Quanta Services, Inc. (PWR) Earnings Call Transcript & Summary

All right. We're live. All right. Excellent. All righty. Well, folks are getting themselves settled in. It's nice to see everyone here again. Julien Dumoulin-Smith, Jefferies. So we are on the webcast here. So good afternoon, everyone, online. And with that said, thank you, team, for joining us here again. It's nice to have you guys back.

[indiscernible] having us.

Of course, absolutely. Well, look, again, as usual, folks across the crowd here can chime in later with questions, but maybe at the outset, do you guys want to open up any comments, questions -- comments, reactions, post 4Q thoughts, perspectives by all means. Otherwise, you know I'm ready. So again, I'll give you an open shot here.

No, thanks. Look, I think from our standpoint, we had a good '25. We set up '26 nicely. We see long-term growth in our businesses and addressable markets that are all growing. And I think for us, you pinch yourself to be in this business with these growth addressable markets in front of us and super happy to execute on them.

Awesome. All right. Well, let's get right after it. You guys have had an incredible year and one of the points seem poised to have an incredible year prospectively here. You guys have a little bit of an update coming ahead. I know I pressed you guys a little bit on this call, but any thoughts you'd care to share as to like what's the point of doing the Analyst Day here, right? Again, and I ask a little facetiously because I get that it's been a few years. But why are you getting everyone together, right? If you want to put it that way or put it initially here?

Yes. I mean I think for us, we wouldn't do it if we didn't think the company had fundamentally changed over a 5-year period. We do believe we've fundamentally changed and where we're going is much different than where we've been. And so as we see that, we need to lay it out properly and show you the opportunity set that we see. I think it's important for us internally that when we give goals, like we intend to hit them. And so it's not something that we take lightly either as a management team. We're not just saying it. I mean we have a plan. We want you to see it and want you to see the opportunities above the plan. And I don't think we can do that with numbers. I think we need to address it and address it in a public forum and hold ourselves accountable to what we say. And I think it's time because like if you look at what we've built and where we go forward, I don't think you can see it until we can just show it to you and outline it. And we've got to do a good job of that and all the pressure is on Jayshree.

Not feeling it.

Not feeling. A cool comment like as always. Par for the course. I mean nothing gets you off, right? Maybe just let's talk about it, like how do you think about the data center strategy here? Again, I'd love to hear how you guys think about this. So you guys have been evolving your approach to the market for a little bit. Folks, look, I wasn't shocked one iota by your announcement with NIPSCO. Like I felt very much like on brand with your expansion. But how do you frame or scope out this data center strategy? And tackling it from its all different avenues. You have been very careful and diligent in building this out on a multiyear basis already.

Yes. I mean I think when you look at it, Julien, I mean, the industry is short generation. We know this. And I think the things that -- the very -- what I would consider critical paths, we can help solve. And if you look at the addressable markets of technology and utilities, we're kind of in the middle of that. So we're seeing all the issues on both sides. And I think when we think about it, can we address generation from all kinds of forms? Yes. Can we build it all? Yes. And so how do we connect going back to the grid or not or whatever they're trying to accomplish to our customer base. And our job is to collaborate with both sides and then bring someone to the middle. And I do think if you look at our utility companies, they are all like moving forward and addressing the market differently than they have in the -- over the last decade because they have to, just like we've had to. So that when that comes together, we have a lot of solutions to provide both sides. And the main thing I think we offer is certainty, like with our vertical supply chain, with the way we look at craft, with self-perform capabilities well above 85% or Let's call it, 80% to 85% at this point. So that's important to both sides that we do what we say we're going to do. And we do think that with craft being where it's at, that having someone like Quanta that you can point to and say, that's who's building my projects, that's a sense of responsibility for us to go and deliver it. And that's what we've set the company up to do is deliver those solutions that are necessary to power America in the future in AI.

It's nice to say it. I got to say, I mean, let's talk about this because you've started to really own this. This NIPSCO announcement, I mean, look, it's thoughtful beyond just the obvious like, look, you guys have been very diligent in waiting into incremental risk. But I think it's really thoughtful in approaching a mid-cap utility and saying, we will help you in particular, right? Because being a mid-cap utility like that's probably where they're taking the counterparty risk. You say, like, look, we want Quanta because we don't have the ability to absorb as a more modest-sized balance sheet, the risk of development either. So I think it's really intriguing. Can you talk about taking that paradigm, the structure that you've employed there in transposing it to other examples here? And how swiftly can you get pull that off? Because it seems like the GenCo structure for NIPSCO itself is novel and people want to follow that too.

Yes. I mean look, I think mid-caps are obviously something most of the utilities that are in that space, yes, we can help them. But it doesn't -- like we're talking to all utilities around different models and model sets around this. It doesn't necessarily have to look like exactly like NIPSCO. I mean there's behind-the-meter solutions that get to the -- eventually to the meter that you have opportunity sets that are with there. We're talking to our clients about on any given day. And I think in general, we're facilitating -- it's more like a technology customer saying, I want to be in this city, can you help me? Or I want to go faster, can you help me? Do you have transformers? Do you have -- what's the interconnection queue look like? And so I think that facilitation to try to move the industry forward and it's broad-based, I would say, yes, Indiana, but you have multiple utilities in Indiana that we work for all of them. And not only just there, but it doesn't matter where you're at. I think all of our top 10, top 20 clients have the same issue. Some of them want to move faster than others. Some of them don't want to get out of territory. Some of them do. And everyone is different. So I think how we approach it is certainty. What are you trying to accomplish? And if people want to come into your territory, what do you want us to say?

You want to speak a little -- actually, that's a good point you brought up on BTM, right? Like I think you guys have been -- somewhere hidden in filings talking about you guys doing some BTM stuff. So it's not just focused on traditional utility constructs, right? We should be expecting you guys to show up across the power development landscape, right, in different...

For sure. I mean I do think there's other ways that we're happy to be behind the meter, we can build it.

Yes. Definitely. As long as it's a good balance sheet counterparty, right?

Yes. That's right.

Yes, absolutely, versus -- with that said, let's -- one of the issues that comes up -- one of the questions, not issues that comes up a lot is your outlook. People are worried at times, how much is inorganic versus organic. Jayshree I'm sure you get this a lot. And people even today are saying, well, even in spite of the more robust set of outlook, people are still asking constantly product. How do you -- what do you say back to this? Because to be fair, you guys have done a string of acquisitions. I mean the quantity of people you added to the organization last year was enormous at the same time.

Yes. I mean I'd push back a little bit on it because a lot of it has to do with we're outpacing -- those acquisitions are outpacing the models significantly, and we're also pushing work over into those models that would normally be done inside and taking on other work. So I don't necessarily think that's accurate and that's why you see me push back on it going. That's not exactly how to look at it. And when you look how we consolidate, we consolidate -- we don't consolidate -- we consolidate in this segment. So the segment has already got the consolidation in it in any segment you're looking at. So -- and then -- so that's an issue as far as how you think through it. But in general, if we can throw the free cash that we think we can throw, we can invest it appropriately on a go-forward basis. When you want to have a business like Quanta with a private equity model there that you could just invest in and you don't have to worry that we can go out and acquire and integrate and build the solution base that we've built, I mean I think it's a great way to look at the company and you get 2 for 1 as far as I'm concerned. So look, I'm not saying we'll acquire like we have in the past either. But I do see a good pipeline of great businesses that want to be a part of our organization and the platforms that we're in and the opportunity sets there. So I do believe we can repeat it.

Yes. And I think there's -- well, I mean, there's not much more to add to that. I totally agree with Duke. I think there's a -- maybe a little bit underappreciated or misunderstanding about our capital allocation approach. And we very much are focused on our strategies first. We have a strong filter around the types of companies that we want to bring into the fold. And there's -- and we work years around this. This isn't about trying to fill a niche in any one quarter or any 1 year. These are things that we've been thinking about for years. I mean Cupertino is a great example. It was a company that was identified. When I joined the company 6 years ago, Duke and I spoke about how much he valued Cupertino and how they approach the market and how they're thinking through their strategies as well before anybody was talking about an AI boom, right? But it was a highly qualified strong management team, been around decades, that execute extremely well and have a craft-first culture. And -- but they weren't ready to move. And that was okay. And you didn't see us go chase another sort of inside electric operation just to say we have an inside electric operation. We waited very patiently when that time came. And we can't time some -- we absolutely are not able to time as well as maybe some people think around when these families are willing to change ownership. But if we've been really careful about how we do it and very thoughtful around our capital allocation strategy, make sure we have the firepower and the balance sheet to move when those things come, we should be able to keep putting capital to work in a way that should be very, very accretive, obviously, to the bottom line, but more importantly, very much driving the strategies around long term. You're hearing us saying this more and more about being a compounder long-term relationship-based approach with our customers. And I don't think that will slow down for sure. I think we're going to continue to do so. And part of what you guys -- I think the investor base should understand is, to Duke's point, we are very much focused on operating, being a customer customer-centric service provider first, but our capital allocation strategy has won -- to our long-term growth profile.

Yes, absolutely. How would you -- just to the point on this, would you say that there -- you should continue to expect some degree of cadence? Is there a way that you'd bucket out the inorganic piece of this equation in any specific way to put it in a box or leave it to the side?

No, I think that's kind of my point. I don't want us to be thinking about it sort of bucketizing because, again, keep the firepower, keep generating the free cash flow, keep thinking about it around our strategies. We should be able to put it to work. But as soon as you start saying, oh, I'm going to do X dollars, and x number of acquisitions, we believe that's where you start going down a bad path, the slippery slope around long-term returns.

Yes. And I do think like -- there's 2 separate discussions on this. EPS growth organically versus top line growth organically. And I -- one to me is way more important than the other. And so our EPS growth organically is what I'm worried about and what does that look like. And then you can talk about stacking on the balance sheet to that, and I think that's more important to me. Like we can grow the business double digits plus at the top line. And if you give me like quality earnings, all that, throw all that out the window and just grow and that's easy. I mean it's a quality of earnings story that compounds over time that we're seeing out 10, 12, we have a track record of delivering that compound earnings profile. And I -- like we don't talk about weather, we don't talk about -- we derisk the business so that we're able to like have those discussions that are long term. And so I think that's really important clarification of EPS growth versus top line growth, which I do believe organically, look, we'll be kind of in the framework we've been talking about.

Yes. Actually, maybe this is a good time to talk about this, right? And as much as like the utilities, right? A lot of utilities here. Having increasingly long duration of their visibility, exceptional duration and growth, right? And again, you guys are kind of a proxy in many ways. Do you want to talk about your -- you guys as kind of an extension of the utility model and your relationships, whether MSAs or otherwise? Because I think it's really important to kind of lean into that because they formally extended all their guidances already, right?

No, I think their capital budgets, we lean into what they say. I mean, we're able to do some generation now. So it's even more important in what they're saying. So all that growth I mean they're dependent on us to deliver or someone like us to deliver that growth. And they're not internally building up capacity to do that. And so as I'm not saying they're not growing some, but like we're certainly in the middle of all those programmatic spends that they have in discussing that certainty with them. The one thing they can't do is not spend the capital that they say when they say it or they'll have a problem. And it's our job to make sure that when they ask us to go build something we understand that certainty. I've been in the 4 generations and understand it from rates to generation to house plug and how to build it. So I think when I -- when we think about it, it's like are the people that we collaborate the most with equity doing good or not. And if they're not, then we're not doing our job. We want everyone that we're involved with in any significant way to have a 52-week high every week. That's our job is to make them successful. And so understanding how they work and understanding that model and growing with them, we'll grow right with them. We always have.

Coming back to that point, right, like derisking the utility model is one thing, right? Like a company that's had 3 or 5 years of visibility having 7 or 8 years is incredible. But for you guys and the entire sector, it seems particularly relevant to get this kind of long duration and visibility, right? People at times worry about the cyclicality in your business in other sectors, you guys hear, and it's incredible. How do you think about kind of articulating that back to the street at times?

Well, I think it's how we build the basis of what you can look at to understand our utility rate base type construct growth. I mean it's part of the segment, but that growth is tied to capital in many, many ways. If they're growing their capital, you can expect us to grow with them. And probably outwardly because they're not going to -- they have a certain amount of internal resources that will do some capital. But the incremental growth of capital, they're going to lean more and more our way on that. And look, I think our job is to give them certainty that go to sleep, you're okay, we got this. And like because we've done the investments to make sure that we can accomplish your goals as well as what we're trying to, and they line up nicely. And in the middle is the hyperscalers or the large load customers they want to move really fast. And so you're balancing all these things at once.

Absolutely. And I'll give people opportunity to ask question. Yes, go for it.

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Yes. Look, I think when we say that we have 2,500 plus engineers or that, when we look at AI, like in what it can do, we believe that we'll continue to hire engineers. We just don't need to expand it any more than our ability to hire in AI will get up to 30%, even 50% in most cases on the things that we work on. Now standardization goes higher, all those things matter. You got to have really smart engineers, and I think the firms are fine. I'm just for us, we engineer to build for the most part. So when you engineer to build, you want it to be highly productive and we can build more if we can design to 30% and then get -- what I got 30% to 50% and then I just don't see us needing that platform to lean into some big firm that's doing that. There's nothing wrong with the ones that are out there and the guys that are acquiring them, I wish them well. But for us, that's not who we are and not what we're trying to be. And I think we can do everything we want to do with AI, and we're proving it out internally. And from our standpoint, we're using technology all the way through and have been for 36 months or more on AI.

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I think -- it's going to be right-of-way type discussions on it. That's where it always bogs down. For the most part, that will be where you see delays in this and that because it will take longer to get right away. From a constructability standpoint, where you have a partnership to build the transformers with AEP. And I think we've leaned into those things from that standpoint. And I think we positioned ourselves with the North American supply chain that I'm confident we're building against. We announced the capital against some of the -- majority of that capital that we announced was -- but those initiatives. So I think we have what I would consider derisk that bill both from an internal standpoint. So all forms of construction and supply chain has been derisked. Now you're down the right away.

Let me come back to -- a couple of people have ping me on this, and it's been an ongoing question. How do you think about managing labor inflation and material inflation right now? How do you think about that being part of the top line at the same time? And then related, how does it differentiate you here versus peers, et cetera, right? Because obviously, you've got this entrenched effort to try to mitigate and address craft availability.

I mean I think that's who we are at the core is craft and like tight labor markets are good for us because we've invested so much in it over time. And like I think when we look at it, labor is always kind of -- my career has been between 3.5% and 6% escalation is always, like you're never going to go below 3.5% and you can get up in the 6s, but it stays in that range most normally. And we've got great teams. We pushed down equity, deepen the organization, like 9,000 employees. We buy back on the backside. So that being part of a bigger company and being part of the ownership is a big deal for a foreman in the field. And many of them have done very, very well with Quanta. And I want them to. I mean I think that's the goal is to make everyone successful and be a part of something that's different. And they're able to look at ticker symbol and be proud of what they're accomplishing every day. And -- we've -- I'm from craft, was raised there generationally and most of our management team is the same and they either bought family businesses or have been around it. It's what we focus on. So I do think -- they want to be there. We're able to retain and keep craft with us because we treat them well, not necessarily because wage inflation, and I'm confident we can manage that. As far as commodities, we don't take a lot of commodity risk. We usually derisk anything from still to gas to whatever it may be, that would be our risk for us. We work with the client on that. And usually normally, we'll build those rates into a multiyear project or it will be a pass-through on MSAs, things like that.

Another one of the embedded questions. You've got it before, but I'd love to hear how you think about it now. Like given the cyclicality of renewables and you guys having the kind of a view on a multiyear basis, how do you think about this being a contributor to growth or a document versus growth over time? Like how do you think about the renewals bucket? Obviously, for years, we've been focused on Blattner and what it could produce. And obviously, there was a synonym with NextEra at times that people used as a kind of a proxy for your business. But how do you think about that cyclicality here? They updated their a couple of months ago. How does that fit into your outlook at this point? Obviously, near term, it looks pretty decent.

I mean I think the growth there, it's not the hour growth, but like double-digit type growth in that business, we see it. And I think like we're seeing things behind beyond 2030 already, which is a good sign, and it's going to continue. I think demand is going to continue for one thing. And I just -- we see -- in renewables if you fill the lineup of batteries in renewables and things like that and you back with gas and other things, it's the right way to look at something. So I do think it's economical in a sense that if you fill the lineup with all forms of energy and the utility business has always said, like, we need all forms. It's the right way to look at it because of the way you think. So I like it. I mean Jayshree can comment. She's been it longer than I have. So I'll let her opine an on my dissertation there?

No. I mean I don't have much more to add to that. I mean, I think as long as I've been in the renewable industry, it's been a long time. You see it's there's always these sort of maybe 1 year, 2 year issues that you might have to manage. But in general, it's been an upward trend, right, a significant upward trend. And just because the economics now continue to be stronger and stronger with the demand side. So we're not seeing any slowdown. We were particularly careful when we bought Blattner. If you remember, I told you Julien specifically, don't be running up the numbers on this. You know how renewables is. It's going to be a nice double-digit growth, and some folks got a little too hyperbolic on how they think about renewables, but those of us who are in the business and really understand why it's part of the mix and how developers think about it and the utilities and because of that, we've been standing behind a 10% growth rate and that still continues to be the case that we're seeing right now. And it's too early to say what happens beyond 2030. But I'm not -- with the customers we're having, they're not sitting here saying, oh, no, the sky falls when the [ OBB ] expires. We've had none of those concerns at this point because, again, the backstop of demand continues to be very, very strong.

And how do you think, one of the concerns out there for you all relative to this is that the ESS business, the battery business has less scope for you guys to be involved with, right? How do you think about that? It's been one of the pushbacks here as the composition of what's being built in the renewable space evolves, if you will?

We're involved in all of that still. I mean it's a big part of our growth story on renewables. That's not a concern for us. And I think the other thing I would also add is the flexibility of our resources when you have sort of a dislocation in any one period because of something that happens in the renewable space. It's always subject to something, a permitting issue, supply chain issue, a tariff issue. You've seen Quanta be able to manage through those pretty comfortably because those resources are valuable in some of the other parts of our business. And so I think as long as we are managing the growth rate at the right -- at the appropriate way, instead of believing some of the hyperbole, we're able to be flexible with that growth with our customers. I mean if it's batteries now, we're able to flex into that. If it's solar, we're obviously in it, well into it. Wind, wind continues to be a part of our mix. It's not the growth story right now and probably won't be but it's not going away, and we continue to see resources being effectively used across that as well.

I think one of the fallacies is with batteries, is it a big substation component? It's probably the most complicated piece of it. I would say like that's our capabilities there on the substation. So big substations on the battery build, it's nice, what I see good long-term growth.

So -- but just to put a finer point on double-digit growth through the decade.

Yes. I mean on batteries, I think so.

No, no, no, not on batteries, but just the overall renewal segment. You talk about hyperbolic growth, I'm like I'm giving you an opportunity to...

I'm saying for the -- we see -- I'm not going to put a time frame it, Julien. Don't ask me to do that. But we see good solid growth in renewables.

Okay. So I gave you the opportunity to pull it back. So let's take the 2 steps back. If you think about what this company is, right, people keep pinging me here in different ways. Renewables one segment of it, it's gotten a lot of attention to your point, Jayshree, for a second, okay, fine. Put it aside, data centers put it on the side. How do you think about the pillars of what this company looks like over the years here? How do you think about the composition of what this company is because it's meaningfully changed, right? We talked about Blattner a few years ago. I mean, it really, Cupertino, et cetera, you've really seen an evolution.

Yes. I mean look, we said it earlier, I mean the technology piece that came into the business and that market that's created for all of this from utilities to ourselves. It's a huge opportunity for us to see outward growth. That takes a whole different discipline and it takes a whole different teams. And I think we've made the right capital allocations along the way and built platforms that are exceptional at what they do. And the solution-based approach to it, I think, is what we'll lay out in a month or whenever that is. It flies by, so probably next week. But anyways, like whenever we do that, I think that's the key to it is we have twice the market we had 5 years ago. And we're in early stages of it. And the company has to look different to capitalize on that. I don't think -- if you look at everything and it's all built around craft, it stays around craft and exceptional execution in the field. But on the top of that, there's way more opportunity there for us to execute on things and we have way more what I would consider craft skill capabilities across that from mechanical to batteries, renewables that we didn't have in the past and other things that allow us to really take off and grow with various customers across that kind of vertical. And I don't think that slows down. I think it's actually speeding up and our ability to obtain as much as we can in that market as we move forward, we'll be kind of how we're thought about. And I do think we've got to stay nimble. The one thing I would caution on it is you can sit there and look at $20 billion of opportunity across 4 or 5 different things. And I would caution everyone to not stack that. That derisk you. We do not expect to stock every one of them and say, okay, $60 billion and plus what you're doing today, and that's that kind of company. It continues to derisk the company in Florida at a higher level. While we have more opportunity sets of each, each one of those will have a time in the life cycle that you'll hear bad press, like that's we know that already. We build on every single model we have. You never really hear us talk about a project cancellation or a weather report or whatever. I mean I think the business is much, much different than that and we move forward on it. You won't see us do that. And it's because of like the strength of the portfolio.

Yes. I mean when you talk about the business -- the scope being twice as large as it was, is that principally as a function of data centers? Or is that literally...

I mean I think it -- that's in the inside business against that backdrop for sure. I mean you have onshoring, you have pharmaceuticals.

I mean I'm almost questioning, whether it's more than twice, but that's...

Yes. Well, I mean I don't doubt that. It is. But I think in general, there's a bunch of different areas that labor is fungible across. And we're not -- like I said, data centers is not -- wasn't that big of a number in backlog, but it has that potential to really ramp. I mean there's a lot of opportunities there. Pharmaceuticals same way. I mean we're seeing Eli Lilly move all across. We're seeing technology onshore. And I think the more unrest you see in the world, the more you'll see onshoring. I mean we were talking about putting data centers that had our data in the Middle East. I'm pretty sure that, that's not going to be like what we think about tomorrow. It's a risk. And so I think you're going to continue to see onshoring. That's what -- that's Duke's view of the world. Don't hold me to...

No, but I hear -- the point is also at the same time, while the scope of the opportunity is wider, your willingness to engage in these other end markets too, is there, right? Like I think that's exactly your point...

Sure. Absolutely.

Right. It's not that you're afraid to get into these end markets. You've been adjacent to them for a bit.

And look, the generation is just starting and it has mechanical capabilities. We're doing some balance of plan. It has all the skill sets that we've created internally. And I mean the self-perform capabilities and how much of that or -- if you don't have your -- like your own superintendents, your own foreman, if you think you're going to go to a union hall in Indiana and grab people, you're sadly mistaken. Yes.

Well, let me ask you this, right? So in as much as when we talk about the business and the risks through it, how do you think about margin expansion? You've been very consistent on this. Some of your larger -- some of your other large peers are now openly talking about being concerned about margin compression on labor inflation, some of them. Again, others talk about, you know what, if they're engineering exposed, they talk about not being too concerned. How do you -- where do you guys come out on this, right, in terms of the trajectory on this. I hear a really wide range, but I suppose in aggregate, the ability to pass along in the extent of the labor availability has really gotten the sector on edge. Our utilities are on edge about it, right? It's palpable at this point. Maybe that's an opportunity for you guys, frankly.

Yes. I think we've always been fairly disciplined about how we think through our regulated workforce. And we work together in many areas on it. We'll continue to do so.

What about the margin piece of it?

Yes. Like I think that's part of it. Scale allows us to move across starts and stops. And so I think, what we do for utility is it doesn't always go as planned. The more scale we have in any given area, we can move across risk. So like if they have a problem with a piece of land or whatever it may be, we can go do something else. And it's not a charge, and we make the same margins on doing a $765 line or $500 or $345 doesn't matter. And we've really given them the flexibility to move their portfolio around without exponentially charging the rate payer, which we should all be concerned with what we charge a rate payer. And that's what my focus is, is try to keep that price pressure down on the rate payer for our clients and doing our job and are part of it in this industry to do that. So yes, I think the regulated piece of the business, the margin stays kind of where it's at. I mean you have -- because your growth on it is the problem. Like you're going to have to add the same amount of employees as a percentage on a go-forward basis that we have in -- you're not getting scale out of our training and all the things that we've done because it's exponential growth across multi-disciplines. I do think our UI segment comes up, and it continues to grow because we've added mechanical in there for the most part. And our gas business in there is some long-haul pipe opportunities and we've talked about some of Alaska, but...

And all of that is margin enhancing...

Yes. For sure. Yes. It's -- so those opportunities are all out there for us. And we still have a great relationship with those clients, and that will enhance that margin. So there's some margin hands. But if you look at our return on invested capital and you look at that, I mean, it grows nicely throughout our models. Like I think even when I looked at it, I was like, oh, it's outpacing our operating income growth.

Wow, that's excellent. Right. And that is a function of mix in addition to -- principally mix.

It is. It's the way we're contracting as well as the type of capital that's -- you got to back out some of that plan expansion until you get moving with it. But after you're moving with it and you look at the model out, you can see that return because of the things that we are doing and revenue per employee goes way up to -- and that's also creating that same environment with that -- I mean, margin is a big piece of any kind of return. But like I do think we're able to do that without increasing margins exponentially. I mean, Jayshree, you can comment.

Yes. No, it's definitely a lot of that is how we -- the cash flow with our customers and turns we're getting there that's helping us quite a bit on ROIC. The other thing is just the share of wallet we were able to capture by being there earlier and working with them from the get-go around planning the supply chain, what we can do from the procurement strategies, taking some of that work. It may not be margin accretive, but it's...

Scope.

It's scope that flows to the bottom line, which helps your returns. And to Duke's point, it's -- we're really much more focused on the ROIC over a long run. And so if you can get in earlier with them and given them confidence around their capital spend over the next several years, you can help take on more of that scope, which allows for a lot more certainty around where we're going to be over the next 5, 10 years, plus improving ROIC at the same time. If we to take a quote from someone that we just spoke to, if it's a sugar high and trying to just take pricing at this point, that's not going to give you that visibility and comfort around that multiyear period that we're looking at.

I always said you guys sound like a utility. With that said, just if I come back to -- channel this a little bit more. I mean it feels that the $765 piece are really gravitating to it as evidenced by the question before. But that's just -- am I hearing you right by insinuating that's expanding the scope with your customers?

Yes. Sure.

Yes. I mean, for sure. I mean, I think we tried to do that. When we looked at it, I mean, we built a factory. We build a lot of things around that, knowing we could expand. I mean I do think you're going to see more and more $765 versus $500 get billed now because that's going to be your backbone infrastructure, it's necessary if we're going to get the load that we have. I mean, I just continue to believe that's the right answer in any cases.

So if I were to pull this all back together, you guys have an incredible, remarkable, consistency in your track record, right? I mean hard to find any company, even utilities that mirrors what you guys have done in consistency. How do you think about rolling that forward? Is this just about doing more of the same?

No. Look, I think we want to be better, right? Like we want to be better at the things that we do. And it will be craft-skill but as that craft skill spins out opportunities, we've got to execute on them, and it will be how we deploy free cash. I mean we got to make sure that we're disciplined in how we deploy free cash against great backdrops and companies and I like our chances on it. I do believe it gets way more opportunity than we've ever had to execute on a plan. And it's exciting times for us. We're super happy to be there. We want to compound earnings and grow them. So I think it's...

You want to do better. That's pretty, that's impressive. There we go. I love it. Jayshree is laughing. Love it.

Jayshree, needs that. But look, that's how we should wake up and we got to get better. Absolutely.

It's great to see you guys. Thank you for the time, right? As always.

Thanks a lot.

Thank you.