Blattner Holding Company, Inc. (PWR) Earnings Call Transcript & Summary

Hello, and welcome to the Quanta Services Blattner Acquisition Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Kip Rupp, Vice President, Investor Relations. Please go ahead, sir.

Thank you, and welcome, everyone, to the call. This morning, we issued a press release regarding our intent to acquire Blattner Holding Company, which can be found in the Investor Relations section of our website at quantaservices.com. Additionally, we will use a slide presentation this morning to accompany our prepared remarks, which is viewable through this call's webcast and is also available on the Investor Relations section of Quanta Services website. Please remember that information discussed on this call speaks only as of today, September 2, 2021, and therefore, you're advised that any time-sensitive information may no longer be accurate as of any replay of this call. This call will include forward-looking statements intended to qualify under the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These include all statements reflecting Quanta's expectations, intentions, assumptions or beliefs about future events or performance or that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control, and actual results may differ materially from those expressed or implied. For additional information concerning some of these risks, uncertainties and assumptions, please refer to the cautionary language included in today's press release, along with the company's periodic reports and other documents filed with the Securities and Exchange Commission, which are available on Quanta's or the SEC's website. You should not place undue reliance on forward-looking statements, and Quanta does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third party regarding the subject matter of this call. Please also note that we will present certain historical and forecasted non-GAAP financial measures in today's call. Further information regarding these measures and reconciliations of certain of these measures to the most directly comparable GAAP financial measures are included in our materials. Lastly, if you would like to be notified when Quanta publishes news releases and other information, please sign up for e-mail alerts through the Investor Relations section of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and Quanta Services on the social media channels listed on our website. Now turning to the agenda. Your host for today's call are Duke Austin, Quanta's President and CEO; Derrick Jensen, Quanta's CFO; and Jayshree Desai, Quanta's Chief Corporate Development Officer. This slide shows the topics we will discuss on the call and in our presentation this morning. Following our prepared remarks, we're happy to take your questions. However, we ask that you keep your questions to topics related to the acquisition of Blattner. With that, I would now like to call -- turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks, Kip. Good morning, everyone, and welcome to our call. We're excited to announce our intention to acquire Blattner Holding Company, the leading utility scale renewable solution provider in North America. In addition to its best-in-class position, Blattner shares many key characteristics with Quanta. A safety-first employee-focused organization, a multi-generational family-owned and led business, the industry leader in their core market, they drive solutions centered on craft skill labor and a trusted long-standing collaborative partner to their customers. Following our discussion this morning, we think you will agree that Quanta's acquisition of Blattner will position us to play a major role in facilitating the energy transition in North America and gives us the opportunity to create significant value for all of our stakeholders. We look forward to bringing this world-class organization and its employees into the Quanta family and delivering infrastructure solutions together. We believe Blattner is an ideal acquisition from a strategic and financial perspective. I'd like to highlight 5 key points related to this transaction. First, it will put us in the forefront of significant and long-term growth in the renewable energy market, which we believe will allow Quanta to collaborate with our customers to shape North America's energy transition to a carbon-neutral economy. Second, Blattner fits our strategy of delivering visible and recurring revenue and earnings because of their market position, established relationships with customers, operational excellence and the long-term growth outlook for the renewable energy market. Third, Blattner and Quanta are aligned culturally, with a shared entrepreneurial mindset and focus on safety, quality and customer service. Fourth, Blattner is highly complementary to Quanta, both from a service offering and customer base perspective. And finally, we expect the transaction will be immediately accretive to Quanta on an earnings, growth, margin and free cash flow basis, even without accounting for synergies. Let's take a more detailed look at Blattner and the renewable energy industry. Owned and operated by the Blattner family since 1907, Blattner is widely regarded as the premier utility scale renewable energy infrastructure solutions provider in North America, with decades of experience and a strong safety culture. Blattner entered the renewable market in 1997 and became 100% renewable-focused by 2006. Their services are diversified, both geographically and across 3 renewable energy technologies, wind, solar and energy storage. Blattner provides front-end engineering, procurement, project management and construction services and like Quanta, self performs most of its work, which helps to manage risk, ensure quality and provide cost and completion certainty to its customers. Our superior operational and financial performance has been driven by decades of experience and client selection, sophisticated operational processes, a focus on craft-skilled labor, the scope and scale of their platform and world-class employees. Further and importantly, Blattner is selective with the projects it pursues. Led by a highly experienced leadership team, Blattner has developed a customer-centric and collaborative approach that leads to early engagement in the project development process and long-term relationships with high levels of repeat business. This approach has resulted in double-digit revenue growth and attractive margins. Additionally, Blattner's corporate sustainability values and initiatives align well with Quanta's focus on people, planet and principles. Further, we believe Blattner's pure-play profile of building renewable energy projects and shared focus on key stakeholders enhances Quanta's already favorable ESG profile. We believe the energy transition in North America is on the cusp of a significant acceleration, driven by consumer and investor preferences, increasing electrification trends, supportive public policy actions and declining levelized cost of renewable energy. Moving to a carbon-neutral economy, we'll require sizable and decades-long investment in renewable generation and related infrastructure, including meaningful repowering and modernization opportunities of existing assets, given the pace of the renewable technology advancements. In an overall fragmented market, Blattner represents a rare scale opportunity that we believe will put Quanta in a leading position in this large and rapidly growing renewables market and the energy transition more broadly. Blattner has installed tens of thousands of wind turbines and tens of millions of solar panels to complete more than 400 renewable energy projects with more than 62 gigawatts of renewable energy capacity throughout North America. Blattner typically works on a portfolio of 30 to 40 projects per year and generated approximately $2.4 billion in revenue in 2020. One of Blattner's many strength is its ability of their project leadership and teams to shift between wind, solar and energy storage projects, which allows them to more efficiently and effectively pursue opportunities across the renewable energy space. This capability, along with their sophisticated project management processes, selective customer approach and ability to collaborate with their clients across technologies on their multiyear renewable generation plans, allows Blattner to manage its opportunity pipeline to capture programmatic customer spending as opposed to focusing on one-off projects. As a result, Blattner has greater visibility into future opportunities and backlog and opportunity to deliver more consistent results. Blattner is diversified, both geographically and from a technology perspective and they provide services across the infrastructure life cycle of renewable energy facilities. Their high self-perform capabilities help to manage execution risk, ensure quality and provide cost and schedule certainty to customers. Blattner has strong and long-standing relationships with leading renewable energy developers, including top U.S. wind and solar developers. The vast majority of Blattner revenues come from repeat customers, which helps provide better insight into timing and amount of future work. What Quanta is to the electric power solutions industry, Blattner is to the utility scale renewable energy solutions industry. Together, we will be focused on what we believe are the most attractive areas of the electric infrastructure complex. We believe the combination of Quanta and Blattner will create a company that is a leader and providing end-to-end infrastructure solutions that support grid modernization, system hardening, electrification, electric vehicle charging and renewable energy. The complementary and holistic nature of our combined offerings creates a unique value proposition and opportunity to collaborate with our customers to shape the energy transition initiatives. The estimated total addressable market for U.S. investor-owned utility CapEx is large and growing. As many of you know, utilities are deploying record levels of capital into their transmission and distribution system for many years. Quanta has been the leading utility infrastructure solutions provider and has played a unique role supporting these initiatives. Utilities are in the early stages of investing in renewable generation, which we believe will expand significantly, over time, as they pursue clean energy strategies and net zero initiatives. As a result, we believe renewable generation, CapEx could ultimately grow at a faster rate than transmission and distribution CapEx. We anticipate that Blattner will put us in a unique position to expand our solutions for our utility customers to support their clean energy and net zero initiatives. I will now turn the call over to Derrick Jensen, our CFO, to review the details of the transaction and our financial expectations for Blattner. Derrick?

Thanks, Duke, and good morning, everyone. As announced this morning, Quanta has signed a definitive agreement to acquire Blattner Company for upfront consideration of approximately $2.7 billion in cash and stock. This consists of approximately $2.36 billion in cash and approximately 3.3 million shares of Quanta common stock valued at approximately $340 million. There is an opportunity for Blattner shareholders to receive additional consideration of up to $300 million based on post-closing EBITDA earned during the 3-year period beginning January 1, 2022. We expect to fund the upfront consideration with a combination of cash on hand, drawings under our existing credit facility and additional debt financing. Based on our June 31 -- June 30, 2021 balance sheet, we estimate that on a pro forma basis, including the additional debt associated with this transaction, that our net debt-to-EBITDA ratio would have been approximately 2.5x, well below debt covenant requirements. While this puts our near-term leverage profile above our target level of 1.5 to 2x, we believe the combination of Blattner's execution capabilities and the opportunity for strong multiyear growth will allow us to meaningfully reduce Quanta's leverage profile over the years following the close of this transaction. Further, we believe we can efficiently delever even while maintaining a level of opportunistic external cash deployment into incremental acquisitions, investments or additional stock repurchases, which demonstrates the compelling financial contribution Blattner provides to Quanta. The Board of Directors of both Quanta and Blattner has unanimously voted to approve this transaction, which we estimate will close in the fourth quarter of 2021, subject to receiving required regulatory approvals and the satisfaction of other customary closing conditions. Blattner's historical performance has been impressive with significant revenue and adjusted EBITDA growth over the last couple of years and adjusted EBITDA margins of approximately 12% last year and expected in 2021. Based on 2020's combined reported results on a pro forma basis, Blattner would have represented just under 20% of the combined company's full year revenues. When considering the aggregate of our electric power operations, including Blattner, it would have represented approximately 75% of consolidated 2020 pro forma revenue, approximately 90% of pro forma 2020 adjusted EBITDA and approximately 75% of total backlog. However, although we are still evaluating, given the anticipated addition of Blattner to our family of companies and their focus on renewable energy infrastructure solutions, we will likely resegment our aggregate renewable solutions revenues going forward. From a forecast perspective, Blattner has a meaningful portion of 2021 to still yet perform. And given the uncertainty around the timing of an ultimate closing, our forecast efforts are focused on 2022 and beyond. However, our commentary should be considered very preliminary, given that it's still very early, and there are significant dynamics that can impact our near-term expectations, not to mention our typical prudent approach to guidance. That being said, looking ahead into 2022, our revenue expectations for Blattner are comparable to 2021. This expectation is attributable to reduced wind capacity additions compared to prior years as developers restock their project pipelines and shift project construction time lines to take advantage of higher levels of production tax credits anticipated in the coming years. In addition, while the solar and storage market will continue to increase, we believe there is some risk to current supply chain disruptions in the solar market, which could cause some projects to delay construction in 2022. Overall, for the year, we see revenues between $2.5 billion and $2.7 billion and adjusted EBITDA, a non-GAAP measure, between $250 million and $290 million. Contribution to adjusted EPS and non-GAAP measure is expected to range between $0.80 and $1 per share. Note that this is not an accretion estimate because we are not yet prepared to provide Quanta consolidated expectations for 2022. While this operating range suggests a slight decline in margins from 2020 and 2021 levels, Margins remain accretive to our current consolidated EBITDA margins, and we believe the opportunity for margins to be in line with prior years certainly exists. Beyond 2022, we expect the revenue trajectory to ramp again as solar manufacturing capacity expands, regulatory support continues and demand for low-cost green energy accelerates. We believe Blattner is well positioned to capitalize on these trends and will experience growth in wind, solar and storage capacity in 2023 and beyond. From a long-term perspective, we believe adding Blattner's world-class capabilities into our operating portfolio strategically positions Quanta to deliver incremental value to our stockholders as we broaden the solutions we offer our customers to support the rapid growth of North American renewable energy. We expect Blattner will deliver double-digit multiyear revenue and EBITDA growth with a complementary margin profile, enhancing Quanta's ability to deliver double-digit earnings per share growth over the long term. Of note, we did not assume any revenue or cost synergies in our valuation or in our future financial expectation. However, as Duke mentioned, we believe there are opportunities to deliver a broader set of infrastructure solutions to both Blattner's and Quanta's existing customers looking to bring renewable generation into the grid. We are excited by the opportunity to bring another world-class multigenerational family business with an exceptional track record in the renewable energy space into the Quanta family. We believe Blattner's capabilities, combined with Quanta's existing operations will further differentiate Quanta in our end markets and allow us to deliver long-term stockholder value. With that, I'll turn it back over to Duke for additional comments.

To summarize, we believe Blattner is a great fit for Quanta and strongly aligns with our key strategies for sustainable success. We have long admired Blattner's reputation, capabilities and track record in the renewable energy space. The values of both organizations are strongly aligned, which we immediately recognized early in the acquisition process. We believe Blattner has all the key criteria that Quanta looks for in a company that will complement and enhance our portfolio. This transaction will be transformational to our ability to collaborate with our customers on their energy transition initiatives and adds complementary skills and customers to our platform. The transaction is expected to be immediately accretive from earnings, growth, margin and cash flow conversion perspective. We believe our entry multiple is attractive and supports meaningful value creation for our stockholders, with upside opportunity to optimize the combined platform and offer holistic energy transition infrastructure solutions across our collective customer base over time. With that, I will now turn the call back to the operator to address your questions. Operator?

[Operator Instructions] Our first question today is coming from Andy Kaplowitz from Citigroup.

Congratulations on the deal.

Thank you.

Duke, could you give us more color into the backlog that Blattner brings and how you assess the risk that backlog. Blattner obviously does a lot of self-perform work like Quanta. But could you give us a little more color into Blattner's track record of performance over time. And then you talked about providing turnkey solutions with Blattner, moving forward. Obviously, that sounds like potentially good revenue synergies, but can you give us more color into how you think about the risk profile of turnkey renewables projects versus your core business?

Andy, thanks. First of all, I'll address the backlog. I think when we look at Blattner and the backlog currently, really, it's early for us. It's early in the stages for Blattner in the process going into next year and years beyond. What I will say is the relationships that Blattner has with our clients and the ability to see out and their alliance capabilities is much like Quanta in our MSA business, so it allows for a recurrent revenue streams in our -- we're looking on the front side of all these projects, more at a megawatt basis versus job for job. And I think that's what we see in the company and how we visualize going forward and get around the long-term nature of the macro market within the renewable business. So we're confident in the way we see it, and it's really more out 20 years, not 24 months. So while the backlog is what it is today, I do think we book and look at the way that the alliance has work very much like Quanta. So we're very comfortable with that. As far as the EPC turnkey, the company has a long track record of performing renewables since 2006, just very similar to us. They perform in double-digit margins, over time, since 2006. So a long track record of performance and very key to the way we look at it. And I will say, many times, we comment on the people and the people and the process here is almost very, very similar to Quanta, if not exactly like it. So it gives us a lot of comfort that the 2 companies put together culturally and the way we operate, the results speak for theirselves.

Very helpful, Duke. And then I know you said you're guiding for Blattner or estimates, whatever you want to call it in '22 is prudently conservative. But maybe just for Derrick, can you give us more color into how you're thinking about the growth profile of the company, as you expect, the '22 estimated EBITDA would be down significantly from '21. Is that just sort of mix, as you talked about with wind being down a bit? Or is it really just we're sitting here in mid-'21 still, and you haven't even closed the deal yet.

Yes. I mean I think it's a false look. If you're looking at the guidance next year. I think it's a 20-year look in the growth of the company, and we've put a slide in to give you some type of growth projections even into '26. So that's the growth we see within the company. As far as the next 24 months, 12 months for that matter, we tried to give you what we thought a prudent nature of guidance the way it sits today. You have COVID, you have a lot of different things that we took into account, and we put a number that we feel like we're very comfortable with. But to say that, that's where it's going to sit and that's guidance. It's directionally, in my mind, where we believe the next 12 months go with Blattner, but there's opportunities on both sides of this. The way they run their business and the way that we look at our alliance customers allows Blattner to have good visibility into the next year as well as beyond. So we feel real comfortable, but I'll let Derrick comment more.

Yes. The only other thing I'd add is that, it's much similar to the way that we approach -- I mean it's -- they've performed quite well over the last few years. Our Quanta's margin profile has performed quite well over the last few years. But it's hard for us to look past decades' worth of margin profile and we very much looked at that as to influence how we think about the future.

Next question today is coming from Sean Eastman from KeyBanc Capital Markets.

Congrats on the transaction.

Thank you.

[ Audio Gap ] Dollar -- EPS contribution is. I think it says in the release that's not accretion. So I'm just curious what is the anticipated accretion in the full year 2022? Just a bit confused on how you're messaging that part.

Yes. It's not an accretion dialogue because Quanta Services hasn't provided '22 guidance yet. And so you need to look at the comprehensive component of it to calculate accretion. So this is just a simple calculation of looking at the volume and profitability of the acquisition against the total shares that would then be outstanding.

Okay. Got it. Got it. All right. And then I guess, higher level, it just seems like the growth story in renewable generation is kind of shifting from wind towards solar. So maybe you could just comment on Blattner's positioning in solar, capabilities in solar and kind of execution track record over the past couple of years as solar has ramped. That would be a helpful discussion.

Yes, John, when we look at the transaction, I think it's more important to look at what we feel like in the energy transition and where we sit. When you put both companies together, how we can collaborate with our customer in shape and mold the way the future looks and the way that we execute along the way with our clients on both sides, all of our energy clients, I think, is where we see the business going, albeit solar, wind, their capabilities, 40 projects a year, they can transition between the teams between wind, solar. It's really more about megawatts installed and what type of project that we're doing. And I think that's an important way to look at this. When you're a market leader, you have scale, you can move people within the client base and what we see because we're on the front side of the business very much like on the T&D business, we're in the front side. It allows us to stay highly utilized and scale the business. And I think that's what you see in Blattner and also what we see, as the 2 companies combined, as we work with the client on their energy transition in the future.

Our next question is coming from Ian MacPherson from Piper Sandler.

Duke and Derrick, congrats. This looks like a rare opportunity here. So glad you were able to get it done. I wanted to ask, first off, on the wind side or really just with regard to the divergent near-term trajectories of wind and solar. Is the -- and I know that you're trying to be prudent and cautious with the way you talk about '22 today. But assuming '22 is going to be down versus '21, can you parse out what is maybe the short-term flattening of the wind backlog versus what are these inflation everywhere pressures that might be impacting the margins across Blattner's portfolio into '22 execution. And then my second question after that is really the opportunity for Blattner in offshore wind longer term.

Yes. So the market -- the way we see it, again, it's around the megawatts installed with our alliance customers that give us a lot of comfort into next year, whether it be solar, wind. Our people are -- we can move from either, and it doesn't matter as much. So in my mind, we're not concerned with what we see in the wind market, albeit it may be down, it may not be. It's early in the cycle. There's plenty of opportunities for the company to look at. And so I think when we look at it, we gave some directional guidance to '22. We're not concerned with where we sit. It's more about the next 20 years in the business that we see. It's visible. We're at the tip of the spear of the energy transition with our clients and able to really lean into it now. And I think for us to be able to, at this point to even give directional guidance on the business to me, says a hell of a lot about where we're at as a company and where Blattner is at on the sphere that for us to even talk about it in early September. It's not common that Quanta would comment on '22. So us to even comment, it gives you a lot of comfort what we think. And I do think we give prudent guidance and wind, solar, it's more about megawatts. So yes, we see that everything that you see, but our ability to be in front of that with the client like we are on T&D, I think if you go back in time, everyone was worried about the T&D business and transformers and delivery from what was getting said in the states, and we were having no issue. It's the same when you're at the top with the customer and talking to them. They're very close to their customers, and we feel very comfortable with the guidance. As far as offshore wind, many of the offshore developers are also onshore. We typically stay onshore. We'll do some interconnects. We'll look at it Boats have not been our friend. So we'll probably stay away from boats.

Our next question today is coming from Michael Dudas from Vertical Research.

First question is maybe you can talk a little bit about the people that you're bringing over. Are you going to structure it similar to other acquisitions that you have entered into the past? Is it going to be more standalone? What's the ownership structure of the company? And how many of the important people are going to be coming on board? And how that's all going to play out? That's my first question.

Yes. Thanks, Mike. The family is actually here and very much supportive of the transaction. And as well, we'll stay on board and help us deliver what I think is a remarkable combination of 2 companies that are going to allow us to really talk to the client around what's next on the energy transition. So very much aligned. We very much thought about that. We talk a lot about our family companies and the management teams, I would say, I'll coin the phrase from Blattner is they do a very good job of building people. And there's a lot of people here. There's a lot of leadership. They're world-class, the people underneath them are world class. So we have a lot of confidence in this team. We do see this as a platform for us in this transition, whether it be electric vehicles, batteries, things of that nature. This will be the platform that we -- as Derrick said in his comments, as we go forward, the segment will -- Blattner will be the part that I think from a programmatic basis, we'll run it through the Blattner company.

And then I was intrigued about your commentary in the release about what your current -- Quanta's current utility client base. Seems like they were asking more of what you can provide. And certainly, you've been highlighting the front-end work and some of the planning. Obviously, is this something that's driven because of that? Is it -- and maybe a little bit on like when you talk about energy transition across the board, driving some of the skill sets that Blattner has to your current place, which again, as you can see, is very -- it doesn't seem like there's much overlap between what the client base that you provide and from Blattner as well. So just maybe an aspect to that to get more visibility on what you can do with your current existing client base, given the skill that you're bringing on with the family.

Yes. I think when you look at our client base and Blattner's client base, both sides, we saw each other a lot on right ways on projects. And I think reputationally, Blattner is to renewable generation, what Quanta is to T&D. And we've often said that our clients are both doing 2 things primarily. It's switching from a carbon environment to a renewable environment through solar and wind or T&D, mostly both. And so it allows us somewhere around 20% of the spend of the utility business, whether it be through PPAs, with developers or theirselves internally. That spend is occurring and about, call it, less than 15% of generation today is renewable and we see a long runway of renewable generation as well as repowering. We think that we're enabling a lot of that through transmission. So some of the bottlenecks or the transmission, we can help with that. And just, us, the combination of the 2 companies with together at the client is powerful to help them collaborate towards their needs to basically go to net zero, both on -- it goes back to as well as our gas customers and pipeline customers as well are trying to move towards a net zero position. And I think this transaction allows us to be at the tip of the spear.

Our next question today is coming from Chad Dillard from Bernstein.

So I just wanted to dig a little bit into Blattner's sales cycle. So I just want to understand, is this more of like a long-term contract business or are you doing one-off bids for these projects? And then like what's the mix between like developer versus public utility? And I just want to understand, I mean, if you could say what is the competitive moat of Blattner? And how should we think about the win rate on the projects they bid for?

So I think it's very similar to Quanta. When you think about Quanta and how we sit with the customers on our MSAs and their long-standing customer is very much the same. They've been together for -- since 2006 and even before. And some of their customers are our customers as well on the developer side and on the utility side. So where they sit in the early stages of projects and the scalability is more around megawatts installed versus a project-based business, and it feels very much programmatic and recurrent. So we're extremely happy with that part of the business. And look, that's -- the key to this is us collaborating together on those things in a programmatic way. And I think that's what you'll see on a go-forward basis.

Got it. And just on the project mix. I think in the slides, the average size was about $64 million or so. But I think Quanta has historically -- you said that $100 million was classified as large. So in that context, I mean what percentage of the project mix is large scale and like what's the mix between fixed versus cost reimbursable?

They primarily work on fixed cost. They have a long history of working on that, history with the client, so I'm working on those metrics. We feel very comfortable with them. They work like an MSA would be to Quanta and when you think about it. We don't know what -- we know we're going to do $500 million on MSA next year. We don't know what the projects are, very similar here. They know the megawatts that are going to get installed. They don't know what the projects are. So difficult to say project size, depending on geographic areas, rock, all kinds of things that come into play. So it's difficult to say the size of the projects. They typically upsize honestly. And so I think we continue to see the projects get larger, not smaller. That will be the way it goes forward. But very comfortable with the risk profile against the margin profile going forward.

Next question coming from Jamie Cook from Crédit Suisse.

Can you hear me now?

We got you.

All right. Sorry, I'm having issues with the remnants from a storm last night. So Duke, if you could send your team over to Westchester. I'd appreciate it. I'm kidding. But anyway, sorry, but a couple of questions, and I apologize if someone asked this. I know in your slides, it said you didn't assume much in the way of synergies, but I'm just wondering if you could sort of speak to potential there and if there's a bigger opportunity more so on revenue versus cost? And then my second question to just sort of how the deal came about? And then I have a clarification on just the EPS contribution. But I guess if you could address the first 2.

Yes. So Jamie, I think really it's about the combination of the 2 companies and the energy transition that we see in the future and what we can do together. You're right, the synergies that we see -- we have not put in a deal. But certainly, as you think about what's the bottlenecks around renewable generation and a lot of that is transmission, batteries, same thing, all the places that we see. Bottlenecks, we're able to enable that on the Quanta side and the places that we're not good at Quanta, which would be generation. Blattner is world class. So the combination, thereof, and what we can do at the client level to facilitate, not only their customers, but their customer's customers, the value that we can bring and the way that we can shape the future of delivering renewables to market is something that the 2 of us believe is will ultimately go down is what this deal is about. And it will be a long-term, long nature deal that we see the value in that and so is our customers. And I think, it's how the deal came about? Well, it's a 107-year-old family company, typically, when we're looking at acquisitions, we look at people. And we had the opportunity to meet the family and have talked to them on the right away or people that work here many times. I would just say they're very much like our businesses, world-class people, the family, it's hard to -- I would have said they are a perfect fit, 5 minutes in the conversation in every minute thereafter, it's a perfect fit. And when we look at things, the numbers are one thing, but the people underneath to make it happen are everything that we look at, and this family is certainly what I would consider, you could see them on top of any organization we have. It looks the same. And I think we'll see that perpetuate out in the future and certainly the people on both sides of the business, our people and Blattner people will only benefit as well as all our customers from this transaction.

Okay. And then just a clarification on the EPS contribution. Does that include the impact from the higher share count and incremental interest expense?

Yes, it does.

Next question is coming from Justin Hauke from Baird.

Most of my questions have been answered here, but I was just curious, is there any specific union versus nonunion mix here that would be either a limiting factor or something that keeps you in certain geographies? Or is this kind of agnostic and it just depends on where the work is and you've got the capabilities either side?

Yes. Similar to Quanta almost same, 50-50, 60-40, but depends on geographic area. Certainly, they were able to operate double breasted and do.

Okay. And then I guess the second question, it sounds like, Derrick, that you're at least preliminarily expecting to report this as its own segment. So I'm just curious, will you be folding any of Quanta's legacy renewable work into this business? And if so, how big was that business? I mean I know it's small, but is there a meaningful part that's going to be reporting under Blattner here?

That's what we'll be evaluating is exactly which components, as we go through this would be qualifying, if you will, into this new segment. Yes, we do some renewables component. We do a lot of things to -- as part of the solution side of that transmission, interconnection, substations, et cetera, versus the physical plant, but we'll be looking at all of that in the evaluation of how we lay out that segment.

Next question is coming from Noelle Dilts from Stifel.

I was hoping -- I know you list in the presentation a number of key customers. But could you give us any detail on whether there's kind of particular customer concentration or if you have sort of a breakdown of the percentage of revenues from the top -- Blattner's top customers.

Noelle, it's Derrick. So yes, they're somewhat concentrated. I would tell you that about 10 to 12 customers represent the vast majority, if not all of their revenues at this stage. Historically, they've had some degree of concentration in the last few years with top 2 or 3 customers representing 50%, 60%, 70% of their revenue base. But the main emphasis we have is that they're very much in repeat customers. They've been able to do that type of revenue concentration, but deliver on a year-to-year basis on a repetitive basis. It really speaks to the programmatic nature that Duke is alluding to.

And we have a bit of overlap with some of the larger customers as well. So we know them very well.

Okay. Great. And then just when you look at the wind, solar and storage markets, could you just speak to if there are any kind of notable margin differences across those businesses? I think the wind market is a bit more concentrated than solar where you have some new entrants. So how should we be thinking about margins as the business shifts a bit?

I think that the company has put itself in a nice position to think about the teams, the project teams that we have to be agnostic to wind or solar. So our ability to perform on the same margin profile and either is certainly something that we can do as a company and feel good about and comfortable about.

Your next question is coming from Adam Thalhimer from Thompson, Davis.

Just 1 question. Does Blattner have much of a maintenance business today? And is there an opportunity to build that out?

Yes. I think when we look at the maintenance business today, the way we see it, the repowering of the wind cycle I think it's what you'll see more of than the maintenance. So our ability to repower the wind farms that have been done by Blattner is certainly something that you'll see us in that arena. If it were -- if people were to get around maintenance and more thereof, we would certainly look to those directions, but it's not something we're focused on today.

Are you early in the repower opportunity, Duke?

Yes, Absolutely.

You broke up a little bit.

Yes, we are. Absolutely. Square in the middle of it.

Next question today is coming from Steven Fisher from UBS.

First question is related to M&A and leverage. Just curious what your M&A plans might be from here if this puts other things on hold? And maybe what was the M&A pipeline looking like for Blattner. And then how quickly do you think you get back to that 1.5 to 2x leverage?

I think the company has been disciplined. We've said all along that as we look at acquisitions that our leverage profile is if we go above 2, we're looking to get back below that. I don't think it precludes us from making acquisitions if they're the right acquisitions going forward. As we've stated many times, we're not looking for acquisitions. On any given day, this was a unique opportunity of a 107-year-old company that we thought we could put together with Quanta and really change the way that we can collaborate for the energy transition of the future is unique. Derrick can comment on payback and such.

Yes, I think we positioned the balance sheet to be quite reasonably conservative of recent. And I think that even with this transaction, we still have a slightly conservative balance sheet. It's a slightly above our kind of 1.5 to 2x, and we'll be focused on using forward cash flows as a component to delever. But I do think that we have the ability in our modeling when we look at the combined free cash flow dynamics to still be opportunistic, both into the path of delevering, but still doing opportunistic M&A, investments and stock buybacks.

We do think there's opportunities around the renewable solar business and things around technology that certainly will support the platform.

Great. And then my second question is just on the learning curve here, these are still relatively newer industries. And I'm curious where you think Blattner is on the learning curve on solar in particular, have they done enough to really say they're at the top of the learning curve there? And then on energy storage, what's the expected ramp-up of learning as that business comes together?

Yes. I mean I think when you look at Blattner, everyone's learning from them and the reason why Quanta wasn't in the business is because Blattner was world-class and the market leader. So their ability to really lead the way in the way that solar and wind is installed is certainly something that we recognize and value. So I think they lead the way in that process.

And energy storage, is there a way, just at the bottom of the learning curve there?

No. I mean it's just -- I think we've installed battery storage in Australia. We've installed it here in the States, commented quite a bit about it. Both EV, electric vehicle charging stations, all those kind of things are early. But as far as how to programmatically install and the client base we work with, they're the same. And I think our approach to it and our clients' approach and the collaboration that we have with them allows us to certainly get ahead of many in the field.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Yes. First, I want to thank, ladies and gentlemen, that are working in the storm in Louisiana, certainly lost the life there and what we do on any given day doesn't go unnoticed. And we're putting lights on every day and staying safe doing it. So thank you to the men and women in the field. And I'd like to thank you all for participating in the conference call. We look forward to completing the acquisition of Blattner and reporting on our future progress. We appreciate your questions, support and ongoing interest in Quanta Services. Thank you. This concludes our call.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time. And have a wonderful day. We thank you for your participation today.