Q4 2023 Quanta Services Inc Earnings Call Q&A

Greetings and welcome to Qantas services Fourthquarter 20 twenty-three earnings conference call.

Operator: Greetings and welcome to Quanta Services' fourth quarter 2023 earnings call. At this time, all participants are on a list of known... Question and answer session will follow the call. If anyone should require operator assistance..., or you can press star zero on your telephone.

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Operator: As a reminder, this conference is being held, and it is now my pleasure to introduce Kip Rupp, Vice President, Invest. Thank you. You may begin. Thank you and welcome everyone to the Quanta Services fourth quarter and full year 2023 earnings conference call. This morning, we issued a press release announcing our fourth quarter and full year 2023 results, which can be found in the investor relations section of our website, quantaservices.com. As highlighted in our earnings release this morning, as well as in the earnings press release announcing our earnings call schedule a couple weeks ago, we've updated our earnings call format and supplemental materials.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Kiprop, Vice President Investor Relations. Thank you you may begin.

Kiprop: Thank you and welcome everyone to the Qantas services fourth quarter and full year of 2023 earnings Conference call. This morning, we issued a press release announcing our fourth quarter and full year of 2023 results, which can be found in the Investor Relations section of our website Qantas services Dot com.

Kiprop: As highlighted in our earnings release this morning, as well as in the earnings press release announcing our earnings call schedule. A couple of weeks ago, we've updated our earnings called format and supplemental materials.

Kip A. Rupp: As a result, shortly after the release of our financial results this morning, we posted our fourth quarter and full year 2023 operational and financial commentary and our 2024 outlook expectation summary on Qantas Investor Relations website. While management will make brief introductory remarks during this morning's call, the operational and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community. Additionally, we no longer have a slide presentation to accompany this call as the information that has historically been included in the presentation can now be found in our operational and financial commentary. Please remember that information reported on this call speaks only as of today, February 22, 2024, and therefore, you are 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 that do not solely relate to historical or current facts.

Kiprop: As a result <unk> shortly after the release of our financial results. This morning, we posted our fourth quarter and full year 2023, operational and financial commentary and our 20th 24 outlook expectation summary on Pointe is investor relations website well.

Kiprop: Will make brief introductory remarks during this morning's call the operational and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community.

Kiprop: Additionally, we no longer have a slide presentation to accompany this call is the information that has historically been included in the presentation can now be found in our operational and financial commentary.

Kiprop: Please remember the information reported on this call speaks only as of today February 22nd 2024.

Kiprop: [noise] for your advise than any time sensitive information may no longer be accurate as of any replay of this call.

Kiprop: 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 that do not solely related to historical our current.

Kiprop: Facts you.

Kip A. Rupp: We should not place undue reliance on these statements as they 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. 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 operational and financial commentary. Please refer to these documents for additional information regarding our forward-looking statements and non-GAAP financial measures. 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.

Kiprop: 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 will also present certain historical and forecast a non-GAAP financial measures reconciliations of these financial measures to their most direct.

Kiprop: Really comparable GAAP financial measures are included in our earnings release and operational and financial commentary. Please refer to these documents for additional information regarding our forward looking statements and non-GAAP financial measures.

Kiprop: Lastly, if you would like to be notified when quantum publishes news releases and other information. Please sign up for email alerts through the Investor Relations section of Qantas services Dot com.

Earl C. Austin: 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 like to now turn the call over to Mr. Duke Austin, Quanta's President and CEO.

Kiprop: We also encourage investors and others interested in our company to follow up want to I R and Qantas services on the social media channels listed on our website.

Kiprop: With that I would like to now turn the call over to Mister, Duke Austin quite as President and C E O.

Earl C. Austin: Thanks, Good good morning, everyone and welcome to the quantum services fourth quarter and full year 2023 earnings conference call.

Earl C. Austin: Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services fourth quarter and full year 2023 earnings conference call. This morning, we reported fourth quarter and full year 2023 results, which included double-digit growth in revenues and earnings and included a number of record financial metrics, which we believe reflect robust demand for our services and solid execution. Total backlog at year-end was $30.1 billion, which we believe reflects the value of our collaborative client relationships and evidences the momentum we see for 2024. Of note, Quanta has delivered record revenue for six of the last seven years, six consecutive years of record-adjusted EBITDA, and seven consecutive years of record-adjusted diluted earnings per share.

Earl C. Austin: This morning, we reported fourth quarter and full year 2023 results, which included double digit growth in revenues and earnings and included a number of record financial metrics, which we believe reflects robust demand for our services and solid execution.

Earl C. Austin: Total backlog at your end was 30.1 billion, which we believe reflects the value of our collaborative client relationships and evidence has the momentum we see for 2024.

Earl C. Austin: No one has delivered record revenue six of the last seven years.

Earl C. Austin: Six consecutive years of record adjusted EBITDA and seven consecutive years of record adjusted diluted earnings per share.

Earl C. Austin: These results were built off an industry-leading operational and financial platform and made possible by our more than 50,000 dedicated Quanta employees, whom we believe are the very best in our industry. As outlined in our Operational and Financial Commentary, 2023 was a significant year for Quanta strategically, operationally, and financially. And though we are proud of our many accomplishments during the year, we continue to look forward with excitement to the multi-year strategic initiatives we are working on and the goals we expect to achieve in this and the coming years. We are positioning Quanta for decades of expected necessary infrastructure investment and believe our service line diversity creates platforms for growth that expand our total adjustable market. Our portfolio approach and focus on craft skill labor is a strategic advantage that provides us the ability to manage risk and ship 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 the most economically attractive and to achieve operating efficiencies and consistent financial results. I will now turn the call over to Jay Shree Desai, Quanta's CFO, to provide a few remarks about our results and 2024 guidance, and then we will take your questions. Jay Shree.

Earl C. Austin: These results were built off an industry, leading operational and financial platform and made possible by our more than 50000 dedicated quantum employees, whom.

Earl C. Austin: And we believe are the very best in our industry.

Earl C. Austin: As outlined in our operational and financial commentary 2023 was a significant ear for guano strategically.

Earl C. Austin: Operationally and financially and though we are a proud of her many accomplishments during the year. We continue to look forward with excitement towards the multi year strategic initiatives. We are working on and the goals, we expect to achieve and this and the coming years.

Earl C. Austin: We are positioning quantum for decades of expected necessary infrastructure investment and believe our service line diversity creates platform for growth that expand our total addressable market.

Earl C. Austin: Our portfolio approach and focus on craft skill labor is strategic.

Earl C. Austin: [noise] advantage that provides us the ability to manage risk and ship resources across service lines and geographies, which we believe will become increasingly important as the energy transition accelerates.

Earl C. Austin: We believe our portfolio approach physicians as well to allocate resources to the opportunities we find the most economically attractive and to achieve operating efficiencies and consistent financial results.

Earl C. Austin: I will now I'll turn the call over to Jay Street decide quantum CFO to provide a few remarks about our results in 2024 guidance and then we will take your questions is sheree.

Jay Street: Thanks, and good morning, everyone quantum.

Jay Shree Desai: Thanks, Duke, and good morning, everyone. Quanta completed the year with fourth-quarter revenues of $5.8 billion, net income attributable to common stock of $210.9 million, or $1.42 per diluted share, and adjusted diluted earnings per share of $2.04. Adjusted EBITDA was $550.2 million, or 9.5% of revenue. Of note, our cash flow in the fourth quarter and for the full year was very strong, with both setting period records. For the fourth quarter and full year of 2023, we had free cash flow of $915.5 million and $1.2 billion, respectively, which exceeded the upper end of our free cash flow guidance expectations. We ended the year with liquidity and a balance sheet that will position us to support our organic growth expectations in 2024, annually increase our dividend, and opportunistically invest capital. To that end, in January, we acquired two companies for an aggregate consideration of approximately $425 million.

Jay Street: Chronic completed the year with fourth quarter revenues of $5.8 billion net.

Jay Street: Come attributable to common stock of $210.9 million, but one dollar and 42 cents per diluted share and adjusted diluted earnings per share of $2.04.

Jay Street: Adjusted EBITDA with $550 $2 million or 9.5% ever having it.

Jay Street: Of note are cash flow in the fourth quarter and for the full year with very strong with both setting period records for the fourth quarter and full year of 2023, we had free cash flow of $915.5 million and $1.2 billion, respectively, which exceeded the upper end of our free cash flow guidance expectations.

Jay Street: We ended the year with liquidity and a balance sheet that will position is to support our organic growth expectations in 2024 annually increase our dividend and Opportunistically and that's capital.

Jay Street: To that end in January we acquire two companies for aggregate consideration of approximately $425 million.

Jay Street: This morning, we also provided our full year 2024 financial expectations, which calls for another year, a profitable growth with record revenues improve margins and opportunity for double digit growth and adjusted EBITDA adjusted earnings per share and free cash flow.

Jay Shree Desai: This morning, we also provided our full-year 2024 financial expectations, which call for another year of profitable growth with record revenues, improved margins, and the opportunity for double-digit growth in adjusted EBITDA, adjusted earnings per share, and free cash. We believe our expectations demonstrate the strength of our portfolio approach to the business, our commitment to our long-term strategy, our favorable end-market trends, and our competitive position in the marketplace. Additional details and commentary about our 2024 financial guidance can be found in our Operational and Financial Commentary and Outlook Expectation Summary, both of which are posted on our IR website. With that said, we are happy to answer your questions, operator. Ladies and gentlemen, at this time, we will be conducting a question and answer session. I'd like to ask a question.

Jay Street: We believe our expectations demonstrates the strength of our portfolio approach to the business our commitment to our long term strategy are favorable and market trends in our competitive position in the marketplace.

Jay Street: Additional details and commentary about our 2024 financial guidance can be found in our operational and financial commentary and outlook expectation summary, both of which are posted on our I R website.

Speaker Change: With that we are happy to answer your questions operator.

Speaker Change: Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

Speaker Change: If you'd like to ask a question you May press star one on your telephone keypad a confirmation tone.

Operator: Star, go to https://www.fema.gov.au to ask one follow-up question, and then. Your first question comes from the line of Chad Dillard with Barron, with your questions. Hi, good morning, everyone.

Speaker Change: Your line is in the question queue, you May press Star too if you would like to remove your question from the Q.

Speaker Change: Four participant choosing speaker equipment, it may be necessary to pick up your handset before pressing his darkies.

Speaker Change: A time please.

Speaker Change: Ask one question and one follow up and then re queue for additional questions.

Speaker Change: Our first question comes from the line of chat Dillard with parents. Please.

Chad Dillard: Please proceed with your question.

Chad Dillard: Hi, good morning, everyone.

Chad Dillard: Good morning good.

Chad Dillard: This morning, I want to spend some time on margins, particularly in electric power. So, I think in some of the prepared remarks, it sounds like there's some pressure happening in Canada. So, I just want to... Now, whether you plan to right-size the business, or is there enough future work out there to continue at the current footprint? I'm just trying to think through, you know, how you think about the trade out there. Yeah, thanks, Chad.

Chad Dillard: Morning, So I wanted to spend some time on on margins, particularly in electric power. So I think in some of the prepared remarks or.

Chad Dillard: It sounds like there is some pressure happening in Canada, So I just watched.

Chad Dillard: You know whether you plan to write plays a business or is there a doctoral work out there to continue at the current footprint I'm just trying to like think through how you think about the trade out there.

Speaker Change: Yeah. Thanks.

Earl C. Austin: When we're looking at margins, you know, I think we've always discussed around 10 in the electric segment, 10 and a half, with the impact of Puerto Rico, is how you should guide it. We continue to believe that's the case. Is there opportunity for upside on the electric side? Yes, we do believe there is.

Speaker Change: Look at the margins that you know I think.

Chad Dillard: We've always discussed around 10 at the electric segment 10, and a half with.

Chad Dillard: Packed to Puerto Rico is how you should got it uhm. We continue to believe that's the case is there opportunity for outside on the electric side. Yes. We do believe there is you know it depends on storms it depends on the utilization.

Earl C. Austin: You know, it depends on storms. It depends on usage. We need to get through some things as we start our larger projects in the renewable segment and in the electric segment. We're in the early stages of the larger dynamics, such as Sunzea, and other big programs that we're starting. So as we get good cadence and as we continue to win these larger projects in the future, the cadence will be where we're always running through contingency philosophically.

Chad Dillard: We we need to get through some things as we start our larger projects in the renewable segment and and the electric segment, where in early stages of the larger dynamics such as sudsy.

Chad Dillard: Other big programs that were starting so as we we get good cadences and as we continue to win these larger projects in the future.

Chad Dillard: The cadence will be.

Chad Dillard: We're always running through contingency.

Chad Dillard: Philosophically, we need to operate in the field, we need to execute as we do we'll release contingencies as we see it.

Earl C. Austin: We need to operate in the field. We need to execute. As we do, we'll release contingencies as we see them, and normally there are upside opportunities in both segments. We've historically operated in both segments at double-digit type margins, and we believe we can operate there in the future. Certainly, we've been through some things where the business has been with the panels and some other things on the renewable side. That's kind of starting to get good cadence there.

Chad Dillard: And normally users outside opportunities in both segments. We've have historically operated in both segments and double digit type margins and we believe we can operate there in the future certainly we've been through some things where the business has been with the panels and some other things on their renewable side.

Chad Dillard: Starting to kind of starting to get good cadence there. It's early we'll see where we get to that by the end of the year, but we're bill confident overtime in our historical numbers, there will be able to operate in double digits. It, especially if you take both segments.

Chad Dillard: It's early. We'll see where we get to by the end of the year. But we feel confident over time with our historical numbers that we'll be able to operate in double digits, especially if you take both segments as one, because the crews do move from one to the other. So for me, the renewable segment and the electric segment, as I see it, put them together, and we should be able to operate in double digits. That's helpful.

Chad Dillard: Is one that the cruise do move from one to the other so for me renewable segment electric segment as as I see it put them together and we should be able to operate in double digits.

Speaker Change: Okay. That's helpful.

Earl C. Austin: So in your prepared commentary, you mentioned that visibility on high-voltage transmission projects is improving. Can you say a little bit more about this? What's changed, and how much more visibility do you have?

Chad Dillard: And and you prepare commentary you mentioned that visibility got high voltage transmission projects, it's improving can you speak a little bit more on this what's changed and how much more visibility D F.

Chad Dillard: Alright, we've got we've said all along that we we think that the nation's grid is under invested in transmission I don't I don't think that's news to anyone that we said.

Earl C. Austin: We've said all along that we think that the nation's grid is under-invested in transmission. I don't think that's news to anyone that we said. If you go to Europe and look at the way that things happen in the corridors, it's three times bigger than anything we have here. We barely invested in the transmission system of this nation.

Chad Dillard: If you go to Europe, and you look at the way that things happened in the corridor is it's three times bigger than anything we have here.

Chad Dillard: Barely invested in the transmission system of this nation and in order to do the things that we want to do with this transition.

Earl C. Austin: And in order to do the things that we want to do with this transition, whether it be EV, whether it be batteries, your fuel switching, the cheapest form to get the generation to the customer is transmission. So I think that's the key to this and the whole key to the securitization of the country, as well as... As for us to get to a carbon-free environment, we'll have to build tons and tons of transmission. So I think you're just getting started on these bigger projects. We're seeing more and more coming our way. There is some push for clean, affordable energy, but I believe that transmission is the cheapest way as well.

Chad Dillard: Whether it be E V whether the batteries your your fuel switching the the cheapest form of up to to get the <unk> to get the generation to the customer is transmission. So I think that's the key to this in the whole key to the securitization of the of the country as well as.

Chad Dillard: As for us to get to carbon free environment will have to build tons.

Chad Dillard: Tons and tons of transmission. So I I think you're you're just getting started on these bigger projects, we're seeing more and more coming our way. There is some push on clean affordable energy, but I I believe that the transmission is <unk> is the cheapest way as well so I <unk>, we're seeing more on the books were continue to.

Chad Dillard: So we're seeing more on the books. We're continuing to be around the edges on all those projects. So Chad Yacht's starting, and we're confident in our ability to execute and win. Great. Thanks.

Chad Dillard: Be around the edges on all of those projects. So chatty out starting in will confident in our ability to execute Lynn.

Speaker Change: Great. Thanks, I'll leave it there.

Operator: I'll leave it there. Our next question comes from the line of Addie Modak with Goldman Sachs. Please proceed with your question. Hi, good morning team.

adding Modoc: Our next question comes from the line of adding Modoc with Goldman Sachs. Please proceed with your question.

Adam Robert Thalhimer: Hi, Good morning. Thank you for taking my questions I just wanted to touch on the acquisitions. You previously talk about do I thought process that I think it was mostly.

Addie Modak: Thank you for taking my questions. I just wanted to touch on the acquisitions. You previously talked about your thought process, which I think was most, trying to internally source your capabilities, but maybe if you could touch on the two acquisitions you've made and the thought process around the industrial solutions side, in particular, as you go forward. Yeah, the acquisitions, as we look at them. Truthfully, I mean, I think we've always said that the industrial business, as far as the UUI segment is concerned, we like it, it The nature of it is much like our MSAs in other businesses. The environmental solutions that we can provide on an industrial base, we don't; we believe that the... The base of the business will stay for decades.

Modoc: Trying to internally source, you our capabilities, but maybe if you can talk to about two acquisitions, you've made and the thought process around the industrial volition site in particular as you go forward from here.

Speaker Change: Yeah the acquisitions.

Speaker Change: As we look at them.

Adam Robert Thalhimer: Truthfully I mean, I think we've always said that the industrial business as far as in the U S segment, we like it it it's it's resilient.

Adam Robert Thalhimer: B the the nature of it as much like our Msas on on other businesses. The environmental solutions that we can provide an industrial base, we don't <unk>, we believe that the.

Adam Robert Thalhimer: The base of the business will stay for decades, you're gonna continue to refine continue to have plastics and things of that nature done on the Gulf coast. So the assets to keep.

Earl C. Austin: You're going to continue to refine, continue to have plastics and things of that nature done on the Gulf Coast. So the assets that keep the plants running and things of that nature will certainly be here for a long time and will be more valuable over time. We're in the catalyst business as well, where we have high voltage and now our environmental solutions business. We like them all three. There are synergies between them. There was very little overlap in the business.

Adam Robert Thalhimer: The plants running and things of that nature will will certainly be here for a long time and be more valuable over time, where in the cows business as well, where we have high voltage now environmental solutions business, we like them all through either synergies as long as it doesn't have very little overlap in the business. So they'll give us really a good customer base we don't.

Earl C. Austin: So it gives us really a good customer base. We don't apply it to synergies in our model. So there is there is synergies for sure. As we move forward, we'll identify them, and I think you'll see them show up in our numbers. So we like we like the management team on our industrial side. We're fully behind that for the long run.

Adam Robert Thalhimer: Apply it and synergies in our model. So there is there is there is synergy for sure as we move forward will identify them and I think you'll soon show up in a a number so we like to we like the management team on an industrial side, we're fully behind that for the long run great opportunity to get an environment.

Earl C. Austin: Great opportunity to get an environmental piece of the business here and really see our service line grow and expand in that area. So, again, the portfolio is something that we value as things move around. But the industrial base and industrial side of our business is great. Coming off of a near-record or record year, very close to it.

Adam Robert Thalhimer: Pieces of business here and.

Adam Robert Thalhimer: See our service line grow in that and expand in that area, So again, where the portfolio.

Adam Robert Thalhimer: Is something that we value as as things move around but the industrial base in industrial side of our business is great coming off a near record a record year very close to it. So we're we're confident longterm and the second piece of it was an internal supply chain that we feel like not.

Addie Modak: So we're confident in the long term. And the second piece of it was an internal supply chain that we felt was necessary from a cost standpoint, as well as to make sure that we can. We self-perform about 85% of the work, between 85 and 90, and the tooling and all the equipment and things that we can do from this platform really allow us to make sure that we can man the work, man the people. Any kind of bottlenecks for us are not acceptable, so we'll make Thanks for that!

Adam Robert Thalhimer: <unk> from a cost standpoint, as well as to make sure that we can.

Adam Robert Thalhimer: We sell from foreign about 85 per cent of the work between 80, 590, and the tooling and all the equipment and things that we can do from this platform really allow us to make sure that we can man the work man the people any kind of bottlenecks for us or not acceptable. So we'll we'll make sure the supply change your study and that we can continue to grow.

Adam Robert Thalhimer: <unk>.

Speaker Change: Thanks for that and then I think you know there's been a lot of market concerns around how your customers are thinking of project and I know you've mentioned.

Earl C. Austin: And then I think, you know, there's been a lot of market concerns around how your customers are thinking of projects. And I know you've mentioned the requirement around transmission. And, you know, the guide came in a lot better than what I think a lot of the street was expecting. But maybe you can touch on how your customers are thinking about this year and the sensitivity around it. Yeah, I'm not seeing that. I'm not hearing that.

Speaker Change: The requirement around transmission and guide came in a lot better than what I think a lot of the street was expecting but maybe you can talk to on how your customers are thinking of this yard and the sensitivity around the potential regulatory changes anything that's latest you know conversations.

Speaker Change: Yeah, I'm not seeing that uhm I'm not hearing that I'm not hearing our customers back off anything I've heard some switching of from distribution and transmission, but their capital continues to grow.

Earl C. Austin: I'm not hearing our customers back off anything. I've heard some switching from distribution and transmission, but their capital continues to grow. You have data centers, and you have load growth that's pushing every jurisdiction we're in. The data centers are not going away. That load growth is not going away.

Speaker Change: You have data centers, you have low growth.

Speaker Change: Pushing every jurisdiction we're in the.

Speaker Change: The the data centers are not going away that loads not going away. The onboarding manufactories not going away E. V penetration may may stall a bit. We've always said, we think that this is a longer longer bill not sure. So <unk>.

Earl C. Austin: The onboarding of manufacturing is not going away, but EV penetration may stall a bit. We've always said that this is a longer build, not a shorter one, so they were saying 2030, maybe it's 2040, maybe it's 2050 for all EV penetration, but that's something on the distribution system that is not impacting, is bad yet. We do need to plan as an industry. We do need to get in front of that, but we also have to be cognizant of state regulators as well as affordability at the customer level, the ultimate customer. So yes, we're concerned with that as an industry. So distribution is something that you may see slip a little. The demand and what needs to be done to the system in order to electrify it, secure it, securitize it, are there, and they remain. Data center push is now, and generation switching is now. So you'll probably see some switch into transmission. It does not affect our portfolio whatsoever. The numbers, you can see them.

Speaker Change: They were saying 2030, maybe it's 2040, maybe it's 2054, all the V penetration, but that's something the on the distribution system that is not impacting.

Speaker Change: As bad yet, we do need to plan as an industry, we do need to get in front of that but we also have to be cognizant, another state regulators and as well as.

Speaker Change: Affordability at the <unk> at the customer level ultimate customer. So yes, we're concerned with that as an industry. So distributions something that you may see slip a little the demand and and what needs to be done to the system in order to electrify secure securitas is it.

Speaker Change: Is there and it has it remains data data center pushes now and generation switching is now so you'll see probably some switch in the transmission.

Speaker Change: Does not affect our portfolio whatsoever.

Speaker Change: Numbers, you can see them, we stand by them, giving good guidance. We've taken all this into account when we give out the 12 months guidance and look it's a it's a prudent number in my mind, it's right, where we need to be.

Earl C. Austin: We stand by them. We've given good guidance. We've taken all this into account when we give out the 12-month guidance. And look, it's a prudent number in my mind. It's right where we need to be. Thank you. Our next question comes from the line of Dergish Chopra with Evercore. Please proceed with your question.

Speaker Change: Card I appreciate the answer thank you I'll turn it over.

Speaker Change: Our next question comes from the line of Turkish Chopra with Evercore. Please proceed with your question.

Turkish Chopra: Hey, good morning, tea and thanks for giving me time, Duke I'd actually gonna flip. The last question. So we've seen you know your utility customers to kind of raise capex and high teens, even Illinois companies came out with their latest capex guidance double digit increases.

Operator: Hey, good morning team. Thanks for giving me time. Duke, I'm actually going to flip the last question. So, we've seen, you know, your utility customers kind of raise CapEx in high... Even Illinois companies came out with their latest CapEx guidance, a double-digit increase. What is that factored into your 24 guidance?

Turkish Chopra: What is factored into your 24 guidance should we assume that you know the the the forward looking capital planning cruises are factored in or are you still learning them and I guess, what I'm asking is what what kind of conservatism are you backing into 2024 guidance.

Dergish Chopra: Should we assume that the forward-looking capital plan increases are factored in, or are you still learning them? And I guess what I'm asking is what kind of conservatism are you baking into 2024 guidance, as you've seen a pretty significant step up, quite frankly, a step change in utility capital expenditures. I think we're in a good spot for the start of the year where we are.

Turkish Chopra: Seen a pretty significant step up quite frankly, a step change utility capex plans.

Speaker Change: Yeah, I think we're in a good spot for the start of the year, where we're at and.

Earl C. Austin: When we look at it, we look at our history, and I'm going to talk about EPS growth. If you look at EPS growth, what we've said is that we grow double digits on a K-group basis, have the opportunity to grow 15%, but the transition, everything that's ongoing, that can't allow that 15% growth. If you go back and look at our history, it's 15% growth. So do I think there's opportunity? Yes, it depends on the storms.

Speaker Change: When we look at it and we look at our historical Ooh I'm Gonna talk about E. P. S Grove.

Speaker Change: If you look at the U P. S growth, what we've said as we grow double digits in case basis have the opportunity to grow 15%.

Speaker Change: The transition everything that's ongoing.

Speaker Change: That I can't allow that 15 per cent growth. If you go back and you look at a historical is 15 per cent growth. So do I think there's opportunity yes.

Speaker Change: It depends on storms it depends on other things that are out of our control at times. So we'll we'll take a a prudent nature to electioneer things like that we've taken all that into account and we give guidance I do think there's opportunities for us to grow 15% you know I'll do we set it and I don't think it's changed I think.

Earl C. Austin: It depends on other things that are out of our control at times. So we'll take a prudent nature to it, election year, things like that. We've taken all that into account when we give guidance. I do think there are opportunities for us to grow 15 percent. You know, I do. We've said it. And I don't think it's changed.

Earl C. Austin: I think from when I look at it, when I look at our opportunities, given the fact that the tech push on AI, on all the things that you can do from a data center, it's backing up everything plus more. So your fuel switching is one thing. But when you think through it and you see the low growth in data centers, it really pushes the transmission system and generation system because, at tech, they want clean power, and they want it now. So I think that push on the industry is something that is why you're seeing such, you know, confidence in the capital expenditures in the transmission systems. It does affect our distribution a bit, as I've said it, but we've taken all that into account.

Speaker Change: When I look at it when I look at our opportunities given.

Speaker Change: Given the fact that the tech push on on AI on all the things that you can do from a data center is backing up everything plus so your fuel switching is one thing, but when you when you think through it and.

Speaker Change: See the load growth in data centers, it really pushes the transmission system the generation system because <unk>.

They won't clean.

Speaker Change: Power and they want it now so I I think that push on the industry is is something that is why you're seeing such.

Speaker Change: Confidence in the <unk>.

Speaker Change: Capital spending and the transmission systems, it does affect our distribution a bit set it but we've taken all the new account I expect later half of the year.

Dergish Chopra: I expect later in the year, distribution to grow as well in a meaningful way. So it's something that we've taken into account. Got it.

Speaker Change: Distribution to grow as well in a meaningful way so it it's something that we've taken into account.

Speaker Change: Got it that is very clear. Thank you and then maybe could you just address risks related to this time to your project and I'm not sure. If you can but can you quantify what are your modeling is is is EBITDA for those projects.

Earl C. Austin: That is very clear. Thank you. And then maybe, could you just address risks related to the Sunzea project? And I'm not sure if you can, but can you quantify what your modeling?

Earl C. Austin: Is EBITDA for those projects? We don't look at it project by project like that. I'm confident in the numbers we've given. Svendzija, the whole thing was about 50 miles.

Earl C. Austin: We don't look at it about project by project like that I am confident the numbers, we've given <unk>. The the whole thing was about 50 miles.

Earl C. Austin: I think the job's 1,000 miles. We have plenty of room to move and work with our client on, stretches of right-of-way here or there, but that is not meaningful. It'll alleviate as we move through. We're not concerned.

Earl C. Austin: Jobs, a thousand miles, we have plenty of room to move and work with our client on.

Speaker Change: On stretches of right away here, there, but that is not meaningful it'll alleviate as we move through we're not concerned.

Earl C. Austin: The project starts now and ramps throughout the year. Part of why you see some guidance move into the second half is the ramp on these larger projects in the back half. But they're known projects, they're contractor projects. So that's the difference is we know we're moving on now and we know what the ramp looks like in the back half. And I do expect us to get more awards in the back half.

Earl C. Austin: The project starts now uhm ramps throughout the year part of why you see some guidance move into the second half as the ramp on on these larger projects in the back half, but they're they're known projects our contractor projects. So that's the difference is we know we're moving on now and we know what the <unk>.

Earl C. Austin: Ramp looks like in the back half and I do expect us to give more awards in the back half and so we'll continue to ramp. It's just some seasonality that you see early but ramps in the back but sons. It I'm not concerned at this point.

Earl C. Austin: And so we'll continue to ramp up. It's just, there's some seasonality that you see early that ramps in the back. But SunZia, I'm not concerned.

Speaker Change: Thank you very much I appreciate the time again.

Operator: Thank you very much. I appreciate the time again. Our next question comes from the line of Steven Fisher with UBS. Please proceed with your question. Thanks. Good morning, and congratulations on a nice 23.

Operator: Sure.

Operator: Our next question comes from the line of Steven Fisher with UBS. Please proceed with your question.

Steven Fisher: Oh, Thanks, good morning, and congrats on not nice twenty-three just curious how we should think about that 20 per cent growth in the renewable segment 2024, clearly their son Z I think there's maybe a piece of T. T T that you're allocating in too.

Steven Fisher: Just curious what we should think about that 20% growth in the renewables segment in 2024. Clearly, there's Sunzea. I think there's maybe a piece of PTT that you are allocating to that segment. So how should we think about the growth rate of the renewables business separately from those couple of pieces? And really just trying to think about the big picture here about renewables. I mean, Sunzea is kind of a unique project, but at a higher level.

Steven Fisher: That segment, so how should we think about the the growth rate of the renewables separately from those couple of pieces I'm really just trying to think about the big picture here about renewables Sunday is kind of a unique project.

Steven Fisher: But at a higher level.

Earl C. Austin: To what extent do we think this is the year where renewables kind of breaks out from a more restrained 22 and 23 from some of the various uncertainties that have been going on in the marketplace? I don't know what our growth was last year, but it was significant. So, and then 22 was significant.

Steven Fisher: To what extent do we can't like this is the year aware renewables kind of breaks out from a.

Earl C. Austin: More restrained 22, and 23 from some of the various uncertainties that have been going on in the marketplace.

Earl C. Austin: I I don't know what our growth was last year, but it was significant so and then 22 significant so I think from our standpoint, we've had phenomenal growth in renewable side, both in 22 and 23.

Earl C. Austin: So, I think from our standpoint, we've had phenomenal growth in the renewable side, both in 22 and 23, off those big growth on balance of plants, solar, and wind. And when you go into 24, we've got good growth in double digits plus on both sides of that, whether it be our legacy business or a balance of power going forward. We continue to see 25, 26, and beyond. There is some pressure when you think about wind.

Earl C. Austin: Uhm off those big growth and balance of plant solar.

Earl C. Austin: And and when you go into 24, we've got good growth in double digits plus on.

Earl C. Austin: On both sides of that whether it would be our legacy business or a balance of plan going forward.

Earl C. Austin: We continue to see 25 26 and beyond there is some pressure with when you think about when when starting to come in for us with Cynthia and other other repower opportunities there Steve. So we're starting to see some assets like cranes things like that that we were sitting on some indirect costs on the <unk>.

Earl C. Austin: Wind's starting to come in for us with Sunzea and other repower opportunities there, Steve. So we're starting to see some assets like cranes, things like that that we were sitting on, some indirect costs on the wind side of the business that will help the overall margins in the back half. As you see wind come in with solar, that mix starts to change a bit more.

Earl C. Austin: One side of the business that.

Earl C. Austin: That will help the overall margins in the back half as the wind come in with a <unk> with the solar or is it that mixed starts to change a bit more you'll continue to see margins move do some <unk> some of the overheads in indirect costs that moved through as well as our Canadian operations are looking better from a renewable side. So all those things will come into the impact.

Steven Fisher: You'll continue to see margins move up due to some of the overheads and indirect costs that move through, as well as our Canadian operations looking better from the renewable side. So all those things will come into effect. You'll continue to see margins move up, and I do believe the top line on the renewable segment will move up. Great, that's very helpful.

Steven Fisher: Continue to see Martin's move up and I do believe the top on renewable segment will move up.

Speaker Change: Okay. That's very helpful. And then when you think about the portfolio approach that you've been implementing where do you think.

Earl C. Austin: And then when you think about the portfolio approach that you've been implementing, where do you think that's going to have the biggest Benefit Impact in 2024? Curious where the kind of directional flow is mostly gonna be. Is it still sort of underground work moving to the electric segment, Canada to the US, anything else to note about how to think about the portfolio approach in 24? From a service line standpoint... I think our distribution business will start to ramp up in the back half more than it is today because Canada geographically is down. We know it's down.

Earl C. Austin: That's gonna have the biggest that.

Earl C. Austin: Benefit impact in 2024 curious where that kind of a directional slow is mostly gonna be is it still sort of underground.

Earl C. Austin: Or moving to electric segment, Canada to the U S or anything else to to note about how to think about the portfolio approaching and 24.

Earl C. Austin: From a service line standpoint.

Earl C. Austin: I think you are our distribution business will start to ramp in the back half more than it is today, Canada geographically is down we know it's down we were seeing.

Earl C. Austin: We're seeing, the later half of this year, 24 with awards and how we're starting projects in the later half of 24. And also what we're seeing from government to the West and BC, as well as the East, so we're seeing the amount of capital getting put into, you know, the same kind of fuel switching you're seeing here in the States. So I do believe Canada will start to move back into good markets, call it late 24 and beyond, as far as we can see. So it does help us there.

Earl C. Austin: Later half of this year 24 with awards and how we're starting projects in the later half of 24 and also what we're seeing from government to the west in D C.

Earl C. Austin: As well as the east so we're.

Earl C. Austin: We're seeing the amount of capital getting put into the same kind of fuel switching you're seeing here in the states. So I I do believe Canada starts to move back.

Earl C. Austin: And the good markets <unk> call. It late 24 and beyond as far as we can see so it does does help us there, but we've right side of that business and yes, it's it's pulling margins down a bit in the states, but the assets there were utilizing your lower 48 as well as across the company.

Earl C. Austin: But we've right-sized that business, and yes, it's pulling margins down a bit in the States, but the assets there are being utilized here in the lower 48 as well as across the company. So that's where the portfolio comes into play, the front side of our business, things like that that we have there that give us some abilities here in the lower 48. You know, look, we're not hitting on all cylinders.

Earl C. Austin: So that's where the portfolio comes into play the front side of our business things like that that we have there that gives some abilities here in the lower 48.

Earl C. Austin: We're not hitting on all cylinders. So I would say is a portfolio.

Earl C. Austin: So I would say as a portfolio, as that moves forward, both geographic and service lines, as they mature, you'll see some undergrounding move from gas to electric. But look, we're taking advantage of those leverages, things that we can leverage at the local levels and making sure that we're in the right place. I'm not too concerned with if we're pulling electric pipe or gas or whatever it is.

Earl C. Austin: That moves forward, both geographic and service lines as a mature you'll see some underground the moved from gas to electric.

Earl C. Austin: Electric but.

Earl C. Austin: Look where taken advantage of those <unk> things that we can leverage at the local levels and making sure that we're in the right place I'm not too concerned with if.

Earl C. Austin: If we're pulling electric Piper.

Earl C. Austin: Gas or whatever it is we're just trying to optimize our our resources. So that's the big thing it should increase margins, we're not where we want to be from a company in the portfolio of double digit type EBITDA margins across the board. We do believe we can operate there. So as we look at the port Blue and everything that we're doing it should be the optimization.

Earl C. Austin: We're just trying to optimize our resources, so that's the big thing. It should increase margins.

Earl C. Austin: We're not where we want to be as a company in the portfolio, a double-digit type, even without margins across the board. But we do believe we can operate there. So as we look at the portfolio and everything that we're doing, it should be the optimization of our margins. But I will say that if you look at the way adjusted returns, our returns are going up substantially. You can see it with cash.

Earl C. Austin: Our margins, but I will say that if you look at the way adjusted returns are returns are going up substantially you can see it with cash you can see <unk> capital.

Earl C. Austin: You can see the return on invested capital. Very good. Thank you so much.

Earl C. Austin: Very good thank you so much.

Earl C. Austin: Our next question comes from the line of Michael Dude US with vertical research partners. Please proceed with your question.

Operator: Our next question comes from the line of Michael Dudas with Vertical Research Partners. Please proceed with your question. Good morning.

Michael Dudas: G Street.

Michael Dudas: Good morning.

Operator:

Michael Dudas: It seemed like a light bulb went off with your utility clients and everybody, and people want to just get out. How do you, how do you guys allocate your, your very... Relative to your client base or where the opportunities are, and is the demand for contracting and your type of services very tight right now relative to supply, and how's that relative to you? https://www.cdc.gov.au and other utilities may be pushing off some of those retirements because they're just gonna be.

Michael Dudas: Seemed like a light bulb went off.

Michael Dudas: Utility clients and everybody because of <unk>.

Michael Dudas: It is and people won't just get out and and do you smoke.

Michael Dudas: How do you how do you guys all Kate.

Michael Dudas: Really dear.

Michael Dudas: Resources.

Michael Dudas: To choose your client base.

Michael Dudas: Where are the opportunities are and as the demand for contacting in your type of services, you know really tight right now relative to supply and how's that relative to your current.

Michael Dudas: <unk> and yeah, just naturally showing apologies in Utah.

Michael Dudas: Utilities, maybe pushing off some of those retirements, because you're just gonna diesel Dizzy.

Michael Dudas: I think I'm gonna I'm gonna transfer some side of the business. We're seeing you know a significant amount of ramp there in areas is spotty.

Earl C. Austin: I think on the transmission side of the business, we're seeing, you know, a significant amount of ramp-up there in areas, it's spotty. No, we're not anywhere near capacity from my standpoint. I think we've got a lot of room. We've not seen anything that would back us off to say that, you know, we're concerned with labor at this point. We're in good shape.

Earl C. Austin: No we're not anywhere near capacity from my standpoint, I think we've got a lot of room, we've not seen anything that with baucus off to say that.

Earl C. Austin: You know we're concerned with Labour at this point, we're willing to shape.

Earl C. Austin: Look, we have a good look at it, a good five-year look at what we see, very close to the business, very close to our clients. We work with them quite a bit on long-term strategies and programs and what's going on when you go from West to East. And with the coverage that we have, you're able to see the things that we know are going to happen. They start in the West, like when you start to see vehicle penetration in the West, you know, it's going to move across the country.

Earl C. Austin: Yeah like when you have a good look at it a good five year look at what we see I'm very close to the business very close to our clients, we work with them quite a bit on longterm nature and programs and what's going on when you go from west to.

Earl C. Austin: East and the coverage that we have you're able to see the you know the things that we know we're gonna happen they starting to west like when you start to see vehicle penetration of West you know, it's gonna move across the country and we're starting to see that as impacts I think Edison had a good <unk>.

Earl C. Austin: And we're starting to see those impacts. I think Edison had a good report on kind of how their grid's changing. And I think it gets worse, not better.

Earl C. Austin: Report on kind of how their grids changing and I think it gets it goes it gets worse not better I didn't capital goes up even from what they're saying and I think you'll continue to see that as you see the total cost impacts of energy really required the grid to be robust to create the environment that you want which is the <unk>.

Earl C. Austin: I think capital goes up even from what they're saying, and I think you'll continue to see that as you see the total cost impacts of energy really require the grid to be robust to create the environment that you want, which is the customer bills going down. You have to build this infrastructure out to get the total cost of energy down. It happened in Europe.

Earl C. Austin: Customer Bill is going down you have to build this infrastructure out to get the total cost of energy down it's happened in Europe, you'll start to see more and more that that getting said, which is really important for us to get in front of the necessary capital at the local levels at the state levels. So they understand.

Earl C. Austin: You'll start to see more and more of that said, which is really important for us to get in front of the necessary capital at the local levels, at the state levels. So they understand in order to get the cost down, you've got to get the infrastructure. And it's also security for the country to get the grid where we need it to be, and you're going to see that with loads going up in places no one expected them to go up like that. The areas that you're seeing a load, they did not expect data cities to come in and take, you know, call it three gigs, five gigs, and they don't want it; they want secure power. So sometimes that requires multiple lines.

Earl C. Austin: <unk> in order to get the cost down you've got to get the infrastructure and it's also a security for the country is to get the grid, where we need it to be and you're gonna see that with loads going up in places no unexpected load to go up like this.

Earl C. Austin: The areas that that you've seen a load they did not expect.

Earl C. Austin: Data cities to come in and take you know.

Earl C. Austin: <unk> three gigs five gigs and they don't want they want.

Earl C. Austin: Secure power, so sometimes that requires <unk>.

Earl C. Austin: Multiple lines.

Earl C. Austin: And when you look at all this and you look at what's coming at you, you know, you're backed up by this, the technology that's coming into the world that requires our services across the board, and utilities are in the growth business. They're growing, and it's necessary for them to spend capital. It's just a matter of getting it through from a federal push into state regulators. And we kind of said that all along that this was necessary. It's going to come to a head, and you're seeing it.

Earl C. Austin: <unk> when you look at all this when you look at what's coming at Ya.

Earl C. Austin: You know you're backed up by this the the technology, that's coming into the to the world of requires our our services across the board and utilities roofing growth isn't.

Earl C. Austin: They're growing and it's necessary for them to spend capital. It's just a matter of getting it through from a federal pushed into the state regulators and we've kind of said that all along that this is necessary is gonna come to a head and you're seeing it.

Earl C. Austin: This transition will be noisy. There will be things that you'll see, you know; it's not straight up every day. It's going to have a kegger look to it at times in parts of the business. That's why I like the portfolio, because we can move around and kind of get through this transition here and, you know, continue to, I believe, perform at a high level and deliver the results we have. Excellent, Duke. Thank you.

Earl C. Austin: Is this transition will be noisy it will be things that you'll see you know it's not straight up every day, it's gonna have <unk> look to it at times in parts of the <unk>, that's why I like the portfolio as much and so we can move around and kind of get through this transition here and continue to what.

Earl C. Austin: I believe perform at a high level and deliver the results we have.

Speaker Change: Excellent too thank you.

Earl C. Austin: Yeah. Our next question comes from the line of Gus Richard with Northland Capital. Please proceed with your question. Yes, thanks for taking the time to answer the question. The AI data center needs not only a lot of power, but it needs a lot of bandwidth. And I'm just wondering if you guys are seeing, along with the AI boom, increased demand for your comm services. And are there any synergies between those two pieces, the power and the comm? Thank you.

Earl C. Austin: Cool.

Gus Richard: Our next question comes from the line of Gosh, Richard Northland Capital. Please proceed with your question.

Gus Richard: Yeah. Thanks for taking my question.

Earl C. Austin: Data center.

Earl C. Austin: Needs a lot of power, but it needs a lot of bandwidth and I'm. Just wondering if you guys are saying along with the a iPhone.

Earl C. Austin: Increased demand for your calm services and you know is there any synergies between those two pieces the power and the com. Thank you.

Earl C. Austin: Okay.

Gus Richard: I think so. When you look at our communication business, I mean, we've done pretty well. We're growing double digits. It's not something we're investing a lot of capital in, but I do see it. I do see technology itself needing to, you know, you're going to strip some of the fiber capacity or are stripping some of the fiber capacity out there. And especially when you start putting big data in different parts of the country, it's much easier to build a telecom line and get telecom service than it is to transmit data.

Earl C. Austin: I think so when you look at our communication business I mean, we've done the iced tea were growing double digits, it's not something that we're investing a lot of capital in but I do I do see it I do see uhm technology itself needing.

Gus Richard: Needing.

Gus Richard: You know you don't you're going to strip some of the fiber capacity are are stripping some of the fiber capacity out there, especially when you start putting big data in different parts of the country.

Gus Richard: It's much easier to build a telecom line and get Telecom service and it is transmission. So sometimes you'll <unk>, you'll see that as soon as you start to locate where the power is almost.

Earl C. Austin: So sometimes in my mind, you'll see data centers start to locate where the power is almost. And right now, you know, if you can't get power to the east and you can't get it to the west, you start to see the Midwest build. And then if you can't get it there, you start to see the south.

Earl C. Austin: And right now so if you can't get power to the East and you can't get it to the West you start to see the Midwest build and then if you can't get it there you're starting to see the south Bill. So everywhere that you can get affordable power today or in the next 24 months, you'll start to see data centers go up even if there's not fiber so you're gonna get fiber going.

Earl C. Austin: So everywhere that you can get affordable power today or in the next 24 months, you'll start to see data centers go up, even if there's not fiber. So you're going to get fiber going to them at some point, nodes, certainly some of it's getting alleviated with satellites, things like that. But still, you need fiber on the ground.

Earl C. Austin: To them at some point nodes certainly some Ah some of it's gonna alleviated with satellites and things like that but still you need the fiber on the ground. So yeah I I do believe it will push it.

Earl C. Austin: So, yeah, I do believe it will push. And yes, there's opportunity. Got it.

Earl C. Austin: And yes, there's opportunity.

Earl C. Austin: Sure.

Gus Richard: And then just on the underground side, you know, there's, you know, There was a pause in, you know, three years out on the build out of Support Capacity. And I'm just wondering, you know, what you're seeing in that business; are projects still moving forward? And, you know, just the fate of natural gas and that business? It's about $600 million in the guidance. It'll be about $600 million next year and the next year and the next year. We don't, we're not going to.

Earl C. Austin: Got it and then just on the underground side.

Gus Richard: You know what to do.

Gus Richard: There was a pause in three years out on on build out of.

Gus Richard: LNG export capacity and I'm, just wondering you know what you're seeing in that business is our projects still moving forward and you know just to.

Gus Richard: Date of natural gas and that business for Ya.

Gus Richard: It's five 600 million guidance, so it'll be five to 600 million next year in the next year in the next year, we don't we're not gonna <unk>.

Earl C. Austin: That's why we moved off, long haul pipe and big pipe. We just can't; we can't build a business around it. It's certainly something we'll take every bit of opportunity we can. We did a billion plus in big pipe last year. So you're seeing some offset in the top line because of that because we got it five to six. Are there opportunities for a billion plus? Sure. But because of government regulations and difficulty in building large diameter pipe anywhere in the country, Canada's a little better.

Gus Richard: That's why we moved off.

Earl C. Austin: Long haul pipe and in Big pipe, we just can't we can't build a business around it. It's certainly something we will take every bit of opportunity. We can we did a billion plus and big pipe last year.

Earl C. Austin: So you're seeing some all set in the top line because of that because we got it five to six is or opportunities for 1 billion plus sure.

Earl C. Austin: The government regulations and difficulty in building large diameter pipe anywhere in the country <unk>.

Earl C. Austin: <unk> is a little better opportunities in Canada, but we're just we can't take that and build it and guys give you any kind of firmness to our number so I look I I think there's opportunities, but it doesn't LNG if if any if everything goes and if it doesn't go it doesn't matter to the guy with giving you doesn't matter.

Earl C. Austin: There are opportunities in Canada, but we're just, we can't take that and build it into guidance and give you any kind of firmness to our numbers. So I look, I think there are opportunities, but LNG, if, if any, if everything goes well and it doesn't go well, it doesn't matter to the guy we've given you. It doesn't matter. Got it. Thanks so much.

Earl C. Austin: Got it thanks, so much.

Earl C. Austin: Alright next question comes from the line of Brian Brophy with Stifel. Please proceed with your question.

Operator: Our next question comes from the line of Brian Brophy with Stiefel. Please proceed with your question. Yeah, thanks.

Brian Brophy: Yeah. Thanks, Good morning, everybody wanted to ask about free cash flow guidance was quite a bit higher than we were expecting your free cash flow conversion is above longterm targets. This year how much of this is more of the one time collections that you called out in the commentary versus potentially a more permanent improvement in free cash.

Brian Brophy: Good morning, everybody wanted to ask about free cash flow guidance, which was quite a bit higher than we were expecting. Your free cash flow conversion is above long-term targets this year. How much of this is more of the one-time collections that you called out in the commentary versus potentially a more permanent improvement in free cash flow conversion here as renewable energy makes its ground. Thanks.

Brian Brophy: No conversion here is renewable energy <unk>. Thanks.

Jay Shree Desai: Yeah, as we've talked about in Investor Day and as you saw in the fourth quarter last year, the renewable business, with the way those contracts are set up, has a very favorable cash flow profile, and the working capital profile is very good. And so as revenue and the renewable side pushes up, you will see better conversion, just as we saw in 2023. Going into 2024, we did take that into consideration, but we did range it. There's a range for a reason.

Speaker Change: Yeah, I believe that I talked about an investor day, and then as you've seen in the fourth quarter last year, the renewable business with the way those contracts are set up has a very favorable cashback profile and working capital profile is very good.

Jay Shree Desai: Uhm as revenue in renewable side pushes that you will see better conversion just simply sign 2023 going into 2024, we did take that into consideration, but we did range. It uhm, there's arrange for a reason and as as I just add renewables can push us and the higher end of that range is 45 to 55 that we talked about investor day, but if you've got if it's.

Jay Shree Desai: As I just said, renewables can push us up in the higher end of that range of 45 to 55 that we talked about on Investor Day. But if it's more growth coming from our electric and underground segments, it can push the other way, right? And so we've given you what we think is a good, prudent look at where free cash flow will be. But having said that, if the mix of work between renewables and electric and utility underground changes, you will see we could be outside of that range or either the high end of that range or the low end of that range.

Jay Shree Desai: More growth coming from her electric and underground segment and can push the other way alright, and so we've we've giving you. What we think is a good way to look at where free cash flow will be but having said that if the mix of work between renewables and electric utility undergrad changes you will see let me can be outside of that range or either.

Jay Shree Desai: Hi ended that ran into the low and arrange the one time.

Brian Brophy: The one-time cash flow impact of the Large Canadian Renewable Project we do believe we will collect next year, excuse me, in 2024. As we talked about in the last several quarters, as construction winds down, which we expect in the next several months, a couple months, conversations with the customer continue to go very well. So we're optimistic we'll be able to collect all of that as well. But, you know, on an ongoing basis, I think it would be good to look at a range of between 45% to 55% conversion. Okay, thanks. And then I just wanted to touch on how you're thinking about capital allocation more broadly this year, given that you're in line with some of your longer-term leverage targets now. Should we be expecting more buybacks this year? What how are you thinking about M&A? Any thoughts there would be helpful.

Jay Shree Desai: Cash flow impact the large Canadian renewable projects, we do believe we will collect next year we.

Brian Brophy: Gives me in 2024, we yeah. So you talked about the last couple of quarters as construction <unk>, which we expect in the next several months Coupla months conversations with the with the customer continues to go very well. So we're optimistic we'll be able to collect all of that as well this year.

Brian Brophy: But yeah like on an ongoing basis I think it would be good to look at arrangements between 45% to 55% conversion.

Brian Brophy: Okay. Thanks, and then just wanted to touch on how you're thinking about capital allocation more broadly this year given that you're in line with some of your longer term leverage targets now should we be expecting more buybacks. This year. How are you thinking about M&A any thoughts of it would be helpful. Thanks.

Brian Brophy: Oh sure it will be opportunistic and how we look at it like we have in the past no different I I, we are below some of our targets.

Earl C. Austin: I'm sure we'll be opportunistic in how we look at it, like we have in the past, no different. We are below some of our targets. It allows us flexibility, which I like a lot. Certainly, there are things that we can be opportunistic about, but the strategies won't change. We've laid out a good strategy plan. Can we go faster as we de-lever, things

Earl C. Austin: It allows us flexibility, which I like a lot you know certainly there's there's things that we can be opportunist again, but I the strategies won't change uhm.

Earl C. Austin: We've laid out a good strategy plan can we get it can we go faster.

Earl C. Austin: As we left Delever things like I'd sure. So I I think ultimately we're moving faster across the five year plan as we said last quarter and continue to say, we're moving faster through it we'll be optimistic with the balance sheet, but but again with the conservative nature of the company and.

Earl C. Austin: Sure. So I think ultimately, we're moving faster across the five-year plan, as we said last quarter and continue to say we're moving faster through it. We'll be opportunistic with the balance sheet, but again, with the conservative nature of the company, we have opportunities on multiple fronts, and we'll take advantage of all of them. Excellent, thanks. I'll pass it on to. Our next question comes from the line of Martin Malloy with Johnson Rice. Please proceed with your question. Um, good morning.

Martin Malloy: Will we have opportunities across.

Martin Malloy: Multiple fronts and will take advantage of all of them.

Martin Malloy: Excellent Thanks, I'll pass it on.

Earl C. Austin: Ooh.

Earl C. Austin: Our next question comes from the line of Martin Malloy with Johnson right. So please proceed with your question.

Martin Malloy: Good morning, I wanted to ask about the trend with higher tax rates for energy storage associated with utility scale solar and wind projects and could you maybe speak to how that impacts your scope of work and margins.

Operator: I wanted to ask about the trend with higher attachment, Storage Associated with Utility-Scale Solar and Wind Projects. Could you maybe speak to how that impacts your scope of work and margin? The tax rates, the PTCs, and the ITCs, and those things are in place. I've not seen them come off at this point, whether it's IRA or PTCs, how it moves in, or ITCs, how it moves in. I think it's the same. Now, if it was repealed, you could see some issues there.

Operator: The tax rates are the P. T CS in I T. Susan those things either in place I've not seen them come off at this point, whether it's R. A or P. R. P. G. <unk> I think it's the same now if it was repealed I I do you know you can see some issues or I do not.

Martin Malloy: I do not believe that that'll be the case going forward. That's something that gives certainty to the industry. So I continue to believe that now how you get them, and our customers have been able to get in front of this, and I think our customer base is solid, and they've got, you know, these things kind of figured out. The IRA has some different things you can get more, not less.

Operator: Believe that that'll be the case I'm going for that's something that gives certainty too.

Martin Malloy:

Martin Malloy: The industry. So I I continue to believe that tax now how you how you get them in our customers have.

Have been able to get in front of this and I think our customer base is solid and they've got you know these things kind of figure it out of the R. A has some different things you can get more not less so I I actually think we're in early stages of the the R. A which should give us more opportunity going for not less so.

Earl C. Austin: So I actually think we're in the early stages of the IRA, which should give us more opportunities going forward, not less. So I see it as more opportunities. We should check the box on from a standpoint of U.S. type. Apprenticeship programs, U.S. type, materials, things of that nature, even internally.

I I see it is more opportunities.

We should check the box on from a standpoint of U S type.

Apprenticeship programs U S type materials things of that nature, even internally. So we really set ourselves up to take advantage of that for the customer. So I I feel good about it I'm not seeing that slowdown on from that standpoint, I mean, everyone's watching but from our customer viewpoint.

Earl C. Austin: So we really set ourselves up to take advantage of that for the customer, so I feel good about it. I'm not seeing it slow down from that standpoint. I mean, everyone's watching, but from our customer viewpoint, they've got it figured out and tax credits figured out and feel good about it. Yeah, oh, I'm sorry.

Earl C. Austin: <unk> got it figured out in tax credits figure it out and feel good about.

Yeah, I'm sorry, I appreciate your comment that I wasn't clear I was actually asking about.

Martin Malloy: I appreciate your comment. I was actually asking about energy storage, the attach rate, at Utility Scale Solar and Wind Projects with the addition of energy storage in conjunction with those projects, and what that means for your scope of work and profit. I think I understand what you're saying, but from a tax rate standpoint, I don't know that it does much, but from a combination standpoint, it actually expands many of the projects that we've built in the past for adding storage to them. Our storage business is growing nicely, and our battery business is growing nicely. So I like that.

Energy storage attach rates.

Martin Malloy: Utility scale solar and wind projects with it adding energy storage in conjunction with those projects and what that means for your scope of work and and profit margins.

I think it <unk> I mean.

I think I understand what you're saying, but.

From a tax rate standpoint, I don't know that does much but from a combination actually expands many of the project. So we built in the past or adding storage to it our storage business is growing nicely in our battery business growing nicely. So I liked that up.

Earl C. Austin: We continue to add that capability and get more refined there as we move forward across geography. So when you ask that, I think it's just more opportunity to increase the size and scope of these projects. All right, thank you.

Martin Malloy: We continue to add that capability and get more of a fine there as we move forward across a.

Geography, so your when you when you ask <unk> I think it's just more opportunity to increase the size and scope of these projects.

Alright, thank you.

Alright.

Our next question comes from the line of Adam Thalheimer with Thompson Davidson Company. Please proceed with your question.

Operator: Our next question comes from the line of Adam Thalhimer with Thompson-Davison Company. Please proceed with your question. Hey, good morning, guys.

Hey, good morning, guys congrats on a salad results.

Adam Robert Thalhimer: Congratulations on the solid results. Hey, quick question on the project funnel for Blattner. Is that still dominated by solar, or are you seeing wind pick up? I mean, Sunzea is a nice project.

Quick quick question on the project funnel for Blattner is that still dominated by solar or are you seeing when to pick up.

I went to get my sons is a nice project that's when the wind side, we're seeing more opportunities Repower I think you'll see a lottery power work going toward your in the early stages of the <unk> cycle coming back for wind. So we're starting to see more and more on the outer ears of wind coming into the portfolio.

Earl C. Austin: It's on the wind side. We're seeing more opportunities for repower. I think you'll see a lot of repower work going forward. You're in the early stages of the cycle coming back for wind.

Earl C. Austin: So we're starting to see more and more in the outer years of wind coming into the portfolio. I don't think it's going to be any large windfall in 24 by any means, but I do think 25-26 it starts to move up significantly as we move out in the outer years, the curves get, You know, where wind makes a lot more sense in areas. So you'll start the transmission needs to be built, too. Like we've got to get the transmission built before you can get the wind out. And that's the other piece of this is you need long haul transmission to move wind out of those sources into load centers. So it's very, you know, chicken and egg sometimes.

I don't think it's gonna be any like large <unk>.

When fall and 24 by any means but I do think 25 26. It starts to move up significantly as we move out in the outer ears the curves good.

Oh, you know where it went and makes a lot more sense in areas. So you'll start transmission needs to be built to like we've got to get the transmission Bill before you can get wind out and that's the other piece of this is you need last long haul transmission to move wound out of both of those sources into load centers. So.

It's very chicken or the egg, sometimes and I I do think both are coming into play.

Earl C. Austin: And I do think both are coming into play, and the wind business will get better from call it 24 on. That's great. And I also wanted to get your early thoughts on PTT and the timing of the capacity expansion. You know, we continue to expand capacity there. There are a lot of things that we can do internally to expand. We're expanding, like the business, more so today than we did the day we looked at it. So it gets better, the opportunities, the synergies, the things that we can do for the clients with PTT, U.S. based. Union in Pennsylvania, a great place to invest, and we're liking that business a lot.

And the wind business gets better from call. It 24 on.

That's great and then I also wanted to get your early thoughts on P. T T and the timing of the capacity expansion there.

We we continued to expand capacity there there's a lot of things that we can do internally to expand we're expanding like the business ever more so today than we did stay.

Today, we looked at it so it gets better the opportunities synergies things that we can do for the clients with P. G. T U S base Union in Pennsylvania, Great place to invest and we're lacking that business a lot.

Thanks to.

Sure.

Operator: The next question comes from the line of Geeta Jain with KeyBank Capital Markets with your questions. Yeah, thank you so much for taking my question. So you gave earnings cadence, which is kind of back-end loaded, which is generally normal for you. And I was wondering if it was just weather and seasonality, or if there is something more to read into how the projects ramp up as the year progresses. No, I think it's mostly seasonality, the typical of what we run. We did, you know, talk about there being a little bit of Canadian pressure in the first half of the year, but it's just normal seasonality. And we do expect, with the additional Sunzea work and some other projects, more back half weighted. But again, nothing more unusual than that.

Our next question comes from the line of <unk> with a Keybanc capital markets. Please proceed with your question.

Thank you so much for taking my question. So I eat you gave earnings cadence, which is kind of back end loaded which is generally normal for you and I was wondering if it was just rather than seasonality alright. If there is something more to read into how the project's ran yeah progressive.

Progressive.

Yeah, I think it's it's mostly seasonality typical of what we <unk>, we didn't touch that there is a little bit of Canadian pressure in the first half of the year, but it's just normal seasonality and we do expect with the additional Cynthia work and some other projects more backend back have waited but again nothing.

<unk> I'm sure than that.

Geeta Jain: Great, thank you. And I just have one follow-up question. And that's on the renewable side.

Great. Thank you and I I just have one follow up and that's under any of those side the biting moratorium on the <unk> on the <unk> comes to an end in June. So I was wondering if you're seeing any kind of pull forward under part of developers who want to install it in that 180 day timeline between purchase and installation.

Earl C. Austin: The Biden moratorium on the tariffs comes to an end in June, so I was wondering if you're seeing any kind of pull forward on the part of developers who want to install within that 180 day timeline between purchase and installation? You know, the customers we work with have been planning for the tariff situation for a while now. So I think our customers have been planning for this moratorium being lifted in June. So, you know, I don't know; I can't answer directly if we're seeing some pull forward.

You know the the the customers we work with had been planning for the Terrace situation for Awhile now. So I think we're our customers had been planning. This AD there's more 20th being lifted in June. So you know, it's I dunno I can't answer directly if you're if we're seeing.

Some pull forward I just know that the customers. We've we've been working with for years now plan for this very well they know how to work. This and then prudent about how they think about their panel procurement and we continue to see good go out within our renewable segment as as a as a result.

Earl C. Austin: I just know that the customers we've been working with for years now plan for this very well. They know how to handle it. They've been prudent about how they think about their panel procurement, and we continue to see good growth in our renewable segment as a result.

Geeta Jain: Great. It's awesome. Thank you so much for answering my questions. Seeing no other questions in queue, I'd like to hand the call back to management for closing remarks. Thank you. I want to thank the 50,000 plus men and women in the field. They're the best in the business. They allow us to have these kinds of calls and give this kind of profile for the company, so we thank them. And I want to thank you for participating in the conference call. We appreciate your questions and your ongoing interest in Quanta Services. This concludes our call. Ladies and gentlemen, today's television show. Please disconnect your lines at this time and have a wonderful day.

Great Awesome. Thank you so much for answering my questions.

Thank you.

No other questions in queue I'd like to hang a call back to management for closing remarks.

Yeah. Thank you I want to thank the 50000, plus men and women in the <unk> the best in the business. They allow us to have these kind of calls and give these kind of profile for the company. So we thank them and I Wanna. Thank you for participating in the conference call. We appreciate your questions and your ongoing interest in <unk> services. This concludes our call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.