Q3 2023 Quanta Services Inc Earnings Call
Greetings and welcome to the Quanta services third quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode. A brief 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 as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Kip Rupp, Vice President Investor Relations. Thank you Kim you may begin.
Thank you and welcome everyone to the Quanta services third quarter 2023 earnings Conference call. This morning, we issued a press release announcing our third quarter 2023 results, which can be found in the Investor Relations section of our website.
<unk> Dot com, along with a summary of our 2020 three 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 on the Investor Relations section of the Quanta services website.
Please remember that information reported on this call speaks only as of today November 2nd 2023, and therefore, you're advised that any time sensitive information may no longer be accurate as of any replay of this call.
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.
Including all statements, reflecting expectations intentions assumptions or beliefs about future events or performance or that do not solely relate to historical or current facts.
You should not place undue reliance on these statements as they involve certain risks uncertainties and assumptions that are difficult to predict or beyond Qantas control and actual results may differ materially from those expressed or implied.
We will also present certain historical and forecasted non-GAAP financial measures reconciliations of these financial measures to their most directly comparable GAAP financial measures are included in our earnings release and slide presentation. Please see slide two of the <unk> and the appendix of the slide presentation for additional information regarding our forward looking statements.
And non-GAAP financial measures lastly, if you'd like to be notified when quanta publishes news releases and other information. Please sign up for E Mail alerts through the Investor Relations section of Quanta Services' Dot 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.
With that I would now like to turn the call over to Mr. Duke Austin, <unk>, President and CEO Duke.
Thanks, Kip good morning, everyone and welcome to the Quanta services third quarter 2023 earnings conference call on the call today, I will provide operational and strategic commentary.
I will then turn it over to Josh who decide on our CFO to provide a review of our third quarter results and full year 2023 financial expectations.
Following <unk> comments well.
From your question.
This morning, we reported our third quarter results, which included strong double digit revenue growth in a number of record financial metrics, which we believe reflects robust demand for our services and solid execution.
Of note, our electric power infrastructure solutions, and renewable energy infrastructure solutions segments drove our revenue and profit growth.
Reflecting ongoing capital deployment into grid modernization and hardening power grid expansion and construction of new renewable generation and other necessary investments needed for north Americas emerging energy transition.
Total backlog at quarter end was $30 1 billion, an all time record high.
Which we believe reflects the value of our collaborative client relationships and indicates momentum for 2024.
We are positioning quantum for decades of expected necessary infrastructure investment and continue to believe our operational portfolio.
As a strategic advantage that provides us the ability to manage risk and shift resources across service lines and geographies, which we believe will become increasingly important as the energy transition accelerates.
We believe our portfolio approach positions us well to allocate resources to the opportunities we find most economically attractive and to achieve operating efficiencies and consistent financial results.
Our electric power operations are performing well.
And for our electric power infrastructure solutions is robust driven by broad based business activity from utility grid modernization.
Security and system hardening initiatives as well as our reputation for consistent and safe execution.
This is further evidenced by the meaningful increase.
And backlog for the segment in the third quarter.
Accordingly, we continue to invest in resources ahead of the anticipated startup of multiple multi year utility programs and projects.
We believe quanta solutions, offering and ability to safely and consistently execute is industry, leading and we are uniquely positioned to collaborate with our clients on their multi year grid programs.
Additionally, our communications operations, continuing to execute well with double digit revenue growth and margins.
We believe these results reflect our focus on being selective with the risk and margin profile of the work, we pursue as well as solid execution.
Renewable infrastructure solutions segment revenues increased significantly in the third quarter.
As construction of renewable generation projects ramped up including solar wind and battery storage.
I voltage electric transmission and substation work also remained active.
Segment total backlog reached a record $7 $9 billion at quarter end driven by the addition of a portion of the Sun's via win contract and various renewable generation transmission and substation projects.
We have mobilized resources for the Cinzia projects and are performing early stages stage construction activities.
So the vast majority of the work is expected to be performed in 2024 and 2025.
We believe the infrastructure solutions, we provide to the renewable industry are gaining momentum as the energy transition gains pace, we are continuing to make the necessary investments to scale, our resources and capacity to handle large scale multiyear renewable programs that we expect will yield.
Record levels of renewable generation over the coming decade.
Driven by the R E and the acceleration of North America's energy transition.
Additionally, we are pursuing billions of dollars of high voltage transmission projects that are designed to support connectivity of current and future renewable generation capacity growth and overall system reliability.
In this morning's earnings release, we also announced the strategic acquisition of Pennsylvania, transformer technology or PTT.
Led by an experienced management team with dedicated employees P.
P. T. T is an established and reliable domestic manufacturer of power Transformers and components for the Investor owned utility electric utility renewable energy municipal power and industrial markets.
Transformers are a critical path of power grid.
Now the power grid that facilitate the safe and efficient transmission of electricity from generators to end users.
North America's energy transition and other Mega trends that are driving current and anticipated future demand for our electric power and renewable energy solutions are also driving significant demand and growth for the transformer market.
As a result lead times are extended and demand and supply imbalances are only expected to intensify as energy intensive sectors, such as electric vehicles renewable energy data centers and manufacturing challenge power infrastructure capacity.
As we have discussed previously several years ago quantum began developing a strategy to create supply chain solutions that are designed to help our clients navigate equipment shortages and delays reduce cost improve availability and enhanced capital deployment efficiency all of which can ultimately benefit the consumer.
For Quanta. The addition of PTT should allow us to better manage the availability of certain critical grid components, which in turn should help us better manage their work schedules and productivity.
We believe PTT provides quanta and our clients and important secure and domestic supply chain solution that is consistent with our strategy.
The strong and visible demand dynamics, but transform Trump former market provide a favorable long term profitable growth opportunity for P. T T. The.
The company also possesses intellectual property for certain grade components not currently in its production, but that are also in high demand by the utility industry.
As a part of Quanta, we believe there are opportunities to enhance and expand ptt's capacity and product offering which could accelerate ptt's growth and provide incremental growth synergies for Qantas electric power and renewable energy infrastructure solutions.
The underground utility and infrastructure solutions segment continues to deliver with double digit revenue growth and solid profitability, our industrial services operations executed well and we had strong demand for our gas utility and pipeline integrity operations.
Driven by regulated spin to modernize systems reduce methane emissions and sure environmental compliance and improve safety and reliability. Additionally.
Additionally, we are increasingly leveraging our underground resources and capabilities to perform underground electric work.
While that work.
As recognized in our electric power segment.
It evidences the value and flexibility of our solutions portfolio.
Okay.
The transition towards a reduced carbon economy continues to progress and we believe is gaining momentum. We believe we are in early stages of capitalizing on significant opportunities across our service lines and geographies.
Driven by our collaborative solution based approach designed to ultimately benefit consumers.
Additionally, the growth of programmatic spending with existing and new customers as well as increase renewable generation activity and favorable megatrends provide greater visibility into our near term near and long term growth outlook.
We are currently pacing ahead of long term financial targets articulated at our Investor day last year and are increasingly comfortable with our ability to achieve them.
This belief is driven by the long term programmatic spend of our customers and favorable long term megatrend opportunities across our portfolio of services.
Which we believe are in the beginning stages of a multi decade process.
One is investing in the future to meet the needs of our customers and take advantage of the visible opportunities ahead of us, which we believe positions us well for double digit EPS growth in 2024 and beyond.
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.
We will pursue opportunities to enhance <unk> base business and leadership position in the industry and provide innovative solutions to our customers. We believe Qantas diversity unique operating model and entrepreneurial mindset form the foundation that will allow us to continue to generate long term value for all our stakeholders.
I will now I'll turn the call over to Joseph decide our CFO for her review of our third quarter results and 2023 expectations to Shri.
Thanks, Dave and good morning, everyone today, we announced record third quarter revenues of $5 $6 billion net income attributable to common stock with $273 million or $1.83 per diluted share and adjusted diluted earnings per share was a record $2.24.
Our third quarter electric power revenues were $2 $5 billion and operating income margins were 11, 9% as a result of the exceptional performance by our base business activities and telecom operations.
Renewable energy infrastructure segment revenues for third quarter 20, $317 billion with operating income margins of eight 7%.
The revenue strength in the quarter reflects continued momentum behind renewable energy infrastructure, the quality of our customers and our comprehensive solutions based approach to the energy transition.
Segment margins improved sequentially as construction activity has accelerated across our portfolio of projects.
However, they were pressured somewhat by lower than expected contingency releases and more mature projects.
Projects have progressed during the quarter.
It's also worth noting that profit associated with revenue from early stage work is generally recognized at a lower margin as risk contingencies are included in the cost to complete during.
During periods of high growth and new project starts this margin dynamic can be a exacerbated which is influencing 2023 segment margins as year to date renewable revenues have grown roughly 50% from 2022.
Yeah.
Underground utility and infrastructure segment revenues were $1 $4 billion for the quarter and operating income margins were eight 9% driven by high volume solid execution and better fixed cost absorption on increased revenue.
For additional commentary comparing third quarter, 23% third quarter 22, please refer to the slides accompanying this call.
At September 30 of 2023 total backlog was a record $30 $1 billion, an increase of $2 $9 billion compared to June 30 with growth coming from both large project awards and our base business activities.
Our 12 month backlog is also at a record level of $17 billion, approximately $1 $4 billion higher than June 30.
For the third quarter of 2023, we had free cash flow of $280 million D.
DSO measured 79 days for the third quarter aided by favorable billing arrangements associated with certain awards during the quarter.
Regarding the Canadian renewable transmission project, we've discussed in prior calls the contract asset balance grew during the quarter as they progressed closer to completion, we continue to have favorable discussions with the customer regarding significant portions of the balance representing approximately seven days of DSO as of September 30, and we remain confident in our position.
As of September 30th 2023, we had total liquidity of approximately $2 billion and a debt to EBITDA ratio of 2.2 as calculated under our credit agreement.
During the quarter, we made a small acquisition that will primarily report to our electric segment and as we announced in today's release earlier. This week, we closed on the strategic acquisition of Pennsylvania transformer to help address a critical supply chain constraint for a utility renewable and industrial customers.
Well, we always measure capital deployment against the return opportunities presented by stock repurchases. We continue to see an active pipeline of strategic opportunities that we believe can be executed at accretive valuations and have the ability to drive significant stockholder value.
Turning to our guidance.
We performed well through the first nine months of the year and demand for our portfolio of solutions remains robust.
As a result, we are raising our consolidated revenue expectations for the year to range between 21 and $24 billion.
From a segment perspective last quarter, we expected electric volumes to ramp in the fourth quarter. However, as it stands today, we now see revenues in the fourth quarter comparable to the third quarter.
Part of the fourth quarter reduction reflects the transferability of resources between the electric and renewable segment as renewable revenues continue to expand and encompass both interconnection and generation projects with interconnection work being performed by crews that would otherwise be captured in the electric segment.
Additionally, we are seeing pockets of inefficiencies due to supply chain dynamics as well as timing of capital deployment in certain region shifting into 2024.
This variability is a periodic disruption to an otherwise growing demand for electric solutions as evidenced by our backlog growth from June 30 levels. Accordingly, we now see electric segment revenues for the year between nine six and $9 $7 billion and full year margins for the segment ranging between 10.4 and 10, 6%.
We continue to build crews and carry costs necessary to execute on the anticipated growth in multi year utility programs.
Of note, we are forecasting storm revenues for the year of around $300 million roughly 3% of segment revenues for the year the lowest level since 2019.
Regarding our renewable segment given the performance of the third quarter and continued backlog growth. We are raising our full year revenue expectation to range between five eight and $5 $9 billion.
Because of the previously described margin dynamics as well as continued investments in labor training and equipment required to address the segments building backlog, we now expect margins for the segment to be around 8% for the year.
After another strong quarter, we now expect revenue from our underground segment to range between four seven and $4 $8 billion or $300 million increase at the mid point from a margin perspective, we expect full year margins for the segment to range between 7.6, and seven 8% and improved outlook and above the previous high end of.
Of our range.
Not included in our expectations or contribution from Pennsylvania, transformer, which will be captured in both our electric and renewable segment.
We are working through purchase price allocation accounting considerations and arent prepared to give any definitive guidance, but given the size of the business today, we don't expect the contribution to be material to our quarterly results.
In the aggregate, we expect revenues for the year to be almost 20% higher than 2022, and we've increased our expectations for full year adjusted EBITDA to range between $1 nine 1 billion and $1 nine $5 billion for full year adjusted diluted earnings per share attributable to common stock. We have now narrowed our prior range maintained our previous midpoint.
And now expect between $7 and $7 27.
With regard to free cash flow, we continue to expect between $800 million and $1 billion.
We slightly modified other aspects of our guidance the details of which are included in our outlook summary, which can be found in the financial information section of our IR website at Quanta services Dotcom dotcom.
Our growing backlog and favorable multi year outlook continues to give us confidence in our ability to achieve the multiyear targets, we laid out in our April 2022 Investor day.
Additionally, we believe the acquisition of Pennsylvania transformer further cements, our ability to provide differentiating solutions to our core customers and elevates the critical role we play in the North American energy transition.
We are uniquely positioned in the markets, we serve and believe we have the opportunity to continue improving our return on invested capital and generating significant stockholder value through organic growth and strategic capital deployment.
I'll now turn it back to the operator for Q&A operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
So that we may address questions from as many participants as possible. We ask that you limit yourself to one question and one follow up.
If you have additional questions you may re queue and time permitting those questions will be addressed.
One moment, please while we poll for questions.
Thank you. Our first question comes from Michael Dudas with vertical Research partners. Please proceed with your question.
Hello, Thank you very much and good morning.
Good morning, Jixi Kip Duke.
Good morning.
Duke as you might've noticed theres been a lot of noise a lot of them.
<unk> news flow around utilities sector. The last four to six weeks and competitors and concerns about renewable energy piece et cetera, maybe you can.
Kind of share your observations on that relative to what your customers are engaging with you, especially as you're looking into the planning budgets for 2024 and beyond and how that differs or is confirming of those expectations again given your position.
In the with the lens that you look through with you.
Electric electric utility in development customers.
Yes, Thanks, Mike.
For us when we look at the customer base and when we when we think about.
Where we're at and where the industry sits I think it's a great time to be in this business and its growth we see growth, we see load growth at the customer level.
As an industry.
Have trends Megatrends that are really pushing on.
Interconnections in EV penetration and distribution systems.
So from our standpoint, a philosophical level, you have a supply and demand issue and you have.
The significant amount of build necessary for infrastructure, so the macro market.
That's great.
As far as the noise I believe.
But from my standpoint, when we said we're trying to provide solutions.
To our clients, we get pushed into a contractor, which we're not when you provide the solutions and our customer bases are much different than you might hear from others on calls.
So our customers are different.
And the way that our customers view the markets versus others is different so they don't have tax equity problems. They don't have some of the problems that you hear us.
And we do a really nice job of talking to them and collaborating with them about where we're going not where we're at and so that's the difference is we're ahead years of planning and with these clients long term versus what you may hear in the market over the next 30 60 90 days, we're talking decades, so I <unk>.
Really feel comfortable with where we're at I feel comfortable that the industry will solve the issues, yes, there's some affordability issues running around and you're hearing about it but this industry will solve those issues.
I appreciate that my follow up is with regard to your Ppt acquisition.
You see a tightness in the marketplace and you expect revenue growth for the company do they have the capacity to meet the needs now and is it going to be a lot of investment required given certainly the demand for their products and how youre going to be able to leverage that through your customer base.
Yeah, Mike we've been working on the acquisition for quite a while and then also philosophically how to help our customers with supply chain. So I think in general.
Pennsylvania transformer U S based domestic product.
It really fits the goals of the interconnections accused for larger transmission and substations that are necessary to facilitate renewable load growth.
When I look at it when we think about it yes, we can it's not a manufacturing play for quanta, it's more of a solution to the client so.
Wouldn't expect us to go out and buy 20 transformer companies, what I would expect us to do is add capacity to our existing facility.
Million square foot facility, one of the biggest and U S. So we're able to really add to it.
And I don't we see some investment in it to get productivity up.
Yes, we can we will increase or some component lines. It will start making that are out a thousand days plus that we have the IP on <unk>. So theres some things there that we can do to really enhance.
Where we sit as a solution provider in the industry.
Thank you too.
Thank you. Our next question comes from the line of Justin Hauke with Baird. Please proceed with your question.
Yeah, good morning, everyone.
I guess I just wanted to piggyback on the renewables.
I guess question and.
You guys took up your revenue guidance there I am just curious.
How much of that is coming through I guess.
Maybe maybe projects that you are procuring and the costs are going up and so there is more like a CFM pass through that is driving the revenue higher and maybe you don't pick up margin on that versus.
How much is like volume so I know, it's hard to think about volume price in this business, but.
Any context around that would be helpful.
Yes.
Look I think we priced the same and honestly I don't the customer our customers may be passing on PPA pricing and things like that if that's what you're asking but as far as from what I see where he spent around 60 plus.
Large scale renewable type projects that are like we said in the past are moving up.
Our revenue so I feel like it's.
We've got really really good customer base that that we're supplying and they continue to build their backlogs and when they're not having tax tax equity problems and things of that nature, Yeah, Justin and then there's the <unk>.
Margins are improving in that segment we.
We have been able to absorb some of the fixed costs that we had we had built in an earlier in the year and ramping up for the significant growth that we had this quarter and continue to see.
So it's moving in the right direction. There are some material components to this segment no doubt that's higher than our electric segment.
But overall, we're seeing margins moving in line with what we had said to you all in the Investor day in that 9% to 10% range.
We did have a little bit of pressure this quarter because of our expectation on some contingency releases that didn't materialize those projects still are performing quite well. It just didn't knock it out of the park, which we had thought we could have in the second quarter. It's it's really some of that and then at the same time you have the significant ramp in renewables that new project dynamic as it comes in.
And they did come in at a lower margin because you need to execute the contingencies before we can raise those margins and so that is providing that is creating some dilutive pressure.
And that's what you're seeing in the third quarter. There is no. There is no other dynamic around the business itself, that's causing anything it will get better and it is continuing to get better.
Okay I appreciate that.
And then I guess.
And the second question here on PTT, I understand you're still finalizing the purchase price allocation, but.
Can you give us some context.
<unk> of data acquisition and then.
Two manufacturing facilities I'm.
I'm just trying to understand how accretive is this margins.
Margins from a materiality standpoint, because I would think that.
Its margins are much higher than probably your base business, but I just don't know how big This acquisition is in and then maybe the last question was part of that would be.
Is there any any change.
On Capex outlook thinking about.
He is the expansion of additional facilities for them.
No.
The company itself the revenue size over $100 million we're.
We're not going to disclose purchase price I'm sure you can find it in the K.
So but in general it's really not about the.
The manufacturing capacity is what we can do with the synergies we can get with it with the client we can add some production fairly quickly.
<unk> invested facility, we will put some money in it I don't see our capital structure changing at all and in next year, where you don't need to do a lot to the facility. So I feel good about the capital deployment in there and a productivity lines and things like that the things that we can do with the manufacturing facility. So I like that part of it.
It is.
Pretty good in 'twenty, four 'twenty five and so it will be about us getting more productivity out of it and really working with our clients on what capacity looks like in the future.
So that's what we'll be working on and putting that into the way that we provide the solution to the client.
Okay, great. Thanks, well look forward to Takeda in later I appreciate it.
Yeah.
Thank you. Our next question comes from Neil Mehta with Goldman Sachs. Please proceed with your question.
Yes, thanks, so much.
I wanted to start off on the customer base because I think this is an important point, which is a lot of your renewable focused investment pace.
With the large utilities as opposed to some private developers. So is there any way you could quantify that.
Customer composition for you as you think about your backlog there and as you have conversations with utility Ceos.
Are you seeing any change in their commitment to the business. We did for example note.
Excel, if anything accelerated their renewables investments in Colorado.
Yes, thanks, Neil when we look at our customer base. We've said all along you know we work for the top 10.
Developers as well as the utilities in.
The world for that matter, so I feel good about where they're at I feel good about where theyre going all of the all of them basically the trends and what we see from backlog.
As well as opportunities continue to grow both with it with the utility business as well as developer business.
I'll go back and say look at our portfolio portfolio that we've put together we de risk. It and then we've also said we could stack onto it.
The company has grown in 'twenty, one we've grown 16% 20 to agree it's 30%. This year were expected to grow 18%. So I don't think we have a problem with the customer base I think we are doing really nicely.
We are working on margins as Joseph said, but that said sequentially. When you look at quarter over quarter. We said there was some.
Cadence issues in our renewables are some cadence issues and the jobs, it's not a margin issue as a cadence issue in every single quarter will get better with respect to operate in double digits next year.
Okay. Thank you and then the follow up for gay tree, you made a comment that you're on track for the plan are tracking ahead of the long term plan any early thoughts on 2024, Yeah you mentioned.
Track to be double digit EPS growth, but considerations, we want to keep in mind as we build out the model for next year.
I think when we look at it we still feel comfortable with kind of the model that we put together it's way too early to give guidance on exactly what that will look like it would be a disservice to you and in us, but I do expect us over time.
<unk> had the opportunity to operate above double digits on the EPS line at times and you know I feel comfortable with the opportunity next year to operate in double digits.
Thanks, Nick.
Yeah.
Thank you. Our next question comes from the line of Andy Kaplowitz with Citigroup. Please proceed with your question.
Good morning, everyone.
Good morning.
Do you guys think I know the answer to this but you mentioned you're still pursuing many large T&D projects do you still have good visibility toward backlog growth as you go into 'twenty four and how do you compare this T&D cycled to other cycles, you mentioned that.
Just to Neil's question, you mentioned, you're ahead of the long term plan, but part of the upside I think when you did your Investor day as it was going to come from Mega trends have you seen the mega trends develop faster than you would've expected then.
It's I see you know when we look at the market. It's the best it's been in our career and it's all about the macro market demands people were underestimating data centers and the loads on data centers, they're underestimating E V.
To about 7% of new car sales in the E V globally, that's a big number for everyone.
Youre interconnections you're it.
Even though in batteries just to make the batteries and the demand on the power cycle. There. So I think all of those things are.
Underestimated when you start looking at where the business is going and so for us the long term nature in the Mega trends that we see continue to compound.
You can delay some things.
It's really it's for us, it's really worrying about the ultimate customer and affordability at the ultimate customer level and how do we help our clients and help the ultimate customer get a cost price that makes sense and as you see as you get leverage across what you're building.
With more demand, what you're seeing 3% demand almost every single place has at least some demand.
Growth load growth the load growth itself is really really enhancing the utility can spend on capital obviously, the market's a little constrained there on the capital markets, but the demand is outpacing supply. So it's some timing in places like I've never seen that where we were.
We see.
So many things at once coming at you from a macro market. So we're real proud of being in this business and okay. I get up every day and happy about me in here and I'm trying to execute on the work that we have I think that's the big thing is just execution at this point.
And then Duke yesterday, there was quite a bit of angst that I thought you were caught up in a little bit with actually offshore wind and I don't think you have any exposure there or very little but could you remind us if you have any on that side.
Yeah. Thanks for the question, we were very deliberate about no boats no water. So we've been there done that where were we.
Not involved in anything offshore other than onshore approaches and some we will help others onshore two five or whatever it may be offshore, but we're not in the water at all and have no exposure really to offshore wind other than the transmission that may be built.
Onshore.
I appreciate that.
Thank you. Our next question comes from Marc Bianchi with TD Cowen. Please proceed with your question.
Hi, Thanks.
I wanted to ask about the the market.
Structure and sort of go forward and electric power and infrastructure and this relates to some of the concerns around <unk>.
Utility ability to to sort of spend in this higher interest rate environment I.
I appreciate that you guys are doing a really good job in long term discussions with customers and so forth, but from a macro perspective is there anything about the current rate environment that maybe limits the growth opportunity in that segment. Obviously, you can continue to grow but maybe not quite at the rate I'm. Just curious if you can talk to that dynamic at all.
I do think you can push some things out I mean, you can EV penetration is not there yet so you can not plan and.
You don't have interconnections at the distribution level, we're seeing some where our crews for example are working 60 70 hours, you're working 50 hours, but you're not losing crews you're just working less hours and youre seeing some of that in the fourth quarter, where we have crews that are just working 40 and that.
It's fine, but we're adding crews as well so really as you move into 'twenty four they move their capital budgets up things look better.
I do think load growth.
Exceed what most people think it really helps with higher interest and costs. So I think we can get through that as an industry.
The only thing is if you had like crazy interest and I don't see that coming on do you believe we've kind of stabilized there in utilities, either you see some that are selling assets to put it back in our regulated business, but look you have a duty to serve and.
You've seen in California, where they have like 120 days to make interconnections now by law.
That's that's going to come it's going to be prevalent across the country and I. Just don't believe that you can delay interconnections, nor can you delay.
The Q and the accused coming out everyone and we've got it as an industry. We've got a plan a little better.
Got to do some things and we've got to get in front of this and as you can be selective and urgency here you've got to get we've got to get the planning done and the work done for the next couple of decades. So we feel confident yes, you can have some bounces along the way, but we've always said that there'll be starts and stops a bit but the CAGR itself.
We will continue to drive the market for the long term any any kind of delay you have just means it's pent up demand it's coming at you. So we.
We feel good we feel good with our customers and our conversations have been.
May not see them grow capital, 20%. They just grew at 15 or from upper levels, but I don't I'm not seeing much pullback at all in fact, I'm seeing more more growth to capital with our clients.
That's helpful. Thanks to <unk> and then on.
On 24.
I know you don't want to get into giving guidance, but.
Double digit growth.
Is what you've said.
If I look at consensus it's up almost 20%.
I'm curious if that if that's attainable knowing that youre not guiding to it but just trying to understand the brackets around what's possible in 'twenty four.
Yes.
We're not giving guidance.
I've I've given in Basel, all I'm going to give and so we've talked about the opportunity to grow double digits. So I think that's that's there we can stack on at times, it's too early to say.
The models that are out there I don't know what's in there.
Chip or just where you can go look at it but I haven't looked at it I just feel comfortable in the double digits talking about double digit margin growth at this point the opportunity for that as well.
EPS EPS growth.
Okay. Thanks, so much.
Yeah.
Thank you. Our next question comes from Chad Dillard with Bernstein. Please proceed with your question.
Hi, Howie regroup, claiming for catheter.
How we should think about the mix of <unk> versus small projects to go over into 'twenty type of course.
How does that how will that impact margin profit.
Can you say that again I'm, sorry, you broke up.
Sorry <unk>.
Think about the mix of large versus small projects going into 2024, and how will that impact the margin profile.
I think theyre, both growing and we stand by the state of margins and to operate in double digits.
We have the opportunity to attunity to operate in double digits in the renewable segment as well as the.
Electric segment in upper singles, and Eli business very much like we've started we'll be prudent about how we guide. So you can expect us to guide prudently in 'twenty four we did we do see growth to 24. So you know the same approach we've taken for the last eight years seven years will be taken.
Going forward as far as the mix, it's still running.
Mid 80, 85% base business, something like that and I believe that'll that'll be there, but the large project dynamics certainly there were seeing multiple fronts of large products it'll be early.
But we do believe.
That is starting to stack a bit.
As well as our base business.
Yes.
At the same rate.
How sustainable are underground margins.
We've always said, we can get leverage out of the UI margins, our industrial business is probably a record year. This year, we still like the industrial business a lot.
So the margins have picked up we have got levers we do move.
Move back and forth, but I caution everyone again that this is a portfolio this portfolio moves around and you've got to look at it as a portfolio of Derisk skew down at the bottom and that's why we're not seeing the blips at the bottom now you're seeing double digit growth.
And again I caution that if we get into this segment discussion.
These crews go from electric to gas to telecom and we should perform well in all of them and our goal is to make sure that the company itself grows and our margin profile stays sustain over time and that's the portfolio, we built to derisk, the investor as well as provide opportunities.
For beyond double digit growth and look we will talk about the segments, but I go back in a point to 80.
18% top line growth.
Still perform at a high margins across the segments and.
Delivering double digit EPS.
Thank you very much.
Thank you. Our next question comes from Steven Fisher with UBS. Please proceed with your question.
Thanks, Good morning.
Duke your comments on that last question notwithstanding I will ask you.
Segment margin question and.
And maybe for Jay Sri I don't know, but your guidance for renewables still implies ramping to double digits in Q4.
Q4 margins and so I'm, just curious what's going to be different in Q4 relative to Q3.
Can allow you to hit those double digit margins I mean, youre still going to be in.
Early stages of projects. So you mentioned about carrying lower accruals.
It sounds like there is a cadence issue not sort of an execution issue so what.
Whats going to be different in Q4, and then how does that carry into 2024.
Yes, I think it's where you started it on all your renewables, we kind of started early in the year and late last year.
Multiple large projects there so as those and we booked all the way through still booking so you're getting a better cadence and the larger project dynamics. So some of them are finishing up and so that allows us to obviously look at contingency releases things like that in the fourth quarter in the renewable segment. So.
That's what you're seeing and then you're also getting scale out of that business as well as you go into 'twenty four same thing the cadence you are starting to some larger.
Wind projects.
On transmission, there and so it will have a little bit of effect, but you don't have Canada coming in and things like that and I can let <unk> comment on the rest, yes, I mean, that's exactly right. There's that and then and then we will continue to progress on the other parts of the segment right as those projects mature there are opportunities and there were opportunities to release contingencies, we'll continue to see that.
In the fourth quarter.
And as as Duke said the scale at which we're growing youre going to start seeing youre.
Youre seeing more and more of that fixed cost absorption that would be more of that in the fourth quarter. So the combination of mature matured products projects as well as at fixed cost absorptions is allowing us to feel comfortable with the with the guide in the fourth quarter, Yes, Steve and I would also add that we talked about 3000 add last quarter, we added roughly four.
And in this quarter. So we were up to 56000 employees, adding 3000 on cadence per quarter is not easy and it does press a bit. So I just caution you know some of that is in there and as you start working through that and you get good cadence with it we can absorb a lot.
That's really helpful. And then maybe just to ask about the electric segment.
<unk> talked in prior quarters about some efficiencies in terms of Canadian underutilization as that market structures, a little different than the US Can you just give us an update on that influence and maybe supply chain as well for the broader.
Electric segment is that any particular.
<unk> influence at this time and what visibility you have to those things kind of smoothing out.
Yeah, we're operating really well in the electric segment over time, I've always said double digits, 10% 10, and a half with the 11, but between 10 and 11 are comfort spot and we're operating those levels, Canada is a drag when we've addressed a lot of things there I think.
And the next year, we won't have the drag this year so.
Pretty optimistic with some of that we are getting some utilizations in the lower 48 with some Canadian influence, but in general what we can do a lot of things on the front end engineering, we can do a lot of things.
From our Canadian assets in the lower 48, so we will be utilizing then here in those assets.
Comparable with where we sit in the next year, we do expect and you know.
We're still negotiating some but I feel confident that.
The larger project dynamic will start stacking in 'twenty, four, albeit early but youll start to see some stocking in 'twenty four.
Terrific. Thank you.
Thank you there are no further questions at this time I would like to turn the floor back over to management for closing remarks.
Yes, first I want to thank her.
56000 employees out in the field.
The numbers up every day to work hard and safe and allow us to have a good call. This morning, they are dedicated.
Shareholders as well so we do appreciate them and I'd like to thank you all for participating in our conference call. We appreciate your questions and your ongoing interest in quanta.
Thank you this concludes our call.
Okay.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Okay.
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Uh huh.
Yeah.
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