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

Good morning, and welcome to the Quanta Services Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. If you have any objection, please disconnect this time. I will now turn the call over to Kip Rupp, Vice President, Investor Relations for introductory remarks.

Thank you, and welcome, everyone, to the Quanta Services Second Quarter 2026 Earnings Conference Call. This morning, we issued a press release announcing our second quarter 2026 results, which can be found in the Investor Relations section of our website at quantaservices.com. This morning, we also posted our second quarter 2026 operational and financial commentary and our 2026 outlook expectation summary on Quanta's Investor Relations website. While management will make brief introductory remarks during this morning's call the operating and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community. Please remember that information reported on this call speaks only as of today, July 30, 2026. And therefore, you're advised that any time-sensitive information may no longer be accurate as of any replay of this call. This call will include forward-looking statements intended to qualify under the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements reflecting expectations, intentions, assumptions or beliefs about future events or financial performance. You should not place undue reliance on these statements as they involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control, and actual results may differ materially from those expressed or implied. We will also present certain historical and forecasted non-GAAP financial measures Reconciliations of these financial measures to their most directly comparable GAAP financial measures are included in our earnings release and operational and financial commentary. Please refer to these statements for additional information regarding our forward-looking statements and non-GAAP financial measures. Lastly, please sign up for e-mail alerts through the Investor Relations section of quantaservices.com. To receive notifications of news releases and other information follow Quanta IR and Quanta Services on the social media channels listed on our website. With that, I would like to now turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services Second Quarter 2026 Earnings Conference Call. I want to begin by recognizing our people in the field. Everything we are about to discuss starts with our more than 85,000 employees and the execution they deliver for our customers safely, on time and on budget every day. This morning, we reported second quarter results that meaningfully exceeded expectations with strong double-digit growth in revenues, adjusted EBITDA and adjusted earnings per share, robust cash flow and record backlog of $53 billion. Given when these acquisitions closed, their contribution to the quarter was minimal. The strength you're seeing today reflects broad-based organic strength across our segments, service lines and end markets and the successful execution of our strategy and the investments we have made against it. During the second quarter, in July, we completed the acquisitions of Phalcon, Enerfab, Percheron and PSD, and we welcome each of these excellent companies and their employees to the Quanta family. These acquisitions enhance our geographic presence and continue our strategy to scale self-perform cross-skill capabilities across electrical, mechanical, civil and fabrication and to lean in to the front end of our customers' programs. But the work takes shape, and we're getting involved early maximizes the value we can deliver. These are companies that have executed successfully for decades and whose owners and leadership came up through the craft with customer relationships often built over generations. These acquisitions strengthen our position in technology and load centers while adding meaningful diversification across end markets we've served for decades. Bone runs it on a culture of absolute performance. and is dedicated to the continuous improvement and the success of our customers. Every acquisition has to fit our strategy and the culture has to fit. That is the first thing we evaluate and something we do not compromise. When a company that has built its name over 50 or 100 years decide to join Quanta, they are choosing a home that protects their legacy, keeps their management team and gives the people more opportunity than they could create a loan. Our solutions-based model is performing well, creating markets and unlocking growth opportunities because it is a platform that brings our customers industry-leading capabilities, scope and scale, with the largest craft workforce in North America at the center. The rigor we built over decades serving utilities, the planning, the safety and the programmatic execution is exactly what we are bringing to technology and load center and generation markets. Technology is trying to move as fast as possible. Utilities are working to protect the rate payer, and Quanta sits in the middle of the nexus voting solutions to both. Our customers realize how important speed and certainty is and the trust and track record we have built over decades is what differentiates Quanta. Quanta's core strategy remains grounded in craft field labor, execution certainty and disciplined capital deployment. Craft is built over time, and we prioritize that investment for well over a decade. We self-perform 80% to 85% of our work, which is what allows us to deliver on time and on budget at scale. That certainty, quarter after quarter and year after year is what our customers count on. is what has produced record adjusted EPS for the last 9 consecutive years and why our customers keep asking us to do more. As a result of our strong first half, improved visibility into the remainder of the year, and expected contributions from the acquisitions announced this morning, we are significantly increasing our full year 2026 financial expectations across all metrics. The record backlog we reported reflects the demand in front of us but we're still in the early stages. The larger programs look to utility generation and technology load center markets are ahead of us, and we expect them to stack in the years to come. In many ways, we are just getting started. We remain focused on executing for our customers' success, deploying capital with discipline and compounding earnings and shareholder value over the long term. I will now turn the call over to Jayshree Desai, Quanta's CFO, to provide a few remarks about our results and 2026 guidance. And then we will take your questions. Jayshree?

Thanks, Duke, and good morning, everyone. This morning, we reported historically strong second quarter results with revenues of $9.6 billion, net income attributable to common stock of $451 million or $2.96 per diluted share adjusted diluted earnings per share of $4.24 and adjusted EBITDA of $1.1 billion. Those results included approximately $11 million of adjusted EBITDA from acquisitions made during the second quarter. The performance in the first half of 2020 exceeded our initial expectations, led by the strength of our end markets and our strategies in action. The versatility of our workforce and our customer-centric delivery model are translating to greater scope, better resource utilization, elevated revenues and improved margins. and our customers are increasingly recognizing how the breadth of our capabilities can contribute to their success as evidenced by another quarter of record backlog. Given the strength of our first half performance, improved visibility into the second half and expected contributions from recent acquisitions, we are raising our full year financial expectations. We now expect revenues to range between $39.3 million and $39.7 billion, adjusted EBITDA to range between $4.1 billion and $4.2 billion, adjusted EPS to range between $16.45 and $16.95 and free cash flow to range between $2 billion and $2.5 billion. As Duke described, subsequent to our first quarter earnings release, we acquired 4 companies for approximately $1.24 billion of upfront consideration, net of cash acquired, plus approximately $242 million of contingent consideration that can be earned based on financial performance in the years following the closing. Included within our increased full year financial expectations, our $1.2 billion to $1.4 billion of revenues and $120 million to $130 million of adjusted EBITDA from these acquisitions. Importantly, as evidenced by the ratings upgrade by Moody's, our balance sheet and credit profile strengthened even as we deployed capital on the aforementioned acquisitions. As calculated under our senior credit agreement at the end of the second quarter, our debt-to-EBITDA ratio improved to 1.7, down from 1.95x at the end of 2025, and we had total liquidity of approximately $2.8 billion. The larger programs broader service offerings and multiyear commitment negotiating every day are a direct reflection of the trust our customers place in our ability to execute at scale. Combined with disciplined way, we're allocating capital across our strategic initiatives we believe we're well positioned to keep converting that trust into durable, attractive returns for our shareholders. Additional detail and commentary on our 2026 financial guidance can be found in our operational and financial commentary and outlook expectation summary both available on our Investor Relations website. With that, we're happy to take your questions.

[Operator Instructions] Your first question comes from Steven Fisher with UBS.

Yes. Just congrats on the strong beats across your business in the quarter, but maybe focusing on the strong margin performance. I know you've been Duke a little bit reserved and Jayshree on the margin upside. I guess, to what extent are you now thinking maybe a little bit more positively longer term about the margin potential here, you have more self-perform and you've got more large load projects becoming more of the mix. I guess, any reason why that wouldn't add to some margin upside over the longer term?

Yes. Thanks, Steve. Thanks for the comments about the quarter. I think when we're looking at the margin profile, we said the UI segment had some room, and we felt like it would move up. The businesses that we've acquired and how we look at that is today, the risk we're willing to take certainly is moving that profile up, and you're seeing that in the quarter. And I believe you'll see that on a go-forward basis. So that moved up Electric as well. I think we moved that up as well on the back side. Look, structurally, fundamentally, the business has changed. We're seeing it change. We have 2 addressable TAMs, both of which are growing I do -- that mix, we're looking at it constantly to make sure that we're giving you good prudent guidance. Yes, I do think we posted a real nice quarter we were printed in the guidance that we gave you in the back half. You're seeing synergies show up. We're seeing a lot of book-to-burn. So I do believe like there is some room in the margins on the backside. We took prudent approach to it. There's no -- you got climbs and Northern [indiscernible] weather. We take everything into risk project slips, all that's already baked into our numbers. So yes, I think there's upside in the back -- and as we see it, as we see the work mix, as we see the mix in the Electric segment, it's a big segment. So we have to really take into account everything in there. And I think we've done a nice job of that, but I do think there's room for margin improvement in the backside. We've always said that the electric segment has the ability to operate 10 to 12 on the utility side, 12 would be the utmost margins that you would see. And that's when you stacked in large transmission and all aspects at once, so you get full utilization, you're also training a lot of people. I mean we've added 15,500 people over the year. 7 of which or 8 of which, 7 or 8, I can't remember, is organic. I believe it's. So in saying that, I mean, significant amount of training going in. We're getting better at training. If we can get better at training, we can get scale out of that as well. I do think we have the ability to improve margins. It's still something we're trying to compound it. We have rate payers on the utility side. It's very much regulated. And so that said, we're doing a nice job on the technology TAM, and we're also getting some sooner data of our training and getting people to the field. So super happy with where we're at.

Your next question will come from Julien Dumolin Smith with Jefferies.

Hopefully, you can hear me okay. Just wanted to ask, one, we've seen a large utility in the west recently indicated for -- at least for their gas generation RFP that they're electing to self-perform because there's inadequate resources. Again, given a backdrop, how do you think about your willingness to participate in the gas generation side of the business? Obviously, you saw a press release from you guys a nice horse earlier. How do you think about leaning further into that? And what would that look like? And as much as a JV structure is not obvious. I'm curious for your thoughts about the Zamarin CPC?

Yes. No. Look, Julian, we're seeing the same thing. I mean I do think some of the utilities, a few of the utilities are trying to self-perform. It sounds easy, it's not. So I think in general, we saw that in the past back in I don't know it was probably 20 years ago, my age myself. Look, we know the risk. We know the risk of the people that we need to employ. Our cross-skill labor is there. We're doing a nice job of building that business. It's something meaningful in the future. We talked about it. As far as like the robust nature of EPC on generation, not only in front of the meter behind the meter, someone was saying not too long ago that we're just in front of the meter, I mean, behind the meter. So we're on both sides of that. We're seeing some small engines. We're seeing big engines. We're seeing all types of generation. And we're installed at EPC. I like the business. We're just not willing to take the risk on the combined cycle side and some of the single cycle engines. So that's the issue. If we can get the type of contracts that we need to feel comfortable with it, we'll do it. And certainly, the inbounds and ask of our customers, we did mention the nice words, I do believe a significant amount of that will go into backlog in the third quarter. That's moving nicely. There's some other what I believe, opportunities in that part of the world that we'll continue to compound. And not only them, but every customer we have, we're working with them on their capital plans to build both generation and T&D.

Just a quick 1 on the technology side. Can you speak a little bit to how you're scaling that business? Are you -- is this just laying and expand with existing customers? What exactly is going on within the details, if you can, just -- obviously, it's a nascent business model for folks, you got a lot of new entrants. Just curious, do you have a lot of interest relationships you're hearing about out there. How much of this is new customers and new platforms and what do you intend to do from like a strategic M&A perspective to continue to build this business, too?

A lot through that. So -- we're not -- when we think -- when we thought about it when we acquired Cupertino, we acquired a platform. We talked about the technology customers that we thought that we could take our collaborative approach and build another TAM that's ever as big as our utility TAM. We're doing that. It's showing up to the hyperscaler, direct to the larger customers showing them what we can do, our self-perform capabilities, we show up. We're on time, we're certain, and that's leading to balance of plant type builds in multiple areas. So call it, 80% or of what a division build less chips. And I think 90 maybe. So we have the abilities to do that. And as people see that we're certain and our projects are on time, on budget, self-perform. More and more addressable market comes our way. So I think we really like what we see, the collaborative nature. We can talk about synergies a lot and we don't put them in anything. But you can see from the quarter, they show up. We're crossing refundable with labor. We're crossing both T and D as well as going into the data centers with our people. You can see the cues on the utility side of substations and all the substations that are out there. We're right in the middle of that. And I think as that nexus, I'm not sure people understand that nexus and how difficult it is to interconnect to the grid and how much we're right in the middle of that interconnection. So that interconnection along their vertical supply chains the various strategies that we've discussed are showing up and the synergies are right there with them. So I do believe on as we look at technology, we're in a collaborative way helping them be certain on not only cost but getting it done on time. So we really like where we sit.

Your next question will come from Chad Dillard with Bernstein.

So my question is on the modular prefab side of the business. It's increasingly clear that you guys are investing in that organically and inorganically. So I'd be curious to hear what shared your RFPs have that capability? And how do you think about that on the next 5 years? And maybe you can talk about just the labor cost savings that you see when you deliver that and to the extent to which you can value-based price with your customers on that?

Yes. I mean, look, we talked about having 7 million square feet. We just added, call it, 0.5 million square feet with the acquisitions that we've made. So yes, we're adding to that. We've always done some what I would consider fabrication. But I do think this integrated fabrication that we're doing, it's different. It's a solution-based approach. It has a lot of video engineering a lot of technology in front of it. We can really design from a construction nature and work with the client and what they're trying to accomplish, less water, closed-loop systems, no water, all kinds of things that we're able to really, really work with the client upfront. I think we have some of the best engineers in the world because they've been in the field and they're not a construct. So that allows us to really lean into these projects become much, much more efficient if we work in a collaborative manner with our clients, much like we've done with AEP on 76. I mean I think when we look at it, we work together and if we can do that, the fabrication is exponential. I don't -- but whether it's cost less or more, it's going to cost less. It's less people to some degree, depending on where you're at and your logistics. So logistics cost a significant amount. So you really need to be close to where you're building, and I think that Northeast environment and what we've done there with the acquisition of Phalcon really gives us a lot of opportunity in the East and the fabrication in the East. But yes, look, it's -- you're certain as well you're inside, and it allows us to really have a certain outcome and the engineering in front of it allows the cost to come down. So yes, the more collaborative the client is with us, the -- what I would consider the total cost goes down significantly for them.

Great. That's helpful. And then have you started to see RFPs for 800-volt work yet. When is that starting? And just from like a labor standpoint, is there any difference in complexity the mix of labor force or even like the use of modular when you're shifting 54 to 804 architecture?

I'll just say it this way. We haven't seen it show up. We're in the middle of engineering with it. We're all over it in the high-voltage side as well as equipment. Anything complicated, anything with the higher voltage, -- the higher the voltage is better for Quanta. So I'll just say it like that. We love complicated high-voltage infrastructure, the more the better.

Your next question will come from Justin Hauke with Baird.

Great. I just got kind of 1 -- obviously, there's a lot of positives on this quarter, but 1 to stand out as well as the free cash flow I just wanted to, I guess, maybe ask, are you seeing changes in kind of maybe like prepayments or other things that are kind of favorable to working capital from some of these large load customers that maybe it's a sustainable dynamic that maybe improves the free cash flow conversion over time? Or is it kind of just a one-off here this quarter?

Justin. No, we're very pleased with what's happening with free cash flow in our business. The first half of the year was very strong. I think it's a real testament to the operators how well they're performing. We are getting favorable contracting terms across the business. But the growth of the MEP business, our EPC business, our Renewables business is contributing to that free cash flow growth. So we believe that we're going to continue to see those types of factors coming into our free cash flow profile. It's improving our working capital, as you said. Having said that, we do think the right way to think about our business continues to be that conversion rate of around 55%. I talked about it in the Investor Day that we have the opportunities to be higher than that, 55% to 60%. Do I believe that we can be at the high end of that even this year and going forward? I do. I think there's opportunities even to beat it. But growth -- where the growth comes from matters. The strong utility business has continued to grow in the back end as well. And as you know, that has a slightly different working capital profile and it can pressure free cash flow. We've taken all that into account in our guide. And -- but I think you can expect, Justin, that we have real abilities to be at the high end of those free cash flow ranges and even better.

Your next question will come from Sangita Jain with KeyBanc.

Can I ask 1 on Percheron, if I'm pronouncing that right, the acquisition that you made? How much of the revenue that they do is already revenue from Quanta and how much is third party? And as you bring it in, are you going to focus it more on just working for Quanta? And then does this allow you to do more front-end work with data centers? Or is it purely just a T&D type operation?

Thank you, Sangita. So Percheron, when we looked at that, really, it's right away acquisition. It's things of that nature, none of which is for Quanta. -- very little, if any, was kind of revenue. So it's all outside the customer base would be utilities of hyperscalers. So both sides of that. The way we think about it, anything that from our standpoint, it doesn't allow our field forces to move forward or we can collaborate with the client in a constructability way, we want that to be a part of the solution. So they were very much a solution for us on the front end. We believe added to Quanta and our constructability, we can work with the client on routes. You hear about permitting quite a bit, land acquisition quite a bit. I'm getting tired of it. So as we see it, we felt like you can either gripe about it or you can fix it. So Percheron will allow us to provide a unique solution to the client on the front end where we believe we can move right away faster and a more economical way to get our people in the field, both on the technology market and actually technology pipeline and Utility T&D. So super proud, great company. I believe we can expense grow that and the synergies are endless.

[Operator Instructions] Our next question will come from Nick Amicucci with Evercore ISI.

I just had a quick one, too. Just given -- I mean, obviously, it seems like pretty strong organic performance within the quarter. I just wanted to see -- I mean, if we could kind of break that out, how much was that -- was there any kind of pull forward of timing or whether implications in there just given kind of more of a mild spring season?

hattNo, I do think you bring up a good point on seasonality. We used to have a much more pronounced seasonality in the business. with being inside and having kind of the electricians and the places that we're at, I do fabrication facilities -- you're going to see that level out in the fourth and the second, and it will start to level. So it won't be as pronounced as it was in the past. So I do think that's part of it. But as far as pulling in, I mean, it is different from a standpoint, nothing pulled in at all that I'm aware of, just nothing. But what is happening, we're getting on sites and people are starting to see us perform and they're asking for a immediately -- so we may book and bill $300 million on a site in a quarter, you never see it show up in backlog. That's part of MEP. And that happens quite a bit though that about how to look at those MSAs on the technology side, especially when we're building balance of plant in multiple areas. We need to look at that internally to decide is a PO against an MSA is it an MSA. So we're following GAAP, but I would tell you the book and burn on that type of work is certainly prevalent in the quarter, and it will be in as far as we can see because we continue to capture more balance of plant opportunities and kind of full-scale data center opportunities, and you'll see us on quite a few sites in the future.

Our next question will come from Adam Thalhimer with Thompson Davis.

Congrats on the another great quarter. and a great day. Duke, I guess I wanted to dial in on your traditional T&D business. How would you say that's other than the obvious that it's good, how would you parse that, how it's trending versus your initial expectations at the beginning of the year? And then I wanted to get an update on your long-term expectations from electric utility customers?

I think we're right on target. We kind of -- you haven't seen the compounding effect. I mean, we're not in backlog on any of the bigger work yet. Even the generation work most of it is, I would say, 95% of it it's not in backlog either. So those big projects, the 765 corridors, 345, 500, all those bigger -- all that bigger work is just starting. A lot of it's in engineering, you'll start to see a hit backlog in the later half of the year throughout what I would consider the decade. So it's a long-term bill well past 2030 on both sides of the business. So we're seeing those projects today, they'll show up and backlog, we'll go to the field, call it, second half of '17, we'll start to see incremental gain there. And the compounding stacking effect will start to hit the backlog and continue to expect us to have record backlog into the third and probably even into the fourth. But definitely, we see the work there, and it has not started. So kind of what I would say upper single-digit growth in the business as it sits, doing nicely, working with clients. So I think double-digit type growth there today, and it's going to get much greater than that as we start our compounding big work there. look much like it did, call it, before '15, was it 12 to 15, somewhere in there. We were on a bunch of big projects and started compounding. We see that type of effect. Yes, it's big numbers, but the big numbers are going to compound as well. So we're super excited about where that's going. Early stages, and it will start to show up, call it, in backlog this year in the field next year.

Your next question will come from Liam Burke with B. Riley Securities.

Yes. Thank you, Doug. Just a quick follow-on on what we just discussed on your longer-term planning on the electric side. Going back to your backlog, similar to what you discussed last quarter is more broader based across the businesses rather than you bringing in these larger projects?

That's right. I mean I do think those larger products -- you're going to get some lumpy quarters where you're 1-12, you're going to start to see 1.5, 1.6 as you bring in a big chunks of projects, and it's going to happen. We saw some of it when we brought in 765 you saw a big boost up. It was broad-based, but it also had a big project in it. that's going to happen. It's not going to be straight line. You're going to see some lumpy kind of quarters, but all kind of lower lows, higher highs all the way through the way we see it, because I just think -- we can't predict timing and bookings on that big work. It just takes time, and we're in LTPs all over the place and verbals all over the place with lots of clients in a collaborative way. I just really like the collaboration the company is doing really trying to help our clients. And I think giving them certainty working with them, driving the cost down to the rate payer, the company is highly focused on driving the cost down to the rate payer. I think that's a deal we're really working hard with -- throughout on the T&D side. And I like where that's going. It's certainly given some multiyear, even decade look outward. You can see their capital budgets, something we can point our finger to. We're working hard together like where the industry is going.

Your next question will come from Philip Shen with ROTH Capital Partners.

Congrats on the strong results. I wanted to check in with you on the recent New York state ban or pause on data centers. We published recently that we could see M&A as 10 more states pursue data center bands or pass by the end of this year. What are your thoughts on this potential risk? How could it impact your business? And then when you add data center work to your backlog, have these projects been cleared of all permitting, environmental approvals, community support. I'm guessing the answer is yes. But -- just was wondering if you can go through, is there any risk that some of these state bans or positives could take some of the projects out of backlog?

Sure. So just a couple of things. It's a good question because it gives me an opportunity to freelance a little bit here. What I would say is 15% of the business is technology, call it, 15 to 20 right in there. And that's a spectrum of chips to everything not just data centers. So it's not a huge piece of the business, number one. We've grown that to that range over the last 2 years, which I think is phenomenal. We built a hell of a business already and got a long way to go. So very early stages. And the quality of the companies that we've acquired is just phenomenal, super proud of the platforms. So in saying that, look, we're involved in lots of data I haven't seen much in New York. Nothing really gets built there. So it's very difficult to build in New York. And having a moratorium in New York doesn't bother me at all. I just hope we can get enough power to continue to keep the lights on PJM. So that's our highly focused there on that. What I would say is, in general, when we think about data centers, I just -- it's such a fallacy of the amount of water and what it does for an economy. I mean, in rural areas, the school districts and the kids and the teachers, we employ people there I mean it's such a benefit to everyone that is building in those areas. And it's not a 1-year build. These are 8, 10-year areas to build and you're providing jobs. And if you look at Northern Louisiana, where they're building there, yes, they're using a little bit more water than in some other areas. I would say there's better designs today and you can use less water. But what that's done teachers, teachers were the lowest paid in all Louisiana. They will be the highest paid in Louisiana in that area, all the teachers. All the -- what it does for the rate base, the economies I just don't think it gets suppressed. We're not doing a good enough job talking about the good things about data centers, national security, everything else that I see, it reminds me a lot of the fracking rhetoric that was out there. So it's just something that I think we have to do a great job to tell the benefits to the industry and how we see it and what it's done to create jobs and good jobs I think you can look at our median wage any, like it's very, very good for us and the economy. So look, we're not seeing any shortage of places to go work. And we're moving forward, really working in local areas to provide jobs. And as long as we do that, and I believe we're on the right side of the rhetoric with data centers is not like where it's going.

Yes. And Phil, just on the backlog, I think it's important to add that we take all those into account. The way we treat our backlog just like we do on the T&D side, just like we do on the generation side, we want to make sure that we have a constructive and prudent way of what goes into backlog. So on the data center side, we tend to put in things that have only and we don't put the rest of it until the project is a go. So I think you can be confident in what we have in our backlog as a result.

Yes. And we're seeing both of your projects, too. So I mean, we're out well beyond 2030.

Your next question will come from Alex Rygiel Rigel with Texas Capital Securities.