to be more productive when they get there. Additionally, we expanded the training programs offered at our Quanta Advanced Training Center in La Grange, Texas. In 2019, Quanta staff trained nearly 10,000 employees through various programs and began training initiatives with our customers. We believe our industry-leading training and recruiting initiatives will improve productivity in the field and ensure that we have the very best craft skill labor.

We further advanced our new communications infrastructure and natural gas distribution services curriculum during the year, which is allowing us to get employees out to the filled faster and for them to be more productive when they get their.

Additionally, we expanded the training programs offered better Quanta advanced training center and the grains, Texas.

And 29 team want to staff trained nearly 10000 employees through various programs and began training initiatives with our customers.

We believe our industry, leading training and recruiting initiatives will improve productivity in the Phil and ensure that we have the very best crop skill labor.

Derek Jensen: This enhances our ability to collaborate with our customers and labor affiliations on future workforce needs and further differentiates us in the marketplace as a strategic solutions provider. We invested approximately $400 million in the strategic acquisition of 7 companies that enhance our self-perform capabilities in certain areas of the United States and Canada. We believe our self-perform capabilities, which account for approximately 85% of our revenues, de-risk our work portfolio through improved execution and result in more consistent earnings. Further, our self-perform capabilities are key to providing cost certainty to our customers. And finally, we demonstrated our commitment to stockholder value and our confidence in Quanta's utility platform by paying Quanta's first quarterly dividend in January 2019, then subsequently announcing a 25% increase in December. We also acquired approximately $20 million of our common stock in 2019, leaving us with approximately $287 million of stock repurchase authorization remaining.

Duke Austin: This enhances our ability to collaborate with our customers and labor affiliations on future workforce needs and further differentiates us in the marketplace as a strategic solutions provider. We invested approximately $400 million in the strategic acquisition of 7 companies that enhance our self-perform capabilities in certain areas of the United States and Canada. We believe our self-perform capabilities, which account for approximately 85% of our revenues, de-risk our work portfolio through improved execution and result in more consistent earnings. Further, our self-perform capabilities are key to providing cost certainty to our customers. And finally, we demonstrated our commitment to stockholder value and our confidence in Quanta's utility platform by paying Quanta's first quarterly dividend in January 2019, then subsequently announcing a 25% increase in December. We also acquired approximately $20 million of our common stock in 2019, leaving us with approximately $287 million of stock repurchase authorization remaining.

This enhances our ability to collaborate with our customers and labor affiliations on future workforce needs and further differentiates us in the marketplace as a street strategic solutions provider.

We invested approximately $400 million in these strategic acquisition of seven companies that enhance our self perform capabilities in certain areas of the United States in Canada.

We believe our self perform capabilities, which account for approximately 85% of our revenues de risk our work portfolio through improved execution and result in more consistent earnings.

Further our self a foreign capabilities are key to providing cost certainty to our customers.

And finally, we demonstrated our commitment to stockholder value and our confidence in Quantums utility platform by paying quanta. His first quarterly dividend in January 2019, then subsequently announcing a 25% increase in December we also acquired approximately $20 million of our common stock in 2019, leaving us.

So the approximately $287 million of stock repurchase authorization remaining.

These are just some of our accomplishments in 2019 that continue to move us down the path of achieving our longer term goals. While we are proud of these achievements. We remain focused on getting better. We continue to believe there is opportunity to create significant stockholder value as we execute on our strategic initiatives which include continued.

Derek Jensen: These are just some of our accomplishments in 2019 that continue to move us down the path of achieving our longer-term goals. While we are proud of these achievements, we remain focused on getting better. We continue to believe there is opportunity to create significant stockholder value as we execute on our strategic initiatives, which include continued margin expansion, sustainable Adjusted EBITDA growth, solid cash flow generation, and improved Return on Invested Capital. The electric utility industry continues to evolve, and many of our longstanding customers have embraced a sustainable and advanced integrated utility model with a heavy focus on electric transmission and distribution investment, increasing focus on renewables and gas distribution, as well as increasing ownership of pipeline infrastructure.

Duke Austin: These are just some of our accomplishments in 2019 that continue to move us down the path of achieving our longer-term goals. While we are proud of these achievements, we remain focused on getting better. We continue to believe there is opportunity to create significant stockholder value as we execute on our strategic initiatives, which include continued margin expansion, sustainable Adjusted EBITDA growth, solid cash flow generation, and improved Return on Invested Capital. The electric utility industry continues to evolve, and many of our longstanding customers have embraced a sustainable and advanced integrated utility model with a heavy focus on electric transmission and distribution investment, increasing focus on renewables and gas distribution, as well as increasing ownership of pipeline infrastructure.

Margin expansion.

They animal adjusted EBITDA growth solid cash flow generation and improved return on invested capital.

The electric utility industry continues to evolve and many of our long standing customers have embraced a sustainable and advanced integrated utility model with a heavy focus on electric transmission and distribution investment.

Increasing focus on renewables and gas distribution as well as increasing ownership a pipeline infrastructure.

Derek Jensen: Looking at Quanta's top utility customers from 2000 to 2018 and their investments during this evolution, which we believe is representative of the broader utility industry, utilities significantly increased their CapEx and OpEx as they transitioned their businesses to an advanced integrated utility model. During that time, Quanta strategically adapted its business to meet the evolving needs of our customers, which has allowed us to collaborate with them and create unique solutions throughout the value chain that benefits the end users. Quanta's end markets remain healthy, and our customers are actively deploying capital into their systems to modernize, harden, expand, and adapt to current and future needs, as evidenced by our double-digit base business revenue growth in both of our segments in 2019.

Duke Austin: Looking at Quanta's top utility customers from 2000 to 2018 and their investments during this evolution, which we believe is representative of the broader utility industry, utilities significantly increased their CapEx and OpEx as they transitioned their businesses to an advanced integrated utility model. During that time, Quanta strategically adapted its business to meet the evolving needs of our customers, which has allowed us to collaborate with them and create unique solutions throughout the value chain that benefits the end users. Quanta's end markets remain healthy, and our customers are actively deploying capital into their systems to modernize, harden, expand, and adapt to current and future needs, as evidenced by our double-digit base business revenue growth in both of our segments in 2019.

Looking at Quanis top utility customers from Twoq, 2002, 2018, and their investments during this evolution, which we believe is representative of the broader utility industry utility significantly increased our capex and opex as they transition transition their businesses to an advanced integrated utility model.

During that time quanta strategically adopted this business to meet the evolving needs of our customers, which has allowed us to collaborate with them and create unique solutions throughout the value chain the benefits the end users.

Quantums end markets remain healthy and our customers are actively deploying capital into their systems to modernize pardon expand and adapt to current and future needs as evidenced by our double digit base business revenue growth and both of our segments in 2019.

Derek Jensen: Further, according to the Edison Electric Institute, 2019 was the eighth consecutive year of record capital investment by the electric utility industry, the most capital-intensive industry in America. Increasing system investments coupled with increasing internal utility workforce attrition expands Quanta's estimated core adjustable market. Quanta generated $7.7 billion in revenue from electric and gas utility customers in 2019, and we believe there is ample opportunity for growth going forward. To that end, longtime Quanta utility customers across our service offerings are investing tens of billions of dollars to modernize and create a sustainable system for end users over the medium term. Quanta is having collaborative conversations with many of our customers about multi-year, multi-billion dollar programs extending as far as 10 years and how Quanta can provide solutions throughout the utility value chain to meet their strategic infrastructure investment goals.

Duke Austin: Further, according to the Edison Electric Institute, 2019 was the eighth consecutive year of record capital investment by the electric utility industry, the most capital-intensive industry in America. Increasing system investments coupled with increasing internal utility workforce attrition expands Quanta's estimated core adjustable market. Quanta generated $7.7 billion in revenue from electric and gas utility customers in 2019, and we believe there is ample opportunity for growth going forward. To that end, longtime Quanta utility customers across our service offerings are investing tens of billions of dollars to modernize and create a sustainable system for end users over the medium term. Quanta is having collaborative conversations with many of our customers about multi-year, multi-billion dollar programs extending as far as 10 years and how Quanta can provide solutions throughout the utility value chain to meet their strategic infrastructure investment goals.

Other according to the Edison Electric Institute 29 chain with the eighth consecutive year of record capital investment by the electric utility industry. The most capital intensive industry in America.

Increasing system investments, coupled with increasing internal utility workforce attrition expands quantus estimated core addressable market.

I want to generated $7.7 billion in revenue from electric and gas utility customers in 2019, and we believe there is ample opportunity for growth going forward.

To that end.

Longtime quanta utility customers across our service offerings are investing tens of billions of dollars to modernize and create a st sustainable system for end users over the medium term.

Quanta is having collaborative conversations with many of our customers about multiyear multi billion dollar programs extending as far as 10 years and harp on a can provide solutions throughout the utility value chain to meet their strategic infrastructure investment goals.

Derek Jensen: Quanta is embedded in the fabric of the North American utility industry and an important resource supporting our customers' efforts to execute their multi-year capital programs that are designed to benefit the ratepayer. It is important to note that approximately 65% of Quanta's revenue is directly tied to regulated electric and gas utility customers, which is core to our business. Throughout our service territories, we are actively pursuing billions of dollars of larger electric transmission projects, which are experiencing increased activity. We are confident we are well positioned for many of these projects. However, it is the smaller projects, maintenance services, and everyday work that is driving much of our growth and backlog. Looking forward, we expect base business activity to remain robust, which currently accounts for approximately 90% of our revenue guidance in 2020, demonstrating the strength of our base business foundation.

Duke Austin: Quanta is embedded in the fabric of the North American utility industry and an important resource supporting our customers' efforts to execute their multi-year capital programs that are designed to benefit the ratepayer. It is important to note that approximately 65% of Quanta's revenue is directly tied to regulated electric and gas utility customers, which is core to our business. Throughout our service territories, we are actively pursuing billions of dollars of larger electric transmission projects, which are experiencing increased activity. We are confident we are well positioned for many of these projects. However, it is the smaller projects, maintenance services, and everyday work that is driving much of our growth and backlog. Looking forward, we expect base business activity to remain robust, which currently accounts for approximately 90% of our revenue guidance in 2020, demonstrating the strength of our base business foundation.

One is embedded in the fabric of the North American utility industry, and an important resource supporting our customers efforts to execute their multiyear capital programs that are designed to benefit the ratepayer.

It is important to note that approximately 65% of Quantus revenue is directly tied to regulated electric and gas utility customers, which is core to our business.

Throughout our service territories, we are actively pursuing billions of dollars of larger electric transmission projects, which are experiencing increased activity.

We are confident we are well positioned for many of these projects. However, it is the smaller projects maintenance services and everyday work that is driving much of our growth and backlog.

Looking forward, we expect base business activity to remain robust, which is currently which currently accounts for approximately 90% of our revenue guidance in 2020, demonstrating the strength of our base business Foundation.

Within our electric segment, our communications operations generated strong double digit revenue growth and 29 team over 2018, our U.S. operations accounted for the vast majority of those revenues.

Derek Jensen: Within our electric segment, our communications operations generated strong double-digit revenue growth in 2019 over 2018. Our US operations accounted for the vast majority of those revenues. Like 2019, we expect strong double-digit revenue growth from our communications operations in 2020, with upper single-digit operating income margin on a full year basis. We continue to believe we can achieve annual revenues of $1 billion or more in the medium term and believe we can operate our communications business with an upper single-digit to double-digit margin profile as we continue to scale our operations. We are gaining visibility into the 5G deployment opportunity and believe it is large and that buildout will take many years due to the density requirements of small cells and the massive amounts of fiber required.

Duke Austin: Within our electric segment, our communications operations generated strong double-digit revenue growth in 2019 over 2018. Our US operations accounted for the vast majority of those revenues. Like 2019, we expect strong double-digit revenue growth from our communications operations in 2020, with upper single-digit operating income margin on a full year basis. We continue to believe we can achieve annual revenues of $1 billion or more in the medium term and believe we can operate our communications business with an upper single-digit to double-digit margin profile as we continue to scale our operations. We are gaining visibility into the 5G deployment opportunity and believe it is large and that buildout will take many years due to the density requirements of small cells and the massive amounts of fiber required.

Slide 2019, we expect strong double digit revenue growth from our communications operations in 2020 with upper single digit operating income margin on a full year basis.

We continue to believe we can achieve annual revenues of $1 billion or more in the medium term and believe we can operate our communications business with an upper single digit to double digit margin profile as we continue to scale our operations.

We are gaining visibility into the to the fiveg deployment opportunity and believe it is large and the build out we'll take many years due to the density requirements of small cells and the massive amounts of fiber required. We believe quanta is uniquely positioned to provide solutions that bridge the gap between wireless carriers and utility companies as five.

Derek Jensen: We believe Quanta is uniquely positioned to provide solutions that bridge the gap between wireless carriers and utility companies as 5G infrastructure is increasingly deployed on the electric distribution system, which requires significant electric lineman resources and project management capabilities. Our pipeline and industrial revenue grew in 2019 despite meaningfully less contribution from larger pipeline projects. Base business activity grew double digits, which speaks to the success of our strategic focus on the strength of our base business within the segment, including gas utility services, pipeline integrity, and industrial services operations. Notably, the benefit of our segment margin improvement initiatives became apparent in our results in the second half of 2019. We believe there is opportunity to improve segment margins in 2020 with the goal of consistently delivering upper single-digit operating income margins annually in the future.

Duke Austin: We believe Quanta is uniquely positioned to provide solutions that bridge the gap between wireless carriers and utility companies as 5G infrastructure is increasingly deployed on the electric distribution system, which requires significant electric lineman resources and project management capabilities. Our pipeline and industrial revenue grew in 2019 despite meaningfully less contribution from larger pipeline projects. Base business activity grew double digits, which speaks to the success of our strategic focus on the strength of our base business within the segment, including gas utility services, pipeline integrity, and industrial services operations. Notably, the benefit of our segment margin improvement initiatives became apparent in our results in the second half of 2019. We believe there is opportunity to improve segment margins in 2020 with the goal of consistently delivering upper single-digit operating income margins annually in the future.

Infrastructure is increasingly deployed on the electric distribution system, which require significant electric Lyman resources and project management capabilities.

Our pipeline in industrial revenue grew in 2019, despite meaningful less contribution from larger pipeline projects.

Based business activity grew double digits, which speaks to the success of our strategic focus on the strength of our base business within the segment, including gas utility services pipeline integrity and industrial services operations.

Notably the benefit of our segment margin improvement initiatives became apparent in our results in the second half of 2019.

We believe there's opportunity to improve segment margins in 2020 with the goal of consistently delivering upper single digit operating income margins annually in the future.

As I mentioned earlier, we have meaningfully increased our gas utility services operations through organic growth and the recent acquisition of power.

Derek Jensen: As I mentioned earlier, we have meaningfully increased our gas utility services operations through organic growth and the recent acquisition of Hallen. Gas utilities are in the early stages of multi-decade modernization programs to replace aging gas distribution infrastructure to meet regulatory requirements aimed at improving reliability and safety. These modernization initiatives provide a visible, recurring, and growing long-term opportunity for our gas utility services that we believe is favorable for our Base Business. In our earnings released this morning, we provided 2020 guidance, which we believe demonstrates the strength and sustainability of our Base Business and long-term strategy, favorable end market trends, our ability to safely execute, and our strong competitive position in the marketplace. Our expectations call for continued growth in revenues, Adjusted EBITDA, and earnings per share, and improved profitability. Additionally, we see opportunity to achieve new record levels of Backlog in 2020.

Duke Austin: As I mentioned earlier, we have meaningfully increased our gas utility services operations through organic growth and the recent acquisition of Hallen. Gas utilities are in the early stages of multi-decade modernization programs to replace aging gas distribution infrastructure to meet regulatory requirements aimed at improving reliability and safety. These modernization initiatives provide a visible, recurring, and growing long-term opportunity for our gas utility services that we believe is favorable for our Base Business. In our earnings released this morning, we provided 2020 guidance, which we believe demonstrates the strength and sustainability of our Base Business and long-term strategy, favorable end market trends, our ability to safely execute, and our strong competitive position in the marketplace. Our expectations call for continued growth in revenues, Adjusted EBITDA, and earnings per share, and improved profitability. Additionally, we see opportunity to achieve new record levels of Backlog in 2020.

Gas utilities are in the early stages of multi decade modernization programs to replace aging gas distribution infrastructure to meet regulatory requirements aimed at improving reliability and safety.

These modernization initiatives provide a visible recurring and growing long term opportunity for our gas utility services that we believe is favorable for our base business.

And our earnings release. This morning, we provided 2020 guidance, which we believe demonstrates the strength and sustainability of our base business and long term strategy favorable end market trends, our ability to safely execute our strong competitive position in the marketplace.

Our expectations call for continued growth in revenues adjusted EBITDA and earnings per share and improved profitability.

Additionally, we see opportunity to achieve new record levels of backlog in 2020.

Our guidance includes the results of Latin America operations, we have completed a strategic review of efforts there and due to the circumstances, we experienced last year in Peru, and political volatility and other areas of the region. We have concluded to pursue an orderly exit of Latin America operations, we are considering various avenues.

Derek Jensen: Our guidance includes the results of Latin America operations. We have completed a strategic review of efforts there, and due to the circumstances we experienced last year in Peru and political volatility in other areas of the region, we have concluded to pursue an early exit of Latin America operations. We are considering various avenues to that end and believe a significant portion of this process could be achieved this year. As a result, we have highlighted the anticipated impact on our 2020 results. This is the right course of action, which we believe will improve Quanta's profitability and optimize our operational portfolio. As we typically do at the beginning of the year, we have taken a prudent approach to the revenue and margin ranges in our guidance to reflect what we believe are possible outcomes based on the risk inherent in our business.

Operator: Our guidance includes the results of Latin America operations. We have completed a strategic review of efforts there, and due to the circumstances we experienced last year in Peru and political volatility in other areas of the region, we have concluded to pursue an early exit of Latin America operations. We are considering various avenues to that end and believe a significant portion of this process could be achieved this year. As a result, we have highlighted the anticipated impact on our 2020 results. This is the right course of action, which we believe will improve Quanta's profitability and optimize our operational portfolio. As we typically do at the beginning of the year, we have taken a prudent approach to the revenue and margin ranges in our guidance to reflect what we believe are possible outcomes based on the risk inherent in our business.

To that end and believe significant.

Worsening of this of the power of this process could be achieved this year as a result, we have highlighted the anticipated impact on our 2020 results. This is the right course of action, which we believe will improve quanis profitability and optimize our operational portfolio.

As we typically do at the beginning of the year, we've taken a prudent approach to the revenue and margin ranges in our guidance to reflect what we believe our possible outcomes based on the risk inherent in our business.

Derek Jensen: As the year progresses and we gain better visibility into our performance, project timing, and industry dynamics, we anticipate being able to refine our expectations. Derek will provide additional detail about our guidance in his commentary. In summary, QUANTA ended the year on a high note and continues to perform well operationally against our strategic plan, which yielded another record year of results in 2019. Our end markets and multi-year visibility are strong, and we continue to see opportunity for service line offerings expansion, growth, improved profitability, solid cash flow generation, and record backlog as we successfully execute on our strategic initiatives. As I think about QUANTA, the platform that has been built over more than 20 years and where we are heading over the medium and longer term, we believe we have a long runway of generating repeatable and sustainable earnings ahead of us.

Duke Austin: As the year progresses and we gain better visibility into our performance, project timing, and industry dynamics, we anticipate being able to refine our expectations. Derek will provide additional detail about our guidance in his commentary. In summary, QUANTA ended the year on a high note and continues to perform well operationally against our strategic plan, which yielded another record year of results in 2019. Our end markets and multi-year visibility are strong, and we continue to see opportunity for service line offerings expansion, growth, improved profitability, solid cash flow generation, and record backlog as we successfully execute on our strategic initiatives. As I think about QUANTA, the platform that has been built over more than 20 years and where we are heading over the medium and longer term, we believe we have a long runway of generating repeatable and sustainable earnings ahead of us.

The year progresses, and we gain better visibility into our performance project timing and industry dynamics, we anticipate being able to refine our expectations.

Derek will provide additional detail about our guidance in his commentary.

In summary, quanta ended the year on a high note and continues to perform to perform well operationally against our strategic plan, which yielded another record year results in 2019.

Our end markets and multiyear visibility our strong and we continue to see opportunity for service line offerings expansion growth improved profitability solid cash flow generation and record backlog as we successfully execute on our strategic initiatives.

As I think about quantifying the platform that has been built over more than 20 years, and where we're heading over the medium and longer term. We believe we have a long runway of generating repeatable and sustainable earnings ahead of us.

Derek Jensen: Considering our organic growth opportunities and the levers available to us to allocate future cash flow generation and to value-creating opportunities such as stock repurchases, acquisitions, and strategic investments in dividends, we believe Quanta has the opportunity to generate meaningful stockholder value going forward. We are focused on operating the business for the long term and expect to continue to distinguish ourselves through safe execution and best-in-class field leadership. We will pursue opportunities to enhance Quanta's base business and leadership position in the industry and provide innovative solutions to our customers. We believe Quanta's diversity, unique operating model, and entrepreneurial mindset form the foundation that will allow us to continue to generate long-term value for all of our stakeholders. With that, I will now turn the call over to Derek Jensen, our CFO, for his review of our fourth quarter and full year results and 2020 guidance. Derek?

Duke Austin: Considering our organic growth opportunities and the levers available to us to allocate future cash flow generation and to value-creating opportunities such as stock repurchases, acquisitions, and strategic investments in dividends, we believe Quanta has the opportunity to generate meaningful stockholder value going forward. We are focused on operating the business for the long term and expect to continue to distinguish ourselves through safe execution and best-in-class field leadership. We will pursue opportunities to enhance Quanta's base business and leadership position in the industry and provide innovative solutions to our customers. We believe Quanta's diversity, unique operating model, and entrepreneurial mindset form the foundation that will allow us to continue to generate long-term value for all of our stakeholders. With that, I will now turn the call over to Derek Jensen, our CFO, for his review of our fourth quarter and full year results and 2020 guidance. Derek?

Considering our organic growth opportunities and the levers available to us to allocate future cash flow generation and to value, creating opportunities such as stock repurchases acquisitions and strategic investments in dividends. We believe quanta has the opportunity to generate meaningful stockholder value going forward.

We are focused on operating the business for the long term and expect to continue to distinguish ourselves through safe execution and best in class build leadership, we will pursue opportunities to enhance quantums based business and leadership position in the industry and provide innovative solutions to our customers, we believe quantus diversity.

Peak operating model and entrepreneurial mindset form the foundation that will allow us to continue to generate long term value for all of our stakeholders.

With that I will now turn the call over to Derrick Jensen, our CFO for his review of our fourth quarter and full year results in 2020 got it.

Eric.

[Company Representative] (Quanta Services): Thanks, Duke, and good morning, everyone. Today, we announced Q4 2019 revenues of $3.1 billion. Net income attributable to common stock was $118.1 million or $0.80 per diluted share, and adjusted diluted earnings per share, a non-GAAP measure, was $0.93. Overall, Q4 closed out another exceptional year of operational performance for Quanta, a year in which we delivered record results across multiple metrics, but most notably in net income, earnings per share, adjusted earnings per share, and adjusted EBITDA. I'll cover some items impacting our Q4 results before discussing our broader 2019 annual performance and our expectations for 2020. Electric power revenues in Q4 were a record $1.85 billion, driven by continued momentum across our base business activities along with growth from our communications operations, which are included within the electric segment.

Derek Jensen: Thanks, Duke, and good morning, everyone. Today, we announced Q4 2019 revenues of $3.1 billion. Net income attributable to common stock was $118.1 million or $0.80 per diluted share, and adjusted diluted earnings per share, a non-GAAP measure, was $0.93. Overall, Q4 closed out another exceptional year of operational performance for Quanta, a year in which we delivered record results across multiple metrics, but most notably in net income, earnings per share, adjusted earnings per share, and adjusted EBITDA. I'll cover some items impacting our Q4 results before discussing our broader 2019 annual performance and our expectations for 2020. Electric power revenues in Q4 were a record $1.85 billion, driven by continued momentum across our base business activities along with growth from our communications operations, which are included within the electric segment.

Thanks, Duke and good morning, everyone.

Today, we announced fourth quarter 2019 revenues of $3.1 billion.

Net income attributable to common stock was $118.1 million or 80 cents per diluted share and adjusted diluted earnings per share a non-GAAP measure was 93 cents.

Overall, the fourth quarter closed out another exceptional year of operational performance for quarter, a year in which we delivered record results across multiple metrics, but most notably in net income earnings per share adjusted earnings per share and adjusted EBITDA.

I'll cover some items impacting our fourth quarter results before discussing our broader 2019 annual performance and our expectations for 2020.

Electric power revenues in the fourth quarter were a record $1.85 billion driven by continued momentum across our base business activities, along with growth from our communications operations, which are included within the electric sector.

[Company Representative] (Quanta Services): Electric margins were 8.7% and, as expected, were lower than target levels during the quarter due to permitting delays on certain larger Canadian transmission projects negatively impacting cost absorption. However, our communications operations, inclusive of Latin America, delivered break-even margins for the quarter compared to upper single-digit expectations. These operations were negatively impacted by two projects: one that experienced cost increases due to schedule uncertainty and another that encountered funding challenges, which was reserved for in the quarter due to potential collectibility concerns. Excluding our Latin America operations, communications margins were in the lower single-digit range, and electric-only margins were 9.6%. As Duke commented, we have concluded to pursue the orderly exit of our Latin America operations. As such, as presented in today's release, we have modified our segment reporting disclosures to separately identify Latin America results.

Derek Jensen: Electric margins were 8.7% and, as expected, were lower than target levels during the quarter due to permitting delays on certain larger Canadian transmission projects negatively impacting cost absorption. However, our communications operations, inclusive of Latin America, delivered break-even margins for the quarter compared to upper single-digit expectations. These operations were negatively impacted by two projects: one that experienced cost increases due to schedule uncertainty and another that encountered funding challenges, which was reserved for in the quarter due to potential collectibility concerns. Excluding our Latin America operations, communications margins were in the lower single-digit range, and electric-only margins were 9.6%. As Duke commented, we have concluded to pursue the orderly exit of our Latin America operations. As such, as presented in today's release, we have modified our segment reporting disclosures to separately identify Latin America results.

Electric margins were 8.7% and as expected were lower than target levels during the quarter due to permitting delays on certain larger Canadian transmission projects negatively impacting cost absorption.

However, our communications operations inclusive of Latin America delivered breakeven margins for the quarter compared to upper single digit expectations.

These operations were negatively impacted by two projects one that experienced cost increases due to schedule uncertainty and another that encountered funder funding challenges, which was reserved for in the quarter due to potential collectability concerns.

Including our Latin America operations Communications margins were in the lower single digit range and electric only margins were 9.6%.

As do commented we have concluded to pursue the orderly exit of our Latin America operations assets as presented in today's release, we've modified our segment reporting disclosures to separately identify Latin America results.

[Company Representative] (Quanta Services): While these operations do not qualify for discontinued operations treatment, we believe that providing visibility into their results will be beneficial in understanding the performance of our ongoing operations. On a go-forward basis, our operational commentary will focus primarily on electric power and communications operations, excluding Latin America. We will otherwise continue to report our communications operating results within electric power due to the potential for the co-mingling of labor resources on future 5G deployments, as any utilization of existing electric infrastructure for 5G will require qualified linemen for installation, blurring the type of work classifications between electric power and communications. Our pipeline and industrial segment revenues were lower versus Q4 2018 due to a significant decline in revenues from larger pipeline projects. Partially offsetting this decline were increased levels of base business activities, particularly gas distribution and industrial services, and approximately $125 million from acquired companies.

Derek Jensen: While these operations do not qualify for discontinued operations treatment, we believe that providing visibility into their results will be beneficial in understanding the performance of our ongoing operations. On a go-forward basis, our operational commentary will focus primarily on electric power and communications operations, excluding Latin America. We will otherwise continue to report our communications operating results within electric power due to the potential for the co-mingling of labor resources on future 5G deployments, as any utilization of existing electric infrastructure for 5G will require qualified linemen for installation, blurring the type of work classifications between electric power and communications. Our pipeline and industrial segment revenues were lower versus Q4 2018 due to a significant decline in revenues from larger pipeline projects. Partially offsetting this decline were increased levels of base business activities, particularly gas distribution and industrial services, and approximately $125 million from acquired companies.

These operations do not qualify for discontinued operations treatment, we believe that providing visibility into their results will be beneficial and understanding the performance of our ongoing operations.

On a go forward basis, our operational commentary will focus primarily on electric power and communications operations, Excluding Latin America.

We will otherwise continue to report our communications operating results within electric power due to the potential for the commingling of labor resources on future Fiveg deployment as any utilization of existing electric infrastructure for Fiveg will require qualified linemen for installation blurring the type of work classifications between electric.

Power and communication.

Our pipeline and industrial segment revenues were lower versus Fourq, you 18, due to a significant decline in revenues from larger pipeline projects.

Lastly, offsetting this decline were increased levels of base business activities, particularly gas distribution in industrial services and approximately $125 million from acquired companies.

[Company Representative] (Quanta Services): Operating margins for the Pipeline and Industrial segment were 7%. The solid margins for the quarter were led by continued execution across our gas distribution and industrial operations. In addition, we favorably settled certain outstanding claims, and while the favorable settlements positively impacted the fourth quarter, they represent the culmination of negotiations on projects with significant construction activities in 2019 and appropriately contribute to full year 2019 operating results. These favorable settlements help to offset negative impacts attributable to wet weather challenges encountered on several large Canadian pipeline projects due to historic rainfall amounts, as well as $10.2 million of impairment charges associated with the winding down and exit of certain oil-influenced operations and assets. Regarding corporate and unallocated costs, amortization expense, deal costs, and changes in the fair value of contingent consideration liabilities increased due to acquisition-related activities and are responsible for the majority of the movement.

Derek Jensen: Operating margins for the Pipeline and Industrial segment were 7%. The solid margins for the quarter were led by continued execution across our gas distribution and industrial operations. In addition, we favorably settled certain outstanding claims, and while the favorable settlements positively impacted the fourth quarter, they represent the culmination of negotiations on projects with significant construction activities in 2019 and appropriately contribute to full year 2019 operating results. These favorable settlements help to offset negative impacts attributable to wet weather challenges encountered on several large Canadian pipeline projects due to historic rainfall amounts, as well as $10.2 million of impairment charges associated with the winding down and exit of certain oil-influenced operations and assets. Regarding corporate and unallocated costs, amortization expense, deal costs, and changes in the fair value of contingent consideration liabilities increased due to acquisition-related activities and are responsible for the majority of the movement.

Operating margins for the pipeline industrial segment were 7%.

The solid margins for the quarter or led by continued execution across our gas distribution and industrial operations.

In addition, we favourably settled certain outstanding claims and while the favorable settlements positively impacted the fourth quarter. They represent the culmination of negotiations on projects with significant construction activities in 2019 and appropriately contribute to full year 2019 operating results.

These favorable settlements helped to offset negative impact attributable to wet weather challenges encountered on several large Canadian pipeline projects due to historic rainfall amounts as well as $10.2 million of impairment charges associated with the winding down and exit certain oil influenced operations and assets.

Regarding corporate and unallocated costs amortization expense deal costs and changes in fair value of contingent consideration liability increased due to acquisition related activities and a responsible for the majority of the movement.

Also of note we sold our interest in the limited partnership related to the Fort Mcmurray transmission project in Alberta, Canada in the fourth quarter.

[Company Representative] (Quanta Services): Also of note, we sold our interest in the limited partnership related to the Fort McMurray transmission project in Alberta, Canada, in Q4. As a result, we recorded a gain of $13 million in other income. The sale also allowed for the recognition of certain tax benefits, therefore delivering a total $20.7 million net income benefit or $0.14 per diluted share. We believe the success of the project and our partnership with ATCO is a true differentiator for Quanta and serves as a blueprint for future opportunities to partner with our customers and deliver world-class infrastructure solutions. Lastly, concerning Q4 results, we had an exceptionally strong cash generation quarter with free cash flow of $581 million. This cash generation was driven by a 10-day reduction in DSO to 81 days compared to the 91 days experienced in Q3 2019.

Derek Jensen: Also of note, we sold our interest in the limited partnership related to the Fort McMurray transmission project in Alberta, Canada, in Q4. As a result, we recorded a gain of $13 million in other income. The sale also allowed for the recognition of certain tax benefits, therefore delivering a total $20.7 million net income benefit or $0.14 per diluted share. We believe the success of the project and our partnership with ATCO is a true differentiator for Quanta and serves as a blueprint for future opportunities to partner with our customers and deliver world-class infrastructure solutions. Lastly, concerning Q4 results, we had an exceptionally strong cash generation quarter with free cash flow of $581 million. This cash generation was driven by a 10-day reduction in DSO to 81 days compared to the 91 days experienced in Q3 2019.

As a result, we recorded a gain of $13 million in other income.

The sale also allowed for the recognition of certain tax benefits, therefore, delivering a totaled $20.7 million net income benefit or 14 cents per diluted share.

We believe the success of the project in our partnership with Atco is a true differentiator for quanta and serves as a blueprint for future opportunities to partner with our customers and deliver a world class infrastructure solutions.

Lastly concerning fourth quarter results, we had an exceptionally strong cash generation quarter with free cash flow of $581 million.

This cash generation was driven by a 10 day reduction in Dsos to 81 days compared to the 91 days experienced in Threeq you 19.

[Company Representative] (Quanta Services): DSO reductions were driven by improved billings and collections with several customers that had negatively impacted DSO levels in prior quarters, as well as the collection of approximately $100 million of pipeline project retainage balances previously expected to be collected in 2020. Also contributing to cash flow in the quarter was approximately $34 million from the sale of certain outstanding pre-petition receivables due from PG&E, as well as the collection of the retainage from the Fort McMurray transmission project discussed on last quarter's call. From a balance sheet perspective, at 31 December 2019, we had $1.8 billion in total liquidity. We ended the year with a debt-to-EBITDA ratio as calculated under our senior secured credit agreement of approximately 1.6 times, which is within our target range of 1.5 to 2 times.

Derek Jensen: DSO reductions were driven by improved billings and collections with several customers that had negatively impacted DSO levels in prior quarters, as well as the collection of approximately $100 million of pipeline project retainage balances previously expected to be collected in 2020. Also contributing to cash flow in the quarter was approximately $34 million from the sale of certain outstanding pre-petition receivables due from PG&E, as well as the collection of the retainage from the Fort McMurray transmission project discussed on last quarter's call. From a balance sheet perspective, at 31 December 2019, we had $1.8 billion in total liquidity. We ended the year with a debt-to-EBITDA ratio as calculated under our senior secured credit agreement of approximately 1.6 times, which is within our target range of 1.5 to 2 times.

DSL reductions were driven by improved billings and collections with several customers that had negatively impacted DSL levels in prior quarters as well as the collection of approximately $100 million a pipeline project retain its balances previously expected to be collected in 2020.

Also contributing to cash flow in the quarter was approximately $34 million from the sale of certain outstanding pre petition receivables due from PG County, as well as the collection of the retain its from the Fort Mcmurray transmission project discussed on last quarter's call.

From a balance sheet perspective at December 31, 2019, we had $1.8 billion in total liquidity.

We ended the year with the debt to EBITDA ratio as calculated under our senior secured credit agreement of approximately 1.6 times, which is within our target range of 1.5 to two times.

[Company Representative] (Quanta Services): I'll make specific note that we exceeded a 2x leverage profile in the third quarter, which we have previously commented we were willing to do with a path-to-D lever, which we achieved successfully in the fourth quarter. Our total backlog exceeded $15 billion for the first time in our history, with 12-month backlog nearing $8 billion. The WATE award discussed in last quarter's earnings call was a significant contributor to the increase from the third quarter, but as in the case with revenues, the base business continues to be the largest driver of backlog growth. As such, as we look ahead to 2020 and beyond, we see the base business propelling multi-year growth opportunities for both segments. Electric segment revenues have grown to $7.1 billion at the end of 2019, with revenues from base business activities, including our communications operations, 20% higher than 2018 levels.

I'll make specific note that we exceeded a two times leverage profile in the third quarter, which we have previously commented we were willing to do with a path to de lever, which we achieved successfully in the fourth quarter.

Our total backlog exceeded $15 billion for the first time in our history with 12 month backlog nearing $8 billion.

Latte Award discussed in last quarters earnings call was a significant contributor to the increase from the third quarter, but as in the case with revenues. The base business continues to be the largest driver of backlog growth.

As such as we look ahead to 2020 and beyond we see the base business propelling multiyear growth opportunities for both segments.

Electric segment revenues have grown to $7.1 billion at the end of 2019 with revenue from based business activities, including our communications operations, 20% higher than 2018 levels.

[Company Representative] (Quanta Services): Included in that growth is the ramp in California fire hardening activities, which aggressively expanded in 2019 and more than offset almost $400 million of reduced revenues from larger projects. We expect those hardening initiatives to continue in 2020, but currently anticipate the revenue contribution to normalize at a level meaningfully lower than 2019 and to largely be weighted towards the back half of 2020. Offsetting this decline is the expected growth of our remaining base business, which we continue to see providing mid-single to double-digit growth opportunities, coupled with some degree of increased contributions from larger projects, primarily associated with previously announced projects in Canada. In the aggregate, we see electric power revenues between $7.6 and $7.8 billion, which includes revenues from our communications operations of around $500 million and minimal Latin America revenues. We expect base business activities to represent approximately 90% of segment revenues.

Derek Jensen: Included in that growth is the ramp in California fire hardening activities, which aggressively expanded in 2019 and more than offset almost $400 million of reduced revenues from larger projects. We expect those hardening initiatives to continue in 2020, but currently anticipate the revenue contribution to normalize at a level meaningfully lower than 2019 and to largely be weighted towards the back half of 2020. Offsetting this decline is the expected growth of our remaining base business, which we continue to see providing mid-single to double-digit growth opportunities, coupled with some degree of increased contributions from larger projects, primarily associated with previously announced projects in Canada. In the aggregate, we see electric power revenues between $7.6 and $7.8 billion, which includes revenues from our communications operations of around $500 million and minimal Latin America revenues. We expect base business activities to represent approximately 90% of segment revenues.

Included in that growth the ramp in California fire hardening activities, which aggressively expanded in 2019 and more than offset almost $400 million of reduced revenues from larger projects.

We expect those hardening initiatives to continue in 2020, but currently anticipate the revenue contribution to normalize at a level meaningfully lower than 2019 and to largely be weighted towards the back half of 2020.

Offsetting this decline is expected growth of our remaining based business, which we continue to see providing mid single to double digit growth opportunities coupled with some degree of increased contributions from larger projects, primarily associated with previously announced project in Canada.

In the aggregate, we see electric power revenues between 7.6, and $7.8 billion, which includes revenues from our communications operations of around $500 million and minimal Latin America of revenues.

We expect base business activities represent approximately 90% of segment revenues.

[Company Representative] (Quanta Services): As it relates to electric power segment revenue seasonality, we expect revenue growth in each quarter of 2020 compared to 2019, with quarter-over-quarter growth in the Q2 and Q3 potentially exceeding 10%. We expect Q1 revenues to be the lowest of the year due to weather impacting certain construction activities as well as the back half weighting of California fire hardening activities. We expect the high end of our revenue range to represent greater revenue growth opportunities in the Q3 and Q4 relative to 2019. We see 2020 operating margins for the electric power segment, including Latin America operations, between 9.2 and 9.8%, with Latin America contributing operating losses of $15 to $20 million. Excluding Latin America losses, margins are expected to range between 9.5 and 10%. We expect that Q1 operating margins will be the lowest for the year, possibly between 7 and 7.5%.

Derek Jensen: As it relates to electric power segment revenue seasonality, we expect revenue growth in each quarter of 2020 compared to 2019, with quarter-over-quarter growth in the Q2 and Q3 potentially exceeding 10%. We expect Q1 revenues to be the lowest of the year due to weather impacting certain construction activities as well as the back half weighting of California fire hardening activities. We expect the high end of our revenue range to represent greater revenue growth opportunities in the Q3 and Q4 relative to 2019. We see 2020 operating margins for the electric power segment, including Latin America operations, between 9.2 and 9.8%, with Latin America contributing operating losses of $15 to $20 million. Excluding Latin America losses, margins are expected to range between 9.5 and 10%. We expect that Q1 operating margins will be the lowest for the year, possibly between 7 and 7.5%.

As it relates to electric power segment revenue seasonality, we expect revenue growth in each quarter of 2020 compared to 2019 with quarter over quarter growth in the second and third quarters potentially exceeding 10%.

We expect first quarter revenues to be the lowest of the year due to weather impacting certain construction activities as well as the back half weighting of California fire Harding activities.

Expect the high end of our revenue range to represent greater revenue growth opportunities in the third and fourth quarters relative to 2019.

We see 2020 operating margins for the electric power segment, including Latin America operations between 9.29, 0.8% with Latin America, contributing operating losses of $15 million to $20 million.

Excluding Latin America losses margins are expected to range between 9.5 and 10%.

We expect the first quarter operating margins will be the lowest for the year, possibly between seven and 7.5%.

[Company Representative] (Quanta Services): This Q1 margin profile is being pressured by operational losses and costs associated with exit activities in Latin America of up to $10 million. Additionally, margins in our core electric and communications operations are expected to be negatively impacted by the weather challenges and fire hardening timing that are impacting Q1 revenue levels, both of which will result in some level of cost absorption pressure. However, we expect subsequent quarters will return to our normal operating range, with margins increasing into the Q2 and Q3 and then experiencing a slight decline in the Q4. We believe communications operating income margins, which have been diluted to segment margins in prior periods, could be at parity with electric operations on a full year basis.

Derek Jensen: This Q1 margin profile is being pressured by operational losses and costs associated with exit activities in Latin America of up to $10 million. Additionally, margins in our core electric and communications operations are expected to be negatively impacted by the weather challenges and fire hardening timing that are impacting Q1 revenue levels, both of which will result in some level of cost absorption pressure. However, we expect subsequent quarters will return to our normal operating range, with margins increasing into the Q2 and Q3 and then experiencing a slight decline in the Q4. We believe communications operating income margins, which have been diluted to segment margins in prior periods, could be at parity with electric operations on a full year basis.

This one Q margin profile is being pressured by operational losses and costs associated with exit activities in Latin America of up to $10 million.

Additionally margins in our core electric and communications operations are expected to be negatively impacted by the weather challenges in fire hardening timing that are impacting first quarter revenue levels, both of which will result in some level of cost absorption pressure.

However, we expect subsequent quarters will return to our normal operating range with margins increasing into the second and third quarters, and then experiencing a slight decline in the fourth quarter.

We believe communications operating income margins, which have been dilutive to segment margins in prior period could be at parity with electric operations on a full year basis.

Regarding our pipeline in industrial segment revenues have increased from $3.9 billion at the end of 2017 to roughly $5 billion at the end of 2019.

[Company Representative] (Quanta Services): Regarding our pipeline and industrial segment, revenues have increased from $3.9 billion at the end of 2017 to roughly $5 billion at the end of 2019, during which time revenues from larger projects have declined from $1.6 billion to $1.2 billion. For 2020, we currently expect the reduction in larger project revenues to continue, declining as much as $700 million to around $500 million for the year. Although some level of incremental larger pipeline project awards are factored into our range of guidance, our final financial expectations for 2020 are not dependent upon contributions from the Atlantic Coast Pipeline Project. This larger project revenue reduction represents a significant headwind. However, we anticipate being able to largely offset this decline with growth from our gas distribution, including a full year of revenues from our 2019 acquisition of Hallen Construction, and continued demand for our industrial services.

Derek Jensen: Regarding our pipeline and industrial segment, revenues have increased from $3.9 billion at the end of 2017 to roughly $5 billion at the end of 2019, during which time revenues from larger projects have declined from $1.6 billion to $1.2 billion. For 2020, we currently expect the reduction in larger project revenues to continue, declining as much as $700 million to around $500 million for the year. Although some level of incremental larger pipeline project awards are factored into our range of guidance, our final financial expectations for 2020 are not dependent upon contributions from the Atlantic Coast Pipeline Project. This larger project revenue reduction represents a significant headwind. However, we anticipate being able to largely offset this decline with growth from our gas distribution, including a full year of revenues from our 2019 acquisition of Hallen Construction, and continued demand for our industrial services.

During which time revenues from larger projects have declined from $1.6 billion to $1.2 billion.

For 2020, we currently expect reduction a larger project revenues to continue declining as much as $700 million to around $500 million for the year.

Although some level of incremental larger pipeline project War awards are factored into our range of guidance are fine on financial expectations for 2020 are not dependent upon contributions from the Atlantic Coast pipeline project.

This larger project revenue reduction represents a significant headwind. However, we anticipate being able to largely offset this decline which growth from our gas distribution, including a full year of revenues from our 2019 acquisition of housing construction and continued demand for our industrial services.

[Company Representative] (Quanta Services): Overall, we see revenues for the segment ranging from $4.6 to 4.8 billion. From a seasonality perspective, we see Q1 revenues being our lowest for the year, likely a double-digit decline from Q1 2019 due to the reduced levels of larger project revenues year-over-year and normal seasonality in our more weather-sensitive regions. Revenues should increase sequentially into Q3, then seasonally decline in Q4. Revenues as compared to 2019 are expected to be lower on a quarter-over-quarter basis for Q3 and Q4, with Q4 revenues potentially declining over 10% relative to 2019. The operating margin improvement in our Pipeline and Industrial segment over the last three years has been a focus area, and we're proud of what we've accomplished while continuing to invest in the growth of the Base Business.

Derek Jensen: Overall, we see revenues for the segment ranging from $4.6 to 4.8 billion. From a seasonality perspective, we see Q1 revenues being our lowest for the year, likely a double-digit decline from Q1 2019 due to the reduced levels of larger project revenues year-over-year and normal seasonality in our more weather-sensitive regions. Revenues should increase sequentially into Q3, then seasonally decline in Q4. Revenues as compared to 2019 are expected to be lower on a quarter-over-quarter basis for Q3 and Q4, with Q4 revenues potentially declining over 10% relative to 2019. The operating margin improvement in our Pipeline and Industrial segment over the last three years has been a focus area, and we're proud of what we've accomplished while continuing to invest in the growth of the Base Business.

Overall, we see revenues for the segment ranging from $4.6 billion to $4.8 billion.

From a seasonality perspective, we see first quarter revenues being our lowest for the year likely a double digit decline from the first quarter of 2019 due to the reduced levels of larger project revenues year over year and normal seasonality and are more weather sensitive reach.

Revenue should increase sequentially into the third quarter than seasonally decline in the fourth quarter.

Revenues as compared to 2019 are expected to be lower on a quarter over quarter basis for the third and fourth quarters with fourth quarter revenues potentially declining over 10% relative to 2019.

The operating margin improvement in our pipeline in industrial segment over the last three years has been a focus area and we're proud of what we've accomplished while continuing to invest in the growth of the base business.

[Company Representative] (Quanta Services): Larger projects historically have represented the best margin opportunities in the segment. However, as larger project revenues have declined, segment margins have improved, and we expect this trend to continue into 2020, even with the lowest level of larger project revenues we've experienced in the last seven years. We see segment margins ranging between 6.8 and 7.2%, led by continued execution from our gas distribution and industrial operations. As we have discussed in years past, our Q1 traditionally has lower activity in our gas distribution business due to weather seasonality, which impacts our revenues and pressures margins. Accordingly, we expect Q1 margins in the lower single digits with improvement into the Q2 and Q3, then seasonally declining in the Q4.

Derek Jensen: Larger projects historically have represented the best margin opportunities in the segment. However, as larger project revenues have declined, segment margins have improved, and we expect this trend to continue into 2020, even with the lowest level of larger project revenues we've experienced in the last seven years. We see segment margins ranging between 6.8 and 7.2%, led by continued execution from our gas distribution and industrial operations. As we have discussed in years past, our Q1 traditionally has lower activity in our gas distribution business due to weather seasonality, which impacts our revenues and pressures margins. Accordingly, we expect Q1 margins in the lower single digits with improvement into the Q2 and Q3, then seasonally declining in the Q4.

Larger projects historically have represented the best margin opportunities in the segment. However, as larger project revenues have declined segment margins have improved and we expect this trend to continue into 2020, even with the lowest level of larger project revenues, we've experienced in the last seven years.

We see segment margins ranging between 6.8 and 7.2% led by continued execution from our gas distribution and industrial operations.

As we've discussed in years past, our first quarter traditionally has lower activity in our gas distribution business due to weather seasonality, which impacts our revenues and pressures margins. Accordingly, we expect first quarter margins in the lower single digits with improvement in the second and third quarters than seasonally declining in the fourth quarter.

We expect our corporate and unallocated segment to represent costs of approximately 2.8% of revenues, which includes estimated amortization and stock based compensation expense of $71 million and $63 million respectively.

[Company Representative] (Quanta Services): We expect our corporate and unallocated segment to represent costs of approximately 2.8% of revenues, which includes estimated amortization and stock-based compensation expense of $71 million and $63 million, respectively. These segment operating ranges support our expectation for 2020 annual revenues of $12.2 billion to $12.6 billion and adjusted EBITDA, a non-GAAP measure, of between $1.03 and $1.12 billion. This represents 14% growth at the midpoint of the range when compared to 2019 adjusted EBITDA, with 2020 revenues currently estimated to grow less than 3% at the midpoint. With these operating results, we estimate our range of GAAP diluted earnings per share attributable to common stock for the year to be between $2.93 and $3.33, and anticipate non-GAAP adjusted diluted earnings per share to be between $3.62 and $4.02, which represents the first time the company has included $4 of adjusted earnings per share in its adjusted EPS guidance.

Derek Jensen: We expect our corporate and unallocated segment to represent costs of approximately 2.8% of revenues, which includes estimated amortization and stock-based compensation expense of $71 million and $63 million, respectively. These segment operating ranges support our expectation for 2020 annual revenues of $12.2 billion to $12.6 billion and adjusted EBITDA, a non-GAAP measure, of between $1.03 and $1.12 billion. This represents 14% growth at the midpoint of the range when compared to 2019 adjusted EBITDA, with 2020 revenues currently estimated to grow less than 3% at the midpoint. With these operating results, we estimate our range of GAAP diluted earnings per share attributable to common stock for the year to be between $2.93 and $3.33, and anticipate non-GAAP adjusted diluted earnings per share to be between $3.62 and $4.02, which represents the first time the company has included $4 of adjusted earnings per share in its adjusted EPS guidance.

These segment operating ranges support our expectation for 2020 annual revenues of 12.2 billion to $12.6 billion and adjusted EBITDA, a non-GAAP measure up between 1.03 and $1.12 billion.

This represents 14% growth at the midpoint of the range when compared to 2019 adjusted EBITDA for 2020 revenues currently estimated to grow less than 3% at the midpoint.

But these operating results we estimate our range of GAAP diluted earnings per share attributable to common stock for the year to be between $2, a 93 cents and $3 in 33 cents.

And anticipate non-GAAP adjusted diluted earnings per share to be between $3.62 and $4 in two cents, which represents the first time. The company has included $4 of adjusted earnings per share and its adjusted EPS Guide.

We estimate capital expenditures of approximately $300 million and free cash flow between 400 $600 million.

[Company Representative] (Quanta Services): We estimate capital expenditures of approximately $300 million and free cash flow between $400 and $600 million. Included in our free cash flow expectation is approximately $82 million of insurance proceeds in Q1 associated with the settlement of two outstanding claims in the Pipeline and Industrial segment. Similar to recent years, it is likely that free cash flow for 2020 will be the strongest in Q4, with potential uses of cash or limited contributions in Q1, Q2, and Q3 of the year. However, various customer movements, billings and receivables timing, and other normal dynamics can create temporary and sometimes sizable quarterly movements in working capital. As we've discussed during prior investor events, our cash flow generation moves counter to our revenue growth rate. Higher revenue growth requires more working capital to support the growth.

Derek Jensen: We estimate capital expenditures of approximately $300 million and free cash flow between $400 and $600 million. Included in our free cash flow expectation is approximately $82 million of insurance proceeds in Q1 associated with the settlement of two outstanding claims in the Pipeline and Industrial segment. Similar to recent years, it is likely that free cash flow for 2020 will be the strongest in Q4, with potential uses of cash or limited contributions in Q1, Q2, and Q3 of the year. However, various customer movements, billings and receivables timing, and other normal dynamics can create temporary and sometimes sizable quarterly movements in working capital. As we've discussed during prior investor events, our cash flow generation moves counter to our revenue growth rate. Higher revenue growth requires more working capital to support the growth.

Included in our free cash flow expectation is approximately $82 million of insurance proceeds in the first quarter associated with the settlement of two outstanding claims in the pipeline in industrial segment.

Similar to recent years it is likely that free cash flow for 2020 will be the strongest in the fourth quarter with potential uses of cash or limited contributions in the first three quarters of the year.

However, various customer movements billings and receivables timing and other normal dynamics can create temporary and sometimes sizable quarterly movements in networking capital.

As we've discussed during prior investor events, our cash flow generation moves counter to our revenue growth rate.

Higher revenue growth requires more working capital to support the growth.

[Company Representative] (Quanta Services): When our revenue growth moderates, our working capital stabilizes, and our cash flow increases. However, we believe the consistent, sustainable growth profile of our base business provides for repeatable levels of free cash flow generation in line with our 2020 guidance in future periods. Please also refer to our outlook summary for additional information, which can be found on our IR website at quantaservices.com. Looking back on our 2019 performance, on last year's fourth quarter call, we emphasized the significance of 2019 as it related to our 2016 strategic plan, most notably our expectation of continued EBITDA growth against the headwind of reduced contributions from larger projects across both segments. We expected almost 90% of our revenues to come from base business activities, the highest percentage in a decade, which is the approximate contribution ultimately delivered in our 2019 results.

Duke Austin: When our revenue growth moderates, our working capital stabilizes, and our cash flow increases. However, we believe the consistent, sustainable growth profile of our base business provides for repeatable levels of free cash flow generation in line with our 2020 guidance in future periods. Please also refer to our outlook summary for additional information, which can be found on our IR website at quantaservices.com. Looking back on our 2019 performance, on last year's fourth quarter call, we emphasized the significance of 2019 as it related to our 2016 strategic plan, most notably our expectation of continued EBITDA growth against the headwind of reduced contributions from larger projects across both segments. We expected almost 90% of our revenues to come from base business activities, the highest percentage in a decade, which is the approximate contribution ultimately delivered in our 2019 results.

When our revenue growth moderates, our working capital stabilizes back cash flow increases.

However, we believe the consistent sustainable growth profile of our base business provides for repeatable levels of free cash flow generation in line with our 2020 guidance in future periods.

Please also refer to our outlook summary for additional information, which can be found on our IR website at quanta services Dot com.

Looking back on our 2019 performance on last year's fourth quarter call. We emphasize the significance of 2019 as it related to our 2016 strategic plan, most notably our expectation of continued EBITDA growth against the headwind of reduced contributions from larger projects across both segments.

We expect it almost 90% of our revenues to come from base business activities, the highest percentage in a decade, which is the approximate contribution ultimately delivered in our 2019 results.

[Company Representative] (Quanta Services): Our strategic plan anticipated this Base Business demand, and over the last four years, we've taken steps to position both segments to capitalize on these dynamics, reflected in both our multi-year historical and expected revenue growth, as well as solid and expanding segment margin profiles. The continued strength of the Base Business and the predictable recurring nature of its earnings profile provided us with an opportunity in 2019 to further strengthen our balance sheet with a substantial increase in liquidity, offering more flexibility to support our strategic objectives. During the current strategic plan of 2016 through 2019, we have deployed approximately $1.1 billion in M&A and strategic investments and $513 million in share repurchases. While we acquired $20 million of common stock in 2019, we have approximately $287 million of availability remaining on our current $500 million stock repurchase program.

Derek Jensen: Our strategic plan anticipated this Base Business demand, and over the last four years, we've taken steps to position both segments to capitalize on these dynamics, reflected in both our multi-year historical and expected revenue growth, as well as solid and expanding segment margin profiles. The continued strength of the Base Business and the predictable recurring nature of its earnings profile provided us with an opportunity in 2019 to further strengthen our balance sheet with a substantial increase in liquidity, offering more flexibility to support our strategic objectives. During the current strategic plan of 2016 through 2019, we have deployed approximately $1.1 billion in M&A and strategic investments and $513 million in share repurchases. While we acquired $20 million of common stock in 2019, we have approximately $287 million of availability remaining on our current $500 million stock repurchase program.

Our strategic plan anticipated this base business demand and over the last four years, we've taken steps to position both segments to capitalize on these dynamics.

Reflected in both our multiyear historical and expected revenue growth as well as solid and expanding segment margin profiles.

The continued strength of the base business and the predictable recurring nature of its earnings profile provided us with an opportunity in 2019 to further strengthen our balance sheet with a substantial increase in liquidity offering more flexibility to support our strategic objectives.

During the current strategic plan for 2016 through 2019, we have deployed approximately $1.1 billion in M&A and strategic investments and $513 million in share repurchases.

While we acquired $20 million of common stock in 2019, we have approximately $287 million of availability remaining on our current $500 million stock repurchase program.

[Company Representative] (Quanta Services): Our first capital priority remains supporting the growth of our business through working capital and capital expenditures. However, we remain committed to the deployment of remaining available capital to shareholders through our dividend and share repurchase programs and opportunistic acquisitions. Overall, we remain confident in the strength of our operations, our prospects for profitable growth, and the repeatable and sustainable nature of our core markets. We've developed a platform for Quanta to capitalize on the trends driving the spend in our end markets, and we firmly believe delivering base business solutions through world-class craft-skilled labor, opportunistic larger project deployments, and continued balance sheet strength will be the key to delivering long-term shareholder value. This concludes our formal presentation and will now open the line for Q&A. Operator. Thank you. At this time, we'll be conducting a question and answer session.

Derek Jensen: Our first capital priority remains supporting the growth of our business through working capital and capital expenditures. However, we remain committed to the deployment of remaining available capital to shareholders through our dividend and share repurchase programs and opportunistic acquisitions. Overall, we remain confident in the strength of our operations, our prospects for profitable growth, and the repeatable and sustainable nature of our core markets. We've developed a platform for Quanta to capitalize on the trends driving the spend in our end markets, and we firmly believe delivering base business solutions through world-class craft-skilled labor, opportunistic larger project deployments, and continued balance sheet strength will be the key to delivering long-term shareholder value. This concludes our formal presentation and will now open the line for Q&A. Operator.

Our first capital priority remains supporting the growth of our business through working capital and capital expenditures. However, we remain committed to the deployment of remaining available capital to shareholders through our dividends and share repurchase programs and opportunistic acquisitions.

Overall, we remain confident in the strength of our operations, our prospects for profitable growth and the repeatable and sustainable nature of our core markets.

We've developed a platform for quanta to capitalize on the trends driving the spend in our end markets and we firmly believe delivering based business solutions through world class Crafts skilled labor optimistic larger project deployments and continued balance sheet strength will be the key to delivering long term shareholder value.

This concludes our formal presentation then we'll now open the line for QNX.

Operator.

Operator: Thank you. At this time, we'll be conducting a question and answer session.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

[Company Representative] (Quanta Services): If you'd like to ask a question, please press star one on your telephone keypad. We ask that you please limit to one question and one follow-up, then re-queue. In confirmation tone, we'll indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question comes from Noelle Dilts with Stifel. Please proceed with your question.

We ask that you please limit to one question and one follow up then re queue.

The confirmation tell indicate your line is in the question Q you May press star to if you'd like to remove your question from the Q.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.

My first question comes from Noelle Dilts with Stifel. Please proceed with your question.

Hi, guys, good morning, and congrats on the quarter and cash flow.

[Analyst] (IRA): Hi, guys. Good morning and congrats on the quarter and the cash flow.

Noelle Dilts: Hi, guys. Good morning and congrats on the quarter and the cash flow.

Duke Austin: Good morning.

Good morning.

[Analyst] (IRA): So the first question's just a little bit of a clarification. On the electric side of the business with the fire hardening headwind that you're anticipating, so with the second half ramp that you're baking into guidance, is that contingent upon PG&E getting through the bankruptcy process and some of their fire hardening work coming back, or is this work with other customers that you've picked up that you expect to accelerate?

So the first question's just a little bit of a clarification. On the electric side of the business with the fire hardening headwind that you're anticipating, so with the second half ramp that you're baking into guidance, is that contingent upon PG&E getting through the bankruptcy process and some of their fire hardening work coming back, or is this work with other customers that you've picked up that you expect to accelerate?

So first question is just a little bit of a clarification in terms on the electric side of the business with the.

Fire hardening headwind that you are anticipating.

So with the second half ramp that you bet, you're baking into guidance is that contingent upon PG any getting to the bankruptcy process and some of their prior hardening work coming back or is this work with other customers that you've picked up that you expect to accelerate.

Duke Austin: Yeah, Noelle Dilts. I think what you're saying is just some seasonality in the business. When we were talking about the electric side, we are talking seasonality in the first quarter due to the pull-down of LatAm impact, which Derek talked about, as well as some of the crew movement in the west. Let me talk a little bit about it. I think what you're seeing there is we just have movement there in the first quarter and the fourth quarter that's not normal in the business. If you go back and you look at what we've done in America, last year we were at double digits in the electric segment. Next year we'll be at double digits. For the last 10 years, we've been at double digits on a cumulative basis. You'll see that this year. It doesn't matter what PG&E does or not.

Yes, I noticed you got I think what your sand is just some seasonality in the business. Some when we're talking about the electric side, we are talking seasonality in the first quarter due to the pull down of Lat am impact, which Derek talked about as well as some of the crew movement in the West Let me talk a little bit about it I think what what you're seeing.

And there as we just have movement, there and the first quarter in the fourth quarter, that's not abnormal in the business and if you go back and you look at what we've done and.

America.

Last year, we were at double digits and the electric segment next year will be a double digits and for the last 10 years, we've been a double digits on accumulate basis, you'll see that this year. It doesn't matter, what PGT does or not we're certainly working with them. It is creating some lumpiness the way we move our crews is not normal but.

Duke Austin: We're certainly working with them. It is creating some lumpiness. The way we move our crews, it's not normal. But when you look at the opportunity that's there, the $37 billion that I didn't see a note on, so we kind of want to see that every now and then, but against PG&E, that they are talking about spending over the next decade, it's significant. And I think we need to be there. We're around the edges there, and it's certainly a great opportunity as we go forward over the coming years of our base business. So that's just a little bit of what's going on. So to answer your question, no, it doesn't matter.

Good.

When you look at the opportunity that's there to $37 billion that I didn't see a note on so we kind of we'll see that every now and then but against Pgxone that they are talking about spending over the next.

Decade.

Significant and I think we need to be there were around the edges Aaron its certainly a great opportunity as we go forward over the coming years of our base business. So that's just a little bit of what's going on so to answer your question no it doesn't matter.

[Analyst] (IRA): Okay. Great. That's helpful. And then shifting over into Pipeline and Industrial, the margins there have, I think, everyone's been pleased to see the margins really start to come through there on the Base Business. One of the things you guys have talked about a lot in the past is that as you kind of expanded the business regionally, it resulted in some costs that you then had to kind of see the volume come through to leverage those costs. Where would you say you are in that process? Is there still some opportunity there to get some additional leverage on these regional operations? And if there's any way you can kind of quantify how much more opportunity you think there may be, that would be helpful.

Okay. Great. That's helpful. And then shifting over into Pipeline and Industrial, the margins there have, I think, everyone's been pleased to see the margins really start to come through there on the Base Business. One of the things you guys have talked about a lot in the past is that as you kind of expanded the business regionally, it resulted in some costs that you then had to kind of see the volume come through to leverage those costs. Where would you say you are in that process? Is there still some opportunity there to get some additional leverage on these regional operations? And if there's any way you can kind of quantify how much more opportunity you think there may be, that would be helpful.

Okay, Great that's helpful.

Then shifting over.

Into into pipeline and industrial.

Margins there have.

I think I think every once in place to see the margins.

Really start to come through there on the base business one of the things you guys have talked about a lot in the past is that as you kind of expand and extended the business regionally resulted in some cost that you then had to kind of see the volumes come through to leverage does cost where would you say you are in that process is there's still some opportunity there to get some additional leverage on.

On these regional operations and if Theres any way you can kind of quantify how much more opportunity you think that maybe that would be helpful.

Duke Austin: Yeah. I think when you look at those businesses, we've done a really nice job of creating margin enhancement year over year. Even our guidance this year, you see somewhat of a 7 handle on it. I really like where we're at. It was a strategy. It was an approach to be more sustainable and deliver those results over time. Our Northeast expansion certainly enhances that. It gives us a nice platform there on that piece of work. And we needed that to really kind of go with the rest of the margins. As far as what the opportunity is, we've talked about getting them in the upper single digits. I think that's still the goal of the company and actually to operate the whole business in double-digit Adjusted EBITDA. So when we think about it, certainly there's some improvement there. We're working on it.

Yes, I think when you look at those businesses, we've done a really nice job of creating margin enhancement year over year, even our guidance two series to somewhat of southern handle on it.

I'd really like what we're at a like it's it was a strategy. It was an approach it's to be more sustainable and deliver those results over time, our northeast expansion certainly enhances that gives us a nice platform there on that piece of work and we needed. That's a really kind of go with the rest of the margins as far.

As what the opportunity as we've talked about getting amend the upper single digits I think thats still the goal the company and actually to operate the whole business and double digit adjusted EBITDA. So when we think about it certainly there is some improvement there were working on it as you get scale and those offices, if we get synergies out of the northeast and the things that we're doing that we really like the bill.

Duke Austin: As you get scale in those offices, as we get synergies out of the Northeast and the things that we're doing there, we really like the business, and we do think it's sustainable, which is what was important to us: is to make sure that that is repeatable and sustainable going forward. So we like where we're at. Opportunities are good, and we continue to see multiple utility customers with large CapEx spends going out 30 years.

And this and we do think it's sustainable which is what was important to US is there to make sure that that is repeatable and sustainable going forward. So we like corot opportunities are good and we continue to see multiple utility customers.

Large capex spends going out 30 years.

Great. Thank you.

[Analyst] (IRA): Great. Thank you.

Great. Thank you.

Our next question comes from Andy Kaplowitz with Citi. Please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Andy Kaplowitz with Citi. Please proceed with your question.

Kip Rupp: Good morning, guys. Good cash. Just trying to think about your 2020 pipeline and infrastructure business. You mentioned the $700 million headwind from LargePipe. I think you said that you expect LargePipe to be the lowest in seven years. We obviously understand that ACP could be upside. But can you give us color on whether you think the $500 million could represent a trough or maybe a conservative estimate at this point? Or if ACP doesn't move forward, we should still be worried that that $500 million could go down in subsequent years.

Good morning, guys good cash.

You just can you just trying to think about your 2020 pipeline infrastructure business you mentioned, the 700 million headwind from large pipe.

I think he said.

We expect to launch Pike Lois in seven years, we obviously I understand that HCP to the upside can give us color on whether you think the 500 million could represent a child or may be conservative estimate at this point or it could be done all forward.

We should still be worried that that's 500 could go down in subsequent years.

Yes, I think when we look at the 500 million so less than 5% of the business.

Duke Austin: Yeah. I think when we look at the $500 million, it's less than 5% of the business. We talk about it quite a bit, but I would say, from my standpoint, we're good with the numbers. We're good with the midpoint. There is opportunities for us to grow. Our larger diameter pipe, greater than $500 million, they're out there. Certainly, we see that as a minimum this year. We believe we can book that. I would tell you, in our mind, if they're not doing that, they can do sub-large diameter projects on low-pressure distributions. Still, that equipment can be utilized in other places, but I'm opportunistic on that. But what I will say is the business itself, if you look at it and look at what we're doing, we're really executing against a backdrop of utility spend.

We talk about it quite a bit but I would say from my standpoint, we're good what we're doing with the numbers one deal at the midpoint there is opportunities for us to grow our larger diameter pipe greater than 500 million they're out there.

Certainly we see that as a minimum this year, we believe we can book that.

I would tell you it doesn't in our mind, if they're not doing that they can do sub large diameter projects on low pressure distribution still that equipment can be utilized in other places, but im opt to opportunistic on that but what I will say is the business itself. If you look at it and look at what we're doing we're really.

The executing against the backdrop of utility spend on if you go to slide nine of the other slides provided you can see some of our customers in what what the impact of that is both gas and electric that's the backdrop of this company and 90% of the backlog is that and it continues and we continue to see that growth we talked.

Duke Austin: If you go to slide 9 of the slides provided, you can see some of our customers and what the impact of that is, both gas and electric. That's the backdrop of this company, and 90% of the backlog is that. It continues, and we continue to see it grow. We talked about it growing 8%. We don't need large diameter pipe to grow this business. It just layers on top with the other opportunities that are out there, such as Keystone, Puerto Rico, other things like that that would layer on top of your 90% base business.

About a growing 8%, we don't need large diameter pipe to grow this business. It just layers on top with the other opportunities are out there such as Keystone, Puerto Rico other things like that that would layer on top of your 90% based business.

That's helpful give good then Gary keeping up strong cash flow in the quarter.

Kip Rupp: That's helpful, Dilts. And then, Derek, keeping a strong cash flow in the quarter, $600 million. We know you always have a strong Q4, but you did beat your own estimate. I know you got Fort McMurray retainage, but did you do anything differently in terms of the focus on collections? And does it give you more confidence, the strong Q4, that you will deliver consistently in that 40% to 50% of adjusted EBITDA range moving forward?

600 million and what we know you always have a strong Q4, but you did behavioral underestimated.

I know you've got 4.8 inch but do you think differently in terms of the focus on collections and give you more confidence the strong king for that you'd go we will deliver consistently in that 40% to 50% of adjusted EBITDA range moving forward.

Nothing unique to the way that we are operating the business I mean, we did have some delays in dsos there into the second and third quarter, we did say that we would.

Duke Austin: Nothing unique to the way that we are operating the business. I mean, we did have some delays in DSOs there in Q2 and Q3. We did say that we would have every expectation that we'd see improvements of that into Q4, maybe drifting a little bit. We were able to achieve almost all that improvement here into Q4. Reality, though, is that you can see that it's really bringing us back into kind of just normal levels. I mean, we ran into about an 80-day DSO. That's really effectively what we've averaged over quite some period of time. So I'll tell you that it's really returning effectively to just normal operations. On a go-forward basis, we will still always try to strive to have the DSOs be lower than that. We achieved that last Q4, as an example.

I have every expectation that we'd see improvements of that into the fourth may be drifting a little bit we were able to achieve almost all of that improvement here in the fourth.

Reality, though is that you can see that it's really bringing it back into kind of just normal levels. I mean, we ran into about an 80 to 80 or so thats really effectively what weve averaged over quite some period of time. So I'd tell you is it is really returning effectively to just normal operation on a go forward basis.

Me that we will still always tried to strive to have the dsos be lower than that we achieved that last fourth quarter as an example.

Duke Austin: But as we look at 2020 right now, I think that we're probably still yet to be having an overall expectation of, call it, an 80-day range, maybe a little higher, maybe a little lower if we're still yet able to bring some level of improvement into it. One other thing, though, that's unique to the Q4, a little bit of the strength of it came. We had some accelerated retainage collections as well, not just from the Fort McMurray, which we called out last time, but we had some pipeline balances that we thought might drift into the Q4 of 2020. And we were able to get through the execution and work with the customer to get some of those balances collected here in the Q4. So that was a little bit of an uptick there.

But as we look at 2020 right now I think that will probably still yet to be having an overall expectation of call. It an 80 day range, maybe a little higher maybe a little lower if we're still yet able to bring some level of of.

Moving into it one other thing, though that unique to the fourth quarter little bit of the strength of it came we had some accelerated retainage collections as well not just from the important Murray with recall that last time, but we had some pipeline balances that we thought might drift into the fourth quarter 2020.

We are able to get to the execution and the customer to get some of those balances collected here in the fourth quarter. So that was a little bit of an uptick there but overall.

Duke Austin: But overall, just good, solid focus on continuing to try to bring the cash in the door.

Just good solid focused on continuing to try to bring cash under.

Thanks, guys. Thanks Glenn.

Kip Rupp: Thanks, guys. Next quarter.

Duke Austin: Thank you. Thanks.

Thank you thanks.

[Company Representative] (Quanta Services): Our next question comes from Sean Eastman with KeyBank Capital Markets. Please proceed with your question.

Our next question comes from Sean Eastman with Keybanc capital markets. Please proceed with your question.

Duke Austin: Hi, team. Congrats on a strong finish there, and thanks for taking my questions. First one from me, just on the comment around the opportunity to achieve record backlog again in 2020. I'm just curious whether that contemplates some mega projects coming in, maybe on the transmission side, or whether that can be achieved just through base business bookings and maybe just some color on the real big pockets of strength within those base business buckets. Yeah. I think if you look at it, I mean, we gave you some representation of what's going on. All of our utility customers are increasing their CapEx year-over-year to facilitate the modernization of the systems or the hardening of the systems, if you're interconnecting renewables and those type of things as well.

Hi, Jim Congrats on a strong finish there.

And thanks for taking my question.

First one for me just on the comment around the opportunity to achieve record backlog again in 2020, I'm, just curious whether that contemplate some mega projects.

Coming in maybe on transmission on the transmission side or whether that can be achieved just through based business bookings and maybe just some color on the real.

Big pockets of strength within those base business buckets.

I think if you look at it I mean, we gave you some representation of what's going on all of our all of our utility customers are increasing their capex on year over year to facilitate the modernization of the systems or the hardening of the systems.

If you're interconnecting renewables and those type of things as well, we just see broad base. The gas the same thing on the gas out of the business continued.

Duke Austin: We just see broad-based, the gas, the same thing on the gas side of the business, continued spending to modernize. It's just an ongoing thing that we're in the middle of. We have some attrition going on within our utility customers. It's allowing us to grow our business there. We are seeing an uptick in large projects on the electric side. The gas side remains decent. Our Canadian operations, it's certainly coming back. We're seeing things there. But I don't think you need some mega project to grow our backlog. Those ones that are announced in Canada are 24, 36 months. The burn on them's not great. So in my mind, we can increase it through our MSA renewals, new customers, new service lines that we're doing organically.

Spending to modernize.

It's just an ongoing thing that's that were in the middle of but we have some attrition going on within our utility customers, it's allowing us to grow our business there.

We are seeing an uptick in large projects on the electric side, the gas side remains decent where our Canadian operations. It's certainly coming back we're seeing things there, but I don't think you need some mega project to grow our backlog those those ones that are announced in Canada, or 24, 36 months to burn on items not.

Great. So in my mind, we can increase it through RMS say renewals new customers New service lines that were doing organically and just.

Duke Austin: Just for us, the opportunities that are out there that we see. We believe we can grow backlog in 2020 and beyond.

Yes, the opportunities are out there that we see we believe we can grow backlog in 2020 and beyond.

Very helpful and one for you Derica, if we look at the free cash flow guidance for 2020 pretty good number there just just wondering if theres any sort of discrete items to hit that.

[Company Representative] (Quanta Services): Very helpful. And one for you, Derek. If we look at the Free Cash Flow guidance for 2020, pretty good number there. Just wondering if there's any sort of discrete items to hit that or whether things like potentially getting some recoveries around those crew bonds, etc., could be upside to the outlook you've laid out there.

Our weather.

Things like potentially getting some recoveries around those through bonds et cetera could be upside to.

Yes, it look you've laid out there.

Kip Rupp: Yeah. So in my prepared remarks, I commented that Q1 does have a degree of some insurance proceeds coming into it. Beyond that, though, there's nothing unique and usual. As it stands, we have not forecasted anything associated with the recollection of any of the outflows for crew or the bonds. So the rest of it is just the dynamics of the way the model works relative to the working capital against those revenue growths.

Yes. So in my prepared remarks, I commented that the first quarter does have a degree of some insurance proceeds coming into it.

The beyond that though theres nothing unique in usual, whereas as it stands we have not forecasted anything associated with the recollection of any of the.

For us for per where the bonds. So the rest of it is just the dynamic that.

The way the model works relative to the working capital against those revenue growth.

[Company Representative] (Quanta Services): Excellent. Thanks very much for the time.

Excellent thanks, very much of the time.

Duke Austin: Thank you. You bet.

Thank you.

Our next question comes from Steven Fisher with UBI as please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Steven Fisher with UBS. Please proceed with your question.

Derek Jensen: Great. Thanks. Good morning, guys. Just starting off on Latam and the exits, just can you give us some more thinking around the timing assumption there? And could that loss potentially be less depending on when you wrap it all up? And what's the risk that it's more? And kind of what are the options on how you approach that exit?

Great. Thanks, Good morning, guys, just starting off on last time and the exit just can you give us some more thinking around the timing assumption there.

To that loss potentially.

The last depending on when you wrap it all up.

And what's the risk that it's more and then can order the options on how you approach that exit.

I think we looked at I looked at our portfolio going into next year, we felt like it was prudent to ring fencing talk about what the guide was and pull it out of.

Duke Austin: Yeah. I think we looked at our portfolio going into next year. We felt like it was prudent to ring-fence it, talk about what the guide was, and pull it out, at least give you some idea of what we're talking about there. In Q1, we're closing offices and doing some things like that. So you just have lease expenses, things of that nature. There is opportunity to claw some of that back if we sell some assets, countries, things like that. The business is in those. So there is some opportunities to claw that back. I don't think, from my standpoint, what we see today, that's it. You see it. That's kind of our look at it. We believe we can kind of close that down within the 12 months. We do feel confident in our position there on the arbitration.

At least give you some idea of what we're talking about there in the first quarter were closing offices and doing some things like that to sub lease expenses.

On things of that nature, there is opportunity to call some of that back if we sell some.

Assets countries things like that the businesses in those so there is some opportunities to call claw that back I don't think from my standpoint, what we see today. That's it you see it that's kind of our look at it.

We believe we can kind of close out down within a 12 months, we do feel confident in our and our physician there on the arbitration it will take 24 months.

Duke Austin: It will take 24 months or longer to get that money, but we do believe we will get that. So we're cognizant of that as we go in and start early closing down Latam. But it was certainly something that we needed to talk to the investment community about and ring-fence it and go on with the rest of our business. So that's been done. We feel like we're in a good spot there, and we'll continue to move forward on the rest of the business.

Our longer to get that money, but we do believe we will get that so we were cognizant of that as we go in and start orderly on closing down loud and but it was certainly something that we needed to talk to.

The investment community about and ring fencing.

Go on with the rest of our business. So that's been done we feel like we're in a good spot there and we'll continue to move forward on the rest of the business one additional bit of clarification is that there are no additional costs associated with unique per project itself. These are all just associated with that Latin America overall, and the primary pieces that will be in first quarter.

Kip Rupp: One additional bit of clarification is that there are no additional costs associated with the unique crew project itself. These are all just associated with the Latin America overall.

Duke Austin: The primary piece of that will be in Q1.

Derek Jensen: Okay. And then just on the revenue guidance, clearly, you had very strong backlog growth, more than 20% year-over-year. Seems like the guidance should maybe be a little bit better than the 2% to 3% midpoint growth. I know you commented in the prepared remarks about wanting to be prudent, which makes sense. Is there anything, though, that's specific that you're concerned about incorporating into the outlook that you've tried to kind of put a little more conservative view on?

Okay, and then just on the revenue guidance clearly you had very strong backlog growth.

More than 20% year over year.

It seems like the guidance should maybe a little bit better than the 2% to 3% midpoint growth I know you commented in the prepared remarks about wanting to be prudent.

Which makes sense is there anything those specific that youre concerned about incorporating.

Into the outlook that you've tried to.

Kind of put a little more conservative view on.

I think if you go up year over year over the last four years, we've tried to be prudent on our guidance and we will continue to do so I think we took a good look I will we had an opportunities are out there give you a top top side other than.

Duke Austin: I think if you go year over year, for the last four years, we've tried to be prudent on our guidance, and we will continue to do so. I think we took a good look at what we had, and opportunities that are out there give you a top side of it. And we've normally beat the midpoint, and we'll continue to work hard at doing that this year. The opportunities for us on the larger diameter work or the bigger work is certainly there. We're going to take a risk profile that we always have and make sure that the risk of those projects don't degrade the rest of the company. So we're doing well underneath it. We can grow it. The opportunity for us to grow is certainly there past the midpoint.

We normally beat the midpoint.

We will continue to work hard to doing that this year's opportunities for us.

On the larger diameter work or the bigger work is certainly there we're going to take a risk profile that we always have and make sure that the risk.

Those projects don't granted the rest of the company. So we are doing well underneath that we can grow at the opportunity for us to grow certainly their past midpoint, but I feel like as we start the year, we have some contingency built in our Canadian projects and things of that nature.

Duke Austin: But I feel like, as we start the year, we have some contingencies built in on our Canadian projects and things of that nature, like we always would. So that'll press margins a bit on the Canadian side. But on a go-forward basis, it really looks good for the next two or three years on the Canadian side because we have those things there, and I believe we'll execute through some of those contingencies over the next 24 months. But as we start it, we'll be prudent about it. We'll also be prudent about the guide on big pipe. Look, when we look at it, we take a risk-adjusted approach to it. If we win it, we win it. If we don't, we don't. We're happy either way. But we're after all those opportunities to move forward.

Like we always wood, so that'll press margins a bit on the on the Canadian side, but on a go forward basis. It really looks good for the next two or three years on the Canadian side, because we have that those things there and I believe we'll execute through some of those contingencies over the next 24 months, but as we start it will be prudent about it will also be prudent about the guide on day.

Pipe.

Look I went out when we look at it we take a risk adjusted approach to it if we win it we when and if we don't we don't we're happy either way.

So, but we're after all those opportunities will move forward.

Derek Jensen: Terrific. Thanks a lot.

Terrific. Thanks, a lot.

Our next question comes from Jamie Cook with Credit Suisse. Please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Jamie Cook with Credit Suisse. Please proceed with your question.

Jamie Cook: Hi. Good morning. Nice cash flow and guide with a 4 on it, Derek, with a 4 handle. I guess 2 questions. One, understanding your guidance is conservative, and we're not assuming ACP is in there. Given the news over the past week or so, can you just provide an update on how you think about the probability of the project moving forward? And then can you remind us sort of of what type of ramp, you know what I mean, that could potentially have or impact on 2020, assuming that does go forward? And then just, I guess, we'll start there, and then I'll ask my follow-up question.

Hi, good morning, and nice cash flow and guide with us for on Derrick beforehand.

I guess Q question two questions. One I understand your guidance is conservative anymore, not assuming HCP is in there given the news over.

Over the past week or so can you just provide an update on how you think about the probability that project moving forward and they can you remind us sort us.

What type of ramps.

You mean that that could potentially have or impact on 2020, assuming that does go forward and then just.

You know I guess, we'll start there and then my follow up question.

Duke Austin: Yeah, Jamie, it's Dilts. I don't think even if ACP got approved in June, I don't think it'd have meaningful contribution this year. I think it's primarily in 2021 in my mind. Like I said, the opportunities are out there for other work, other kinds of work with our utility customers. So I'm confident that we'll stay busy. And you can see the margin improvement on the guide. There's opportunities past that. Like we said, our goal is to get an upper single digit, and we're doing everything necessary to get scale all these offices and get us there over time.

Afternoon still got on auto think even if it's if you got to prove in June I don't think you'd have meaningful contribution. This year I think it's primarily a good primarily in 21 in my mind.

Like I said the opportunities are out there for other work other common to other kinds of work with our utility customer. So I'm confident that will stay busy and you can see the margin improvement on the guide there's opportunities on past that like we said were our goal is to get an upper single digits tumor, we're doing everything necessary to get scale. These offices and get us there over time.

And then just on the communicate can the communications business actually had nice gross fair. This year can you just talk about whether at that business is requiring any sort of investment on your part to get ready for the ramp and just your broader view on on how Fiveg.

Jamie Cook: And then just on the communications business, obviously, you had nice growth there this year. Can you just talk about whether that business is requiring any sort of investment on your part to get ready for the ramp and just your broader view on how 5G ramps? Thank you.

Thank you.

Duke Austin: Yeah, Jamie. I think when we looked at the communication business, we see the opportunity there. It's certainly there. We took a prudent approach to getting in it. We didn't go into the major cities. We felt like there was a lot of risk there, so we stayed in the tier two cities. As that burns off and the rest of the backlog starts to move in this year, I feel certainly that we can operate at parity. We're doing that in the field today. The opportunity is greater as we prove out our abilities to take on complex projects with these customers. We're used to EPC. We're used to permitting risk. We're used to those kind of risks within the cities.

As Jamie I think when we look to communicate the communication business we do.

We see the opportunity there certainly there when you took a prudent approach to getting unit. We didn't go into the major cities. We felt like there was a lot of risks there. So we stayed in those tier two cities.

As as that Burns off and the rest of the backlog starts to move in.

This year I, Phil certainly that we can operate at parity, we're doing that in the field today the opportunities greater as we prove out our abilities to take on complex projects with these customers are you CPC reached the permitting risks are used to those kind of risks with within the cities in our and our offices are located all across North America soda.

Duke Austin: Our offices are located all across North America, so it allows us a real backdrop for the customers on the communication side to rely on us for the big programmatic spend that's coming up on both small cells and fiber. We're working with them. We like our opportunity, and we do think we can get into the billion-dollar range like we talked about in the medium to short term here.

Allows us a rule.

Backdrop for for the customers you on the communication side to rely on us for the big programmatic spend that's coming up on both small cells and fiber. So we're working with them, we like our opportunity and when we do think we can get into $1 billion range like we talked about the niche in the medium to short term.

Turn here.

Okay. Thanks for the color.

Jamie Cook: Okay. Thanks for the color.

Yes.

Our next question comes from Michael Dudas.

[Company Representative] (Quanta Services): Our next question comes from Michael Dudas with Vertical Research Partners. Please proceed with your question.

Vertical research partners. Please proceed with your question.

Michael Dudas: Good morning, gentlemen.

Good morning, gentlemen.

[Company Representative] (Quanta Services): Morning.

Morning.

Duke Austin: Morning.

Morning.

Duke winners talking about you certainly you mentioned by the hardening efforts out in California, and the ramp that we are seeing 2020, maybe you could also elaborate on somebody other bigger customers are the mindsets of utilities are the public utility commissions on.

Michael Dudas: Dilts, when you were talking about you certainly mentioned about the hardening efforts out in California and the ramp that we're going to see in 2020. Maybe you could also elaborate on some of the other bigger customers or the mindsets of the utilities or the public utility commissions on pushing those types of projects and maybe seeing a little more acceleration into 2020, into 2021, and beyond, given there was such visibility with that regarding in 2019. Is that still momentum there, and are you positioned to benefit from that maybe better than you would have anticipated?

Pushing those types of projects and.

Maybe seeing a mill more acceleration into 2020% 21 and beyond.

Given there was a such visibility with that regarding in 2019 is that still momentum there and are you positioned to benefit from the that maybe better or better than you would anticipate.

I think the companies in a great position as far as the hardening efforts to the west we certainly have the resources in the capabilities. There it's complex environment and California is even in the west. So when we look at it we're right in the middle level, we've talked to him on a daily basis, the opportunities multi year, even decades of work there.

Duke Austin: I think the company's in a great position as far as the hardening efforts to the west. We certainly have the resources and the capabilities there. It's a complex environment in California, even in the west. So when we look at it, we're right in the middle of it. We talk to them on a daily basis. The opportunity is multi-year, even decades of work there. So we'll approach it that way. It certainly starts a little slow and then ramps. So we will get to some normalization, I believe, by the end of the year there. If it's not there, we still see the southeast, quite a bit of work, the northeast. It doesn't really matter where you're at. The modernization that's necessary for electric vehicles just in general across our utility base is necessary.

There so we'll we'll approach it that way.

Certainly starts a little slow and then ramps. So we will get to some normalization I believe by the ended the year there.

It's not there we use we still see the southeast.

Quite a bit of where the northeast it doesn't really matter, where you're at the modernization that's necessary for electric vehicles, just in general across our utility based as necessary, we talked about the 8% growth of their capex over time, and and Thats certainly across the board and they.

Duke Austin: We talk about the 8% growth of their CapEx over time, and that's certainly across the board. They also have attrition going on as well, which we're helping out there and collaborating with our customers. We like our end markets. We're in the right position. We've talked about it. We've shown the growth over the past 4 years against that backdrop of, call it, $130 to 160 billion worth of CapEx, OpEx year over year that's growing at 8%. We really like that as a base and in our backdrop against it.

I also have attrition going on as well, which were helping out there and collaborating with our customers. We like our end markets. We're in arrive position. We've we've talked about it we've shown the growth over the past four years against that backdrop of call. It 130 $160 billion worth a capex opex year over year, that's grown at 8%, we really like that as a.

Basin, and our backdrop against that.

Well said do can my follow up is.

Michael Dudas: Well said, Dilts. My follow-up is, as you're looking at your allocation plans going forward, you mentioned, I guess, about $400 million in combined acquisitions. I guess Hallen was a big part of that. How do you see 2020 as that moves forward? Are there areas, regions, skill sets, and markets that you're targeting towards? And would we be surprised to see something that would be lower than that type of number you put up for that in 2019?

As you looking at your.

Allocation plans going forward, you mentioned I guess about 400 million and combine acquisitions I guess, how how long was a big part of that.

How do you see 2020 as that moves forward are there areas regions skill sets and end markets that you look you're targeting towards and we'd be surprised to see something that would be lower than that type of number you put up and from for that 29.

I think when we look at acquisitions, we don't look at them is eminent.

Duke Austin: I think when we look at acquisitions, we don't look at them as imminent. We do see some reports about building earnings in the future on those acquisitions. We do not do that. We're opportunistic. We have an approach. We have, from my mind, a way that we go about it. The acquisitions, we can't really predict when they come in. So we don't know what this year will bring. There's certainly opportunity for us to acquire out there to match our strategic needs. But I don't see we'll look at capital, as I said before, against our stock price to make sure that whatever we do is accretive against our stock. So that being said, and our working capital needs going forward. So the allocations haven't changed. There's certainly opportunities, but none of them are imminent.

We do see some reports about building earnings in the future on those acquisitions, we do not do that we were opportunistic we have an approach we have from our mind a lay that we go about it they the acquisitions, we can't really predict when they come in so we.

We don't know what this year will bring theres certainly opportunity for us to acquire out there to match, our strategic needs, but I don't see out we'll look at capital as I've said before against our stock price to make sure that whatever we do is accretive against our stock so that being said in our working capital needs going for.

Sure. So the allocations haven't changed there's certainly opportunities, but none of them are imminent.

Understood I appreciate that thanks.

Michael Dudas: Understood. I appreciate that. Thanks, Dilts.

Duke Austin: Sure.

Sure.

Our next question comes from Blake Hirschman with Stephens. Please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Blake Hirschman with Stephens. Please proceed with your question.

Justin Hauke: Yeah. Thanks. Good morning, guys.

Hi, Thanks, Good morning, guys.

Michael Dudas: Morning, Blake.

[Company Representative] (Quanta Services): Morning.

Good morning, just a quick question for me.

Justin Hauke: Just a quick one from me. On ACP, can you give us any rough idea as to what percentage of the overall job has been done to date?

Can you give us any rough idea as to what percentage of the overall job.

To date.

Yes, we really don't talk about John job by job bases in specialty one that doesn't really drive anything this year.

Duke Austin: Yeah. We really don't talk about job-by-job basis, especially one that doesn't really drive anything this year. In my mind, I don't have a comment on it. We don't keep track of it like that. We have certainly a significant amount left to go.

In my mind.

Just I don't have a comment on it we don't keep track of it like that we have certainly a significant amount left to go.

Alright.

Justin Hauke: All right. That works. And then on the buyback, there's a good amount left under the authorization. Is there any reason to think you wouldn't be looking pretty hard at kind of buying back your stock here?

On the buyback.

Hi, good amount.

Under the authorization.

Is there any reason to thank you wouldn't be looking pretty good buyback your stock here.

Certainly we don't think devaluation is what it should be.

Duke Austin: Certainly, we don't think the valuation is what it should be. In our mind, we continue to talk about what we've done as a company, what we believe we can do going forward, the macro markets, what our utility customers are doing, what 90% of our business is doing. So as we look at it, if we see the opportunities, you can look at our history. We've leaned into it. We have no problem leaning into it on a go-forward basis, and we'll do so if necessary.

And our mine we continue to talk about what we've done as the company. What we believe we can do going forward the macro markets, what our utility customers are doing what 90% of our business is doing so as we look at it if we see the opportunities you can look at our history, we leaned into it we have no problem leaning into it on a go forward basis, and we'll do so nothing.

Sir.

Got it that's it for me thanks.

Justin Hauke: Got it. That's it for me. Thanks.

Our next question comes from Brent Salmond with D.A. Davidson. Please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Brent Thielman with D.A. Davidson. Please proceed with your question.

Great. Thanks, Congrats as well, yes, I just had one I think most my questions have been asked but little bit more bigger picture you've talked in the past about the number of utilities that continue to perform services in house and when you look at.

Derek Jensen: Great. Thanks. Congrats as well. Yeah, I just had one. I think most of my questions have been asked, but a little bit more bigger picture. You've talked in the past about the number of utilities that continue to perform services in-house. And when you look at sort of your expanding presence in the base business, is there a way for us to think about how much of this growth is sort of going towards this outsourcing model versus market share over others that maybe have been established in these markets?

Through your expanding presence in the base business is that a way for us to think about how much of this growth is sort of going towards this outsourcing model versus market share over others, maybe been established in these markets.

I think when you look at as you continue to see outsourcing increase over time. So certainly other utility has a different model and they will always have some workforce. So when we look at it we just work with them and try to look at attrition look at their attrition help.

Duke Austin: I think when you look at it, you continue to see outsourcing increase over time. Certainly, every utility has a different model, and they'll always have some workforce. So when we look at it, we just work with them and try to look at attrition, look at their attrition, help them with their own crews as well as us. And so when we think about it, it's a collaborative effort with the industry to make sure that we have enough resources, craft skilled labor resources on a go-forward basis. Obviously, the attrition trend, the outsourcing trend has certainly been there and will remain. But that being said, they'll still do some of that work in-house over time. It's a big piece of it.

Them.

With their own crews as well as us and so when we think about it it's a collaborative effort with the industry to make sure that we have enough resources crafts skilled labor resources on a go forward basis.

Obviously, the attrition trend the outsource trend has certainly been there and will remain but that being said they'll still do some of that work in house non over time, it's a big piece of it.

Okay. Thank you.

[Company Representative] (Quanta Services): Okay. Thank you.

Sure.

Duke Austin: Sure.

[Company Representative] (Quanta Services): Our next question comes from Adam Thalhimer with Thompson Davis. Please proceed with your question.

Our next question comes from Adam Thalhimer with Thompson Davis. Please proceed with your question.

Adam Thalhimer: Hey. Good morning, guys. Can you talk about the large transmission bidding environment a little bit and what the outlook is for awards this year?

Hey, Good morning, guys can you talk about.

The large.

Transmission bidding environment, a little bit and with the outlook is for awards this year.

I think it's a robust even the underlying kind a name in the large work from our standpoint, there's there's quite a bit of work out there we're seeing it it's broad based across the board the bigger transmission.

Duke Austin: I think it's robust, even the underlying kind of not even the large work from our standpoint. There's quite a bit of work out there. We're seeing it. It's broad-based across the board. The bigger transmission, like I said, it's an uptick for us. We're seeing bigger jobs moving around. So that's a good thing, good sign. We'll layer it on top of the base business, but I expect this to be fully utilized.

So it's an uptick for us we're seeing bigger jobs moving around.

So that's good thing good sign will layered on top of the base business, but not are expected to be fully utilized.

Adam Thalhimer: Would you say that transmission bidding's kind of better today than it was a year ago?

Would you say that.

The mission Biddings.

Got it better today than it was a year ago.

I think we talked about the bigger bigger projects being more robust stride now than it has been so the opportunities there certainly bigger than they were a year ago.

Duke Austin: I think we talked about the bigger projects being more robust right now than it has been. So the opportunities there are certainly bigger than they were a year ago.

Adam Thalhimer: And then just curious, the lack of pipeline awards, is that more you guys being disciplined on price, or are the projects just not out there?

And then just curious the lack of pipeline awards.

Is that more you guys being disciplined on price or other projects just got out there.

I think the projects are there the opportunities are there I will we will just look at it from a risk profile. We went on we went them. If we if we don't we don't it's not necessary for us to to win large projects to make make our numbers. So.

Duke Austin: I think the projects are there. The opportunities are there. We will just look at it from a risk profile. We win them. We win them. If we don't, we don't. It's not necessary for us to win large projects to make our numbers. So we certainly price the risk. We see it different sometimes than others do. I don't know. From my standpoint, we'll announce them when we win them, and we have the opportunity to win a bunch.

We certainly price the risk, we see a different sometimes and others do I don't know from our standpoint, we'll announce and when we went on and we have the opportunity to win a bunch.

Our next question comes from Chad Dillard with Deutsche Bank. Please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Chad Dillard with Deutsche Bank. Please proceed with your question.

Chad Dillard: Hi. Good morning, guys.

Hi, good morning, guys.

Yep.

[Company Representative] (Quanta Services): Hey, Chad.

So I think you guys talked about.

Chad Dillard: I think you guys talked about your large project pipeline being around like $6 billion either a quarter or two ago. I was hoping you could give an update, talk about how that splits between transmission versus pipeline. I mean, I realize that these projects can be lumpy, but do you have a good sense for whether we should be expecting some of these to hit in 2020?

Large project pipeline being around like $6 billion, either a quarter two guys, hoping you could.

Given update talk about how that splits between transmission versus pipeline and I mean, I realize that these projects can be lumpy, but yes do you have I guess since for whether we should be expecting.

Some of these did in 2020.

Duke Austin: I think when you look at Quanta and you think about us from a programmatic spend standpoint and what we're doing on large projects, it's much greater than $6 billion. That number continues to grow from programmatic spends to just one-off projects. They're out there. We talked about Keystone. We talked about Puerto Rico. We talked about big fire hardening programs, 5G, how we fit there on those programmatic spends. Those are things that are big in nature and that the company's working on strategically. So when we talk about it, it's not a one-off project. Sometimes it may be $5 billion of programmatic spend over 10 years. So it's not just one project. And I think that's why we're confident in our backlog, our backlog approach, and the things that we're doing as a company underlying on the base business that's just driving all that.

I think when you look at Quanta, and you think about us and from a programmatic stunned spend standpoint, and what we're doing on large projects, it's much greater than 6 billion.

That number continues to grow from programmatic spends to just one off projects that are out there we talked about Keystone, we talked about Puerto Rico, we talked about big far Harding programs.

Fiveg, how we fit there on those programmatic spend those are things that are big nature in the company's working on strategically so when we talk about it it's not a one off projects on ponds that may be.

$5 billion of programmatic spend over 10 years. So it's not just one project and I think Thats why were.

Confident in our backlog our backlog approach and the things that we're doing as a company underlying on the base business. It's just driving all that and we continue to talk about the big ones. When we went on there are out there.

Duke Austin: We continue to talk about the big ones when we win them. They're out there.

Chad Dillard: Got it. Okay. And then so for the Hallen business, what was the organic growth in Q4? And perhaps could you just talk about how you're seeing that business on a pro forma basis evolve into 2020? And then just secondly, just to clarify on the cash flow, did I hear correctly? Basically, cash flow is going to be negative for Q1, Q2, and Q3 and then upswing positively in Q4?

Got it okay.

And then.

So for that business.

What was the organic growth in the fourth quarter, and perhaps getting just talk about.

Hi, rich.

That business on a pro forma basis evolve and into 2020, and then just just secondly, just to clarify on.

The cash flow.

Hear correctly.

Based on cash flows any negative for the first three quarters and then.

Upswing positively in the fourth quarter.

[Company Representative] (Quanta Services): I'll let Derek take the cash flow first. Yeah. So, no, I think that it's just typical kind of quarter progression that we do see, that it could be flat and/or some negative dynamics in the Q1, Q2, and Q3 with positive there in the Q4. It doesn't mean that we will be negative. It's kind of calling out the same type of dynamics we have in normal seasonality for cash flow, that growth of the business has a tendency to draw capital.

I'll, let Derek the cash flow first.

Yes, so no I think that it's just that typical kind of quarter progression that we do see that it could be flat and or some negative dynamics in the first second and third quarter with positive during the fourth doesn't mean that we will be negative. It's just it's kind of calling out the same type dynamics, we havent normal seasonality for cash for that growth of the business as the tendency to draw capital.

Duke Austin: As far as Hallen goes, we're really pleased with the company and where it sits. I think from our standpoint, it's doing better than expected or at least on track, as we discussed in the past. The management team's phenomenal. We're extremely pleased with that and what we can do there from a synergistic standpoint in future years. So we like it. We like the platform. We're extremely happy with that. And you should see that pull through there on the P&I side in the future years.

As far as time goes we're really pleased with the company and where it sits I think from our standpoint, it's doing better than expected or at least on track.

As Weve discussed in the past the management teams phenomenon, we're extremely pleased with with that and what we can do there from a synergistic standpoint and future years. So we like it we like the platform we were extremely happy with that and we should see that pull through there on the MPN aside and the future years.

Thank you.

Chad Dillard: Thank you.

Duke Austin: Sure.

Sure.

Our next question comes from Justin Hauke with Robert W. Baird. Please proceed with your question.

[Company Representative] (Quanta Services): Our next question comes from Justin Hauke with Robert W. Baird & Co. Please proceed with your question.

Justin Hauke: Great. Thanks. I've got two here. So first one, just I wanted to make sure that I had all the pieces together. It was clarified in terms of the retainage balances and the AR. You guys made good progress. You got the Fort McMurray, and it sounded like you pulled forward a little bit from one Q. Is there anything still kind of unusual in the retainage balance that would be notable to call out? And then also, what exactly is the outstanding receivables still from PG&E and Peru?

Great. Thanks, I've got two here. So first one just I wanted to make sure that.

I had all the pieces together it was clarified in terms of the retainage balances in the IR.

You guys made good progress you've got Fort Mac and it sounds like you pulled forward a little bit from one Q is there anything still.

Kind of unusual in the Retainage balance that that would be notable to call out and then also.

What exactly is the outstanding receivable still from PGT and Peru.

Yes, so no I mean retains balances move.

[Company Representative] (Quanta Services): Yes. So no. I mean, retainage balances move periodically with us in large projects. And as you move forward, the timing of those things, a lot of times, get wrapped up into when you get to the final completions or each individual final billing. As it stands here, I mean, those things are normal for us. We had actually kind of a coincidental timing that we had both larger portions of retainage let go here in the fourth quarter. But on a go-forward basis, there isn't anything unusual or standing out, and buried in the retainage balances other than normal work. Then on PG&E, we have about $5 million of the pre-petition still outstanding. And those things were actually not receivables. There's a component of unbilled.

Periodically with us in a large projects and as you move forward.

Hi, My those things a lot of times get wrapped up into when you get to the final completions are each individual final building.

As it stands here I mean, those things are normal for us.

We had actually kind of a coincidental timing that we had both larger portions of retains let go here in the fourth quarter, but on a go forward basis, there is anything unusual or standing out and buried in the retain as balances on the normal normal work.

Dan on PGT, we have about $5 million.

Pre petition still outstanding and those things were actually not receivables as a component of Unbilled.

We still as every month goes by we continue to whittle down on that balance with with so much other activity going on.

[Company Representative] (Quanta Services): As every month goes by, we continue to whittle down on that balance with so much other activity going on, honestly, that some of that stuff just takes a little bit of time in the grand scheme of things. But there's just some small little unbilled balances we're continuing to pursue resolution on. And then relative to Peru, no new activity. That's the comments that Duke had laid out, that as it stands here, we continue to look at that as going on. We'll continue to be pursuing that. I think for 2020, we have nothing in our current expectations towards collections of that, although we still think we have a strong case and we're making strong progress through the year towards a resolution.

Honestly that some of that stuff just takes a little bit of time wins in the Grand scheme of things, but theres, a small little unbilled balances were continuing to pursue.

Resolution on and then.

Relative to Peru, no new activity. That's the that's guy's comments that do could laid out that as it stands here. We continue to look at that is going on it will continue to be pursuing that I think.

For 2020, we have nothing in our current expectations towards collections of that although we still think we have.

Strong case, when we're making.

Strong progress through the year towards the resolution.

Weve reached the end of the question answer session. At this time I'd like to turn the call back to management for closing comments.

[Company Representative] (Quanta Services): We've reached the end of the question and answer session. At this time, I'd like to turn the call back to management for closing comments.

Duke Austin: Yeah. I'd like to thank everyone in the field, ladies and gentlemen, that are there working hard for us every day, and our shareholders. They certainly have world-class craft skill labor and management teams out there. So we want to thank them for what they've done in 2019 as we go into 2020. I'd like to thank you for participating in the fourth quarter conference call. We appreciate your questions and your ongoing interest in Quanta Services. Thank you. This concludes our call.

Yes, I'd like to thank everyone in the filled and ladies and gentlemen that are that are they're working hard for us everyday in our shareholders. They certainly a world class.

Crop skill labor and management teams out there. So we want to thank implant they've done in 2019 as we go into 2020 I'd like to thank you for participating in the fourth quarter Conference call. We appreciate your questions and your ongoing interest in Quanta services. Thank you. This concludes our call.

This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

[Company Representative] (Quanta Services): This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation. The conference call has ended. Please disconnect your lines. Thank you.

The conference call has ended please disconnect your lines. Thank you.

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