Q4 2024 Quanta Services Inc Earnings Call
Good morning and welcome to the Quanta Services fourth quarter and full year 2024 earnings call. At this time, all participants are in a listen-only mode.
A question-and-answer session will follow management's prepared remarks, and we ask that you please hold all questions until that time. I will then provide instructions for the question-and-answer session.
Speaker Change: As a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Kip Rupp, Vice President of Investor Relations, for introductory remarks.
Speaker Change: Thank you and welcome everyone to the Qantas Services fourth quarter and full year 2024 earnings conference call. This morning we issued a press release announcing our fourth quarter and full year 2024 results, which can be found in the investor relations section of our website at qantaservices.com.
Speaker Change: This morning, we also posted our fourth quarter and full year 2024 operational and financial commentary and our 2025 outlook expectation summary on Kwanzaa Investor Relations website.
Speaker Change: 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.
Speaker Change: Please remember that information reported on this call speaks only as of today, February 20th, 2025, and therefore you are advised that any time-sensitive information may no longer be accurate as of any replay of this call.
Speaker Change: This call will include forward-looking statements and information intended to qualify under the Safe Harbor from Liability established by the Private Securities Litigation Reform Act of 1995.
Speaker Change: including statements reflecting expectations, intentions, assumptions, or beliefs about future events or financial performance that do not solely relate to historical and current facts.
Speaker Change: You should not place undue reliance on these statements, as they involve certain risks, uncertainties, and assumptions that are difficult to predict or beyond quantum's control, and actual results may differ materially from those expressed or implied.
Speaker Change: Please refer to these documents for additional information regarding our forward-looking statements and non-GAAP financial measures.
Speaker Change: Lastly, please sign up for email alerts through the investor relations section of quantaservices.com to receive notifications of news releases and other information and follow Quanta IR and Quanta Services on the social media channels listed on our website.
Speaker Change: With that, I would like to now turn the call over to Mr. Duke Austin, Kwanzaa's President and CEO. Duke?
Duke Austin: Thanks, Kip. This morning we reported our fourth quarter and full year 2024 results, which included double-digit growth in revenues and earnings and a number of record financial metrics.
Duke Austin: Total backlog at year-end was $34.5 billion, and notably, Renewable Energy Infrastructure Solutions segment, 12-month in total backlog, achieved all-time highs.
Duke Austin: Our ability to deliver consistent, profitable growth is a testament to the strength of our portfolio approach, a diversified, solutions-based strategy that enables us to adapt to evolving industry dynamics while delivering mission-critical infrastructure.
Speaker Change: Juana has produced record revenues seven of the last eight years. Seven consecutive years of record adjusted DIPA DAW and eight consecutive years of record adjusted diluted earnings per share.
Duke Austin: These results were made possible by more than 58,000 dedicated employees and our industry-leading operational and financial platform.
Speaker Change: 2024 was another successful year for Kiwana strategically, operationally, and financially.
Speaker Change: And while there are always areas for improvement, we are proud of our many accomplishments during this year and we continue to look forward with excitement towards the multi-year strategic initiatives we are working on and the goals we expect to achieve in this and the coming years.
Speaker Change: We continue to see significant opportunity to advance our growth strategy and are pacing well against our multi-year financial targets including double-digit EPS growth and double-digit returns.
Speaker Change: Our strategic initiatives are enhancing our service lines and capabilities while also expanding our customer base and therefore enlarging our total adjustable market opportunity for both organic growth and strategic capital deployment.
Speaker Change: The energy and infrastructure landscape is undergoing a fundamental transformation, and Kwana is positioned at its center.
Speaker Change: Utilities across the United States are experiencing and forecasting meaningful increases in power demand for the first time in two decades.
Speaker Change: which is being driven by the adoption of new technologies and related infrastructure including data centers and artificial intelligence. The energy transition and policies intended to strategically reinforce domestic manufacturing and supply chain resources.
Speaker Change: This increasing demand, coupled with tightening power generation capacity, underscores the urgent need for large-scale grid modernization and energy infrastructure development.
Speaker Change: Ona's portfolio approach uniquely positions us to support our clients as they navigate this evolving landscape.
Speaker Change: Our diversified service lines, self-performed capabilities, and craft-skilled workforce give us the flexibility to deploy resources where they create the most value across geographies, industries, and service lines.
Speaker Change: We believe our collaborative, solution-based approach is valued by our clients more than ever.
Speaker Change: We are positioning Quantum for decades of expected necessary infrastructure investment and believe our service line diversity creates platforms for growth that expand our total adjustable market.
Speaker Change: Our portfolio approach and focus on craft-skilled labor is a strategic advantage that provides us the ability to manage risk and shift resources across service lines and geographies.
Speaker Change: which we believe will become increasingly important as load growth, electrification, and the energy transition accelerates.
Speaker Change: We believe our portfolio approach positions us well to allocate resources to opportunities we find the most economically attractive and to achieve operating efficiencies and consistent financial results.
Speaker Change: I will now turn the call over to Jayshree Desai, Qantas CFO, to provide a few remarks about our results and 2025 guidance, and then we will take your questions.
Shashree
Speaker Change: Thanks, Duke, and good morning, everyone. Fonda completed the year with fourth-quarter revenues of $6.6 billion, net income attributable to common stock of $305.1 million, or $2.03 per diluted share, and adjusted diluted earnings per share of $2.94.
Speaker Change: Of note, our cash flow in the fourth quarter and for the full year exceeded the upper end of our free cash flow guidance expectations. For the fourth quarter and full year of 2024, we had free cash flow of $575.4 million and $1.6 billion respectively, with our full year free cash flow a record.
Speaker Change: Our earnings and cash flow performance allowed us to end the fourth quarter with ample liquidity and a balance sheet that supports both our organic growth expectations and the opportunistic investment of capital to generate incremental returns for our stockholders.
Speaker Change: To that end, subsequent to the end of 2024, we acquired two companies for aggregate upfront consideration of approximately $562 million of cash and stocks.
Speaker Change: This morning, we provided our full year 2025 financial expectations, which calls for another year of profitable growth with record revenues, improved margins, and opportunity for double-digit growth in adjusted EBITDA and adjusted earnings per share.
Speaker Change: 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.
Speaker Change: As mentioned in our earnings release, beginning with three months ending March 31, 2025, we will report our results under two reportable segments, Electric Infrastructure Solutions and Underground Utility and Infrastructure Solutions.
Speaker Change: The new Electric Infrastructure Solutions segment combines the previous Electric Power Infrastructure Solutions and Renewable Energy Infrastructure Solutions segments.
Speaker Change: This new segment reporting reflects how the business is managed and resources are allocated and better reflects the positioning of our strategies and comprehensive solutions for our growing and increasingly converging addressable markets.
Speaker Change: Additional details and commentary about our 2025 financial guidance can be found in our Operational and Financial Commentary and Outlooks Expectation Summary, both of which are posted on our IR website.
Speaker Change: In summary, we are executing well on our strategic plan and are pacing well against our multi-year financial targets, including double-digit EPS growth and double-digit returns.
Speaker Change: We ended 2024 with record backlog, and our end markets have never been better, and we see opportunity for further strength in the coming years. With that, we are happy to answer your questions. Operator?
Speaker Change: Thank you. We will now move to our question and answer session. We ask that all participants limit themselves to one question. If you have additional questions, you may re-cue and ask the question.
Speaker Change: and those questions will be addressed time permitting. If you have joined via the webinar, please use the raise hand icon, which can be found in the bottom of your webinar application.
Speaker Change: If you have joined by phone, please dial star 9 to raise your hand.
Speaker Change: Our first question comes from Chad Dillard with Bernstein. Your line is open. Please go ahead.
Andy, good morning, guys.
Speaker Change: So just a big picture question here. So what does the shift from investing and training data centers to inference mean for Quanta and the broader grid? Is there any difference in labor needs, design approach, grid use? Is it a positive, negative, or net neutral?
Speaker Change: I mean, when we look at data centers and what it does...
Speaker Change: like before AI there was still significant demand. After AI there's more demand. How much demand? I don't know. What I do see is we see firm commitments of generation at our customer level. You can look at it. You can point to it. It's
well over 50 gigs
Speaker Change: In 100 gigs, honestly, so when you see those that type of demand on energy that the type of data centers and
Speaker Change: How you're looking at it. We're not looking at it in that way. We're just seeing the demand on our infrastructure and what we need to build. We're booking backlog against it. So we, you know, we just see a great market there. And from deep seek to
Speaker Change: and what that does. We're not concerned with that at this point. We just seek that demand that's firm.
Speaker Change: That's helpful. Second question just on the the recent M&A that you guys did. So I guess first of all
Speaker Change: like what sort of revenue contribution should we be baking in for for 25?
Speaker Change: And then on the civil business, how are you thinking about the mix of business going forward? Is this meant to support Qantas' core business or are there going to be other ancillary verticals that you're going to be operating in?
Speaker Change: And then on the Australia expansion, I guess, like, what was your long-term view on Australia as, you know, an attractive market and, I guess, what is the market structure and how is a quantum position there with this acquisition?
Yeah, so the basically the
Speaker Change: The civil acquisition business, I think from my standpoint, the DNA, the culture of the company, we've known them a long time, known them for decades, I passed by their office.
Speaker Change: My whole career. So I know the family. It's a great family business. It fits our DNA and it also is something that the company itself has synergies against that, you know, obviously we don't put those in the deal.
Speaker Change: I feel like when we look at those solutions that we can provide, it gives us a holistic approach. Our customers are asking for it. We can deliver it on a holistic basis and really add value to the overall solutions of what we're trying to accomplish.
Speaker Change: If you look at a 1,000-acre solar site, look at a 1,000-acre, 10,000-acre...
Speaker Change: Data Center, you look at all the things that we do and try to provide solutions to whether it's LNG
Speaker Change: It doesn't matter, we will take the assets, the people, which are the core to it, and go and deliver against our own business as well as others. So it's a solution that people are asking for, and we want to be holistic when we look at it.
more capabilities and give ourselves.
Speaker Change: the more flexibility as we look at the markets. In Australia.
Speaker Change: We continue to invest in Australia. The front side of the business down there is something that we've said all along that we'll continue to invest in. Great companies, great markets. We're market leaders.
Speaker Change: The renewable business down in Australia, we like it long term and feel like we can continue to invest.
in the country, so great rule of law.
Speaker Change: obviously gives us a lot of flexibility, so we're excited about that.
Speaker Change: on that market as well. I'll let Jayshree comment on the revenues. We don't contribute, we're not going to discuss any individual acquisitions, but we'll tell you that...
Jayshree Desai: The two acquisitions, the majority of it is captured in our UU&I segment and we did give you guidance in that around what the inorganic contribution in our guide is related to that.
Thank you.
Speaker Change: Our next question will come from Ati Modak with Goldman Sachs. Please unmute and ask your question.
Ati Modak: Hi, good morning team. Maybe I was wondering if you can provide some color on the margin performance in the electric power segment, the factors that drove that, and how much of the margin improvement should we consider as structural going forward?
Yeah, I mean I
Ati Modak: We executed well in the quarter. We've done, you know, some acquisitions there with Cupertino that are in the segment. Obviously, it had a lower margin profile, but a better return. So I do think when we look at it,
Ati Modak: The margins that we've stated in the past, 10.5%, 11% type framework, 12% on the outer years if you've got a lot of...
utilizations and things of that nature.
Ati Modak: in the business. But in general, we sat all along and it was back half loaded. We felt like the electric business was going to be strong in the second half. It was. You know, I can only say the field and the personnel that we've had out there and the structures that we've put together is what's delivering it. And I think as we see the markets, we will continue to deliver.
Ati Modak: No matter what we do in that segment, that's kind of how you should look at the framework going forward. Yeah, there will be some years that are above it due to some factors here or there, but given what we see in the market, that's kind of the framework we see going forward ten and a half to eleven percent.
I think also just to add to it
If you look at our electric segment...
Ati Modak: are you seeing us at over 10%? And that's after taking into consideration that.
Ati Modak: We have reduced storm from where we were in 2024. It takes out the Peru impact and even with that we're still in double-digit segment revenue and I think that you should take comfort that we are we're going to continue operating at that level and the performance of the company from last year is going to go into 2025 as well.
It makes sense. Thank you, Jeshree.
Speaker Change: Our next question will come from the line of Jamie Cook with Truist Securities.
Speaker Change: It appears you're on a phone, Jamie. Star six will allow you to unmute.
Jamie Cook: Hi, can you hear me? Hey, can you hear me now? Hi, Jamie.
Jamie Cook: Oh hey, thanks guys. I guess my first question, Duke, if you could frame...
Jamie Cook: the expectations for backlog growth in 2025, and in particular, can you talk to potential synergies or big awards that could be coming out of Cupertino? I know you guys were very successful with revenue synergies associated with Blattner. I'm just trying to understand what's going on with Cupertino, and is that an opportunity for larger awards in 2025? But my second question, Jayshree, just, and I'm.
Jamie Cook: If you miss this, I know on the cash flow guide, you sort of talk to it being more back end loaded. Just how do we think about first half versus back half and what's driving that? Thank you.
Thanks, Jamie.
Jamie Cook: I think we look at the business in totality. When we buy these platform companies, we don't build synergies into, you know, the discussions that we have or the way we value them. But what we do see is when the total adjustable markets of TAMs on the business are something that goes unnoticed,
Jamie Cook: customer base goes on those those synergies show up and you've seen with Blattner as they've gotten
Jamie Cook: balance a plant, the things that we're able to do with these high customers because there's convergence between technology, utilities
Jamie Cook: and the way we look at the data centers. And so the way that we're looking at the business certainly looks different. And those markets are different. If you just look at the tech.
Jamie Cook: Our concerns and how we convert the nexus of the middle of it really puts us in a different position on larger projects So I expect our backlog to be at record levels. It could kegger at record levels. It wouldn't surprise me
Jamie Cook: But I do expect us to be at record levels throughout the year. I can't tell you exactly, you know how the backlog books, so I can't tell you exactly when that'll happen, but what I see, bigger projects, our ability to perform solutions is something that's unnoticed.
to the investment community.
Jamie Cook: We are a solutions provider. I'll say it again. Solutions provider. And what we do and those solutions that we provide and how we collaborate with that customer will allow us in our addressable markets only getting bigger. So it just allows us more opportunity. And I think we see it. We see it showing up.
Jamie Cook: Super excited about where we sit and the strategies that we have going forward against that solution based
you know, how we use
Jamie Cook: craft skill and engineering in that solution so yeah I mean I fully expect us to book larger projects and but we'll continue the base business we are not taking our eye off that either so
Hey Jamie, on a pre-cash flow, oh sorry, go ahead.
Jamie Cook: Yeah, I was just going to say specific to Cupertino is the question too, Duke, like anything specific to Cupertino in terms of a Revenue Center, you know, larger awards in 2025.
Jamie Cook: I think I inferred that, but yes, absolutely. Okay. Okay. All right. Sorry, Jayshree. Go fill out another catch-all question. Thanks.
Jamie Cook: Yeah, on free cash flow, it's our typical profile, Jamie. It'll be back half-weighted. Wouldn't expect too much in the first half, just given the nature of how our business operates. So I think you'll see similar patents to what we've done the last couple of years.
Okay, thank you.
Thanks, Jimmy.
Speaker Change: Our next question will come from Stephen Fisher with UBS. Please unmute and ask your question.
in high and low voltage, just curious directionally.
Speaker Change: kind of above the high and low voltage rate for the next couple of years, or is this sort of like the renewables piece, you know, kind of driving generation which is going to slow down while the grid part should be accelerating and those streams will cross, if you will?
Speaker Change: Yes, I mean, I think you're seeing growth across the business. You're seeing growth at the EPS line at the midpoint, what is it, 16%? At the midpoint of EPS. And you're seeing growth on the top line, call it organic growth, 6 to 7. 10% if you look at the whole company on the top. So we're seeing growth. One of the reasons that we're going to one segment is how we run the business.
Speaker Change: and we feel like that the convergence of the business we we spoke a lot last year around T&D actually I explained it for four months that our transition distribution crews
Speaker Change: Cross segments. It was very confusing to the investment community. It's not how we run the business. So we put it together. So for us to go in and tell you
Speaker Change: with how much generation growth or, you know, what is that? Because there's substations. There's all kinds of different things. Are people cross?
from data centers to ship plants to
Speaker Change: hospitals, clean rooms, we move all across. So we're going to optimize our people against the markets. We're not making a specific manufacturing, you know,
Speaker Change: anything manufacturing where it's only specific to one segment or one TAM I mean we're addressing across a large customer base so we like the way we're set up
and we're not going to get into...
Speaker Change: guidance on little pieces of the segment because it doesn't matter to us. What matters is the markets are growing, all the businesses growing, we're putting up
Speaker Change: at the midpoint of the range, 10 plus, you see growth all across it, so we feel like that
Speaker Change: All the markets that we're in are growing and we can move and be nimble across them and provide those solutions that we've discussed when we go forward based on how we're going to run the business, how we're going to talk about the business, and we have growth, and we see growth.
Speaker Change: You can see the backlog. I welcome you to look at the backlog and see what we put up in the renewable segment alone, which I believe we...
Speaker Change: that last quarter that we would put it up and we did and I those kind of numbers are staying there and they're not just 12-month backlog it's long-term backlog in the 26, 27, and 28 so we see growth and I think you can comfort yourself on the demand you see for generation.
Speaker Change: It's just a supply and demand issue. We've said this, like the demand on generation, it doesn't matter.
Speaker Change: it's going to be renewables, it's going to be gas fire generation, it's going to continue and you can see it, it's right there and then we're talking about it daily. So we're optimistic, we like the growth, we're not going to get into those little pieces of the segment. That's not who we are, we're a solution provider.
Sounds good. Thank you.
Speaker Change: Our next question will come from the line of Julian Dumoulin-Smith with Jeffreys.
Speaker Change: If you're on a phone, Julian, Star 6 will allow you to unmute.
Julian Dumoulin-Smith: Excellent. Good morning everyone. Thank you very much for the time. I appreciate it. Maybe just to come back to that last point here briefly, just on the renewable front real quickly. As you think about some of the the headlines here under the new administration, can you speak a little bit to your confidence in the execution on the Sunzea project specifically?
Julian Dumoulin-Smith: both in terms of operations and permit considerations across federal lands. I suspect it's largely intact, but just want to make sure we've checked that off. And then separately and related here, as you think about this resegmentation, I think you were alluding to it a moment ago, but you know, if you weren't to resegment, right, again just to use the hypothetical and brief, can you speak
Julian Dumoulin-Smith: as to how that backlog would translate into compounding revenue as it stands today. I suspect some folks are looking at this and saying, well, is there something about a deceleration in the renewables business? Clearly, the backlog data points today would suggest otherwise. But if you can speak to that even more clearly than you just alluded to a moment ago, I'd appreciate it.
Speaker Change: How you doing? Thanks. Sundia, first of all, we're doing great. We're progressing well. I fully expect us to complete. We're not seeing any permitting issues on it.
Julian Dumoulin-Smith: We're well past that. I want to talk a little bit about Sunzea because I think people are worried about the replacement. If you break Sunzea down and you go soon after your project, if you look at the wind piece, it's basically two jobs a year. We're not worried about replacement. Sunzea, we've already replaced it. It's in the backlog.
Julian Dumoulin-Smith: And then on the transmission line, yes, it's a big line, but we replaced that as well.
Julian Dumoulin-Smith: And so, I'm not concerned at all with our ability to replace Cynthia going forward, and I think that's a misnomer in the investment community, and I wanted to get that out there and say, we're not worried.
Julian Dumoulin-Smith: The second, when we're talking about generation, we're seeing renewable generation growth. We're seeing it in outer years.
At 26, 27, 28, we put growth up and
Julian Dumoulin-Smith: 25. We'll put growth up in 26. We're not concerned at that at this point with that and yes there's going to be gas generation getting built. We see it. We've said it all along it's 20-30 percent.
Julian Dumoulin-Smith: When you start ordering turbans that are 36 to 48 months out,
Julian Dumoulin-Smith: What are you going to do between now and then and I still believe like even when you get turbines in when you start to see that It you still got to build renewables behind it and fill up the lines and it When I look at the cost of renewables
Julian Dumoulin-Smith: The way I'm looking at it and the way everyone should, we got to fill the lines up with renewables, gas, batteries.
Julian Dumoulin-Smith: everything possible because that's what matters and people are underestimating transmission. The real issue is we need to build transmission in North America to
Julian Dumoulin-Smith: really fully get the capabilities of all forms of energy. So I'm not worried about growth, but we need to get the permitting straight to get the transmission built.
Julian Dumoulin-Smith: and Jillian, just to be clear, we are re-segmenting, starting first quarter. Yeah, yeah, we're re-segmenting first quarter.
Julian Dumoulin-Smith: Yeah, no, absolutely indeed. And if I could pick up on that last point quickly, because these RTOs have really released quite substantive increases in their transmission.
Speaker Change: planning processes in the last quarter or so. What's the timeline and cadence that you're looking at to flow into your backlog? I get that there is some kind of lag here, it could be a couple quarters or so. How do you think about that across these, because the numbers are really quite staggering in the last few months.
Speaker Change: Yeah, I'm glad you noticed. What I would say is, I do think...
Speaker Change: We're having those discussions today and before they even came out, I think...
that, you know, Steve was talking about the larger projects.
Speaker Change: Someone should look at those cues and see what those say and that's on top of their already ongoing capital Those are big projects that are both in Mainly all the RTOs for that matter. So you're starting to see bigger work and we're having those discussions On a daily basis. I like our chances
All right, best of luck.
Thank you.
Speaker Change: I can see that. We can hear you. Please go ahead.
Speaker Change: I think you answered the question on renewables that you it sounds like
Speaker Change: The tailwinds are still there that you're seeing despite the change in administration and some of the tariffs, other things that have come up just means they're, I just like, would just ask, is there anything
that you're watching are wary up there.
Speaker Change: but certainly didn't look like it with the backlog increase you got. Second question is, you mentioned, you know, a lot of focus on gas and that seems to keep increasing. I know you don't want to be in the gas turbine business, but just
Speaker Change: coming together for, you know, more growth in your undergrounding business over the next...
Speaker Change: several years as this does seem to be likely to ramp up meaningfully you know looking out
Speaker Change: Yes, Steve. First of all, like, you know, we do look at, I mean, we're looking at administration on PTCs and how that would impact our customers. I think we watch that closely. There's a lot of safe harboring. We feel good about our top 10 clients, and they're very sophisticated. And I'm not as concerned, but we do watch it. I think, you know, we have a really good
Speaker Change: You know, look out in the renewables and what we see. I mean, certainly some of that is based on the RA and the way it impacts it.
The guy
Speaker Change: The administration, yes, it will be noisy, but I think in the end the generation that's needed and what we need will prevail against those kind of, you know,
Speaker Change: short-term dynamics in the market what you may hear we are booking backlog we see work out long long out and you know we need all forms of generation I think it goes back probably ten years and when we talked about it we talked about all forms of energy all forms of generation it's never been as
pronounced as it is today. We need all forms.
Speaker Change: and we need it quickly and as fast as we can build it. And I think the demand is there. That's why you're seeing behind the meter, things come up, distributed generation, everything that you're seeing because we can't meet it fast enough.
Speaker Change: When I look at, see, when we look at combined cycle, it's just not who we are. We can build it We probably will build it, but we're not going to build it at risk
Speaker Change: And so yes, we'll help our customers, we can build substations around it, we can do all kinds of things around it.
Speaker Change: But you know the cost of a combined cycle is not cheap either and so I think
Speaker Change: trying to get gas to it and the cost on turbines and how much it costs to build one these days is not the same. And so I think in general we have to make sure that
Speaker Change: recover the company off on that risk. It's certainly been something in the past that I can't get out of my head, and we'll be prudent about how we look at that business. I do think it's opportunities and opportunities all the way around it. Single cycles, small stuff, yeah we can build on those.
Speaker Change: Those aren't difficult and we'll be involved in some of that, but we won't take the risk on Kumbh Mansa.
Thank you.
Speaker Change: Your next question will come from the line of Justin Houck with Robert W. Baird. Please go ahead.
Justin Houck: Great, thanks, good morning everyone. I guess I wanted to ask, a lot of the big picture questions have been asked, I wanted to ask about the impact of the California wildfires. Yeah, I don't really think of that as storm work the same way that you know hurricanes knock down lines but just curious if that's had any impact to you here in the first quarter and maybe more importantly just the long term thinking about underground lines and
Justin Houck: your ability to do that and kind of the cost differential versus overhead lines just kind of the long-term rebuild impact if you could comment on that.
Justin Houck: We're involved with some of the underground in California now and it continues to progress nicely. It's expensive, it is, so there's no question about it, but between that and taking fire risk, I think it's probably not expensive when you really look at the long-term nature of the business.
I do, we do see violent weather across the
Justin Houck: You know whether it's winter weather today or or you know storms that hurricanes fires
Justin Houck: We're seeing it and impacts of it. So I think as an industry you're seeing the hardening programs in the West You know, certainly energy's got a resilient program ongoing and we're involved in so we're involved in them every one of them
Justin Houck: with our clients and trying to harden the grid and de-risk their business. I don't think anyone ever intended to take fire risk on a line 35 years ago, 40, 50 years ago. So we have to, you know, put
Justin Houck: for ourselves and try to help and collaborate on what we see across the board to make the grid more resilient, more modern, and we're doing that. There's technologies out and things like that that are coming along as well, so
You know, everyone's, everyone's...
Justin Houck: kind of in this new paradigm of these violent events and we've got to harden the grid and we're seeing that ongoing and we'll continue to see it for decades or more. We built this grid over the last
60, 70 years, got a long way to go.
Justin Houck: So I do see that happening and we've got to get in front of that as an industry.
Justin Houck: There is risk out from from fire as well I mean we have to watch ourselves and the risk that we have on fire in the West so I do think how we interact and how we make sure that the company de-risk ourselves in the middle of the fire is something that we watch as well, so
Justin Houck: Now look, we're all in it together with the clients and working hard to try to make a difference and make sure that we spare human life when these events happen.
Okay, thank you very much.
Speaker Change: Your next question will come from the line of Brian Brophy with Stiefel Nikolaus. Your line is open, please go ahead.
Star six will allow you to unmute Brian.
Brian Brophy: Thanks, good morning everybody. I was hoping you could talk about the communications outlook here a bit and any more detail on this Lumen announcement that you made here. How meaningful could that be and when should we start thinking about contributions on that front? Thanks.
Brian Brophy: Yeah, I was just trying to make sure you guys knew we were still in the telecom business. But in general, look, we had a nice award there. We continue to grow the business. We continue to, you know, incrementally move it forward. The data center demand on fiber is big.
It probably goes unnoticed a bit on everything else, but...
Brian Brophy: I do think we continue to see long-haul fiber opportunities as well as just our core business and communications. We love the business. We're growing it, like I said, nicely, and sometimes it goes unnoticed, but I thought the award was meaningful and something that the investment community should see that we're still growing.
Brian Brophy: We're much larger, and I said it before, our addressable markets continue to grow. And where the company was five years ago versus where it's at today is much different from an addressable market standpoint. So when you look at the growth going forward, you can see it across
Brian Brophy: multiple segments, whether it's communication technology or utilities. We could go on and on, but I just think that is something that goes unnoticed and I want to make sure that everyone realizes that our addressable markets across this company have grown and getting larger.
Appreciate it, I'll pass it on.
Please.
Speaker Change: As a reminder, we are asking that all participants limit to one question. If you have additional questions, you may re-queue and those questions will be addressed time permitting.
Our next question will come from Adam Thalimer with
Sorry, Adam Tholmer with Thompson Davis.
Hey, good morning, guys.
Speaker Change: I had the same question actually. I was curious about lumen. What else you're seeing in terms of long-haul fiber? Could you book another award of a similar magnitude?
Speaker Change: And then Jayshree, curious if you can comment on the tax rate. It was a decent step up year over year, just wanted to see what was going on there. Thank you.
Speaker Change: Now we kind of talked about, you know, telecom being a billion. We're growing off a billion and we based there and I do think we'll see growth in long haul.
Speaker Change: We bought some smaller businesses 34 years ago. They're really growing nicely. Our markets are growing.
Speaker Change: There's no shortage of demand on infrastructure around the telecom data space.
Speaker Change: I do see us getting more awards and we can deliver on a national footprint. We talk about the utilizations of some of our underground.
Speaker Change: business moving over into telecom that can still happen. So we're leveraging all assets and leveraging people.
Speaker Change: across these TAMs and so I do think our ability to move resources across these customer bases is something that you'll continue to see the company move forward and we're in multiple conversations across.
Speaker Change: You know, what I would consider all businesses, and there's growth to every one of them, infrastructure for the next two decades that I see out is significant, and we're right in the middle of it with our craft, skill, labor, and engineering capabilities.
Speaker Change: Yeah, and as for the tax rate, I think a couple of things. One, we had a nice, we did some nice tax planning here that came through at the end of the year that allowed us to...
Speaker Change: This year we had the big benefit as well, earlier in the year, of the RSU vesting. We're assuming a lower vest rate and vesting of the stock price in 2025, and so you see that as well. The combination of both of those things are why you're seeing a step up in the tax rate.
Thanks, guys.
Speaker Change: Our next question will come from the line of Drew Chamberlain with J.P. Morgan. Please unmute and ask your question.
Yeah, good morning and thanks for taking the question.
Just a...
Speaker Change: being at play and what the outlook could be for further safe harbor type winds in 2025.
Speaker Change: Yeah, I think when we're looking at the renewable business, I mean, certainly
Speaker Change: like we're not seeing any pullback and so we're actually seeing more demand and there's safe harbor the safe harbor is really meant to you know
our customers
Speaker Change: for buying equipment. They're doing the things that are necessary to make sure that the projects are protected for the long term and the smart, the bigger ones...
and as far as the data center demand and...
Speaker Change: If you were going to build Generation tomorrow, I would just ask, what would you build and how quickly could you build it? And you would find yourself building a solar plant, probably. It's the fastest thing you can build.
Speaker Change: I just think that the way you go to market right now, no one wants to hear 48 months. They want to hear 48 minutes.
Speaker Change: and so I think that will be key on how we look at the business. It won't be as much about what form of generation will be, how quick can you get it.
Great, thanks Duke.
Our next question...
Speaker Change: Our next question will come from the line of Sangeeta Jain with Keystone. Please unmute and ask your question.
Speaker Change: Hey, thanks for taking my question. So, if I can ask on the civil acquisition that you made, is that mostly Texas-oriented? Now I'm trying to see if you can leverage that to your Cupertino low-voltage work for data centers maybe?
Yeah, I mean, I think...
Speaker Change: to expand the business. So yes, I mean we can we can expand.
Speaker Change: When we look at it, you know, Cupertino works all across the lower 48, so they're in Texas as well, in the southeast, and there's a lot of southeast expansions and Texas expansions. You know, I just think our synergies would allow us to really grow the business.
Speaker Change: We could probably absorb the whole business internally with Fenergie's internally, so.
Speaker Change: That's not going to be the case. They get involved in industrial-based L&G, all kinds of different things, and so we're super excited about having the capabilities.
Speaker Change: I think when we look at acquisitions, we weren't looking for a civil business, but we know the business well, and it's really the culture, the DNA, what we look for in management teams and how we go about our ability to
Speaker Change: put strategies forth and solutions to our clients and also the quality of the management teams are so paramount when we look at acquisitions that this is a long-standing business.
Speaker Change: 50-plus years old, generationally, that we're super excited that those solutions will be something that both internally and externally you can see. And sometimes you can't see it, but we certainly see it, and we like our opportunities there.
We appreciate it. Thank you.
Speaker Change: Your next question will come from the line of Mark Bianchi with Callen. Please unmute and ask your question.
Mark Bianchi: Hi, thanks. I wanted to ask on the outlook for underground here in 25. So 24 was a bit of a lower margin year for that business.
Mark Bianchi: and you're showing sort of an expectation for improvement in 25, and particularly the year-over-year improvement as we get past the first quarter looks like it's a pretty good step up. So I was hoping you could kind of unpack kind of, you know, what happened in 24 and
what's driving the confidence in the bounce back in 25.
Mark Bianchi: A couple things, your industrial business was down a bit and you know the margins were down, we had some storms come through the Gulf Coast and impacts us in the back half, so part of it is our industrial business gets better.
Mark Bianchi: Canada, we're coming off a big pipe in Canada. And so that's some of the impacts that are going back into your LDC business that we have growth in. And then, you know, when you look at the acquisitions, it's a creative.
So the acquisitions are creative
Mark Bianchi: We have a better industrial margin profile going forward as well as our LDC business and our core business in the utility space. People are starting to put more capital back into the gas business, so we're seeing that come back into the core. So all those things kind of come together and that's why you're seeing the impacts of margins going forward. But I would still say
that we're leveraging the
underground capabilities of gas across into telecom and into
Mark Bianchi: Electric space on any given day. So you can see some pullback and then the electric may go up 200 million of gas assets and people that move over there three or four hundred. So you can see that on any given day in the business.
Mark Bianchi: If it was up to me, I'd have one segment, but it's not. So, like, we have two.
and it does cross.
Mark Bianchi: But I do like our business in totality, and I think it's something that will continue to see margin improvement. We're still not happy with where it's at, and I do believe you can get an upper single digits there, or maybe even double digits.
Great. Thanks so much, Duke. I'll turn it back.
Speaker Change: Our next question will come from the line of Gus Richard with Northland Capital Markets. Please unmute and ask your question.
Gus Richard: Yes, thanks for taking the question. On the federal level is a lot of changes. You've got indiscriminate layoffs by the
you know, Government Efficiency Bureau and
Gus Richard: That could slow approval processes, you've got the potential of deregulation to speed things up, you've got the potential of...
Gus Richard: bands of solar panels being imported, another impact, and I'm just wondering if you're seeing anything at this point due to these potential changes and sort of what's your expectation on
You know
Gus Richard: how easy it'll get projects to get done will get pulled in or pushed out.
Gus Richard: Had a good question, you know really try to put my head down and work and not listen too much to it because it changes by the minute
Gus Richard: I don't fundamentally from the customers and how we see it and what we've got it to we've taken to account we've been very prudent about how we got it to the midpoint
Gus Richard: and anything that we've seen or think that could be a possibility, they can do our guidance at this point.
Gus Richard: So, I feel comfortable that, you know, across our adjustment markets, we have room to expand on any given day. But you're right. I mean, one day, you know, some things are really, really good for certain parts of the business and some things...
Gus Richard: could impact a bit. But in totality, we see growth, we see opportunity, and everything I hear is just opportunity. I don't think, when you look at it, there's still a lot of...
Gus Richard: If you go back to first term, a lot of this happened and we did nicely and we continue to grow the business. I think the same thing will happen. It will never be as good as you think and it will never be as bad as you think.
Gus Richard: So, we'll be right down the middle with it, and, you know, the great thing is, is under any scenario, demand is going to outpace supply at this point, and we just, we have to really try to figure out how to get in front of that would be more important.
Great, thanks for the answer.
and Steve. Thank you. Thank you. Thank you.
Speaker Change: Your next question comes from the line of Joseph Osha with Guggenheim Partners. Please go ahead.
Thanks. Good morning. Can you hear me okay?
Thank you. Thank you.
Speaker Change: Okay, great. Duke, you alluded to this a little earlier. Obviously lead times are way up there for combined cycle machines, but...
Speaker Change: I was at PowerGen last week, and we're starting to hear sort of the same thing happening on the single cycle side as people look to put peaking power alongside renewables. So I'm just wondering, how are you seeing your mix evolve, and are you starting to see that same kind of frenzy and longer lead times on the single cycle side as well? Thank you.
Speaker Change: Yeah, I mean, you know, the single cycle business for us, we're certainly capable, and I'm not concerned near as much building a single cycle.
Speaker Change: So, yes, we'll be around the edges on that. We do see a lot of opportunity there, you know, whether it be.
Speaker Change: You know, you have a lot of diesel generation back up today. I think the single cycles will be forms of energy you can back up and use them in merchant type situations and things of that nature. So it is.
Speaker Change: way quicker to market with single cycle. So I do think that'll be a part of the solutions.
get the
Speaker Change: you know, the project started quicker. So, we see the opportunity as well, and the company is well-positioned to take advantage of those types of arrangements.
Thank you.
Speaker Change: Absolutely. All right. So, you, first of all, thank you for the opportunity. This is your first interview with us, right? Mm hmm. Yes. I'm pleased. I had just computershipped my computer to make an actual interview. Right. It's our first incredible job very soon. So, we're looking forward to hopefully capping that. That's brilliant. Okay. Absolutely indeed. Absolutely. That's awesome. To come safely home, yes, absolutely. You could see those very clear. Wonderful. Thank you. We have that original information for you. But we've got people here sitting outside who presented the reporting. That's great. I want to thank you for your level of support.
Speaker Change: I wanted to go back to the AI data center theme. What opportunities are you conceptualizing now that could deepen your exposure to the AI data center trend beyond Cupertino?
Speaker Change: Now you emphasize that you're a solutions provider. What kinds of problems are your data center-related customers experiencing that you could support in a deeper way than you do now?
Yeah, I mean, I...
Speaker Change: We're taking the same approach with the data center owners that we are with the utilities and that intersection as well.
So...
our ability to talk to.
Speaker Change: Our clients on the utility side help them and help the data centers and stay in the middle. We want to build infrastructure, all types of infrastructure. If it involves craft skills, if it involves engineering, if it involves...
You know anything really to be honest like we're certainly
Speaker Change: in the middle of those discussions, and how do we help collaborate to move things faster, more efficiently across both customers, as well as our renewables as well. So, look, it's a convergence. We see it, and we're in the middle of it, and we will be
Speaker Change: trying to take advantage of those markets on a go-forward basis that we see. And we've said all along that we feel comfortable with craft skill, we feel comfortable building up our capacity on the front end side of the business, and using those
Speaker Change: service lines to provide a solution. So there's not much we're not talking about with these clients.
Great. Thanks, Steve.
Sure.
Speaker Change: And there are no more questions at this time. I'd now like to turn the call back over to management for closing remarks.